Pharmacies and Clinics Transactions

6 Months Ended

Aug. 01, 2015

Discontinued Operations and Disposal Groups [Abstract]

Pharmacies and Clinics Transaction

Pharmacies and Clinics Transaction

On June 12, 2015, we entered into an asset purchase agreement with CVS Pharmacy, Inc. (CVS) to sell our pharmacy and clinic businesses for cash consideration of approximately $1.9 billion. The closing of the transaction is subject to regulatory approval and other customary conditions. Either party will be permitted to terminate the agreement if the closing has not occurred on or before March 15, 2016 (or September 15, 2016 solely in the event that, as of March 15, 2016, all conditions other than regulatory approval have been satisfied or waived). Following the closing, CVS will operate the pharmacy and clinic businesses in our stores on a long term basis.

The agreement includes the sale of inventory and other assets. These currently held for sale assets have been classified as follows.

(millions)	August 1, 2015		January 31, 2015		August 2, 2014
Inventory included in other current assets	$	464	$	500	$	479
Other current assets	13		—		—
Other noncurrent assets	—		13		12
Total	$	477	$	513	$	491

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 were closed.

Loss on Discontinued Operations	Three Months Ended						Six Months Ended
(millions)	August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
Sales	$	—		$	449		$	—		$	842
Cost of sales	—			367			—			686
SG&A expenses	—			216			—			434
Depreciation and amortization	—			70			—			137
Interest expense	—			19			—			38
Pretax loss from operations	—			(223		)	—			(453		)
Pretax exit costs (a)	(80		)	—			(113		)	—
Income taxes	60			66			77			144
Loss on discontinued operations	$	(20	)	$	(157	)	$	(36	)	$	(309	)

^(a) For the three and six months ended August 1, 2015, the pretax exit costs related to our ongoing support of the liquidation process, other professional fees, and an increase to our accrual for the estimated probable losses related to claims that may be asserted against us, primarily under guarantees of certain leases.

Recorded Assets and Liabilities

Assets and Liabilities of Discontinued Operations
(millions)	August 1, 2015		January 31, 2015			August 2, 2014
Income tax benefit	$	234	$	1,430	Inventory	$	510
Receivables from Canada Subsidiaries	319		326		Property and equipment, net	5,056
Receivables under the debtor-in-possession credit facility	—		19		Other	832
Total assets	$	553	$	1,775	Total assets	$	6,398
					Capital lease obligations	$	1,240
Accrued liabilities	$	336	$	296	Accounts payable and other liabilities	505
Total liabilities	$	336	$	296	Total liabilities	$	1,745

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 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.

Receivables from the Canada Subsidiaries primarily relate to loans made to fund the operations of the Canada Subsidiaries and receivables generated in the ordinary course of business prior to deconsolidation. To assess recoverability, we estimated the fair value of the underlying net assets of the Canada Subsidiaries available for distribution to their creditors in relation to the estimated creditor claims and the priority of these claims. 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. Our ultimate recovery is subject to the final liquidation value of the Canada Subsidiaries.

Income Taxes

During the second quarter of 2015, we recognized a net tax benefit of $60 million in discontinued operations, which primarily relates to our second quarter pretax exit costs and adjustments to the tax benefit from our investment loss in Canada. During the fourth quarter of 2014, we recognized a tax benefit of $1,627 million in discontinued operations. The majority of the tax benefit was received in the first quarter of 2015, and we expect to use substantially all of the remainder to reduce our 2015 estimated tax payments.