<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 August 3, 1996
---------------
Commission file number 1-6049
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Dayton Hudson Corporation
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(Exact name of registrant as specified in its charter)
Minnesota 41-0215170
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(State of incorporation or organization) (I.R.S. Employer Identification No.)
777 Nicollet Mall Minneapolis, Minnesota 55402-2055
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 370-6948
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None
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(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 and
(2) has been subject to such filing requirements for the past 90 days.
The number of shares outstanding of common stock as of August 3, 1996 was
216,731,031.
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DAYTON HUDSON CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
PART I FINANCIAL INFORMATION:
<S> <C> <C>
ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Results of 1
Operations for the Three Months, Six
Months and Twelve Months ended August 3,
1996 and July 29, 1995
Condensed Consolidated Statements of 2
Financial Position at August 3, 1996,
February 3, 1996 and July 29, 1995
Condensed Consolidated Statements of 3
Cash Flows for the Six Months ended
August 3, 1996 and July 29, 1995
Notes to Condensed Consolidated 4-5
Financial Statements
ITEM 2 - MANAGEMENT'S DISCUSSION AND 6-10
ANALYSIS OF OPERATIONS AND FINANCIAL
CONDITION
PART II OTHER INFORMATION:
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 11
Signatures 12
Exhibit Index 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED Dayton Hudson Corporation
RESULTS OF OPERATIONS and Subsidiaries
(Millions of Dollars, Except Per Share Data) Three Months Ended Six Months Ended Twelve Months Ended
- -----------------------------------------------------------------------------------------------------------------------------
AUGUST 3, July 29, AUGUST 3, July 29, AUGUST 3, July 29,
(Unaudited) 1996 1995 1996 1995 1996* 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $5,751 $5,236 $11,131 $9,993 $24,654 $ 22,037
COSTS AND EXPENSES
Cost of retail sales, buying and
occupancy 4,197 3,896 8,146 7,400 18,273 16,264
Selling, publicity and administrative 1,009 937 1,994 1,826 4,211 3,755
Depreciation and amortization 159 147 316 291 619 570
Interest expense, net 111 108 220 215 447 430
Taxes other than income taxes 108 101 220 196 433 384
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Total Costs and Expenses 5,584 5,189 10,896 9,928 23,983 21,403
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Earnings Before Income Taxes 167 47 235 65 671 634
Provision for Income Taxes 66 19 93 26 257 249
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NET EARNINGS $ 101 $ 28 $ 142 $ 39 $ 414 $ 385
=============================================================================================================================
PRIMARY EARNINGS PER SHARE $ 0.44 $ 0.11 $ 0.60 $ 0.14 $ 1.81 $ 1.69
FULLY DILUTED EARNINGS PER SHARE $ 0.42 $ 0.11 $ 0.59 $ 0.14 $ 1.74 $ 1.62
=============================================================================================================================
DIVIDENDS DECLARED PER COMMON SHARE $ 0.16 $ 0.15 $ 0.31 $ 0.29 $ 0.60 $ 0.57
AVERAGE COMMON SHARES OUTSTANDING
(Millions):
Primary 218.7 216.9 218.2 216.6 217.6 216.2
Fully Diluted 230.5 217.1 230.4 216.8 229.7 228.9
=============================================================================================================================
</TABLE>
*Consisted of 53 weeks.
See accompanying Notes to Condensed Consolidated Financial Statements.
1
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS Dayton Hudson Corporation
OF FINANCIAL POSITION and Subsidiaries
AUGUST 3, February 3, July 29,
(Millions of Dollars) 1996 1996* 1995
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ASSETS (UNAUDITED) (Unaudited)
CURRENT ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 221 $ 175 $ 175
Accounts receivable 1,412 1,510 1,596
Merchandise inventories 3,228 3,018 3,111
Other 191 252 172
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Total Current Assets 5,052 4,955 5,054
PROPERTY AND EQUIPMENT 10,401 10,224 9,670
Accumulated depreciation (2,944) (2,930) (2,817)
------- ------- ------
Property and Equipment, net 7,457 7,294 6,853
OTHER 503 321 346
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TOTAL ASSETS $13,012 $12,570 $12,253
=============================================================================================================================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt and notes payable $ 228 $ 182 $ 284
Accounts payable 2,176 2,247 2,165
Other 1,116 1,094 1,019
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Total Current Liabilities 3,520 3,523 3,468
LONG-TERM DEBT 5,297 4,959 4,969
DEFERRED INCOME TAXES AND OTHER 628 623 581
CONVERTIBLE PREFERRED STOCK, NET 54 62 50
SHAREHOLDERS' INVESTMENT 3,513 3,403 3,185
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TOTAL LIABILITIES AND SHAREHOLDER'S INVESTMENT $13,012 $12,570 $12,253
=============================================================================================================================
COMMON SHARES OUTSTANDING (Millions) 216.7 215.9 215.5
=============================================================================================================================
</TABLE>
* The February 3, 1996 Consolidated Statement of Financial Position is condensed
from the audited financial statements.
See accompanying Notes to Condensed Consolidated Financial Statements.
2
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CONDENSED CONSOLIDATED Dayton Hudson Corporation
STATEMENTS OF CASH FLOWS and Subsidiaries
<TABLE>
<CAPTION>
(Millions of Dollars) Six Months Ended
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AUGUST 3, July 29,
(Unaudited) 1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 142 $ 39
Reconciliation to cash flow:
Depreciation and amortization 316 291
Deferred tax provision (29) (17)
Other non-cash items affecting earnings 46 42
Changes in operating accounts providing/(requiring)cash:
Accounts receivable 98 214
Merchandise inventories (210) (334)
Accounts payable (71) 204
Other 112 (141)
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Cash Flow Provided by Operations 404 298
================================================================================
INVESTING ACTIVITIES
Expenditures for property and equipment, net (682) (760)
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Cash Flow Required for Investing Activities (682) (760)
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Net Financing Requirements (278) (462)
================================================================================
FINANCING ACTIVITIES
(Decrease)/increase in notes payable, net (24) 550
Additions to long-term debt 500 150
Reductions of long-term debt (92) (144)
Dividends paid (74) (73)
Other 14 7
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Cash Flow Provided by Financing Activities 324 490
================================================================================
Net Increase in Cash and Cash Equivalents 46 28
Cash and Cash Equivalents at Beginning of Period 175 147
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 221 $ 175
================================================================================
</TABLE>
Amounts in this statement are presented on a cash basis and therefore may differ
from those shown elsewhere in this 10-Q report. Cash paid for income taxes was
$205 million and $158 million during the first six months of 1996 and 1995,
respectively. Cash paid for interest (including interest capitalized) in the
first six months of 1996 and 1995 was $214 million and $216 million,
respectively.
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 1995 Annual Shareholders' Report throughout pages 23-34. As
explained on page 33 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 Holiday season are not necessarily indicative of the operating
results that may be expected for the full year.
PER SHARE DATA
Primary earnings per share equals net earnings, less dividend requirements on
ESOP preferred shares, divided by the average number of common shares and common
share equivalents outstanding during the period. Fully diluted earnings per
share assumes conversion of the ESOP preferred shares into common shares, unless
the conversion is antidilutive. Net earnings are also adjusted for the
additional expense required to fund the ESOP debt service, caused by the assumed
replacement of the ESOP preferred dividends with common stock dividends, unless
the conversion is antidilutive. References to earnings per share relate to fully
diluted earnings per share.
COMMON STOCK SPLIT
On June 12, 1996, the Board of Directors approved a three-for-one split of the
Corporation's common stock. Two additional shares of common stock were
distributed on July 17, 1996 to shareholders of record as of June 28, 1996. All
earnings per share, dividends per share and common shares outstanding presented
in this report reflect the stock split.
LONG-TERM DEBT
During the second quarter, the Corporation issued $200 million of long-term debt
at 7.5% per annum, maturing in 2006. The proceeds from this issuance were used
for general corporate purposes.
SUBSEQUENT EVENTS
On August 28, 1996, the Dayton Hudson Credit Card Master Trust issued a Series
1996-1 Class A Variable Funding Certificate backed by credit card receivables.
This Certificate was issued at $300 million and may fluctuate based on financing
needs. The Class A Certificate will be reflected as debt of Dayton Hudson
Receivables Corporation (DHRC), a subsidiary of the Corporation, on the
Corporation's Consolidated Statement of Financial Position. Accordingly, the
coupon payment will be reflected in interest expense on the Corporation's
Consolidated Results of Operations. The proceeds were used to repay outstanding
commercial paper and for general corporate purposes.
4
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The Corporation announced that DSD has entered into agreements to sell its four
Marshall Field's stores in Texas. The agreements are subject to customary
contingencies. The stores will continue to operate as Marshall Field's stores
through the Holiday season. The transaction is anticipated to close at the end
of December 1996 and is expected to result in an immaterial gain.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current-year
presentation.
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 1996
ANALYSIS OF OPERATIONS
Second quarter 1996 net earnings were $101 million, compared with $28 million
for second quarter 1995. For the first half of 1996, net earnings increased to
$142 million from $39 million for the same period a year ago. Earnings per share
for the second quarter and the first half were $.42 and $.59, respectively,
compared with $.11 and $.14 per share for the same periods last year.
The improvement in earnings for the second quarter and first half of the year
was due to very strong sales and earnings performance at Target, a significant
turnaround in profitability at Mervyn's and expense savings associated with our
corporation-wide cost reduction initiatives.
The following table illustrates the impact of the major factors contributing to
the changes in earnings per share:
<TABLE>
<CAPTION>
Three Six
Months Months
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<S> <C> <C>
1995 Earnings Per Share $ .11 $ .14
Changes in earnings per share due to:
Revenues .06 .06
Gross margin rate .18 .21
Operating expense rate .14 .30
Start-up expenses (.01) (.03)
Interest expense, net (.01) (.01)
Corporate and other expense, net (.05) (.08)
- -------------------------------------------------------------------------------
1996 Earnings Per Share $ .42 $ .59
===============================================================================
</TABLE>
Strong sales growth at Target, our lowest margin and expense rate division,
continues to impact our business mix. As a result, for second quarter and for
the six-month period the Corporation's overall revenue growth and total
operating expense rate were favorably affected, while the gross margin rate was
unfavorably affected. If the sales mix between divisions had remained constant
with the comparable periods in 1995, the gross margin rate variance would have
been $.03 and $.07 more favorable and the operating expense rate would have been
$.07 and $.12 less favorable for the second quarter and six months,
respectively.
The overall gross margin rate favorability for the second quarter and six months
reflects significant improvement at Target and Mervyn's. The overall operating
expense rate improvement for the second quarter and first half reflects
significant improvement at Mervyn's, strong sales leveraging and reduced
expenses at Target, partially offset by increased store expenses at DSD.
6
<PAGE>
Revenues
- --------
Total revenues increased 10% and 11% for the three- and six-month periods ended,
respectively, while comparable-store revenues (revenues from stores open longer
than one year) increased 3% and 5%, respectively.
Revenues by business segment were as follows :
<TABLE>
<CAPTION>
(Millions of Dollars) Three Months Ended Percentage Change
------------------- -------------------
AUGUST 3, July 29, All Comparable
1996 1995 Stores Stores
--------- -------- ------- ----------
<S> <C> <C> <C> <C>
Target $ 4,078 $3,514 16% 7%
Mervyn's 999 1,030 (3) (5)
DSD 674 692 (2) (4)
------- ------ --- ---
Total Revenues $ 5,751 $5,236 10% 3%
======= ====== === ===
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Percentage Change
------------------- -------------------
AUGUST 3, July 29, All Comparable
1996 1995 Stores Stores
--------- -------- ------- ----------
<S> <C> <C> <C> <C>
Target $ 7,801 $6,671 17% 8%
Mervyn's 1,966 1,944 1 (1)
DSD 1,364 1,378 (1) (2)
------- ------ --- ---
Total Revenues $11,131 $9,993 11% 5%
======= ====== === ===
</TABLE>
Target's strong revenue results reflect new store growth, strong base-business
sales, and higher finance-charge revenues and late-fee revenues associated with
the continued growth of the Target Guest Card. Mervyn's total and comparable-
store revenues declined in the second quarter and were essentially flat in the
first half. Due to its repositioning, DSD's total and comparable-store revenues
declined for the second quarter and first half versus last year due to
substantially fewer promotional days associated with its new strategy, partially
offset by increased regular-price sales, particularly in better merchandise
categories.
7
<PAGE>
Operating Profit
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Operating profit increased 77% and 64% for the second quarter and six-month
period, respectively. Operating profit is LIFO earnings from operations before
corporate expense, interest and income taxes.
Operating profit by business segment was as follows:
<TABLE>
<CAPTION>
(Millions of Dollars) Three Months Ended
---------------------------------
AUGUST 3, July 29, Percentage
1996 1995 Change
--------- -------- ----------
<S> <C> <C> <C>
Target $ 240 $ 144 66%
Mervyn's 54 3 100+
DSD 10 24 (59)
----- ----- ---
Total Operating Profit $ 304 $ 171 77%
===== ===== ===
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------
AUGUST 3, July 29, Percentage
1996 1995 Change
--------- -------- ----------
<S> <C> <C> <C>
Target $ 373 $ 241 54%
Mervyn's 93 4 100+
DSD 38 62 (39)
----- ----- ----
Total Operating Profit $ 504 $ 307 64%
===== ===== ====
</TABLE>
Operating profit reflects a reduction of finance-charge revenues as well as a
reduction of bad debt expense related to the sale of securitized accounts
receivable by DHRC in September, 1995. The net reduction to operating profit was
$(2) million each for Target, Mervyn's and DSD for the three months ended August
3, 1996, and a net reduction of $(3) million, $(5) million and $(4) million,
respectively, for the six-month period. The reductions to operating profit in
both periods were offset by comparable interest expense savings due to the
replacement of debt with securitization proceeds. There was no operating profit
reduction for the three- or six-month periods ended July 29, 1995.
TARGET'S second quarter and six-month operating profit increases of 66% and 54%
reflect strong total and comparable-store revenue growth as well as gross margin
rate and operating expense rate improvements. Target's gross margin rate for the
second quarter and first half of 1996 improved primarily due to promotional
markdown favorability and higher markup. Target's improved operating expense
rate for the second quarter and six-month period reflects strong sales
leveraging and continued expense reduction. During the first half of 1996,
Target realized approximately 50% of the $50 million annualized cost savings
identified as part of its multi-year cost reduction program. Looking forward to
the second half of the year, sales growth is expected to result in additional
leveraging, which combined with continued cost reduction efforts, should produce
continued year-over-year operating profit increases.
8
<PAGE>
MERVYN'S operating profit for the second quarter and first half increased to $54
million and $93 million, respectively, from $3 million and $4 million for the
comparable periods last year. The gross margin rate increased significantly in
both periods reflecting increased markup and lower markdowns. Mervyn's operating
expense rate for the second quarter and first half of 1996 also showed
substantial improvement due to expense reductions in stores, marketing and
headquarters, as a result of realizing one half of the 1996 savings expected
from its cost reduction program. Looking forward, Mervyn's is expected to
continue to achieve operating profit improvement over last year, although not to
the degree experienced in the first half of 1996. Our second half plans continue
to assume a slight comparable-store sales decline, a strong fourth quarter
increase in the gross margin rate and further realization of operating expense
savings throughout the year.
DSD'S second quarter and six-month operating profit declined compared with the
same periods last year. The second quarter gross margin rate declined slightly
due to higher clearance markdowns partially offset by lower promotional
markdowns and higher markup. The six-month rate increased slightly. The
operating expense rate for both the second quarter and first half was
unfavorable to last year due to lower sales leverage and higher store expense
related to increased staffing to improve guest service. In the second half of
the year, DSD will continue to refine and implement its new strategy. The basic
elements of this strategy include: improving guest service, offering better and
more unique merchandise, reducing the number of storewide promotional days and
continuing to pursue cost savings initiatives. Underlying trends in the second
half are expected to include slightly negative comparable-store sales results,
offset by improvement in the gross margin rate and a reduction in operating
expenses due to various expense savings initiatives, resulting in moderate year-
over-year growth for second half operating profit.
Other Performance Factors
- -------------------------
The last-in first-out (LIFO) provision was zero for the three- and six-month
periods for both 1996 and 1995. The cumulative LIFO provision was $77 million at
August 3, 1996 and February 3, 1996, and $60 million at July 29, 1995.
Net interest expense increased $3 million in the second quarter and $5 million
in the first half of 1996 compared with the same periods last year. Higher
average debt balances were substantially offset by lower average portfolio
interest rates and interest savings resulting from the replacement of debt with
the proceeds from the sale of securitized accounts receivable. Looking forward,
this trend is expected to continue throughout 1996.
The estimated annual effective income tax rate is 39.5% for 1996, unchanged from
the first half 1995 estimated annual rate.
9
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ANALYSIS OF FINANCIAL CONDITION
Our financial condition remains strong. The ratio of debt to total
capitalization attributable to our retail operations was 55% at the end of
second quarter 1996, slightly higher than the same period last year. The
increase from 53% at year-end 1995 reflects typical seasonality. Looking
forward to year-end, this ratio is expected to be slightly lower than last
year.
At August 3, 1996, working capital was $1,532 million, down 3% from a year
ago, principally due to $216 million in accounts receivable growth offset by
the $400 million reduction related to the securitized accounts receivable sold
in September 1995. The 6% decline in accounts receivable from year end
reflects the typical reduction from seasonally high levels. Compared with
second quarter 1995, merchandise inventories increased $117 million or 4%
primarily as a result of Target's new store growth, partially offset by
inventory reductions at Mervyn's and DSD. Total merchandise inventories
increased 7% reflecting increases over the seasonally low year-end balances at
all three divisions.
Net capital expenditures for the first half of 1996 were $682 million,
compared with $760 million for the same period a year ago. Approximately 84%
of the current year expenditures were made by Target, 4% by Mervyn's and 12%
by DSD.
We continue to fund the growth in our business through a combination of debt,
the sale of securitized accounts receivable and retained earnings. Our debt
has increased $272 million compared with a year ago and our shareholders'
investment has grown by $328 million.
To support our objective of providing shareholders with an attractive total
return on their investment, on June 12, 1996 the Board of Directors declared a
9% increase in the Corporation's quarterly dividend to 16 cents per common
share.
A key to the Corporation's liquidity is its ability to access a variety of
capital markets. Subsequent to the quarter end, the Corporation, through its
subsidiary DHRC, accessed the receivables-backed commercial paper market
through the sale of a Series 1996-1 Class A Variable Funding Certificate in
the amount of $300 million. This market represents an alternative source of
variable rate funding.
STORE DATA
At August 3, 1996, Target operated 714 stores in 37 states, Mervyn's operated
299 stores in 16 states and DSD operated 66 stores in nine states. During the
quarter, the Corporation opened 26 Target stores, two Mervyn's stores and two
DSD stores.
<TABLE>
<CAPTION>
Retail square footage was as follows:
AUGUST 3, February 3, July 29,
(In thousands, reflects total square feet, less 1996 1996 1995
office, warehouse and vacant space)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Target 76,519 71,108 68,198
Mervyn's 24,449 24,113 24,148
DSD 14,082 13,870 13,824
- ---------------------------------------------------------------------------------
Total Retail Square Footage 115,050 109,091 106,170
=================================================================================
</TABLE>
10
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PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(2). Not applicable
(3). Restated Articles of Incorporation (as amended July 17, 1996)
(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). Not applicable
(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:
Form 8-K dated June 12, 1996 reporting a stock split and an
increase in the quarterly dividend.
11
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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 13, 1996 By /s/ Douglas A. Scovanner
-------------------------
Douglas A. Scovanner
Senior Vice President and
Chief Financial Officer
Date: September 13, 1996 By /s/ J.A. Bogdan
-------------------------
JoAnn Bogdan
Controller and
Chief Accounting Officer
12
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Exhibit Index
- -------------
(3). Restated Articles of Incorporation (as amended July 17, 1996)
(11). Statements re Computations of Per Share Earnings
(12). Statements re Computations of Ratios
(27). Financial Data Schedule
13
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Exhibit 3
RESTATED
ARTICLES OF INCORPORATION
OF
DAYTON HUDSON CORPORATION
(As amended through July 17, 1996)
ARTICLE I
The name of the corporation is Dayton Hudson Corporation.
ARTICLE II
The location and post-office address of the registered office of the corporation
in the State of Minnesota is number 777 Nicollet Mall in the City of
Minneapolis, County of Hennepin.
ARTICLE III
The total authorized number of shares of the corporation is 1,505,000,000. The
shares are classified in two classes, consisting of 5,000,000 shares of
Preferred Stock of the par value of $.01 per share and 1,500,000,000 shares of
Common Stock of the par value of $.3333 per share.
The Board of Directors is authorized to establish one or more series of
Preferred Stock, setting forth the designation of each such series, and fixing
the relative rights and preferences of each such series.
Each holder of record of Common Stock shall be entitled to one vote for each
share of Common Stock held by such shareholder on every matter voted on at every
meeting of shareholders of the corporation. No holder of shares of stock of any
class or series shall be entitled to cumulate his/her votes in any election of
directors.
No holder of shares of stock of any class or series shall be entitled as such,
as a matter of right, to subscribe for or purchase any part of any new or
additional issue of shares of stock of any class or series whatsoever or of any
securities convertible into or exchangeable for any shares of stock of any class
or series whatsoever, whether now or hereafter authorized or issued for cash or
other consideration.
1
<PAGE>
ARTICLE IV
A. In addition to any affirmative vote required by law or these Articles of
Incorporation, and except as otherwise expressly provided in Section B of
this Article IV, a Business Combination (as hereinafter defined) shall
require the affirmative vote of not less than seventy-five percent (75%) of
the votes entitled to be cast by the holders of all then outstanding shares
of Voting Stock (as hereinafter defined), voting together as a single
class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage or separate class
vote may be specified, by law or by any other provision of these Articles
of Incorporation or in any agreement with any national securities exchange
or otherwise.
B. The provisions of Section A of this Article IV shall not be applicable to
any particular Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is required by law or by any
other provision of these Articles of Incorporation or in any agreement with
any national securities exchange or otherwise, if the conditions specified
in either of the following Paragraphs 1 or 2 are met:
1. The Business Combination shall have been approved by a majority of the
Continuing Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
a. The aggregate amount of cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of Common Stock in such Business
Combination shall be at least equal to the higher amount
determined under clauses (i) and (ii) below:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested
Shareholder (as hereinafter defined) for any share of Common
Stock in connection with the acquisition by the Interested
Shareholder of beneficial ownership of shares of Common
Stock (a) within the two-year period immediately prior to
the date of the first public announcement of the proposed
Business Combination (the "Announcement Date") or (b) in the
transaction in which it became an Interested Shareholder,
whichever is higher; and
2
<PAGE>
(ii) the fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (such latter
date being referred to herein as the "Determination Date"),
whichever is higher.
b. The aggregate amount of cash and the Fair Market Value as of the
date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders
of shares of any class or series of outstanding Capital Stock (as
hereinafter defined), other than Common Stock, shall be at least
equal to the highest amount determined under clauses (i), (ii)
and (iii) below:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested
Shareholder for any share of such class or series of Capital
Stock in connection with the acquisition by the Interested
Shareholder of beneficial ownership of shares of such class
or series of Capital Stock (a) within the two-year period
immediately prior to the Announcement Date or (b) in the
transaction in which it became an Interested Shareholder,
whichever is higher;
(ii) the Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the
Determination Date, whichever is higher; and
(iii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class or series of
Capital Stock would be entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the corporation, regardless of whether
the Business Combination to be consummated constitutes such
an event.
The provisions of this Paragraph 2.b shall be required to be met
with respect to every class or series of outstanding Capital
Stock, whether or not the Interested Shareholder has previously
acquired beneficial ownership of any shares of a particular class
or series of Capital Stock.
c. The consideration to be received by holders of a particular class
or series of outstanding Capital Stock shall be in cash or in the
same
3
<PAGE>
form as previously has been paid by or on behalf of the
Interested Shareholder in connection with its direct or indirect
acquisition of beneficial ownership of shares of such class or
series of Capital Stock. If the consideration so paid for shares
of any class or series of Capital Stock varied as to form, the
form of consideration for such class or series of Capital Stock
shall be either cash or the form used to acquire beneficial
ownership of the largest number of shares of such class or series
of Capital Stock previously acquired by the Interested
Shareholder. The price determined in accordance with Paragraphs
2.a and 2.b of Section B of this Article IV shall be subject to
appropriate adjustment in the event of any stock dividend, stock
split, combination of shares or similar event.
d. After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business
Combination: (i) there shall have been no failure to declare and
pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) payable in accordance with the terms
of any outstanding Capital Stock, except as approved by a
majority of the Continuing Directors; (ii) there shall have been
no reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any stock dividend, stock
split, combination of shares or similar event), except as
approved by a majority of the Continuing Directors; (iii) there
shall have been an increase in the annual rate of dividends paid
on the Common Stock as necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction that has the effect of
reducing the number of outstanding shares of Common Stock, unless
the failure to increase such annual rate is approved by a
majority of the Continuing Directors; and (iv) except as approved
by a majority of the Continuing Directors, such Interested
Shareholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the
transaction that results in such Interested Shareholder becoming
an Interested Shareholder and except in a transaction that, after
giving effect thereto, would not result in any increase in the
Interested Shareholder's percentage beneficial ownership of any
class or series of Capital Stock.
e. After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received
the benefit, directly or indirectly (except proportionately as a
shareholder of the corporation), or any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax
4
<PAGE>
advantages provided by the corporation, whether in anticipation
of or in connection with such Business Combination or otherwise.
f. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder
(the "Act") (or any subsequent provisions replacing such Act,
rules or regulations) shall be mailed to all shareholders of the
corporation at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to the Act or
subsequent provisions). The proxy or information statement shall
contain on the first page thereof, in a prominent place, any
statement as to the advisability (or inadvisability) of the
Business Combination that a majority of the Continuing Directors
may choose to make and, if deemed advisable by a majority of the
Continuing Directors, the opinion of an investment banking firm
selected by a majority of the Continuing Directors as to the
fairness (or lack of fairness) of the terms of the Business
Combination from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the Interested
Shareholder and its Affiliates (as hereinafter defined) or
Associates (as hereinafter defined).
g. Such Interested Shareholder shall not have made or caused to be
made any major change in the corporation's business or equity
capital structure without the approval of a majority of the
Continuing Directors.
C. For the purposes of this Article IV:
1. The term "Business Combination" shall mean:
a. any merger, consolidation or statutory exchange of shares of the
corporation or any Subsidiary (as hereinafter defined) with (i)
any Interested Shareholder or (ii) any other corporation (whether
or not itself an Interested Shareholder) which is or after such
merger, consolidation or statutory share exchange would be an
Affiliate or Associate of an Interested Shareholder, provided,
however, that the foregoing shall not include the merger of a
wholly-owned Subsidiary of the corporation into the corporation
or the merger of two or more wholly-owned Subsidiaries of the
corporation; or
b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to
or with
5
<PAGE>
an Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder of any assets of the corporation or any
Subsidiary equal to or greater than ten percent (10%) of the book
value of the consolidated assets of the corporation; or
c. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to
or with the corporation or any Subsidiary of any assets of any
Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder equal to or greater than ten percent (10%)
of the book value of the consolidated assets of the corporation;
or
d. the issuance or transfer by the corporation or any Subsidiary (in
one transaction or a series of transactions) to any Interested
Shareholder or any Affiliate or Associate of any Interested
Shareholder of any securities of the corporation (except pursuant
to stock dividends, stock splits, or similar transactions which
would not have the effect, directly or indirectly, of increasing
the proportionate share of any class or series of Capital Stock,
or any securities convertible into Capital Stock or into equity
securities of any Subsidiary, that is beneficially owned by any
Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder) or of any securities of a Subsidiary
(except pursuant to a pro rata distribution to all holders of
Common Stock of the Corporation); or
e. the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by or on behalf of an
Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder; or
f. any transaction (whether or not with or otherwise involving an
Interested Shareholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class or
series of Capital Stock, or any securities convertible into
Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder, including,
without limitation any reclassification or securities (including
any reverse stock split), or recapitalization of the corporation,
or any merger, consolidation or statutory exchange of shares of
the corporation with any of its Subsidiaries; or
6
<PAGE>
g. any agreement, contract or other arrangement or understanding
providing for any one or more of the actions specified in the
foregoing clauses (a) to (f).
2. The term "Capital Stock" shall mean all capital stock of the
corporation authorized to be issued from time to time under Article
III of these Articles of Incorporation. The term "Voting Stock" shall
mean all Capital Stock of the corporation entitled to vote generally
in the election of directors of the corporation.
3. The term "person" shall mean any individual, firm, corporation or
other entity and shall include any group comprised of any person and
any other person with whom such person or any Affiliate or Associate
of such person has any agreement, arrangement or understanding,
directly or indirectly, for the purpose of acquiring, holding, voting
or disposing of Capital Stock.
4. The term "Interested Shareholder" shall mean any person (other than
the corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the
corporation or any Subsidiary or any trustee of or fiduciary with
respect to any such plan when acting in such capacity) who (a) is the
beneficial owner of Voting Stock representing ten percent (10%) or
more of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock; or (b) is an Affiliate or
Associate of the corporation and at any time within the two-year
period immediately prior to the date in question was the beneficial
owner of Voting Stock representing ten percent (10%) or more of the
votes entitled to be cast by the holders of all then outstanding
shares of Voting Stock; or (c) is an assignee of or has otherwise
succeeded to any shares of Voting Stock which were at any time within
the two-year period immediately prior to the date in question
beneficially owned by any Interested Shareholder, if such assignment
or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
5. A person shall be a "beneficial owner" of any Capital Stock (a) which
such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates
or Associates has, directly or indirectly, (i) the right to acquire
(whether such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or (iii) the
right to dispose or direct the disposition of,
7
<PAGE>
pursuant to any agreement, arrangement or understanding; or (c) which
are beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Capital stock. For the
purpose of determining whether a person is an interested Shareholder
pursuant to Paragraph 4 of this Section C, the number of shares of
Capital Stock deemed to be outstanding shall include shares deemed
beneficially owned by such person through application of this
Paragraph 5, but shall not include any other shares of Capital Stock
that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, exchange rights,
warrants or options, or otherwise.
6. The term "Affiliate", used to indicate a relationship with a specified
person, shall mean a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with, such specified person. The term "Associate",
used to indicate a relationship with a specified person, shall mean
(a) any person (other than the corporation or a Subsidiary) of which
such specified person is an officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of any
class of equity securities, (b) any trust or other estate in which
such specified person has a substantial beneficial interest or as to
which such specified person serves as trustee or in a similar
fiduciary capacity, (c) any relative or spouse of such specified
person or any relative of such spouse, who has the same home as such
specified person or who is a director or officer of the corporation or
any Subsidiary, and (d) any person who is a director or officer of
such specified person or any of its parents or subsidiaries (other
than the corporation or a Subsidiary).
7. The term "Subsidiary" shall mean any corporation of which a majority
of any class of equity security is beneficially owned, directly or
indirectly, by the corporation; provided, however, that for the
purposes of Paragraph 4 of this Section C, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity
security is beneficially owned, directly or indirectly, by the
corporation.
8. The term "Continuing Director" shall mean any member of the Board of
Directors of the corporation, while such person is a member of the
Board of Directors, who was a member of the Board of Directors prior
to the time that the Interested Shareholder involved in the Business
Combination in question became an Interested Shareholder, and any
member of the Board of Directors, while such person is a member of the
Board of Directors, whose election, or nomination for election by the
corporation's shareholders, was approved by a vote of a majority of
the Continuing
8
<PAGE>
Directors; provided, however, that in no event shall an Interested
Shareholder involved in the Business Combination in question or any
Affiliate, Associate or representative of such Interested Shareholder,
be deemed to be a Continuing Director.
9. The term "Fair Market Value" shall mean (a) in the case of cash, the
amount of such cash; (b) in the case of stock, the highest closing
sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape on the New York Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Act on which such stock is listed, or,
if such stock is not listed on any such exchange, the highest closing
bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any similar
system then in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock as
determined by a majority of the Continuing Directors in good faith;
and (c) in the case of property other than cash or stock, the fair
market value of such property on the date in question as determined in
good faith by a majority of the Continuing Directors.
10. In the event of any Business Combination in which the corporation
survives, the phrase "consideration other than cash to be received" as
used in Paragraphs 2.a and 2.b of Section B of this Article IV shall
include the shares of Common Stock and/or the shares of any other
class or series of Capital Stock retained by the holders of such
shares.
D. The Continuing Directors by majority vote shall have the power to determine
for the purposes of this Article IV, on the basis of information known to
them after reasonable inquiry, (a) whether a person is an Interested
Shareholder, (b) the number of shares of Capital Stock (including Voting
Stock) or other securities beneficially owned by any person, (c) whether a
person is an Affiliate or Associate of another, (d) whether the assets that
are the subject of any Business Combination equal or exceed ten percent
(10%) of the book value of the consolidated assets of the corporation, (e)
whether a proposed plan of dissolution or liquidation is proposed by or on
behalf of an Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder, (f) whether any transaction has the effect,
directly or indirectly, of increasing the proportionate share of any class
or series of Capital Stock, or any securities convertible into Capital
Stock or into equity securities of any Subsidiary, that is beneficially
owned by an Interested Shareholder or any Affiliate or Associate of an
Interested Shareholder, (g) whether any Business Combination satisfies the
conditions set forth in Paragraph 2 of Section B of this Article IV, and
(h) such other matters with
9
<PAGE>
respect to which a determination is required under this Article IV. Any
such determination made in good faith shall be binding and conclusive on
all parties.
E. Nothing contained in this Article IV shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions of
Section B of this Article IV shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, or the Continuing Directors, or any of them, to approve such
Business Combination or recommend its adoption or approval to the
shareholders of the corporation, nor shall such compliance limit, prohibit
or otherwise restrict in any manner the Board of Directors, or any member
thereof, or the continuing Directors, or any of them, with respect to
evaluations of or actions and responses taken with respect to such Business
Combination.
G. Notwithstanding any other provisions of these Articles of Incorporation
(and notwithstanding the fact that a lesser percentage or separate class
vote may be specified by law or these Articles of Incorporation), the
affirmative vote of the holders of not less than seventy-five percent (75%)
of the votes entitled to be cast by the holders of all then outstanding
shares of Voting Stock, voting together as a single class, shall be
required to amend or repeal, or adopt any provisions inconsistent with,
this Article IV.
ARTICLE V
No director of the corporation shall be personally liable to the corporation or
its shareholders for monetary damages for breach of fiduciary duty as a
director, provided, however, that this Article V shall not eliminate or limit
the liability of a director to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the corporation or its shareholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under section 302A.559 or 80A.23
of the Minnesota Statutes, (iv) for any transaction from which the director
derived an improper personal benefit, or (v) for any act or omission occurring
prior to the effective date of this Article V. No amendment to or repeal of
this Article V shall apply to or have any effect on the liability or alleged
liability of any director of the corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
ARTICLE VI
The business and affairs of the corporation shall be managed by or under the
director of a Board of Directors consisting of not less than five nor more than
twenty-one persons,
10
<PAGE>
who need not be shareholders. The number of directors may be increased by the
shareholders or Board of Directors or decreased by the shareholders from the
number of directors on the Board of Directors immediately prior to the effective
date of this Article VI; provided, however, that any change in the number of
directors on the Board of Directors (including, without limitation, changes at
annual meetings of shareholders) shall be approved by the affirmative vote of
not less than seventy-five percent (75%) of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock (as defined in Article
IV), voting together as a single class, unless such change shall have been
approved by a majority of the entire Board of Directors. If such change shall
not have been so approved, the number of directors shall remain the same. The
directors shall be divided into three classes, designated Class I, Class II and
Class III. Each class shall consist, as nearly as may be possible, of one-third
of the total number of directors constituting the entire Board of Directors.
At the 1988 annual meeting of shareholders, Class I directors shall be elected
for a one-year term, Class II directors for a two-year term and Class III
directors for a three-year term. At each succeeding annual meeting of
shareholders beginning in 1989, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class. In no case will
a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which the director's term expires and until a successor shall be elected and
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Removal of a director from office
(including a director named by the Board of Directors to fill a vacancy or newly
created directorship), with or without cause, shall require the affirmative vote
of not less than seventy-five percent (75%) of the votes entitled to be cast by
the holders of all then outstanding shares of Voting Stock, voting together as a
single class. Any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the Board of
Directors then in office, and any other vacancy occurring in the Board of
Directors may be filled by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. Any director elected to
fill a vacancy not resulting from an increase in the number of directors shall
have the same remaining term as that of such director's predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more classes
of preferred or preference stock issued by the corporation shall have the right,
voting separately by class or series, to elect directors at an annual or special
meeting of shareholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by or pursuant to the
applicable terms of these Articles of Incorporation, and such directors so
elected shall not be divided into classes pursuant to this Article VI unless
expressly provided by such terms.
11
<PAGE>
No person (other than a person nominated by or on behalf of the Board of
Directors) shall be eligible for election as a director at any annual or special
meeting of shareholders unless a written request that his or her name be placed
in nomination is received from a shareholder of record by the Secretary of the
corporation not less than 60 days prior to the date fixed for the meeting,
together with the written consent of such person to serve as a director.
Notwithstanding any other provisions of these Articles of Incorporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law or these Articles of Incorporation), the affirmative vote of
the holders of not less than seventy-five percent (75%) of the votes entitled to
be cast by the holders of all then outstanding shares of Voting Stock, voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, this Article VI.
12
<PAGE>
EXHIBIT (11)
DAYTON HUDSON CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF PER SHARE EARNINGS
(In Millions, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
AUGUST 3, 1996 July 29, 1995
----------------- -----------------
EARNINGS SHARES Earnings Shares
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Primary Computations
- --------------------
Net earnings ........................................................ $ 101 $ 28
Less: Dividend requirements on ESOP preferred shares, net of tax
benefit on unallocated shares ..................................... (5) (5)
----- -----
Adjusted net earnings ............................................... $ 96 $ 23
===== =====
Average common shares outstanding 216.6 215.4
Average number of common share equivalents:
Stock options ................................................... 1.2 0.5
Performance shares .............................................. 0.9 1.0
----- -----
Adjusted common equivalent shares outstanding-primary ............... 218.7 216.9
===== =====
PRIMARY EARNINGS PER SHARE $0.44 $0.11
===== =====
Fully Diluted Computations
- --------------------------
Net earnings ........................................................ $ 101 $ 28
Less: Dividend requirements on ESOP preferred shares, net of tax
benefit on unallocated shares ..................................... - (5)a/
Less: Earnings impact of assumed ESOP preferred share conversion,
net of tax benefit on unallocated shares .......................... (4) -
----- -----
Adjusted net earnings ............................................... $ 97 $ 23
===== =====
Average common and common equivalent shares-primary ................. 218.7 216.9
Additional common share equivalents attributable to
applications of the treasury stock method ......................... - 0.2
Assumed conversion of ESOP preferred shares ......................... 11.8 - a/
----- -----
Adjusted common equivalent shares outstanding-fully diluted ......... 230.5 217.1
===== =====
FULLY DILUTED EARNINGS PER SHARE $0.42 $0.11
===== =====
AVERAGE ALLOCATED ESOP PREFERRED SHARES OUTSTANDING (IN MILLIONS) ... 3.0 2.5
===== =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------------
AUGUST 3, 1996 July 29, 1995
----------------- -----------------
EARNINGS SHARES Earnings Shares
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Primary Computations
- --------------------
Net earnings ........................................................ $ 142 $ 39
Less: Dividend requirements on ESOP preferred shares, net of tax
benefit on unallocated shares ..................................... (10) (9)
----- -----
Adjusted net earnings ............................................... $ 132 $ 30
===== =====
Average common shares outstanding 216.3 215.3
Average number of common share equivalents:
Stock options ................................................... 1.0 0.4
Performance shares .............................................. 0.9 0.9
----- -----
Adjusted common equivalent shares outstanding-primary ............... 218.2 216.6
===== =====
PRIMARY EARNINGS PER SHARE $0.60 $0.14
===== =====
Fully Diluted Computations
- --------------------------
Net earnings ........................................................ $ 142 $ 39
Less: Dividend requirements on ESOP preferred shares, net of tax
benefit on unallocated shares ..................................... - (10)a/
Less: Earnings impact of assumed ESOP preferred share conversion,
net of tax benefit on unallocated shares .......................... (7) -
----- -----
Adjusted net earnings ............................................... $ 135 $ 29
===== =====
Average common and common equivalent shares-primary ................. 218.2 216.6
Additional common share equivalents attributable to
applications of the treasury stock method ......................... 0.3 0.2
Assumed conversion of ESOP preferred shares ......................... 11.9 - a/
----- -----
Adjusted common equivalent shares outstanding-fully diluted ......... 230.4 216.8
===== =====
FULLY DILUTED EARNINGS PER SHARE $0.59 $0.14
===== =====
AVERAGE ALLOCATED ESOP PREFERRED SHARES OUTSTANDING (IN MILLIONS) ... 2.9 2.4
===== =====
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
-------------------------------------
AUGUST 3, 1996 July 29, 1995
----------------- -----------------
EARNINGS SHARES Earnings Shares
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Primary Computations
- --------------------
Net earnings ........................................................ $ 413 $ 385
Less: Dividend requirements on ESOP preferred shares, net of tax
benefit on unallocated shares ..................................... (20) (19)
----- -----
Adjusted net earnings ............................................... $ 393 $ 366
===== =====
Average common shares outstanding 216.0 215.0
Average number of common share equivalents:
Stock options ................................................... 0.7 0.4
Performance shares .............................................. 0.9 0.8
----- -----
Adjusted common equivalent shares outstanding-primary ............... 217.6 216.2
===== =====
PRIMARY EARNINGS PER SHARE $1.81 $1.69
===== =====
Fully Diluted Computations
- --------------------------
Net earnings ........................................................ $ 413 $ 385
Less: Dividend requirements on ESOP preferred shares, net of tax
benefit on unallocated shares ..................................... - -
Less: Earnings impact of assumed ESOP preferred share conversion,
net of tax benefit on unallocated shares .......................... (14) (13)
----- -----
Adjusted net earnings ............................................... $ 399 $ 372
===== =====
Average common and common equivalent shares-primary ................. 217.6 216.2
Additional common share equivalents attributable to
applications of the treasury stock method ......................... - 0.1
Assumed conversion of ESOP preferred shares ......................... 12.1 12.6
----- -----
Adjusted common equivalent shares outstanding-fully diluted ......... 229.7 228.9
===== =====
FULLY DILUTED EARNINGS PER SHARE $1.74 $1.62
===== =====
AVERAGE ALLOCATED ESOP PREFERRED SHARES OUTSTANDING (IN MILLIONS) ... 2.8 2.1
===== =====
</TABLE>
a/ ESOP preferred shares were anti-dilutive.
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT (12)
DAYTON HUDSON CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES AND
RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS FOR THE
SIX MONTHS ENDED AUGUST 3, 1996 AND JULY 29, 1995
AND FOR THE FIVE YEARS ENDED FEBRUARY 3, 1996
(MILLIONS OF DOLLARS)
Six Months Ended Fiscal Year Ended
-------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aug. 3, Jul. 29, Feb. 3, Jan. 28, Jan. 29, Jan. 30, Feb. 1,
1996 1995 1996 1995 1994 1993 1992
-------- --------- -------- -------- -------- --------- --------
RATIO OF EARNINGS TO FIXED CHARGES:
Earnings:
Consolidated net earnings.............. $ 142 $ 39 $ 311 $ 434 $ 375 $ 383 $ 301
Income taxes.......................... 93 26 190 280 232 228 171
------ ----- ------ ------ ------ ------ -----
Total earnings........................ 235 65 501 714 607 611 472
------ ----- ------ ------ ------ ------ -----
Fixed charges:
Interest expense...................... 232 226 461 439 459 454 421
Interest portion of rental expense.... 29 32 59 56 45 43 39
------ ----- ------ ------ ------ ------ -----
Total fixed charges................. 261 258 520 495 504 497 460
------ ----- ------ ------ ------ ------ -----
Less:
Capitalized interest.................. (11) (8) (14) (7) (5) (6) (11)
------ ----- ------ ------ ------ ------ -----
Fixed charges in earnings........... 250 250 506 488 499 491 449
------ ----- ------ ------ ------ ------ -----
Earnings available for fixed charges.... $ 485 $ 315 $1,007 $1,202 $1,106 $1,102 $ 921
====== ===== ====== ====== ====== ====== =====
Ratio of earnings to fixed charges...... 1.86 1.22 1.94 2.43 2.19 2.22 2.00
====== ===== ====== ====== ====== ====== =====
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS:
Total fixed charges, as above........... $ 261 $ 258 $ 520 $ 495 $ 504 $ 497 $ 460
Dividends on preferred stock
(pre-tax basis)....................... 18 19 37 39 39 39 39
------ ----- ------ ------ ------ ------ -----
Total fixed charges and preferred
stock dividends................... 279 277 557 534 543 536 499
------ ----- ------ ------ ------ ------ -----
Earnings available for fixed charges
and preferred stock dividends...... $ 485 $ 315 $1,007 $1,202 $1,106 $1,102 $ 921
====== ===== ====== ====== ====== ====== =====
Ratio of earnings to fixed charges
and preferred stock dividends......... 1.73 1.14 1.81 2.25 2.04 2.06 1.85
====== ====== ====== ====== ====== ====== =====
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Dayton Hudson Corporation's Form 10Q for the second quarter ended August 3, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> AUG-03-1996
<CASH> 221
<SECURITIES> 0
<RECEIVABLES> 1474
<ALLOWANCES> 62
<INVENTORY> 3228
<CURRENT-ASSETS> 5052
<PP&E> 10401
<DEPRECIATION> 2944
<TOTAL-ASSETS> 13012
<CURRENT-LIABILITIES> 3520
<BONDS> 5297
<COMMON> 72
54
0
<OTHER-SE> 3441
<TOTAL-LIABILITY-AND-EQUITY> 13012
<SALES> 11131
<TOTAL-REVENUES> 11131
<CGS> 8146
<TOTAL-COSTS> 8146
<OTHER-EXPENSES> 2502
<LOSS-PROVISION> 28
<INTEREST-EXPENSE> 220
<INCOME-PRETAX> 235
<INCOME-TAX> 93
<INCOME-CONTINUING> 142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.59
</TABLE>
