UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X]Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended January 29, 2000 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 Identification incorporation or organization) No.) N56 W17000 Ridgewood Drive, 53051 Menomonee Falls, Wisconsin (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code (262) 703-7000 Securities registered pursuant to section 12(b) of the Act: Title of each class Name of each exchange on which Common Stock, $.01 Par Value registered New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE 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. X Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At April 5, 2000 the aggregate market value of the voting stock of the registrant held by stockholders who were not affiliates of the registrant was $14,371,757,081 (based upon the closing price of Registrant's Common Stock on the New York Stock Exchange on such date). At April 5, 2000, the registrant had issued and outstanding an aggregate of 164,500,996 shares of its Common Stock. Documents Incorporated by Reference: 1. Portions of Registrant's Proxy Statement dated April 13, 2000 are incorporated into Part III.
PART I Item 1. Business The Company currently operates 298 family oriented, specialty department stores primarily in the Midwest, Mid-Atlantic and Northeast areas of the United States that feature quality, national brand merchandise priced to provide exceptional value to customers. The Company's stores sell moderately priced apparel, shoes, accessories and home products targeted to middle-income customers shopping for their families and homes. Kohl's offers a convenient shopping experience through easily accessible locations, well laid out stores, central checkout and good in-stock position which allows the customer to get in and out quickly. Kohl's stores have fewer departments than traditional, full-line department stores, but offer customers dominant assortments of merchandise displayed in complete selections of styles, colors and sizes. Central to the Company's pricing strategy and overall profitability is a culture focused on maintaining a low cost structure. Critical elements of this low cost structure are the Company's unique store format, lean staffing levels, sophisticated management information systems and operating efficiencies resulting from centralized buying, advertising and distribution. As used herein, the term the "Company" and "Kohl's" refer to Kohl's Corporation, its consolidated subsidiaries and predecessors. The Company's fiscal year ends on the Saturday closest to January 31. Fiscal 1999 ended on January 29, 2000 and was a 52 week year. Expansion Since 1986, the Company has expanded from 40 stores in three states to the current total of 298 stores in 25 states both by acquiring and converting pre- existing stores and by opening new stores. Kohl's expansion strategy is to open a mix of new market, contiguous market and fill-in stores. This allows the Company to balance the cost of new market entry by leveraging advertising, purchasing, transportation and regional overhead expenses in fill-in markets. In fiscal 1999, Kohl's opened 46 new stores which included 25 stores in new markets and 21 stores in fill-in or contiguous markets. New markets entered included Denver, CO with six stores, St. Louis, MO with six stores and Dallas/Ft. Worth, TX with 13 stores. Fill-in or contiguous stores included 11 midwest, 8 mid-Atlantic and 2 southeast stores. Management believes there is substantial opportunity for further growth and intends to open approximately 60 new stores in fiscal 2000. In the first quarter of fiscal 2000, Kohl's opened 39 stores including the conversion of 33 stores previously operated by Caldor Corp. in New York, New Jersey, Connecticut and Maryland. In addition, four new stores in the Dallas/Fort Worth, TX market and one new store each in Rochester, MN and Arnold, MO were opened. In fall of 2000, Kohl's plans to open approximately 21 additional stores, entering the Oklahoma market for the first time with three stores in the Tulsa market and expansion in a number of existing markets including Chicago, Denver, Dallas and New York. Kohl's expansion plan for 2001 is to open 55-60 new stores, including entering the Atlanta market with approximately 12 stores. Kohl's retailing strategy has proven to be readily transferable to all size markets. For example, Kohl's successfully operates stores in small markets such as Kalamazoo and Green Bay, intermediate markets such as Kansas City and Denver and large markets such as Chicago and Dallas. In addition, the Kohl's concept has been successful in multiple retailing formats: strip shopping centers, community and regional malls and free-standing stores. Management believes the transferability of the Kohl's retailing strategy, the Company's experience in acquiring and converting pre-existing stores and in building new stores, combined with the Company's substantial investment in management information systems, centralized distribution and headquarters functions provide a solid foundation for further expansion. In determining where to open new stores, the Company evaluates: demographic information, the availability of prime real estate locations, existing and potential competitors, and the potential impact on existing stores. In addition, the Company develops pro forma projections that must meet internal hurdle rates taking into account the economies of scale available in advertising, distribution and regional expenses. 2
Merchandising Kohl's stores feature moderately priced, department store national brands which provide exceptional value to customers. Kohl's merchandise is targeted to appeal to middle-income customers shopping for their families and homes. All of the Company's stores generally carry a consistent merchandise assortment with some differences attributable to regional preferences. The Company's stores emphasize apparel and shoes for children, women and men, soft home products, such as towels, sheets and pillows, and housewares. The Company's merchandise mix is reflected by the following table: <TABLE> <CAPTION> Merchandise Mix (percent of net sales) Fiscal Year ---------------- 1999 1998 1997 ---- ---- ---- <S> <C> <C> <C> Womens.................................................. 28.8% 27.9% 26.4% Mens.................................................... 21.0% 21.3% 22.2% Home.................................................... 19.3% 18.9% 18.9% Childrens............................................... 12.9% 13.6% 13.7% Footwear................................................ 9.8% 10.2% 10.9% Accessories............................................. 8.2% 8.1% 7.9% </TABLE> The Company purchases approximately 87% of its merchandise from domestic suppliers. Distribution The Company receives 99% of its merchandise at four distribution centers, with the balance delivered directly to the stores by vendors or their distributors. The distribution centers ship merchandise to each store by contract carrier several times a week. The Menomonee Falls, Wisconsin distribution center opened in 1981. This 500,000 square foot facility services the Company's stores in Illinois, Iowa, Wisconsin, Minnesota and North Dakota. The Findlay, Ohio distribution center opened in August 1994. This 650,000 square foot facility services the Company's stores in Ohio, Michigan, Indiana, Kentucky, Tennessee and West Virginia. The Company opened a 350,000 square foot distribution center in Winchester, Virginia in the summer of 1997. This facility was expanded during 1999 by approximately 50,000 square feet to increase its capacity. The facility services the Company's stores in North Carolina, Pennsylvania, Virginia, Maryland, Connecticut, New York, Delaware and New Jersey. The Company opened a 540,000 square foot distribution center in Blue Springs, Missouri in December of 1999. The facility was built to handle approximately 100 stores and is servicing the Company's stores in Colorado, Iowa, Kansas, Missouri, Nebraska, South Dakota, and Texas. These four facilities are capable of supporting approximately 400 stores. The Company plans to open its fifth distribution center in New York in 2001. Employees As of January 29, 2000, the Company had approximately 43,000 employees, including approximately 13,100 full-time and approximately 29,900 part-time associates. The number of associates varies during the year, peaking during the "back-to-school" and Christmas holiday seasons. None of the Company's associates is represented by a collective bargaining unit. The Company believes its relations with its associates are very good. 3
Competition The retail industry is highly competitive. Management considers quality, value, merchandise mix, service and convenience to be the most significant competitive factors in the industry. The Company's primary competitors are traditional department stores, up-scale mass merchandisers and specialty stores. The Company's specific competitors vary from market to market. Seasonality 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. Trademarks and Service Marks The name "Kohl's", written in its distinctive block style, is a registered service mark of the Company, and the Company considers this mark and the accompanying name recognition to be valuable to its business. The Company has approximately 40 additional trademarks, trade names and service marks, most of which are used in its private label program. Item 2. Properties As of January 29, 2000, the Company operated 259 stores in 24 states. The Company owned 67 stores, owned 50 stores with ground leases and leased 142 stores under operating leases. The typical ground lease has an initial term of between 15 and 25 years, with 2 to 6 renewal periods of 5 to 10 years each, exercisable at the Company's option. The typical operating lease has an initial term of between 15 and 20 years, with 2 to 8 renewal periods of 5 to 10 years each, exercisable at the Company's option. Substantially all of the Company's leases provide for a minimum annual rent that is fixed or adjusts to set levels during the lease term, including renewals. Approximately 52% of the leases provide for additional rent based on a percentage of sales to be paid when designated sales levels are achieved. At January 29, 2000, the average minimum annual rent of the 142 leased stores was $6.53 per square foot, and the average minimum annual rent of the 50 stores operated under ground leases was $2.78 per square foot. 4
The Company's stores are located in strip shopping centers (159), community and regional malls (43), and as free standing units (57). Of the Company's stores, 228 are one story facilities and 31 are two story facilities. <TABLE> <CAPTION> Number of Stores at January 29, 2000 ----------- <S> <C> Illinois...................................................... 37 Ohio.......................................................... 31 Wisconsin..................................................... 27 Pennsylvania.................................................. 21 Michigan...................................................... 20 Indiana....................................................... 17 Minnesota..................................................... 14 Texas......................................................... 13 Virginia...................................................... 12 Maryland...................................................... 9 North Carolina................................................ 9 Missouri...................................................... 8 Kansas........................................................ 7 Colorado...................................................... 6 New Jersey.................................................... 6 Iowa.......................................................... 4 Kentucky...................................................... 4 Nebraska...................................................... 4 Tennessee..................................................... 3 Delaware...................................................... 2 West Virginia................................................. 2 New York...................................................... 1 North Dakota.................................................. 1 South Dakota.................................................. 1 --- Total......................................................... 259 === </TABLE> The Company owns its distribution centers in Menomonee Falls, Wisconsin; Findlay, Ohio; Winchester, Virginia and Blue Springs, Missouri. The Company also owns its corporate headquarters in Menomonee Falls, Wisconsin. Item 3. Legal Proceedings See Note 9 to the Company's Consolidated Financial Statements concerning routine legal matters. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the Company's security holders during the last quarter of fiscal 1999. 5
PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters (a) Market information The Common Stock has been traded on the New York Stock Exchange since May 19, 1992, under the symbol "KSS." On March 6, 2000 and March 9, 1998, the Company's Board of Directors declared a 2 for 1 stock split effected in the form of a stock dividend on the Company's common stock. The record dates for the stock splits were April 7, 2000 and April 10, 1998, respectively. The prices in the table set forth below indicate the high and low prices of the Common Stock for each quarter in fiscal 1999 and 1998, adjusted by the Company to retroactively give effect to the stock splits. <TABLE> <CAPTION> Price Range ------------- High Low ------ ------ <S> <C> <C> Fiscal 1999 First Quarter............................................... $39.00 $31.38 Second Quarter.............................................. 40.63 31.75 Third Quarter............................................... 39.97 30.75 Fourth Quarter.............................................. 39.22 31.47 Fiscal 1998 First Quarter............................................... $21.73 $17.34 Second Quarter.............................................. 28.81 20.25 Third Quarter............................................... 29.47 17.03 Fourth Quarter.............................................. 33.88 22.56 </TABLE> (b) Holders At April 5, 2000, there were 5,794 holders of record of the Common Stock. (c) Dividends The Company has never paid a cash dividend, has no current plans to pay dividends on its Common Stock and intends to retain all earnings for investment in and growth of the Company's business. In addition, financial covenants and other restrictions in the Company's financing agreements limit the payment of dividends on the Common Stock. The payment of future dividends, if any, will be determined by the Board of Directors in light of existing conditions, including the Company's earnings, financial condition and requirements, restrictions in financing agreements, business conditions and other factors deemed relevant by the Board of Directors. 6
Item 6. Selected Consolidated Financial Data The selected consolidated financial data presented below should be read in conjunction with the consolidated financial statements of the Company and related notes included elsewhere in this document. The selected consolidated financial data, except for the operating data, has been derived from the audited consolidated financial statements of the Company, which have been audited by Ernst & Young LLP, independent auditors. <TABLE> <CAPTION> Fiscal Year Ended ----------------------------------------------------------------------------- January 29, January 30, January 31, February 1, February 3, 2000 1999 1998 1997 1996 (a) ------------- ------------- ------------- ------------- ------------- (Dollars in Thousands, Except Per Share and Per Square Foot Data) <S> <C> <C> <C> <C> <C> Statement of Operations Data: Net sales................. $ 4,557,112 $ 3,681,763 $ 3,060,065 $ 2,388,221 $ 1,925,669 Cost of merchandise sold.. 3,014,073 2,447,301 2,046,468 1,608,688 1,294,653 ------------- ------------- ------------- ------------- ------------- Gross margin.............. 1,543,039 1,234,462 1,013,597 779,533 631,016 Selling, general and administrative expenses.. 975,269 810,162 678,793 536,226 436,442 Depreciation and amortization............. 88,523 70,049 57,380 44,015 33,931 Preopening expenses....... 30,972 16,388 18,589 10,302 10,712 Credit operations, non- recurring(b)............. -- -- -- -- 14,052 ------------- ------------- ------------- ------------- ------------- Operating income.......... 448,275 337,863 258,835 188,990 135,879 Interest expense, net..... 27,163 21,114 23,772 17,622 13,150 ------------- ------------- ------------- ------------- ------------- Income before income taxes.................... 421,112 316,749 235,063 171,368 122,729 Provision for income taxes.................... 162,970 124,483 93,790 68,890 50,077 ------------- ------------- ------------- ------------- ------------- Net income................ $ 258,142 $ 192,266 $ 141,273 $ 102,478 $ 72,652 ============= ============= ============= ============= ============= Per share(c): Basic................... $ 0.80 $ 0.61 $ 0.46 $ 0.35 $ 0.25 Diluted................. $ 0.77 $ 0.59 $ 0.45 $ 0.34 $ 0.24 Operating Data: Comparable store sales growth(d)................ 7.9% 7.9% 10.0% 11.3% 5.9% Net sales per selling square foot(e)........... $ 270 $ 265 $ 267 $ 261 $ 257 Total square feet of selling space (in thousands; end of period).................. 18,757 15,111 12,533 10,064 8,378 Number of stores open (end of period)............... 259 213 182 150 128 Balance Sheet Data (end of period): Working capital........... $ 732,111 $ 559,207 $ 525,251 $ 229,339 $ 175,368 Property and equipment, net...................... 1,352,956 933,011 749,649 596,227 409,168 Total assets.............. 2,914,662 1,936,095 1,619,721 1,122,483 805,385 Total long-term debt...... 494,993 310,912 310,366 312,031 187,699 Shareholders' equity...... 1,685,503 1,162,779 954,782 517,471 410,638 </TABLE> - -------- (a) Fiscal 1995 contained 53 weeks. (b) Effective September 1, 1995, the Company terminated its agreement with Citicorp Retail Services (CRS) under which it sold its private label credit card receivables to CRS and established its own credit operation. In connection with this transaction, the Company incurred a one-time charge of $14.1 million ($8.3 million after-tax). (c) All per share data has been adjusted to reflect the 2 for 1 stock splits effected in April 2000, April 1998 and April 1996. (d) Comparable store sales for each period are based on sales of stores (including relocated or expanded stores) open throughout the full period and throughout the full prior period. Comparable store sales growth for fiscal 1996 compares the 52 weeks of fiscal 1996 versus the same 52 week calendar in fiscal 1995 and excludes the discontinued electronics business. Comparable store sales growth for fiscal 1995 has been adjusted to reflect the elimination of the 53rd week in fiscal 1995. (e) Net sales per selling square foot is calculated using net sales of stores that have been open for the full year divided by their square footage of selling space. 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 7. Results of Operations Net Sales Net sales for the last three years, number of stores, sales growth and net sales per selling square foot by year were as follows: <TABLE> <CAPTION> Fiscal Year ---------------------------------- 1999 1998 1997 ---------- ---------- ---------- <S> <C> <C> <C> Net sales (in thousands).................... $4,557,112 $3,681,763 $3,060,065 Number of stores open (end of period)....... 259 213 182 Sales growth--all stores.................... 23.8% 20.3% 28.1% Sales growth--comparable stores(a).......... 7.9% 7.9% 10.0% Net sales per selling square foot(b)........ $270 $265 $267 </TABLE> - -------- (a) Comparable store sales growth for each period is based on sales of stores (including relocated or expanded stores) open throughout the full period and throughout the full prior period. (b) Net sales per selling square foot is calculated using net sales of stores that have been open for the full year divided by their square footage of selling space. Increases in net sales primarily reflect new store openings and comparable stores sales growth. Net sales increased $875.3 million, or 23.8%, from $3,681.8 million in fiscal 1998 to $4,557.1 million in fiscal 1999. Of the increase, $608.9 million is attributable to the opening of 46 new stores in fiscal 1999 and to the inclusion of a full year of operating results for the 32 stores opened in fiscal 1998. The remaining $266.4 million is attributable to the increase in comparable store sales. Net sales increased $621.7 million, or 20.3%, from $3,060.1 million in fiscal 1997 to $3,681.8 million in fiscal 1998. Of the increase, $408.6 million is attributable to the opening of 32 new stores in fiscal 1998 and to the inclusion of a full year of operating results for 32 stores opened in fiscal 1997. The remaining $213.1 million is attributable to the increase in comparable store sales. Components of Earnings The following table sets forth statement of operations data as a percentage of net sales for each of the last three years: <TABLE> <CAPTION> Fiscal Year ------------------- 1999 1998 1997 ----- ----- ----- <S> <C> <C> <C> Net sales.................................................. 100.0% 100.0% 100.0% Cost of merchandise sold................................... 66.1 66.5 66.9 ----- ----- ----- Gross margin............................................... 33.9 33.5 33.1 Selling, general and administrative expenses............... 21.4 22.0 22.2 Depreciation and amortization.............................. 1.9 1.9 1.8 Preopening expenses........................................ .7 .4 .6 ----- ----- ----- Operating income........................................... 9.9 9.2 8.5 Interest expense, net...................................... .6 .6 .8 ----- ----- ----- Income before income taxes................................. 9.3 8.6 7.7 Income taxes............................................... 3.6 3.4 3.1 ----- ----- ----- Net income................................................. 5.7% 5.2% 4.6% ===== ===== ===== </TABLE> 8
Gross Margin. The Company's gross margin has increased from 33.1% in fiscal 1997 to 33.9% in fiscal 1999. This increase is primarily attributable to a change in merchandise mix and improvements related to inventory management. Selling, General and Administrative Expenses. Selling, general and administrative expenses include all direct store expenses such as payroll, occupancy and store supplies and all costs associated with the Company's distribution centers, advertising and headquarters functions, but exclude depreciation and amortization. Although the total amount of selling, general, and administrative expenses increased from fiscal 1997 to fiscal 1999 due to the addition of new stores, such expenses decreased as a percent of net sales. Selling, general and administrative expenses decreased from 22.2% in fiscal 1997 to 21.4% in fiscal 1999. This decline reflects the leveraging of store, distribution and headquarters expenses as a result of the increased sales. Depreciation and Amortization. The total amount of depreciation and amortization increased from fiscal 1997 to fiscal 1999 due to the addition of new stores, the remodeling of existing stores and the mix of owned versus leased stores. Depreciation and amortization increased as a percentage of net sales from 1.8% in fiscal 1997 to 1.9% in fiscal 1999. Preopening Expenses. 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. The Company incurred $31.0 million of preopening expenses in fiscal 1999. Approximately $23.6 million related to the opening of 46 stores in fiscal 1999. The remaining $7.4 million is associated with the opening of 39 stores in the spring of 2000. The Company incurred $16.4 million of preopening expenses in fiscal 1998. Approximately, $15.4 million related to the opening of 32 stores in fiscal 1998. The remaining $1.0 million is associated with the opening of 18 stores in the spring of 1999. These expenses relate to the costs associated with new store openings, including advertising, hiring and training costs for new employees and processing and transporting initial merchandise. Operating Income. Operating income increased $110.4 million, or 32.7% in fiscal 1999, $79.0 million, or 30.5%, in fiscal 1998 and $69.8 million, or 37.0%, in fiscal 1997 due to the factors described above. Interest Expense. Net interest expense increased $6.1 million to $27.2 million in fiscal 1999. The increase in fiscal 1999 was primarily due to the $200 million of non-callable unsecured debentures issued in June 1999 to help finance the Company's continued store growth. Net interest decreased $2.7 million to $21.1 million in fiscal 1998. The decrease in fiscal 1998 was primarily due to a reduction in borrowings under its revolving credit facility and increased interest income on short-term investments that resulted from cash generated from a 1997 public equity offering. Net interest expense increased $6.2 million to $23.8 million in fiscal 1997. The increase in fiscal 1997 was due primarily to the $100 million non-callable unsecured senior notes issued in 1996. Income Taxes. The Company's effective tax rate was 38.7% in fiscal 1999, 39.3% in fiscal 1998 and 39.9% in fiscal 1997. The overall decline in the effective tax rates in fiscal 1999, fiscal 1998 and fiscal 1997 was primarily due to the decrease in state income taxes, net of federal tax benefits and non-deductible goodwill amortization as a percentage of income before taxes. Impact of Year 2000 In prior years, the Company discussed the nature and progress of its plan to ensure that appropriate systems would be Year 2000 compliant. In late 1999, the Company completed its remediation and testing of systems. As a result of those planning and implementation efforts, the Company experienced no significant disruptions in mission critical information technology and non- information technology systems and believes those systems successfully responded to the Year 2000 date change. The Company incurred total costs of approximately $8.5 million in connection with remediating its systems including $3.1 million in 1999. Of the total project cost, $7.1 million was attributable to the purchase of new hardware and software and related development costs that was 9
capitalized. The remaining $1.4 million of programming and testing costs was expensed as incurred and did not have a material effect on the results of operations. The Company is not aware of any material problems resulting from Year 2000 issues, either with our products, our internal systems or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. Inflation 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. Liquidity and Capital Resources The Company's primary ongoing cash requirements are for inventory purchases, the growth in the accounts receivable file and capital expenditures in connection with expansion and remodeling programs and preopening 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 $300 million 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 holiday selling season. In addition, the Company periodically accesses the capital markets, as needed, to finance its growth. In March 1999, the Company issued 5,600,000 shares (2,800,000 shares pre-split) of common stock to the public with net proceeds of approximately $200 million. The Company also issued $200 million of non-callable, unsecured 30 year public debentures on June 1, 1999. The Company's working capital increased to $732.1 million at January 29, 2000 from $559.2 million at January 31, 1999. Of this increase, $145.5 million is attributable to higher credit card receivables, net of the amounts financed by a bank, as the Company internally financed a larger balance of receivables in fiscal 1999. The remaining increase was primarily the result of higher merchandise levels required to support existing stores and incremental new store locations offset in part by increased accounts payable. Cash provided by operating activities was $110.2 million for fiscal 1999 as compared to $230.7 million for fiscal 1998 and cash used in operating activities of $50.2 million for fiscal 1997. The decrease is mainly attributable to the on balance sheet financing of the Company's accounts receivables in 1999. Excluding changes in operating assets and liabilities, cash provided by operating activities was $355.4 million for fiscal 1999, $265.8 million for fiscal 1998 and $199.0 million for fiscal 1997. In December 1999, the Company entered into a one year $225 million Receivable Purchase Agreement (RPA) with a bank, renewable at the Company's request and bank's option, under which it periodically sells, generally with recourse, an undivided interest in the Company's private label credit card receivables. This sale does not meet the true sale requirements of SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinquishments of Liabilities". At January 29, 2000, proceeds received upon the sale of $85 million of receivables to the bank are reflected as short-term debt. Prior to entering into the RPA in December 1999, the Company's subsidiary, KRC, had a similar agreement with the same bank in which it sold an undivided interest in its receivables. This transaction was structured in a way that receivable interests sold to the bank met the true sale requirements of SFAS No. 125. Accordingly, the $113.0 million interest sold at January 30, 1999 is reflected as a reduction of accounts receivable. The Company's capital expenditures were $625.4 million during fiscal 1999, $248.9 during fiscal 1998 and $202.7 during fiscal 1997. The increase in capital expenditures in 1999 is primarily attributable to new store spending, the construction of a new distribution center in Blue Springs, Missouri, the purchase of rights to 10
occupy 32 stores previously operated by Caldor Corporation and the related expenditures to renovate and refixture these locations. The increase in capital expenditures in 1998 is primarily attributable to the Company's remodeling program and new store spending in fiscal 1998. The Company recorded favorable lease rights of $121.6 million in 1999 from the purchase of the rights of Caldor Corporation's leases. The rights will be amortized on a straight line basis over the composite average life of the leases. Total capital expenditures for fiscal 2000 are currently expected to range between $450-$500 million. 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 plans to open approximately 60 new stores in fiscal 2000. The total cash outlay required for a newly constructed leased store, including capital expenditures, preopening expenses and net working capital, is approximately $5.5 million. The additional cash outlay required for new owned stores will vary depending upon land and sitework costs, but is expected to be approximately $7.5 million per location. The Company does not anticipate that its planned expansion will be limited by any restrictive covenants in its financing agreements. The Company anticipates that it will be able to satisfy its working capital requirements, planned capital expenditures and debt service requirements with proceeds from cash flows from operations, short-term trade credit, ongoing sales of receivables under the RPA and seasonal borrowings under its $300 million revolving credit facility. The Company expects to generate adequate cash flows from operating activities to sustain current levels of operations. The Company maintains favorable banking relations and anticipates that the necessary credit agreements will be extended or new agreements will be entered into in order to provide future borrowing requirements as needed. 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 store openings, debt service requirements and planned capital expenditures. Forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "plans", "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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Company's primary exposure to market risk consists of changes in interest rates or borrowings. At January 29, 2000, the Company's long-term debt excluding capital leases was $459.4 million, all of which is fixed rate debt. Long-term fixed rate debt is utilized as a primary source of capital. When these debt instruments mature, the Company intends to refinance such debt at then existing market interest rates which may be more or less than interest rates on the maturing debt. If interest rates on the existing fixed rate debt outstanding at January 29, 2000, changed by 100 basis points for fiscal 2000, the Company's interest rate would change by $4.6 million. During fiscal 1999, average borrowings under the Company's variable rate revolving credit facility were $7.0 million. If interest rates on the average fiscal 1999 variable rate debt changed by 100 basis points for fiscal 2000, the Company's interest expense would change by $70,000. Item 8. Financial Statements and Supplementary Data The financial statements are included in this report beginning on page 16. Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None 11
PART III Item 10. Executive Officers of Registrant The information set forth under "Election of Directors" on pages 1-2 and under "Compliance with Sec. 16(a) of the Exchange Act" on page 5 of Registrant's Proxy Statement dated April 13, 2000 is incorporated herein by reference. The executive officers of the Company are as follows: <TABLE> <CAPTION> Name Age Position ---- --- -------- <C> <C> <S> Caryn Blanc 42 Executive Vice President--Merchandise Planning and Logistics William S. Kellogg 56 Chairman and Director John Lesko 47 Executive Vice President--Chief Information Officer Richard Leto 48 Executive Vice President--General Merchandise Manager and Product Development Kevin Mansell 47 President and Director Arlene Meier 48 Executive Vice President--Chief Financial Officer, Secretary and Director R. Lawrence Montgomery 51 Vice Chairman, Chief Executive Officer and Director Jack Moore 45 Executive Vice President--General Merchandise Manager Jeffrey Rusinow 45 Executive Vice President--Regional Director of Stores and Store Administration Don Sharpin 51 Executive Vice President--Human Resources Gary Vasques 52 Executive Vice President--Marketing </TABLE> Ms. Blanc has served as Executive Vice President--Logistics since 1991 and added Merchandise Planning to her existing responsibilities in February 1999. Ms. Blanc has served in other management positions with the Company since 1988. Ms. Blanc joined the Company in 1978, and has 22 years of experience in the retail industry. Mr. Kellogg has served as Chairman since 1979 and served as Chief Executive Officer from 1979 to 1998. Mr. Kellogg joined the Company in 1967, and has 33 years of experience in the retail industry. Mr. Lesko joined the Company in November 1997. From January 1997 to November 1997, Mr. Lesko served as Senior Vice President, Information Systems of Jack Eckerd Corporation, a division of the J.C. Penney Company. Prior to 1997, Mr. Lesko served as Executive Vice President, Marketing and Information Systems for Thrift Drug, a wholly owned subsidiary of J.C. Penney Company. Mr. Lesko has 25 years of experience in the retail industry. Mr. Leto has served as Executive Vice President--General Merchandise Manager since July 1996 and added Product Development to his existing responsibilities in February 1999. Prior to joining the Company, Mr. Leto served as Executive Vice President, Merchandising for the R. H. Macy Corporation. Mr. Leto has 27 years of experience in the retail industry. Mr. Mansell has served as President and Director since February 1999. Mr. Mansell served as Executive Vice President--General Merchandise Manager from 1987 to 1998. Mr. Mansell joined the Company as a Divisional Merchandise Manager in 1982, and has 25 years of experience in the retail industry. Ms. Meier has served as Executive Vice President--Chief Financial Officer since October 1994 and was appointed to the Board of Directors in March 2000. Ms. Meier joined the Company as Vice President--Controller in 1989. Ms. Meier has 24 years of experience in the retail industry. 12
Mr. Montgomery has served as Chief Executive Officer since February 1999 and has served as Vice Chairman since March 1996. Mr. Montgomery served as Executive Vice President of Stores from February 1993 to February 1996. Mr. Montgomery joined the Company as Senior Vice President--Director of Stores in 1988. Mr. Montgomery has 29 years of experience in the retail industry. Mr. Moore has served as Executive Vice President--General Merchandise Manager since February 1999. Mr. Moore joined the Company in 1997 as a Vice President--Divisional Merchandise Manager. Mr. Moore also served as Senior Vice President of Merchandise Planning and Allocation. Prior to joining the Company, Mr. Moore served in various management positions at Dayton Hudson Department Stores. Mr. Moore has 23 years of experience in the retail industry. Mr. Rusinow has served as Executive Vice President--Regional Manager of Stores since January 1998 and added Store Administration to his existing responsibilities in February 1999. Mr. Rusinow has served in other management positions with the Company since joining the Company in 1994. Mr. Rusinow has 22 years of experience in the retail industry. Mr. Sharpin has served as Executive Vice President--Human Resources since August 1998 and in other management positions with the Company since joining the Company in 1988. Mr. Sharpin has 21 years of experience in the retail industry. Mr. Vasques has served as Executive Vice President--Marketing since December 1995. Prior to joining the Company, Mr. Vasques served as Senior Vice President--Marketing of Caldor from 1991 to November 1995. Mr. Vasques has 30 years of experience in the retail industry. Item 11. Executive Compensation The information set forth under "Executive Compensation" on pages 6-9 of Registrant's Proxy Statement dated April 13, 2000 is incorporated herein by reference. Compensation of directors as set forth under "Director Committees and Compensation" on page 3 of Registrant's Proxy Statement dated April 13, 2000 is incorporated herein by reference. Item 12. Beneficial Ownership of Stock The information set forth under "Beneficial Ownership of Shares" on pages 4- 5 of Registrant's Proxy Statement dated April 13, 2000 is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information set forth under "Other Transactions" on page 9 of Registrant's Proxy Statement dated April 13, 2000 is incorporated herein by reference. 13
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE OF KOHL'S CORPORATION <TABLE> <CAPTION> Page ---- <S> <C> Consolidated Financial Statements Report of Independent Auditors............................................. F-2 Consolidated Balance Sheets................................................ F-3 Consolidated Statements of Income.......................................... F-4 Consolidated Statements of Changes in Shareholders' Equity................. F-5 Consolidated Statements of Cash Flows...................................... F-6 Notes to Consolidated Financial Statements................................. F-7 Financial Statement Schedule Schedule II--Valuation and Qualifying Accounts............................. F-18 </TABLE> All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. F-1
REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Kohl's Corporation We have audited the accompanying consolidated balance sheets of Kohl's Corporation and subsidiaries (the Company) as of January 29, 2000 and January 30, 1999, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended January 29, 2000. Our audits also included the financial statement schedule listed in the Index. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at January 29, 2000 and January 30, 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 29, 2000, in conformity with accounting practices generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. ERNST & YOUNG LLP Milwaukee, Wisconsin March 3, 2000 F-2
KOHL'S CORPORATION CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> January 29, January 30, 2000 1999 ----------- ----------- <S> <C> <C> (In Thousands) ASSETS Current assets: Cash and cash equivalents............................ $ 12,608 $ 2,858 Short-term investments............................... 27,500 26,736 Accounts receivable trade, net....................... 501,162 270,704 Merchandise inventories.............................. 794,439 617,362 Deferred income taxes................................ 22,184 14,412 Other................................................ 8,630 7,366 ---------- ---------- Total current assets............................... 1,366,523 939,438 Property and equipment, net............................ 1,352,956 933,011 Other assets........................................... 42,422 25,027 Favorable lease rights................................. 133,023 13,681 Goodwill............................................... 19,738 24,938 ---------- ---------- Total assets....................................... $2,914,662 $1,936,095 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable..................................... $ 330,084 $ 212,926 Accrued liabilities.................................. 143,784 117,200 Income taxes payable................................. 63,955 48,572 Short-term debt...................................... 85,000 -- Current portion of long-term debt.................... 11,589 1,533 ---------- ---------- Total current liabilities.......................... 634,412 380,231 Long-term debt......................................... 494,993 310,912 Deferred income taxes.................................. 66,482 53,787 Other long-term liabilities............................ 33,272 28,386 Shareholders' equity: Common stock--$.01 par value, 800,000,000 shares authorized, 326,197,268 and 316,789,470 shares issued at January 29, 2000 and January 30, 1999, respectively........................................ 3,262 3,168 Paid-in capital...................................... 767,179 502,691 Retained earnings.................................... 915,062 656,920 ---------- ---------- Total shareholders' equity......................... 1,685,503 1,162,779 ---------- ---------- Total liabilities and shareholders' equity......... $2,914,662 $1,936,095 ========== ========== </TABLE> See accompanying notes F-3
KOHL'S CORPORATION CONSOLIDATED STATEMENTS OF INCOME <TABLE> <CAPTION> Fiscal Year Ended ------------------------------------------ January 29, January 30, January 31, 2000 1999 1998 ------------ ------------ ------------ (In Thousands, Except Per Share Data) <S> <C> <C> <C> Net sales............................ $ 4,557,112 $ 3,681,763 $ 3,060,065 Cost of merchandise sold............. 3,014,073 2,447,301 2,046,468 ------------ ------------ ------------ Gross margin......................... 1,543,039 1,234,462 1,013,597 Operating expenses: Selling, general and administrative.................... 975,269 810,162 678,793 Depreciation and amortization...... 83,323 64,849 52,180 Goodwill amortization.............. 5,200 5,200 5,200 Preopening expenses................ 30,972 16,388 18,589 ------------ ------------ ------------ Total operating expenses............. 1,094,764 896,599 754,762 ------------ ------------ ------------ Operating income..................... 448,275 337,863 258,835 Other expense (income): Interest expense................... 29,470 22,872 24,605 Interest income.................... (2,307) (1,758) (833) ------------ ------------ ------------ Income before income taxes........... 421,112 316,749 235,063 Provision for income taxes........... 162,970 124,483 93,790 ------------ ------------ ------------ Net income........................... $ 258,142 $ 192,266 $ 141,273 ============ ============ ============ Net income per share: Basic.............................. $ 0.80 $ 0.61 $ 0.46 Diluted............................ $ 0.77 $ 0.59 $ 0.45 </TABLE> See accompanying notes F-4
KOHL'S CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY <TABLE> <CAPTION> Common Stock Total -------------- Paid-in Retained Shareholders' Shares Amount Capital Earnings Equity ------- ------ -------- --------- ------------- (In Thousands) <S> <C> <C> <C> <C> <C> Balance at February 1, 1997... 295,681 $2,957 $191,133 $323,381 $ 517,471 Issuance of common shares..... 18,281 183 282,685 -- 282,868 Exercise of stock options..... 1,553 15 7,055 -- 7,070 Income tax benefit of stock options...................... -- -- 6,100 -- 6,100 Net income.................... -- -- -- 141,273 141,273 ------- ------ -------- -------- ---------- Balance at January 31, 1998... 315,515 3,155 486,973 464,654 954,782 Exercise of stock options..... 1,274 13 5,873 -- 5,886 Income tax benefit of stock options...................... -- -- 9,845 -- 9,845 Net income.................... -- -- -- 192,266 192,266 ------- ------ -------- -------- ---------- Balance at January 30, 1999... 316,789 3,168 502,691 656,920 1,162,779 Issuance of common shares..... 5,600 56 199,570 -- 199,626 Exercise of stock options..... 3,808 38 17,610 -- 17,648 Income tax benefit of stock options...................... -- -- 47,308 -- 47,308 Net income.................... -- -- -- 258,142 258,142 ------- ------ -------- -------- ---------- Balance at January 29, 2000... 326,197 $3,262 $767,179 $915,062 $1,685,503 ======= ====== ======== ======== ========== </TABLE> See accompanying notes F-5
KOHL'S CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> Fiscal Year Ended ----------------------------------- January 29, January 30, January 31, 2000 1999 1998 ----------- ----------- ----------- (In Thousands) <S> <C> <C> <C> Operating activities Net income................................ $ 258,142 $ 192,266 $ 141,273 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization........... 88,837 70,249 57,724 Deferred income taxes................... 4,923 886 (2,786) Other noncash charges................... 3,536 2,353 2,784 Changes in operating assets and liabilities: Accounts receivable trade............. (230,458) (31,087) (212,906) Merchandise inventories............... (177,077) (101,572) (92,583) Other current assets.................. (1,264) (2,107) 1,144 Accounts payable...................... 117,158 62,247 24,318 Accrued and other long-term liabilities.......................... 31,025 27,366 17,795 Income taxes payable.................. 15,383 10,090 13,012 --------- --------- --------- Net cash provided by (used in) operating activities............................... 110,205 230,691 (50,225) Investing activities Acquisition of property and equipment and favorable lease rights................... (625,392) (248,878) (202,735) Proceeds from sale of property and equipment................................ 4,350 1,292 295 Purchase of short-term investments, net... (764) (26,736) -- Other..................................... (20,151) (14,587) (6,534) --------- --------- --------- Net cash used in investing activities..... (641,957) (288,909) (208,974) Financing activities Proceeds from short-term debt............. 85,000 -- -- Proceeds from public debt offering........ 197,258 -- -- Net borrowings (repayments) under credit facilities............................... (1,600) 1,600 -- Repayment of other long-term debt, net.... (1,582) (416) (1,483) Payment of financing fees on debt......... (2,156) -- (101) Net proceeds from issuance of common shares................................... 264,582 15,731 296,038 --------- --------- --------- Net cash provided by financing activities............................... 541,502 16,915 294,454 --------- --------- --------- Net increase (decrease) in cash and cash and equivalents.......................... 9,750 (41,303) 35,255 Cash and cash equivalents at beginning of period................................... 2,858 44,161 8,906 --------- --------- --------- Cash and cash equivalents at end of period................................... $ 12,608 $ 2,858 $ 44,161 ========= ========= ========= </TABLE> See accompanying notes F-6
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business and Summary of Accounting Policies Business Kohl's Corporation (the Company) operates family oriented, specialty department stores primarily in the Midwest and Mid-Atlantic areas of the United States that feature national brand apparel, shoes, accessories, soft home products and housewares targeted to middle-income customers. Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Revenue Recognition Revenue from sales of the Company's merchandise is recognized at the time of sale, net of any returns. Accounting Period The Company's fiscal year end is the Saturday closest to January 31. The financial statements reflect the results of operations and cash flows for the fiscal years ended January 29, 2000 (fiscal 1999), January 30, 1999 (fiscal 1998) and January 31, 1998 (fiscal 1997), which all include 52 weeks. Cash Equivalents Cash equivalents represent debt securities with an original maturity of three months or less, which are held to maturity. Debt securities are stated at cost which approximates market value. Short-term Investments Short-term investments are classified as available-for-sale securities and are highly liquid debt instruments. These securities have a put option feature that allows the Company to liquidate the investments at its discretion. These investments are stated at cost, which approximates market value. Merchandise Inventories Merchandise inventories are valued at the lower of cost or market with cost determined by the last-in, first-out (LIFO) method. Inventories would have been $2,983,000 higher at January 29, 2000, and $1,921,000 higher at January 30, 1999 if they had been valued using the first-in, first-out (FIFO) method. F-7
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 1. Business and Summary of Accounting Policies (continued) Property and Equipment Property and equipment is carried at cost and generally depreciated on a straight-line basis over the estimated useful lives of the assets. Property rights under capital leases and improvements to leased property are amortized on a straight-line basis over the term of the lease or useful life of the assets, whichever is less. The annual provisions for depreciation and amortization have been principally computed using the following ranges of useful lives: <TABLE> <CAPTION> Buildings and improvements................................... 20-40 years <S> <C> Store fixtures and equipment................................. 3-20 years Property under capital leases................................ 20-40 years </TABLE> Construction in progress includes land and improvements for locations not yet opened at the end of each fiscal year. Capitalized Interest The Company capitalizes interest on the acquisition and construction of new stores and depreciates that amount over the lives of the related assets. The total interest capitalized was $4,405,000, $1,878,000 and $2,043,000 in 1999, 1998 and 1997, respectively. Favorable Lease Rights Favorable lease rights are amortized on a straight-line basis over a composite average life, including options and reflect accumulated amortization of $19,327,000 at January 29, 2000 and $18,820,000 at January 30, 1999. The favorable lease rights balance at January 29, 2000 includes $121,600,000 related to a 1999 acquisition. The related stores are expected to open in 2000 and amortization will begin at that time. The composite average life of favorable lease rights as of January 29, 2000 is 22 years. Goodwill Goodwill is being amortized on a straight-line basis over 15 years. Accumulated amortization is $57,666,000 at January 29, 2000 and $52,466,000 at January 30, 1999. Long-Lived Assets The Company annually considers whether indicators of impairment of long- lived assets held for use (including favorable leasehold rights and goodwill) are present and determines that if such indicators are present whether the sum of the estimated undiscounted future cash flows attributable to such assets is less than their carrying amounts. The Company evaluated the ongoing value of its property and equipment and other long-lived assets as of January 29, 2000 and January 30, 1999, and determined that there was no significant impact on the Company's results of operations. Preopening Costs Preopening expenses, which are expensed as incurred, relate to the costs associated with new store openings, including advertising, hiring and training costs for new employees, and processing and transporting initial merchandise. All previously deferred preopening costs were written-off effective January 30, 1999. F-8
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 1. Business and Summary of Accounting Policies (continued) Advertising Advertising costs included in selling, general and administrative are expensed as incurred and totaled $176,009,000, $147,619,000 and $117,879,000 in fiscal 1999, 1998 and 1997, respectively. Income Taxes Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. Net Income Per Share The numerator for the calculation of basic and diluted net income per share is net income. The denominator is summarized as follows: <TABLE> <CAPTION> Fiscal Year ----------------------- 1999 1998 1997 ------- ------- ------- (In Thousands) <S> <C> <C> <C> Denominator for basic earnings per share--weighted average shares....................................... 324,628 316,134 304,942 Employee stock options................................ 9,228 9,132 7,212 ------- ------- ------- Denominator for diluted earnings per share............ 333,856 325,266 312,154 ======= ======= ======= </TABLE> 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 6, 2000, effected in the form of a stock dividend. Comprehensive Income Net income for all years presented is the same as comprehensive income. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 2. Selected Balance Sheet Information Property and equipment consist of the following: <TABLE> <CAPTION> January 29, January 30, 2000 1999 ----------- ----------- (In Thousands) <S> <C> <C> Land.................................................... $ 137,900 $ 98,491 Buildings and improvements.............................. 726,846 505,475 Store fixtures and equipment............................ 469,247 377,772 Property under capital leases........................... 54,862 55,700 Construction in progress................................ 243,042 104,042 ---------- ---------- Property and equipment, at cost......................... 1,631,897 1,141,480 Less accumulated depreciation........................... 278,941 208,469 ---------- ---------- $1,352,956 $ 933,011 ========== ========== </TABLE> Depreciation expense for property and equipment totaled $76,851,000, $60,994,000 and $48,802,000 for fiscal 1999, 1998 and 1997, respectively. F-9
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 2. Selected Balance Sheet Information (continued) Accrued liabilities consist of the following: <TABLE> <CAPTION> January 29, January 30, 2000 1999 ----------- ----------- (In Thousands) <S> <C> <C> Payroll and related fringe benefits..................... $ 29,332 $ 24,565 Sales and property taxes................................ 45,429 33,761 Other accruals.......................................... 69,023 58,874 -------- -------- $143,784 $117,200 ======== ======== </TABLE> 3. Accounts Receivable Financing Prior to December 23, 1999, the Company's private label credit card receivables were sold without recourse or were contributed to its wholly owned subsidiary and special purpose entity, Kohl's Receivables Corporation (KRC). KRC then periodically sold, generally with recourse, an undivided interest in the revolving pool of these receivables to a bank, up to a maximum of $225 million. Based on this two-tier structure of selling receivables, and a supporting legal opinion, the true sale accounting requirements were met, as defined by SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". Accordingly, the $113 million interest sold under this agreement at January 30, 1999, is reflected as a reduction of accounts receivable. On December 23, 1999, the Company entered into a new one year agreement with the same bank, similar to the agreement KRC had with the bank, under which the Company periodically sells, generally with recourse, an undivided interest in the revolving pool of its private label credit card receivables directly to the bank. The agreement is renewable at the Company's request and the bank's option. The structure of this transaction no longer meets the true sale requirements of SFAS No. 125. Thus, the proceeds received upon sale of $85 million of receivables to the bank as of January 29, 2000, is recorded as short-term debt in the accompanying consolidated balance sheet. On December 31, 1999, KRC was merged into the Company. The cost of the financing program is based on the bank's A1/P-1 commercial paper rate, approximately 6.0% at January 29, 2000, plus certain fees and is included in selling, general and administrative expenses beginning December 23, 1999. The agreement is secured by interests in the receivables and contains covenants which require the Company to maintain a minimum portfolio quality and meet certain financial tests. The Company maintains an allowance for doubtful accounts for all receivables on the balance sheet based upon management's estimates of the Company's risk of credit loss, as summarized below: <TABLE> <CAPTION> January 29, January 30, 2000 1999 ----------- ----------- (In Thousands) <S> <C> <C> Accounts Receivable Trade: Gross receivables..................................... $508,333 $387,773 Receivables off balance sheet......................... -- 113,000 -------- -------- Total accounts receivable on balance sheet.............. 508,333 274,773 Allowance for doubtful accounts....................... 7,171 4,069 -------- -------- Net..................................................... $501,162 $270,704 ======== ======== </TABLE> F-10
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. Accounts Receivable Financing (continued) Average accounts receivable balances both on and off balance sheet are summarized below: <TABLE> <CAPTION> Fiscal Year -------------------------- 1999 1998 1997 -------- -------- -------- (In Thousands) <S> <C> <C> <C> Average accounts receivable trade: Gross accounts receivable......................... $443,000 $328,000 $242,000 Receivables off-balance sheet..................... 86,000 120,000 154,000 -------- -------- -------- Receivables on-balance sheet...................... $357,000 $208,000 $ 88,000 ======== ======== ======== </TABLE> The revenue from the credit program, net of expenses, is summarized below for all receivables accounted for on-balance sheet and is included in selling, general and administrative expenses in the accompanying consolidated statements of income. Pursuant to SFAS No. 125, once receivables are sold to the bank and the true sale requirements are met, the Company has no exposure to bad debts and retains no rights to finance charge income for financial statement purposes. Because the true sale requirements were met prior to December 23, 1999, all income and expense items with respect to receivables sold prior to December 23, 1999, are not presented as part of the Company's results of operations. <TABLE> <CAPTION> Fiscal Year ----------------------- 1999 1998 1997 ------- ------- ------- (In Thousands) <S> <C> <C> <C> Finance charges and other income....................... $63,879 $38,744 $16,528 Operating expenses: Cost of financing program............................ 191 -- -- Provision for doubtful accounts...................... 13,402 7,831 4,502 Other credit and collection expenses................. 18,636 10,740 5,477 ------- ------- ------- Total operating expenses............................. 32,229 18,571 9,979 ------- ------- ------- Net revenue of credit program included in selling, general and administrative expenses................... $31,650 $20,173 $ 6,549 ======= ======= ======= </TABLE> 4. Debt Debt consists of the following: <TABLE> <CAPTION> January 29, January 30, 2000 1999 ----------- ----------- (In Thousands) <S> <C> <C> Senior notes.......................................... $ 60,000 $ 60,000 Public offered debt, net of discount of $2,681 in 1999................................................. 397,319 200,000 Capital leases........................................ 47,160 48,392 Other................................................. 2,103 4,053 -------- -------- Total................................................. 506,582 312,445 Less current portion.................................. 11,589 1,533 -------- -------- Long-term debt........................................ $494,993 $310,912 ======== ======== </TABLE> The Company has issued $60 million of 6.57% unsecured senior notes. The notes will mature in 2004 with required annual prepayments beginning March 31, 2000. F-11
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 4. Debt (continued) The public offered debt includes $100 million of non-callable 6.70% unsecured senior notes which mature on February 1, 2006 and $100 million of non-callable 7.375% unsecured senior notes which mature on October 15, 2011. Additionally on June 1, 1999, the Company issued $200 million of non-callable 7.25% unsecured debentures, which mature June 1, 2029. The debentures were issued at a discount with a yield to maturity of 7.36%. The Company, using discounted cash flow analyses based upon the Company's current incremental borrowing rates for similar types of borrowing arrangements, estimates the fair value of long-term debt, including current portion and excluding capital leases, to be approximately $432 million at January 29, 2000. The Company has a $300 million unsecured revolving bank credit facility (the Credit Facility) which matures on June 13, 2003. The Credit Facility can be extended each year for an additional one year with the banks' consents provided that the Company meets certain financial covenants. Depending on the type of advance, amounts borrowed bear interest at competitive bid rates; the LIBOR plus a margin, depending on the Company's long-term unsecured debt rating; or the agent bank's base rate. No amounts were outstanding under this facility at January 29, 2000 or January 30, 1999. The various debt agreements contain certain covenants that limit, among other things, additional indebtedness and payment of dividends, as well as requiring the Company to meet certain financial tests. Interest payments, net of amounts capitalized, were $27,038,000, $22,950,000 and $24,158,000 in fiscal 1999, 1998 and 1997, respectively. Annual maturities of long-term debt, excluding capital lease obligations, for the next five years are: $10,367,000 in 2000; $15,333,000 in 2001; $15,340,000 in 2002; $10,138,000 in 2003 and $10,056,000 in 2004. 5. Commitments The Company leases property and equipment. Many of the store leases obligate the Company to pay real estate taxes, insurance and maintenance costs, and contain multiple renewal options, exercisable at the Company's option, that range from two additional five-year periods to eight ten-year periods. Rent expense charged to operations was $111,863,000, $89,508,000 and $72,286,000 in fiscal 1999, 1998 and 1997, respectively. Rent expense includes contingent rents, based on sales, of $3,487,000, $4,209,000 and $3,847,000 in fiscal 1999, 1998 and 1997, respectively. Property under capital leases consists of the following: <TABLE> <CAPTION> January 29, January 30, 2000 1999 ----------- ----------- (In Thousands) <S> <C> <C> Buildings and improvements.............................. $54,862 $55,700 Less accumulated amortization........................... 16,342 15,177 ------- ------- $38,520 $40,523 ======= ======= </TABLE> Amortization expense related to capital leases totaled $2,004,000, $2,266,000 and $2,428,000 for fiscal 1999, 1998 and 1997, respectively. F-12
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 5. Commitments (continued) Future minimum lease payments at January 29, 2000, under leases that have initial or remaining noncancellable terms in excess of one year, are as follows: <TABLE> <CAPTION> Capital Operating Leases Leases -------- ---------- <S> <C> <C> Fiscal year: 2000....................................................... $ 6,641 $ 128,886 2001....................................................... 6,613 143,162 2002....................................................... 6,631 139,823 2003....................................................... 6,525 138,754 2004....................................................... 6,846 138,270 Thereafter................................................. 80,699 1,824,927 -------- ---------- 113,955 $2,513,822 ========== Less amount representing interest.......................... 66,795 -------- Present value of minimum lease payments.................... $ 47,160 ======== </TABLE> Included in the operating lease schedule above is $761,264,000 of minimum lease payments for stores that will open in 2000 and 2001. 6. Benefit Plans The Company has an Employee Stock Ownership Plan (ESOP) for the benefit of its associates other than executive officers. Contributions are made at the discretion of the Board of Directors. The Company recorded expenses of $4,408,000 $3,300,000 and $2,610,000 in fiscal 1999, 1998 and 1997, respectively. Shares of Company common stock held by the ESOP are included as shares outstanding for purposes of the income per share computations. The Company also has a defined contribution savings plan covering all full- time and certain part-time associates which provides for monthly employer contributions based on a percentage of qualifying contributions made by participating associates. Total expense was $3,020,000, $2,531,000 and $2,221,000 in fiscal 1999, 1998 and 1997, respectively. In addition, the Company made defined annual contributions to the savings plan on the behalf of all qualifying full-time and part-time associates based on a percentage of qualifying payroll earnings. Total expense was $4,168,000, $3,629,000 and $2,978,000 in fiscal 1999, 1998 and 1997, respectively. 7. Income Taxes Deferred income taxes consist of the following: <TABLE> <CAPTION> January 29, January 30, 2000 1999 ----------- ----------- (In Thousands) <S> <C> <C> Deferred tax liabilities: Property and equipment................................ $80,371 $65,773 Deferred tax assets: Merchandise inventories............................... 18,080 9,684 Accrued and other liabilities......................... 11,273 11,360 Accrued rent liability................................ 6,720 5,354 ------- ------- 36,073 26,398 ------- ------- Net deferred tax liability.............................. $44,298 $39,375 ======= ======= </TABLE> F-13
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. Income Taxes (continued) The components of the provision for income taxes are as follows: <TABLE> <CAPTION> Fiscal Year ------------------------- 1999 1998 1997 -------- -------- ------- (In Thousands) <S> <C> <C> <C> Current Federal...................................... $135,586 $104,336 $82,184 Current State........................................ 22,461 19,261 14,392 Deferred............................................. 4,923 886 (2,786) -------- -------- ------- $162,970 $124,483 $93,790 ======== ======== ======= </TABLE> The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate tax rate due to the following items: <TABLE> <CAPTION> Fiscal Year -------------------------- 1999 1998 1997 ------- -------- ------- <S> <C> <C> <C> Provision at statutory rate........................ 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit..... 3.6 3.9 4.2 Goodwill amortization.............................. 0.4 0.6 0.8 Other.............................................. (.3) (.2) (.1) ------- -------- ------- Provision for income taxes......................... 38.7% 39.3% 39.9% ------- -------- ------- Amounts paid for income taxes (in thousands)....... $95,075 $103,628 $74,826 ======= ======== ======= </TABLE> 8. Preferred and Common Stock The Company's authorized capital stock includes 10,000,000 shares of $.01 par value preferred stock of which none have been issued. On March 6, 2000 and March 9, 1998, the Company's Board of Directors declared 2 for 1 stock splits which were effected in the form of a stock dividend on the Company's common stock. Shareholders' equity, and all share and per share amounts have been retroactively adjusted to reflect these dividends. The 1992 and 1994 Long-Term Compensation Plans provide for the granting of options to purchase shares of the Company's common stock to officers and key employees. The 1997 Stock Option Plan provides for granting of similar stock options to outside directors. The following table presents the number of options initially authorized and options available to grant under each of the plans: <TABLE> <CAPTION> 1992 Plan 1994 Plan 1997 Plan Total ---------- ---------- --------- ---------- <S> <C> <C> <C> <C> Options initially authorized........ 22,800,000 24,000,000 400,000 47,200,000 Options available for grant: January 30, 1999.................. 105,478 15,455,050 320,000 15,880,528 January 29, 2000.................. 179,216 11,464,950 320,000 11,964,166 </TABLE> The majority of options granted vest in four equal annual installments. Remaining options granted vest in either five or seven year increments. Options which are surrendered or terminated without issuance of shares are available for future grants. F-14
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 8. Preferred and Common Stock (continued) The following table summarizes the Company's stock options at January 29, 2000, January 30, 1999 and January 31, 1998 and the changes for the years then ended: <TABLE> <CAPTION> Number Weighted Average of Options Exercise Price ---------- ---------------- <S> <C> <C> Balance at February 1, 1997........................ 21,885,152 $ 5.79 Granted.......................................... 4,451,820 16.56 Surrendered...................................... (558,620) 7.32 Exercised........................................ (1,553,604) 4.68 ---------- ------ Balance at January 31, 1998........................ 24,224,748 7.79 Granted.......................................... 3,418,250 28.85 Surrendered...................................... (329,582) 13.28 Exercised........................................ (1,273,558) 5.00 ---------- ------ Balance at January 30, 1999........................ 26,039,858 10.64 Granted.......................................... 4,434,750 35.13 Surrendered...................................... (518,388) 14.95 Exercised........................................ (3,807,798) 5.04 ---------- ------ Balance at January 29, 2000........................ 26,148,422 $15.53 ========== ====== </TABLE> <TABLE> <CAPTION> Options exercisable at: Weighted Average Shares Exercise Price ---------- ---------------- <S> <C> <C> January 29, 2000.................................. 13,628,550 $8.60 January 30, 1999.................................. 14,029,610 $6.06 January 31, 1998.................................. 11,044,000 $4.85 </TABLE> Exercise prices for options outstanding at January 29, 2000, ranged from $1.75--$40.44. Additional information related to these options segregated by exercise price range is as follows: <TABLE> <CAPTION> Exercise Price Range ----------------------------- $1.75 to $6.50 to $17.50 to $6.49 $17.49 $40.44 --------- --------- --------- <S> <C> <C> <C> Options outstanding............................. 8,912,552 9,474,016 7,761,854 Weighted average exercise price of options outstanding.................................... $4.88 $11.70 $32.42 Weighted average remaining contractual life of options outstanding............................ 4.3 9.0 14.3 Options exercisable............................. 8,121,202 4,762,032 745,316 Weighted average exercise price of options exercisable.................................... $4.92 $11.62 $29.34 </TABLE> The Company continues to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related Interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. As required by SFAS No. 123, Accounting for Stock-Based Compensation, the Company calculated the pro forma effect on net income and net income per share of accounting for employee stock options under the fair value method prescribed by SFAS No. 123 in the table below. The weighted-average fair values of options granted during fiscal 1999, 1998 and 1997 were estimated using a Black-Scholes option pricing model to be $11.64, $9.57 and $5.43, respectively. The model used the following assumptions for all years: risk free interest rate between 5.0%--6.0%; dividend yield 0%; volatility factors of the Company's common stock of 30%; and a 7-8 year expected life of the option. F-15
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 8. Preferred and Common Stock (continued) <TABLE> <CAPTION> Fiscal Year -------------------------- 1999 1998 1997 -------- -------- -------- <S> <C> <C> <C> Pro forma net income................................. $246,513 $183,785 $137,320 Pro forma net income per share: Basic.............................................. $0.76 $0.58 $0.45 Diluted............................................ $0.74 $0.57 $0.44 </TABLE> The SFAS No. 123 expense reflected above only includes options granted since fiscal 1995 and, therefore, may not be representative of future expense. 9. 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. 10. Quarterly Financial Information (Unaudited) <TABLE> <CAPTION> Fiscal Year 1999 -------------------------------------------------- First Second Third Fourth Total -------- -------- ---------- ---------- ---------- (in thousands except per share data) <S> <C> <C> <C> <C> <C> Net sales.................. $910,256 $939,503 $1,099,852 $1,607,501 $4,557,112 Gross margin............... 313,128 325,304 375,659 528,948 1,543,039 Net income................. 39,319 45,233 53,014 120,576 258,142 Basic net income per share..................... .12 .14 .16 .37 .80 Diluted net income per share..................... .12 .13 .16 .36 .77 </TABLE> <TABLE> <CAPTION> Fiscal Year 1998 ------------------------------------------------ First Second Third Fourth Total -------- -------- -------- ---------- ---------- (in thousands except per share data) <S> <C> <C> <C> <C> <C> Net sales.................... $744,571 $758,747 $888,897 $1,289,548 $3,681,763 Gross margin................. 253,469 256,577 299,622 424,794 1,234,462 Net income................... 26,848 31,348 40,008 94,062 192,266 Basic net income per share... .09 .10 .13 .30 .61 Diluted net income per share....................... .08 .10 .12 .29 .59 </TABLE> Due to changes in stock prices during the year and timing of issuance of shares, the cumulative total of quarterly net income per share amounts may not equal the net income per share for the year. The Company uses the LIFO method of accounting for merchandise inventories because it results in a better matching of costs and revenues. The following information is provided to show the effects of the LIFO provision on each quarter, as well as to provide users with the information to compare to other companies not on LIFO. <TABLE> <CAPTION> Fiscal Year ---------------- LIFO Expense (Credit) 1999 1998 - --------------------- ------- -------- (In Thousands) <S> <C> <C> First.......................................................... $ 1,363 $ 1,861 Second......................................................... 1,409 1,896 Third.......................................................... 1,651 1,900 Fourth......................................................... (3,361) (8,519) ------- -------- Total year..................................................... $ 1,062 $(2,862) ======= ======== </TABLE> The Company estimates its LIFO provision throughout the year based on expected inflation. The provision is adjusted to actual inflation indices at year-end. F-16
KOHL'S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 11. Related Parties A director of the Company is also a shareholder of a law firm which performs legal services for the Company. A director of the Company is also the chief executive officer of an insurance company which provides $40 million of the senior notes to the Company (see Note 4). Total interest expense incurred on the senior notes totaled $2.6 million in 1999, 1998 and 1997. Another director was previously affiliated with an investment bank which performed services for the Company. Investment banking fees incurred with this investment bank totaled approximately $8.8 million in fiscal 1997 and no fees were paid in fiscal 1998. The director retired from the investment bank in 1998. Rent expense incurred on store leases with various entities owned by a director of the Company and his affiliates, which is included in the total rent expense above, was $4,353,000, $4,323,000 and $3,789,000 in fiscal 1999, 1998 and 1997, respectively. F-17
KOHL'S CORPORATION SCHEDULE II Valuation and Qualifying Accounts (Dollars in Thousands) <TABLE> <CAPTION> Years Ended ----------------------------------- January 29, January 30, January 31, 2000 1999 1998 ----------- ----------- ----------- <S> <C> <C> <C> Accounts Receivable--Allowances: Balance at Beginning of Period........... $ 4,069 $ 4,669 $ 700 Charged to Costs and Expenses............ 13,402 7,831 4,502 Deductions--Bad Debts Written off, Net of Recoveries and Other Allowances......... (12,277) (7,668) (4,357) Other (1)................................ 1,977 (763) 3,824 -------- ------- ------- Balance at End of Period................. $ 7,171 $ 4,069 $ 4,669 ======== ======= ======= </TABLE> - -------- (1) Adjustments to the accounts receivable allowance for receivables sold pursuant to SFAS No. 125. F-18
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned Kohl's Corporation By: /s/ William S. Kellogg ----------------------------------- William S. Kellogg Chairman and Director Dated: April 17, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: /s/ William S. Kellogg - ------------------------------------- ------------------------------------- William S. Kellogg Frank Sica Chairman and Director Director /s/ Jay H. Baker - ------------------------------------- ------------------------------------- Jay H. Baker Herbert Simon Director Director /s/ John F. Herma /s/ Peter M. Sommerhauser - ------------------------------------- ------------------------------------- John F. Herma Peter M. Sommerhauser Director Director /s/ R. Lawrence Montgomery /s/ Elton White - ------------------------------------- ------------------------------------- R. Lawrence Montgomery R. Elton White Vice Chairman, Chief Executive Officer Director and Director /s/ Kevin Mansell /s/ James Ericson - ------------------------------------- ------------------------------------- Kevin Mansell James Ericson President and Director Director /s/ Arlene Meier - ------------------------------------- ------------------------------------- Arlene Meier Wayne Embry Chief Financial Officer (Principal Director Financial and Accounting Officer), Secretary and Director 31
EXHIBIT INDEX <TABLE> <CAPTION> Exhibit Number Description ------- ----------- <C> <S> 3.1 Articles of Incorporation of the Company, as amended, incorporated herein by reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 1999. 3.2 Bylaws of the Company. 4.1 Revolving Credit Agreement dated as of June 13, 1997 among Kohl's Corporation, Kohl's Department Stores, Inc., various commercial banking institutions, The Bank of New York, as Administrative Agent, and The First National Bank of Chicago, as Syndication Agent, incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 1997. 4.2 Amendment to Revolving Credit Agreement dated as of June 5, 1998, incorporated herein by reference to Exhibit 4.1 of the Company's registration statement on Form S-3 (File No. 333-73257). 4.3 Indenture dated as of December 1, 1995 between the Company and The Bank of New York as trustee, incorporated herein by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 1996. 4.4 First Supplemental Indenture dated as of June 1, 1999 between the Company and The Bank of New York, incorporated herein by reference to Exhibit 4.2 of the Company's Registration Statement on Form S-4 (Reg. No. 333-83031). 4.5 Certain other long-term debt is described in Note 4 of the Notes to Consolidated Financial Statements. The Company agrees to furnish to the Commission, upon request, copies of any instruments defining the rights of holders of any such long-term debt described in Note 4 and not filed herewith. 10.1 Employment Agreement between the Company and William S. Kellogg, incorporated herein by reference to Exhibit 10.6 of the Company's registration statement on Form S-1 (File No. 33-46883).* 10.2 Employment Agreement between the Company and Jay H. Baker, incorporated herein by reference to Exhibit 10.7 of the Company's registration statement on Form S-1 (File No. 33-46883).* 10.3 Employment Agreement between the Company and John F. Herma, incorporated herein by reference to Exhibit 10.8 of the Company's registration statement on Form S-1 (File No. 33-46883).* 10.4 Employment Agreement between the Company and R. Lawrence Montgomery, incorporated herein by reference to Exhibit 10.4 of the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1998.* 10.5 Employment Agreement between the Company and Kevin Mansell, incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 1999.* 10.6 Executive Medical Plan, incorporated herein by reference to Exhibit 10.9 of the Company's registration statement on Form S-1 (File No. 33- 46883).* 10.7 Executive Life Insurance Plan, incorporated herein by reference to Exhibit 10.10 of the Company's registration statement on Form S-1 (File No. 33-46883).* 10.8 Executive Accidental Death and Dismemberment Plan, incorporated herein by reference to Exhibit 10.11 of the Company's registration statement on Form S-1 (File No. 33-46883).* 10.9 Executive Committee Bonus Plan, incorporated herein by reference to Exhibit 10.12 of the Company's registration statement on Form S-1 (File No. 33-46883).* 10.10 1992 Long Term Compensation Plan, incorporated herein by reference to Exhibit 10.13 of the Company's registration statement on Form S-1 (File No. 33-46883).* 10.11 1994 Long-Term Compensation Plan, incorporated herein by reference to Exhibit 10.15 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 4, 1996.* </TABLE>
<TABLE> <CAPTION> Exhibit Number Description ------- ----------- <C> <S> 10.12 1997 Stock Option Plan for Outside Directors, incorporated herein by reference to Exhibit 4.4 of the Company's registration statement on Form S-8 (File No. 333-26409), filed on May 2, 1997.* 10.13 Amended and Restated Agreements dated December 10, 1998 between the Company and Ms. Blanc, incorporated herein by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 1999.* 10.14 Amended and Restated Agreements dated December 10, 1998 between the Company and Mr. Mansell, incorporated herein by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 1999.* 10.15 Amended and Restated Agreements dated December 10, 1998 between the Company and Mr. Montgomery, incorporated herein by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 1999.* 10.16 Receivables Purchase Agreement dated December 23, 1999 by and among Kohl's Corporation, Kohl's Department Stores, Inc., PREFCO, various Investors and Bank One, NA, as agent. 12.1 Statement regarding calculation of ratio of earnings to fixed charges. 13.1 1999 Annual Report. 21.1 Subsidiaries of the Registrant. 24.1 Consent of Ernst & Young LLP. 27. Financial Data Schedules--Article 5 of Regulation S-X, 12 months ended January 29, 2000. </TABLE> - -------- * A management contract or compensatory plan or arrangement.