TARGET CORP — Interim / Quarterly Report 2002

Sep 13, 2002

10-Q 1 a2089176z10-q.htm 10-Q

Use these links to rapidly review the document TABLE OF CONTENTS

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended August 3, 2002

Commission file number 1-6049

User-specified TAGGED TABLE

Target Corporation (Exact name of registrant as specified in its charter)
Minnesota	41-0215170
(State of incorporation or organization)	(I.R.S. Employer Identification No.)
1000 Nicollet Mall, Minneapolis, Minnesota	55403
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code	(612) 304-6073
N/A (Former name, former address and former fiscal year, if changed since last report.)

end of user-specified TAGGED TABLE

The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.

The number of shares outstanding of common stock as of August 3, 2002 was 908,388,817.

ZEQ.=1,SEQ=1,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=439127,FOLIO='blank',FILE='DISK014:[02STP5.02STP2295]BA2295A.;7',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT

TABLE OF CONTENTS

TARGET CORPORATION

User-specified TAGGED TABLE

PART I	FINANCIAL INFORMATION:
	Item 1 – Financial Statements
	Consolidated Results of Operations for the Three Months, Six Months and Twelve Months ended August 3, 2002 and August 4, 2001
	Consolidated Statements of Financial Position at August 3, 2002, February 2, 2002 and August 4, 2001
	Consolidated Statements of Cash Flows for the Six Months ended August 3, 2002 and August 4, 2001
	Notes to Consolidated Financial Statements
	Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II	OTHER INFORMATION:
	Item 6 – Exhibits and Reports on Form 8-K
	Signature
	Certifications
	Exhibit Index

end of user-specified TAGGED TABLE ZEQ.=1,SEQ=2,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=818391,FOLIO='blank',FILE='DISK014:[02STP5.02STP2295]BG2295A.;19',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT

TOC_END

PART I. FINANCIAL INFORMATION

User-specified TAGGED TABLE

CONSOLIDATED RESULTS OF OPERATIONS TARGET CORPORATION

end of user-specified TAGGED TABLE User-specified TAGGED TABLE

(Millions, except per share data)	August 3	,	August 4	,	Six Months Ended — August 3	,	August 4	,	Twelve Months Ended — August 3	,	August 4
(Unaudited)	2002		2001		2002		2001		2002		2001
Sales	$ 9,791	$	8,795	$	19,127	$	16,981	$	41,260	$	37,576
Net credit revenues	277		146		535		294		953		574
Total revenues	10,068		8,941		19,662		17,275		42,213		38,150
Cost of sales	6,640		6,082		12,962		11,685		28,420		26,139
Selling, general and administrative expense	2,249		1,974		4,376		3,861		8,976		8,173
Credit expense	171		78		336		150		649		296
Depreciation and amortization	295		259		584		515		1,148		1,001
Interest expense	154		109		289		216		546		447
Earnings before income taxes	559		439		1,115		848		2,474		2,094
Provision for income taxes	215		168		426		323		942		802
Net earnings	$ 344	$	271	$	689	$	525	$	1,532	$	1,292
Basic earnings per share	$ .38	$	.30	$	0.76	$	.58	$	1.69	$	1.44
Diluted earnings per share	$ .38	$	.30	$	0.75	$	.58	$	1.68	$	1.43
Dividends declared per common share	$ .060	$	.055	$	.120	$	.110	$	.235	$	.220
Weighted average common shares outstanding:
Basic	907.9		901.0		907.2		900.0		905.1		899.2
Diluted	913.0		908.9		913.9		908.7		912.4		908.2

end of user-specified TAGGED TABLE

See accompanying Notes to Consolidated Financial Statements.

ZEQ.=1,SEQ=3,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=301329,FOLIO='1',FILE='DISK014:[02STP5.02STP2295]DE2295A.;15',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT

TOC_END User-specified TAGGED TABLE

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION TARGET CORPORATION

end of user-specified TAGGED TABLE User-specified TAGGED TABLE

		,	February 2	,	August 4	,
(Millions)	2002		2002	*	2001
Assets	(Unaudited)				(Unaudited)
Cash and cash equivalents	$ 1,755	$	499	$	798
Accounts receivable, net	4,304		3,831		–
Receivable-backed securities	–		–		1,721
Inventory	4,549		4,449		4,408
Other	1,112		869		893
Total current assets	11,720		9,648		7,820
Property and equipment
Property and equipment	19,584		18,442		17,069
Accumulated depreciation	( 5,214	)	( 4,909	)	( 4,561	)
Property and equipment, net	14,370		13,533		12,508
Other	1,169		973		917
Total assets	$ 27,259	$	24,154	$	21,245
Liabilities and shareholders' investment
Accounts payable	$ 4,187	$	4,160	$	3,735
Current portion of long-term debt and notes payable	1,583		905		580
Other	2,031		1,989		1,886
Total current liabilities	7,801		7,054		6,201
Long-term debt	9,735		8,088		6,999
Deferred income taxes and other	1,206		1,152		1,047
Shareholders' investment	8,517		7,860		6,998
Total liabilities and shareholders' investment	$ 27,259	$	24,154	$	21,245
Common shares outstanding	908.4		905.2		901.7

end of user-specified TAGGED TABLE

• The February 2, 2002 Consolidated Statement of Financial Position is condensed from the audited financial statement.

See accompanying Notes to Consolidated Financial Statements.

ZEQ.=1,SEQ=4,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=820134,FOLIO='2',FILE='DISK014:[02STP5.02STP2295]DG2295A.;14',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT

TOC_END User-specified TAGGED TABLE

CONSOLIDATED STATEMENTS OF CASH FLOWS TARGET CORPORATION

end of user-specified TAGGED TABLE User-specified TAGGED TABLE

(Millions)	August 3	,	August 4	,
(Unaudited)	2002		2001
Operating activities
Net earnings	$ 689	$	525
Reconciliation to cash flow:
Depreciation and amortization	584		515
Bad debt provision	192		–
Other non-cash items affecting earnings	106		56
Changes in operating accounts providing/(requiring) cash:
Accounts receivable	(665	)	–
Inventory	(100	)	(160	)
Other current assets	(197	)	(142	)
Other assets	(121	)	(67	)
Accounts payable	27		159
Accrued liabilities	13		(97	)
Income taxes payable	20		94
Other	19		–
Cash flow provided by operations	567		883
Investing activities
Expenditures for property and equipment	(1,479	)	(1,586	)
Decrease in receivable-backed securities	–		220
Proceeds from disposals of property and equipment	11		10
Cash flow required by investing activities	(1,468	)	(1,356	)
Net financing requirements	(901	)	(473	)
Financing activities
Decrease in notes payable, net	–		(247	)
Additions to long-term debt	2,500		1,750
Reductions of long-term debt	(245	)	(476	)
Dividends paid	(109	)	(99	)
Repurchase of stock	–		(14	)
Other	11		1
Cash flow provided by financing activities	2,157		915
Net increase in cash and cash equivalents	1,256		442
Cash and cash equivalents at beginning of year	499		356
Cash and cash equivalents at end of period	$ 1,755	$	798

end of user-specified TAGGED TABLE

Amounts in this statement are presented on a cash basis and therefore may differ from those shown elsewhere in this 10-Q report.

See accompanying Notes to Consolidated Financial Statements.

ZEQ.=1,SEQ=5,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=870992,FOLIO='3',FILE='DISK014:[02STP5.02STP2295]DI2295A.;8',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT

TOC_END User-specified TAGGED TABLE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TARGET CORPORATION

end of user-specified TAGGED TABLE

Accounting Policies

The accompanying consolidated financial statements should be read in conjunction with the financial statement disclosures contained in our 2001 Annual Shareholders' Report throughout pages 28-36. The same accounting policies are followed in preparing quarterly financial data as are followed in preparing annual data. In the opinion of management, all adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature.

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

Due to the seasonal nature of the retail industry, quarterly earnings are not necessarily indicative of the results that may be expected for the full fiscal year.

Extraordinary Items

In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." We elected to early adopt this Statement in the first quarter of 2002. Previously, all gains and losses from the early extinguishment of debt were required to be aggregated and classified as an extraordinary item in the Consolidated Results of Operations, net of the related tax effect. Under SFAS No. 145, gains and losses from the early extinguishment of debt will be included in interest expense. Prior year financial statements have been restated to reflect this change. The adoption of SFAS No. 145 has no impact on current year or previously reported net earnings, cash flows or financial position.

Derivatives

During the second quarter, we entered into an interest rate swap with a notional amount of $400 million. The swap hedges the fair value of certain debt by effectively converting interest from fixed rate to variable. During the quarter we also terminated an interest rate swap with a notional amount of $500 million. This transaction did not have a material impact on net earnings for the quarter.

During the first quarter we entered into an interest rate swap with a notional amount of $500 million.

The fair value of our outstanding swaps is reflected in the financial statements and any "hedge ineffectiveness" is recognized in interest expense. At August 3, 2002, the fair value of our existing swaps was immaterial.

ZEQ.=1,SEQ=6,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=1029905,FOLIO='4',FILE='DISK014:[02STP5.02STP2295]DK2295A.;27',USER='MVANGB',CD='12-SEP-2002;14:14'

Goodwill and Other Intangible Assets

In the first quarter, we adopted SFAS No. 142, "Goodwill and Other Intangible Assets." We have complied with all of the adoption provisions of the Statement. The adoption of SFAS No. 142 reduced second quarter and year to date amortization expense by approximately $3 million and $5 million, respectively (less than $.01 per share). Additionally, we have completed our initial impairment test and concluded that our $155 million of goodwill and indefinite lived intangible assets are not impaired.

Per Share Data

User-specified TAGGED TABLE

													Diluted EPS
	Three Months Ended			Six Months Ended				Twelve Months Ended				Three Months Ended				Six Months Ended				Twelve Months Ended
	Aug 3	,	Aug 4	,	Aug 3	,	Aug 4	,	Aug 3	,	Aug 4	,	Aug 3	,	Aug 4	,	Aug 3	,	Aug 4	,	Aug 3	,	Aug 4	,
	2002	2001		2002		2001		2002		2001		2002		2001		2002		2001		2002		2001
Net earnings	$ 344	$	271	$	689	$	525	$	1,532	$	1,292	$	344	$	271	$	689	$	525	$	1,532	$	1,292
Weighted average common shares outstanding	907.9		901.0		907.2		900.0		905.1		899.2		907.9		901.0		907.2		900.0		905.1		899.2
Stock options	—		—		—		—		—		—		5.1		7.9		6.7		8.7		7.3		8.9
Put options	—		—		—		—		—		—		—		—		—		—		—		.1
Total common equivalent shares outstanding	907.9		901.0		907.2		900.0		905.1		899.2		913.0		908.9		913.9		908.7		912.4		908.2
Earnings per share	$ .38	$	.30	$	.76	$	.58	$	1.69	$	1.44	$	.38	$	.30	$	.75	$	.58	$	1.68	$	1.43

end of user-specified TAGGED TABLE

Share Repurchase Program

Prior to 2001, our Board of Directors authorized the repurchase of $2 billion of our common stock. Since the inception of our share repurchase program, we have repurchased a total of 40.5 million shares of our common stock at a total cost of $1,186 million ($29.29 per share), net of the premium from exercised and expired put options.

Common stock repurchases under our program have been essentially suspended. Consequently, common stock repurchases did not have a material impact on our second quarter or year to date 2002 earnings and financial position.

ZEQ.=2,SEQ=7,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=323373,FOLIO='5',FILE='DISK014:[02STP5.02STP2295]DK2295A.;27',USER='MVANGB',CD='12-SEP-2002;14:14'

Long-term Debt

During the second quarter and first half of 2002, we repurchased $46 million and $50 million, respectively, of long-term debt with a weighted average interest rate of approximately 9.7 percent for each period. These transactions resulted in a pre-tax loss of $16 million and $18 million ($.01 per share) in the second quarter and first half of 2002, respectively, which is included in interest expense in the Consolidated Results of Operations.

During the second quarter we issued $750 million of long-term debt, bearing interest at 5.38 percent, maturing in June 2009. Also during the quarter, Target Receivables Corporation sold, through the Target Credit Card Master Trust, $750 million of credit card receivables to the public in a secured debt transaction. This issue of receivable-backed securities has an expected maturity of five years and a floating rate initially set at 1.99 percent. During the first quarter we issued $1 billion of long-term debt, bearing interest at 5.88 percent, maturing in March 2012.

Accounts Receivable

Accounts receivable is recorded net of an allowance for expected losses. The allowance, estimated from historical portfolio performance and projections of trends, was $332 million at August 3, 2002 and $261 million at February 2, 2002.

Benefit Plans

Certain non-qualified pension and survivor benefits owed to current executives were exchanged for deferrals in an existing defined contribution employee benefit plan. Additionally, certain retired executives accepted our offer to exchange our obligation to them in a frozen non-qualified plan for deferrals in the existing defined contribution plan. These exchanges resulted in second quarter pre-tax net expense of $15 million ($.01 per share) and year to date pre-tax net expense of $35 million ($.02 per share). These amounts reflect $20 million and $47 million for the quarter and year to date, respectively, of additional defined contribution plan benefits expense partially offset by reduced net pension expense.

We will enjoy lower future expenses as a result of these transactions because they were designed to be economically neutral or slightly favorable to us.

ZEQ.=3,SEQ=8,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=506261,FOLIO='6',FILE='DISK014:[02STP5.02STP2295]DK2295A.;27',USER='MVANGB',CD='12-SEP-2002;14:14' THIS IS THE END OF A COMPOSITION COMPONENT

Segment Disclosures (Millions)

Revenues by segment were as follows:

User-specified TAGGED TABLE

	Three Months Ended — August 3	,	August 4	, %		Six Months Ended — August 3	,	August 4	, %
	2002	2001		Change		2002	2001		Change
Target	$ 8,499	$	7,311	16.2	%	$ 16,528	$	14,082	17.4	%
Mervyn's	886		931	(4.9	)	1,749		1,802	(3.0	)
Marshall Field's	589		598	(1.4	)	1,214		1,227	(1.1	)
Other	94		101	(7.8	)	171		164	4.5
Total	$ 10,068	$	8,941	12.6	%	$ 19,662	$	17,275	13.8	%

end of user-specified TAGGED TABLE

Pre-tax segment profit and the reconciliation to pre-tax earnings were as follows:

User-specified TAGGED TABLE

	Three Months Ended — August 3	,	August 4	, %		Six Months Ended — August 3	,	August 4	, %
	2002	2001		Change		2002	2001		Change
Target	$ 708	$	522	35.5	%	$ 1,386	$	1,024	35.3 %
Mervyn's	59		60	(1.2	)	111		108	3.0
Marshall Field's	18		16	18.0		50		39	28.8
Total pre-tax segment profit	785		598	31.4		1,547		1,171	32.1
Securitization adjustment (interest equivalent)	–		(13	)		–		(25	)
Interest expense	(154	)	(109	)		(289	)	(216	)
Other	(72	)	(37	)		(143	)	(82	)
Earnings before income taxes	$ 559	$	439	27.4	%	$ 1,115	$	848	31.5 %

end of user-specified TAGGED TABLE ZEQ.=1,SEQ=9,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=947611,FOLIO='7',FILE='DISK014:[02STP5.02STP2295]DM2295A.;13',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT

TOC_END User-specified TAGGED TABLE

MANAGEMENT'S DISCUSSION AND ANALYSIS TARGET CORPORATION

end of user-specified TAGGED TABLE

Analysis of Operations

Second quarter 2002 net earnings were $344 million, or $.38 per share, compared with $271 million, or $.30 per share, for the same period last year. First half 2002 net earnings were $689 million, or $.75 per share, compared with $525 million, or $.58 per share for first half 2001.

Revenues and Comparable-Store Sales

Total revenues for the quarter increased 12.6 percent to $10,068 million compared with $8,941 million for the same period a year ago. Total comparable-store sales (sales from stores open longer than one year) increased 3.0 percent. Our revenue growth reflected Target's new store expansion and comparable-store sales growth combined with growth in our credit card operations.

Year-over-year changes in comparable-store sales by business segment were as follows:

User-specified TAGGED TABLE

Target	Three Months Percentage Change — 4.4	%	Six Months Percentage Change — 5.6	%
Mervyn's	(5.1	)	(3.3	)
Marshall Field's	(2.5	)	(2.3	)
Total	3.0	%	4.1	%

end of user-specified TAGGED TABLE

Gross Margin Rate

The gross margin rate represents gross margin (sales less cost of sales) as a percent of sales. In the second quarter, our gross margin rate was favorable to the second quarter of last year, reflecting strong gross margin rate improvement at Target and Mervyn's.

Operating Expense Rate

The operating expense rate represents selling, general and administrative expense as a percent of sales. In the second quarter, our operating expense rate was unfavorable to the second quarter of last year, as growth in expense was only partially offset by the benefit of overall growth at Target, our lowest expense rate division.

Pre-tax Segment Profit

We define pre-tax segment profit as earnings before LIFO, securitization effects, interest, other expense and unusual items. Our second quarter pre-tax segment profit increased 31.4 percent to $785 million compared with $598 million for the same period a year ago. Pre-tax segment profit in the first half of 2002 increased 32.1 percent to $1,547 million compared with $1,171 million for the same period a year ago. During the second quarter 2002, Target's pre-tax profit increased 35.5

ZEQ.=1,SEQ=10,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=436649,FOLIO='8',FILE='DISK014:[02STP5.02STP2295]DO2295A.;15',USER='KHUGGET',CD='12-SEP-2002;09:22'

percent from the same period a year ago while Mervyn's pre-tax profit decreased 1.2 percent and Marshall Field's pre-tax profit improved 18.0 percent. A reconciliation of pre-tax segment profit to pre-tax earnings is provided in the Notes to Consolidated Financial Statements.

Other Performance Factors

The total of interest expense and interest equivalent was $154 million and $289 million in the second quarter and first half of 2002, representing a $32 million and $48 million increase, respectively, from the same periods last year. The increase in interest expense and interest equivalent was due to the repurchase of high interest rate debt at a premium and higher average funded balances, partially offset by the benefit of a lower average portfolio interest rate. For analytical purposes, the amounts that represented payments accrued to holders of sold securitized receivables prior to August 22, 2001 are considered as "interest equivalent." After that date such payments constitute interest expense.

Our estimated annual effective income tax rate is 38.2 percent in 2002, compared with 38.0 percent for 2001.

Analysis of Financial Condition

Our financial condition remains strong. We continue to fund the growth in our business through a combination of internally generated funds and debt.

For the second quarter, total gross receivables serviced increased $1,949 million, or 72.5 percent, over the second quarter of last year. The growth in receivables serviced was driven by the company's national roll-out of the Target Visa card. Inventory increased $141 million, or 3.2 percent, over the second quarter of last year primarily reflecting new square footage growth at Target. The inventory growth was more than fully funded by a $452 million, or 12 percent, increase in accounts payable.

Capital expenditures for the first half of 2002 were $1,479 million, compared with $1,586 million for the same period a year ago. The 2001 expenditures included the acquisition of rights to 35 former Montgomery Wards stores. Investment in Target stores accounted for 94 percent of current year capital expenditures.

Our share repurchase program is described in the Notes to Consolidated Financial Statements.

Credit Card Operations (Millions)

Our credit card programs strategically support our core retail operations and are an integral component of each business segment. Therefore, included in each segment's pre-tax profit is revenue and expense from its credit card operations.

ZEQ.=2,SEQ=11,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=1033933,FOLIO='9',FILE='DISK014:[02STP5.02STP2295]DO2295A.;15',USER='KHUGGET',CD='12-SEP-2002;09:22'

Credit card contribution to pre-tax segment profit on an accounts receivable serviced basis was as follows:

User-specified TAGGED TABLE

	Three Months Ended — August 3	,	August 4	,	August 3	,	August 4
	2002	2001		2002		2001
Revenues
Finance charges, late fees and other revenues	$ 262	$	175	$	506	$	350
Merchant fees
Intracompany	23		22		45		44
Third-party	15		1		29		2
Total revenues	300		198		580		396
Expenses
Bad debt	103		45		192		81
Operations and marketing	68		50		144		102
Total expenses	171		95		336		183
Pre-tax credit contribution	$ 129	$	103	$	244	$	213

end of user-specified TAGGED TABLE

Total receivables serviced were as follows:

User-specified TAGGED TABLE

	2002	2001
Target
Guest Card	$ 865	$ 1,255
Target Visa	2,534	131
Mervyn's	586	639
Marshall Field's	651	662
Quarter-end receivables serviced	$ 4,636	$ 2,687
Past due*	5.6 %	6.8 %
Average receivables serviced	$ 4,301	$ 2,732

end of user-specified TAGGED TABLE

*Accounts with two or more payments past due as a percent of total outstanding receivables.

The allowance for doubtful accounts on serviced receivables was as follows:

User-specified TAGGED TABLE

	Three Months Ended — August 3	,	August 4	,	August 3	,	August 4	,
	2002	2001		2002		2001
Allowance at beginning of period	$ 297	$	207	$	261	$	211
Bad debt provision	103		45		192		81
Net write-offs	(68	)	(39	)	(121	)	(79	)
Allowance at end of period	$ 332	$	213	$	332	$	213
As a percent of period-end receivables serviced	7.2	%	7.9	%	7.2	%	7.9	%
As a multiple of current 12 months net write-offs	1.5		1.4		1.5		1.4

end of user-specified TAGGED TABLE ZEQ.=3,SEQ=12,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=960416,FOLIO='10',FILE='DISK014:[02STP5.02STP2295]DO2295A.;15',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT

Store Data

During the quarter, we opened a total of 33 new Target stores. Net of relocations and closings, these openings included 19 discount stores and 7 SuperTarget stores. At August 3, 2002, our number of stores and retail square feet were as follows:

User-specified TAGGED TABLE

	Number of Stores — August 3	Feb. 2	August 4	Retail Square Feet* — August 3	Feb. 2	August 4
	2002	2002	2001	2002	2002	2001
Target	1,107	1,053	1,019	133,811	125,203	119,822
Mervyn's	264	264	265	21,425	21,425	21,480
Marshall Field's	64	64	64	14,638	14,638	14,638
Total	1,435	1,381	1,348	169,874	161,266	155,940

end of user-specified TAGGED TABLE

*In thousands, reflects total square feet, less office, warehouse and vacant space

Supplemental Information (Millions)

We provide the following supplemental information derived from our financial statements because we believe it provides a meaningful aid to the analysis of our performance by segment. We define segment EBITDA as pre-tax segment profit before depreciation and amortization expense. Our definition of EBITDA and pre-tax segment profit may differ from definitions used by other companies. This presentation is not intended to be a substitute for GAAP reported measures of profitability and cash flow. A reconciliation of pre-tax segment profit to pre-tax earnings is provided in the Notes to Consolidated Financial Statements. Segment EBITDA and the reconciliation of pre-tax segment profit were as follows:

User-specified TAGGED TABLE

	Three Months Ended — August 3	,	August 4	, %		Six Months Ended — August 3	,	August 4	, %
	2002	2001		Change		2002	2001		Change
Target	$ 931	$	709	31.2	%	$ 1,830	$	1,395	31.1	%
Mervyn's	86		91	(5.2	)	167		171	(1.9	)
Marshall Field's	49		50	(0.3	)	113		107	5.8
Total segment EBITDA	$ 1,066	$	850	25.5	%	$ 2,110	$	1,673	26.1
Segment depreciation and amortization	(281	)	(252	)		(563	)	(502	)
Pre-tax segment profit	$ 785	$	598	31.4	%	$ 1,547	$	1,171	32.1	%
Cash flows provided by/(used for):
Operating activities						$ 567	$	883
Investing activities						(1,468	)	(1,356	)
Financing activities						2,157		915
Net increase in cash and cash equivalents						$ 1,256	$	442

end of user-specified TAGGED TABLE ZEQ.=1,SEQ=13,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=379723,FOLIO='11',FILE='DISK014:[02STP5.02STP2295]DQ2295A.;8',USER='JKEENE',CD='13-SEP-2002;10:46'

Outlook for Fiscal Year 2002

For the full year, we believe that we are well positioned to deliver strong growth in revenues and earnings. We expect this growth to be driven by increases in comparable-store sales and contributions from new store growth at Target as well as by continued growth in contribution from our credit card operations, primarily through the Target Visa credit card. For the Corporation overall, gross margin rate and operating expense rates are expected to remain essentially even with 2001.

Interest expense is expected to be considerably higher than interest expense and interest equivalent in 2001 due to higher average funded balances to support expansion of Target stores and credit card receivables.

Forward-Looking Statements

The preceding Management's Discussion and Analysis contains forward-looking statements regarding our performance, liquidity and the adequacy of our capital resources. Those statements are based on our current assumptions and expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. We caution that the forward-looking statements are qualified by the risks and challenges posed by increased competition, shifting consumer demand, changing consumer credit markets, changing capital markets and general economic conditions, hiring and retaining effective team members, sourcing merchandise from domestic and international vendors, investing in new business strategies, achieving our growth objectives, the outbreak of war and other significant national and international events, and other risks and uncertainties. As a result, while we believe that there is a reasonable basis for the forward-looking statements, you should not place undue reliance on those statements. You are encouraged to review Exhibit (99)C attached to our Form 10-K Report for the year ended February 2, 2002, which contains additional important factors that may cause actual results to differ materially from those predicted in the forward-looking statements.

ZEQ.=2,SEQ=14,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=314741,FOLIO='12',FILE='DISK014:[02STP5.02STP2295]DQ2295A.;8',USER='JKEENE',CD='13-SEP-2002;10:46' THIS IS THE END OF A COMPOSITION COMPONENT

TOC_END

PART II. OTHER INFORMATION

User-specified TAGGED TABLE

Item 6.	Exhibits and Reports on Form 8-K
a)	Exhibits
	(2).	Not applicable
	(4)A.	Amended and Restated Rights Agreement, dated as of August 5, 2002, between Target Corporation and Mellon Investor Services LLC.
	(4)B.	Instruments defining the rights of security holders, including indentures. Registrant agrees to furnish the Commission on request copies of instruments with respect to long-term debt.
	(10).	Not applicable
	(11).	Not applicable
	(12).	Statements re Computations of Ratios
	(15).	Not applicable
	(18).	Not applicable
	(19).	Not applicable
	(22).	Not applicable
	(23).	Not applicable
	(24).	Not applicable
b)	Reports on Form 8-K:
	Form 8-K filed July 11, 2002, providing the News Release relating to June sales results.
	Form 8-K filed August 8, 2002, providing the News Release relating to July sales results.
	Form 8-K filed August 15, 2002, providing the News Release relating to second quarter results.
	Form 8-K filed September 5, 2002, providing the News Release relating to August sales results.

end of user-specified TAGGED TABLE ZEQ.=1,SEQ=15,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=260322,FOLIO='13',FILE='DISK014:[02STP5.02STP2295]JA2295A.;13',USER='JKEENE',CD='13-SEP-2002;10:46' THIS IS THE END OF A COMPOSITION COMPONENT

TOC_END

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

User-specified TAGGED TABLE

Dated: September 13, 2002	TARGET CORPORATION — By:	/s/ Douglas A. Scovanner Douglas A. Scovanner Executive Vice President, Chief Financial Officer and Chief Accounting Officer

end of user-specified TAGGED TABLE

Certifications

I, Robert J. Ulrich, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Target Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. User-specified TAGGED TABLE

Date: September 13, 2002
/s/ Robert J. Ulrich Robert J. Ulrich Chairman of the Board and Chief Executive Officer

end of user-specified TAGGED TABLE ZEQ.=1,SEQ=16,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=420590,FOLIO='14',FILE='DISK014:[02STP5.02STP2295]JC2295A.;8',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT

I, Douglas A. Scovanner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Target Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. User-specified TAGGED TABLE

Date: September 13, 2002
/s/ Douglas A. Scovanner Douglas A. Scovanner Executive Vice President and Chief Financial Officer

end of user-specified TAGGED TABLE ZEQ.=1,SEQ=17,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=184349,FOLIO='15',FILE='DISK014:[02STP5.02STP2295]JE2295A.;3',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT

TOC_END User-specified TAGGED TABLE

Exhibit Index
(10).	Amended and Restated Rights Agreement
(12).	Statements re Computations of Ratios

end of user-specified TAGGED TABLE ZEQ.=1,SEQ=18,EFW="2089176",CP="TARGET CORPORATION",DN="1",CHK=106069,FOLIO='16',FILE='DISK014:[02STP5.02STP2295]KA2295A.;2',USER='KHUGGET',CD='12-SEP-2002;09:22' THIS IS THE END OF A COMPOSITION COMPONENT TOCEXISTFLAG