Target 2011 Annual Report Download - page 77

Download and view the complete annual report

Please find page 77 of the 2011 Target annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

Compensation expense associated with unvested restricted stock is recognized on a straight-line basis over
the shorter of the vesting period or the minimum required service period. The expense recognized each period is
dependent upon our estimate of the number of shares that will ultimately be issued. At January 28, 2012, there was
$44 million of total unrecognized compensation expense related to restricted stock, which is expected to be
recognized over a weighted average period of 1.3 years. The fair value of restricted stock vested and converted was
$9 million in 2011, $3 million in 2010 and $12 million in 2009.
26. Defined Contribution Plans
Team members who meet certain eligibility requirements can participate in a defined contribution 401(k) plan
by investing up to 80 percent of their compensation, as limited by statute or regulation. Generally, we match
100 percent of each team member’s contribution up to 5 percent of total compensation. Company match
contributions are made to funds designated by the participant.
In addition, we maintain a nonqualified, unfunded deferred compensation plan for approximately 3,500 current
and retired team members whose participation in our 401(k) plan is limited by statute or regulation. These team
members choose from a menu of crediting rate alternatives that are the same as the investment choices in our
401(k) plan, including Target common stock. We credit an additional 2 percent per year to the accounts of all active
participants, excluding members of our management executive committee, in part to recognize the risks inherent to
their participation in a plan of this nature. We also maintain a nonqualified, unfunded deferred compensation plan
that was frozen during 1996, covering substantially fewer than 100 participants, most of whom are retired. In this
plan, deferred compensation earns returns tied to market levels of interest rates plus an additional 6 percent return,
with a minimum of 12 percent and a maximum of 20 percent, as determined by the plan’s terms.
We mitigate some of our risk of offering the nonqualified plans through investing in vehicles, including
company-owned life insurance and prepaid forward contracts in our own common stock, that offset a substantial
portion of our economic exposure to the returns of these plans. These investment vehicles are general corporate
assets and are marked to market with the related gains and losses recognized in the Consolidated Statements of
Operations in the period they occur.
The total change in fair value for contracts indexed to our own common stock recognized in earnings was
pretax income/(loss) of $(4) million in 2011, $4 million in 2010 and $36 million in 2009. During 2011 and 2010, we
invested $61 million and $41 million, respectively, in such investment instruments, and this activity is included in the
Consolidated Statements of Cash Flows within other investing activities. Adjusting our position in these investment
vehicles may involve repurchasing shares of Target common stock when settling the forward contracts as
described in Note 24. The settlement dates of these instruments are regularly renegotiated with the counterparty.
ContractualPrepaid Forward Contracts on Target Common Stock
Number of Price Paid Contractual Total Cash
(millions, except per share data) Shares per Share Fair Value Investment
January 29, 2011 1.2 $44.09 $63 $51
January 28, 2012 1.4 $44.21 $69 $61
Plan Expenses
(millions) 2011 2010 2009
401(k) Plan:
Matching contributions expense $197 $190 $178
Nonqualified Deferred Compensation Plans:
Benefits expense (a) $38 $63 $83
Related investment income (b) (10) (31) (77)
Nonqualified plan net expense $28 $32 $ 6
(a) Includes market-performance credits on accumulated participant account balances and annual crediting for additional benefits earned
during the year.
(b) Includes investment returns and life-insurance proceeds received from company-owned life insurance policies and other investments
used to economically hedge the cost of these plans.
53
PART II