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Target provides clarity on expected Q2 results in light of December data breach

BY Antoinette Alexander

MINNEAPOLIS — Target announced on Tuesday that its second-quarter financial results are expected to include gross expenses of $148 million, partially offset by a $38 million insurance receivable, related to the December 2013 data breach.

These expenses include an increase to the accrual for estimated probable losses for what the company believes to be the vast majority of actual and potential breach-related claims, including claims by payment card networks.

In addition, the company provided an estimate of costs related to its recently completed early debt retirement and updated expectations for second-quarter adjusted and GAAP earnings per share. All earnings per share figures refer to diluted earnings per share.

“Since the data breach last December, we have been focused on providing clarity on the company’s estimated financial exposure to breach-related claims,” said John Mulligan, interim president, CEO and CFO of Target. “With the benefit of additional information, we believe that today is an appropriate time to provide greater clarity on this topic.”

Given the varying stages of claims and related proceedings, and the inherent uncertainty surrounding them, the company’s estimates involve significant judgment and are based on currently available information, historical precedents and an assessment of the validity of certain claims, Target said. The company said that these estimates may change as new information becomes available and, although the company does not believe it is probable, it is reasonably possible that the company may incur a material loss in excess of the amount accrued. According to Target, it is unable to estimate the amount of such reasonably possible excess loss exposure at this time. The accrual does not reflect future breach-related legal, consulting or administrative fees, which are expensed as incurred and not expected to be material in any individual period.

Update on Second-Quarter Debt Retirement Costs

In second-quarter 2014, Target completed tender offers in which the company paid $1 billion to retire, at market value, $725 million of its long-term debt. As a result, Target incurred a pre-tax loss of $285 million.

The company now expects its second-quarter 2014 adjusted EPS will be within a range around 78 cents, compared with prior guidance of 85 cents to $1 per share.

“While the environment in both the United States and Canada continues to be challenging, and results aren’t yet where they need to be, we are making progress in our efforts to drive U.S. traffic and sales, improve our Canadian operations and advance Target’s digital transformation,” Mulligan siad. “With last week’s announcement that the board has chosen Brian Cornell as Target’s next chairman and CEO, we are excited to welcome Brian to the team and committed to working together to accelerate Target’s transformation and become a leading omnichannel retailer.”

Target will provide additional detail on its second-quarter financial performance and expectations for the remainder of fiscal 2014 in its earnings release and conference call scheduled for Aug. 20.

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MinuteClinic sees 24% revenue increase in Q2

BY Antoinette Alexander

WOONSOCKET, R.I. — CVS Caremark’s MinuteClinic business enjoyed double-digit revenue gains during the second quarter as it remains on track to open at least 150 new clinics in 2014.

Revenues during the quarter ended June 30 increased 24% compared with the year-ago period, CVS Caremark president and CEO Larry Merlo told analysts during the company’s second-quarter conference call Tuesday morning.

It currently operates 860 clinics in 28 states and Washington, D.C.

Merlo also highlighted its recently announced partnership with USA Football, which makes MinuteClinic its official retail medical clinic and sports physical provider.

“We will offer a special discount for sports physicals to more than one million young athletes and their coaches,” Merlo told analysts.

He also noted the recent addition of four U.S. health system alliances during the quarter, as well as another four alliances in July. This brings to 40 the total number of affiliations with major U.S. health systems.
 

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One-in-four Americans purposefully misuse prescription drugs

BY Michael Johnsen

EAGAN, Minn. — One-in-four Americans admits that they have misused prescription drugs, according to a new national survey by FindLaw.com.
 
According to the survey, the most common form of misuse admitted by survey respondents involved use of a drug by someone other than the person listed on the prescription: as many as 24% of people say they have either taken a medicine that was prescribed to someone else or have given their own prescription medicines to someone else.
 
"Controlling prescription drug abuse is now part of the National Drug Control Strategy by the federal government," stated Stephanie Rahlfs, an attorney-editor at FindLaw.com. "Prescription drug laws are intended to limit access and distribution of those drugs to persons with documented medical needs under strictly controlled conditions. Use of prescription drugs by persons other than the person named on the prescription or for uses other than intended is both illegal and dangerous."
 
Much of the self-admitted drug abuse appears to be attempts to self-medicate a medical condition. Only 5% say they have taken a prescription medicine, ­ whether their own or someone else's, ­ for the purpose of getting of high. 
 
Approximately 3% of people say that have paid someone to obtain a prescription medicine and 1% of people say that they have stolen a medicine that was prescribed for someone else. 
 
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