Target 2015 Annual Report Download - page 47

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.
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