Target 2002 Annual Report Download

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Target Corporation: Creating value.
A N N U A L R E P O RT 2 0 0 2

Table of contents

  • Page 1
    Target Corporation: Creating value. ANNUAL REPORT 2002

  • Page 2
    ... profit Net earnings* 2002 2001 $43,917 $ 3,461 $ 1,654 $39,826 $ 2,965 $ 1,368 $1.23 1.50 Change Per Share Data Diluted earnings* Cash dividends $ $ 1.81 .240 $ $ 1.50 .225 21% 7% At Year-end (thousands, except Number of stores) Common shares outstanding Retail square feet Number of stores...

  • Page 3
    .... Fun. It means delighting our guests, respecting our team members, supporting our communities and delivering superior shareholder returns. So how is value created? Is value created by product design or price? Is it about a convenient store location or a convenient store layout? Is value about the...

  • Page 4
    yes. 2

  • Page 5
    ...anniversary of Target Stores, the 150th anniversary of Marshall Field's and our 35th year as a publicly traded company. • We leveraged our strategic positioning and financial services expertise, strengthened our relationships with existing guests and enhanced our overall financial results through...

  • Page 6
    ... to the support of community programs that are meaningful to our guests, including education, social services and the arts. Our goal is to deliver even greater value to our guests by understanding them better. Through our proprietary credit cards at Target, Mervyn's and Marshall Field's, we are...

  • Page 7
    ... programs that make our guests' communities safer and more attractive places to live and work. Today, we maintain this tradition of giving with donations totaling more than two million dollars each week and hundreds of thousands of hours in team member service. In 2002, Forbes recognized Target...

  • Page 8
    6

  • Page 9
    Exceptional value. 7

  • Page 10
    ... value as we further expanded our market share and increasingly differentiated the Target shopping experience. We added approximately 12 percent in net new square footage to our store base, opening 114 new discount stores and SuperTarget locations. We introduced premium brands such as Starbucks...

  • Page 11
    9

  • Page 12
    10

  • Page 13
    ... rewards, saves you money and raises funds for your child's school while you shop. For over a century, Target Corporation has created value for our guests by offering financial services and products that include proprietary credit cards, the Target Visa card and an array of unique store-branded gift...

  • Page 14
    ... Target we 12 have begun capturing electronic signatures at checkout and are piloting electronic coupons for our Target Visa guests using smart chip technology. Investments in our supply chain and infrastructure are also critical to our competitive position and support our guest service objectives...

  • Page 15
    13

  • Page 16
    14

  • Page 17
    ... week. For nearly six decades, Target Corporation has contributed five percent of our federally taxable income to support non-profit programs across the country. Reflecting the importance we place on our relationships with our guests, our annual giving is directed to areas that our guests most value...

  • Page 18
    ... 50%. Even in our most densely populated states, our market presence has expanded nearly 40%, indicating ample opportunity for profitable growth well into the future. Year-end Store Count and Square Footage by State 2002 Sq. Ft. per Thousand Population Number of Stores Retail Sq. Ft. (in thousands...

  • Page 19
    ... Results of Operations as shown on page 24. $43,917 Mervyn's Marshall Field's *Thirteen-month average retail square feet. Gross Margin Rate Gross margin rate represents gross margin (sales less cost of sales) as a percent of sales. In 2002, our consolidated gross margin rate expanded by almost...

  • Page 20
    ... disclosures of other companies in the same line of business. EBITDA and as a Percent of Revenues EBITDA (millions) 2002 2001 2000 As a Percent of Revenues 2002 2001 2000 Target Mervyn's Marshall Field's Total segment EBITDA Segment depreciation and amortization Pre-tax segment profit $4,013 360...

  • Page 21
    ...impact on current year or previously reported net earnings, cash flows or financial position. Accounting for Accounts Receivable On August 22, 2001, Target Receivables Corporation (TRC) sold, through the Target Credit Card Master Trust (the Trust), $750 million of receivable-backed securities to the...

  • Page 22
    ... cost trend rates. Our pension and postretirement health care benefits are further described in the Notes to Consolidated Financial Statements on page 34. Insurance/self-insurance We retain a portion of the risk related to certain general liability, workers' compensation, property loss and employee...

  • Page 23
    ... on our 2002 or 2001 net earnings and financial position. Our financing strategy is to ensure liquidity and access to capital markets, to manage the amount of floating-rate debt and to maintain a balanced spectrum of debt maturities. Within these parameters, we seek to minimize our cost of borrowing...

  • Page 24
    ... was driven primarily by the substantial growth in average receivables due to increases in the issuance and usage of the Target Visa credit card. Credit Card Contribution to Segment Profit (millions) Revenues: Finance charges, late fees and other revenues Merchant fees Intracompany Third-party Total...

  • Page 25
    ... market share growth. We expect that this performance will be driven by increases in comparable-store sales, contributions from new store growth at Target, and continued growth in contribution from our credit card operations, primarily through the Target Visa credit card. Overall, gross margin rate...

  • Page 26
    ...per share data) Sales Net credit card revenues Total revenues Cost of sales Selling, general and administrative expense Credit card ...share Diluted earnings per share Weighted average common shares outstanding: Basic Diluted See Notes to Consolidated Financial Statements throughout pages 28-36. 2002...

  • Page 27
    ... Assets Cash and cash equivalents Accounts receivable, net Inventory Other Total current assets Property and equipment Land Buildings and improvements Fixtures and equipment Construction-in-progress Accumulated depreciation Property and equipment, net Other Total assets Liabilities and shareholders...

  • Page 28
    ... accounts providing/(requiring) cash: Accounts receivable Inventory Other current assets Other assets Accounts payable Accrued liabilities Income taxes payable Other Cash flow provided by operations Investing activities Expenditures for property and equipment Increase in receivable-backed securities...

  • Page 29
    ...the holder to sell shares of our common stock to us, at a specified price, if the holder exercises the option. No put options were sold during or were outstanding at the end of 2002 or 2001. During 2000, we sold put options on 9.5 million shares. Premiums received from the sale of put options during...

  • Page 30
    ...(the Corporation) is a general merchandise retailer, comprised of three operating segments: Target, Mervyn's and Marshall Field's. Target, an upscale discount chain located in 47 states, contributed 84 percent of our 2002 total revenues. Mervyn's, a middle-market promotional department store located...

  • Page 31
    ... interests related to the sold securities. This resulted in an unusual pre-tax charge of $67 million ($.05 per share). Next, we reclassified the owned receivable-backed securities to accounts receivable at fair value. This reclassification had no impact on our consolidated statements of operations...

  • Page 32
    ... included in accounts payable were $1,125 million and $958 million at year-end 2002 and 2001, respectively. Lines of Credit At February 1, 2003, two committed credit agreements totaling $1.9 billion were in place through a group of 30 banks at specified rates. There were no balances outstanding at...

  • Page 33
    ... fair value of total notes payable and notes and debentures, using a discounted cash flow analysis based on our incremental interest rates for similar types of financial instruments, was $11,741 million at February 1, 2003 and $9,279 million at February 2, 2002. Required principal payments on...

  • Page 34
    ...** Includes current portion of $10 million Owned and Leased Store Locations At year-end 2002, owned, leased and "combined" (generally an owned building on leased land) store locations by operating segment were as follows: Owned Target Mervyn's Marshall Field's Total 904 156 51 1,111 Leased Combined...

  • Page 35
    ... Range of Exercise Prices 2002 (options in thousands) Number Outstanding Average Life* Average Number Price** Exercisable Average Price** 2001 .6% 30% 4.3% 5.0 $13.09 2000 .6% 30% 4.8% 5.0 $11.15 Dividend yield Volatility Risk-free interest rate Expected life in years Weighted average fair value...

  • Page 36
    ... current executives were exchanged for deferrals in an existing non-qualified defined contribution employee benefit plan. Service cost benefits earned during the period Interest cost on projected benefit obligation Expected return on assets Recognized gains and losses Recognized prior service cost...

  • Page 37
    ... operating segment's assets and operating results include accounts receivable and receivable-backed securities held by Target Receivables Corporation and Retailers National Bank, as well as related income and expense. * Consisted of 53 weeks. ** Net assets represent total assets (including publicly...

  • Page 38
    ...may not equal the total year amount due to the impact of changes in average quarterly shares outstanding. (d) Our common stock is listed on the New York Stock Exchange and Pacific Exchange. At March 19, 2003, there were 17,108 registered shareholders and the closing common stock price was $29.60 per...

  • Page 39
    ... shares outstanding (b) Capital expenditures Number of stores: Target Mervyn's Marshall Field's Total stores Total retail square footage (thousands): Target Mervyn's Marshall Field's Total retail square footage (a) Consisted of 53 weeks. (b) Earnings per share, dividends per share and common shares...

  • Page 40
    ...statements of financial position of Target Corporation and subsidiaries as of February 1, 2003 and February 2, 2002 and the related consolidated results of operations, cash flows and shareholders' investment for each of the three years in the period ended February 1, 2003. These financial statements...

  • Page 41
    ... President, Investor Relations Tracy Kofski Vice President, Total Compensation Stephen C. Kowalke Vice President and Treasurer Richard J. Kuzmich President, Associated Merchandising Corp. Dale Nitschke President, target.direct Ronald A. Prill President, Target Financial Services (Retiring Effective...

  • Page 42
    ...-794-9871, access its web site at www.melloninvestor.com, or write to: Mellon Investor Services, P.O. Box 3315, South Hackensack, NJ 07606-1915. Target, The Bullseye Design, SuperTarget, Expect More. Pay Less., Archer Farms, Market Pantry, Marshall Field's, Field's, Take Charge of Education, Ready...

  • Page 43
    Expect More. Pay Less.

  • Page 44
    1000 Nicollet Mall, Minneapolis, MN 55403 612-304-6073 www.target.com