Target 2005 Annual Report Download - page 37

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During the year ended January 29, 2005, $566 million of the
proceeds attributable to the real properties sold in the Marshall Field's
and Mervyn's dispositions were used to acquire replacement
properties which will be used in our business. $373 million of the gain
related to the sold real properties was deferred for income tax
purposes as allowed by Section 1031 of the Internal Revenue Code
until such time as the replacement properties are disposed.
24. Other Non-Current Liabilities
January 28, January 29,
(millions) 2006 2005
Deferred compensation $ 596 $ 528
Worker’s compensation and general liability 362 317
Other 274 192
Total $1,232 $1,037
25. Share Repurchase
In June 2004, our Board of Directors authorized the repurchase of
$3 billion of our common stock. In November 2005, our Board
increased the aggregate authorization by $2 billion, for a total
authorization of $5 billion. In 2005, we repurchased 23.1 million shares
at an average price per share of $51.88, for a total investment of
$1,197 million. Since June 2004, we have repurchased a total of
51.6 million shares at an average price per share of $47.95, for a total
investment of $2,473 million. We expect to complete the aggregate
program in the next two to three years.
26. Share-Based Compensation
Our accounting policy for share-based compensation is discussed
in Note 1 on page 28.
We maintain a long-term incentive plan for key employees and
non-employee members of our Board of Directors. Our long-term
incentive plan allows us to grant equity-based compensation awards,
including stock options, performance share awards, restricted stock
awards, or a combination of awards. A majority of granted awards
are non-qualified stock options that vest annually in equal amounts
over a four-year period. These options generally expire no later than
10 years after the date of the grant. Options granted to the non-
employee members of our Board of Directors become exercisable
after one year and have a 10-year term. We have issued performance
share or performance share unit awards annually since January 2003.
These awards represent shares potentially issuable in the future based
upon the attainment of performance criteria including compound
annual growth rates in revenue and EPS. The number of unissued
common shares reserved for future grants under the share-based
compensation plans was 47,659,572 at January 28, 2006 and
51,560,249 at January 29, 2005.
Share-Based Compensation Awards
Stock Options
Total Outstanding Currently Exercisable Performance
Shares
(options and shares Number of Exercise Intrinsic Number of Exercise Intrinsic Potentially
in thousands) Options Price (a) Value (b) Options Price (a) Value (b) Issuable
February 1, 2003 34,787 $25.73 $204 21,931 $20.89 $204 552 (c)
Granted 4,638 38.34 573 (d)
Canceled/ forfeited (407) 34.77 —
Exercised (2,859) 12.58 —
January 31, 2004 36,159 $28.28 $363 23,689 $24.48 $326 1,125
Granted 4,072 49.12 629 (e)
Canceled/ forfeited (513) 35.32 (73)
Exercised/earned (7,727) 20.95 (73)
January 29, 2005 31,991 $32.59 $540 22,102 $28.79 $458 1,608
Granted 4,057 53.94 597 (f)
Canceled/ forfeited (691) 40.67 (252)
Exercised (6,643) 26.58 —
January 28, 2006 28,714 $36.82 $505 19,229 $31.64 $438 1,953 (g)
(a) Weighted average.
(b) Represents stock price appreciation subsequent to the grant date, in millions.
(c) Awards are earned based on performance during four years ending
February 3, 2007.
(d) Awards are earned based on performance during four years ending
February 2, 2008.
(e) Awards are earned based on performance during three years ending
February 2, 2008.
(f) Awards are earned based on performance during three years ending
January 31, 2009.
(g) Approximately 34 percent of these potentially issuable performance shares,
if and when earned, will be paid in cash or deferred through a credit to the
deferred compensation accounts of the participants in an amount equal to the
value of any earned performance shares.
Nonvested Options and Performance Share Awards
Weighted Performance Weighted
Average Shares Average
Stock Fair Value at Potentially Fair Value at
(options and shares in thousands) Options Grant Date Issuable Grant Date
Nonvested at January 30, 2005 9,889 $11.83 1,608 $38.84
Granted 4,057 16.85 597 53.96
Vested/ earned (a) (3,774) 11.75 — —
Cancelled/ forfeited (687) 11.78 (252) 39.28
Nonvested at January 28, 2006 9,485 $14.01 1,953 $44.55
(a) Based on the explicit vesting period.
The Black-Scholes model was used to estimate the fair value of
the options at grant date based on the assumptions noted in the
following table. Volatility represents an average of market quotes for
implied volatility of 5.5-year options on Target stock. The expected
life is estimated based on analysis of options already exercised and
any foreseeable trends or changes in behavior. The risk-free interest
rate is an interpolation of the relevant U.S. Treasury security maturities
as of each applicable grant date. The assumptions disclosed below
represent a weighted average of the assumptions used for all of our
stock option grants throughout the year.