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2: EX-10.JJ Material Contract HTML 50K
3: EX-12 Statement re: Computation of Ratios HTML 32K
4: EX-31.A Certification -- §302 - SOA'02 HTML 23K
5: EX-31.B Certification -- §302 - SOA'02 HTML 23K
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7: EX-32.B Certification -- §906 - SOA'02 HTML 18K
14: R1 Document and Entity Information HTML 35K
15: R2 Consolidated Statements of Operations HTML 88K
16: R3 Consolidated Statements of Comprehensive Income HTML 32K
17: R4 Consolidated Statements of Comprehensive Income HTML 22K
(Parenthetical)
18: R5 Consolidated Statements of Financial Position HTML 110K
19: R6 Consolidated Statements of Financial Position HTML 38K
(Parenthetical)
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21: R8 Consolidated Statements of Shareholders' HTML 60K
Investment
22: R9 Accounting Policies HTML 20K
23: R10 Fair Value Measurements HTML 68K
24: R11 Revenues HTML 19K
25: R12 Notes Payable and Long-Term Debt HTML 23K
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Financial Instruments not Measured at Fair Value
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Registrant’s telephone number, including area code: 612/304-6073
Former name, former address and former fiscal year, if changed since last report: N/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer x
Accelerated
filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of registrant’s classes of common stock, as of the latest practicable date. Total shares of common stock, par value $0.0833, outstanding at May 16, 2017 were 551,708,283.
Cash
and cash equivalents, including short term investments of $1,135, $1,110 and $2,931
$
2,680
$
2,512
$
4,036
Inventory
7,986
8,309
8,459
Assets
of discontinued operations
26
69
354
Other current assets
1,047
1,100
1,099
Total
current assets
11,739
11,990
13,948
Property and equipment
Land
6,105
6,106
6,120
Buildings
and improvements
27,740
27,611
27,198
Fixtures and equipment
5,177
5,503
5,112
Computer
hardware and software
2,546
2,651
2,437
Construction-in-progress
379
200
242
Accumulated
depreciation
(17,265
)
(17,413
)
(16,060
)
Property and equipment, net
24,682
24,658
25,049
Noncurrent
assets of discontinued operations
10
12
81
Other noncurrent assets
787
771
830
Total
assets
$
37,218
$
37,431
$
39,908
Liabilities and shareholders’ investment
Accounts
payable
$
6,537
$
7,252
$
6,391
Accrued and other current liabilities
4,137
3,737
3,833
Current
portion of long-term debt and other borrowings
1,717
1,718
1,627
Liabilities of discontinued operations
1
1
168
Total
current liabilities
12,392
12,708
12,019
Long-term debt and other borrowings
11,086
11,031
12,596
Deferred
income taxes
869
861
841
Noncurrent liabilities of discontinued operations
18
18
18
Other
noncurrent liabilities
1,832
1,860
1,889
Total noncurrent liabilities
13,805
13,770
15,344
Shareholders’
investment
Common stock
46
46
49
Additional
paid-in capital
5,674
5,661
5,520
Retained earnings
5,927
5,884
7,593
Accumulated
other comprehensive loss
(626
)
(638
)
(617
)
Total shareholders’ investment
11,021
10,953
12,545
Total
liabilities and shareholders’ investment
$
37,218
$
37,431
$
39,908
Common Stock Authorized 6,000,000,000 shares, $.0833
par value; 551,657,501, 556,156,228 and 593,583,619 shares issued and outstanding at April 29, 2017, January 28, 2017 and April 30, 2016, respectively.
See
accompanying Notes to Consolidated Financial Statements.
5
Notes to Consolidated Financial Statements (unaudited)
1. Accounting Policies
These financial statements should be read in conjunction with the financial statement disclosures in our 2016 Form 10-K. We use the same accounting policies in preparing quarterly and annual financial statements. All
adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature. Certain prior-year amounts have been reclassified to conform to the current year presentation. Unless otherwise noted, amounts presented within the Notes to Consolidated Financial Statements refer to our continuing operations.
Due to the seasonal nature of our business, quarterly revenues, expenses, earnings, and cash flows are not necessarily indicative of the results that may be expected for the full year.
2. Revenues
In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09,
Revenue from Contracts with Customers (Topic 606). We plan to adopt the standard in the first quarter of fiscal 2018 using the full retrospective approach. We do not expect the standard to materially affect our consolidated net earnings, financial position, or cash flows.
We are evaluating the impact the standard has on our determination of whether we act as principal or agent in certain vendor arrangements where the purchase and sale of inventory is virtually simultaneous. We currently record revenue and related costs gross, with approximately 3 percent of consolidated sales made under such arrangements. Due to the varying terms of these arrangements, the presentation required under the standard
will depend on contract-specific terms and, in some instances, may result in net presentation of these amounts. Any change to net presentation would not impact gross margin or earnings. We are also evaluating the presentation of certain ancillary income streams, including credit card profit sharing income.
3. Fair Value Measurements
Fair value measurements are reported in one of three levels reflecting the valuation techniques used to to determine fair value.
(a)
The carrying amounts of certain other current assets, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature.
(b) The carrying amount and estimated fair value of debt exclude unamortized swap valuation adjustments and capital lease obligations.
4. Notes Payable and Long-Term Debt
We obtain short-term financing from time to time under our commercial paper program, a form of notes payable. No balances were outstanding at any time during the three months ended April
29, 2017 and April 30, 2016.
In April 2016, we issued unsecured fixed rate debt of $1 billion at 2.5% that matures in April 2026 and $1 billion at 3.625% that matures in April 2046. During the three months ended April 30, 2016, we used cash on hand and proceeds from these issuances to repurchase $565 million of debt before its maturity at a market value of $820 million. We recognized a loss on early retirement of approximately $261 million, which
was recorded in net interest expense in our Consolidated Statements of Operations.
In May 2016, we used cash on hand and proceeds from the April issuances to repurchase an additional $824 million of debt before its maturity at a market value of $981 million. We recognized an additional loss on early retirement of approximately $160 million in the second quarter of 2016. The $824 million of debt repurchased during the second quarter of 2016 was classified as current in our Consolidated Statements of Financial Position at April 30, 2016.
In May 2017,
we used cash on hand to repay $598 million of debt at its maturity.
5. Derivative Financial Instruments
Our derivative instruments primarily consist of interest rate swaps, which we use to mitigate interest rate risk. As a result of our use of derivative instruments, we have counterparty credit exposure to large global financial institutions. We monitor this concentration of counterparty credit risk on an ongoing basis. See Note 3 for a description of the fair value measurement of our derivative instruments and their classification on the Consolidated Statements of Financial Position.
As
of April 29, 2017 and April 30, 2016, interest rate swaps with notional amounts totaling $1,000 million and $1,250 million, respectively, were designated fair value hedges. No ineffectiveness was recognized during the three months ended April 29, 2017 or April 30, 2016.
As of April 29,
2017, one interest rate swap with a notional amount of $250 million was not designated a fair value hedge because it was de-designated concurrent with the repurchase of debt during the first half of 2016. As of April 30, 2016, two interest rate swaps, each with a notional amount of $500 million, were not designated fair value hedges. These two interest rate swaps had largely offsetting terms and matured during the second quarter of 2016.
During the three months ended April 29, 2017 and April
30, 2016, we recorded income of $4 million and $8 million, respectively, within net interest expense on our Consolidated Statements of Operations related to periodic payments, valuation adjustments, and amortization of gains or losses on our interest rate swaps.
6. Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense
recognition in the income statement.
We must adopt the standard no later than the first quarter of 2019, which begins on February 3, 2019. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.
7
We plan to adopt the standard in the first quarter of 2018. We expect to elect the package of practical expedients, including the use of hindsight to determine the lease term. While lease classification
will remain unchanged, hindsight may result in different accounting lease terms for certain leases and affect the timing of related depreciation, interest, and rent expense. We do not expect to apply the recognition requirements to short-term leases and will recognize those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term.
While we are continuing to assess the standard, we anticipate this standard will have a material impact on our Consolidated Statements of Financial Position, but will not materially affect our consolidated net earnings. We believe the addition of retail-store and office-space operating leases to our balance sheet will represent the most significant change. We also expect a reduction to the amount of finance lease assets and liabilities on our Consolidated Statements of Financial Position, primarily due
to our use of hindsight to reduce certain lease terms.
We do not believe the new standard will have a notable impact on our liquidity. The standard will have no impact on our debt-covenant compliance under our current agreements.
In
March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715), which requires employers to disaggregate and present separately the current service cost component from the other components of net benefit cost within the Consolidated Statement of Operations. We plan to adopt the standard in the first quarter of fiscal 2018. We are evaluating the presentation of the other components of net benefit cost.
8
9. Accumulated Other Comprehensive (Loss) / Income
(a)
Represents gains and losses on cash flow hedges, net of $1 million of taxes.
(b) Represents amortization of pension and other benefit liabilities, net of $5 million of taxes.
10. Segment Reporting
Our segment measure of profit (segment earnings before interest expense and income taxes) is used by management to evaluate performance and make operating decisions. We operate as a single segment that includes all of our continuing operations, which are designed to enable guests to purchase products
seamlessly in stores or through our digital channels.
Segment earnings before interest expense and income taxes
1,178
1,323
Pharmacy Transaction-related costs (a)(b)
—
(11
)
Earnings
from continuing operations before interest expense and income taxes
1,178
1,312
Net interest expense
144
415
Earnings from continuing
operations before income taxes
$
1,034
$
897
Note: Amounts may not foot due to rounding.
(a) For the three months ended April 30, 2016, represents items related to the December 2015 sale of our former pharmacy and clinic businesses to CVS (Pharmacy Transaction).
(b)
The sum of segment SG&A expenses and Pharmacy Transaction-related costs equal consolidated SG&A expenses.
(a) Represents the insurance receivable related to the 2013 data breach.
9
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
First quarter 2017 includes the following notable items:
•
GAAP earnings per share from continuing operations were $1.22.
•
Adjusted
earnings per share from continuing operations were $1.21.
•
Comparable sales decreased (1.3) percent, driven by small declines in both traffic and average transaction amount.
•
Comparable digital channel sales increased 22 percent.
•
We
returned $637 million to shareholders in the first quarter through dividends and share repurchase.
Sales were $16,017 million for the three months ended April 29, 2017, a decrease of $179 million or 1.1 percent from the same period in the prior year. Operating cash flow provided by continuing operations was $1,255 million and $253 million for the three months ended April 29, 2017 and April 30,
2016, respectively. The operating cash flow increase is due to the payment of approximately $500 million of taxes during the first quarter of 2016, primarily related to the December 2015 sale of our pharmacy and clinic businesses (Pharmacy Transaction), a smaller decrease in accounts payable in the first quarter of 2017 compared to the first quarter of 2016 related to timing, and a larger first quarter 2017 inventory reduction.
Note: Amounts may not foot due to rounding. Adjusted diluted earnings per share from continuing operations (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items not related to our routine
retail operations. Management believes that Adjusted EPS is meaningful to provide period-to-period comparisons of our operating results. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 14.
We report after-tax return on invested capital (ROIC) from continuing operations because we believe ROIC provides a meaningful measure of the effectiveness of our capital allocation over time. For the trailing twelve months ended April 29, 2017, ROIC was 14.2 percent, compared with 16.0 percent for the trailing twelve months ended April 30, 2016. Excluding the net gain on the
Pharmacy Transaction, ROIC was 14.0 percent for the trailing twelve months ended April 30, 2016. A reconciliation of ROIC is provided on page 15.
Note:
See Note 10 of our Financial Statements for a reconciliation of our segment results to earnings before income taxes.
(a) For the three months ended April 29, 2017 and April 30, 2016, SG&A includes $171 million and $158 million, respectively, of net profit-sharing income under our credit card program agreement.
Note: Rate analysis metrics are computed by dividing the applicable amount by sales.
Sales
Sales include all merchandise sales, net of expected returns, and gift card breakage. Digital channel sales include all sales initiated through mobile applications and our conventional websites.
Digital channel sales may be fulfilled through our distribution centers, our vendors, or our stores.
Comparable
sales is a measure that highlights the performance of our stores and digital channels by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales include all sales, except sales from stores open less than 13 months, digital acquisitions we have owned less than 13 months, stores that have been closed, and digital acquisitions that we no longer operate. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies.
Digital
channel contribution to comparable sales change
0.8
0.6
Total comparable sales change
(1.3
)%
1.2
%
Note: Amounts may not foot due to rounding.
The
collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible.
We monitor the percentage of sales that are paid for using REDcards (REDcard Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on REDcards are also incremental sales for Target. Guests receive a 5 percent discount on virtually all purchases when they use a REDcard at Target.
For the three months ended April 29, 2017, our gross margin rate was 30.5 percent compared with 30.9 percent in the comparable period last year. Virtually all of the decrease was due to increased shipping and digital fulfillment costs.
12
Selling,
General, and Administrative Expense Rate
For the three months ended April 29, 2017, our SG&A expense rate was 19.6 percent compared to 19.4 percent in the comparable period last year. The increase was primarily due to higher incentive compensation and timing of marketing campaigns, partially offset by cost savings driven by efficiency in our technology operations.
(a)
In thousands, reflects total square feet, less office, distribution center, and vacant space.
Other Performance Factors
Other Selling, General, and Administrative Expenses
We recorded $11 million of selling, general, and administrative expenses outside of the segment during the three months ended April 30, 2016 because they were discretely managed. Additional information about these expenses is provided within Note 10 to the Consolidated Financial Statements included in Item 1 (the Financial Statements).
13
Net
Interest Expense
Net interest expense from continuing operations was $144 million for the three months ended April 29, 2017, compared to $415 million for the three months ended April 30, 2016. Net interest expense for the three months ended April 30, 2016 included a loss on early retirement of debt of $261 million.
Provision for Income Taxes
Our
effective income tax rate from continuing operations for the three months ended April 29, 2017 was 34.5 percent compared with 31.6 percent for the three months ended April 30, 2016. The increase was primarily due to the recognition of $17 million of excess tax benefits related to share-based payments for the three months ended April 30, 2016, and the net tax effect of our global sourcing operations.
Reconciliation of Non-GAAP Financial Measures to GAAP Measures
To
provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share from continuing operations (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our continuing operations. This measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States (GAAP). The most comparable GAAP measure is diluted earnings per share from continuing operations. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP. Other companies may calculate Adjusted EPS differently than we do, limiting the usefulness of the measure for comparisons with other companies.
GAAP diluted earnings per share from continuing operations
$
1.22
$
1.02
Adjustments
Loss
on early retirement of debt
$
—
$
—
$
—
$
261
$
159
$
0.26
Pharmacy
Transaction-related costs
—
—
—
11
7
0.01
Resolution
of income tax matters
—
(7
)
(0.01
)
—
(2
)
—
Adjusted
diluted earnings per share from continuing operations
$
1.21
$
1.29
Note:
Amounts may not foot due to rounding.
14
We have also disclosed after-tax return on invested capital from continuing operations (ROIC), which is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure between us and our competitors. We believe this metric provides a meaningful measure of the effectiveness of our capital allocation over time. Other companies
may calculate ROIC differently than we do, limiting the usefulness of the measure for comparisons with other companies.
Current portion of long-term debt and other
borrowings
$
1,717
$
1,627
$
112
+ Noncurrent portion of long-term debt
11,086
12,596
12,585
+
Shareholders' equity
11,021
12,545
14,174
+ Capitalized operating lease obligations (b)(d)
1,210
1,367
1,495
-
Cash and cash equivalents
2,680
4,036
2,768
- Net assets of discontinued operations
17
249
335
Invested
capital
$
22,337
$
23,850
$
25,263
Average invested capital (e)
$
23,093
$
24,556
After-tax
return on invested capital (f)
14.2
%
16.0
%
(a) Represents the add-back to operating income to reflect the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as capital leases, using eight times our trailing twelve months rent expense
and an estimated interest rate of six percent.
(b) See the following Reconciliation of Capitalized Operating Leases table for the adjustments to our GAAP total rent expense to obtain the hypothetical capitalization of operating leases and related operating lease interest.
(c) Calculated using the effective tax rate for continuing operations, which was 33.4 percent and 31.9 percent for the trailing twelve months ended April 29, 2017 and April 30, 2016, respectively. For the trailing twelve months ended April 29,
2017 and April 30, 2016, includes tax effect of $1,614 million and $1,814 million, respectively, related to EBIT and $24 million and $26 million, respectively, related to operating lease interest.
(d) Calculated as eight times our trailing twelve months rent expense.
(e) Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.
(f)
Excluding the net gain on the Pharmacy Transaction, ROIC was 14.0 percent for the trailing twelve months ended April 30, 2016.
Capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The most comparable GAAP measure is total rent expense. Capitalized operating lease obligations and operating lease interest should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP.
Capitalized
operating lease obligations (total rent expense x 8)
1,210
1,367
1,495
Operating lease interest (capitalized operating lease obligations x 6%)
72
82
n/a
Analysis
of Financial Condition
Liquidity and Capital Resources
Our cash and cash equivalents balance was $2,680 million at April 29, 2017, compared with $4,036 million for the same period in 2016, primarily reflecting timing as debt issuance proceeds from the first quarter of 2016 were not fully used for early retirement of long-term debt until the second quarter of 2016. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments
that mature in 60 days or less. We also place certain dollar limits on our investments in individual funds or instruments.
Capital Allocation
We follow a disciplined and balanced approach to capital allocation, based on the following priorities, ranked in order of importance: first, we fully invest in opportunities to grow our business profitably, create sustainable long-term value, and maintain our current operations and assets; second, we maintain a competitive quarterly dividend and seek to grow it annually; and finally, we return excess cash to shareholders by repurchasing shares within the limits of our credit rating goals.
Cash Flows
Operating
cash flow provided by continuing operations was $1,255 million for the three months ended April 29, 2017, compared with $253 million for the same period in 2016. The increase is primarily due to the payment of approximately $500 million of taxes during the first quarter of 2016 related to the Pharmacy Transaction, a smaller decrease in accounts payable in the first quarter of 2017 compared to the first quarter of 2016 related to timing, and a larger first quarter 2017 inventory reduction. These cash flows, combined with our prior year-end cash position, allowed us to invest in the business, pay dividends, and repurchase shares under our share repurchase program.
Share
Repurchases
During the three months ended April 29, 2017 and April 30, 2016, we returned $305 million and $893 million, respectively, to shareholders through share repurchase. In first quarter 2017, repurchases were primarily made under a pre-existing trading plan implemented in 2016. See Part II, Item 2 of this Quarterly Report on Form 10-Q and Note 7 to the Financial Statements for more information.
Dividends
We paid dividends totaling $332 million ($0.60
per share) for the three months ended April 29, 2017, and $336 million ($0.56 per share) for the three months ended April 30, 2016, a per share increase of 7.1 percent. We declared dividends totaling $333 million ($0.60 per share) in first quarter 2017, a per share increase of 7.1 percent over the $335 million
($0.56 per share) of declared dividends during the first quarter of 2016. We have paid dividends every quarter since our 1967 initial public offering, and it is our intent to continue to do so in the future.
16
Short-term and Long-term Financing
Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced spectrum of debt maturities, and to manage our net exposure to floating interest rate volatility. Within these parameters, we seek to minimize our
borrowing costs. Our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity. Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings. As of April 29, 2017 our credit ratings were as follows:
Credit Ratings
Moody’s
Standard and Poor’s
Fitch
Long-term
debt
A2
A
A-
Commercial paper
P-1
A-1
F2
If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted. Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same as described above.
We
have additional liquidity through a committed $2.5 billion revolving credit facility obtained through a group of banks in October 2016, which expires in October 2021. This unsecured revolving credit facility replaced a $2.25 billion unsecured revolving credit facility that was scheduled to expire in October 2018. No balances were outstanding under either credit facility at any time during 2017 or 2016.
Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, at April 29, 2017, no
notes or debentures contained provisions requiring acceleration of payment upon a credit rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control; and (ii) our long-term debt ratings are either reduced and the resulting rating is noninvestment grade, or our long-term debt ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is noninvestment grade.
We believe our sources of liquidity will continue to be adequate to maintain operations, finance anticipated expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share repurchase program for the foreseeable future. We continue to anticipate ample access to commercial paper and long-term financing.
Contractual
Obligations and Commitments
As of the date of this report, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since January 28, 2017 as reported in our 2016 Form 10-K.
New Accounting Pronouncements
Refer to Note 2, Note 6, and Note 8 of the Financial Statements for a description of new accounting pronouncements related to revenues, leases, and pension benefits, respectively. We do not expect any other recently issued accounting
pronouncements will have a material effect on our financial statements.
Forward-Looking Statements
This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words “expect,”“may,”“could,”“believe,”“would,”“might,”“anticipates,” or words of similar import. The principal forward-looking statements in this report include: our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the continued execution of our share repurchase program, our expected capital expenditures, the expected
compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, the expected return on plan assets, and the expected outcome of, and adequacy of our reserves for, claims and litigation.
All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our
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actual
results to differ from our forward-looking statements are set forth on our description of risk factors in Item 1A of our Form 10-K for the fiscal year ended January 28, 2017, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Form 10-K for the fiscal year
ended January 28, 2017.
Item 4. Controls and Procedures
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the first quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure
Controls and Procedures
As of the end of the period covered by this quarterly report, we conducted an evaluation, under supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the Securities and Exchange Commission
(SEC) under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
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PART II. OTHER INFORMATION
Item
1. Legal Proceedings
The following update to a previously reported governmental enforcement proceeding relating to environmental matters is being reported pursuant to instruction 5(C) of Item 103 of Regulation S-K because it involves potential monetary sanctions in excess of $100,000:
On February 27, 2015, the California Attorney General sent us a letter alleging, based on a series of compliance checks, that we have not achieved compliance with California’s environmental laws and the provisions of the injunction that was part of a settlement reached in 2011. No formal legal action has been commenced, but in April 2017 the California Attorney General’s Office and certain California District Attorneys’ Offices made an initial settlement demand
including monetary and injunctive relief. The relief being sought is not material to our financial statements.
Item 1A. Risk Factors
There have been no material changes to the risk factors described in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On September
20, 2016, our Board of Directors authorized a new $5 billion share repurchase program. We began repurchasing shares under this new authorization during the fourth quarter of 2016. There is no stated expiration for the share repurchase program. Under the program, we have repurchased 8.7 million shares of common stock through April 29, 2017, at an average price of $65.36, for a total investment of $0.6 billion. The table below presents information with respect to Target common stock purchases made during the three months ended April 29, 2017, by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.