Fiscal 2004 EPS From Continuing Operations $2.07MINNEAPOLIS, Feb 17, 2005 /PRNewswire-FirstCall via COMTEX/ -- Target Corporation
(NYSE: TGT) today reported earnings from continuing operations of
$809 million, or $0.90 per share, for the fourth quarter ended January 29,
2005, compared with $722 million, or $0.79 per share, in the fourth quarter
ended January 31, 2004. For the full year, earnings from continuing
operations were $1.885 billion, or $2.07 per share, in 2004, compared with
$1.619 billion, or $1.76 per share, in 2003. As previously disclosed, fourth
quarter and full year 2004 earnings from continuing operations were reduced by
$65 million, or $0.04 per share, as a result of an adjustment to the company's
lease accounting. All earnings per share figures refer to diluted earnings
per share. The attached consolidated financial statements are unaudited.
Net earnings for the fourth quarter of 2004 were $825 million, or
$0.91 per share. These results included a gain on disposal of discontinued
operations of $16 million, or $0.01 per share, related to finalizing the tax
attributes of the transaction, in addition to the earnings from continuing
operations. Net earnings for the full year were $3.198 billion, or $3.51 per
share. In addition to earnings from continuing operations, total year results
also included earnings from discontinued operations of $75 million, or
$0.08 per share, and a gain of $1.238 billion, or $1.36 per share, related to
the sale of Marshall Field's and Mervyn's.
"We are pleased with our performance and our many accomplishments during
2004, including our strong growth and continued market share gains at Target
and the successful sale of our Mervyn's and Marshall Field's divisions," said
Bob Ulrich, chairman and chief executive officer of Target Corporation. "We
believe that we remain well-positioned in 2005 and the years beyond to delight
our guests, achieve profitable growth and deliver superior value to our
shareholders."
Analysis of Continuing Operations -- Full Year Results
Total revenues increased 11.5 percent to $46.839 billion from
$42.025 billion in 2003, driven by a 5.3 percent increase in comparable store
sales combined with the contribution from new store expansion and our 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, earnings before interest and income taxes (EBIT) increased
14.0 percent to $3.601 billion, compared with $3.159 billion in 2003. The
contribution from the company's credit card operations to EBIT was
$485 million, an increase of $61 million, or 14.4 percent.
The company's gross margin rate improved from the prior year primarily due
to an increase in markup, while the company's expense rate was unfavorable to
prior year primarily due to previously disclosed lease accounting adjustments.
(Gross margin rate represents sales less cost of sales expressed as a
percentage of sales. Expense rate represents selling, general and
administrative expenses expressed as a percentage of sales.)
Net interest expense grew $14 million to $570 million in 2004, including
$89 million related to loss on debt repurchase, compared with $556 million in
2003, including $15 million of loss on debt repurchase. The impact of the
higher loss on debt repurchase on 2004 interest expense was partially offset
by substantially lower average funded balances in the third and fourth
quarters resulting from the application of proceeds from the Mervyn's and
Marshall Field's sale transactions.
Analysis of Continuing Operations -- Fourth Quarter Results
Fourth quarter revenues were $15.194 billion, up 11.1 percent from
$13.676 billion in the same period a year ago. Comparable store sales for the
quarter rose 5.4 percent.
Fourth quarter earnings before interest and income taxes were
$1.409 billion, an increase of $118 million, or 9.1 percent, from the fourth
quarter of 2003.
The company's gross margin rate improved slightly from the prior year
primarily due to an increase in markup, partially offset by higher markdowns.
The company's expense rate was unfavorable to prior year primarily due to
previously disclosed lease accounting adjustments, partially offset by expense
rate favorability in other areas. The contribution from the company's credit
card operations to EBIT was $134 million, an increase of $23 million, or
21.0 percent.
Net interest expense decreased $22 million for the quarter. This
improvement was due to the benefit of significantly lower average funded
balances, reflecting the application of proceeds from the Mervyn's and
Marshall Field's sale transactions, partially offset by a higher average
portfolio rate.
Analysis of Discontinued Operations
During 2004, Target Corporation completed the sale of its Mervyn's and
Marshall Field's business segments in separate transactions for an aggregate
cash consideration of approximately $4.9 billion. As a result of these
transactions, the corporation reported a pretax gain of $2.000 billion, or
$1.36 per share, for the full year. In addition, the financial results of
Marshall Field's and Mervyn's are reported as discontinued operations for both
2004 and 2003.
In connection with the sale of Marshall Field's, Target is providing
transition support services for a fee to The May Department Stores Company
until the end of first quarter 2005. Target is also supplying transition
services for a fee, in connection with the sale of Mervyn's, until the earlier
of August 2007 or the date on which an alternative long-term solution for
providing these services is in place. Consideration received from providing
these services is reflected as an offset to expenses incurred.
Other Factors
In the fourth quarter of 2004, Target adopted SFAS 123R, which requires
that all stock-based compensation, including grants of employee stock options,
be accounted for using a fair-value-based method. The impact of adopting this
revised accounting guidance, using the modified retrospective transition
method, was a reduction in pre-tax earnings of approximately $7 million, or
less than $0.01 per share, in the fourth quarter and $38 million, or about
$0.03 per share, for the full year. All prior periods have been restated to
reflect this accounting change.
The company's annual effective income tax rate for continuing operations
was 37.8 percent in both 2004 and 2003.
In June 2004, the company announced a $3 billion share repurchase program.
Under this program, the company repurchased $300 million of its common stock
during the fourth quarter, acquiring 6.1 million shares at an average price of
$49.51 per share. For the full year, the company has acquired 28.9 million
shares of its common stock at an average price per share of $44.68, reflecting
a total investment of approximately $1.29 billion. The company continues to
expect that this share repurchase program will be completed within two to
three years of its inception.
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 http://www.target.com (click on
"investors/webcasts"). A telephone replay of the call will be available
beginning at approximately 11:30am CST today through the end of business on
February 18, 2005. The replay number is (203) 369-1043.
Forward-looking statements in this release should be read in conjunction
with the cautionary statements in Exhibit (99)C to the company's 2003 Form
10-K.
Target Corporation's continuing operations include large, general
merchandise discount stores, as well as an on-line business called Target.com.
At year-end, the company operated 1,308 Target stores in 47 states.
Target Corporation news releases are available at http://www.target.com or
http://www.prnewswire.com .
(Tables Follow)
TARGET
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended Twelve Months Ended
(Millions, except January January January January
per share data) 29, 31, % 29, 31, %
(Unaudited) 2005 2004 Change 2005 2004 Change
Sales $14,877 $13,389 11.1 % $45,682 $40,928 11.6 %
Net credit revenues 317 287 10.6 1,157 1,097 5.5
Total revenues 15,194 13,676 11.1 46,839 42,025 11.5
Cost of sales 10,348 9,339 10.8 31,445 28,389 10.8
Selling, general and
administrative
expense 2,888 2,568 12.5 9,797 8,657 13.2
Credit expense 205 192 6.5 737 722 2.0
Depreciation and
amortization 344 286 20.2 1,259 1,098 14.6
Earnings from
continuing
operations before
interest expense
and income taxes 1,409 1,291 9.1 3,601 3,159 14.0
Interest expense 107 129 (17.3) 570 556 2.6
Earnings from
continuing
operations before
income taxes 1,302 1,162 12.0 3,031 2,603 16.4
Provision for income
taxes 493 440 12.0 1,146 984 16.4
Earnings from
continuing
operations 809 722 12.0 1,885 1,619 16.4
Earnings from
discontinued
operations, net
of $62, $46 and
$116 tax - 101 - 75 190 (60.4)
Gain on disposal of
discontinued
operations, net
of ($21) and $761
tax 16 - - 1,238 - -
Net earnings $825 $823 0.1 % $3,198 $1,809 76.7 %
Basic earnings per
share:
Continuing
operations $0.91 $0.79 14.1 $2.09 $1.78 17.4
Discontinued
operations - 0.11 - 0.08 0.21 (59.5)
Gain on disposal
of discontinued
operations 0.01 - - 1.37 - -
Basic earnings
per share $0.92 $0.90 1.9 % $3.54 $1.99 78.2 %
Diluted earnings per
share:
Continuing
operations $0.90 $0.79 13.9 $2.07 $1.76 17.4
Discontinued
operations - 0.11 - 0.08 0.21 (59.6)
Gain on disposal
of discontinued
operations 0.01 - - 1.36 - -
Diluted earnings
per share $0.91 $0.90 1.8 % $3.51 $1.97 78.1 %
Weighted average
common shares
outstanding:
Basic 895.3 911.6 903.8 911.0
Diluted 903.0 918.0 912.1 919.2
TARGET
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
SUBJECT TO RECLASSIFICATION
(Millions) January 29, January 31,
(Unaudited) 2005 2004
ASSETS
Cash and cash equivalents $2,245 $708
Accounts receivable, net 5,069 4,621
Inventory 5,384 4,531
Other current assets 1,224 1,000
Current assets of discontinued
operations - 2,092
Total current assets 13,922 12,952
Property and equipment, net 16,860 15,153
Other noncurrent assets 1,511 1,377
Noncurrent assets of discontinued
operations - 1,934
Total assets $32,293 $31,416
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Accounts payable $5,779 $4,956
Current portion of long-term debt and
notes payable 504 863
Other current liabilities 1,937 1,670
Current liabilities of discontinued
operations - 825
Total current liabilities 8,220 8,314
Long-term debt 9,034 10,155
Deferred income taxes 973 632
Other noncurrent liabilities 1,037 917
Noncurrent liabilities of
discontinued operations - 266
Shareholders' investment 13,029 11,132
Total liabilities and shareholders'
investment $32,293 $31,416
Common shares outstanding 890.7 911.8
TARGET
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUBJECT TO RECLASSIFICATION Twelve Months Ended
(Millions) January 29, January 31,
(Unaudited) 2005 2004
OPERATING ACTIVITIES
Net earnings $3,198 $1,809
Earnings from and gain on disposal of
discontinued operations, net of tax 1,313 190
Earnings from continuing operations 1,885 1,619
Reconciliation to cash flow:
Depreciation and amortization 1,259 1,098
Deferred tax provision 234 208
Bad debt provision 451 476
Loss on disposal of fixed assets, net 59 41
Other noncash items affecting earnings 127 58
Changes in operating accounts
providing/(requiring) cash:
Accounts receivable (898) (817)
Inventory (853) (579)
Other current assets (64) (234)
Other assets (147) (149)
Accounts payable 823 721
Accrued liabilities 319 85
Income taxes payable (79) 99
Other (16) 24
Cash Flow Provided by Operations 3,100 2,650
INVESTING ACTIVITIES
Expenditures for property and equipment (3,068) (2,756)
Proceeds from the disposal of fixed assets 56 67
Proceeds from sale of discontinued
operations 4,893 -
Cash Flow Provided/(Required) by
Investing Activities 1,881 (2,689)
FINANCING ACTIVITIES
Decrease in notes payable, net - (100)
Additions to long term debt 10 1,200
Reductions of long term debt (1,487) (1,179)
Dividends paid (272) (237)
Repurchase of stock (1,260) (5)
Stock Option Exercises 146 36
Other 57 (10)
Cash Flow Required by Financing Activities (2,806) (295)
Net Cash (Required)/Provided by
Discontinued Operations (638) 292
Net Increase / (Decrease) in Cash and
Cash Equivalents 1,537 (42)
Cash and Cash Equivalents at
Beginning of Year 708 750
Cash and Cash Equivalents at End of
Period $2,245 $708
Target Corporation
(Millions)
(Unaudited)
NUMBER OF STORES, RETAIL SQUARE FEET and COMPARABLE STORE SALES
Retail square feet in thousands; reflects total square feet less office,
warehouse and vacant space.
Number of Stores Retail Square Feet
January January January January
29, 31, 29, 31, %
2005 2004 2005 2004 Change
Target General Merchandise
Stores 1,172 1,107 140,953 131,638 7.1
SuperTarget Stores 136 118 24,056 20,925 15.0
Total 1,308 1,225 165,009 152,563 8.2 %
Three Months Twelve Months
Ended Ended
January January January January
29, 31, 29, 31,
2005 2004 2005 2004
Continuing Operations
Comparable Store Sales 5.4% 6.1% 5.3% 4.4%
CREDIT CARD CONTRIBUTION
OF CONTINUING OPERATIONS
Three Months Twelve Months
Ended Ended
January January January January
29, 31, 29, 31,
2005 2004 2005 2004
Revenues
Finance charges, late fees and
other revenues $288 $264 $1,059 $1,015
Merchant fees
Intracompany 22 16 65 49
Third-party 29 23 98 82
Total revenues 339 303 1,222 1,146
Expenses
Bad debt 124 126 451 476
Operations and marketing 81 66 286 246
Total expenses 205 192 737 722
Pre-tax credit card
contribution $134 $111 $485 $424
As a percent of total average
receivables (annualized) 10.2% 9.1% 9.8% 9.1%
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Three Months Twelve Months
Ended Ended
January January January January
29, 31, 29, 31,
2005 2004 2005 2004
Allowance at beginning of
period $363 $340 $352 $320
Bad debt provision 124 126 451 476
Net write-offs (100) (114) (416) (444)
Allowance at end of period $387 $352 $387 $352
As a percent of period-end
receivables 7.1% 7.1% 7.1% 7.1%
SUPPLEMENTAL DATA
January January
29, 31,
2005 2004
Period-end receivables $5,456 $4,973
Total past due as a percent of
period-end receivables * 3.5% 4.2%
* Accounts with three or more
payments past due.
Three Months Twelve Months
Ended Ended
January January January January
29, 31, 29, 31,
2005 2004 2005 2004
Total revenues as a percent
of average receivables
(annualized): 25.7% 24.9% 24.8% 24.6%
Net write-offs as a percent
of average receivables
(annualized): 7.6% 9.5% 8.4% 9.5%
Total average receivables $5,278 $4,881 $4,927 $4,661
SOURCE Target Corporation
investors, Susan Kahn, +1-612-761-6735, or financial media, Cathy Wright,
+1-612-761-6627, or +1-847-615-1538, both of Target Corporation
