Target 2012 Annual Report Download - page 56

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5. Advertising Costs
Advertising costs, which primarily consist of newspaper circulars, internet advertisements and media broadcast,
are expensed at first showing or distribution of the advertisement, and are recorded net of related vendor income.
Advertising Costs
(millions) 2012 2011 2010
Gross advertising costs $1,653 $1,589 $1,490
Vendor income 231 229 198
Net advertising costs $1,422 $1,360 $1,292
6. Earnings per Share
Basic earnings per share (EPS) is calculated as net earnings divided by the weighted average number of common
shares outstanding during the period. Diluted EPS includes the potentially dilutive impact of share-based awards
outstanding at period end, consisting of the incremental shares assumed to be issued upon the exercise of stock
options and the incremental shares assumed to be issued under performance share and restricted stock unit
arrangements.
Earnings Per Share
(millions, except per share data) 2012 2011 2010
Net earnings $2,999 $2,929 $2,920
Basic weighted average common shares outstanding 656.7 679.1 723.6
Dilutive impact of share-based awards (a) 6.6 4.8 5.8
Dilutive weighted average common shares outstanding 663.3 683.9 729.4
Basic earnings per share $ 4.57 $ 4.31 $ 4.03
Dilutive earnings per share $ 4.52 $ 4.28 $ 4.00
(a) Excludes 5.0 million, 15.5 million and 10.9 million share-based awards for 2012, 2011 and 2010, respectively, because their effects were
antidilutive.
7. Credit Card Receivables Transaction
On October 22, 2012, we reached an agreement to sell our entire consumer credit card portfolio to TD Bank Group
(TD) for cash consideration equal to the gross (par) value of the outstanding receivables at the time of closing.
Historically, our credit card receivables were recorded at par value less an allowance for doubtful accounts. With
this agreement, our receivables are classified as held for sale at February 2, 2013, and are recorded at the lower of
cost (par) or fair value. We recorded a gain of $161 million outside of our segments in 2012, representing the net
adjustment to eliminate our allowance for doubtful accounts and record our receivables at lower of cost (par) or fair
value.
On March 13, 2013, we completed the sale to TD for cash consideration of $5.7 billion, equal to the gross (par) value
of the outstanding receivables at the time of closing. Subsequent to year-end, and concurrent with the sale of the
portfolio, we repaid the nonrecourse debt collateralized by credit card receivables (2006/2007 Series Variable
Funding Certificate) at par of $1.5 billion, resulting in net cash proceeds of $4.2 billion. 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.
Following this sale, TD will underwrite, fund and own Target Credit Card and Target Visa receivables in the U.S. TD
will control risk management policies and oversee regulatory compliance, and we will perform account servicing
and primary marketing functions. We will earn a substantial portion of the profits generated by the Target Credit
Card and Target Visa portfolios. This transaction will be accounted for as a sale, and the receivables will no longer
be reported on our Consolidated Statements of Financial Position.
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