<PAGE>
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 October 31, 1998
-----------------------------------
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: December 3, 1998 Common
-----------------------
Stock, Par Value $.01 per Share, 158,274,022 shares Outstanding.
- ----------------------------------------------------------------
<PAGE>
KOHL'S CORPORATION
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets at
October 31, 1998, January 31, 1998 and
November 1, 1997 3
Condensed Consolidated Statements of Income
for the Three Months and Nine Months Ended
October 31, 1998 and November 1, 1997 4
Consolidated Statement of Changes in
Shareholders' Equity for the Nine Months
Ended October 31, 1998 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
October 31, 1998 and November 1, 1997 6
Notes to Condensed Consolidated Financial
Statements 7-8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-15
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
<PAGE>
KOHL'S CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
October 31, January 31, November 1,
1998 1998 1997
--------------------------------------
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 17,757 $ 44,161 $ 8,366
Accounts receivable, trade 123,459 239,617 56,869
Merchandise inventories 832,338 515,790 752,665
Deferred income taxes 6,576 6,615 1,042
Other 5,180 5,259 6,296
---------- ---------- ----------
Total current assets 985,310 811,442 825,238
Property and equipment, at cost 1,075,652 926,534 887,769
Less accumulated depreciation 192,050 176,885 163,750
---------- ---------- ----------
883,602 749,649 724,019
Other assets 20,783 12,643 10,258
Favorable lease rights 14,153 15,849 16,583
Goodwill 26,238 30,138 31,438
---------- ---------- ----------
Total assets $1,930,086 $1,619,721 $1,607,536
========== ========== ==========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 315,770 $ 150,679 $ 259,989
Accrued liabilities 88,283 95,185 87,682
Income taxes payable 13,141 38,482 7,789
Current portion of long-term debt 1,559 1,845 1,769
---------- ---------- ----------
Total current liabilities 418,753 286,191 357,229
Long-term debt 379,076 310,366 310,932
Deferred income taxes 51,318 45,104 43,472
Other long-term liabilities 24,001 23,278 21,342
Shareholders' equity
Common stock-$.01 par value,
400,000,000 shares authorized,
158,202,170, 157,757,956 and
157,576,790 issued at October 31,
1998, January 31, 1998 and
November 1, 1997, respectively 1,582 1,578 1,528
Paid-in capital 492,498 488,550 480,977
Retained earnings 562,858 464,654 392,056
---------- ---------- ----------
Total shareholders' equity 1,056,938 954,782 874,561
---------- ---------- ----------
Total liabilities and
shareholders' equity $1,930,086 $1,619,721 $1,607,536
========== ========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
KOHL'S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
3 Months 3 Months 9 Months 9 Months
(13 Weeks) (13 Weeks) (39 Weeks) (39 Weeks)
Ended Ended Ended Ended
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
-----------------------------------------------------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Net sales $888,897 $757,773 $2,392,215 $1,982,257
Cost of merchandise sold 589,275 503,892 1,582,547 1,317,121
-------- -------- ---------- ----------
Gross margin 299,622 253,881 809,668 665,136
Operating expenses:
Selling, general, and administrative 202,156 173,065 565,280 472,061
Depreciation and amortization 16,839 13,392 47,483 37,913
Goodwill amortization 1,300 1,300 3,900 3,900
Preopening expenses 8,049 6,421 15,591 18,589
-------- -------- ---------- ----------
Operating income 71,278 59,703 177,414 132,673
Interest expense, net 5,367 5,583 15,627 18,405
-------- -------- ---------- ----------
Income before income taxes 65,911 54,120 161,787 114,268
Provision for income taxes 25,903 21,594 63,583 45,593
-------- -------- ---------- ----------
Net income $40,008 $32,526 $98,204 $68,675
======== ======== ========== ==========
Earnings per share:
Basic
Net income $0.25 $0.21 $0.62 $0.46
Average number of shares 158,132 156,045 158,007 150,732
Diluted
Net income $0.25 $0.20 $0.60 $0.45
Average number of shares 162,723 159,999 162,492 154,270
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
KOHL'S CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------ Paid-In Retained
Shares Amount Capital Earnings Total
----------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 31, 1998 157,758 $1,578 $488,550 $464,654 $ 954,782
Net income - - - 98,204 98,204
Exercise of stock options (net) 444 4 3,948 - 3,952
----------------------------------------------------------
Balance at October 31, 1998 158,202 $1,582 $492,498 $562,858 $1,056,938
==========================================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
KOHL'S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
9 Months 9 Months
(39 Weeks) (39 Weeks)
Ended Ended
October 31, 1998 November 1, 1997
----------------------------------
<S> <C> <C>
(In thousands)
Operating activities
Net income $ 98,204 $ 68,675
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 51,532 42,107
Deferred income taxes 6,253 1,155
Other noncash charges 1,573 1,593
Accounts receivable, trade 116,158 (30,158)
Other working capital (181,396) (203,857)
--------- ---------
Net cash provided by (used in) operating activities 92,324 (120,485)
Investing activities
Acquisition of property and equipment, net (183,784) (163,921)
Other (8,270) (3,455)
--------- ---------
Net cash used in investing activities (192,054) (167,376)
Financing activities
Net borrowings under working capital loan 69,500 --
Proceeds from long-term debt 1,187 --
Repayments of long-term debt (1,313) (993)
Payment of financing fees on debt -- (101)
Net proceeds from issuance of common stock (including stock options) 3,952 288,415
--------- ---------
Net cash provided by financing activities 73,326 287,321
--------- ---------
Net decrease in cash and cash equivalents (26,404) (540)
Cash and cash equivalents at beginning of period 44,161 8,906
--------- ---------
Cash and cash equivalents at end of period $ 17,757 $ 8,366
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
6
<PAGE>
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.
Shareholders' equity, share and per share amounts for all periods presented
have been adjusted for the 2 for 1 stock split declared by the Company's Board
of Directors on March 9, 1998, effected in the form of a stock dividend.
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.
<TABLE>
<CAPTION>
LIFO Expense 9 Months Ended
Quarter October 31, 1998 November 1, 1997
------- ---------------- ----------------
<S> <C> <C>
(In Thousands)
First $1,861 $1,501
Second 1,896 1,560
Third 1,900 1,895
------ ------
Total $5,657 $4,956
</TABLE>
Inventories would have been $10,440,000, $4,783,000 and $9,832,000 higher
at October 31, 1998, January 31, 1998 and November 1, 1997, 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
7
<PAGE>
adverse impact on the Company's financial position or results of operations.
4. Net Income Per Share
In February, 1997 the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, "Earnings per Share", which specifies the computation,
presentation and disclosure requirements of earnings per share. All net income
per share amounts for all periods have been presented to conform to SFAS No. 128
disclosure requirements. The numerator for the calculation of basic and diluted
net income per share is net income. The denominator is summarized as follows
(in thousands):
<TABLE>
<CAPTION>
3 Months 9 Months
Ended Ended Ended Ended
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Denominator for basic
earnings per share -
weighted average
shares 158,132 156,045 158,007 150,732
Employee stock
options 4,591 3,954 4,485 3,538
------- ------- ------- -------
Denominator for
diluted earnings
per share 162,723 159,999 162,492 154,270
======= ======= ======= =======
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
----------------------------------------------
THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 1998
---------------------------------------------------
Results of Operations
- ---------------------
At October 31, 1998, the Company operated 214 stores compared with 182
stores at the same time last year. The Company opened 17 stores during the third
quarter: three stores in the Washington, D.C. market; two stores in the
Philadelphia market; two stores in the Charlotte, NC market; two stores in the
Detroit, MI market; two stores in the Chicago market; two stores in the
Columbus, OH market and stores in Toledo, OH; Charleston, WV; Akron, OH and
Lawrence, KS market. In addition, the Company relocated one of its Indianapolis
stores and one of its Milwaukee stores to larger locations.
The Company plans to open eighteen stores in the spring of 1999: five
stores in the Denver, CO market; two stores in the Harrisburg, PA market; two
additional stores in the Washington, D.C. market; two additional stores in the
Chicago market; two additional stores in the Detroit, MI market; and additional
stores in the Philadelphia; Lexington, KY; Omaha, NE; Goshen/Elkhart, IN; and
Indianapolis, IN markets. Kohl's will open 22-27 additional stores in the fall
of 1999 including its entry into the St. Louis market. To support its expansion
plans, the Company plans to open its fourth distribution center in the spring of
2000. The distribution center will be located in the Kansas City area.
Net sales increased $131.1 million or 17.3% to $888.9 million for the three
months ended October 31, 1998 from $757.8 million for the three months ended
November 1, 1997. Of the increase, $99.3 million is attributable to the
inclusion of 12 new stores opened in 1997 and 32 new stores opened in 1998. The
remaining $31.8 million is attributable to comparable store sales growth of
4.3%.
Net sales increased $409.9 million or 20.7% to $2,392.2 million for the
nine months ended October 31, 1998 from $1,982.3 million for the nine months
ended November 1, 1997. Of the increase, $252.2 million is attributable to the
inclusion of 32 new stores opened in 1997 and in 1998, respectively. The
remaining $157.8 million is attributable to comparable stores sales growth of
8.8%.
Gross margin for the three months ended October 31, 1998 was 33.7% compared
to 33.5% for the three months ended November 1, 1997. Gross margin for the nine
months ended October 31, 1998 was 33.8% compared to 33.6% for the nine months
ended November 1, 1997. These increases are primarily attributable to a change
in merchandise mix.
9
<PAGE>
The Company incurred $8.0 million of pre-opening expenses associated with
the opening of 17 new stores and relocating two stores during the three months
ended October 31, 1998 compared to $6.4 million for 10 new stores during the
three months ended November 1, 1997. The Company incurred $15.6 million of pre-
opening expenses associated with the opening of 32 new stores and the relocation
of two stores in the nine months ended October 31, 1998 compared to $18.6
million for 32 new stores and the relocation of one store in the nine months
ended November 1, 1997. The expenses relate to the cost associated with new
store openings, including hiring and training costs for new employees, Kohl's
charge account solicitations and processing and transporting initial
merchandise.
Operating income for the three months ended October 31, 1998, increased
$11.6 million or 19.4% over the three months ended November 1, 1997. Operating
income for the nine months ended October 31, 1998 increased $44.7 million or
33.7% over the nine months ended November 1, 1997. Excluding pre-opening
expenses, operating income increased 27.6% for the nine months ended October 31,
1998. These increases resulted from the increased sales, higher gross margin
rates and the Company's ability to leverage its selling, general and
administrative expenses as net sales increased. Selling, general and
administrative expenses declined to 22.7% of net sales for the three months
ended October 31, 1998 from 22.8% of net sales for the three months ended
November 1, 1997. Selling, general and administrative expenses declined to 23.6%
of net sales for the nine months ended October 31, 1998 from 23.8% of the net
sales for the nine months ended November 1, 1997.
Net interest expense for the three months ended October 31, 1998 decreased
$0.2 million from the three months ended November 1, 1997. Net interest expense
for the nine months ended October 31, 1998 decreased $2.8 million from the nine
months ended November 1, 1997. The decreases were primarily due to a reduction
in borrowings under its revolving credit facility and increased interest income
on short-term investments.
For the three months ended October 31, 1998, net income increased 23.0% to
$40.0 million from $32.5 million in the three months ended November 1, 1997.
Earnings were $.25 per diluted share for the three months ended October 31, 1998
compared to $.20 per diluted share for the three months ended November 1, 1997.
Net income for the nine months ended October 31, 1998 increased 43.0% to $98.2
million or $.60 per diluted share from $68.7 million or $.45 per diluted share
in the nine months ended November 1, 1997.
10
<PAGE>
Impact of Year 2000
- -------------------
The Company currently has a Year 2000 Readiness Plan implemented. Defined in
the plan are compliance definitions and testing guidelines for in-house
developed applications and computer hardware platforms. The plan defines a
methodology for assessing in-house developed applications and provides a means
for documentation. Team members and their responsibilities are defined including
senior executives that participate on the Year 2000 steering committee. The plan
defines three phases to address the Year 2000 problem:
. The Assessment phase involves the inventory of all in-house developed
applications, purchased software and hardware, merchandise vendors, non-IT
systems, utilities and service providers. The Assessment phase also includes
developing a plan for addressing each item and/or vendor to ensure Year 2000
compliance.
. The Remediation phase is implementing the change to reach compliance and unit
testing. This includes correspondence with vendors that have products or
services that impact the Company's ability to continue normal business
operations.
. The Verification phase is system testing the change(s) in similar
environments. This includes testing with vendors and service provider
organizations.
The Company changed its client server and mainframe date routine standards to
incorporate four digits for all new systems development a number of years ago.
As a result, there are many systems that need only to be certified and have the
interfaces reviewed and tested. There are however, legacy and package financial
systems that are not Year 2000 compliant. The Company has assessed these systems
and presently believes that with modification to existing software and
conversions to new software, the Year 2000 issue will not pose significant
operational problems. The Company is utilizing both internal and external
resources to reprogram, or replace and test the software for Year 2000
modifications.
The Company is in the remediation phase of its Year 2000 plan. The Company
anticipates completing the necessary project code modifications by January 31,
1999 and the replacement code in the second quarter of 1999. The last phase,
"Verification/System testing" has started and will be completed in 1999. The
Company has installed a Year 2000 test lab that is identical to the production
environment. Year 2000 date simulation testing can be performed without
affecting production files.
11
<PAGE>
The Company has initiated formal communications with all significant suppliers
to determine the extent to which the Company's interface systems are vulnerable
to those parties' failure to remediate their own Year 2000 issues. The Company
is currently unit testing in-house developed applications, EDI and non-IT
systems. The Company continues to refine its contingency plans and is enhancing
and adding to the plans for each business area. The Company has identified that
it may experience certain inconveniences or inefficiencies as a result of a
supplier's failure to remediate its Year 2000 issue. The Company believes
however, the vast majority of the Company's business will proceed without any
significant interruption.
The Company's total Year 2000 project costs and estimates to complete include
the impact of third party Year 2000 issues based on presently available
information. The total cost of the Year 2000 project is estimated at $10
million and is being funded through operating cash flows. Of the total project
cost, approximately $6 million is attributable to the purchase of new software
and hardware that will be capitalized. The remaining $4 million of programming
and testing costs will be expensed as incurred and is not expected to have a
material effect on the results of the operations. Of the capital, approximately
$4 million is for a new financial system. The new financial system was a
previously planned project that supports the Company's growth, provides
significant business enablement and eliminates a substantial Year 2000 effort.
To date, the Company has incurred approximately $4.0 million ($1.4 million
expensed and $2.6 million capitalized) related to the assessment of, and
preliminary efforts on, its Year 2000 project and the development of a
modification plan, purchase of new systems and systems modifications.
The cost of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. In addition to
the Company's reliance on certain third parties to remediate their own Year 2000
issues, specific factors that might cause such material differences include, but
are not limited to, the continued availability and cost of personnel trained in
this area and the ability to locate and correct all relevant computer codes.
Seasonality & Inflation
- -----------------------
The Company's business, like that of most retailers, is subject to seasonal
influences, with the major portion of sales and income realized during the last
half of each fiscal year, which includes the back-to-school and holiday seasons.
Because of the seasonality of the Company's business, results for any quarter
are not necessarily indicative of the results that may be achieved for
12
<PAGE>
a full fiscal year. In addition, quarterly results of operations depend
significantly upon the timing and amount of revenues and costs associated with
the opening of new stores. The Company does not believe that inflation has had a
material effect on the results during the periods presented. However, there can
be no assurance that the Company's business will not be affected in the future.
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 pre-opening expenses. The Company's primary sources of
funds for its business activities are cash flow from operations, sales of its
proprietary accounts receivable, 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 October 31, 1998, the Company's merchandise inventories had increased
$316.5 million over the January 31, 1998 balance and $79.7 million over the
November 1, 1997 balance. These increases reflect the purchase of fall
inventory as well as inventory for new stores. The Company's working capital
increased to $566.6 million at October 31, 1998 from $525.3 million at January
31, 1998 and $468.0 million at November 1, 1997. Of the $98.6 million increase
from November 1, 1997, $66.6 million is attributable to higher credit card
receivables as the Company internally financed a higher percentage of
receivables. The remaining increase was primarily the result of higher
merchandise inventory levels required to support existing stores and incremental
new store locations offset in part by increased accounts payable.
Cash provided by operating activities was $92.3 million for the nine months
ended October 31, 1998 compared to cash used in operating activities of $120.5
million for the nine months ended November 1, 1997. The increase in cash
provided resulted primarily from increased profitability and proceeds from sales
of proprietary accounts receivable. Excluding changes in operating assets and
liabilities, cash provided by operating activities was $157.6 million for the
nine months ended October 31, 1998 compared to $113.5 million for the nine
months ended November 1, 1997.
Capital expenditures for the nine months ended October 31, 1998 were $183.8
million compared to $163.9 million for the same period a year ago. The increase
in expenditures in 1998 is primarily attributable to the Company's remodel
program for the nine months ended October 31, 1998 offset by construction of the
13
<PAGE>
Winchester, Virginia distribution center in the nine months ended November 1,
1997.
Total capital expenditures for fiscal 1998 are currently expected to be
approximately $250.0 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.
New Accounting Pronouncements
- -----------------------------
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes the standards for reporting and displaying
comprehensive income and its components (revenue, expenses, gains and losses) as
part of a full set of financial statements. This statement requires that all
elements of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The statement
is effective for fiscal years beginning after December 15, 1997. Since this
standard applies only to presentation of comprehensive income, it will not have
any impact on the Company's results of operations, financial position or cash
flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 establishes standards for the
way public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company has one operating segment;
therefore, this standard
14
<PAGE>
will not have any impact on the Company's results of operations, financial
position or cash flows.
In March 1998, the AICPA issued Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed for or Obtained for
Internal Use." The SOP is effective for fiscal years beginning after December
15, 1998. The SOP will require the capitalization of certain costs incurred
after the date of adoption in connection with developing or obtaining software
for internal use. Effective February 1, 1998, the Company adopted SOP 98-1.
Prior to the adoption of this SOP, the Company expensed such costs as incurred.
Based on costs incurred to date, the adoption of this SOP should not have any
material impact on the Company's results of operations or financial position.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-
Up Activities." The SOP is effective for fiscal years beginning after December
15, 1998 and requires that start-up costs capitalized prior to adoption of the
SOP be written off and any future costs be expensed as incurred. It is not
practical to estimate at this time what the effect of this charge will be on the
Company's future earnings or financial position.
15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
12.1 Statement regarding calculation of ratio of earnings to
fixed charges.
27.1 Financial Data Schedule - Article 5 of Regulation S-X,
9 Months ended October 31, 1998.
27.2 Financial Data Schedule - Article 5 of Regulation S-X,
3 Months ended May 3, 1997, (restated).
27.3 Financial Data Schedule - Article 5 of Regulation S-X,
6 Months ended August 2, 1997, (restated).
27.4 Financial Data Schedule - Article 5 of Regulation S-X,
9 Months ended November 1, 1997, (restated).
b) Reports on Form 8-K
There were no reports on Form 8-K filed for three months ended
October 31, 1998
16
<PAGE>
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: December 7, 1998 /s/William Kellogg
---------------------
William Kellogg
Chairman, Chief Executive Officer
Date: December 7, 1998 /s/Arlene Meier
--------------------
Arlene Meier
Executive Vice President - Finance
Chief Financial Officer
17
<PAGE>
Exhibit 12.1
Kohl's Corporation
Ratio of Earnings to Fixed Charges
($000s)
<TABLE>
<CAPTION>
39 Weeks Ended
-------------- Fiscal Year (1)
Oct 31, Nov 1, ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Income before income taxes and
extraordinary items $161,787 $114,268 $235,063 $171,368 $122,729 $117,451 $ 96,691
Fixed charges (3) 46,049 42,628 57,446 42,806 30,649 19,758 16,144
Less interest capitalized
during period (1,215) (1,611) (2,043) (2,829) (1,287) (603) (376)
-------- -------- -------- -------- -------- -------- --------
$206,621 $155,285 $290,466 $211,345 $152,091 $136,606 $112,459
======== ======== ======== ======== ======== ======== ========
Fixed Charges
Interest (expensed or capitalized) (3) $ 18,196 $ 20,174 $ 26,304 $ 20,574 $ 14,774 $ 7,911 $ 6,253
Portion of rent expense
representative of interest 27,704 22,159 30,798 22,031 15,798 11,777 9,113
Amortization of deferred
financing fees 149 295 344 201 77 70 778
-------- -------- -------- -------- -------- -------- --------
$ 46,049 $ 42,628 $ 57,446 $ 42,806 $ 30,649 $ 19,758 $ 16,144
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges 4.49 3.64 5.06 4.94 4.96 (2) 6.91 6.97
======== ======== ======== ======== ======== ======== ========
</TABLE>
(1) Fiscal 1997, 1996, 1994 and 1993 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.
(3) Interest expense for fiscal 1997, 1996, and 1995 has been restated to
properly reflect interest expense included on the Condensed Consolidated
Statements of Income.
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