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EXHIBIT 99(a)
FOR IMMEDIATE RELEASE | Contact: | Susan Kahn (investor) (612) 761-6735 | ||
Cathy Wright (financial media) (612) 761-6627 |
TARGET CORPORATION FOURTH QUARTER
EARNINGS PER SHARE $0.75
FISCAL 2002 EPS $1.81
MINNEAPOLIS, February 20, 2003 – Target Corporation today reported earnings per share for the fourth quarter ended February 1, 2003 of 75 cents, compared with 72 cents in the fourth quarter ended February 2, 2002. Fourth quarter net earnings increased 4.4 percent to $688 million, compared with $658 million in 2001. All earnings per share figures refer to diluted earnings per share.
For the full year, diluted earnings per share were $1.81, an increase of 16.7 percent compared with $1.55 before a 5-cent reduction related to the impact of restoring our securitized accounts receivable to our financial statements in 2001. On the same basis, net earnings were $1.654 billion, up 17.3 percent compared with $1.410 billion in the prior year. On a GAAP basis, 2002 net earnings grew 20.9 percent.
"We are pleased with our overall financial results for fiscal 2002, especially in light of our relatively soft sales performance," said Bob Ulrich, chairman and chief executive officer of Target Corporation. "In 2003, we will continue to focus on delivering even greater value to our guests and achieving profitable market share growth. We remain confident that we will continue to generate average annual earnings per share growth of 15 percent or more over time."
Full Year Results
Total revenues in 2002 increased 10.3 percent to $43.917 billion from $39.826 billion in 2001, driven by an increase in consolidated comparable-store sales of 1.1 percent as well as contribution from Target's new store expansion and from credit card operations. (Total revenues include retail sales and net credit revenues. Comparable-store sales are sales from stores open longer than one year.)
For the year, pre-tax segment profit increased 16.7 percent to $3.461 million, compared with $2.965 million in 2001. Pre-tax profit at Target Stores increased $542 million, or 21.3 percent. Pre-tax profit at Marshall Field's rose by $2 million and pre-tax profit at Mervyn's declined $48 million. (Pre-tax segment profit is earnings before LIFO, securitization effects, interest, other expense and unusual items.)
The company's full year gross margin rate increased from the prior year, due to improvement at both Target and Mervyn's, partially offset by the mix impact of growth at Target, our lowest gross margin rate division. (Gross margin rate represents gross margin as a percentage of sales.)
The full year expense rate, excluding credit card operations, was unfavorable to prior year, principally due to slower-than-expected same store sales growth. This effect was only partially offset by the benefit of overall growth at Target, our lowest expense rate division. (Expense rate represents selling, general and administrative expenses as a percentage of sales. It includes buying and occupancy, advertising, start-up and other expense, and excludes depreciation and expenses associated with credit card operations.)
The full year contribution from the company's credit card operations increased 19.6 percent to $532 million from $445 million last year. At year-end, gross receivables were $5.963 billion, compared with $4.092 billion at the end of 2001, due to the continued growth in issuance and usage of the Target Visa card. The provision for bad debt expense exceeded net write-offs by $138 million for the year, as a result of the company's consistent practice of providing for projected future write-offs as receivables are created. Results of credit card operations are reflected in the pre-tax segment profit of each of our three business segments.
Fourth Quarter Results
Fourth quarter revenues increased 6.4 percent to $14.061 billion from $13.220 billion in the same period a year ago. Comparable store sales for the quarter decreased 2.2 percent.
Fourth quarter 2002 pre-tax segment profit increased 1.4 percent to $1.291 billion, compared with $1.272 billion in the fourth quarter of 2001, due to continued growth at Target Stores, partially offset by the declines at Mervyn's and Marshall Field's.
The company's fourth quarter gross margin rate was favorable to the prior year, while the expense rate in the quarter was unfavorable. Contribution from the corporation's credit card operations to pre-tax segment profit rose 41.5 percent, or $44 million, to $150 million.
Other Factors
Fourth quarter and full year gross margin results include a pretax LIFO credit of $12 million, or $0.01 per share, in 2002, compared with an $8 million charge in 2001.
Net interest expense for the quarter increased $19 million, due to higher average funded balances, partially offset by the benefit of a lower average portfolio interest rate. For the full year, net interest expense rose $88 million compared with net interest expense and interest equivalent in 2001. This increase is due to higher average funded balances and the repurchase of high interest rate debt at a premium, partially offset by a lower portfolio interest rate.
The company's annual effective income tax rate was 38.2 percent, compared with 38.0 percent last year.
Miscellaneous
Target Corporation will webcast its fourth quarter earnings conference call at 9:30am CST today. Investors and the media are invited to listen to the call through the company's website at www.target.com (click on "company/Target Corporation/investor information/webcasts"). A telephone replay of the call will be available beginning at approximately 11:30am CST today through the end of business on February 21, 2003. The replay number is (800) 934-7969.
Forward-looking statements in this release should be read in conjunction with the cautionary statements in Exhibit (99)C to the company's 2001 Form 10-K.
Additional 2002 quarterly and annual credit card disclosures for Target Visa and Target Corporation's proprietary credit cards are included in a separate news release issued this morning.
Target Corporation operates large-store general merchandise formats, including discount stores, moderate-priced promotional and traditional department stores, as well as a direct mail and on-line business called target.direct. The company currently operates 1,475 stores in 47 states. This included 1,147 Target stores, 264 Mervyn's stores and 64 Marshall Field's stores.
Target Corporation news releases are available at www.target.com or www.prnewswire.com.
###
(Tables Follow)
CONSOLIDATED RESULTS OF OPERATIONS
| | (Unaudited) Three Months Ended | Year Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Millions, except per share data) | February 1, 2003 | February 2, 2002 | % Change | February 1, 2002 | February 2, 2001 | % Change | ||||||||||||
| Sales | $ | 13,711 | $ | 12,985 | 5.6 | % | $ | 42,722 | $ | 39,114 | 9.2 | % | ||||||
| Net credit revenues | 350 | 235 | 49.4 | 1,195 | 712 | 68.0 | ||||||||||||
| Total revenues | 14,061 | 13,220 | 6.4 | 43,917 | 39,826 | 10.3 | ||||||||||||
Cost of sales | 9,562 | 9,121 | 4.8 | 29,260 | 27,143 | 7.8 | ||||||||||||
| Selling, general and administrative expense | 2,676 | 2,457 | 8.9 | 9,416 | 8,461 | 11.3 | ||||||||||||
| Credit expense | 233 | 163 | 42.7 | 765 | 463 | 65.1 | ||||||||||||
| Depreciation and amortization | 323 | 283 | 14.2 | 1,212 | 1,079 | 12.4 | ||||||||||||
| Interest expense | 154 | 135 | 14.9 | 588 | 473 | 24.2 | ||||||||||||
| Earnings before income taxes | 1,113 | 1,061 | 4.7 | 2,676 | 2,207 | 21.3 | ||||||||||||
| Provision for income taxes | 425 | 403 | 5.3 | 1,022 | 839 | 21.9 | ||||||||||||
Net earnings | $ | 688 | $ | 658 | 4.4 | % | $ | 1,654 | $ | 1,368 | 20.9 | % | ||||||
Basic earnings per share | $ | 0.76 | $ | 0.73 | 3.8 | % | $ | 1.82 | $ | 1.52 | 20.0 | % | ||||||
| Diluted earnings per share | $ | 0.75 | $ | 0.72 | 4.3 | % | $ | 1.81 | $ | 1.50 | 20.3 | % | ||||||
Weighted average common shares outstanding: | ||||||||||||||||||
| Basic | 909.3 | 903.9 | 908.0 | 901.5 | ||||||||||||||
| Diluted | 914.3 | 913.6 | 914.0 | 909.8 | ||||||||||||||
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| (Millions) | February 1, 2003 | February 2, 2002 | |||||
|---|---|---|---|---|---|---|---|
| ASSETS | |||||||
| Cash and cash equivalents | $ | 758 | $ | 499 | |||
| Accounts receivable, net | 5,565 | 3,831 | |||||
| Inventory | 4,760 | 4,449 | |||||
| Other | 852 | 869 | |||||
| Total current assets | 11,935 | 9,648 | |||||
Property and equipment, net | 15,307 | 13,533 | |||||
| Other | 1,361 | 973 | |||||
| Total assets | $ | 28,603 | $ | 24,154 | |||
LIABILITIES AND SHAREHOLDERS' INVESTMENT | |||||||
| Accounts payable | $ | 4,684 | $ | 4,160 | |||
| Current portion of long-term debt and notes payable | 975 | 905 | |||||
| Other | 1,864 | 1,989 | |||||
| Total current liabilities | 7,523 | 7,054 | |||||
Long-term debt | 10,186 | 8,088 | |||||
| Other | 1,451 | 1,152 | |||||
| Shareholders' investment | 9,443 | 7,860 | |||||
| Total liabilities and shareholders' investment | $ | 28,603 | $ | 24,154 | |||
Common shares outstanding | 909.8 | 905.2 | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | Year Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Millions) | February 1, 2003 | February 2, 2002 | |||||||
| OPERATING ACTIVITIES | |||||||||
| Net earnings | $ | 1,654 | $ | 1,368 | |||||
| Reconciliation to cash flow: | |||||||||
| Depreciation and amortization | 1,212 | 1,079 | |||||||
| Bad debt provision | 460 | 230 | |||||||
| Deferred tax provision | 248 | 49 | |||||||
| Other non-cash items affecting earnings | 226 | 212 | |||||||
| Changes in operating accounts providing/(requiring) cash: | |||||||||
| Accounts receivable | (2,194 | ) | (1,193 | ) | |||||
| Inventory | (311 | ) | (201 | ) | |||||
| Other current assets | 15 | (91 | ) | ||||||
| Other assets | (174 | ) | (178 | ) | |||||
| Accounts payable | 524 | 584 | |||||||
| Accrued liabilities | (21 | ) | 29 | ||||||
| Income taxes payable | (79 | ) | 124 | ||||||
| Other | 30 | — | |||||||
| Cash Flow Provided by Operations | 1,590 | 2,012 | |||||||
INVESTING ACTIVITIES | |||||||||
| Expenditures for property and equipment | (3,221 | ) | (3,163 | ) | |||||
| Decrease in receivable-backed securities | — | (174 | ) | ||||||
| Proceeds from disposals of property and equipment | 32 | 32 | |||||||
| Other | — | (5 | ) | ||||||
| Cash Flow Required by Investing Activities | (3,189 | ) | (3,310 | ) | |||||
| Net Financing Requirements | (1,599 | ) | (1,298 | ) | |||||
FINANCING ACTIVITIES | |||||||||
| Increase/(decrease) in notes payable, net | — | (808 | ) | ||||||
| Additions to long-term debt | 3,153 | 3,250 | |||||||
| Reductions of long-term debt | (1,071 | ) | (793 | ) | |||||
| Dividends paid | (218 | ) | (203 | ) | |||||
| Repurchase of stock | (14 | ) | (20 | ) | |||||
| Other | 8 | 15 | |||||||
| Cash Flow Provided by Financing Activities | 1,858 | 1,441 | |||||||
| Net Increase in Cash and Cash Equivalents | 259 | 143 | |||||||
| Cash and Cash Equivalents at Beginning of Year | 499 | 356 | |||||||
| Cash and Cash Equivalents at End of Year | $ | 758 | $ | 499 | |||||
Target Corporation
(Millions, except as indicated)
REVENUES and COMPARABLE-STORE SALES
Comparable-store sales are sales from stores open longer than one year.
| | (Unaudited) Three Months Ended | Year Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | % Change | | | % Change | |||||||||||||||
| | Feb. 1, 2003 | Feb. 2, 2002 | Revenues | Comp. Sales | Feb. 1, 2003 | Feb. 2, 2002 | Revenues | Comp. Sales | |||||||||||||
| Target | $ | 11,930 | $ | 10,941 | 9.0 | % | (1.1 | )% | $ | 36,917 | $ | 32,588 | 13.3 | % | 2.2 | % | |||||
| Mervyn's | 1,150 | 1,265 | (9.1 | ) | (9.3 | ) | 3,816 | 4,027 | (5.2 | ) | (5.3 | ) | |||||||||
| Marshall Field's | 800 | 853 | (6.2 | ) | (6.2 | ) | 2,691 | 2,778 | (3.1 | ) | (3.7 | ) | |||||||||
| Other | 181 | 161 | 11.9 | na | 493 | 433 | 13.8 | na | |||||||||||||
| TOTAL | $ | 14,061 | $ | 13,220 | 6.4 | % | (2.2 | )% | $ | 43,917 | $ | 39,826 | 10.3 | % | 1.1 | % | |||||
NUMBER OF STORES, RETAIL SQUARE FEET and INVENTORY
Retail square feet in thousands; reflects total square feet less office, warehouse and vacant space.
| | Number of Stores | Retail Square Feet | Inventory | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Feb. 1, 2003 | Feb. 2, 2002 | Feb. 1, 2003 | Feb. 2, 2002 | % Change | Feb. 1, 2003 | Feb. 2, 2002 | % Change | |||||||||||
| Target | 1,147 | * | 1,053 | * | 140,255 | 125,245 | 12.0 | % | $ | 3,748 | $ | 3,348 | 12.0 | % | |||||
| Mervyn's | 264 | 264 | 21,425 | 21,425 | 0.0 | 486 | 523 | (7.1 | ) | ||||||||||
| Marshall Field's | 64 | 64 | 14,845 | 14,954 | (0.7 | ) | 324 | 348 | (6.9 | ) | |||||||||
| Other | — | — | — | — | — | 202 | 230 | (12.1 | ) | ||||||||||
| TOTAL | 1,475 | 1,381 | 176,525 | 161,624 | 9.2 | % | $ | 4,760 | $ | 4,449 | 7.0 | % | |||||||
PRE-TAX SEGMENT PROFIT AND EARNINGS RECONCILIATION
Pre-tax segment profit is earnings before LIFO, securitization effects, interest, other expense and unusual items.
| | (Unaudited) Three Months Ended | Year Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Feb. 1, 2003 | Feb. 2, 2002 | % Change | Feb. 1, 2003 | Feb. 2, 2002 | % Change | ||||||||||||
| Target | $ | 1,165 | $ | 1,078 | 8.0 | % | $ | 3,088 | $ | 2,546 | 21.3 | % | ||||||
| Mervyn's | 75 | 131 | (42.9 | ) | 238 | 286 | (16.8 | ) | ||||||||||
| Marshall Field's | 51 | 63 | (18.9 | ) | 135 | 133 | 1.4 | |||||||||||
| Total pre-tax segment profit | 1,291 | 1,272 | 1.4 | 3,461 | 2,965 | 16.7 | ||||||||||||
| LIFO credit / (provision) | 12 | (8 | ) | 12 | (8 | ) | ||||||||||||
| Securitization adjustment (unusual item) | — | — | — | (67 | ) | |||||||||||||
| Securitization adjustment (interest equivalent) | — | — | — | (27 | ) | |||||||||||||
| Interest expense | (154 | ) | (135 | ) | (588 | ) | (473 | ) | ||||||||||
| Other | (36 | ) | (68 | ) | (209 | ) | (183 | ) | ||||||||||
| Earnings before income taxes | $ | 1,113 | $ | 1,061 | 4.7 | % | $ | 2,676 | $ | 2,207 | 21.3 | % | ||||||
EBITDA (unaudited)
EBITDA is pre-tax segment profit before depreciation and amortization, and is not intended to be a substitute for GAAP reported measures of profitability and cash flow.
| | Three Months Ended | Year Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Feb. 1, 2003 | Feb. 2, 2002 | % Change | Feb. 1, 2003 | Feb. 2, 2002 | % Change | |||||||||||
| Target | $ | 1,409 | $ | 1,284 | 9.6 | % | $ | 4,013 | $ | 3,330 | 20.5 | % | |||||
| Mervyn's | 113 | 163 | (30.6 | ) | 360 | 412 | (12.6 | ) | |||||||||
| Marshall Field's | 82 | 95 | (13.9 | ) | 260 | 268 | (3.2 | ) | |||||||||
| Total segment EBITDA | $ | 1,604 | $ | 1,542 | 4.0 | % | $ | 4,633 | $ | 4,010 | 15.5 | % | |||||
| Segment depreciation and amortization | (313 | ) | (270 | ) | (1,172 | ) | (1,045 | ) | |||||||||
| Pre-tax segment profit | $ | 1,291 | $ | 1,272 | 1.4 | % | $ | 3,461 | $ | 2,965 | 16.7 | % | |||||
| | Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
| | Feb. 1, 2003 | Feb. 2, 2002 | Feb. 1, 2003 | Feb. 2, 2002 | |||||
| Pre-tax Segment Profit as a % of Revenues: | |||||||||
| Target | 9.8 | % | 9.9 | % | 8.4 | % | 7.8 | % | |
| Mervyn's | 6.5 | % | 10.3 | % | 6.2 | % | 7.1 | % | |
| Marshall Field's | 6.4 | % | 7.4 | % | 5.0 | % | 4.8 | % | |
EBITDA as a % of Revenues: | |||||||||
| Target | 11.8 | % | 11.7 | % | 10.9 | % | 10.2 | % | |
| Mervyn's | 9.8 | % | 12.8 | % | 9.4 | % | 10.2 | % | |
| Marshall Field's | 10.3 | % | 11.2 | % | 9.7 | % | 9.7 | % | |
CREDIT CARD CONTRIBUTION
| | Three Months Ended | Year Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | February 1, 2003 | February 2, 2002 | February 1, 2003 | February 2, 2002 | ||||||||||
| Revenues | ||||||||||||||
| Finance charges, late fees and other revenues | $ | 329 | $ | 221 | $ | 1,126 | $ | 779 | ||||||
| Merchant fees | ||||||||||||||
| Intracompany | 32 | 34 | 102 | 102 | ||||||||||
| Third-party | 22 | 14 | 69 | 18 | ||||||||||
| Total revenues | 383 | 269 | 1,297 | 899 | ||||||||||
Expenses | ||||||||||||||
| Bad debt | 150 | 99 | 460 | 230 | ||||||||||
| Operations and marketing | 83 | 64 | 305 | 224 | ||||||||||
| Total expenses | 233 | 163 | 765 | 454 | ||||||||||
| Pre-tax credit contribution | $ | 150 | $ | 106 | $ | 532 | $ | 445 | ||||||
| As a percent of average receivables (annualized) | 10.4 | % | 11.7 | % | 11.0 | % | 14.7 | % | ||||||
QUARTER-END RECEIVABLES
| | February 1, 2003 | February 2, 2002 | ||||||
|---|---|---|---|---|---|---|---|---|
| Target | ||||||||
| Guest Card | $ | 827 | $ | 1,063 | ||||
| Target Visa | 3,774 | 1,567 | ||||||
| Mervyn's | 626 | 706 | ||||||
| Marshall Field's | 737 | 756 | ||||||
| Quarter-end receivables | $ | 5,964 | $ | 4,092 | ||||
| Past due* | 3.8 | % | 3.2 | % | ||||
| Quarter-to-date average receivables | $ | 5,731 | $ | 3,642 | ||||
| Year-to-date average receivables | $ | 4,841 | $ | 3,016 | ||||
- *
- Accounts with three or more payments past due as a percent of total outstanding receivables.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
| | Three Months Ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | February 1, 2003 | February 2, 2002 | February 1, 2003 | February 2, 2002 | |||||||||
| Allowance at beginning of period | $ | 360 | $ | 216 | $ | 261 | $ | 211 | |||||
| Bad debt provision | 150 | 99 | 460 | 230 | |||||||||
| Net write-offs | (111 | ) | (54 | ) | (322 | ) | (180 | ) | |||||
| Allowance at end of period | $ | 399 | $ | 261 | $ | 399 | $ | 261 | |||||
| As a percent of period-end receivables | 6.7 | % | 6.4 | % | 6.7 | % | 6.4 | % | |||||
TARGET CORPORATION FOURTH QUARTER EARNINGS PER SHARE $0.75 FISCAL 2002 EPS $1.81
CONSOLIDATED RESULTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
CONSOLIDATED STATEMENTS OF CASH FLOWS