Kohl's (KSS) 10-Q 4 Jun 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended May. 01, 2010	May. 29, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-05-01
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	KSS
Entity Registrant Name	KOHLS CORPORATION
Entity Central Index Key	0000885639
Current Fiscal Year End Date	--01-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		307,919,332

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	May. 01, 2010	Jan. 30, 2010	May. 02, 2009
Current assets:
Cash and cash equivalents	$2,388	$2,267	$856
Merchandise inventories	3,017	2,923	2,804
Deferred income taxes	91	73	74
Other	209	222	188
Total current assets	5,705	5,485	3,922
Property and equipment, net	7,109	7,018	7,001
Long-term investments	318	321	327
Favorable lease rights, net	201	204	198
Other assets	133	132	115
Total assets	13,466	13,160	11,563
Current liabilities:
Accounts payable	1,412	1,188	1,003
Accrued liabilities	895	1,002	777
Income taxes payable	113	184	82
Current portion of long-term debt and capital leases	318	16	17
Total current liabilities	2,738	2,390	1,879
Long-term debt and capital leases	1,754	2,052	2,056
Deferred income taxes	380	377	323
Other long-term liabilities	497	488	420
Shareholders' equity:
Common stock	4	4	4
Paid-in capital	2,133	2,085	1,981
Treasury stock, at cost, 46 shares	(2,642)	(2,639)	(2,639)
Accumulated other comprehensive loss	(36)	(36)	(46)
Retained earnings	8,638	8,439	7,585
Total shareholders' equity	8,097	7,853	6,885
Total liabilities and shareholders' equity	$13,466	$13,160	$11,563

1_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical)
Share data in Millions	May. 01, 2010	Jan. 30, 2010	May. 02, 2009
Treasury stock, shares	46	46	46

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Millions, except Per Share data	3 Months Ended May. 01, 2010	3 Months Ended May. 02, 2009
Net sales	$4,035	$3,638
Cost of merchandise sold (exclusive of depreciation shown separately below)	2,498	2,270
Gross margin	1,537	1,368
Operating expenses:
Selling, general, and administrative	1,031	961
Depreciation and amortization	151	141
Preopening expenses	4	15
Operating income	351	251
Interest expense, net	31	32
Income before income taxes	320	219
Provision for income taxes	121	82
Net income	$199	$137
Basic:
Basic	0.65	0.45
Average number of shares	307	305
Diluted:
Diluted	0.64	0.45
Average number of shares	309	306

2_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (USD $)
In Millions	Common Stock	Paid-in Capital	Treasury Stock	Accumulated other Comprehensive loss	Retained Earnings	Total
Ending Balance at May. 02, 2009						$6,885
Beginning Balance at Jan. 30, 2010	4	2,085	(2,639)	(36)	8,439	7,853
Beginning Balance (in shares) at Jan. 30, 2010	353
Net income and other comprehensive income					199	199
Share-based compensation		15				15
Exercise of stock options and other (in shares)	1
Exercise of stock options and other		32				32
Net income tax impact from exercise of stock options		1				1
Treasury stock purchases			(3)			(3)
Ending Balance (in shares) at May. 01, 2010	354
Ending Balance at May. 01, 2010	$4	$2,133	($2,642)	($36)	$8,638	$8,097

3_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended May. 01, 2010	3 Months Ended May. 02, 2009
Operating activities
Net income	$199	$137
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt discount and deferred financing fees	152	141
Share-based compensation	14	11
Excess tax benefits from share-based compensation	2
Deferred income taxes	(16)	4
Other non-cash revenues and expenses	8	24
Changes in operating assets and liabilities:
Merchandise inventories	(92)	(5)
Other current and long-term assets	12	21
Accounts payable	224	122
Accrued and other long-term liabilities	(146)	(36)
Income taxes	(70)	(25)
Net cash provided by operating activities	287	394
Investing activities
Acquisition of property and equipment and favorable lease rights	(191)	(186)
Sales of investments in auction rate securities	4	7
Other	(1)	2
Net cash used in investing activities	(188)	(177)
Financing activities
Treasury stock purchases	(3)	(1)
Capital lease payments	(5)	(4)
Proceeds from stock option exercises	32	1
Excess tax benefits from share-based compensation	(2)
Net cash provided by (used in) financing activities	22	(4)
Net increase in cash and cash equivalents	121	213
Cash and cash equivalents at beginning of period	2,267	643
Cash and cash equivalents at end of period	2,388	856
Supplemental information:
Interest paid, net of capitalized interest	15	17
Income taxes paid	$207	$103

Basis of Presentation

Basis of Presentation
	3 Months Ended May. 01, 2010
Basis of Presentation	1. Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 related footnotes included in our Form 10-K (Commission File No.1-11084) filed with the Securities and Exchange Commission. Due to the seasonality of our 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 sales and costs associated with the opening of new stores. We operate as a single business unit. Certain reclassifications have been made to the Condensed Consolidated Balance Sheet as of May2, 2009 and the Statement of Cash Flows for the three months ended May2, 2009 to conform to the 2010 presentation.

Debt

Debt
	3 Months Ended May. 01, 2010
Debt	2. Debt Long-term debt consists of the following: Maturing Weighted Average Effective Rate May1, 2010 January30, 2010 May2, 2009 (Dollars in Millions) Non-callable and unsecured senior debt: March 2011 6.32% $ 300 $ 300 $ 300 October 2011 7.41% 100 100 100 2017 6.31% 650 650 650 2029 7.36% 200 200 200 2033 6.05% 300 300 300 2037 6.89% 350 350 350 Total senior debt 6.55% 1,900 1,900 1,900 Capital lease obligations 178 174 180 Unamortized debt discount (6) (6) (7) Less current portion (318) (16) (17) Long-term debt and capital leases $ 1,754 $ 2,052 $ 2,056 Based on quoted market prices (Level 1per ASC No.820, Fair Value Measurements and Disclosures), the estimated fair value of our senior debt was approximately $2.1 billion at May1, 2010.

Share-Based Compensation

Share-Based Compensation
	3 Months Ended May. 01, 2010
Share-Based Compensation	3. Share-Based Compensation We grant share-based compensation, including options to purchase shares of our common stock and nonvested stock, pursuant to various plans. Annual grants of stock options and nonvested stock are generally made to eligible employees in the first quarter of the fiscal year. Grants to newly-hired and promoted employees and other discretionary grants are made periodically throughout the remainder of the year. In conjunction with the March 2010 annual grant, we implemented various changes to our share-based compensation practices. Share-based compensation is no longer granted to employees below our management board. All employees who remain eligible for share-based compensation may now elect to receive their annual equity awards in the form of stock options, nonvested stock awards, or a blend of stock options and nonvested stock awards. Finally, annual grants are now based on a fixed dollar value tied to the employees performance rating, which will eliminate the expense volatility caused by changes in our stock price. The Black-Scholes option valuation model was used to estimate the fair value of each option award during the first quarter of the respective fiscal year based on the following assumptions: 2010 2009 Volatility 33.6% 42.8% Risk-free interest rate 2.5% 1.7% Expected life in years 5.4 5.4 Dividend yield 0% 0% Weighted-average fair value at grant date $19.51 $16.98 The following table summarizes our stock option activity for the first quarters of 2010 and 2009: 2010 2009 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price (Shares in Thousands) Balance at beginning of year 19,848 $ 52.10 19,134 $ 53.01 Granted 458 55.66 2,617 41.51 Forfeited/expired (139) 54.06 (300) 56.70 Exercised (872) 36.27 (26) 29.38 Balance at end of quarter 19,295 $ 52.89 21,425 $ 51.58 The following table summarizes our nonvested stock activity for the first quarters of 2010 and 2009: 2010 2009 Shares Weighted Average Grant DateFair Value Shares Weighted Average GrantDate FairValue (Shares in Thousands) Balance at beginning of year 883 $ 45.44 276 $ 54.39 Granted 430 55.74 657 41.63 Vested (179) 47.41 (58) 60.73 Balance at end of quarter 1,134 $ 49.03 875 $ 44.38 Total share-based compensation expense was $14 million for the three months ended May1, 2010 and $11 million for the three months ended May2, 2009. Total unrecognized share-based compensation expense for all share-based payment plans was $131 million at May1, 2010, of which approximately $46 million is expected to be recognized in the remainder of 2010, $36 million in 2011, $22 million in 2012, $18 million in 2013 and $9 million in 2014. Future compensation expense may be impacted by future grants, changes in forfeiture estimates and/or actual forfeitures whi

Long-Term Investments

Long-Term Investments
	3 Months Ended May. 01, 2010
Long-Term Investments	4. Long-Term Investments Our long-term investments consist primarily of investments in auction rate securities (ARS), which are long-term debt instruments with interest rates reset through periodic short-term auctions. Our ARS portfolio consists entirely of highly-rated, insured student loan backed securities. Substantially all of the principal and interest is insured by the federal government and the remainder is insured by highly-rated insurance companies. As of May1, 2010, $189 million of our ARS (at fair value) were rated AAA by Moodys, Standard Poors and/or Fitch Ratings. The remaining ARS investments have ratings equivalent to the Standard Poors AA and A ratings. We intend to hold our ARS until their fair value once again equals their par value and believe we have the ability to do so based on other sources of liquidity. Therefore, impairment charges are considered temporary and have been included in Accumulated Other Comprehensive Loss within our Condensed Consolidated Balance Sheets. The fair value for our ARS is based on third-party pricing models and is classified as a Level 3 pricing category.The Level 3 pricing category includes financial instruments that are not actively traded on a market exchange and includes situations where there is little, if any, market activity for the financial instrument. Level 3 prices are determined using significant unobservable inputs or valuation techniques. We utilized a discounted cash flow model to estimate the current fair market value for each of the securities we owned as there was no recent activity in the secondary markets in these types of securities. This model used unique inputs for each security including discount rate, interest rate currently being paid and maturity. The discount rate was calculated using the closest match available for other insured asset backed securities. A market failure scenario was employed as recent successful auctions of these securities were very limited. The following table presents a rollforward of our ARS, all of which are measured at fair value on a recurring basis using unobservable inputs (Level 3per ASC No.820, Fair Value Measurements and Disclosures): 2010 2009 (In Millions) Balance at beginning of year $ 320 $ 332 Sales (at par) (4) (7) Unrealized gains 1 1 Balance at end of quarter $ 317 $ 326

Contingencies

Contingencies
	3 Months Ended May. 01, 2010
Contingencies	5. Contingencies We are 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 our consolidated financial statements.

Net Income Per Share

Net Income Per Share
	3 Months Ended May. 01, 2010
Net Income Per Share	6. Net Income Per Share The calculations of the numerator and denominator for basic and diluted net income per share are summarized as follows: ThreeMonths Ended May1, 2010 May2, 2009 (In Millions) Numerator - net income $ 199 $ 137 Denominator - weighted average shares: Basic 307 305 Impact of dilutive employee stock options and non-vested stock (a) 2 1 Diluted 309 306 (a) Excludes 8million options for the three months ended May1, 2010 and 19million options for the three months ended May2, 2009, as the impact of such options was antidilutive.