EXHIBIT (13)
Financial Review
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(Millions of Dollars, Except Per-Share Data)
FINANCIAL POLICIES
Our principal financial policies are as follows:
MAINTAIN STRONG INVESTMENT GRADE DEBT RATINGS. Our long-term debt ratings are
A+, A3 and A from Duff & Phelps, Moody's and Standard & Poor's, respectively.
Our commercial paper debt ratings are D-1+, P-2 and A-1 from Duff & Phelps,
Moody's and Standard & Poor's, respectively.
MAINTAIN A YEAR-END DEBT RATIO WITHIN A RANGE OF 45% TO 65%. This debt ratio
range enables management to take advantage of changes in the economy and the
retail environment.
Our debt ratio declined to 59% at the end of 1993 and we expect it to move
toward the middle of the range over time while continuing to support our
expansion.
DEBT RATIO 1993 1992 1991
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DEBT AND EQUIVALENTS
Notes payable and current
portion of long-term debt* $ 373 $ 394 $ 453
Long-term debt* 4,279 4,330 4,227
Present value of operating leases 504 419 411
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Total debt and equivalents $5,156 $5,143 $5,091
====================================================================
CAPITALIZATION
Debt and equivalents $5,156 $5,143 $5,091
Deferred income taxes and other 536 450 381
Convertible preferred stock 368 374 377
Common shareholders' investment 2,737 2,486 2,231
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Total capitalization $8,797 $8,453 $8,080
====================================================================
YEAR-END DEBT RATIO 59% 61% 63%
====================================================================
* Includes capital leases.
Dayton Hudson Corporation and Subsidiaries Page 17
Financial Review
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(Millions of Dollars, Except Per-Share Data)
FINANCIAL POLICIES continued
FUNDING OF CAPITAL EXPENDITURES. Capital expenditure commitments are
limited to what can be financed by projected internally-generated funds and
committed financing.
CAPITAL EXPENDITURES
Capital expenditures totaled $978 million in 1993 and are expected to be
approximately $1.3 billion in 1994. Capital expenditure priorities are as
follows:
KEEP existing facilities fresh and exciting to maintain and grow current
market share.
IMPROVE distribution and systems to cost-effectively support sales growth.
BUILD new stores in existing markets to increase market share and leverage
our existing expense structure.
BUILD stores in new markets to enhance growth and increase market share.
Due to sufficient capital resources, we were able to maintain our capital
expenditure priorities while allocating the majority of our spending towards new
store growth. Most new store capital continues to be allocated to Target due to
its proven record of successful expansion and profitable growth.
In order to retain flexibility, the majority of our planned capital
spending for the next several years remains uncommitted.
SHAREHOLDER RETURN
DIVIDENDS. To support our objective of providing shareholders with an
attractive total return on their investment, it is our policy to make regular
annual increases in dividends declared on common stock. Dividends declared in
1993 increased 5% to $1.62 per share, compared with $1.54 per share declared in
1992. The quarterly dividend paid in the first quarter of 1994 was increased to
$.42 per share, indicating an annualized dividend of $1.68 per share.
MARKET VALUE PER SHARE. The common stock price reflects the market's view
of our performance and future prospects, as well as industry and general
economic conditions. At March 24, 1994 there were 11,787 shareholders of record
and the common stock price was $74.75 per share.
Dayton Hudson Corporation and Subsidiaries Page 18
Analysis of Operations
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(Millions of Dollars, Except Per-Share Data)
Our 1993 financial performance did not meet our expectations. Net earnings
were $375 million compared with $383 million in 1992 and $301 million in 1991.
The shortfall from our expectations was primarily due to poor performance at
Mervyn's.
Despite not meeting our net earnings expectations, total operating profit
reached a record $1,109 million compared with $1,086 million in 1992 and $910
million in 1991. Target posted a 15% increase in operating profit and the
Department Store Division (DSD) reported an 18% increase. Mervyn's declined 37%.
Operating profit in 1993 was aided by a substantial LIFO credit, mainly due to
Mervyn's and DSD's adoption of internally-generated price indices (see
discussion on page 31).
TARGET'S record operating profit improved strongly from 1992, reflecting
solid revenue growth and improved expense control somewhat offset by a lower
gross margin rate.
MERVYN'S operating profit declined significantly as a result of lower
revenues, a lower gross margin rate and a higher operating expense rate.
DSD achieved record operating profit due to higher revenues and improved
gross margin and operating expense rates.
Fully diluted earnings per share were $4.77 in 1993 versus $4.82 in 1992
and $3.72 in 1991. Target, our primary growth vehicle, has contributed the
largest share to overall earnings in the past three years. Due to the
significant growth at Target, our lowest margin division, overall revenue growth
and the operating expense rate were favorably affected, while the gross margin
rate was unfavorably affected. The table below identifies the major factors in
the change in earnings per share:
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VARIANCE ANALYSIS 1993 1992 1991
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Prior year's earnings per share $4.82 $3.72 $ 5.20
Change due to:
Revenues (a) .59 .81 .75
Gross margin rate (b) (.52) (.77) (1.27)
Operating expense rate (c) .16 1.32 (.09)
Start-up expenses (d) .06 (.03) (.14)
Interest expense, net (.08) (.31) (.54)
Corporate expense and other, net (e) (.03) .08 (.19)
Unusual items (primarily earthquake) (.23) - -
- -----------------------------------------------------------------------
EARNINGS PER SHARE $4.77 $4.82 $ 3.72
=======================================================================
(a) Includes sales, finance charge revenue and other.
(b) Excludes buying and occupancy costs.
(c) Includes buying and occupancy costs, portions of selling, publicity and
administrative expense, depreciation and taxes other than income taxes.
(d) Includes costs associated with opening new stores and remodeling existing
stores; included in selling, publicity and administrative expense.
(e) Includes corporate headquarters expense, corporate charitable contributions
and other miscellaneous items.
REVENUES
The Corporation reported a 7% increase in total revenues and a 1% increase
in comparable-store revenues in 1993 despite deflation of retail prices at all
operating divisions. Target's solid revenue increase was primarily due to its
new store expansion and continued success of its value-pricing strategy.
Mervyn's revenue decline reflects the slow process of re-orienting the consumer
from a heavy promotional shopping environment to a more balanced value-pricing
and promotional strategy. Additionally, both Target and Mervyn's have a
substantial presence in the California market, which remained depressed
throughout 1993. DSD's revenues were up slightly due primarily to added
promotional events.
Revenue growth in 1992 was the result of expanding the value-pricing
strategy at Target, along with new store growth, increased promotions and
increases in base business at all operating divisions. Revenue growth in 1991
was driven by new store expansion and the full-year contribution of Marshall
Field's operations. Overall price changes in 1992 and 1991 were minimal and, as
a result, reported comparable-store revenue increases closely approximate real
growth.
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REVENUE GROWTH 1993 1992 1991
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ALL COMP. All Comp. All Comp.
STORES STORES* Stores Stores* Stores Stores*
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Target 13% 5% 15% 5% 11% 4%
Mervyn's (2) (6) 9 3 2 (1)
DSD 1 1 3 2 17 1
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Total 7% 1% 11% 4% 9% 2%
=====================================================================================
*Comparable-store revenues are revenues from stores open longer than a year.
One measure used to evaluate store productivity is revenues per square
foot. Higher revenues per square foot at Target reflect increased base business,
partially offset by the inherent lower productivity of new stores. DSD's growth
was due to enhanced productivity, especially at the Marshall Field's stores.
Mervyn's decline reflects lower revenues.
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REVENUES PER SQUARE FOOT* (dollars) 1993 1992 1991
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Target $213 $209 $205
Mervyn's 204 223 224
DSD 221 219 215
=====================================================================
*Thirteen-month average retail square footage.
Dayton Hudson Corporation and Subsidiaries Page 19
Analysis of Operations
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(Millions of Dollars, Except Per-Share Data)
GROSS MARGIN RATE
Our gross margin rate declined in 1993, reflecting our lowering of opening
retail prices to meet the needs of the value-conscious consumer, partially
offset by a LIFO credit. Also, the 1993 holiday season was one of the most
promotional. Looking forward, with accelerated growth from Target and strategies
focusing on value at all the operating divisions, the gross margin rate may
continue to decline.
TARGET'S gross margin rate declined slightly in 1993, reflecting the
ongoing impact of its value-pricing strategy. This impact was partially offset
by a corresponding improvement in the promotional markdown rate along with a
LIFO credit.
MERVYN'S 1993 gross margin rate declined reflecting higher clearance
markdowns associated with reducing inventories. Also, implementation of a value
strategy pressured the gross margin rate despite an improvement in the
promotional markdown rate.
DSD'S gross margin rate increased in 1993 reflecting a lower cost of
merchandise, in addition to a LIFO credit. Implementation of a value-pricing
strategy and higher promotional markdowns partially offset the improvement.
The gross margin rate in 1992 declined slightly reflecting increased
consumer value-consciousness in a competitive retail environment. The 1991 gross
margin rate declined reflecting a weak economy and strong customer response to
advertised merchandise.
OPERATING EXPENSE RATE
Our overall operating expense rate continued to improve in 1993 with
expense management at each of the operating divisions and the benefit of cross-
divisional synergies in technology, logistics and advertising. Operating expense
rate reductions will continue to be a major focus in 1994.
TARGET'S operating expense rate improved in 1993, reflecting sales leverage
and expense efficiencies within the stores.
MERVYN'S operating expense rate deteriorated substantially in 1993 despite
its continued focus on expense disciplines. The rate increase reflects slightly
higher operating expenses on lower revenues.
DSD'S operating expense rate improved in 1993 due to distribution expense
efficiencies, partially offset by increased advertising expenses associated with
incremental promotional events.
In 1992, the operating expense rate improved significantly through
disciplined expense management at each operating division. The 1991 operating
expense rate increased slightly, reflecting weak comparable-store revenue growth
at Mervyn's and DSD.
START-UP EXPENSES
Start-up expenses declined in 1993 due to a reduction in the number of new
stores opened. Start-up expenses increased in 1992 and 1991 due to Target's
accelerated store growth and ongoing remodeling programs at all the operating
divisions. A total of 62 new stores were opened in 1993 compared with 68 in 1992
and 63 in 1991. Start-up expenses are recognized evenly throughout the year in
which the expenses are incurred.
INTEREST EXPENSE
Total interest expense increased in 1993, 1992 and 1991 due to an increase
in average debt required to finance the business. Lower interest rates somewhat
offset the impact of increased average debt levels.
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COMPONENTS OF INTEREST EXPENSE, NET 1993 1992 1991
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Interest on debt $438 $431 $397
Interest on capital leases 15 15 14
Interest cost capitalized (5) (6) (11)
Interest income (2) (3) (2)
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Interest expense, net $446 $437 $398
=====================================================================
UNUSUAL ITEMS
In January 1994, 11 Target stores and 13 Mervyn's stores sustained various
levels of damage associated with the Los Angeles earthquake. The portion of
uninsured losses included in operating profit and recorded in selling, publicity
and administrative expense, were $7 million and $15 million for Target and
Mervyn's, respectively.
The Tax Reform Act of 1993 required a one-time after-tax charge to earnings
of $4 million, or $.05 per share, as a result of applying the higher tax rate to
deferred tax balances (see page 23).
Dayton Hudson Corporation and Subsidiaries Page 20
Notes and Analysis
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(Millions of Dollars, Except Per-Share Data)
BUSINESS SEGMENTS 1993 1992 1991
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REVENUES
Target $11,743 $10,393 $ 9,041
Mervyn's 4,436 4,510 4,143
Department Store Division 3,054 3,024 2,931
Other - - -
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Total $19,233 $17,927 $16,115
=======================================================================
OPERATING PROFIT
Target $ 662 $ 574 $ 458
Mervyn's 179 284 284
Department Store Division 268 228 168
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Total 1,109 1,086 910
Interest expense, net 446 437 398
Corporate and other 56 38 40
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EARNINGS BEFORE INCOME TAXES $ 607 $ 611 $ 472
=======================================================================
OPERATING PROFIT AS A PERCENT OF REVENUES
Target 5.6% 5.5% 5.1%
Mervyn's 4.0 6.3 6.9
Department Store Division 8.8 7.5 5.7
=======================================================================
ASSETS
Target $ 5,495 $ 4,913 $ 4,393
Mervyn's 2,750 3,042 2,686
Department Store Division 2,240 2,292 2,317
Corporate and other 293 90 89
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Total $10,778 $10,337 $ 9,485
=======================================================================
DEPRECIATION
Target $ 263 $ 236 $ 208
Mervyn's 146 135 117
Department Store Division 88 87 84
Corporate and other 1 1 1
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Total $ 498 $ 459 $ 410
=======================================================================
CAPITAL EXPENDITURES
Target $ 716 $ 571 $ 605
Mervyn's 180 294 303
Department Store Division 80 72 106
Corporate and other 2 1 2
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Total $ 978 $ 938 $ 1,016
=======================================================================
Operating profit is LIFO earnings from operations before corporate expense,
interest and income taxes.
Dayton Hudson Corporation and Subsidiaries Page 21
Consolidated Results of Operations
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(Millions of Dollars, Except Per-Share Data) 1993 1992 1991
================================================================================
REVENUES $19,233 $17,927 $16,115
COSTS AND EXPENSES
Cost of retail sales, buying and occupancy 14,164 13,129 11,751
Selling, publicity and administrative 3,175 2,978 2,801
Depreciation 498 459 410
Interest expense, net 446 437 398
Taxes other than income taxes 343 313 283
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Total Costs and Expenses 18,626 17,316 15,643
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Earnings Before Income Taxes 607 611 472
Provision for Income Taxes 232 228 171
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NET EARNINGS $ 375 $ 383 $ 301
================================================================================
PRIMARY EARNINGS PER SHARE $ 4.99 $ 5.02 $ 3.86
FULLY DILUTED EARNINGS PER SHARE $ 4.77 $ 4.82 $ 3.72
================================================================================
AVERAGE COMMON SHARES OUTSTANDING (MILLIONS):
Primary 71.8 71.6 71.5
Fully Diluted 76.1 75.9 75.9
================================================================================
The financial statements should be read in conjunction with the Notes and
Analysis contained throughout pages 21-32.
Dayton Hudson Corporation and Subsidiaries Page 22
Notes and Analysis
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(Millions of Dollars, Except Per-Share Data)
FINANCE CHARGE REVENUES
Finance charge revenues on internal credit sales were $192 million on sales of
$3.5 billion in 1993, $186 million on sales of $3.5 billion in 1992 and $182
million on sales of $3.3 billion in 1991.
INCOME TAXES
At the beginning of 1993, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which
requires the use of the liability method of accounting for deferred income
taxes. Prior-year financial statements have not been restated for the provisions
of SFAS No. 109. The cumulative and the current-year effects of the adoption
were not significant. Income taxes for 1992 and 1991 were calculated according
to SFAS No. 96, "Accounting for Income Taxes," which was superseded by SFAS No.
109.
The Corporation's effective tax rate was 38.2% for 1993 compared with 37.3%
for 1992 and 36.3% for 1991. The increase in the 1993 tax rate over 1992
reflects the one percentage point increase in the federal statutory tax rate and
the associated one-time adjustment to increase deferred tax balances, partially
offset by tax savings from the reenactment of the Targeted Jobs Tax Credit.
Also, with the adoption of SFAS No. 109, the financial reporting deductibility
of ESOP preferred stock dividends earned was reduced to shares allocated to
participant accounts versus all outstanding ESOP shares. The higher effective
tax rate in 1992 over 1991 was primarily due to increased state tax rates.
Effective tax rates vary from the federal statutory rate as follows:
- ---------------------------------------------------------------
PERCENT OF EARNINGS BEFORE
INCOME TAXES 1993 1992 1991
- ---------------------------------------------------------------
Statutory rate 35.0% 34.0% 34.0%
State income taxes, net of
federal tax benefit 4.6 4.7 4.0
Cumulative effect of adopting
SFAS No. 109 (1.4) - -
Dividends on preferred stock (.5) (1.5) (2.0)
Other .5 .1 .3
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Effective tax rate 38.2% 37.3% 36.3%
===============================================================
INCOME TAXES continued
The components of the provision for income taxes were:
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INCOME TAX PROVISION 1993 1992 1991
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Current:
Federal $166 $176 $112
State 37 41 25
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203 217 137
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Deferred:
Federal 23 8 31
State 6 3 3
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29 11 34
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Total $232 $228 $171
===============================================================
The components of the net deferred tax liability were:
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JANUARY 29, January 30,
NET DEFERRED TAX LIABILITY 1994 1993
- ---------------------------------------------------------------
Gross deferred tax assets:
Deferred compensation $ 55 $ 47
Self-insured benefits 69 44
Postretirement health care obligation 41 38
Other 59 74
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224 203
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Gross deferred tax liabilities:
Inventory 37 -
Property and equipment 304 290
Purchase accounting differences 33 33
Other 34 35
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408 358
- ---------------------------------------------------------------
Net deferred tax liability $184 $155
===============================================================
EARNINGS PER SHARE
Primary earnings per share equal net earnings, less dividend requirements on
ESOP preferred stock (net of tax benefits in 1993 related to unallocated shares
associated with the adoption of SFAS No. 109), divided by the average number of
common shares and common stock equivalents outstanding during the period.
Fully diluted earnings per share are computed based on the average number of
common shares and common stock equivalents outstanding during the period. The
computation assumes conversion of the ESOP preferred stock into common stock.
Net earnings also are adjusted for the additional expense required to fund the
ESOP debt service (net of tax benefits in 1993 related to unallocated shares
associated with the adoption of SFAS No. 109), which results from the assumed
replacement of the ESOP preferred dividends with common stock dividends.
References to earnings per share relate to fully diluted earnings per share.
Dayton Hudson Corporation and Subsidiaries Page 23
Consolidated Statements of Financial Position
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JANUARY 29, JANUARY 30,
(Millions of Dollars) 1994 1993
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 321 $ 117
Accounts receivable 1,536 1,514
Merchandise inventories 2,497 2,618
Other 157 165
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Total Current Assets 4,511 4,414
PROPERTY AND EQUIPMENT
Land 1,120 998
Buildings and improvements 4,753 4,342
Fixtures and equipment 2,162 2,197
Construction-in-progress 248 223
Accumulated depreciation (2,336) (2,197)
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Net Property and Equipment 5,947 5,563
OTHER 320 360
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TOTAL ASSETS $10,778 $10,337
===============================================================================
LIABILITIES AND COMMON SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Notes payable $ 200 $ 23
Accounts payable 1,654 1,596
Accrued liabilities 903 849
Income taxes payable 145 125
Current portion of long-term debt 173 371
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Total Current Liabilities 3,075 2,964
LONG-TERM DEBT 4,279 4,330
DEFERRED INCOME TAXES AND OTHER 536 450
CONVERTIBLE PREFERRED STOCK 368 374
LOAN TO ESOP (217) (267)
COMMON SHAREHOLDERS' INVESTMENT
Common stock 72 71
Additional paid-in capital 73 58
Retained earnings 2,592 2,357
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Total Common Shareholders' Investment 2,737 2,486
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TOTAL LIABILITIES & COMMON SHAREHOLDERS' INVESTMENT $10,778 $10,337
===============================================================================
The financial statements should be read in conjunction with the Notes and
Analysis contained throughout pages 21-32.
Dayton Hudson Corporation and Subsidiaries Page 24
Notes and Analysis
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(Millions of Dollars, Except Per-Share Data)
CASH EQUIVALENTS
Cash equivalents represent short-term investments with a maturity of three
months or less at the time of purchase. Short-term investments are recorded at
cost, which approximates fair value.
ACCOUNTS RECEIVABLE
Customer accounts receivable are classified as current assets and include
some which are due after one year, consistent with industry practice. Accounts
receivable generally are written off when any portion of the balance is 12
months past due, or when the required payments have not been received for six
consecutive months. The allowance for doubtful accounts was $35 million and $37
million at year-end 1993 and 1992, respectively.
CREDIT CARD SUBSIDIARY
Retailers National Bank (the Bank), a national credit card bank and a
wholly owned subsidiary, was chartered on January 7, 1994. The Bank, at
inception, acquired the outstanding accounts receivable of DSD and Target. It
issues DSD-named credit cards, which are accepted at DSD and Target stores. Net
earnings for the Bank were insignificant for 1993. The following is the
condensed statement of financial position for the Bank.
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JANUARY 29, 1994
- --------------------------------------------------------------------------------
Accounts receivable, net $668
Other assets 16
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Total Assets $684
================================================================================
Liabilities, principally deposit due to the Corporation $634
Investment of the Corporation 50
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Total Liabilities and Investment $684
================================================================================
INVENTORIES
Inventories and the related cost of sales are accounted for by the retail
inventory accounting method using the last-in, first-out (LIFO) basis. Under
this method, the cost of retail sales, as reported in the Consolidated Results
of Operations, represents current cost, thereby reflecting the effect of
changing prices. The accumulated LIFO provision was $80 million and $171 million
at year-end 1993 and 1992, respectively (see page 31 for further discussion of
the LIFO provision).
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
For financial reporting purposes, depreciation on property is computed using the
straight-line method over estimated useful lives. Accelerated depreciation
methods generally are used for income tax purposes.
ACCOUNTS PAYABLE
Outstanding drafts included in accounts payable were $239 million and $372
million at year-end 1993 and 1992, respectively.
LEASES
Assets held under capital leases are included in property and equipment and
are charged to depreciation and interest over the life of the lease. Operating
leases are not capitalized and lease rentals are expensed. Rent expense on
buildings, included in buying and occupancy, includes percentage rents which are
based on a percentage of retail sales over stated levels. Total rent expense was
$100 million, $94 million and $92 million in 1993, 1992 and 1991, respectively.
Many of the long-term leases include options to renew, with renewal terms
varying from five to 30 years. Certain leases also include options to purchase
the property. Future minimum lease payments required under noncancelable lease
agreements existing at the end of 1993 were:
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Operating Capital
FUTURE MINIMUM LEASE PAYMENTS Leases Leases
- ------------------------------------------------------------------------------
1994 $ 99 $ 20
1995 98 20
1996 91 19
1997 71 19
1998 64 18
After 1998 501 189
- ------------------------------------------------------------------------------
Total future minimum lease payments 924 285
Less: Interest* (411) (153)
Executory costs (9) (5)
- ------------------------------------------------------------------------------
Present value of minimum lease payments $504 $127**
==============================================================================
* Calculated using the average interest rate in the year of inception for each
lease (weighted average interest rate - 9.6%).
** Includes current portion of $5 million.
COMMITMENTS AND CONTINGENCIES
Commitments for the purchase of real estate, construction of new
facilities, remodeling of existing facilities and other equipment purchases over
the next year amounted to approximately $186 million at January 29, 1994.
The Corporation is exposed to claims and litigation arising out of the
ordinary course of business. Considering the insurance coverage in place for a
major portion of the claims and litigation, and noting that the ultimate
resolutions cannot be accurately predicted, management, after consulting with
legal counsel, believes that the presently identified claims and litigation will
not have a material adverse effect on the Corporation's results of operations or
its financial condition.
Dayton Hudson Corporation and Subsidiaries Page 25
Consolidated Statements of Cash Flows
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(Millions of Dollars) 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings $ 375 $383 $ 301
Reconciliation to cash flow:
Depreciation 498 459 410
Deferred tax provision 29 11 34
Other noncash items affecting earnings 60 48 26
Changes in operating accounts providing/(requiring) cash:
Accounts receivable (22) (84) (23)
Merchandise inventories 121 (237) (365)
Accounts payable 58 272 57
Accrued liabilities 63 142 59
Income taxes payable 20 27 (62)
Other 17 (37) -
- ------------------------------------------------------------------------------------------------------
Cash Flow Provided by Operations 1,219 984 437
- ------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for property and equipment (969) (918) (1,009)
Disposals of property and equipment 79 10 19
- ------------------------------------------------------------------------------------------------------
Cash Flow Required for Investing Activities (890) (908) (990)
- ------------------------------------------------------------------------------------------------------
Net Financing Sources/(Requirements) 329 76 (553)
- ------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
(Decrease)/increase in notes payable (23) (242) 161
Additions to long-term debt 528 550 756
Reductions of long-term debt (581) (290) (280)
Principal payments received on loan to ESOP 61 58 49
Dividends paid (138) (133) (128)
Other 28 2 (1)
- ------------------------------------------------------------------------------------------------------
Cash Flow (Used)/Provided by Financing Activities (125) (55) 557
- ------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 204 21 4
Cash and Cash Equivalents at Beginning of Year 117 96 92
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 321 $117 $ 96
======================================================================================================
The reclassification of $200 million of long-term debt to notes payable,
associated with the subsequent event discussed on page 27, is not reflected
in financing activities in the Statements of Cash Flows because it did not
involve cash. Amounts in these statements are presented on a cash basis
and therefore may differ from those shown in other sections of this annual
report.
Cash paid for interest (including interest capitalized) was $441 million, $438
million and $389 million in 1993, 1992 and 1991, respectively. Income taxes
paid were $183 million, $189 million and $200 million in 1993, 1992 and 1991,
respectively.
The financial statements should be read in conjunction with the Notes and
Analysis contained throughout pages 21-32.
Dayton Hudson Corporation and Subsidiaries Page 26
Notes and Analysis
- --------------------------------------------------------------------------------
(Millions of Dollars, Except Per-Share Data)
ANALYSIS OF CASH FLOW (Unaudited)
OPERATING ACTIVITIES. The improvement in 1993 cash flow from operations
reflects a decline in working capital, primarily Mervyn's inventories.
Internally-generated funds represent an important component of our capital
resources.
INVESTING ACTIVITIES. The Corporation's investing activities reflect strategic
capital spending in all three operating divisions, primarily Target.
Approximately 73% of 1993 capital expenditures were made by Target, 19% by
Mervyn's and 8% by DSD. Nearly 63% of total expenditures were for building new
stores, with the balance spent on store remodeling, systems and distribution.
Capital expenditures for 1994 are expected to be approximately $1.3 billion. The
1994 store opening plans are for approximately 60 new Target stores and 10 new
Mervyn's stores, while the remodel program includes approximately 45 stores.
FINANCING ACTIVITIES. Cash flow from operations and proceeds from the issuance
of debt are generally used to fund the Corporation's capital expenditures,
working capital needs, dividend payments and debt maturities and redemptions.
Internally-generated funds were sufficient to finance the Corporation's
investment activities in 1993 and 1992, while a portion of the Corporation's
needs were met by financing activities in 1991. (Refer to the Lines of Credit
note on this page for information regarding the Corporation's available credit.)
LINES OF CREDIT
At year-end, two revolving credit agreements totaling $1 billion were
available from various lending institutions. There were no balances outstanding
at January 29, 1994. A fee is paid for the availability under these agreements
and the Corporation may borrow at various specified rates. Fees paid under these
agreements were $2 million each in 1993, 1992 and 1991.
NOTES PAYABLE
At January 29, 1994, $200 million in commercial paper was outstanding. The
average amount of commercial paper outstanding during the year was $298
million, at a weighted average interest rate of 3.2%.
Interest rate swaps were used to reduce interest rate exposure by effectively
fixing the rate on $200 million of variable-rate commercial paper at
approximately 8.6% until 1999. Subsequent to year end, the interest rate swaps
were terminated at a premium of $22 million. The premium will be amortized into
interest expense through 1999. It is anticipated that future interest rate
savings will offset the premium amortization. At January 30, 1993,
NOTES PAYABLE CONTINUED
$200 million of commercial paper, which supported the underlying obligation of
the swaps, was classified as long-term debt. Long-term revolving credit
agreements backed the commercial paper.
LONG-TERM DEBT
During 1993, $528 million of long-term debt was issued with maturities of 1996
to 2023 at rates ranging from 4.65% to 7.875%, with an average interest rate of
7.1%. At year-end, the weighted average interest rate on total long-term debt
was 9.0% with an average maturity of 15 years. In 1993, the Corporation called
$300 million of notes and debentures at 7.875% to 10.75% due 1996 to 2013. The
replacement of this debt at lower interest rates results in current and future
expense savings.
Long-term debt due beyond one year was:
- -------------------------------------------------------------------------------
JANUARY 29, JANUARY 30,
LONG-TERM DEBT 1994 1993
- -------------------------------------------------------------------------------
Swapped commercial paper backed by revolving credit $ - $ 200
4.65% to 10.0% unsecured notes and sinking
fund notes and debentures due 1995 to 2023,
and other debt 4,157 4,004
Capital lease obligations 122 126
- -------------------------------------------------------------------------------
Total $4,279 $4,330
===============================================================================
At January 29, 1994, the fair value of the $4,157 million 4.65% to 10.0%
unsecured notes, sinking fund notes and debentures, and other debt was
approximately $4,799 million. The fair value of the $200 million swapped
commercial paper was approximately $231 million at year-end. The fair value of
the long-term debt and swaps was estimated using discounted cash flow analysis,
based on the Corporation's current incremental borrowing rates for similar types
of financial instruments. The carrying amounts of the Corporation's other
borrowings, including the current portion of long-term debt, approximate their
fair values.
As a condition of certain borrowings, related land, buildings and equipment
have been pledged as collateral. At year end, approximately $67 million of
property and equipment served as collateral for these loans.
Required principal payments on long-term debt over the next five years,
excluding capital lease obligations, will be $168 million in 1994, $204 million
in 1995, $68 million in 1996, $123 million in 1997 and $200 million in 1998.
Dayton Hudson Corporation and Subsidiaries Page 27
Consolidated Statements of Common Shareholders' Investment
- -------------------------------------------------------------------------------
Additional
Common Paid-in Retained
(Millions of Dollars) Stock Capital Earnings Total
- -----------------------------------------------------------------------------------------------------
FEBRUARY 2, 1991 $71 $41 $1,936 $2,048
Consolidated net earnings - - 301 301
Dividends declared - - (128) (128)
Conversion of preferred stock - 2 - 2
Stock option activity - 8 - 8
- -----------------------------------------------------------------------------------------------------
FEBRUARY 1, 1992 71 51 2,109 2,231
Consolidated net earnings - - 383 383
Dividends declared - - (135) (135)
Conversion of preferred stock - 3 - 3
Stock option activity - 4 - 4
- -----------------------------------------------------------------------------------------------------
JANUARY 30, 1993 71 58 2,357 2,486
Consolidated net earnings - - 375 375
Dividends declared - - (140) (140)
Tax benefit on unallocated preferred share dividends - 6 - 6
Conversion of preferred stock - 6 - 6
Stock option activity 1 3 - 4
- -----------------------------------------------------------------------------------------------------
JANUARY 29, 1994 $72 $73 $2,592 $2,737
=====================================================================================================
COMMON STOCK
Authorized 500,000,000 shares, $1.00 par value; 71,525,082 shares issued
and outstanding at January 29, 1994; 71,383,880 shares issued and outstanding at
January 30, 1993.
PREFERRED STOCK
Authorized 5,000,000 shares; Series B ESOP Convertible Preferred Stock $.01
par value, 425,979 shares issued and outstanding at January 29, 1994; 432,014
shares issued and outstanding at January 30, 1993. Each share converts into ten
shares of the Corporation's common stock, has voting rights equal to the
equivalent number of common shares, and is entitled to cumulative annual
dividends of $56.20. Under certain circumstances, the shares may be redeemed at
the election of the Corporation or the ESOP.
JUNIOR PREFERRED STOCK RIGHTS
The Corporation declared a distribution of shares of preferred share
purchase rights in 1986. Terms of the plan provide for a distribution of one
preferred share purchase right for each outstanding share of Dayton Hudson
common stock. Each right will entitle shareholders to buy one-hundredth of a
share of a new series of junior participating preferred stock at an exercise
price of $150, subject to adjustment. The rights will be exercisable only if a
person or group acquires ownership of 20% or more of Dayton Hudson common stock
or announces a tender offer to acquire 30% or more of the common stock.
The financial statements should be read in conjunction with the Notes and
Analysis contained throughout pages 21-32.
Dayton Hudson Corporation and Subsidiaries Page 28
Notes and Analysis
- --------------------------------------------------------------------------------
(Millions of Dollars, Except Per-Share Data)
STOCK OPTION PLAN
The Corporation has a stock option plan for key employees. Grants have
included stock options, performance shares and, beginning in 1993, restricted
stock awards. Options have included Incentive Stock Options, Non-Qualified Stock
Options or a combination of the two. Twelve months after the grant date 25% of
the majority of options granted become exercisable with another 25% after each
succeeding 12 months. These options are cumulatively exercisable and expire no
later than 10 years after the date of the grant. Stock options are awarded at
fair market value on the grant date. When exercised, proceeds are credited to
common shareholders' investment and no expense is incurred.
Beginning in 1993, the performance shares earned and restricted stock awarded
generally vest at the end of a four-year period, at which time common stock is
issued and placed in escrow, subject to further restrictions. Prior to 1993,
performance shares earned were paid in cash and common stock. Compensation
expense on performance shares and restricted stock awards is recorded based on
the current market price of the Corporation's common stock and the extent to
which certain goals are being met. Performance share and restricted stock award
expense was less than $1 million in 1993, compared with $3 million and $1
million of performance share expense in 1992 and 1991, respectively.
The number of shares of unissued common stock reserved for future grants under
the plan was 3,106,901 at the end of 1993 and 3,396,070 at the end of 1992.
- -------------------------------------------------------------------------------------
OPTIONS, PERFORMANCE SHARES AND RESTRICTED STOCK AWARDS OUTSTANDING
- -------------------------------------------------------------------------------------
OPTIONS
-----------------------------------------
NUMBER PRICE SHARES PERFOR- RESTRICTED
OF PER EXER- MANCE STOCK
SHARES SHARE CISABLE SHARES AWARDS
- -------------------------------------------------------------------------------
Feb. 2, 1991 1,072,349 $14.30-$75.50 571,948 219,091 -
Granted 190,513 73.81- 75.19
Canceled (49,706) 30.25- 75.50
Exercised (141,990) 14.30- 69.56
- -------------------------------------------------------------------------------
Feb. 1, 1992 1,071,166 17.44- 75.50 561,774 190,215 -
Granted 198,027 59.81- 67.63
Canceled (14,666) 17.44- 75.50
Exercised (100,109) 17.44- 53.19
- -------------------------------------------------------------------------------
Jan. 30, 1993 1,154,418 30.25- 75.50 590,807 207,758 -
Granted 205,268 65.25- 83.25
Canceled (16,856) 53.00- 78.00
Exercised (70,009) 30.25- 75.50
- -------------------------------------------------------------------------------
JAN. 29, 1994 1,272,821 $30.25-$83.25 654,624 247,689 30,494
===============================================================================
PENSION PLANS
The Corporation has three defined benefit pension plans which cover all
employees who meet certain requirements of age, length of service and hours
worked per year. The benefits provided are based upon years of service and the
employee's compensation.
Contributions to the pension plans are made solely by the Corporation. To
compute net pension cost, the Corporation's actuarial consulting firm estimates
the total benefits which will ultimately be paid to eligible employees and then
allocates these costs to service periods.
The period over which unrecognized pension costs and credits are amortized,
including prior service costs and actuarial gains and losses, is based on the
remaining service period for those employees expected to receive pension
benefits.
- -------------------------------------------------------------------------------------
COMPONENTS OF NET PENSION EXPENSE 1993 1992 1991
- -------------------------------------------------------------------------------------
Service cost-benefits earned during the period $22 $19 $18
Interest cost on projected benefit obligation 32 30 26
Return on assets-current (50) (30) (79)
-deferred 14 (1) 50
Amortization of transitional asset - - (7)
- -------------------------------------------------------------------------------------
Net pension expense $18 $18 $ 8
=====================================================================================
- -------------------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS 1993 1992 1991
- -------------------------------------------------------------------------------------
Discount rate 7-1/4% 8-1/2% 8-1/2%
Expected long-term rate of return on plan assets 9-1/2 9-1/2 9-1/2
Average assumed rate of compensation increase 5-1/4 7 7
=====================================================================================
During 1993, the Corporation changed certain actuarial assumptions used in the
calculation of its projected benefit obligation for the defined benefit plans.
The net effect of these changes on future years' pension expense is not expected
to be significant.
- ---------------------------------------------------------------------------
December 31,
FUNDED STATUS 1993 1992
- ---------------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $385 $297
Accumulated benefit obligation 411 316
===========================================================================
Projected benefit obligation 466 380
Fair market value of plans' assets* 454 403
- ---------------------------------------------------------------------------
Plans' assets (less than)/in excess of projected
benefit obligation (12) 23
Unrecognized prior service cost 4 5
Unrecognized net actuarial loss/(gain) 42 (4)
- ---------------------------------------------------------------------------
Prepaid pension asset $ 34 $ 24
===========================================================================
*Plans' assets consist primarily of equity and fixed income securities.
Dayton Hudson Corporation and Subsidiaries Page 29
Notes and Analysis
- --------------------------------------------------------------------------------
(Millions of Dollars, Except Per-Share Data)
SUPPLEMENTAL RETIREMENT PLAN
The Corporation sponsors a defined contribution employee benefit plan.
Employees who meet certain eligibility requirements of age, length of service
and hours worked per year can participate in the plan by investing up to 15% of
their compensation.
The Corporation's match equals 100% of each employee's contribution up to 5%
of each participant's total compensation, within ERISA limits. The Corporation's
contribution to the plan is invested in the ESOP.
In 1989, the Corporation lent $379 million to the ESOP at a 9% interest rate
with an estimated maturity of 15 years. Proceeds from the loan were used by the
ESOP to purchase 438,353 shares of Series B ESOP Convertible Preferred Stock of
the Corporation. The original issue value of the ESOP preferred stock of $864.60
per share is guaranteed by the Corporation.
The Corporation's contributions to the ESOP, plus dividends paid on preferred
stock held by the ESOP, are used to repay the loan principal and interest. Cash
contributed to the ESOP was $61 million each in 1993 and 1992, and $53 million
in 1991. Dividends earned on shares held by the ESOP were $24 million each in
1993 and 1992, and $25 million in 1991. Benefits expense, calculated based on
the shares allocated method, was $33 million, $28 million and $25 million in
1993, 1992 and 1991, respectively.
In November 1993, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 93-6 "Employers' Accounting for Employee
Stock Ownership Plans." The statement is effective for fiscal years beginning
after December 15, 1993. Within the SOP, the Corporation may continue its
current accounting.
POSTRETIREMENT HEALTH CARE BENEFITS
Certain health care benefits are provided for retired employees. Employees
eligible for retirement become eligible for these benefits if they meet minimum
age and service requirements and agree to contribute a portion of the cost. The
Corporation has the right to modify or terminate these benefits.
POSTRETIREMENT HEALTH CARE BENEFITS CONTINUED
- -----------------------------------------------------------------------
December 31,
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION 1993 1992
- -----------------------------------------------------------------------
Retirees $51 $52
Fully eligible active plan participants 26 30
Other active plan participants 14 14
Prior service cost (7) (6)
Unrecognized gain 14 4
- -----------------------------------------------------------------------
Total accumulated postretirement
benefit obligation $98 $94
=======================================================================
- --------------------------------------------------------------------------------
NET PERIODIC COST 1993 1992 1991
- --------------------------------------------------------------------------------
Service cost - benefits earned during the period $1 $1 $1
Interest cost on accumulated benefit 8 8 7
- --------------------------------------------------------------------------------
Net cost $9 $9 $8
================================================================================
An increase in the cost of covered health care benefits of 9.5% is assumed for
fiscal 1994. The rate is assumed to decrease incrementally to 6% in the year
2000 and remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example, a 1%
increase in the health care trend rate would increase the accumulated
postretirement benefit obligation by $7 million at year-end 1993 and the net
periodic cost by $1 million for the year. The discount rate used in determining
the accumulated postretirement benefit obligation was 7.25% for 1993 and 8.5%
for 1992.
During 1993, the Corporation changed certain actuarial assumptions used in the
calculation of its projected benefit obligation for the postretirement health
care benefits. The net effect of these changes on future years' results for the
postretirement health care benefits is not expected to be significant.
SUMMARY OF OTHER ACCOUNTING POLICIES
CONSOLIDATION. The financial statements include the accounts of the
Corporation after elimination of material intercompany balances and
transactions. All subsidiaries are wholly owned.
FISCAL YEAR. Our fiscal year ends on the Saturday nearest January 31.
- ------------------------------------------------------------------------------------
FISCAL YEAR Ended Weeks
- ------------------------------------------------------------------------------------
1993 January 29, 1994 52
1992 January 30, 1993 52
1991 February 1, 1992 52
====================================================================================
Unless otherwise stated, references to years in this report relate to fiscal
years rather than to calendar years.
Dayton Hudson Corporation and Subsidiaries Page 30
Notes and Analysis
- --------------------------------------------------------------------------------
(Millions of Dollars, Except Per-Share Data)
QUARTERLY RESULTS (Unaudited)
The same accounting policies are followed in preparing quarterly financial
data as are followed in preparing annual data. Costs directly associated with
revenues, such as cost of goods sold and percentage rent on leased stores, are
allocated based on revenues. Certain other costs not directly associated with
revenues, such as benefit plan expenses, bonuses and real estate taxes, are
allocated evenly throughout the year.
The table below summarizes results by quarter for 1993 and 1992:
- ----------------------------------------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter Total Year
1993 1992 1993 1992 1993 1992 1993 1992 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
Revenues $4,040 $3,719 $4,287 $3,967 $4,625 $4,340 $6,281 $5,901 $19,233 $17,927
Gross Profit(a) $1,067 $1,009 $1,107 $1,068 $1,208 $1,151 $1,687 $1,570 $ 5,069 $ 4,798
Net Earnings $ 30 $ 35 $ 24 $ 42 $ 43 $ 57 $ 278 $ 249 $ 375 $ 383
Earnings Per Share(b) $ .35 $ .40 $ .28 $ .50 $ .53 $ .70 $ 3.62 $ 3.22 $ 4.77 $ 4.82
============================================================================================================================
Fully Diluted Average
Common Shares
Outstanding (Millions) 76.1 75.9 76.0 75.9 76.1 76.0 76.1 76.0 76.1 75.9
Dividends Declared Per
Share $ .40 $ .38 $ .40 $ .38 $ .40 $ .38 $ .42 $ .40 $ 1.62 $ 1.54
Common Stock Price(c)
High $ 83-3/4 $ 70 $ 75 $ 69 $ 71-7/8 $ 78-3/8 $ 74-3/4 $ 79-1/8 $ 83-3/4 $ 79-1/8
Low 69-1/8 60 63-1/4 59 65 61-7/8 65-7/8 72-1/2 63-1/4 59
============================================================================================================================
(a) Gross profit is revenues less cost of retail sales, buying and occupancy.
(b) Earnings per share are computed independently for each of the quarters
presented. The sum of the quarterly earnings per share may not equal the
total-year amount due to the impact of changes in average quarterly shares
outstanding.
(c) Dayton Hudson Corporation's common stock is listed on the New York Stock
Exchange and the Pacific Stock Exchange.
LIFO PROVISION
The following table shows the quarterly pre-tax LIFO provision and its impact
on earnings per share:
- -------------------------------------------------------------------------------
LIFO Expense/(Credit)* 1993 1992 1991
- -------------------------------------------------------------------------------
Per Per Per
Quarter (Unaudited) Total Share Total Share Total Share
- -------------------------------------------------------------------------------
First $ 6 $ .05 $13 $.11 $ 16 $ .13
Second 6 .05 15 .12 13 .11
Third 3 .02 3 .02 3 .02
Fourth (106) (.87) (22) (.18) (70) (.59)
- -------------------------------------------------------------------------------
Total year $(91) $(.75) $ 9 $.07 $(38) $(.32)
===============================================================================
*LIFO expense/(credit) per share is computed based on fully diluted average
shares outstanding during each period. The sum of quarterly LIFO expense per
share may not equal the total-year amount due to the impact of changes in
average shares outstanding.
The fourth quarter 1993 LIFO credit was primarily the result of the adoption
of internally-generated price indices at Mervyn's and DSD. Previously, Mervyn's
and DSD used the Bureau of Labor Statistics' Department Stores Inventory Price
Index to estimate retail price changes.
These internal price indices capture the inventory valuation impact of lower
retail prices resulting from our value-pricing strategies. This change generated
a LIFO credit of $77 million, or $.63 per share. The cumulative and prior years'
effects of this change are not determinable. In addition to this change, the
1993 LIFO credit was affected by a lower-than-expected internally-generated
price index at Target, partially offset by a substantial decline in inventory
levels at Mervyn's.
The 1992 LIFO expense, as compared with the 1991 credit, was primarily due to
a higher internal price index at Target, partially offset by lower inflation at
Mervyn's and DSD. The 1991 LIFO credit primarily reflects Target's adoption of
an internally-generated price index.
The LIFO provision is adjusted each quarter for estimated changes in year-end
retail inflation rates, inventory levels and markup levels. A final adjustment
is recorded in the fourth quarter for the difference between the prior quarters'
estimates and actual total year LIFO expense.
Dayton Hudson Corporation and Subsidiaries Page 31
Report of Independent Auditors
- --------------------------------------------------------------------------------
Board of Directors and Shareholders
Dayton Hudson Corporation
We have audited the accompanying consolidated statements of financial position
of Dayton Hudson Corporation and subsidiaries as of January 29, 1994 and January
30, 1993 and the related consolidated results of operations, cash flows and
common shareholders' investment for each of the three years in the period ended
January 29, 1994. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Dayton Hudson
Corporation and subsidiaries at January 29, 1994 and January 30, 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 29, 1994, in conformity with generally
accepted accounting principles.
As discussed in the notes to the financial statements, the Corporation changed
its method of estimating retail price indices used in its LIFO inventory
valuation for Mervyn's and the Department Store Division in 1993.
/s/ Ernst & Young
Minneapolis, Minnesota
March 18, 1994
Dayton Hudson Corporation and Subsidiaries Page 32
Summary Financial and Operating Data
- --------------------------------------------------------------------------------
(Millions of Dollars, Except Per-Share Data) 1993 1992 1991 1990 1989(a)
- --------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA
- --------------------------------------------------------------------------------------------------------
Revenues $19,233 17,927 16,115 14,739 13,644
- --------------------------------------------------------------------------------------------------------
Cost of retail sales,
buying and occupancy $14,164 13,129 11,751 10,652 9,890
- --------------------------------------------------------------------------------------------------------
Selling, publicity and administrative $ 3,175 2,978 2,801 2,478 2,264
- --------------------------------------------------------------------------------------------------------
Depreciation $ 498 459 410 369 315
- --------------------------------------------------------------------------------------------------------
Interest expense, net $ 446 437 398 325 267
- --------------------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes $ 607 611 472 659 678
- --------------------------------------------------------------------------------------------------------
Income taxes $ 232 228 171 249 268
- --------------------------------------------------------------------------------------------------------
Net earnings: Continuing (b) $ 375 383 301 412 410
- --------------------------------------------------------------------------------------------------------
Consolidated $ 375 383 301 412 410
- --------------------------------------------------------------------------------------------------------
FINANCIAL POSITION DATA
- --------------------------------------------------------------------------------------------------------
Working capital $ 1,436 1,450 1,452 1,236 912
- --------------------------------------------------------------------------------------------------------
Property and equipment $ 5,947 5,563 5,102 4,525 3,523
- --------------------------------------------------------------------------------------------------------
Total assets $10,778 10,337 9,485 8,524 6,684
- --------------------------------------------------------------------------------------------------------
Long-term debt $ 4,279 4,330 4,227 3,682 2,510
- --------------------------------------------------------------------------------------------------------
Convertible preferred stock $ 368 374 377 379 379
- --------------------------------------------------------------------------------------------------------
Common shareholders' investment $ 2,737 2,486 2,231 2,048 1,753
- --------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
- --------------------------------------------------------------------------------------------------------
Fully diluted net earnings per share:
Continuing (b) $ 4.77 4.82 3.72 5.20 5.35
- --------------------------------------------------------------------------------------------------------
Consolidated $ 4.77 4.82 3.72 5.20 5.35
- --------------------------------------------------------------------------------------------------------
Cash dividend declared $ 1.62 1.54 1.46 1.35 1.17
- --------------------------------------------------------------------------------------------------------
Market price - high $ 83-3/4 79-1/8 80 78-1/8 66-3/8
- --------------------------------------------------------------------------------------------------------
Market price - low $ 63-1/4 59 56-3/8 47 43
- --------------------------------------------------------------------------------------------------------
Market price - close $ 65-7/8 77-3/4 65-1/8 65-3/4 61-3/4
- --------------------------------------------------------------------------------------------------------
Common shareholders' investment $ 38.27 34.83 31.31 28.82 24.73
- --------------------------------------------------------------------------------------------------------
The Summary Financial and Operating Data should be read in conjunction with the
Financial Statements, Notes and Analysis on pages 21-32.
(a) Consisted of 53 weeks.
(b) Includes cumulative income effect of two accounting changes, net, of $2
million ($.03 per share) in 1990.
Dayton Hudson Corporation and Subsidiaries Page 33
DAYTON HUDSON CORPORATION 1993 FACTS
. One of America's largest general merchandise retailers with revenues of $19.2
billion.
. More than 80% of revenues derived from discount and moderate-price retailing.
. Serves a wide range of consumers through 893 stores housing 94 million square
feet of retail space in 33 states.
. Among America's 20 largest private employers, with a workforce totaling
174,000.
. Largest commitment to community giving of any major general merchandise
retailer with 1993 giving of $24.0 million. Only major retailer to invest
five percent of its federally taxable income in social action and arts
programs in store communities.
TARGET
Target is an upscale discounter which provides quality merchandise at attractive
prices in clean, spacious and customer-friendly stores. It has 554 stores
coast-to-coast.
(Millions of Dollars) 1993 1992 1991
- ----------------------- ------- ------- -------
Revenues $11,743 $10,393 $9,041
- --------------------------------------------------
Operating Profit $ 662 $ 574 $ 458
- --------------------------------------------------
Stores 554 506 463
- --------------------------------------------------
Retail Square Feet* 58,087 52,211 47,086
MERVYN'S
Mervyn's is a moderate-priced family department store chain specializing in soft
goods. The division operates 276 stores in 15 states in the Northwest, West,
Southwest, Southeast, and Michigan.
(Millions of Dollars) 1993 1992 1991
- ----------------------- ------- ------- -------
Revenues $4,436 $4,510 $4,143
- --------------------------------------------------
Operating Profit $ 179 $ 284 $ 284
- --------------------------------------------------
Stores 276 265 245
- --------------------------------------------------
Retail Square Feet* 22,273 21,305 19,479
DEPARTMENT STORES
The Department Store Division emphasizes fashion leadership, quality merchandise
and superior customer service. The Division operates 63 full-service, full-line
department stores through three store groups predominantly in nine Midwestern
states: 19 Dayton's stores, 21 Hudson's stores and 23 Marshall Field's stores.
(Millions of Dollars) 1993 1992 1991
- ----------------------- ------- ------- -------
Revenues $3,054 $3,024 $2,931
- --------------------------------------------------
Operating Profit $ 268 $ 228 $ 168
- --------------------------------------------------
Stores 63 63 62
- --------------------------------------------------
Retail Square Feet* 13,824 13,846 13,744
*In thousands, reflects total square feet less office, warehouse and vacant
space.
Dayton Hudson Corporation and Subsidiaries Page 34
TARGET LOCATIONS
Retail Sq. Ft. No.
in thousands of stores
Arizona 1,921 18
Arkansas 186 2
California 12,127 115
Colorado 1,887 18
Florida 4,822 44
Georgia 1,469 15
Idaho 309 3
Illinois 3,211 28
Indiana 2,692 30
Iowa 1,554 17
Kansas 305 3
Kentucky 556 6
Louisiana 202 2
Michigan 3,563 34
Minnesota 4,467 38
Missouri 840 8
Montana 182 2
Nebraska 597 6
Nevada 842 8
New Mexico 403 4
North Carolina 479 5
North Dakota 416 4
Ohio 809 7
Oklahoma 779 8
Oregon 828 8
South Carolina 297 3
South Dakota 391 4
Tennessee 1,298 13
Texas 6,713 63
Washington 1,835 18
Wisconsin 1,925 18
Wyoming 182 2
- ---------------------------------------------------
Total 58,087 554
MAJOR MARKETS
Greater Los Angeles 60
Minneapolis/St. Paul 28
Chicago 18
Dallas/Ft. Worth 17
Detroit 17
Houston 17
San Francisco Bay Area 17
Atlanta 14
Miami/Ft. Lauderdale 13
Phoenix 13
Denver 12
San Diego 12
Seattle/Tacoma 10
MERVYN'S LOCATIONS
Retail Sq. Ft. No.
in thousands of stores
Arizona 1,154 14
California 9,558 123
Colorado 927 12
Florida 1,634 18
Georgia 487 6
Idaho 83 1
Louisiana 538 7
Michigan 1,175 15
Nevada 412 6
New Mexico 180 2
Oklahoma 270 3
Oregon 479 6
Texas 3,331 41
Utah 678 7
Washington 1,367 15
- --------------------------------------------------------
Total 22,273 276
MAJOR MARKETS
Greater Los Angeles 47
San Francisco Bay Area 22
Dallas/Ft. Worth 13
Miami/Ft. Lauderdale 13
San Diego 11
Phoenix 10
Detroit 9
Houston 9
Seattle/Tacoma 8
Atlanta 6
Denver 7
Salt Lake City 6
Sacramento 7
DEPARTMENT STORE LOCATIONS
Retail Sq. Ft. No.
in thousands of stores
DAYTON'S
Minnesota 2,748 12
North Dakota 299 3
South Dakota 102 1
Wisconsin 349 3
HUDSON'S
Indiana 246 2
Michigan 4,315 18
Ohio 187 1
MARSHALL FIELD'S
Illinois 3,944 15
Ohio 201 1
Texas 721 4
Wisconsin 712 3
- ------------------------------------------------------
Total 13,824 63
MAJOR MARKETS
Chicago 14
Minneapolis/St. Paul 10
Detroit 9
Dayton Hudson Corporation and Subsidiaries Page 35