Transaction Structure, Accounting and Earnings ImpactsTarget expects its third quarter 2012 GAAP earnings per share will reflect a pre-tax gain of approximately $150 million due to a change in the accounting treatment of its receivables from “held for investment” to “held for sale”. In addition, at closing Target expects to recognize an additional pre-tax gain of $350 to $450 million on the sale of its portfolio. Target has posted details on the accounting aspects of this transaction on its investor relations website: www.Target.com/investors. Target expects to deploy proceeds from the sale in a manner that will preserve its strong investment-grade credit ratings. Specifically, the company expects to apply approximately 90 percent of net transaction proceeds to reduce the company’s net debt position, with the remainder applied to share repurchase over time. Under the terms of the program agreement, Target will continue to earn a substantial portion of the profits generated by the Target Credit Card and Target Visa portfolios. Target’s income from the profit-sharing arrangement, net of account servicing expenses, will be recognized within SG&A expenses in its U.S. Retail Segment. Beginning with the fiscal quarter in which the transaction closes, Target will no longer report its U.S. Credit Card Segment. Target expects that net income from this profit-sharing arrangement, combined with the benefit of debt reduction and share repurchase resulting from deployment of proceeds from the sale, will result in mild dilution to Target’s adjusted earnings per share in the first 12 months following closing*. Specifically, Target expects that in the 12 months following closing its adjusted earnings per share will be approximately 10 cents lower compared with a scenario in which Target continued to fund its portfolio. Based on its forecast for income from profit sharing combined with the expected benefit from share repurchase and interest savings, Target expects that the adjusted EPS impact of this transaction will be neutral over time.
*Target calculates adjusted earnings per share to measure the results from operations in its U.S. businesses. Accordingly, adjusted earnings per share excludes the impact of Target’s Canadian Segment and other non-segment expenses related to its Canadian market entry.Miscellaneous Statements in this release related to the closing of the transaction and timing thereof, the deployment of proceeds and the transaction’s expected impact on earnings performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements speak only as of the date they are made and are subject to risks and uncertainties which could cause the company's actual results to differ materially. The most important risks and uncertainties include: (i) the risk that the transaction may not close or may not close on the expected timeline; (ii) the risk that cardholders will pay down their existing balances faster than anticipated; and (iii) the risks described in Item 1A of the company's Form 10-K for the fiscal year ended January 28, 2012 and Form 10-Q for the fiscal quarter ended July 28, 2012. About Target Minneapolis-based Target Corporation (NYSE:TGT) serves guests at 1,781 stores across the United States and at Target.com. The company plans to open its first stores in Canada in 2013. In addition, the company operates a credit card segment that offers branded proprietary credit card products. Since 1946, Target has given 5 percent of its profit through community grants and programs; today, that giving equals more than $4 million a week. For more information about Target’s commitment to corporate responsibility, visit Target.com/hereforgood. For more information, visit Target.com/Pressroom.