Exhibit 99.2
Unaudited Condensed Financial Statements
Marshall Field's
Thirteen Weeks Ended May 1, 2004
Marshall Field's
Unaudited Condensed Financial Statements
Thirteen Weeks Ended May 1, 2004
Contents
Condensed Financial Statements
Results of Operations..................................................1
Statement of Financial Position........................................2
Statements of Cash Flows...............................................3
Notes to Financial Statements..........................................4
Marshall Field's
Results of Operations
(Unaudited)
(in thousands)
13 Weeks Ended
May 1, 2004 May 3, 2003
Sales $ 583,887 $ 557,746
Net credit card revenues 29,809 32,213
Total revenues 613,696 589,959
Cost of sales 334,390 330,194
Selling, general and administrative
expense 229,989 208,993
Depreciation and amortization 28,750 29,393
Interest expense 11,590 12,793
Earnings before income taxes 8,977 8,586
Provision for income taxes 3,378 3,263
Net earnings $ 5,599 $ 5,323
See accompanying notes.
1
Marshall Field's
Statement of Financial Position
May 1, 2004
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 25,672
Accounts receivable, net 596,060
Inventory 363,001
Deferred taxes and other 64,450
Total current assets 1,049,183
Property and equipment
Land 104,581
Buildings and improvements 786,419
Fixtures and equipment 569,654
Construction in progress 4,723
Accumulated depreciation (622,018)
Property and equipment, net 843,359
Due from affiliate 1,383,409
Prepaid pension and other 231,397
Total assets $ 3,507,348
Liabilities and shareholder's investment
Current liabilities:
Accounts payable $ 256,386
Accrued liabilities 160,954
Income taxes payable 15,370
Current portion of capital leases 929
Total current liabilities 433,639
Note payable to affiliate 948,325
Capital leases, net of current portion 8,720
Deferred taxes and other long-term liabilities 185,201
Shareholder's investment:
Common stock 2
Additional paid-in capital 13,193
Retained earnings 1,918,268
Total shareholder's investment 1,931,463
Total liabilities and shareholder's investment $ 3,507,348
See accompanying notes.
2
Marshall Field's
Statements of Cash Flows
(Unaudited)
(in thousands)
13 Weeks Ended
May 1, 2004 May 3, 2003
Operating activities
Net earnings $ 5,599 $ 5,323
Reconciliation to cash flow:
Depreciation and amortization 28,750 29,393
Bad debt provision 5,405 8,741
Deferred tax provision (603) (621)
Loss on disposal of fixed assets, net 67 392
Other non-cash items affecting earnings (837) 2,014
Changes in operating accounts providing cash:
Accounts receivable 45,567 72,793
Inventory (37,597) (13,548)
Other current assets 5,890 18
Other assets 1,003 (9,600)
Due from affiliate (53,744) (125,123)
Accounts payable 65,736 67,779
Accrued liabilities (61,954) (86,995)
Income taxes payable 29,774 54,091
Cash flow provided by operating activities 33,056 4,657
Investing activities
Expenditures for property and equipment (13,974) (21,822)
Proceeds from disposals of property and equipment 16 17,693
Cash flow required for investing activities (13,958) (4,129)
Financing activities
Dividends (9,032) (1,580)
Reductions of capital leases (220) (202)
Cash flow required for financing activities (9,252) (1,782)
Net increase (decrease) in cash and cash equivalents 9,846 (1,254)
Cash and cash equivalents at beginning of year 15,826 22,234
Cash and cash equivalents at end of period $ 25,672 $ 20,980
See accompanying notes.
3
Marshall Field's
Notes to Condensed Financial Statements
Interim Results
The unaudited condensed financial statements have been prepared in accordance
with the regulations set out by the Securities and Exchange Commission and
should be read in conjunction with the Notes to Financial Statements in the
2003 audited financial statements. In the opinion of management, this
information is fairly presented and all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the results for the
interim periods have been included; however, certain items are included in
these statements based on estimates for the entire year. Operating results of
periods, which exclude the Christmas season, may not be indicative of the
operating results that may be expected for the fiscal year.
Accounts Receivable
Accounts receivable are recorded net of an allowance for expected losses. The
allowance, recognized in an amount equal to the anticipated future write-offs
based on delinquencies, risk scores, aging trends, industry risk trends and
historical experience, was $25 million at May 1, 2004.
Inventory
Inventory and the related cost of sales are accounted for under the retail
inventory accounting method using the last-in, first-out (LIFO) basis.
Inventory is stated at the lower of LIFO cost or market. There was no change in
the cumulative LIFO provision during the first quarter of 2003 and 2004.
4
Marshall Field's
Notes to Condensed Financial Statements
Stock Option Plans
Certain key employees participate in Target Corporation stock option plans.
These long-term incentive plans provide for the granting of stock options and
performance share awards or a combination of awards which are granted in Target
Corporation common stock. A majority of the awards are non-qualified stock
options that vest annually in equal amounts over a four-year period. These
options expire no later than ten years after the date of grant. Performance
share awards are issuable in the future based upon the attainment of specified
levels of future financial performance of Target Corporation as a whole.
Awards granted to key employees under the Target Corporation stock option plan
are accounted for using the fair-value-based method to record stock-based
compensation. Stock-based compensation expense for the first quarter of 2004
and 2003 was $2 million.
Pension and Postretirement Health Care Benefits
The company has qualified defined benefit pension plans that cover all
employees who meet certain age, length of service and hours worked per year
requirements. The company also has unfunded non-qualified pension plans for
employees who have qualified plan compensation restrictions. Benefits are
provided based upon years of service and the employee's compensation. Retired
employees also become eligible for certain health care benefits if they meet
minimum age and service requirements and agree to contribute a portion of the
cost.
5
Marshall Field's
Notes to Condensed Financial Statements
Net pension and postretirement health care benefits expense for the thirteen
weeks ended May 1, 2004 was:
Postretirement
Pension Health Care
Benefits Benefits
(In Thousands)
Service cost benefits earned during the period $2,560 $ 101
Interest cost on projected benefit obligation 4,003 1,201
Expected return on assets (6,123) -
Recognized losses 869 -
Recognized prior service cost (238) 96
Total $1,071 $ 1,398
The amortization of any prior service cost is determined using a straight-line
amortization of the cost over the average remaining service period of employees
expected to receive benefits under the plan.
Subsequent Events
Subsequent to May 1, 2004, Target Corporation reached an agreement to sell
substantially all of the operating assets of Marshall Field's to The May
Department Stores Company for approximately $3.2 billion in cash. The sale
occurred during the second quarter of fiscal year 2004.
6