Target 2012 Annual Report Download - page 37

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service expenses. Additionally, we recorded $97 million and $48 million in depreciation for 2012 and 2011,
respectively.
Other Performance Factors
Net Interest Expense
Net interest expense was $762 million in 2012, including $78 million of interest on Canadian capitalized leases. This
decrease of 12.0 percent, or $104 million, from 2011 was primarily due to an $87 million loss on early retirement of
debt in 2011. As of March 20, 2013, we also have open tender offers to use up to an aggregate of $1.2 billion of cash
proceeds from the sale to repurchase outstanding debt, which will impact interest expense in 2013.
Net interest expense was $866 million for 2011, increasing 14.4 percent, or $109 million from 2010. This increase
was due to an $87 million loss on early retirement of debt, $44 million of interest on Canadian capitalized leases and
higher average debt balances, partially offset by a lower average portfolio interest rate.
Provision for Income Taxes
Our effective income tax rate increased to 34.9 percent in 2012, from 34.3 percent in 2011, primarily due to a
reduction in the favorable resolution of various income tax matters and the unfavorable impact of losses in Canada,
which are tax effected at a lower rate than U.S. earnings. Various income tax matters were resolved in 2012 and
2011 which reduced tax expense by $58 million and $85 million, respectively. A tax rate reconciliation is provided in
Note 23 to our Consolidated Financial Statements.
Our effective income tax rate decreased to 34.3 percent in 2011, from 35.1 percent in 2010, primarily due to a
reduction in the structural domestic effective tax rate. This reduction was slightly offset by a reduction in the
favorable resolution of various income tax matters and the unfavorable impact of losses in Canada, which are tax
effected at a lower rate than U.S. earnings. Various income tax matters were resolved in 2011 and 2010 which
reduced tax expense by $85 million and $102 million, respectively.
We expect a 2013 consolidated effective income tax rate of 35.7 percent to 36.7 percent, excluding the impact of
resolution of income tax matters.
21
PART II