TARGET CORP — Interim / Quarterly Report 2019

Aug 30, 2019

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended August 3, 2019

OR

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

For the transition period from _ to _

Commission File Number 1-6049

TARGET CORP ORATION

(Exact name of registrant as specified in its charter)

Minnesota

(State or other jurisdiction of incorporation or organization)

1000 Nicollet Mall , Minneapolis , Minnesota

(Address of principal executive offices)

41-0215170

(I.R.S. Employer Identification No.)

55403

(Zip Code)

Registrant’s telephone number, including area code: 612 / 304-6073

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0833 per share	TGT	New York Stock Exchange

Indicate by check mark whether 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer — Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of registrant’s classes of common stock, as of the latest practicable date. Total shares of common stock, par value $0.0833, outstanding at August 26, 2019 were 510,928,517 .

TARGET CORPORATION

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Operations	1
	Consolidated Statements of Comprehensive Income	2
	Consolidated Statements of Financial Position	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of Shareholders’ Investment	5
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	21
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	23
Signature		24

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations
	Three Months Ended				Six Months Ended
(millions, except per share data) (unaudited)	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Sales	$ 18,183		$ 17,552		$ 35,584		$ 34,108
Other revenue	239		224		465		450
Total revenue	18,422		17,776		36,049		34,558
Cost of sales	12,625		12,239		24,874		23,865
Selling, general and administrative expenses	3,912		3,865		7,575		7,410
Depreciation and amortization (exclusive of depreciation included in cost of sales)	561		539		1,142		1,109
Operating income	1,324		1,133		2,458		2,174
Net interest expense	120		115		246		237
Net other (income) / expense	( 13	)	( 4	)	( 27	)	( 12	)
Earnings from continuing operations before income taxes	1,217		1,022		2,239		1,949
Provision for income taxes	279		223		509		433
Net earnings from continuing operations	938		799		1,730		1,516
Discontinued operations, net of tax	—		—		3		1
Net earnings	$ 938		$ 799		$ 1,733		$ 1,517
Basic earnings per share
Continuing operations	$ 1.83		$ 1.50		$ 3.37		$ 2.84
Discontinued operations	—		—		0.01		—
Net earnings per share	$ 1.83		$ 1.50		$ 3.37		$ 2.84
Diluted earnings per share
Continuing operations	$ 1.82		$ 1.49		$ 3.34		$ 2.81
Discontinued operations	—		—		0.01		—
Net earnings per share	$ 1.82		$ 1.49		$ 3.35		$ 2.82
Weighted average common shares outstanding
Basic	512.1		531.7		513.9		534.3
Diluted	516.1		536.3		517.8		538.6
Antidilutive shares	—		—		—		—

Note: Per share amounts may not foot due to rounding.

See accompanying Notes to Consolidated Financial Statements.

1

Consolidated Statements of Comprehensive Income
	Three Months Ended			Six Months Ended
(millions) (unaudited)	August 3, 2019	August 4, 2018		August 3, 2019	August 4, 2018
Net earnings	$ 938	$ 799		$ 1,733	$ 1,517
Other comprehensive income
Pension, net of tax	10	16		20	29
Currency translation adjustment and cash flow hedges, net of tax	—	( 2	)	3	( 5	)
Other comprehensive income	10	14		23	24
Comprehensive income	$ 948	$ 813		$ 1,756	$ 1,541

See accompanying Notes to Consolidated Financial Statements.

2

Consolidated Statements of Financial Position — (millions, except footnotes) (unaudited)	August 3, 2019		February 2, 2019		August 4, 2018
Assets
Cash and cash equivalents	$ 1,656		$ 1,556		$ 1,180
Inventory	9,122		9,497		9,112
Other current assets	1,341		1,466		1,211
Total current assets	12,119		12,519		11,503
Property and equipment
Land	6,054		6,064		6,074
Buildings and improvements	29,908		29,240		28,629
Fixtures and equipment	5,622		5,912		5,356
Computer hardware and software	2,627		2,544		2,575
Construction-in-progress	667		460		685
Accumulated depreciation	( 18,866	)	( 18,687	)	( 18,147	)
Property and equipment, net	26,012		25,533		25,172
Operating lease assets	2,062		1,965		1,976
Other noncurrent assets	1,373		1,273		1,345
Total assets	$ 41,566		$ 41,290		$ 39,996
Liabilities and shareholders’ investment
Accounts payable	$ 9,152		$ 9,761		$ 9,116
Accrued and other current liabilities	4,059		4,201		3,878
Current portion of long-term debt and other borrowings	1,153		1,052		1,044
Total current liabilities	14,364		15,014		14,038
Long-term debt and other borrowings	10,365		10,223		10,108
Noncurrent operating lease liabilities	2,111		2,004		2,028
Deferred income taxes	1,082		972		828
Other noncurrent liabilities	1,808		1,780		1,827
Total noncurrent liabilities	15,366		14,979		14,791
Shareholders’ investment
Common stock	43		43		44
Additional paid-in capital	6,114		6,042		5,788
Retained earnings	6,461		6,017		6,058
Accumulated other comprehensive loss	( 782	)	( 805	)	( 723	)
Total shareholders’ investment	11,836		11,297		11,167
Total liabilities and shareholders’ investment	$ 41,566		$ 41,290		$ 39,996

Common Stock Authorized 6,000,000,000 shares, $ 0.0833 par value; 511,335,375 , 517,761,600 and 526,112,846 shares issued and outstanding at August 3, 2019 , February 2, 2019 , and August 4, 2018 , respectively.

Preferred Stock Authorized 5,000,000 shares, $ 0.01 par value; no shares were issued or outstanding during any period presented.

See accompanying Notes to Consolidated Financial Statements.

3

Consolidated Statements of Cash Flows
	Six Months Ended
(millions) (unaudited)	August 3, 2019		August 4, 2018
Operating activities
Net earnings	$ 1,733		$ 1,517
Earnings from discontinued operations, net of tax	3		1
Net earnings from continuing operations	1,730		1,516
Adjustments to reconcile net earnings to cash provided by operations
Depreciation and amortization	1,267		1,234
Share-based compensation expense	86		71
Deferred income taxes	104		129
Noncash losses / (gains) and other, net	42		99
Changes in operating accounts
Inventory	375		( 515	)
Other assets	64		1
Accounts payable	( 731	)	342
Accrued and other liabilities	( 127	)	( 154	)
Cash provided by operating activities—continuing operations	2,810		2,723
Cash provided by operating activities—discontinued operations	2		1
Cash provided by operations	2,812		2,724
Investing activities
Expenditures for property and equipment	( 1,394	)	( 1,856	)
Proceeds from disposal of property and equipment	10		15
Other investments	—		3
Cash required for investing activities	( 1,384	)	( 1,838	)
Financing activities
Additions to long-term debt	994		—
Reductions of long-term debt	( 1,026	)	( 255	)
Dividends paid	( 658	)	( 665	)
Repurchase of stock	( 662	)	( 954	)
Accelerated share repurchase pending final settlement	—		( 525	)
Stock option exercises	24		50
Cash required for financing activities	( 1,328	)	( 2,349	)
Net increase / (decrease) in cash and cash equivalents	100		( 1,463	)
Cash and cash equivalents at beginning of period	1,556		2,643
Cash and cash equivalents at end of period	$ 1,656		$ 1,180
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities	$ 156		$ 15
Leased assets obtained in exchange for new operating lease liabilities	195		169

See accompanying Notes to Consolidated Financial Statements.

4

Consolidated Statements of Shareholders’ Investment
	Common		Stock		Additional				Accumulated Other
	Stock		Par		Paid-in		Retained		Comprehensive
(millions) (unaudited)	Shares		Value		Capital		Earnings		(Loss) / Income		Total
February 3, 2018	541.7		$ 45		$ 5,858		$ 6,495		$ ( 747	)	$ 11,651
Net earnings	—		—		—		718		—		718
Other comprehensive income	—		—		—		—		10		10
Dividends declared	—		—		—		( 333	)	—		( 333	)
Repurchase of stock	( 6.9	)	( 1	)	—		( 493	)	—		( 494	)
Accelerated share repurchase pending final settlement	( 2.9	)	—		( 225	)	( 200	)	—		( 425	)
Stock options and awards	1.0		—		31		—		—		31
May 5, 2018	532.9		$ 44		$ 5,664		$ 6,187		$ ( 737	)	$ 11,158
Net earnings	—		—		—		799		—		799
Other comprehensive income	—		—		—		—		14		14
Dividends declared	—		—		—		( 341	)	—		( 341	)
Repurchase of stock	( 2.9	)	—		225		( 232	)	—		( 7	)
Accelerated share repurchase pending final settlement	( 4.6	)	—		( 170	)	( 355	)	—		( 525	)
Stock options and awards	0.7		—		69		—		—		69
August 4, 2018	526.1		$ 44		$ 5,788		$ 6,058		$ ( 723	)	$ 11,167
Net earnings	—		—		—		622		—		622
Other comprehensive income	—		—		—		—		9		9
Dividends declared	—		—		—		( 338	)	—		( 338	)
Repurchase of stock	( 1.7	)	( 1	)	170		( 171	)	—		( 2	)
Accelerated share repurchase pending final settlement	( 3.5	)	—		( 163	)	( 287	)	—		( 450	)
Stock options and awards	0.9		—		72		—		—		72
November 3, 2018	521.8		$ 43		$ 5,867		$ 5,884		$ ( 714	)	$ 11,080
Net earnings	—		—		—		799		—		799
Other comprehensive loss	—		—		—		—		( 91	)	( 91	)
Dividends declared	—		—		—		( 336	)	—		( 336	)
Repurchase of stock	( 4.7	)	—		163		( 330	)	—		( 167	)
Stock options and awards	0.7		—		12		—		—		12
February 2, 2019	517.8		$ 43		$ 6,042		$ 6,017		$ ( 805	)	$ 11,297

5

Consolidated Statements of Shareholders’ Investment
	Common		Stock	Additional				Accumulated Other
	Stock		Par	Paid-in		Retained		Comprehensive
(millions) (unaudited)	Shares		Value	Capital		Earnings		(Loss) / Income		Total
February 2, 2019	517.8		$ 43	$ 6,042		$ 6,017		$ ( 805	)	$ 11,297
Net earnings	—		—	—		795		—		795
Other comprehensive income	—		—	—		—		13		13
Dividends declared	—		—	—		( 330	)	—		( 330	)
Repurchase of stock	( 3.6	)	—	—		( 277	)	—		( 277	)
Accelerated share repurchase pending final settlement	( 3.0	)	—	( 153	)	( 247	)	—		( 400	)
Stock options and awards	1.1		—	19		—		—		19
May 4, 2019	512.3		$ 43	$ 5,908		$ 5,958		$ ( 792	)	$ 11,117
Net earnings	—		—	—		938		—		938
Other comprehensive income	—		—	—		—		10		10
Dividends declared	—		—	—		( 341	)	—		( 341	)
Repurchase of stock	( 1.3	)	—	153		( 94	)	—		59
Stock options and awards	0.3		—	53		—		—		53
August 3, 2019	511.3		$ 43	$ 6,114		$ 6,461		$ ( 782	)	$ 11,836

We declared $ 0.66 and $ 0.64 dividends per share for the three months ended August 3, 2019 , and August 4, 2018 , respectively, and $ 2.54 per share for the fiscal year ended February 2, 2019 .

See accompanying Notes to Consolidated Financial Statements.

6

Notes to Consolidated Financial Statements (unaudited)

1. Accounting Policies

These unaudited condensed consolidated financial statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC) applicable to interim financial statements. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by United States (U.S.) generally accepted accounting principles (U.S. GAAP) for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statement disclosures in our 2018 Form 10-K.

We use the same accounting policies in preparing quarterly and annual financial statements. Unless otherwise noted, amounts presented within the Notes to Consolidated Financial Statements refer to our continuing operations.

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. Nearly all of our revenues are generated in the U.S. The vast majority of our long-lived assets are located within the U.S.

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

2. Revenues

General merchandise sales represent the vast majority of our revenues. We also earn revenues from a variety of other sources, most notably credit card profit sharing income from our arrangement with TD Bank Group (TD).

Revenues — (millions)	Three Months Ended — August 3, 2019	August 4, 2018	Six Months Ended — August 3, 2019	August 4, 2018
Apparel and accessories (a)	$ 3,656	$ 3,470	$ 6,946	$ 6,584
Beauty and household essentials (a)	5,076	4,784	10,047	9,401
Food and beverage	3,460	3,372	7,182	6,959
Hardlines	2,503	2,501	4,889	4,814
Home furnishings and décor	3,457	3,402	6,458	6,304
Other	31	23	62	46
Sales	18,183	17,552	35,584	34,108
Credit card profit sharing	168	167	328	333
Other	71	57	137	117
Other revenue	239	224	465	450
Total revenue	$ 18,422	$ 17,776	$ 36,049	$ 34,558

(a) We reclassified certain non-apparel baby merchandise sales totaling $ 398 million and $ 854 million for the three and six months ended August 3, 2019 , respectively, and $ 373 million and $ 763 million for the three and six months ended August 4, 2018 , respectively, from Apparel and Accessories to Beauty and Household Essentials.

We record almost all retail store revenues at the point of sale. Digitally originated sales may include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store. Sales are recognized net of expected returns, which we estimate using historical return patterns and our expectation of future returns. As of August 3, 2019 , February 2, 2019 , and August 4, 2018 , the accrual for estimated returns was $ 131 million , $ 116 million , and $ 114 million , respectively. We have not historically had material adjustments to our returns estimates.

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

7

(millions)	February 2, 2019	Gift Cards Issued During Current Period But Not Redeemed (a)	Revenue Recognized From Beginning Liability		August 3, 2019
Gift card liability	$ 840	$ 317	$ ( 465	)	$ 692

(a) Net of estimated breakage.

Credit card profit sharing – We receive payments under a credit card program agreement with TD. Under the agreement, we receive a percentage of the profits generated by the Target Credit Card and Target MasterCard receivables in exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target Credit Card and Target MasterCard receivables, controls risk management policies, and oversees regulatory compliance.

3. Fair Value Measurements

Fair value measurements are reported in one of three levels reflecting the valuation techniques used to determine fair value.

Fair Value Measurements - Recurring Basis — (millions)	Classification	Pricing Category	Fair Value at — August 3, 2019	February 2, 2019	August 4, 2018
Assets
Short-term investments	Cash and Cash Equivalents	Level 1	$ 796	$ 769	$ 353
Prepaid forward contracts	Other Current Assets	Level 1	20	19	22
Interest rate swaps	Other Noncurrent Assets	Level 2	108	10	—
Liabilities
Interest rate swaps	Other Current Liabilities	Level 2	—	3	7
Interest rate swaps	Other Noncurrent Liabilities	Level 2	—	—	2

Significant Financial Instruments not Measured at Fair Value (a) (millions)	August 3, 2019 — Carrying Amount	Fair Value	February 2, 2019 — Carrying Amount	Fair Value	August 4, 2018 — Carrying Amount	Fair Value
Long-term debt, including current portion (b)	$ 10,244	$ 11,635	$ 10,247	$ 10,808	$ 10,243	$ 10,682

(a) The carrying amounts of certain other current assets, commercial paper, 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 commercial paper, unamortized swap valuation adjustments, and lease liabilities.

4. Property and Equipment

We review long-lived assets for impairment when store performance expectations, events, or changes in circumstances—such as a decision to relocate or close a store or distribution center, discontinue projects, or make significant software changes—indicate that the asset’s carrying value may not be recoverable. We recognized impairment charges of $ 10 million and $ 13 million during the three and six months ended August 3, 2019 , respectively, primarily resulting from store impairments. We recognized impairment charges of $ 78 million and $ 85 million during the three and six months ended August 4, 2018 , respectively, primarily resulting from planned store closures. The impairment charges are recorded in Selling, General and Administrative Expenses.

5. Commercial Paper and Long-Term Debt

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

8

Our commercial paper program provides a source of short-term financing. For the six months ended August 3, 2019 , the maximum amount outstanding was $ 744 million , and the average daily amount outstanding was $ 74 million at a weighted average annual interest rate of 2.4 percent . For the six months ended August 4, 2018 , the maximum amount outstanding was $ 658 million , and the average daily amount outstanding was $ 63 million at a weighted average annual interest rate of 1.8 percent . As of August 3, 2019 , and August 4, 2018 , no balances were outstanding.

6. Derivative Financial Instruments

Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 3 provides the fair value and classification of these instruments.

In March 2019, we entered into interest rate swaps with a total notional amount of $ 1,000 million , and in June 2019, interest rate swaps with a total notional amount of $ 1,000 million matured. As of August 3, 2019 , we were party to interest rate swaps with notional amounts totaling $ 1,500 million , compared with $ 1,250 million as of August 4, 2018 . We pay a variable rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were perfectly effective during the three and six months ended August 3, 2019 , and August 4, 2018 .

Effect of Hedges on Debt — (millions)	August 3, 2019	February 2, 2019		August 4, 2018
Current portion of long-term debt and other borrowings
Carrying amount of hedged debt	$ —	$ 996		$ 992
Cumulative hedging adjustments, included in carrying amount	—	( 3	)	( 7	)
Long-term debt and other borrowings
Carrying amount of hedged debt	1,600	508		247
Cumulative hedging adjustments, included in carrying amount	108	10		( 2	)

Effect of Hedges on Net Interest Expense — (millions)	Three Months Ended — August 3, 2019		August 4, 2018		Six Months Ended — August 3, 2019		August 4, 2018
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges	$ 86		$ 1		$ 101		$ ( 3	)
Hedged debt	( 86	)	( 1	)	( 101	)	3
Total	$ —		$ —		$ —		$ —

7. Share Repurchase

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

9

(millions, except per share data)	Three Months Ended — August 3, 2019 (a)	August 4, 2018 (b)	Six Months Ended — August 3, 2019 (a)	August 4, 2018 (b)
Total number of shares purchased	4.3	5.8	7.9	12.7
Average price paid per share	$ 80.02	$ 74.31	$ 78.63	$ 72.64
Total investment	$ 341	$ 431	$ 618	$ 925

(a) Includes activity related to the ASR arrangement entered in first quarter 2019 because final settlement occurred in second quarter 2019. Under the ASR arrangement, we repurchased 4.2 million shares for a total cash investment of $ 340 million . We did not enter into any new ASR arrangements during second quarter 2019.

(b) Activity related to the second quarter 2018 ASR arrangement described below is omitted because final settlement had not occurred as of August 4, 2018.

During the second quarter of 2018, we entered into an ASR arrangement to repurchase $ 400 to $ 525 million of our common stock. Under the agreement, we paid $ 525 million and received an initial delivery of 4.6 million shares, which were retired, resulting in a $ 355 million reduction to Retained Earnings. As of August 4, 2018 , $ 170 million was included as a reduction to Additional Paid-in Capital. Upon final settlement in the third quarter of 2018, we received an additional 0.2 million shares, which were retired, and $ 125 million for the remaining amount not settled in shares. In total, we repurchased 4.8 million shares under the ASR arrangement for a total cash investment of $ 400 million ( $ 83.88 per share).

8. Pension Benefits

We provide pension plan benefits to eligible team members.

Net Pension Benefits Expense — (millions)	Classification	Three Months Ended — August 3, 2019		August 4, 2018		Six Months Ended — August 3, 2019		August 4, 2018
Service cost benefits earned	SG&A Expenses	$ 23		$ 25		$ 46		$ 49
Interest cost on projected benefit obligation	Net Other (Income) / Expense	37		37		74		73
Expected return on assets	Net Other (Income) / Expense	( 62	)	( 62	)	( 124	)	( 123	)
Amortization of losses	Net Other (Income) / Expense	16		20		31		41
Amortization of prior service cost	Net Other (Income) / Expense	( 3	)	( 3	)	( 5	)	( 6	)
Settlement charges	Net Other (Income) / Expense	—		3		—		3
Total		$ 11		$ 20		$ 22		$ 37

9. Accumulated Other Comprehensive (Loss) / Income

(millions) — February 2, 2019	Cash Flow Hedges — $ ( 13	)	Currency Translation Adjustment — $ ( 20	)	Pension — $ ( 772	)	Total — $ ( 805	)
Other comprehensive income before reclassifications, net of tax	—		3		—		3
Amounts reclassified from AOCI, net of tax	—		—		20		20
August 3, 2019	$ ( 13	)	$ ( 17	)	$ ( 752	)	$ ( 782	)

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

Second quarter 2019 includes the following notable items:

• GAAP earnings per share from continuing operations and adjusted earnings per share were $1.82 .

• Total revenue increased 3.6 percent , driven by a comparable sales increase and sales from new stores.

• Comparable sales increased 3.4 percent, driven by a 2.4 percent increase in traffic.

◦ Comparable store sales grew 1.5 percent .

◦ Digital channel sales increased 34 percent , contributing 1.8 percentage points to comparable sales growth.

• Operating income of $1,324 million was 16.9 percent higher than the comparable prior-year period.

Sales were $18,183 million for the three months ended August 3, 2019 , an increase of $631 million , or 3.6 percent, from the same period in the prior year. Operating cash flow provided by continuing operations was $2,810 million for the six months ended August 3, 2019 , an increase of $87 million , or 3.2 percent , from $2,723 million for the six months ended August 4, 2018 .

Earnings Per Share from Continuing Operations	Three Months Ended — August 3, 2019	August 4, 2018	Change	Six Months Ended — August 3, 2019	August 4, 2018	Change
GAAP diluted earnings per share	$ 1.82	$ 1.49	22.0 %	$ 3.34	$ 2.81	18.7 %
Adjustments	—	(0.02	)	—	(0.03	)
Adjusted diluted earnings per share	$ 1.82	$ 1.47	23.9 %	$ 3.34	$ 2.78	20.1 %

Note: Amounts may not foot due to rounding. Adjusted diluted earnings per share from continuing operations (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our continuing operations. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 17.

For the trailing twelve months ended August 3, 2019 , after-tax return on invested capital from continuing operations (ROIC) was 15.2 percent, compared with 16.0 percent for the trailing twelve months ended August 4, 2018 . Excluding the discrete impacts of the Tax Cuts and Jobs Act of 2017 (Tax Act), ROIC was 15.0 percent and 14.2 percent for the trailing twelve months ended August 3, 2019 , and August 4, 2018 , respectively. The calculation of ROIC is provided on page 18.

11

Analysis of Results of Operations

(dollars in millions)	Three Months Ended — August 3, 2019	August 4, 2018	Change	Six Months Ended — August 3, 2019	August 4, 2018	Change
Sales	$ 18,183	$ 17,552	3.6 %	$ 35,584	$ 34,108	4.3 %
Other revenue	239	224	6.3	465	450	3.4
Total revenue	18,422	17,776	3.6	36,049	34,558	4.3
Cost of sales	12,625	12,239	3.1	24,874	23,865	4.2
Selling, general and administrative expenses	3,912	3,865	1.2	7,575	7,410	2.2
Depreciation and amortization (exclusive of depreciation included in cost of sales)	561	539	4.1	1,142	1,109	3.0
Operating income	$ 1,324	$ 1,133	16.9 %	$ 2,458	$ 2,174	13.1 %

Rate Analysis	Three Months Ended — August 3, 2019	August 4, 2018	Six Months Ended — August 3, 2019	August 4, 2018
Gross margin rate	30.6 %	30.3 %	30.1 %	30.0 %
SG&A expense rate	21.2	21.7	21.0	21.4
Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate	3.0	3.0	3.2	3.2
Operating income margin rate	7.2	6.4	6.8	6.3

Note: Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales. All other rates are calculated by dividing the applicable amount by total revenue.

Sales

Sales include all merchandise sales, net of expected returns, and gift card breakage. Comparable sales is a measure that highlights the performance of our stores and digital channels by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales include all sales, except sales from stores open less than 13 months, digital acquisitions we have owned less than 13 months, stores that have been closed, and digital acquisitions that we no longer operate. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies. Digitally originated sales include all sales initiated through mobile applications and our websites. Our stores fulfill the majority of digitally originated sales, including shipment from stores to guests, store pick-up or drive-up, and delivery via our wholly-owned subsidiary, Shipt. Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.

The increase in sales during the three and six months ended August 3, 2019 , is due to a comparable sales increase of 3.4 percent and 4.1 percent , respectively, and the contribution from new stores.

Comparable Sales	Three Months Ended — August 3, 2019	August 4, 2018	Six Months Ended — August 3, 2019	August 4, 2018
Comparable sales change	3.4 %	6.5 %	4.1 %	4.8	%
Drivers of change in comparable sales
Number of transactions	2.4	6.4	3.3	5.0
Average transaction amount	0.9	0.1	0.7	(0.3	)

Note: Amounts may not foot due to rounding.

12

Contribution to Comparable Sales Change	Three Months Ended — August 3, 2019	August 4, 2018	Six Months Ended — August 3, 2019	August 4, 2018
Stores channel comparable sales change	1.5 %	4.9 %	2.1 %	3.4 %
Digital channel contribution to comparable sales change	1.8	1.5	1.9	1.3
Total comparable sales change	3.4 %	6.5 %	4.1 %	4.8 %

Note: Amounts may not foot due to rounding.

Sales by Channel	Three Months Ended — August 3, 2019	August 4, 2018	Six Months Ended — August 3, 2019	August 4, 2018
Stores originated	92.7 %	94.4 %	92.8 %	94.6 %
Digitally originated	7.3	5.6	7.2	5.4
Total	100 %	100 %	100 %	100 %

Note 2 to the Consolidated Financial Statements provides sales by product category. The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible.

We monitor the percentage of purchases that are paid for using REDcards (REDcard Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on REDcards are also incremental sales for Target. Guests receive a 5 percent discount on virtually all purchases when they use a REDcard at Target.

REDcard Penetration	Three Months Ended — August 3, 2019	August 4, 2018	Six Months Ended — August 3, 2019	August 4, 2018
Target Debit Card	12.5 %	13.0 %	12.8 %	13.2 %
Target Credit Cards	10.7	10.9	10.6	10.8
Total REDcard Penetration	23.2 %	23.9 %	23.4 %	24.0 %

Note: Amounts may not foot due to rounding.

13

Gross Margin Rate

For the three and six months ended August 3, 2019 , our gross margin rate was 30.6 percent and 30.1 percent , respectively, compared with 30.3 percent and 30.0 percent , respectively, in the comparable periods last year. The increase was primarily due to merchandising efforts to optimize costs, pricing, promotions, and assortment, combined with favorable category sales mix, partially offset by increased digital fulfillment and supply chain costs.

14

Selling, General, and Administrative Expense Rate

For the three and six months ended August 3, 2019 , our SG&A expense rate was 21.2 percent and 21.0 percent , respectively, compared with 21.7 percent and 21.4 percent , respectively, in the comparable periods last year. The decrease reflects lower impairment charges in 2019, timing of certain expenses, and other broad-based cost savings. For the three and six months ended August 3, 2019, store labor productivity offset pressure from wage growth.

Store Data

Change in Number of Stores	Three Months Ended — August 3, 2019		August 4, 2018	Six Months Ended — August 3, 2019		August 4, 2018
Beginning store count	1,851		1,829	1,844		1,822
Opened	4		6	11		13
Closed	(2	)	—	(2	)	—
Ending store count	1,853		1,835	1,853		1,835

15

Number of Stores and Retail Square Feet	Number of Stores — August 3, 2019	February 2, 2019	August 4, 2018	Retail Square Feet (a) — August 3, 2019	February 2, 2019	August 4, 2018
170,000 or more sq. ft.	272	272	274	48,619	48,604	48,952
50,000 to 169,999 sq. ft.	1,499	1,501	1,502	188,711	188,900	189,258
49,999 or less sq. ft.	82	71	59	2,357	2,077	1,644
Total	1,853	1,844	1,835	239,687	239,581	239,854

(a) In thousands, reflects total square feet less office, distribution center, and vacant space.

Other Performance Factors

Net Interest Expense

Net interest expense from continuing operations was $120 million and $246 million for the three and six months ended August 3, 2019 , respectively, and $115 million and $237 million for the three and six months ended August 4, 2018 , respectively. The increase is due to a higher average debt balance during the three and six months ended August 3, 2019 , as compared with the prior-year periods.

Provision for Income Taxes

Our effective income tax rate from continuing operations for the three and six months ended August 3, 2019 , was 23.0 percent and 22.7 percent , respectively, compared with 21.8 percent and 22.2 percent , respectively, for the comparable periods last year. The effective income tax rates for the three and six months ended August 4, 2018, included benefits from the resolution of certain income tax matters unrelated to current period operations.

16

Reconciliation of Non-GAAP Financial Measures to GAAP Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share from continuing operations (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our continuing operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the U.S. (GAAP). The most comparable GAAP measure is diluted earnings per share from continuing operations. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP. Other companies may calculate Adjusted EPS differently, limiting the usefulness of the measure for comparisons with other companies.

	Three Months Ended
	August 3, 2019			August 4, 2018
(millions, except per share data)	Pretax	Net of Tax	Per Share Amounts	Pretax	Net of Tax		Per Share Amounts
GAAP diluted earnings per share from continuing operations			$ 1.82				$ 1.49
Adjustments
Income tax matters (a)	—	—	—	—	(12	)	(0.02	)
Adjusted diluted earnings per share from continuing operations			$ 1.82				$ 1.47

	Six Months Ended
	August 3, 2019			August 4, 2018
(millions, except per share data)	Pretax	Net of Tax	Per Share Amounts	Pretax	Net of Tax		Per Share Amounts
GAAP diluted earnings per share from continuing operations			$ 3.34				$ 2.81
Adjustments
Income tax matters (a)	—	—	—	—	(18	)	(0.03	)
Adjusted diluted earnings per share from continuing operations			$ 3.34				$ 2.78

Note: Amounts may not foot due to rounding.

(a) Represents benefits from the resolution of certain income tax matters unrelated to current period operations.

Earnings from continuing operations before interest expense and income taxes (EBIT) and earnings before interest expense, income taxes, depreciation and amortization (EBITDA) are non-GAAP financial measures which we believe provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and for EBITDA, capital investment. These measures are not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is net earnings from continuing operations. EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measure for comparisons with other companies.

EBIT and EBITDA — (dollars in millions) (unaudited)	Three Months Ended — August 3, 2019	August 4, 2018	Change	Six Months Ended — August 3, 2019	August 4, 2018	Change
Net earnings from continuing operations	$ 938	$ 799	17.4 %	$ 1,730	$ 1,516	14.1 %
+ Provision for income taxes	279	223	25.2	509	433	17.5
+ Net interest expense	120	115	4.3	246	237	3.8
EBIT	$ 1,337	$ 1,137	17.6 %	$ 2,485	$ 2,186	13.6 %
+ Total depreciation and amortization (a)	624	603	3.5	1,267	1,234	2.7
EBITDA	$ 1,961	$ 1,740	12.7 %	$ 3,752	$ 3,420	9.7 %

(a) Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

17

We have also disclosed after-tax ROIC, which is a ratio based on GAAP information. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies.

After-Tax Return on Invested Capital
(dollars in millions)
	Trailing Twelve Months
Numerator	August 3, 2019	August 4, 2018 (a)
Operating income	$ 4,395	$ 4,150
+ Net other income / (expense)	42	41
EBIT	4,437	4,191
+ Operating lease interest (b)	85	81
- Income taxes (c)(d)	937	589
Net operating profit after taxes	$ 3,585	$ 3,683

Denominator	August 3, 2019	August 4, 2018	July 29, 2017
Current portion of long-term debt and other borrowings	$ 1,153	$ 1,044	$ 1,365
+ Noncurrent portion of long-term debt	10,365	10,108	10,706
+ Shareholders' equity	11,836	11,167	11,055
+ Operating lease liabilities (e)	2,285	2,183	2,032
- Cash and cash equivalents	1,656	1,180	2,291
- Net assets of discontinued operations (f)	—	—	10
Invested capital	$ 23,983	$ 23,322	$ 22,857
Average invested capital (g)	$ 23,652	$ 23,090

After-tax return on invested capital (d)	15.2	16.0
After-tax return on invested capital excluding discrete impacts of Tax Act (d)	15.0 %	14.2 %

(a) Consisted of 53 weeks.

(b) Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A Expenses. Operating lease interest is added back to operating income in the ROIC calculation to control for differences in capital structure between us and our competitors.

(c) Calculated using the effective tax rates for continuing operations, which were 20.7 percent and 13.8 percent for the trailing twelve months ended August 3, 2019 , and August 4, 2018 , respectively. For the trailing twelve months ended August 3, 2019 , and August 4, 2018 , includes tax effect of $919 million and $578 million , respectively, related to EBIT, and $18 million and $11 million , respectively, related to operating lease interest.

(d) The effective tax rate for the trailing twelve months ended August 3, 2019 , and August 4, 2018 , includes discrete tax benefits of $36 million and $343 million, respectively, related to the Tax Act.

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

(f) Included in Other Assets and Liabilities.

(g) Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.

18

Analysis of Financial Condition

Liquidity and Capital Resources

Our cash and cash equivalents balance was $1,656 million , $1,556 million , and $1,180 million at August 3, 2019 , February 2, 2019 , and August 4, 2018 , respectively. Our cash and cash equivalents balance includes short-term investments of $796 million , $769 million , and $353 million as of August 3, 2019 , February 2, 2019 , and August 4, 2018 , respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place dollar limits on our investments in individual funds or instruments.

Capital Allocation

We follow a disciplined and balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, we fully invest in opportunities to profitably grow our business, create sustainable long-term value, and maintain our current operations and assets; second, we maintain a competitive quarterly dividend and seek to grow it annually; and finally, we return any excess cash to shareholders by repurchasing shares within the limits of our credit rating goals.

Operating Cash Flows

Operating cash flow provided by continuing operations was $2,810 million for the six months ended August 3, 2019 , compared with $2,723 million for the six months ended August 4, 2018. The operating cash flow increase resulted from higher net earnings during the six months ended August 3, 2019 , compared with the same period in the prior year, partially offset by higher cash settlement of accounts payable in 2019 driven by elevated 2018 inventory levels.

Inventory

Inventory was $9,122 million as of August 3, 2019 , compared with $9,497 million and $9,112 million at February 2, 2019 , and August 4, 2018 , respectively. The decrease from February 2, 2019, reflects a reduction from elevated year-end inventory levels.

Dividends

We paid dividends totaling $328 million ( $0.64 per share) and $658 million ( $1.28 per share) for the three and six months ended August 3, 2019 , respectively, and $330 million ( $0.62 per share) and $665 million ( $1.24 per share) for the three and six months ended August 4, 2018 , respectively, a per share increase of 3.2 percent. We declared dividends totaling $341 million ( $0.66 per share) during the second quarter of 2019 , a per share increase of 3.1 percent over the $340 million ( $0.64 per share) of declared dividends during the second quarter of 2018 . We have paid dividends every quarter since our 1967 initial public offering, and it is our intent to continue to do so in the future.

Share Repurchase

We returned $341 million and $618 million to shareholders through share repurchase during the three and six months ended August 3, 2019 . See Part II, Item 2 of this Quarterly Report on Form 10-Q and Note 7 to the Consolidated Financial Statements for more information.

Financing

Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced spectrum of debt maturities, and to manage our net exposure to floating interest rate volatility. Within these parameters, we seek to minimize our borrowing costs. Our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity. Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings. As of August 3, 2019 , our credit ratings were as follows:

Credit Ratings	Moody’s	Standard and Poor’s	Fitch
Long-term debt	A2	A	A-
Commercial paper	P-1	A-1	F1

19

If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted. Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same as described above. Fitch raised our commercial paper rating from F2 to F1 during the three months ended August 3, 2019.

In March 2019, we issued $1.0 billion of debt, and in June 2019, we repaid $1.0 billion of debt at maturity. Notes 5 and 6 to the Consolidated Financial Statements provide additional information.

We have additional liquidity through a committed $2.5 billion revolving credit facility obtained through a group of banks. In October 2018, we extended this credit facility by one year to October 2023. No balances were outstanding at any time during 2019 or 2018 .

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. Additionally, as of August 3, 2019 , no notes or debentures contained provisions requiring acceleration of payment upon a credit rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control; and (ii) our long-term credit ratings are either reduced and the resulting rating is noninvestment grade, or our long-term credit ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is noninvestment grade.

We believe our sources of liquidity will continue to be adequate to maintain operations, finance anticipated expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share repurchase program for the foreseeable future. We continue to anticipate ample access to commercial paper and long-term financing.

Contractual Obligations and Commitments

As of the date of this report, other than the new borrowings discussed in Note 5 to the Consolidated Financial Statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since February 2, 2019 , as reported in our 2018 Form 10-K.

New Accounting Pronouncements

We do not expect any recently issued accounting pronouncements to have a material effect on our financial statements.

Forward-Looking Statements

This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words “expect,” “may,” “could,” “believe,” “would,” “might,” “anticipates,” or similar words. The principal forward-looking statements in this report include: our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the continued execution of our share repurchase program, our expected capital expenditures and new lease commitments, the expected compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, the expected return on plan assets, the expected outcome of, and adequacy of our reserves for, claims, litigation and the resolution of tax matters, the expected impact of changes in information technology systems, and changes in our assumptions and expectations.

All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth on our description of risk factors in Item 1A of our Form 10-K for the fiscal year ended February 2, 2019 , which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Form 10-K for the fiscal year ended February 2, 2019 .

20

Item 4. Controls and Procedures

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, the following change to our information technology systems materially affected, or is reasonably likely to materially affect, our internal control over financial reporting:

• We are in the process of a broad multi-year migration of many mainframe-based systems and middleware products to a modern platform, including systems and processes supporting inventory and supply chain-related transactions.

During the most recently completed fiscal quarter, no other change in our internal control over financial reporting materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, we conducted an evaluation, under supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the Securities and Exchange Commission (SEC) under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

21

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

No response is required under Item 103 of Regulation S-K, nor have there been any material developments for any previously reported legal proceedings.

Item 1A. Risk Factors

There have been no material changes to the risk factors described in our Annual Report on Form 10-K for the fiscal year ended February 2, 2019 .

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 20, 2016, our Board of Directors authorized a $5 billion share repurchase program. We began repurchasing shares under this authorization during the fourth quarter of 2016. There is no stated expiration for the share repurchase program. Under the program, we have repurchased 56.4 million shares of common stock through August 3, 2019 , at an average price of $70.46, for a total investment of $4.0 billion. The table below presents information with respect to Target common stock purchases made during the three months ended August 3, 2019 , by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Programs	Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Programs
May 5, 2019 through June 1, 2019
Open market and privately negotiated purchases	—	$ —	—	$ 964,936,694
June 2, 2019 through July 6, 2019
April 2019 ASR (a)	1,235,450	80.21	1,235,450	1,025,219,743
July 7, 2019 through August 3, 2019
Open market and privately negotiated purchases (b)	20,000	41.13	20,000	1,024,397,045
Total	1,255,450	$ 79.59	1,255,450	$ 1,024,397,045

(a) Represents the incremental shares received upon final settlement of the accelerated share repurchase (ASR) agreement initiated in first quarter 2019.

(b) Represents shares retired through the partial settlement of a prepaid forward contract that was initiated in third quarter 2008.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

22

Item 6. Exhibits

(3)A	Amended and Restated Articles of Incorporation (as amended through June 9, 2010) (1)
(3)B	Bylaws (as amended through November 11, 2015) (2)
(31)A	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(31)B	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32)A	Certification of the Chief Executive Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(32)B	Certification of the Chief Financial Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

(1) Incorporated by reference to Exhibit (3)A to the Registrant’s Form 8-K Report filed June 10, 2010.

(2) Incorporated by reference to Exhibit (3)A to the Registrant’s Form 8-K Report filed November 12, 2015.

23

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.

/s/ Cathy R. Smith
Cathy R. Smith
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
/s/ Robert M. Harrison
Robert M. Harrison
Senior Vice President, Chief Accounting Officer
and Controller

24