-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M2106dSTztfCVcaaSqGkpLGxEpWItbpOZuwmCAE0ZgCzQQBHsQbKsVqZO/19U682 uCSl4GdQbeF64lorhR3EpA== 0000950131-97-003998.txt : 19970617 0000950131-97-003998.hdr.sgml : 19970617 ACCESSION NUMBER: 0000950131-97-003998 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970503 FILED AS OF DATE: 19970616 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOHLS CORPORATION CENTRAL INDEX KEY: 0000885639 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 391630919 STATE OF INCORPORATION: WI FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11084 FILM NUMBER: 97624663 BUSINESS ADDRESS: STREET 1: N54 W13600 WOODALE DR CITY: MENOMONEE FALLS STATE: WI ZIP: 53051 BUSINESS PHONE: 4147835800 MAIL ADDRESS: STREET 1: N54 W13600 WOODALE DR CITY: MENOMONEE FALLS STATE: WI ZIP: 53051 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 3, 1997 ------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to _____________________ Commission file number 1-11084 -------- KOHL'S CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) WISCONSIN 39-1630919 - ------------------------------- --------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin 53051 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (414) 703-7000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 Days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: June 10, 1997 Common Stock, Par Value $.01 per Share, 74,068,166 Shares Outstanding. KOHL'S CORPORATION INDEX PART I. FINANCIAL INFORMATION
Item 1 Financial Statements: Condensed Consolidated Balance Sheets at May 3, 1997, February 1, 1997 and May 4, 1996 3 Condensed Consolidated Statements of Income for the Three Months Ended May 3, 1997 and May 4, 1996 4 Consolidated Statement of Changes in Shareholders' Equity for the Three Months Ended May 3, 1997 5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended May 3, 1997 and May 4, 1996 6 Notes to Condensed Consolidated Financial Statements 7-8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 PART II. OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders 12 Item 6 Exhibits and Reports on Form 8-K 13 Signatures 14
-2- KOHL'S CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
May 3, February 1, May 4, 1997 1997 1996 ---------------------------------------- (Unaudited) (Audited) (Unaudited) Assets -------- Current assets: Cash and cash equivalents $2,191 $8,906 $1,832 Merchandise inventories 537,887 423,207 397,352 Other 19,611 33,045 11,650 ---------- ---------- -------- Total current assets 559,689 465,158 410,834 Property and equipment, at cost 787,858 725,082 542,846 Less accumulated depreciation 139,801 128,855 101,223 ---------- ---------- -------- 648,057 596,227 441,623 Other assets 7,919 7,615 5,488 Favorable lease rights 17,615 18,076 20,029 Goodwill 34,038 35,338 39,238 ---------- ---------- -------- Total assets $1,267,318 $1,122,414 $917,212 ========== ========== ======== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable $192,288 $126,548 $135,684 Accrued liabilities 78,824 79,594 58,820 Income taxes payable 6,824 25,470 9,955 Deferred income taxes 3,052 2,544 7,139 Current portion of long-term debt 1,663 1,663 1,425 ---------- ---------- -------- Total current liabilities 282,651 235,819 213,023 Long-term debt 390,173 312,031 225,369 Deferred income taxes 40,221 38,731 31,678 Other long-term liabilities 19,383 18,362 21,891 Shareholders' equity Common stock-$.01 par value, 400,000,000 shares authorized, 74,055,365, 73,920,277 and 73,789,772 issued at May 3, 1997, February 1, 1997 and May 4, 1996 respectively. 740 739 738 Paid-in capital 195,461 193,351 189,849 Retained earnings 338,689 323,381 234,664 ---------- ---------- -------- Total shareholders' equity 534,890 517,471 425,251 ---------- ---------- -------- Total liabilities and shareholders' equity $1,267,318 $1,122,414 $917,212 ========== ========== ========
See Accompanying Notes to Condensed Consolidated Financial Statements 3 KOHL'S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
3 Months 3 Months (13 Weeks) (13 Weeks) Ended Ended May 3, May 4, 1997 1996 ---------------------------------- (In thousands except per share data) Sales $600,547 $468,638 Cost of merchandise sold 397,377 311,836 --------- --------- Gross margin 203,170 156,802 Operating expenses: Selling, general, and administrative 146,751 115,890 Depreciation and amortization 11,700 8,665 Goodwill amortization 1,300 1,300 Preopening expenses 12,112 3,639 --------- --------- Operating income 31,307 27,308 Interest expense, net 5,836 4,102 --------- --------- Income before income taxes 25,471 23,206 Provision for income taxes 10,163 9,445 --------- --------- Net income $15,308 $13,761 ========= ========= Earnings per share: Net income $0.21 $0.19 ========= ========= Weighted average number of common shares 73,992 73,771 ========= =========
See Accompanying Notes to Condensed Consolidated Financial Statements 4 KOHL'S CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Common Stock ---------------------------- Paid-In Retained Shares Amount Capital Earnings Total ----------------------------------------------------------- (In thousands, except share data) Balance at February 1, 1997 73,920,277 $739 $193,351 $323,381 $517,471 Net income - - - 15,308 15,308 Exercise of stock options 135,088 1 2,110 - 2,111 ----------------------------------------------------------- Balance at May 3, 1997 74,055,365 $740 $195,461 $338,689 $534,890 ===========================================================
See Accompanying Notes to Condensed Consolidated Financial Statements 5 KOHL'S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
3 Months 3 Months (13 Weeks) (13 Weeks) Ended Ended May 3, 1997 May 4, 1996 ------------------------- (In thousands) Operating activities Net income $15,308 $13,761 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization 13,063 10,010 Deferred income taxes 1,998 2,412 Other noncash charges 506 263 Changes in operating assets and liabilities (54,407) (24,328) --------- --------- Net cash provided by (used in) operating activities (23,532) 2,118 Investing activities Acquisition of property and equipment, net (63,071) (40,440) Other (359) (295) --------- --------- Net cash used in investing activities (63,430) (40,735) Financing activities Net borrowings under working capital loan 78,500 (62,000) Proceeds from public debt offering - 100,000 Repayments of long-term debt (358) (330) Payment of financing fees on debt (6) (892) Net proceeds from issuance of common shares (including stock options) 2,111 852 --------- --------- Net cash provided by financing activities 80,247 37,630 --------- --------- Net decrease in cash and cash equivalents (6,715) (987) Cash and cash equivalents at beginning of period 8,906 2,819 --------- --------- Cash and cash equivalents at end of period $2,191 $1,832 ========= =========
See Accompanying Notes to Condensed Consolidated Financial Statements 6 KOHL'S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for fiscal year end financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto included in the Company's Form 10-K (Commission File No. 1- 11084) filed with the Securities and Exchange Commission. 2. Inventories The Company uses the last-in, first out (LIFO) method of accounting for merchandise inventory because it results in a better matching of cost and revenues. The following information is provided to show the effects of the LIFO provision on the quarter, as well as to provide users with the information to compare to other companies not on LIFO.
LIFO Expense 3 Months Ended ------------ -------------- Quarter May 3, 1997 May 4, 1996 ------- ----------- ----------- Total Total ----- ----- (In Thousands) First $1,501 $1,171
Inventories would have been $6,377,000, $4,876,000 and $832,000 higher at May 3, 1997, February 1, 1997 and May 4, 1996, respectively, if they had been valued using the first-in, first-out (FIFO) method. 3. Contingencies The Company is involved in various legal matters arising in the normal course of business. In the opinion of management, the outcome of such proceedings and litigation will not have a material adverse impact on the Company's financial position or results of operations. The Internal Revenue Service (the "IRS") has audited the Company's federal income tax returns for fiscal years ended August -7- 1986, 1987 and 1988. In January 1994, the IRS proposed approximately $20 million of tax consisting primarily of an adjustment to the LIFO inventory method used by the Company. The impact of the proposed adjustments before interest had previously been reflected in the Company's deferred income tax accounts. The Company contested the proposed adjustments vigorously within the administrative appeals process of the IRS and has reached a tentative resolution of the matter which, if finalized, would not have a material adverse impact on the Company's results of operations or liquidity. 4. New Accounting Pronouncement In February 1997, the FASB issued Statement No. 128, Earnings Per Share, which specifies the computation, presentation and disclosure requirements for earnings per share (EPS) for entities with publicly held common stock or potential common stock. Statement 128 will require reporting of both basic and diluted EPS effective for annual and interim periods ending after December 15, 1997. If the Company were reporting pursuant to Statement 128, earnings per share would have been $0.20 and $0.18 for the periods ended May 3, 1997 and May 4, 1996, respectively. The dilutive effect is a result of unexercised stock options. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS ---------------------------------------------- THREE MONTHS ENDED May 3, 1997 ------------------------------ Results of Operations - --------------------- At May 3, 1997, the Company operated 170 stores compared with 136 stores at the same time last year. During the quarter, the Company successfully opened twenty new stores including eight new stores in the Washington, D.C./Baltimore markets; seven in the Philadelphia market; two in Wilmington, DE; one in Evansville, IN; one in Allentown, PA and one in Winchester, VA. In addition, the Company relocated one of its Indianapolis stores to a larger location. In August, Kohl's will open an additional store in the Philadelphia market and its second store in Louisville, Kentucky. In October, Kohl's will open four additional stores in the Philadelphia trade area (three in New Jersey and one in Pennsylvania), an additional store in the Washington, D.C. market, its second store in Omaha, Nebraska, and enter the Pittsburgh market with three stores. To support the expansion in the Mid-Atlantic, the Company will open a distribution center in Winchester, VA this summer. Net sales increased $131.9 million or 28.1% to $600.5 million for the three months ended May 3, 1997 from $468.6 million for the three months ended May 4, 1996. Of the increase, $92.2 million is attributable to the inclusion of 22 new stores opened in 1996 and twenty new stores opened in 1997. The remaining $39.7 million is attributable to comparable store sales growth of 9.3% (excluding the discontinued electronics business). Gross margin for the three months ended May 3, 1997 was 33.8% compared to 33.5% in the three months ended May 4, 1996. This increase is primarily attributable to the elimination of the Company's electronics business in 1996. The Company incurred $12.1 million of preopening expenses associated with the opening of twenty stores and the relocation of one store in the three months ended May 3, 1997 compared to $3.6 million for eight stores opened in the three months ended May 4, 1996. These expenses include hiring and training costs for new employees, Kohl's charge account solicitation and processing and transporting initial merchandise. Operating income for the three months ended May 3, 1997 increased $4.0 million or 14.6% over the three months ended May 4, 1996. Excluding pre-opening expenses, operating income increased 40.3%. This increase resulted primarily from the increased sales and the Company's ability to leverage its selling, general and administrative expenses as net sales increased. Selling, general and administrative expenses declined to 24.4% of net sales for the three months ended May 3, 1997 from 24.7% of net sales for the three months ended May 4, 1996. -9- Net interest expense for the three months ended May 3, 1997 increased $1.7 million from the three months ended May 4, 1996. This increase was due to higher interest rates associated with the $100 million non-callable 7.375% unsecured senior notes issued in October 1996 and increased spending on capital and working capital requirements of new stores. The Company expects interest expense to increase for fiscal 1997 over fiscal 1996. Interest expense is fixed on $60 million of senior notes issued in 1994, $200 million of non-callable senior notes issued in 1996 and $52.3 million of capital lease debt. In addition, the Company will borrow under its revolving credit facility for seasonal working capital needs. For the three months ended May 3, 1997, net income increased 11.2% to $15.3 million from $13.8 million in the three months ended May 4, 1996. Earnings were $.21 per share for the three months ended May 3, 1997 compared to $.19 per share for the three months ended May 4, 1996. Seasonality & Inflation - ----------------------- The Company's business is seasonal, reflecting increased consumer buying in the "back-to-school" and Christmas seasons. The Company's financial position and operations are also affected by the timing of new store openings. Inflation did not materially affect the Company's net income during the periods presented. Financial Condition and Liquidity - --------------------------------- The Company's primary ongoing cash requirements are for inventory purchases, capital expenditures in connection with the Company's expansion and remodeling programs and preopening expenses. The Company's primary sources of funds for its business activities are cash flow from operations, borrowings under its revolving credit facility, and short-term trade credit. Short-term trade credit, in the form of extended payment terms for inventory purchases or third party factor financing, represents a significant source of financing for merchandise inventories. The Company's working capital and inventory levels typically build throughout the Fall, peaking during the Christmas selling season. At May 3, 1997, the Company's merchandise inventories had increased $114.7 million over the February 1, 1997 balance and $140.5 million over the May 4, 1996 balance. These increases reflect the purchase of summer inventory as well as inventory for new stores. The Company's working capital increased to $277.0 million at May 3, 1997 from $229.3 million at February 1, 1997 and $197.8 million at May 4, 1996. The increase is due primarily to higher inventory levels offset in part by increased accounts payable. The Company expects working capital levels to continue to grow as new stores are opened. -10- Cash used in operating activities was $23.5 million for the three months ended May 3, 1997 compared to cash provided of $2.1 million for the three months ended May 4, 1996. Excluding changes in operating assets and liabilities, cash provided by operating activities was $30.9 million for the three months ended May 3, 1997 compared to $26.5 million for the three months ended May 4, 1996. Capital expenditures for the three months ended May 3, 1997 were $63.1 million compared to $40.4 million for the same period a year ago. The increase in expenditures in 1997 is primarily attributable to the opening of twenty new stores and the construction of a third distribution center for the three months ended May 3, 1997 compared to eight new stores for the three months ended May 4, 1996. The Company's long-term debt increased from $312.0 million at February 1, 1997 to $390.2 million at May 3, 1997 primarily as a result of the Company's growth. Total capital expenditures for fiscal 1997 are currently expected to be approximately $200.0 million (excluding assets under capital leases). The actual amount of the Company's future annual capital expenditures will depend primarily on the number of new stores opened, whether such stores are owned or leased by the Company and the number of existing stores remodeled or refurbished. The Company anticipates that it will be able to satisfy its current operating needs, planned capital expenditures and debt service requirements with current working capital, cash flows from operations, seasonal borrowings under its revolving credit facility, short-term trade credit and other lending facilities. Information in this document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to debt service requirements and planned capital expenditures. Forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "should" or "anticipates" or the negative thereof or other variations thereon. No assurance can be given that the future results covered by the forward-looking statements will be achieved. -11- PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders of Kohl's Corporation was held on May 28, 1997: 1. To elect three directors to serve for a three-year term. 2. To ratify the appointment of Ernst & Young LLP as independent auditors. 3. To consider and act upon a proposal to adopt the Company's 1997 Stock Option Plan for Outside Directors. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitations. All of management's nominees for directors as listed in the proxy statement were elected. The results of the voting were as follows: 1. Election of directors Jay H. Baker For - 65,319,233 shares Withheld - 2,186,464 shares Herbert Simon For - 57,096,976 shares Withheld - 10,408,721 shares Peter Sommerhauser For - 65,313,007 shares Withheld - 2,192,690 shares 2. Ratification of Ernst & Young LLP as independent auditors For - 67,432,928 shares Against - 54,594 shares Abstain - 18,175 shares 3. To consider and act upon a proposal to adopt the Company's 1997 Stock Option Plan for Outside Directors. For - 48,188,147 shares Against - 19,199,336 shares Abstain - 118,214 shares -12- Item 6. Exhibits and Reports on Form 8-K a) Exhibits 12.1 Statement regarding calculation of ratio of earnings to fixed charges. 27 Financial Data Schedule - Article 5 of Regulation S-X b) Reports on Form 8-K There were no reports on Form 8-K filed for three months ended May 3, 1997 -13- SIGNATURES ---------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Kohl's Corporation (Registrant) Date: June 13, 1997 /s/William Kellogg --------------------------------- William Kellogg Chairman, Chief Executive Officer Date: June 13, 1997 /s/Arlene Meier ------------------------------------ Arlene Meier Executive Vice President - Finance Chief Financial Officer -14- EX-12.1 2 STATEMENT RE: RATIO OF EARNINGS/FIXED CHARGES Exhibit 12.1 Kohl's Corporation Ratio of Earnings to Fixed Charges ($000s)
Fiscal Quarter Ended -------------------- Fiscal Year (1) May 3, May 4, -------------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- Earnings Income before income taxes and extraordinary items $25,471 $23,206 $171,368 $122,729 $117,451 $96,691 $50,134 Fixed charges 13,439 9,377 44,054 30,770 19,758 16,144 21,503 Less interest capitalized during period (643) (176) (2,829) (1,287) (603) (376) 0 ------- ------- -------- -------- -------- -------- ------- $38,267 $32,407 $212,593 $152,212 $136,606 $112,459 $71,637 ======= ======= ======== ======== ======== ======== ======= Fixed Charges Interest (expensed or capitalized) $6,647 $4,443 $21,822 $14,895 $7,911 $6,253 $13,648 Portion of rent expense representative of interest 6,729 4,889 22,031 15,798 11,777 9,113 6,794 Amortization of deferred financing fees 63 45 201 77 70 778 1,061 ------- ------- -------- -------- -------- -------- ------- $13,439 $9,377 $44,054 $30,770 $19,758 $16,144 $21,503 ======= ======= ======== ======== ======== ======== ======= Ratio of earnings to fixed charges 2.85 3.46 4.83 4.95 (2) 6.91 6.97 3.33 ======= ======= ======== ======== ======== ======== =======
(1) Fiscal 1996,1994, 1993 and 1992 are 52 week years and fiscal 1995 is a 53 week year. (2) Excluding the credit operations non-recurring expense of $14,052, the ratio of earnings to fixed charges would be 5.40. EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-31-1998 FEB-02-1997 MAY-03-1997 2,191 0 0 0 537,887 559,689 787,858 139,801 1,267,318 282,651 390,173 0 0 740 534,150 1,267,318 600,547 600,547 397,377 569,240 0 0 5,836 25,471 10,163 15,308 0 0 0 15,308 0.21 0.20
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