<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended July 30, 1994
-------------------
Commission file number 1-6049
----------
Dayton Hudson Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0215170
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 Nicollet Mall Minneapolis, Minnesota 55402-2055
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 370-6948
----------------------------
None
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
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.
The number of shares outstanding of common stock as of July 30, 1994 was
71,596,983.
<PAGE>
DAYTON HUDSON CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
PART I FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Results of Operations for the 1
Three Months, Six Months and Twelve Months Ended
July 30, 1994 and July 31, 1993
Condensed Consolidated Statements of Financial Position 2
at July 30, 1994, January 29, 1994 and July 31, 1993
Condensed Consolidated Statements of Cash Flows for the 3
Six Months Ended July 30, 1994 and July 31, 1993
Notes to Condensed Consolidated Financial Statements 4-5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF 6-9
OPERATIONS AND FINANCIAL CONDITION
PART II OTHER INFORMATION:
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 10
Signatures 11
Exhibit Index 12
<PAGE>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED Dayton Hudson Corporation
RESULTS OF OPERATIONS and Subsidiaries
<TABLE>
<CAPTION>
(Millions of Dollars, Except Per-Share Data) Three Months Ended Six Months Ended Twelve Months Ended
- ------------------------------------------------------------------------------------------------------------
JULY 30, July 31, JULY 30, July 31, JULY 30, July 31,
(Unaudited) 1994 1993 1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $4,802 $4,287 $9,267 $8,327 $20,173 $18,568
COSTS AND EXPENSES
Cost of retail sales, buying and occupancy 3,519 3,180 6,772 6,153 14,783 13,673
Selling, publicity and administrative 874 748 1,694 1,446 3,423 3,064
Depreciation 131 126 260 250 508 485
Interest expense, net 105 113 211 225 432 447
Taxes other than income taxes 92 82 185 167 361 326
- ------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 4,721 4,249 9,122 8,241 19,507 17,995
- ------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 81 38 145 86 666 573
Provision for Income Taxes 32 14 57 32 257 213
- ------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 49 $ 24 $ 88 $ 54 $ 409 $ 360
============================================================================================================
PRIMARY EARNINGS PER SHARE $ .62 $ .28 $ 1.10 $ .63 $ 5.45 $ 4.74
FULLY DILUTED EARNINGS PER SHARE $ .61 $ .28 $ 1.07 $ .63 $ 5.21 $ 4.55
============================================================================================================
DIVIDENDS DECLARED PER COMMON SHARE $ .42 $ .40 $ .84 $ .80 $ 1.66 $ 1.58
AVERAGE COMMON SHARES OUTSTANDING (MILLIONS):
Primary 72.0 71.7 72.0 71.7 71.9 71.7
Fully Diluted 76.3 76.0 76.3 76.1 76.2 76.0
============================================================================================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
1
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS Dayton Hudson Corporation
OF FINANCIAL POSITION and Subsidiaries
<TABLE>
<CAPTION>
JULY 30, January 29, July 31,
(Millions of Dollars) 1994 1994* 1993
- ------------------------------------------------------------ ----------- ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 169 $ 321 $ 97
Accounts receivable 1,418 1,536 1,207
Merchandise inventories 2,860 2,497 2,725
Other 129 157 86
- ------------------------------------------------------------ ------- ------- -------
Total Current Assets 4,576 4,511 4,115
PROPERTY AND EQUIPMENT 8,679 8,283 8,101
Accumulated depreciation (2,508) (2,336) (2,364)
------- ------- -------
Net Property and Equipment 6,171 5,947 5,737
OTHER 342 320 362
- ------------------------------------------------------------ ------- ------- -------
TOTAL ASSETS $11,089 $10,778 $10,214
============================================================ ======= ======= =======
LIABILITIES AND COMMON SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Commercial paper and current portion of long-term debt $ 178 $ 373 $ 492
Accounts payable 1,842 1,654 1,464
Other 994 1,048 841
- ------------------------------------------------------------ ------- ------- -------
Total Current Liabilities 3,014 3,075 2,797
LONG-TERM DEBT 4,599 4,279 4,357
DEFERRED INCOME TAXES AND OTHER 545 536 456
CONVERTIBLE PREFERRED STOCK 365 368 371
LOAN TO ESOP (192) (217) (243)
COMMON SHAREHOLDERS' INVESTMENT 2,758 2,737 2,476
- ------------------------------------------------------------ ------- ------- -------
TOTAL LIABILITIES AND COMMON SHAREHOLDERS' INVESTMENT $11,089 $10,778 $10,214
============================================================ ======= ======= =======
COMMON SHARES OUTSTANDING (MILLIONS) 71.6 71.5 71.5
============================================================ ======= ======= =======
</TABLE>
* The January 29, 1994 Consolidated Statement of Financial Position is
condensed from the audited financial statements.
See accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
CONDENSED CONSOLIDATED Dayton Hudson Corporation
STATEMENTS OF CASH FLOWS and Subsidiaries
<TABLE>
<CAPTION>
(Millions of Dollars) Six Months Ended
- ------------------------------------------------------------------------
July 30, July 31,
(Unaudited) 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 88 $ 54
Reconciliation to cash flow:
Depreciation 260 250
Deferred tax provision (38) (16)
Other noncash items affecting earnings 49 67
Changes in operating accounts providing/
(requiring) cash:
Accounts receivable 118 307
Merchandise inventories (363) (107)
Accounts payable 188 (132)
Other 6 (71)
- ------------------------------------------------------------------------
Cash Flow Provided by Operations 308 352
- ------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for property (496) (427)
- ------------------------------------------------------------------------
Net Financing Requirements (188) (75)
- ------------------------------------------------------------------------
FINANCING ACTIVITIES
(Decrease) in commercial paper - (23)
Additions to long-term debt 272 417
Reduction of long-term debt (144) (273)
Dividends paid (72) (69)
Other (20) 3
- ------------------------------------------------------------------------
Cash Flow Provided by Financing Activities 36 55
- ------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (152) (20)
Cash & Cash Equivalents at Beginning of Period 321 117
- ------------------------------------------------------------------------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 169 $ 97
========================================================================
</TABLE>
Amounts in this statement are presented on a cash basis and therefore may
differ from those shown elsewhere in this 10-Q report.
SUPPLEMENTAL CASH FLOW INFORMATION:
. Interest paid (including interest capitalized) in the first six months of
1994 and 1993 was $213 million and $214 million, respectively.
. Income tax payments of $175 million and $127 million were made during the
first six months of 1994 and 1993, respectively.
. In the Consolidated Statement of Financial Position as of July 30, 1994,
$472 million of commercial paper was classified as long-term debt. Because
it does not involve cash, it is not reflected herein.
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
NOTES TO CONDENSED CONSOLIDATED Dayton Hudson Corporation
FINANCIAL STATEMENTS and Subsidiaries
ACCOUNTING POLICIES
The accompanying condensed consolidated financial statements should be read in
conjunction with the financial statement disclosures contained in the
Corporation's 1993 Annual Shareholders' Report throughout pages 21-32. As
explained on page 31 of the Annual Report, the same accounting policies are
followed in preparing quarterly financial data as are followed in preparing
annual data. In the opinion of management, all adjustments necessary for a
fair presentation of quarterly operating results are reflected herein and are
of a normal, recurring nature.
Due to the seasonal nature of the retail industry, earnings for periods which
exclude the Christmas season are not indicative of the operating results that
may be expected for the full fiscal year.
MERCHANDISE INVENTORIES
The last-in, first-out (LIFO) provision, included in cost of retail sales, for
the three- and six-month periods ended July 30, 1994 was zero versus charges
of $6 million ($.05 per share) and $12 million ($.10 per share), respectively,
for the same periods in 1993.
The cumulative LIFO provision was $80 million at July 30, 1994 and January 29,
1994, and $183 million at July 31, 1993.
LONG-TERM DEBT
Beginning with the first quarter of 1994, commercial paper is classified as
long-term debt because it is supported by the Corporation's revolving credit
agreement of $600 million which expires in 1999. Commercial paper will be
classified as long-term, provided the term of the related credit agreement
exceeds one year and any unused commitments thereunder equal or exceed the
amount of commercial paper outstanding.
SPECIAL ITEMS
During the second quarter, Target recorded a pre-tax charge of $18 million
($.15 per share) for the repositioning of several stores within its existing
markets. Also during the second quarter, Mervyn's recorded a pre-tax charge
of $10 million ($.08 per share) related to the remodeling of the majority of
its Colorado stores. The Colorado project will pilot new merchandising and
store design strategies in the creation of an improved Mervyn's prototype.
Additionally, Mervyn's reversed an $8 million ($.06 per share) reserve
associated with the January 1994 Los Angeles earthquake, as repair costs were
less than original estimates. During second quarter 1993, the Department
Store Division recorded a nonrecurring pre-tax credit of $9 million ($.07 per
share) related to a casualty loss recovery. These items are included in
selling, publicity and administrative expense.
4
<PAGE>
PER SHARE DATA
Primary earnings per share are computed by dividing net earnings less dividend
requirements on ESOP preferred stock (net of tax benefits related to
unallocated shares) by the average common stock and common stock equivalents
outstanding during the period. Fully diluted earnings per share assumes
conversion of the ESOP preferred stock (net of tax benefits related to
unallocated shares) into common stock. Additionally, it assumes adjustment of
net earnings for the additional expense required to fund the ESOP debt service
resulting from the assumed replacement of the ESOP preferred dividends with
common stock dividends.
References to earnings per share relate to fully diluted earnings per share.
RECLASSIFICATIONS
Certain reclassifications have been made to previously reported amounts to
conform with the 1994 presentation.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 1994
ANALYSIS OF OPERATIONS
Second quarter net earnings were $49 million compared with $24 million for
second quarter last year. For the first half of 1994, net earnings increased
64% to $88 million from $54 million for the same period a year ago. Fully
diluted earnings per share for the second quarter increased to $.61, compared
with second quarter 1993 earnings per share of $.28. For the six-month period
ended July 30, 1994, fully diluted earnings per share were $1.07 compared with
$.63 for the same period last year.
The following table illustrates the impact of the major factors contributing
to the changes in earnings per share:
<TABLE>
<CAPTION>
Three Six
Months Months
- ----------------------------------------------------------
<S> <C> <C>
1993 Fully Diluted Earnings Per Share $ .28 $ .63
Changes in earnings per share:
Revenues .22 .35
Gross margin rate .20 .36
Operating expense rate .05 (.06)
Start-up expense (.08) (.12)
Interest expense, net .05 .10
Corporate expense and other, net (.11) (.19)
----- -----
1994 Fully Diluted Earnings Per Share $ .61 $1.07
==========================================================
</TABLE>
Our second quarter earnings improvement was led by better than expected
operating results at Target, while Mervyn's and the Department Store
Division's results met our expectations. The overall gross margin rate was
favorable to last year, reflecting improved markdowns at all three divisions.
The overall operating expense rate was lower despite the special items
disclosed in the notes to the financial statements. Also, the rate
improvement reflects better sales leveraging, partially offset by increased
advertising expense at all three divisions.
Changes in our second quarter revenue mix, primarily the result of strong
revenue growth at Target, our lowest margin division, affected changes in the
gross margin and operating expense rates. If the revenue mix had remained
constant with the second quarter and the first six months of 1993, the gross
margin rate variance would have been $.27 and $.51, respectively, and the
operating expense rate variance would have been ($.07) and ($.26),
respectively.
6
<PAGE>
Revenues
--------
For the three- and six-month periods ended July 30, 1994, total revenues
increased 12% and 11%, respectively. Comparable-store revenues (revenues from
stores open longer than a year) increased 6% and 5%, respectively.
Revenues by business segment were as follows:
<TABLE>
<CAPTION>
Three Months Ended Percentage Change
------------------ --------------------
JULY 30, July 31, All Comparable
(Millions of Dollars) 1994 1993 Stores Stores
-------- -------- ------- -----------
<S> <C> <C> <C> <C>
Target $3,084 $2,611 18% 9%
Mervyn's 1,051 1,024 3 (1)
Department Store Division 667 652 2 2
------ ------ -- --
Total $4,802 $4,287 12% 6%
====== ====== == ==
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Percentage Change
------------------ -------------------
JULY 30, July 31, All Comparable
1994 1993 Stores Stores
-------- -------- ------ ----------
<S> <C> <C> <C> <C>
Target $5,903 $5,067 16% 8%
Mervyn's 2,011 1,963 2 (1)
Department Store Division 1,353 1,297 4 4
------ ------ -- --
Total $9,267 $8,327 11% 5%
====== ====== == ==
</TABLE>
Target's strong revenue growth reflects new store growth combined with the
benefit of additional advertising and good merchandising execution. Total
revenue growth at Mervyn's reflects a slower rate of store growth. Despite a
slight decline in comparable-store revenues, Mervyn's remains committed to
lower everyday prices and a shift to a more branded merchandise assortment.
The Department Store Division's (DSD) total and comparable-store revenues
reflect moderate growth in the second quarter with added promotional efforts.
Operating Profit
----------------
All three divisions contributed to the strong increase in operating profit for
the second quarter over last year. (Operating profit is LIFO earnings from
operations before corporate expense, interest and income taxes.) For the
first half of 1994, operating profit increased 19%.
7
<PAGE>
TARGET experienced a strong increase in operating profit for the three and six
months ended July 30, 1994 compared with the same periods last year. The
increase was primarily due to strong revenue performance. Included in
Target's second quarter results is an $18 million ($.15 per share) pre-tax
charge for the repositioning of several stores within its markets. The gross
margin rate was slightly favorable to last year, reflecting lower markdowns
partially offset by the continual refining of the value pricing strategy. The
operating expense rate improved primarily due to better sales leveraging.
MERVYN'S operating profit, for the second quarter and six-month period, was up
significantly as expected over last year's weak base. The gross margin rate
improvement reflects a substantial reduction in markdowns, somewhat offset by
lower markup associated with lower everyday prices. The operating expense
rate deterioration reflects lower sales leveraging as well as higher
advertising expenses. Also, Mervyn's recorded a pre-tax charge of $10 million
($.08 per share) for the remodeling of a majority of its Colorado stores, as
well as a pre-tax credit of $8 million ($.06 per share) as costs related to
the January 1994 Los Angeles earthquake were less than original estimates.
DSD'S operating profit, for the second quarter and six-month period, was up
significantly, compared with 1993's results, excluding last year's $9 million
($.07 per share) pre-tax credit related to a casualty loss recovery. The gross
margin rate improved over last year as a result of reduced markdowns. The
operating expense rate was higher primarily due to increased advertising
costs.
Other Performance Factors
-------------------------
The LIFO provision, for the three- and six-month periods ended July 30, 1994
was zero versus charges of $6 million ($.05 per share) and $12 million ($.10
per share), respectively, for the same periods in 1993. The reduced provision
reflects lower estimated annual inflation rates compared with the estimated
annual rates used in the second quarter last year. The lower inflation rates
reflect the adoption of internally-generated price indices in the fourth
quarter of 1993 at Mervyn's and DSD. Our internally-generated retail price
indices, used in the LIFO calculations at all three operating divisions,
capture the ongoing impact of our value-pricing strategies.
Net interest expense decreased $8 million ($.06 per share) in the second
quarter and $14 million ($.11 per share) in the first half of 1994 compared
with the same periods last year. A reduction in financing requirements and a
lower effective interest rate contributed to the interest expense decline.
As of the end of second quarter 1994, the estimated annual effective income
tax rate was 39% as compared to 37.5% in 1993. The increase in the 1994 rate
is primarily the result of the increase in the federal statutory rate in the
third quarter of 1993.
8
<PAGE>
FINANCIAL CONDITION
-------------------
Our overall financial condition remains strong. Our ratio of debt (including
the present value of operating leases) to total capitalization was 59% at the
end of second quarter 1994 and at year end 1993, compared with 61% a year ago.
We expect the debt ratio to continue declining towards the mid-point of our
financial policy range of 45% to 65%.
At July 30, 1994, working capital was $1,562 million, or 19% higher than a
year ago. Accounts receivable decreased 8% from year-end, reflecting a
reduction from seasonal high levels, but was 17% higher than last year. The
increase over last year reflects an increase in sales as well as Mervyn's and
DSD's focus on increased internal credit sales penetration. Merchandise
inventories increased moderately compared to 1993 second quarter due to new
store growth, partially offset by significant inventory reductions at
Mervyn's. Accounts payable were 26% higher than 1993 second quarter and 11%
higher than year-end, primarily reflecting new store growth.
Capital expenditures for the first half of 1994 were $496 million, compared
with $427 million for the same period a year ago. Approximately 81% of these
expenditures were made by Target, 12% by Mervyn's and 7% by DSD.
STORE DATA
----------
At July 30, 1994 Target operated 584 stores in 32 states, Mervyn's operated
283 stores in 15 states and DSD operated 63 stores in nine states.
9
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(2). Not applicable
(4). Instruments defining the rights of security holders, including
indentures. Registrant agrees to furnish the Commission on
request copies of instruments with respect to long-term debt.
(10). Agreement
(11). Statements re Computations of Per Share Earnings
(12). Statements re Computations of Ratios
(15). Not applicable
(18). Not applicable
(19). Not applicable
(22). Not applicable
(23). Not applicable
(24). Not applicable
(27). Financial Data Schedule
(99). Not applicable
b) Reports on Form 8-K. The registrant did not file any reports on
Form 8-K during the quarter ended July 30, 1994.
10
<PAGE>
Signatures
----------
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.
DAYTON HUDSON CORPORATION
Registrant
Date: September 9, 1994 By /s/ Douglas A. Scovanner
--------------------------------
Douglas A. Scovanner
Senior Vice President,
Chief Financial Officer and
Treasurer
Date: September 9, 1994 By /s/ J.A. Bogdan
--------------------------------
JoAnn Bogdan
Controller and
Chief Accounting Officer
11
<PAGE>
Exhibit Index
-------------
(10). Agreement
(11). Statements re Computations of Per Share Earnings
(12). Statements re Computations of Ratios
(27). Financial Data Schedule
12
<PAGE>
EXHIBIT 10
----------
AGREEMENT
---------
THIS AGREEMENT is made as of the 27th day of May, 1994 by and between
DAYTON HUDSON CORPORATION (herein called the "Company") and HENRY T. DeNERO
(herein called "Executive").
RECITALS
--------
A. Executive is employed by Company; and
B. Company and Executive wish to sever Company's and Executive's ties as
employer and employee respectively, on the terms and conditions hereafter set
forth; and
C. The Company maintains an Income Continuance Policy (the "ICP") for
which Executive is eligible, the terms and provisions of which Executive has
been subject to and familiar with; and
D. The ICP requires a release in writing; and
E. Executive claims that, by reason of the circumstances and publicity
leading to the severance of his employment relationship with the Company,
Executive has been injured in his personal and business reputations and the
Company has inflicted upon him and caused him to suffer great mental anguish,
distress and anxiety, loss of self esteem, and humiliation due to the fact,
among others, that Executive has suddenly and tortiously been deprived of his
livelihood and the benefits of continued employment with the Company. Company
denies Executive's allegations; and
<PAGE>
F. Executive acknowledges he has been advised and encouraged to review
this Agreement with an attorney and is fully aware of the potential rights and
remedies he may have as a result of his termination; and
G. Executive and the Company wish to memorialize herein the resolution and
settlement of all their respective rights, remedies and obligations whatsoever,
flowing from Executive's employment and relationships with the Company and the
severance and termination of that employment and said relationships.
1. Effective Termination Date. From the date of this Agreement to and
through June 1, 1994, Executive shall act and perform his current duties for the
Company. Effective on June 1, 1994 (unless sooner terminated) the employer-
employee relationship of Company and Executive shall be severed and terminated.
2. Salary. Executive shall be paid his regular salary weekly for services
rendered as an employee under paragraph 1 hereof through and including the
termination of his employment, subject to all required and voluntary
withholdings.
3. Income Continuance Payments. Executive shall be entitled to one
hundred four equal weekly income continuance payments pursuant to and subject to
the terms and conditions of the ICP, commencing on or about June 17, 1994 and
ending with the final payment on or about June 7, 1996. The amount of each
weekly payment, subject to the terms and conditions of the ICP, shall be
$12,998.08. The weekly amount shall be reduced for taxes withheld by Company.
4. Vacation Pay. Company shall pay to Executive unused accrued vacation
due Executive in the amount of $79,288.27 not later than on June 17, 1994.
2
<PAGE>
5. Health Insurance. Executive may continue to participate in Company's
medical and dental program to the extent, if any, permitted by Company's Health
Service Providers. In order to continue such coverage, Executive must maintain
continuous coverage under the Company Plans and pay 102% of the full cost of
such Plans. Executive acknowledges that Company may modify its premium
structure, the terms of its plans and the coverages of the plans, including the
termination of all or part of a plan. All insurance coverage shall terminate at
the earlier of December 4, 1995, or when Executive becomes a participant under
another group medical plan, whether or not that plan has a pre-existing
conditions clause (provided however, if that plan has a pre-existing conditions
clause and Executive or a dependent are excluded from coverage because of that
clause Executive or such dependent can continue coverage until the end of the
pre-existing condition provision or other termination provisions set forth in
this sentence, whichever is earlier) or similar clauses or when the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") permits
terminations. Executive agrees to notify Company when Executive is eligible to
participate in another group plan, when he begins to participate in another
group plan and when a pre-existing condition expires.
6. Life Insurance. Executive may take his universal life insurance policy
with him after June 1, 1994. In order to continue such policy, he will be
required to make all payments with respect to the policy.
7. Pension Plan - Savings Plan. Executive's rights under the Dayton
Hudson Corporation Employees' Retirement Plan and the Dayton Hudson Corporation
3
<PAGE>
Supplemental Retirement, Savings, and Employee Stock Ownership Plan will be
determined under the terms of such plans as they are constituted on any relevant
date.
8. Deferred Compensation Plan. Executive will be paid his benefits for
his deferred compensation under the Dayton Hudson Corporation Deferred
Compensation Plan Senior Management Group under the terms of the plan as it is
in effect on June 1, 1994.
9. Supplemental Pension Plan. Executive is not entitled to any benefits
under the Dayton Hudson Corporation Supplemental Pension Plan.
10. Option Plans. Executive's rights under the Company Executive Long
Term Incentive Plan will be determined under such plan. Executive must exercise
all options that are exercisable on June 1, 1994 within two hundred ten days
after such date or they will expire. No further installments will accrue after
June 1, 1994 and all rights to performance shares and restricted stock will
terminate on June 1, 1994.
11. Other Benefits. Except as specifically hereinabove set forth,
Executive shall be entitled to no other employee benefits, fringe benefits or
other remuneration or compensation.
12. Non-Recruiting. Executive agrees, unless he has a written agreement
signed by the Chief Personnel Officer of the Company allowing him to recruit
persons named in that agreement, that he will not as an employee of the Company
or for the period June 1, 1994 to June 7, 1996, recruit directly or indirectly
any employee of the Company or any subsidiary of the Company for employment with
any other operations. Violation of this agreement will result in the
termination of paragraph 3.
4
<PAGE>
13. Serving as a Witness. Executive agrees that he will cooperate, make
himself available, and testify on the Company's behalf, if the Company requests,
without requiring a subpoena, in any and all lawsuits or administrative hearings
arising out of acts, occurrences, or decisions while he was employed of which he
has direct knowledge and to which the Company's attorneys believe Executive's
testimony is necessary for the prosecution, defense or favorable resolution of
the claims or matter; provided, however, that Executive shall not be required to
take any action that is contrary to Executive's legal or equitable rights,
except through a subpoena or other court order. The Company agrees to reimburse
Executive for any reasonable out-of-pocket expenses he incurs as a result of
such activities.
14. Payments. Not later than June 17, 1994, the Company shall pay to
Executive the lump sum of $240,314.25 as compensation to Executive for the
release of his claims for personal injury, pain and suffering, emotional
anguish, distress and anxiety, loss of self esteem, humiliation, and damage to
his personal and business reputation. No portion of the lump sum represents
back pay, severance pay, vacation pay, salary continuation or any other manner
of compensation and, therefore, there shall be no deductions for state or
federal taxes, FICA, or any other deduction or reporting. No portion of the
lump sum represents punitive damages.
15. Confidentiality. Executive agrees that he will not disclose the terms
or conditions of this Agreement or any of them, including without limitation,
the payments hereunder, the detrimental conduct provisions hereunder or the
benefits hereunder except as follows: (1) to his spouse, attorney, certified
public accountant and financial
5
<PAGE>
and estate planning advisors/its outside attorney, auditors or others directly
associated with its business or operations and needing to know thereof, provided
any such thereof agrees to keep them confidential or (2) pursuant to a legally
enforceable order, provided that he notifies the Company of the proceeding and
allows the Company to oppose or contest the order on his behalf.
16. Confidential Information. Executive recognizes and acknowledges that
the confidential information of various kinds, including but without limitation
to lists of the Company's (as used herein includes the Company's subsidiaries)
executives and employees, the ratings, performance appraisal scores and other
employee data, as well as the Company's strategic plans and manpower planning
plans and goals, the Company's new strategies, plans and proposals as they may
exist from time to time, are valuable, special and unique assets of the
Company's business. Executive will not, during or after the term of his
employment as an employee or a recipient of payments described in paragraph 3,
disclose or cause or permit to be disclosed any of such information or any other
information the Company treats as confidential, to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever.
In the event of a breach or threatened breach by Executive of the provisions of
this paragraph or the violation of paragraph 12, the Company shall be entitled
to an injunction restraining Executive from violating paragraph 12 of this
Agreement, from disclosing, in whole or in part, any of the information listed
above or any other information the Company treats as confidential, or from
rendering any services to any person, firm, corporation, association, or other
entity to whom such information, in whole or in part, has been disclosed or is
6
<PAGE>
threatened to be disclosed by act or default of Executive. Nothing in this
Agreement shall be construed as prohibiting the Company from pursuing any other
remedy or remedies available to it for such breach or threatened breach,
including but without limitation to the recovery of damages, together with costs
and attorneys' fees, from or on account of Executive.
17. Detrimental Conduct. Executive shall not express or endorse
publication of untrue statements which are intended or likely to receive broad
public attention and to bring the Company or its interests, methods or
representatives into disrepute.
18. Termination of Payments. The Company shall have the right to
terminate any ICP payments owing, but not yet due, to Executive under paragraph
3 only if Executive deliberately breaches his obligations under paragraphs 12,
16, or 17, or on any other ground set forth in the ICP. Notwithstanding any
termination of payments under paragraph 3, the requirements of paragraph 12, 13,
16 and 17 hereof and the Releases set forth in paragraph 21 hereof shall remain
in full force and effect.
19. Directly Competitive Employment. For purposes of Section II.G of
the ICP, Directly Competitive Employment shall be employment with K-Mart, May
Company or J.C. Penney or any parent, subsidiary, division or affiliated company
of such company.
20. Taxes. Executive will be solely responsible for the payment of any
and all taxes, if any, of whatever kind that may be due or payable from him as
the result of the payment of any non-wage settlement amount.
7
<PAGE>
21. Release.
A. DEFINITIONS. All words used in this Release are intended to have their
plain meanings in ordinary English. Specific terms in this Release have the
following meanings:
1) Executive includes both Executive and anyone who has or obtains any
legal rights or claims through Executive.
2) Company means Dayton Hudson Corporation and any company related to
Company in the present or past, any company providing insurance to Company in
the present or past, any present or past employee benefit plan sponsored by
Company, Company's present or past officers, directors, employees and agents and
any person who acted on behalf of Company or on instructions from Company.
3) Executive Claims means all of the rights Executive has now to any
relief of any kind from Company, whether or not Executive knows about the rights
or claims, including without limitation:
a. All claims Executive has now arising out of his employment with Company
and his employment termination including, but not limited to, claims for breach
of contract; claims for unpaid compensation or benefits; breach of the covenant
of good faith and fair dealing; promissory or equitable estoppel; breach of
fiduciary duty; violation of the Age Discrimination in Employment Act, Title VII
of the Civil Rights Act of 1964, Civil Rights Act of 1991, Section 1981 of the
Civil Rights Act of 1866, the Equal Pay Act of 1963, Americans with Disabilities
Act, The Minnesota Human Rights Act and other federal, state, and local civil
rights or discrimination laws;
8
<PAGE>
violation of the Employee Retirement Income Security Act of 1974; violation of
the National Labor Relations Act; harassment; retaliation or reprisal;
constructive discharge; invasion of privacy; violation of public policy;
Executive's conduct as a "whistleblower"; fraud or misrepresentation;
defamation; intentional or negligent infliction of emotional distress;
negligence; interference with contractual or business relationships;
interference with prospective economic advantage; wrongful termination of
employment; assault; battery; and any other claims for unlawful employment
practices, including all claims or causes of action in tort or contract;/1/ and
b. All claims for attorneys' fees and costs.
4) Company Claims means all of the rights the Company has now to any
relief of any kind from Executive, except for any rights based upon facts not
now known to the Company, including, without limitation:
a. All claims the Company has now arising out of Executive's employment
with the Company and his employment termination including, but not limited to,
claims for breach of contract; breach of the covenant of good faith and fair
dealing; promissory or equitable estoppel, breach of fiduciary duty; violation
of the Employee Retirement Income Security Act of 1974; violation of the
National Labor Relations Act; harassment; retaliation or reprisal; invasion of
privacy; violation of public policy; fraud or misrepresentation; defamation;
negligence; interference with contractual or business relationships;
interference with prospective economic advantage; and any other claims,
including all claims or causes of action in tort or contract; and
- ------------------
/1/ Any references to government statutes include any amendments to such
statutes.
9
<PAGE>
b. All claims for attorneys' fees and costs.
B. AGREEMENT TO RELEASE EMPLOYEE CLAIMS. In exchange for Company's having
entered into this Agreement, Executive agrees to give up all Executive Claims
against Company as described above, except as otherwise set forth in this
Agreement. Executive will not bring any lawsuits or make any other demands
against Company based on Executive Claims, except as otherwise set forth in this
Agreement. The consideration Executive will receive under this Agreement is full
and fair for the release of Executive Claims. Company does not owe Executive
anything in addition to what Executive will be receiving under this Agreement.
C. AGREEMENT TO RELEASE COMPANY CLAIMS. In exchange for Executive's
having entered into this Agreement, the Company agrees to give up all Company
Claims against Executive as described above, except as otherwise set forth in
this Agreement. The Company will not bring any lawsuits or make any other
demands against Executive based on Company claims, except as otherwise set forth
in this Agreement. The consideration the Company will receive under this
Agreement is full and fair for the release of Company Claims. Executive does
not owe the Company anything in addition to what the Company will be receiving
under this Agreement. If Executive revokes this Agreement, the Company's
release provided herein shall become null and void.
D. INDEMNIFICATION AND ADVANCING DEFENSE COSTS. This Agreement shall not
release any claim or right of Executive for indemnification or advancing of
defense costs from the Company (or any insurer) arising out of, related to,
10
<PAGE>
or connected with any claim asserted by a third party against the Company or
Executive, or both, or any other claim or right of Executive for indemnification
or advancing of defense costs from the Company based upon applicable law. The
Company warrants and agrees that, when required to do so under applicable law,
it shall comply with its obligations to indemnify Executive and advance his
defense costs.
E. ADDITIONAL AGREEMENTS AND UNDERSTANDINGS. Even though Company will pay
Executive to release Executive Claims against it, Company does not admit that it
may be responsible or legally obligated to Executive. In fact, Company denies
that it is responsible or legally obligated for Executive Claims or that it has
engaged in any wrongdoing.
22. Miscellaneous. The services under this Agreement are personal
services and this Agreement may not be assigned by Executive; provided, however,
that the benefits of the Agreement under paragraph 3 may be assigned or
transferred by Executive in connection with his estate planning. This Agreement
shall be binding upon the Company and its successors and assigns and the
Executive, his heirs, executors, successors and assigns. This Agreement
embodies the entire Agreement and understandings between the Company and
Executive and, except as set forth herein, supersedes all prior agreements and
understandings (oral or written) relating to the subject matter (including those
with any subsidiary of the Company). The terms of this Agreement may only be
modified by an agreement in writing signed by Executive and a senior corporate
officer of the Company.
11
<PAGE>
23. Minnesota Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Minnesota, without giving
effect to the conflict of laws principles.
24. Revocation. Executive understands that he may revoke, that is, cancel
the Release set forth in Paragraph 21, if he does so within 15 calendar days
after he signs this Agreement. To revoke he must do so in writing. The writing
must be hand delivered or postmarked within 15 calendar days of the date that
Executive signs this Agreement and must be addressed to the Corporate Secretary,
Dayton Hudson Corporation, 777 Nicollet Mall, Minneapolis, Minnesota 55402.
Executive understands that, if he mails his revocation, mailing by certified
mail, return receipt requested, is recommended to show proof of mailing.
Please read carefully before signing
------------------------------------
. Executive acknowledges that he has carefully read and understands the
terms of this Agreement.
. Executive acknowledges that he has been advised and encouraged to
consult with an attorney prior to signing this Agreement.
. Executive acknowledges that he has been given 21 days (or more) to
consider whether to sign this Agreement. Executive acknowledges that if he
signs this Agreement before the end of the 21 day period, it will be Executive's
personal, voluntary decision to do so.
. In agreeing to sign this Agreement, Executive acknowledges that he has
not relied on any statements or explanations made by Company or its attorneys.
12
<PAGE>
. Executive understands that if he revokes this Release he will not
receive any payments or benefits set forth in paragraphs 2, 3, 8, 14 and 21.C.,
except that payments under paragraph 8 will be made in one lump sum.
IN WITNESS WHEREOF the parties have hereto executed this Agreement.
DAYTON HUDSON CORPORATION
Date: 5/27/94 By: /s/ James T. Hale
----------- ---------------------------
Title: Sr. V.P.
---------------------------
Date: May 27, 1994 /s/ Henry T. DeNero
---------------- ---------------------------------
HENRY T. DeNERO
13
<PAGE>
EXHIBIT (11)
DAYTON HUDSON CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF PER SHARE EARNINGS
(In Millions, Except Per-Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
----------------------------------- ---------------------------------- ----------------------------------
July 30, 1994 July 31, 1993 July 30, 1994 July 31, 1993 July 30, 1994 July 31, 1993
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Earnings Shares Earnings Shares Earnings Shares Earnings Shares Earnings Shares Earnings Shares
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Primary Computations
- --------------------
Net earnings $ 49 $ 24 $ 88 $ 54 $ 409 $ 360
Less: Dividend
requirements on ESOP
preferred shares, net
of tax benefit on
unallocated shares (4) (4) (9) (9) (17) (21)
----- ----- ----- ----- ----- -----
Adjusted net earnings $ 45 $ 20 $ 79 $ 45 $ 392 $ 339
===== ===== ===== ===== ===== =====
Average common shares
outstanding 71.6 71.4 71.6 71.4 71.5 71.4
Average number of
common share
equivalents:
Stock options 0.2 0.1 0.2 0.2 0.2 0.2
Performance shares 0.2 0.2 0.2 0.1 0.2 0.1
----- ----- ----- ----- ----- -----
Adjusted common
equivalent shares
outstanding-primary 72.0 71.7 72.0 71.7 71.9 71.7
===== ===== ===== ===== ===== =====
Primary Earnings Per
Share $0.62 $0.28 $1.10 $0.63 $5.45 $4.74
===== ===== ===== ===== ===== =====
Fully Diluted Computations
- --------------------------
Net earnings $ 49 $ 24 $ 88 $ 54 $ 409 $ 360
Less: Earnings impact of
assumed ESOP preferred
share conversion, net
of tax benefit on
unallocated shares (3) (3) (6) (6) (12) (15)
----- ----- ----- ----- ----- -----
Adjusted net earnings $ 46 $ 21 $ 82 $ 48 $ 397 $ 345
===== ===== ===== ===== ===== =====
Average common and common
equivalent shares-primary 72.0 71.7 72.0 71.7 71.9 71.7
Additional common stock
equivalents attributable
to application of the
treasury stock method 0.1 - 0.1 0.1 - -
Assumed conversion of
ESOP preferred shares 4.2 4.3 4.2 4.3 4.3 4.3
----- ----- ----- ----- ----- -----
Adjusted common equivalent
shares outstanding-fully
diluted 76.3 76.0 76.3 76.1 76.2 76.0
===== ===== ===== ===== ===== =====
FULLY DILUTED EARNINGS
PER SHARE $0.61 $0.28 $1.07 $0.63 $5.21 $4.55
===== ===== ===== ===== ===== =====
AVERAGE ALLOCATED ESOP
PREFERRED SHARES
OUTSTANDING (IN MILLIONS) 2.1 1.5 2.0 1.4 1.9 1.3
===== ===== ===== ===== ===== =====
</TABLE>
<PAGE>
EXHIBIT (12)
DAYTON HUDSON CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
FOR THE SIX MONTHS ENDED JULY 30, 1994 AND JULY 31, 1993
AND FOR THE FIVE YEARS ENDED JANUARY 29, 1994
(Millions of Dollars)
<TABLE>
<CAPTION>
Six Months Ended Fiscal Year Ended
----------------- --------------------------------------------
Jul 30, Jul 31, Jan 29, Jan 30, Feb 1, Feb 2, Feb 3,
1994 1993 1994 1993 1992 1991 1990
-------- ------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Consolidated net earnings........... $ 88 $ 54 $ 375 $ 383 $ 301 $ 412 $ 410
Income taxes........................ 57 32 232 228 171 249 268
----- ----- ------ ------ ----- ------ -----
Total earnings.................... 145 86 607 611 472 661 678
----- ----- ------ ------ ----- ------ -----
Fixed charges:
Interest expense.................... 217 231 459 454 421 333 283
Dividends on preferred stock
(pre-tax basis).................... 19 19 39 39 39 39 2
Interest portion of rental expense.. 25 21 45 43 39 46 45
----- ----- ------ ------ ----- ------ -----
Total fixed charges............... 261 271 543 536 499 418 330
Less:
Dividends on preferred stock
(pre-tax basis).................... (19) (19) (39) (39) (39) (39) (2)
Capitalized interest................ (3) (3) (5) (6) (11) (8) (10)
----- ----- ------ ------ ----- ------ -----
Fixed charges in earnings......... 239 249 499 491 449 371 318
----- ----- ------ ------ ----- ------ -----
Earnings available for fixed charges.. $ 384 $ 335 $1,106 $1,102 $ 921 $1,032 $ 996
===== ===== ====== ====== ===== ====== =====
Ratio of earnings to fixed charges.... 1.47 1.24 2.04 2.06 1.85 2.47 3.02
===== ===== ====== ====== ===== ====== =====
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
DAYTON HUDSON CORPORATION'S FORM 10-Q FOR THE SIX-MONTH PERIOD ENDED
JULY 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> JAN-30-1994
<PERIOD-END> JUL-30-1994
<CASH> 169
<SECURITIES> 0
<RECEIVABLES> 1456
<ALLOWANCES> 38
<INVENTORY> 2860
<CURRENT-ASSETS> 4576
<PP&E> 8679
<DEPRECIATION> 2508
<TOTAL-ASSETS> 11089
<CURRENT-LIABILITIES> 3014
<BONDS> 4599
<COMMON> 72
365
0
<OTHER-SE> 2686
<TOTAL-LIABILITY-AND-EQUITY> 11089
<SALES> 9124
<TOTAL-REVENUES> 9267
<CGS> 6772
<TOTAL-COSTS> 6772
<OTHER-EXPENSES> 2109
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 211
<INCOME-PRETAX> 145
<INCOME-TAX> 57
<INCOME-CONTINUING> 88
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.07
</TABLE>
