<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 May 1, 1999
----------------------------------
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 8, 1999 Common Stock,
--------------------------
Par Value $.01 per Share, 162,803,837 shares Outstanding.
- --------------------------------------------------------
<PAGE>
KOHL'S CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets at
May 1, 1999, January 30, 1999 and
May 2, 1998 3
Condensed Consolidated Statements of Income
for the Three Months Ended May 1, 1999
and May 2, 1998 4
Consolidated Statement of Changes in
Shareholders' Equity for the Three Months
Ended May 1, 1999 5
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
May 1, 1999 and May 2, 1998 6
Notes to Condensed Consolidated Financial
Statements 7-8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of 15
Security Holders
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 17
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<PAGE>
KOHL'S CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 1, January 30, May 2,
1999 1999 1998
-------------------------------------------------------
(Unaudited) (Audited) (Unaudited)
(In thousands)
<S> <C> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 2,960 $ 2,858 $ 2,551
Short-term investments 15,000 26,736 15,000
Accounts receivable trade, net 235,764 270,704 183,079
Merchandise inventories 721,955 617,362 623,486
Income taxes receivable 12,680 - -
Deferred income taxes 14,548 14,412 5,226
Other 14,130 7,366 8,335
----------- ----------- -----------
Total current assets 1,017,037 939,438 837,677
Property and equipment, net 984,831 933,011 781,325
Other assets 28,930 25,027 16,181
Favorable lease rights 141,053 13,681 15,388
Goodwill 23,638 24,938 28,838
----------- ----------- -----------
Total assets $ 2,195,489 $ 1,936,095 $ 1,679,409
=========== =========== ===========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 237,079 $ 212,926 $ 209,403
Accrued liabilities 108,036 117,200 84,479
Income taxes payable - 48,572 17,358
Current portion of long-term debt 1,578 1,533 1,845
----------- ----------- -----------
Total current liabilities 346,693 380,231 313,085
Long-term debt 308,878 310,912 311,142
Deferred income taxes 56,670 53,787 46,185
Other long-term liabilities 28,520 28,386 25,931
Shareholders' equity
Common stock-$.01 par value, 400,000,000 shares
authorized, 162,762,962, 158,394,735, and
157,947,202 issued at May 1, 1999, January 30,
1999 and May 2, 1998, respectively. 1,628 1,584 1,579
Paid-in capital 756,861 504,275 489,985
Retained earnings 696,239 656,920 491,502
----------- ----------- -----------
Total shareholders' equity 1,454,728 1,162,779 983,066
----------- ----------- -----------
Total liabilities and shareholders' equity $ 2,195,489 $ 1,936,095 $ 1,679,409
=========== =========== ===========
</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
(13 Weeks) (13 Weeks)
Ended Ended
May 1, May 2,
1999 1998
------------------------------------
(In thousands except per share data)
<S> <C> <C>
Net sales $ 910,256 $ 744,571
Cost of merchandise sold 597,128 491,102
----------- -----------
Gross margin 313,128 253,469
Operating expenses:
Selling, general, and administrative 216,032 180,353
Depreciation and amortization 18,577 14,984
Goodwill amortization 1,300 1,300
Preopening expenses 7,945 7,542
----------- -----------
Operating income 69,274 49,290
Interest expense, net 5,132 5,059
----------- -----------
Income before income taxes 64,142 44,231
Provision for income taxes 24,823 17,383
----------- -----------
Net income $39,319 $26,848
=========== ===========
Earnings per share:
Basic
Net income $0.25 $0.17
Average number of shares 160,436 157,867
Diluted
Net income $0.24 $0.17
Average number of shares 165,376 162,181
</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 30, 1999 158,395 $1,584 $504,275 $656,920 $1,162,779
Issuance of common shares 2,800 28 199,598 - 199,626
Exercise of stock options 1,568 16 13,394 - 13,410
Income tax benefit from stock options - - 39,594 - 39,594
Net income - - - 39,319 39,319
----------- ----------- ------------- ------------- ------------
Balance at May 1, 1999 162,763 $1,628 $756,861 $696,239 $1,454,728
=========== =========== ============= ============= ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
KOHL'S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
3 Months 3 Months
(13 Weeks) (13 Weeks)
Ended Ended
May 1, 1999 May 2, 1998
---------------------------------------
(In thousands)
Operating activities
<S> <C> <C>
Net income $39,319 $26,848
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Depreciation and amortization 19,927 16,335
Deferred income taxes 2,747 2,470
Other noncash charges 732 1,234
Changes in operating assets and liabilities:
Accounts receivable 34,940 56,538
Merchandise inventories (104,593) (107,696)
Other current assets (6,764) (3,076)
Accounts payable 24,153 58,724
Accrued and other long-term liabilities (7,587) (9,287)
Income taxes (61,252) (21,124)
------------- -------------
Net cash provided by (used in) operating activities (58,378) 20,966
Investing activities
Acquisition of property and equipment
and favorable lease rights, net (203,344) (45,846)
Proceeds from sale of assets 4,350 -
Sale (purchase) of short-term investments, net 11,736 (15,000)
Other (4,903) (3,942)
------------- -------------
Net cash used in investing activities (192,161) (64,788)
Financing activities
Net repayments under credit facilities (1,600) -
Net borrowings (repayments) of other long-term debt (389) 776
Net proceeds from issuance of common shares 252,630 1,436
------------- -------------
Net cash provided by financing activities 250,641 2,212
------------- -------------
Net increase (decrease) in cash and cash equivalents 102 (41,610)
Cash and cash equivalents at beginning of period 2,858 44,161
------------- -------------
Cash and cash equivalents at end of period $2,960 $2,551
============= =============
</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.
Certain reclassifications have been made to prior years' financial
statements to conform to the fiscal 1999 presentation.
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 1, 1999 May 2, 1998
------- ----------- -----------
(In Thousands)
First $1,363 $1,861
Inventories would have been $3,284,000, $1,921,000 and $6,644,000 higher at
May 1, 1999, January 30, 1999 and May 2, 1998, respectively if they had been
valued using the first-in, first-out (FIFO) method.
-7-
<PAGE>
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.
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 Ended
----------------------------
May 1, 1999 May 2, 1998
----------- -----------
<S> <C> <C>
Denominator for
basic earnings
per share -
weighted average
shares 160,436 157,867
Employee stock
options 4,940 4,314
------- -------
Denominator for
diluted earnings
per share 165,376 162,181
======= =======
</TABLE>
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
----------------------------------------------
THREE MONTHS ENDED May 1, 1999
------------------------------
Results of Operations
- ---------------------
At May 1, 1999, the Company operated 226 stores compared with 197 stores at
the same time last year. During the quarter, the Company successfully opened 13
new stores: two stores in the Chicago, IL market; two stores in the Washington,
D.C. market; two stores in the Detroit, MI market; two stores in the York, PA
market; and stores in the Philadelphia, PA; Omaha, NE; Indianapolis IN; Goshen,
IN; and Lexington, KY markets. Kohl's opened five stores in the Denver, CO
market on May 15th. The Company plans to open nine stores in August: six in
the St. Louis, MO market, a store in Hickory, NC and additional stores in
Richmond, VA and Washington, D.C. In October, Kohl's plans to open 17 stores:
11 in Dallas/Ft. Worth, TX and additional stores in Harrisburg, PA; Chicago, IL;
Lansing, MI; Minneapolis, MN; Grand Rapids, MI and Denver, CO.
Net sales increased $165.7 million or 22.3% to $910.3 million for the three
months ended May 1, 1999 from $744.6 million for the three months ended May 2,
1998. Of the increase, $89.5 million is attributable to the inclusion of 32 new
stores opened in 1998 and 13 new stores opened in 1999. The remaining $76.2
million is attributable to comparable store sales growth of 10.8%.
Gross margin for the three months ended May 1, 1999 was 34.4% compared to
34.0% in the three months ended May 2, 1998. This increase is primarily
attributable to a change in merchandise mix and improvements related to
inventory management.
Effective January 30, 1999, the Company implemented SOP 98-5, "Reporting on
the Costs of Start-Up Activities", which requires preopening costs to be
expensed as incurred. For new stores opened in March and April, 1999,
approximately $1 million in preopening costs was expensed in fiscal 1998 and
$5.2 million was expensed during the three months ended May 1, 1999 for a total
average cost per store of $0.5 million. In addition, the Company incurred $2.7
million in preopening costs for stores to be opened later in fiscal 1999. 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 May 1, 1999, increased $20.0
million or 40.5% over the three months ended May 2, 1998. Excluding pre-opening
expenses, operating income increased 35.9%. This increase resulted primarily
from the increased sales, improved gross margin and the Company's ability to
leverage its
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<PAGE>
selling, general and administrative expenses as net sales increased. Selling,
general and administrative expenses declined to 23.7% of net sales for the three
months ended May 1, 1999 from 24.2% of net sales for the three months ended May
2, 1998.
For the three months ended May 1, 1999, net income increased 46.5% to $39.3
million from $26.8 million in the three months ended May 2, 1998. Earnings were
$.24 per diluted share for the three months ended May 1, 1999 compared to $.17
per diluted share for the three months ended May 2, 1998.
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.
Approximately 17% and 30% of sales occur during the back-to-school and holiday
seasons, respectively. 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 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.
Impact of Year 2000
- -------------------
The Company currently has a Year 2000 Readiness Plan implemented. Detailed
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 includes three phases to address the Year 2000 issue and a
status of these key milestones is summarized below:
Year 2000 Readiness Plan Phases Current Status
- -------------------------------- --------------
Assessment Complete
Remediation Complete
Verification On schedule
. Replacement code systems August 1999 target completion date
. Packaged financial systems September 1999 target completion date
. Non-IS systems (including September 1999 target completion date
merchandise vendor EDI
transactions)
-10-
<PAGE>
The phases of the Year 2000 Readiness Plan are defined below:
. The Assessment phase involved 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
included developing a plan for addressing each item and/or vendor to ensure
Year 2000 compliance. This phase is complete.
. The Remediation phase involved implementing the changes required to reach
compliance and unit testing. This included correspondence with vendors that
have products or services that impact the Company's ability to continue
normal business operations. This phase is also complete.
. The Verification phase is system testing the change(s) in similar
environments. This includes testing with vendors and service provider
organizations. The Company has installed a Year 2000 test lab that is
identical to the production environment so that Year 2000 date simulation
testing can be performed without affecting production files. The
Verification testing phase, except for all packaged financial systems, will
be completed in August 1999. The rollout of the packaged financial systems
has started and will be completed by the end of August 1999. Even though
the packaged financial systems are identified Year 2000 compliant, the
Company will be conducting integrated testing in September 1999.
Several years ago, the Company changed its client server and mainframe date
routine standards to incorporate four digits for all new systems development.
As a result, there are many systems that need only to be certified and have the
interfaces reviewed and tested. There are however, a number of 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 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 merchandise vendor EDI transactions and
non-IS systems and expects to be over 90% complete by the end of July, 1999. 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
-11-
<PAGE>
inconveniences or inefficiencies as a result of a supplier's failure to
remediate its Year 2000 issues. 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. However, there can be no guarantee that the systems of other
companies on which the Company's systems rely will be timely converted and would
not have an adverse effect on the Company's systems.
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 capitalized portion,
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 $6.1 million ($2.1
million expensed and $4.0 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.
Financial Condition and Liquidity
- ---------------------------------
The Company's primary ongoing cash requirements are for inventory
purchases, capital expenditures in connection with expansion and remodeling
programs and pre-opening expenses. The Company's primary sources of funds for
its business activities are cash flow from operations, sale 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
-12-
<PAGE>
merchandise inventories. The Company's working capital and inventory levels
typically build throughout the fall, peaking during the holiday selling season.
At May 1, 1999, the Company's merchandise inventories had increased $104.6
million over the January 30, 1999 balance and $98.5 million over the May 2, 1998
balance. These increases reflect the purchase of summer inventory as well as
inventory for new stores. The Company's working capital increased to $670.3
million at May 1, 1999 from $559.2 million at January 30, 1999 and increased
from $524.6 million at May 2, 1998. Of the $145.7 million increase from May 2,
1998, $52.7 million is attributable to higher credit card receivables as the
Company internally financed a higher percentage of receivables. Approximately
$30.0 million of the increase is attributed to the change in income taxes
receivable/(payable) which resulted primarily from the tax benefit associated
with the exercise of employee stock options. 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 used in operating activities was $58.4 million for the three months
ended May 1, 1999 compared to cash provided by operating activities of $21.0
million for the three months ended May 2, 1998. Excluding changes in operating
assets and liabilities, cash provided by operating activities was $62.7 million
for the three months ended May 1, 1999 compared to $46.9 million for the three
months ended May 2, 1998.
In March 1999, the Company purchased the right to occupy 33 store locations
previously operated by Caldor Corporation for $142 million. The Company expects
that the stores will be open for business in spring 2000. The Company expects to
invest approximately $165 million more to renovate and refixture the stores. To
fund the renovation and refixturing, the Company issued 2,800,000 shares of its
common stock to the public in March 1999 for net proceeds of approximately $200
million.
Capital expenditures, including the acquisition of the rights to occupy the
Caldor stores, for the three months ended May 1, 1999 were $203.3 million
compared to $45.8 million for the same period a year ago. Approximately $142
million of the increase in expenditures in 1999 is attributable to the
acquisition of the rights to occupy the Caldor stores. The remaining increase is
primarily attributable to the Company's new store spending in fiscal 1999.
-13-
<PAGE>
Total capital expenditures for fiscal 1999 are currently expected to range
between $550-$575 million. This estimate includes the purchase of favorable
lease rights from Caldor Corporation and renovation and refixturing of the
properties. 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.
In June 1999, the Company issued $200 million redeemable 7.25% unsecured
debentures. The debentures mature on June 1, 2029. The proceeds will be used
for general corporate purposes and continued store growth.
The Company anticipates that it will be able to satisfy its current
operating needs, planned capital expenditures and debt service requirements with
proceeds from the June 1999 debt offering and March 1999 stock offering, current
working capital, cash flows from operations, seasonal borrowings under its $300
million revolving credit facility, short-term trade credit and other sources of
financing.
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.
-14-
<PAGE>
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
25, 1999:
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 amend the Articles of Incorporation to increase authorized common
stock from 400,000,000 shares authorized to 800,000,000 shares
authorized.
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
James D. Ericson
For - 127,357,625 shares
Withheld - 1,104,117 shares
William S. Kellogg
For - 126,784,783 shares
Withheld - 1,676,959 shares
R. Elton White
For - 127,361,114 shares
Withheld - 1,100,628 shares
2. Ratification of Ernst & Young LLP as independent auditors
For - 128,356,759 shares
Against - 43,568 shares
Abstain - 61,415 shares
3. To amend the Articles of Incorporation to increase authorized common stock
from 400,000,000 shares authorized to 800,000,000 shares authorized.
For - 118,787,491 shares
Against - 9,574,576 shares
Abstain - 99,675 shares
-15-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.1 Employment agreement between the Company and Kevin
Mansell.
12.1 Statement regarding calculation of ratio of earnings to
fixed charges.
27.1 Financial Data Schedule - Article 5 of Regulation S-X, 3
Months ended May 1, 1999
27.2 Financial Data Schedule - Articles of Regulation S-X, 3
Months ended May 2, 1998, (restated)
b) Reports on Form 8-K
During the three months ended May 1, 1999, the Company filed a
report on Form 8-K dated March 9, 1999 with respect to Item 5 of
Form 8-K. The Form 8-K includes the Company's press release
announcing 1998 operating results.
-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: June 9, 1999 /s/ William Kellogg
-----------------------------
William Kellogg
Chairman
Date: June 9, 1999 /s/ Arlene Meier
-----------------------------
Arlene Meier
Executive Vice President - Finance
Chief Financial Officer
-17-
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT, made and entered into as of the 1st day of February, 1999,
by and between KOHL'S DEPARTMENT STORES, INC., a Delaware corporation
("Corporation"), and Kevin Mansell ("Executive").
W I T N E S S E T H :
WHEREAS, the Corporation desires to employ the Executive in the capacity
and under the terms set forth herein and the Executive desires to be employed by
the Corporation on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Corporation and the Executive agree as
follows:
ARTICLE I
---------
Employment Duties
-----------------
During the term of the Executive's employment hereunder, the Corporation
shall employ the Executive and the Executive shall serve as President of the
Corporation. Subject to the authority and direction of the Chairman and Chief
Executive Officer and Board of Directors of the Corporation, the Executive shall
have supervision and control over, and responsibility for, the general
management and day-to-day operation of the Corporation. The Executive shall also
have such other powers and duties as may from time to time be prescribed by the
Board of Directors of the Corporation; provided, however, that such duties are
reasonably consistent with the duties normally performed by a President. The
Executive's principal place of employment shall be at the Corporation's
headquarters in Menomonee Falls, Wisconsin; provided, however, that the
Executive acknowledges and agrees that he may from time to time be required to
travel
<PAGE>
outside Milwaukee, Wisconsin on behalf of the Corporation. The Executive shall
devote his entire working time and efforts to the business affairs of the
Corporation and its affiliates and shall faithfully and to the best of his
ability perform his duties hereunder, provided that Executive may take
reasonable amounts of time to serve on corporate, civil or charitable boards or
committees if such activities do not interfere with the performance of
Executive's duties hereunder. The Executive hereby agrees to serve as an officer
of the Corporation and of affiliates of the Corporation as part of his
contemplated duties hereunder without additional compensation therefor.
ARTICLE II
----------
Term
----
The term of the Executive's employment (the "Employment Term") under this
Agreement shall commence as of the date first above written (the "Anniversary
Date"), and shall, except as it may otherwise be subject to termination
hereunder, continue thereafter until the third anniversary of such Anniversary
Date; provided, however, that at the end of each day during the Employment Term
the Employment Term shall be automatically extended for one (1) day unless
either party shall give written notice to the other not less than thirty (30)
days prior thereto that the Employment Term shall not be so extended.
ARTICLE III
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Compensation
------------
3.1. Salary. The Corporation shall pay to the Executive an annual base
------
salary in the amount of Five Hundred Sixty Thousand Dollars ($560,000.00) during
the Employment Term ("Annual Base Salary"). The Executive's Annual Base Salary
shall be payable in equal installments not less frequently than monthly.
Executive's Annual Base Salary shall be reviewed by the Board of Directors of
the Corporation at least annually and may be increased by such amount as the
Board of Directors, in its sole discretion, may determine, taking into
consideration the profitability of the Corporation relative to its business plan
and such other factors as the Board of Directors may deem relevant for that
purpose. Annual Base Salary shall not be reduced
2
<PAGE>
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased.
3.2. Bonuses. The Executive shall participate in bonus plans established
-------
for the executive officers of the Corporation on terms no less favorable than
those applicable to other employees of the Corporation of comparable status with
the Executive.
ARTICLE IV
----------
Termination of Employment
-------------------------
4.1. Causes for Termination. Notwithstanding the term set forth in Article
----------------------
II, above, Executive's employment hereunder may be terminated prior to the
expiration of such term upon occurrence of any of the following events:
4.11. Death. The Executive's employment shall terminate upon the
-----
Executive's death.
4.12. Disability. The Executive's employment shall terminate in
----------
the event of the Disability of the Executive. For purposes of this
Agreement, the term "Disability" shall be defined as the inability of the
Executive to perform his normal duties as a full-time employee of the
Corporation for a continuous period of two hundred seventy (270) consecutive
days by reason of physical or mental illness or incapacity, or for periods
of physical or mental illness or incapacity aggregating two hundred fifteen
(215) business days in any consecutive twelve (12) month period. If the
Corporation determines in good faith that the Disability of Executive has
occurred it may give the Executive written notice of its intention to
terminate the Executive's employment. In such event, Executive's employment
with the Corporation shall terminate on the thirtieth (30th) day after
receipt of such notice by the Executive unless within such thirty (30) day
period Executive shall have returned to full-time performance of his duties
or Executive shall deliver written notice to the Corporation disagreeing
that a Disability has occurred. If there is any dispute as to whether
Executive is disabled, such question shall be submitted to a licensed
physician for the purpose of making such determination. An examination of
the Executive shall be made within thirty (30) days after written notice by
the Corporation to the
3
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Executive by a licensed physician appointed by the Corporation. The
Executive shall submit to such examination and provide such information as
such physician may request. If the Executive shall disagree with the
determination of the physician appointed by the Corporation, he may request
an examination to be conducted by a physician of his own choosing. If the
two (2) physicians shall disagree, the two (2) physicians shall jointly
appoint an independent physician, whose determination shall be binding and
conclusive on all parties concerned for purposes of this Agreement. The
termination shall be deemed effective as of the date of the final
determination of Disability.
4.13. Cause. The Corporation may terminate the Executive for
-----
"Cause." A termination for Cause is a termination upon (a) the continued
failure by Executive to substantially perform his duties with the
Corporation (other than any such failure resulting from termination by
Executive for Good Reason) after a written demand for substantial
performance is delivered to Executive that specifically identifies the
manner in which the Corporation believes that Executive has not
substantially performed his duties, and Executive has failed to resume
substantial performance of his duties on a continuous basis within sixty
(60) days after receiving such demand; (b) the willful engaging by Executive
in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise; (c) any dishonest or fraudulent
conduct which results or is intended to result in gain to Executive or
Executive's personal enrichment at the expense of the Corporation; or (d)
Executive's conviction of a felony, misdemeanor or criminal offense (other
than traffic violations and other minor offenses).
4.14. Good Reason. The Executive may terminate his employment for
-----------
"Good Reason." "Good Reason" shall mean the occurrence of any of the
following:
(a) A change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, does not represent a promotion from his
status, title, position or responsibilities as in effect immediately prior
thereto; the assignment to the Executive of any duties or responsibilities
which, in the Executive's reasonable judgment, are inconsistent with his
status, title, position or responsibilities in effect immediately prior to
such assignment; or any removal
4
<PAGE>
of the Executive from or failure to reappoint or reelect him to any
position, except in connection with the termination of his employment for
Disability, Cause, as a result of his death or by the Executive other than
for Good Reason.
(b) The insolvency or the filing (by any party, including the
Corporation) of a petition for bankruptcy of the Corporation.
(c) Any material breach by the Corporation of this Agreement.
(d) Any purported termination of the Executive's employment for Cause
by the Corporation which does not comply with the terms of this Agreement.
(e) The failure of the Corporation to obtain an agreement,
satisfactory to the Executive, from any successor or assign of the
Corporation, to assume and agree to perform this Agreement, as contemplated
in Section 9.4 hereof.
Provided, however, that no termination shall be for Good Reason until the
Corporation shall have had at least thirty (30) days to cure any conduct
alleged to have caused Good Reason after a written demand shall have been
delivered to the Corporation specifying the alleged conduct.
The Executive's right to terminate his employment pursuant to this
Section 4.14 shall not be affected by his incapacity due to physical or
mental illness. The Executive's continued employment or failure to give
Notice of Termination shall not constitute consent to, or a waiver of rights
with respect to, any circumstances constituting Good Reason hereunder.
Subject to the thirty (30) day cure period set forth above, any good
faith determination of Good Reason made by the Executive shall be
conclusive.
4.15. Voluntary. The Executive's employment shall terminate upon
---------
the Executive's voluntary resignation as an employee of the Corporation.
4.2. Notice of Termination. Any purported termination by the Corporation
---------------------
or by the Executive (other than by death of the Executive) shall be communicated
by Notice of Termination to the other. For purposes of this Agreement, a "Notice
of Termination" shall mean a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances
5
<PAGE>
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated, and (iii) the Termination Date. For purposes of this
Agreement, no such purported termination of employment shall be effective
without such Notice of Termination.
4.3. Termination Date, etc. "Termination Date" shall mean in the case
---------------------
of the Executive's death, his date of death, in the event of Executive's
Disability, the date set forth in Paragraph 4.12, or in all other cases, the
date specified in the Notice of Termination subject to the following:
(a) If the Executive's employment is terminated by the
Corporation, the date specified in the Notice of Termination shall be at
least thirty (30) days after the date the Notice of Termination is given to
the Executive, Provided, however, that in the case of Disability, the
Executive shall not have returned to the full-time performance of his
duties during such period of at least thirty (30) days.
(b) If the Executive's employment is terminated for Good
Reason, the date specified in the Notice of Termination shall not be less
than thirty (30) nor more than sixty (60) days after the date the Notice of
Termination is given to the Corporation.
(c) Except in the case of a termination for Disability subject
to the provisions of Paragraph 4.12, in the event that within thirty (30)
days following the date of receipt of the Notice of Termination, one party
notifies the other that a dispute exists concerning the basis for
termination, the Executive's employment hereunder shall not be terminated
except after the dispute is finally resolved and a Termination Date is
determined either by a mutual written agreement of the parties, or by a
binding and final judgment order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal
having been perfected).
6
<PAGE>
ARTICLE V
---------
Obligations of the Corporation Upon Termination
-----------------------------------------------
5.1. Good Reason; Other Than for Cause, Death or Disability. If,
------------------------------------------------------
during the Employment Term, the Corporation shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(a) The Corporation shall pay to the Executive in a lump sum in
cash within ten (10) days after the Termination Date the aggregate of the
following amounts:
(1) The sum of:
(i) The Executive's Annual Base Salary through the
Termination Date to the extent not theretofore paid.
(ii) The product of (x) the sum of the average
bonuses paid or payable, including any amounts that were deferred, and the
average value of any stock options and stock appreciation rights awarded
(computed solely by reference to the difference between the value of the stock
to which it relates and the exercise price or base value thereof) to the
Executive in respect of the three (3) fiscal years immediately preceding the
fiscal year in which the Effective Date occurs (the "Recent Average Bonus") and
(y) a fraction, the numerator of which is the number of days completed in the
current fiscal year through the Termination Date, and the denominator of which
is 365; and
(iii) Except as provided in Paragraph 5.1(b), any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid.
The sum of the amounts described in clauses (i), (ii) and
(iii)shall be hereinafter referred to as the "Accrued Obligations";
(2) The amount equal to the product of (i) the number of
days remaining in the Employment Term as of the Termination Date had the
Executive's employment not been terminated (the "Remaining Employment Term")
divided by 365, and (ii) the sum of (x) the Executive's Annual Base Salary
(increased for this purpose by any Section 401(k) deferrals, cafeteria plan
elections, or other deferrals that would have
7
<PAGE>
increased Executive's Annual Base Salary if paid in cash to Executive when
earned) and (y) the Executive's Recent Average Bonus.
(b) To the extent not theretofore paid or provided, the
Corporation shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or which the Executive is
eligible to receive after a termination of Employment under any plan,
program, Policy or practice or contract or agreement of the Corporation
(such other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
5.2. Death. If the Executive's employment is terminated by reason of the
-----
Executive's death during the Employment Term, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, except that the Corporation shall pay or provide the Accrued
Obligations, six (6) months of Annual Base Salary, and the other Benefits. The
Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within thirty (30) days of the Termination
Date. The six (6) months of Annual Base Salary shall be paid during the six (6)
month period following the Termination Date on a monthly basis.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this section shall include, and the Executive's family shall be
entitled to receive, benefits at least equal to the most favorable benefits
provided by the Corporation to surviving families of peer executives of the
Corporation.
5.3. Disability. If the Executive's employment is terminated by reason of
----------
the Executive's Disability during the Employment Term, this Agreement shall
terminate without further obligations to the Executive, except that the Company
shall pay or provide the Accrued Obligations, six (6) months of Annual Base
Salary (subject to reduction as provided below) and the Other Benefits. The
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
thirty (30) days of the Termination Date. The six (6) months of Annual Base
Salary shall be paid during the six (6) month period following the termination
on a monthly basis. The six (6) months of Annual Base Salary shall be reduced by
any amounts paid to the Executive for such six (6) month period under any
disability insurance or program paid by the Corporation. With respect to the
provision of other Benefits, the term Other Benefits as utilized in this section
8
<PAGE>
shall include, and the Executive shall be entitled to receive, disability and
other benefits at least equal to the most favorable of those generally provided
by the Corporation to disabled executives and/or their families to other peer
executives and their families.
5.4. Cause; Other Than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Term, or if the Executive
voluntarily terminates employment during the Employment Term for other than Good
Reason, this Agreement (other than Paragraph 7.3, if applicable, and Article
VIII thereof) shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive Annual Base Salary through the Date
of Termination, any other amounts earned or accrued through the Termination
Date, and the amount of any compensation previously deferred by the Executive,
in each case to the extent theretofore unpaid; provided that if Executive
voluntarily terminates Executive shall receive the benefits normally provided
upon normal or early retirement with respect to other peer Executives and their
families to the extent he qualifies therefore. All salary or compensation
hereunder shall be paid to the Executive in a lump sum in cash within thirty
(30) days of the Date of Termination.
5.5. Delinquent Payments. If any of the payments referred to in this
-------------------
Article V are not paid within the time specified after the Termination Date
(hereinafter a "Delinquent Payment"), in addition to such principal sum, the
Corporation will pay to the Executive interest on all such Delinquent Payments
computed at the prime rate as announced from time to time by Bankers Trust
Company, New York, New York, or its successor, compounded monthly.
5.6. No Mitigation. In no event shall the Executive be obligated to
-------------
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced (except to the extent expressly set forth
herein) whether or not the Executive obtains other employment.
5.7. Excise Tax Payments.
-------------------
(a) Notwithstanding anything contained in this Agreement to
the contrary, in the event that any payment or distribution to or for the
benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of
9
<PAGE>
this Agreement or otherwise in connection with, or arising out of, his
employment with the Corporation (a "Payment" or "Payments"), would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code")), or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
interest and penalties, are collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) A determination shall be made as to whether and when Gross-Up
Payment is required pursuant to this Section 5.7 and the amount of such Gross-Up
Payment, such determination to be made within fifteen (15) business days of the
Termination Date, or such other time as requested by the Corporation or by the
Executive (provided the Executive reasonably believes that any of the Payments
may be subject to the Excise Tax) . Such determination shall be made by a
national independent accounting firm selected by the Executive (the "Accounting
Firm"). All fees, costs and expenses (including, but not limited to, the cost of
retaining experts) of the Accounting Firm shall be borne by the Corporation and
the Corporation shall pay such fees, costs and expenses as they become due. The
Accounting Firm shall provide detailed supporting calculations, acceptable to
the Executive, both to the Company and the Executive. The Gross-Up Payment, if
any, as determined pursuant to this Section 5.7(b) shall be paid by the
Corporation to the Executive within five (5) business days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive with respect to a Payment or Payments, it
shall furnish the Executive with an unqualified opinion that no Excise Tax will
be imposed with respect to any such Payment or Payments. Any such initial
determination by the Accounting Firm of the Gross-Up Payment shall be binding
upon the Corporation and the Executive subject to the application of Section 5.7
(c).
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(c) As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a
portion thereof) will be paid which should not have been paid (an "Overpayment")
or a Gross-Up Payment (or a portion thereof) which should have been paid will
not have been paid (an 'Underpayment"). An Underpayment shall be deemed to have
occurred upon notice (formal or informal) to the Executive from any governmental
taxing authority that the tax liability of the Executive (whether in respect of
the then current taxable year of the Executive or in respect of any prior
taxable year of the Executive) may be increased by reason of the imposition of
the Excise Tax on a Payment or Payments with respect to which the Company has
failed to make a sufficient Gross-Up Payment. An Overpayment shall be deemed to
have occurred upon a "Final Determination" (as hereinafter defined) that the
Excise Tax shall not be imposed upon a Payment or Payments with respect to which
the Executive had previously received a Gross-Up Payment. A Final Determination
shall be deemed to have occurred when the Executive has received from the
applicable governmental taxing authority a refund of taxes or other reduction in
his tax liability by reason of the Overpayment and upon either (i) the date a
determination is made by, or an agreement is entered into with, the applicable
governmental taxing authority which finally and conclusively binds the Executive
and such taxing authority, or in the event that a claim is brought before a
court of competent jurisdiction, the date upon which a final determination has
been made by such court and either all appeals have been taken and finally
resolved or the time for all appeals has expired or (ii) the expiration of the
statute of limitations with respect to the Executive's applicable tax return. If
an Underpayment occurs, the Executive shall promptly notify the Corporation and
the Corporation shall pay to the Executive at least five (5) business days prior
to the date on which the applicable governmental taxing authority has requested
payment, an additional Gross-Up Payment equal to the amount of the Underpayment
plus any interest and penalties imposed on the Underpayment. If an Overpayment
occurs, the amount of the Overpayment shall be treated as a loan by the
Corporation to the Executive and the Executive shall, within ten (10) business
days of the occurrence of such Overpayment, pay to the Corporation the
11
<PAGE>
amount of the Overpayment plus interest at an annual rate equal to the rate
provided for in Section 1274 (b)(2)(B) of the Code from the date the Gross-
Up Payment (to which the Overpayment relates) was paid to the Executive.
(d) Notwithstanding anything contained in this Agreement to the
contrary, in the event it is determined that an Excise Tax will be imposed
on any Payment or Payments, the Corporation shall pay to the applicable
governmental taxing authorities as Excise Tax withholding, the amount of
the Excise Tax that the Corporation has actually withheld from the Payment
or Payments.
ARTICLE VI
----------
Expenses
--------
During the term of the Executive's employment hereunder, the
Corporation shall promptly pay or reimburse the Executive for all reasonable and
necessary business expenses incurred by the Executive in the interest of the
Corporation. The Executive shall be required to submit an itemized account of
such expenditures and such proof as may be reasonably necessary o establish to
the satisfaction of the Corporation that the expenses incurred by the Executive
were ordinary and necessary business expenses incurred on behalf of the
Corporation.
ARTICLE VII
-----------
Fringe Benefits
---------------
7.1. Benefits. During the term of the Executive's employment
--------
hereunder, the Executive shall be entitled to participate in any benefit plans
and programs which the Corporation may from time to time make available to its
executive employees, including, without limitation (i) health and dental
insurance (family plan); (ii) supplemental executive medical plan (without
maximum limit); (iii) long term disability insurance; (iv) annual physical; (v)
business travel accident insurance; and (vi) financial consulting (up to Three
Thousand Five Hundred Dollars ($3,500.00) per year). The Executive acknowledges
that he shall have no vested rights in any such programs except as expressly
provided under the terms thereof and that such programs may be terminated,
modified, altered or reduced as well as supplemented.
12
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7.2. Life Insurance. During the term of the Executive's employment
--------------
hereunder, the Corporation shall provide the Executive with term life insurance
equal to not less than three (3) times the annual salary of the Executive;
provided, however, that the Executive shall have the option to purchase, at his
own expense, additional insurance equal to his annual salary under such term
life insurance policy.
7.3. Health Insurance. Notwithstanding anything contained herein to
----------------
the contrary, in the event the Executive's employment with the Corporation is
terminated (i) at the expiration of the Employment Term, or (ii) prior to such
date for any reason other than (A) a termination for Cause, or (B) a voluntary
termination by the Executive for any reason other than "Good Reason" or other
than approved by the Board of Directors of the Corporation, the Corporation
shall continue, until the Executive's death, to provide the Executive and his
spouse and dependents with health insurance and a supplemental executive medical
plan (with coverage similar to that received by the Executive at the time of
such termination and covering the Executive, his spouse and his dependents (as
defined in such insurance and medical plan), provided such insurance is
reasonably available to the Corporation with respect to the Executive.
7.4. Automobile. The Executive shall be provided with an automobile of
----------
a quality and value comparable to the automobile provided to Executive as of the
date of this Agreement for the Executive's use during the term of this
Agreement. Every two (2) years during the term of this Agreement, the Executive
shall be entitled to exchange the automobile then in his possession for a new
automobile of a quality and value comparable to the vehicle being replaced. The
Corporation shall provide or reimburse the Executive for all reasonable
insurance and maintenance for such automobile, including repairs, gas and oil.
7.5. Vacation. The Executive shall be entitled to such vacation time
--------
as the Corporation may from time to time make available to its executive
employees.
ARTICLE VIII
------------
Non-Competition and Confidential Information
--------------------------------------------
8.1. Non-Competition. The Executive agrees that he shall not at any
---------------
time while he is employed hereunder or at any time during the Restricted Period
(as hereinafter defined), for
13
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any reason, either directly or indirectly, whether as agent, stockholder (except
as the holder of not more than five percent (5%) of the stock of a publicly held
company, provided the Executive does not participate in the business of such
company or render advice or assistance to it), employee, officer, director,
trustee, partner, consultant, proprietor or otherwise:
(i) Engage in, render advice or assistance to, or in any way be
connected with any Competitive Entity (as hereinafter defined) located in
the Restricted Area (as hereinafter defined).
(ii) Except on behalf of the Corporation, entice or attempt to
entice any of the suppliers or customers of the Corporation, so as to
cause, or attempt to cause, any of said suppliers or customers not to do
business with the Corporation or to reduce or adversely change the nature
of the business done with the Corporation.
(iii) For purposes of this Paragraph 8, the following definitions
shall apply:
(A) A "Competitive Entity" shall be defined as any
business, person, firm, association, partnership, corporation or other
entity which (x) is engaged directly or indirectly in the retail department
store business or (y) which competes with the business of the Corporation
as such business is conducted from time to time during the course of the
Executive's employment hereunder.
(B) The term "Restricted Area" shall be defined during
the Executive's employment as fifty (50) miles from any store operated by
the Corporation from time to time during the course of the Executive's
employment, and after the termination of the Executive's employment it
shall be defined as fifty (50) miles from any store operated by the
Corporation during the one (1) year period prior to the termination of the
Executive's employment or during the Restricted Period.
(C) The term Restricted Period" shall be defined as
two (2) years from the date of termination of the Executive's employment
hereunder; provided, hereunder, that the Restricted Period shall be
-------- ---------
extended for the period during which it is determined that the Executive is
in violation of the provisions of this Paragraphs 8.1 or 8.2.
14
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8.2. Confidential Information. The Executive agrees that he shall not, at any
------------------------
time while he is employed hereunder and during the Restricted Period, disclose
to any person who is not at the time of such disclosure, a person to whom such
disclosure has been authorized by the Board or Chief Executive officer any
confidential information regarding the Corporation or its business obtained by
the Executive while in the employ of the Corporation, including without
limitation, financial information, marketing information and pricing information
(the "Confidential Information"). The Executive acknowledges that he also
understands and agrees that the foregoing shall not constitute a waiver by the
Corporation of any right to protect its trade secrets, including rights under
Section 134.90 of the Wisconsin Statutes and any successor provision thereto.
8.3. Return of Material. The Executive agrees upon termination of his
------------------
employment with the Corporation immediately to surrender to the Corporation all
correspondence, letters, contracts, manuals, mailing lists, marketing data,
ledgers, supplies, and all other materials or records of any kind relating to
the Corporation or its business then in his possession or under his control, as
well as all copies of any of the foregoing.
8.4. Specific Performance. The Executive recognizes that irrevocable injury
--------------------
may result to the Corporation and its business and properties, in the event of a
breach by him of the restrictions imposed by this Article VIII and that the
Executive's acceptance of such restrictions was a material factor in the
Corporation's decision to enter into this Agreement. The Executive agrees that
if he shall engage in any acts in violation of this Article VIII, the
Corporation shall be entitled, in addition to such other remedies and damages as
may be available to it, to an injunction prohibiting Executive from engaging in
any such acts.
ARTICLE IX
----------
Miscellaneous
-------------
9.1. Insurance. The Executive agrees to perform all acts and execute all
---------
instruments necessary in connection with the obtaining by the Corporation of
life insurance or disability insurance on the Executive.
9.2. Waiver of Breach. No waiver by either party hereto of any breach of any
----------------
provision of this Agreement shall be deemed a waiver by such party of any
subsequent breach.
15
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9.3. Notice. Any notice required or permitted to be given hereunder shall be
------
in writing and shall be deemed to be sufficiently given and received in all
respects when personally delivered or when deposited in the United States mail,
certified or registered mail, postage prepaid, return receipt requested,
addressed as follows:
IF TO THE Kohl's Department Stores, Inc.
CORPORATION: N56 W17000 Ridgewood Drive
Menomonee Falls, WI 53051
Attention: Chairman
With a Copy to: Kohl's Department Stores, Inc.
N56 W17000 Ridgewood Drive
Menomonee Falls, WI 53051
Attention: General Counsel
IF TO THE Kevin Mansell
EXECUTIVE: 6050 North Lake Drive
Whitefish Bay, WI 53217
9.4. Assignment. This Agreement shall not be assignable by the Corporation
----------
without the written consent of the Executive, except that if the Corporation
shall merge or consolidate with or into or transfer all or substantially all of
its assets, including goodwill, to another corporation or other form of business
organization, the Corporation shall require any successor corporation in such
merger, consolidation or transfer to assume and perform this Agreement. The
Executive may not assign, pledge or encumber any interest in this Agreement or
any part thereof without the written consent of the Corporation.
9.5. Complete Agreement; Amendment. once the term of this Agreement commences,
-----------------------------
this Agreement shall contain the full and complete understanding and agreement
of the parties and supersede all prior agreements and understandings between the
parties with respect to the subject matter hereof. This Agreement may not be
modified, amended, terminated or discharged orally.
9.6. Fees and Expenses. The Corporation shall pay all legal fees and related
-----------------
expenses (including the costs of experts, evidence and counsel) reasonably
incurred by the Executive as they become due as a result of a position taken in
good faith by the Executive with respect to (i) the Executive's termination of
employment.(including all such fees and expenses, if
16
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any, incurred in contesting or disputing any such termination of employment),
(ii) the Executive's hearing before the Board as contemplated in Section 4.13 of
this Agreement, (iii) the Executive's seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Corporation under which the Executive is or may be entitled to
receive benefits or (iv) a dispute between the Executive and the Internal
Revenue Service (or any other taxing authority) with regard to an "Underpayment"
(as defined in Section 5.7 of this Agreement).
9.7. Severability. The provisions of this Agreement shall be deemed severable
------------
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
9.8. Withholding Taxes. The Corporation shall deduct from all payments to the
-----------------
Executive hereunder any federal, state or local withholding or other taxes or
charges which the Corporation is from time to time required to deduct under
applicable law, and all amounts payable to the Executive hereunder are stated
herein before any such deduction. The Corporation shall have the right to rely
upon written opinion of legal counsel, which may be independent legal counsel or
legal counsel regularly employed by the Corporation, if any questions should
arise as to any such deductions.
9.9. Governing Law. This Agreement and all questions or its interpretation,
-------------
performance, enforceability and the rights and remedies of the parties hereto
shall be governed by and determined in accordance with the laws of the State of
Wisconsin.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day, month and year first above written.
17
<PAGE>
KOHL'S DEPARTMENT STORES, INC.
By: /s/ William S. Kellogg
-----------------------------
William S. Kellogg, Chairman
EXECUTIVE:
/s/ Kevin Mansell
---------------------------------
Kevin Mansell
18
<PAGE>
Exhibit 12.1
Kohl's Corporation
Ratio of Earnings to Fixed Charges
($000s)
<TABLE>
<CAPTION>
13 Weeks Ended
-----------------
May 1, May 2, Fiscal Year (1)
------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
- --------
Income before income taxes and
extraordinary items $64,142 $44,231 $316,749 $235,063 $171,368 $122,729 $117,451
Fixed charges (3) 17,252 15,103 63,135 57,446 42,806 30,649 19,758
Less interest capitalized
during period (719) (445) (1,878) (2,043) (2,829) (1,287) (603)
------- ------- -------- -------- -------- -------- --------
$80,675 $58,889 $378,006 $290,466 $211,345 $152,091 $136,606
======= ======= ======== ======== ======== ======== ========
Fixed Charges
- -------------
Interest (expensed or capitalized) (3) $6,139 $6,059 $24,550 $26,304 $20,574 $14,774 $7,911
Portion of rent expense
representative of interest 11,063 8,994 38,385 30,798 22,031 15,798 11,777
Amortization of deferred
financing fees 50 50 200 344 201 77 70
------- ------- -------- -------- -------- -------- --------
$17,252 $15,103 $63,135 $57,446 $42,806 $30,649 $19,758
======= ======= ======== ======== ======== ======== ========
Ratio of earnings to fixed charges 4.68 3.90 5.99 5.06 4.94 4.96 (2) 6.91
======= ======= ======== ======== ======== ======== ========
</TABLE>
(1) Fiscal 1998, 1997, 1996 and 1994 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 Consolidated Statements of
Income.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> MAY-01-1999
<CASH> 2,960
<SECURITIES> 15,000
<RECEIVABLES> 239,769
<ALLOWANCES> 4,005
<INVENTORY> 721,955
<CURRENT-ASSETS> 1,017,037
<PP&E> 1,208,992
<DEPRECIATION> 224,161
<TOTAL-ASSETS> 2,195,489
<CURRENT-LIABILITIES> 346,693
<BONDS> 308,878
0
0
<COMMON> 1,628
<OTHER-SE> 1,453,100
<TOTAL-LIABILITY-AND-EQUITY> 2,195,489
<SALES> 910,256
<TOTAL-REVENUES> 910,256
<CGS> 597,128
<TOTAL-COSTS> 840,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,132
<INCOME-PRETAX> 64,142
<INCOME-TAX> 24,823
<INCOME-CONTINUING> 39,319
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,319
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.24
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> MAY-02-1998
<CASH> 2,551
<SECURITIES> 15,000
<RECEIVABLES> 186,586
<ALLOWANCES> 3,507
<INVENTORY> 623,486
<CURRENT-ASSETS> 837,677
<PP&E> 972,380
<DEPRECIATION> 191,055
<TOTAL-ASSETS> 1,679,409
<CURRENT-LIABILITIES> 313,085
<BONDS> 311,142
0
0
<COMMON> 1,579
<OTHER-SE> 981,487
<TOTAL-LIABILITY-AND-EQUITY> 1,679,409
<SALES> 744,571
<TOTAL-REVENUES> 744,571
<CGS> 491,102
<TOTAL-COSTS> 695,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,059
<INCOME-PRETAX> 44,231
<INCOME-TAX> 17,383
<INCOME-CONTINUING> 26,848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,848
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.17
</TABLE>
