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Pharmacies and Clinics Transactions (Notes) | 12 Months Ended
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Jan. 30, 2016
Discontinued Operations and Disposal Groups [Abstract] |
Pharmacies and Clinics Transaction | Pharmacies and Clinics Transaction In December 2015, we closed the previously announced sale of our pharmacy and clinic businesses to CVS for cash consideration of $1.9 billion, recognizing a gain of $620 million, and deferred income of $694 million. This transaction was accounted for as a sale, and following the transaction, the inventory and other assets sold are no longer reported in our Consolidated Statement of Financial Position. CVS now operates the pharmacy and clinic businesses in our stores under a perpetual operating agreement. No profit sharing arrangement exists, but CVS will make an ongoing annual, inflation-adjusted occupancy-related payment to us, starting at $20 million to $25 million in the first year of the agreement that will be recorded as a reduction to SG&A expense. The operating agreement may only be terminated by mutual consent of both parties, or by either party if (i) the other party suffers an adverse event that materially and adversely harms such other party’s goodwill or reputation that could reasonably be expected to have a material adverse effect on the reputation or goodwill of the terminating party if it continued its association with the nonterminating party, (ii) the other party breaches its obligations, which breach remains uncured and results in a material adverse effect on the business or operations of the nonterminating party in Target stores, (iii) the other party files for bankruptcy protection, or (iv) the other party is acquired by or consolidated with certain identified competitors of the terminating party. We also entered a development agreement with CVS through which we may jointly develop small-format stores.
Gain on Pharmacies and Clinics Transaction (millions) | 2015 |
Cash consideration | $ | 1,868 |
Less: |
Deferred income (a) | 694 |
Inventory | 447 |
Other assets | 13 |
Pretax transaction costs and contingent liabilities (b) | 94 |
Pretax gain on pharmacies and clinics transaction (c) | $ | 620 |
(a) | Represents deferred income that will be recorded as a reduction to SG&A expense evenly over the 23-year weighted average remaining accounting useful life of our stores. As of January 30, 2016, $690 million remains in other current and other noncurrent liabilities.
(b) | Primarily relates to professional services, contract termination charges, severance, and impairment of certain assets not sold to CVS.
(c) | Recorded outside of segment results and excluded from Adjusted EPS.
Deferred income of $694 million represents the consideration received at the close of the sale related to CVS’s leasehold interest in the related space within our stores. We estimated the fair value of this leasehold interest using a discounted cash flow analysis. The pharmacy and clinic inventory and other assets sold had the following balances as of January 31, 2015:
(millions) |  | January 31, 2015 |
Inventory included in other current assets |  | $ | 508 |
Other current assets |  | 2 |
Other noncurrent assets |  | 12 |
Total |  | $ | 522 |
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 former Canadian operations and our former Canadian Segment, filed for protection under the CCAA with the Court and were deconsolidated. As a result, we recorded a pretax impairment loss on deconsolidation and other related charges, collectively totaling $5.1 billion. The Canada Subsidiaries are in the process of liquidation. Subsequent to deconsolidation, we use the cost method to account for our equity investment in the Canada Subsidiaries, which has been reflected as zero in our Consolidated Statement of Financial Position at January 30, 2016 and January 31, 2015 based on the estimated fair value of the Canada Subsidiaries' net assets. Income / (Loss) on Discontinued Operations Our Canadian exit represented a strategic shift in our business. For this reason, our Canadian Segment results for all periods prior to deconsolidation and costs to exit are classified as discontinued operations.
Income / (Loss) on Discontinued Operations (millions) | 2015 |  | 2014 |  | 2013 |
Sales | $ | — |  | $ | 1,902 |  | $ | 1,317 |
Cost of sales | — |  | 1,541 |  | 1,121 |
SG&A expenses | — |  | 909 |  | 910 |
Depreciation and amortization | — |  | 248 |  | 227 |
Interest expense | — |  | 73 |  | 77 |
Pretax loss from operations | — |  | (869 | ) | (1,018 | )
Pretax exit costs | (129 | ) | (5,105 | ) | — |
Income taxes | 171 |  | 1,889 |  | 295 |
Income / (loss) from discontinued operations | $ | 42 |  | $ | (4,085 | ) | $ | (723 | )
The 2015 and 2014 Canadian pretax exit costs totaled $129 million and $5,105 million, respectively, and included the following:
Pretax Exit Costs (millions) | 2015 |  | 2014 |
Investment impairment | $ | 6 |  | $ | 4,766 |
Contingent liabilities | 62 |  | 240 |
Other exit costs | 61 |  | 99 |
Total | $ | 129 |  | $ | 5,105 |
Investments in Canada Subsidiaries Target continues to indirectly own 100% of the common stock of the Canada Subsidiaries, but has deconsolidated those entities because Target no longer has a controlling interest. At the date of deconsolidation, we adjusted our investment in the Canada Subsidiaries to fair value with a corresponding charge to income. Because the estimated amount of the Canada Subsidiaries' liabilities exceed the estimated fair value of the assets available for distribution to its creditors, the fair value of Target’s equity investment approximates zero. Target Corporation Amounts Receivable from Canada Subsidiaries Prior to deconsolidation, Target Corporation made loans to the Canada Subsidiaries for the purpose of funding its operations and had accounts receivable generated in the ordinary course of business. The loans, corresponding interest and the accounts receivable were considered intercompany transactions and eliminated in the consolidated Target Corporation financial statements. As of the deconsolidation date, the loans, associated interest, and accounts receivable are now considered related party transactions and have been recognized in Target Corporation's consolidated financial statements at $320 million and $326 million at January 30, 2016 and January 31, 2015, respectively. Recovery Estimates and Valuation Techniques We assessed the recoverability of amounts receivable from the Canada Subsidiaries by comparing the estimated 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 those claims. The net assets were valued based on the liquidation price received by the Canada Subsidiaries, less the operating costs incurred to execute the liquidation process. Estimated creditor claims were valued based on our estimate of probable loss related to claims submitted to the Canada Subsidiaries. Based on our estimates, creditor claims exceed net assets. 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. Further, the final liquidation value and ultimate recovery by the creditors of the Canada Subsidiaries, including Target Corporation, is likely to be impacted by the manner in which the Target Corporation guarantees described below are resolved. Target Corporation Contingencies The recorded expenses include an accrual for the estimated probable loss related to claims that may be asserted directly against us (rather than against the Canada Subsidiaries), primarily under our guarantees of certain leases of the Canada Subsidiaries. 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 in the liquidation process, including estimated payments to the beneficiaries of the guarantees. In the fourth quarter of 2015, we reached settlements with two entities that controlled guaranteed leases representing approximately 46 percent of the recorded accrual at that time. Under the settlement terms, these entities have subrogated to us their claims against the Canada Subsidiaries. The settlement amounts were materially consistent with our previously recorded accruals. As part of a March 2016 settlement between the Canada Subsidiaries and all of their former landlords, we have agreed to subordinate a portion of our intercompany claims and make certain cash contributions to the estate in exchange for a full release from obligations under guarantees of certain leases. This agreement remains subject to creditor and Court approval. The financial impact of this agreement is materially consistent with amounts recorded in our financial statements. If the agreement is not approved by the creditors and the Court, 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. We are not able to reasonably estimate a range of possible losses in excess of the year-end accrual because there would be significant factual and legal issues to be resolved if the agreement is not approved. Any such losses would be reported in discontinued operations. Recorded Assets and Liabilities
Assets and Liabilities of Discontinued Operations (millions) | January 30, 2016 |  |  | January 31, 2015 |
Income tax benefit | $ | 77 |  |  | $ | 1,430 |
Receivables from Canada Subsidiaries (a) | 320 |  |  | 326 |
Receivables under the debtor-in-possession credit facility | — |  |  | 19 |
Total assets | $ | 397 |  |  | $ | 1,775 |
Accrued liabilities | $ | 171 |  |  | 296 |
Total liabilities | $ | 171 |  |  | $ | 296 |
(a) | Represents loans and accounts receivable from Canada Subsidiaries.
Income Taxes During 2015, we recognized net tax benefits of $171 million in discontinued operations, which primarily related to our pretax exit costs and change in the estimated tax benefit from our investment losses in Canada. During 2014, we recognized a tax benefit of $1,627 million in discontinued operations, which primarily related to a loss on our investment in Canada and includes other tax benefits resulting from certain asset write-offs and liabilities paid or accrued to facilitate the liquidation. The majority of these tax benefits were received in the first quarter of 2015, and we used substantially all of the remainder in 2015 to reduce our estimated tax payments.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=51716988&loc=SL51721533-107759 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721665-107760 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5C -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721675-107760 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 3A -URI http://asc.fasb.org/extlink&oid=51719941&loc=SL51724579-110230 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721663-107760 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=51719941&loc=d3e2941-110230 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51717284&loc=d3e1361-107760 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5B -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721673-107760 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 3A -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721659-107760 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5A -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721671-107760 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5D -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721677-107760 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=51717284&loc=d3e1474-107760 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721683-107760 + Details
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