Canada Exit

Background

On January 15, 2015, Target Canada Co. and certain other wholly owned subsidiaries of Target (collectively Canada Subsidiaries), comprising substantially all of our Canadian operations and our historical Canadian Segment, filed for protection (the Filing) under the Companies' Creditors Arrangement Act (CCAA) with the Ontario Superior Court of Justice in Toronto (the Court) and were deconsolidated. The Canada Subsidiaries are executing a liquidation process. As of May 2, 2015, all stores have been closed.



Loss on Discontinued Operations (millions)	Three Months Ended
	May 2, 2015			May 3, 2014
Sales	$	—		$	393
Cost of sales	—			319
SG&A expenses	—			218
Depreciation and amortization	—			67
Interest expense	—			19
Pretax loss from operations	—			(230		)
Pretax exit costs ^(a)	(34		)	—
Income taxes	18			77
Loss on discontinued operations	$	(16	)	$	(153	)

^(a) The pretax exit costs primarily related to our ongoing support of the liquidation process, other professional fees, and a $4 million payment to the Canadian employee trust.

Recorded Assets and Liabilities



Assets and Liabilities of Discontinued Operations (millions)
	May 2, 2015		January 31, 2015			May 3, 2014
Income tax benefit	$	264	$	1,430	Inventory	$	544
Receivables from Canada Subsidiaries	342		326		Property and equipment, net	5,025
Receivables under the debtor-in-possession credit facility	—		19		Other	754
Total assets	$	606	$	1,775	Total assets	$	6,323
					Capital lease obligations	$	1,233
Accrued liabilities	$	271	$	296	Accounts payable and other liabilities	517
Total liabilities	$	271	$	296	Total liabilities	$	1,750

Accrued liabilities include estimated probable losses related to claims that may be asserted against us, primarily under guarantees of certain leases. The beneficiaries of those guarantees may seek damages or other related relief as a result of our exit from Canada. Our probable loss estimate is based on the expectation that claims will be asserted against us and negotiated settlements will be reached, and not on any determination that it is probable we would be found liable were these claims to be litigated. Our estimates involve significant judgment and are based on currently available information, an assessment of the validity of certain claims and estimated payments by the Canada Subsidiaries. We are not able to reasonably estimate a range of possible losses in excess of the year-end accrual because there are significant factual and legal issues to be resolved. We believe that it is reasonably possible that future changes to our estimates of loss and the ultimate amount paid on these claims could be material to our results of operations in future periods. Any such losses would be reported in discontinued operations.

DIP Financing

In conjunction with the Filing, the Court approved Target's agreement to provide a debtor-in-possession credit facility (the DIP facility) to the Canada Subsidiaries, which provides for borrowings under the facility up to $175 million. As of January 31, 2015, there was $19 million drawn and outstanding under the DIP facility, which was fully repaid in the first quarter of 2015. No amounts were drawn on the facility during the first quarter of 2015, and we do not expect any additional amounts to be drawn under the facility before it expires.

Income Taxes

During the fourth quarter of 2014, we recognized a tax benefit of $1,627 million in discontinued operations. The majority of this tax benefit has been received in the first quarter of 2015, and we expect to use substantially all of the remainder to reduce our 2015 estimated tax payments.