UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 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 incorporation or organization) Identification No.) N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin 53051 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (262) 703-7000 ----------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 Days. Yes X No ______ ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: May 26, 2000 Common Stock, ---------------------------- Par Value $.01 per Share, 329,669,427 shares Outstanding. - --------------------------------------------------------

KOHL'S CORPORATION INDEX PART I. FINANCIAL INFORMATION Item 1 Financial Statements: Condensed Consolidated Balance Sheets at April 29, 2000, January 29, 2000 and May 1, 1999 3 Condensed Consolidated Statements of Income for the Three Months Ended April 29, 2000 and May 1, 1999 4 Condensed Consolidated Statement of Changes In Shareholders' Equity for the Three Months Ended April 29, 2000 5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 29, 2000 and May 1, 1999 6 Notes to Condensed Consolidated Financial Statements 7-8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 PART II. OTHER INFORMATION Item 4 Submission of Matters to a Vote of 12-13 Security Holders Item 6 Exhibits 14 Signatures 15 2

KOHL'S CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS April 29, January 29, May 1, 2000 2000 1999 -------------------------------------------------------------- (Unaudited) (Audited) (Unaudited) (In thousands) Assets ------------ Current assets: Cash and cash equivalents $ 3,639 $ 12,608 $ 2,960 Short-term investments - 27,500 15,000 Accounts receivable trade, net 544,328 501,162 235,764 Merchandise inventories 994,493 794,439 721,955 Income taxes receivable 10,595 - 12,680 Deferred income taxes 16,736 22,184 14,548 Other 23,516 8,630 14,130 ------------ ------------ ------------ Total current assets 1,593,307 1,366,523 1,017,037 Property and equipment, net 1,479,627 1,352,956 984,831 Other assets 46,229 42,422 28,930 Favorable lease rights 131,999 133,023 141,053 Goodwill 18,438 19,738 23,638 ------------ ------------ ------------ Total assets $3,269,600 $2,914,662 $2,195,489 ============ ============ ============ Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 454,155 $ 330,084 $ 237,079 Accrued liabilities 140,094 143,784 108,036 Income taxes payable - 63,955 - Short term debt 225,000 85,000 - Current portion of long-term debt 16,589 11,589 1,578 ------------ ------------ ------------ Total current liabilities 835,838 634,412 346,693 Long-term debt 520,654 494,993 308,878 Deferred income taxes 69,643 66,482 56,670 Other long-term liabilities 35,614 33,272 28,520 Shareholders' equity Common stock-$.01 par value, 800,000,000 shares authorized, 329,423,752, 326,197,268, and 325,525,924 issued at April 29, 2000, January 29, 2000 and May 1, 1999, respectively. 3,294 3,262 3,256 Paid-in capital 836,877 767,179 755,233 Retained earnings 967,680 915,062 696,239 ------------ ------------ ------------ Total shareholders' equity 1,807,851 1,685,503 1,454,728 ------------ ------------ ------------ Total liabilities and shareholders' equity $3,269,600 $2,914,662 $2,195,489 ============ ============ ============ See accompanying Notes to Condensed Consolidated Financial Statements 3

KOHL'S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) 3 Months 3 Months (13 Weeks) (13 Weeks) Ended Ended April 29, May 1, 2000 1999 --------------------------------- (In thousands, except per share data) Net sales $1,228,666 $910,256 Cost of merchandise sold 802,746 597,128 ------------ ----------- Gross margin 425,920 313,128 Operating expenses: Selling, general, and administrative 284,256 216,032 Depreciation and amortization 27,240 18,577 Goodwill amortization 1,300 1,300 Preopening expenses 19,129 7,945 ------------ ----------- Operating income 93,995 69,274 Interest expense, net 8,230 5,132 ------------ ----------- Income before income taxes 85,765 64,142 Provision for income taxes 33,147 24,823 ------------ ----------- Net income $ 52,618 $ 39,319 ============ =========== Earnings per share: Basic Net income $ 0.16 $ 0.12 Average number of shares 327,806 320,871 Diluted Net income $ 0.16 $ 0.12 Average number of shares 336,353 330,752 See accompanying Notes to Condensed Consolidated Financial Statements 4

KOHL'S CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Common Stock Paid-In Retained ---------------------- Shares Amount Capital Earnings Total -------- --------- --------- ----------- ---------- (In thousands) Balance at January 29, 2000 326,197 $3,262 $767,179 $915,062 $1,685,503 Exercise of stock options 3,227 32 24,413 - 24,445 Income tax benefit from stock options - - 45,285 - 45,285 Net income - - - 52,618 52,618 -------- --------- --------- ----------- ---------- Balance at April 29, 2000 329,424 $3,294 $836,877 $967,680 $1,807,851 ======== ========= ========= =========== ========== See accompanying Notes to Condensed Consolidated Financial Statements 5

KOHL'S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 3 Months 3 Months (13 Weeks) (13 Weeks) Ended Ended April 29, 2000 May 1, 1999 -------------------------------------------- (In thousands) Operating activities Net income $ 52,618 $ 39,319 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization 28,628 19,927 Deferred income taxes 8,609 2,747 Other noncash charges 1,069 732 Changes in operating assets and liabilities: Accounts receivable (43,166) 34,940 Merchandise inventories (200,054) (104,593) Other current assets (14,886) (6,764) Accounts payable 124,071 24,153 Accrued and other long-term liabilities (2,417) (7,587) Income taxes (74,550) (61,252) ------------- ------------- Net cash used in operating activities (120,078) (58,378) Investing activities Acquisition of property and equipment and favorable lease rights, net (151,062) (203,344) Proceeds from sale of assets - 4,350 Purchase of short-term investments, net 27,500 11,736 Other (5,676) (4,903) ------------- ------------- Net cash used in investing activities (129,238) (192,161) Financing activities Proceeds from short-term debt 140,000 - Net borrowings (repayments) under credit facilities 41,000 (1,600) Net repayments of other long-term debt (10,362) (389) Payment of financing fees on debt (21) - Net proceeds from issuance of common shares 69,730 252,630 ------------- ------------- Net cash provided by financing activities 240,347 250,641 ------------- ------------- Net increase (decrease) in cash and cash equivalents (8,969) 102 Cash and cash equivalents at beginning of period 12,608 2,858 ------------- ------------- Cash and cash equivalents at end of period $ 3,639 $ 2,960 ============= ============= See accompanying Notes to Condensed Consolidated Financial Statements 6

KOHL'S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for fiscal year end financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto included in the Company's Form 10-K (Commission File No. 1- 11084) filed with the Securities and Exchange Commission. 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. 2. Merchandise Inventories The Company uses the last-in, first out (LIFO) method of accounting for merchandise inventory because it results in a better matching of cost and revenues. The following information is provided to show the effects of the LIFO provision on the quarter, as well as to provide users with the information to compare to other companies not on LIFO. LIFO Expense 3 Months Ended ------------ ------------------------------- Quarter April 29, 2000 May 1, 1999 ------- -------------- ----------- (In Thousands) First $1,844 $1,363 Inventories would have been $4,827,000, $2,983,000 and $3,284,000 higher at April 29, 2000, January 29, 2000 and May 1, 1999, respectively, if they had been valued using the first-in, first-out (FIFO) method. 3. Contingencies The Company is involved in various legal matters arising in the normal course of business. In the opinion of management, the outcome of such proceedings and litigation will not have a material 7

adverse impact on the Company's financial position or results of operations. 4. 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 (in thousands): 3 Months Ended ------------------------------- April 29, 2000 May 1, 1999 -------------- ----------- Denominator for basic earnings per share - weighted average shares 327,806 320,871 Employee stock options 8,547 9,881 ------- ------- Denominator for diluted earnings per share 336,353 330,752 ======= ======= 8

MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- THREE MONTHS ENDED April 29, 2000 --------------------------------- Results of Operations - --------------------- At April 29, 2000, the Company operated 298 stores compared with 226 stores at the same time last year. During the quarter, the Company successfully opened 39 stores including the conversion of 33 stores previously operated by Caldor Corporation in New York, New Jersey, Connecticut and Maryland. In addition, four new stores in the Dallas/Fort Worth, TX market and one new store in Rochester, MN and Arnold, MO were opened. The Company plans to open eight stores in August, 2000; two additional stores in Chicago, two in Denver and additional stores in Ft. Worth, TX; Harrisburg, PA; Pittsburgh, PA and Neenah, WI. In October, 2000, the Company plans to open approximately 13 stores including three on Long Island, entering Tulsa, OK with three stores and additional stores in Chicago, Denver, St. Louis, North Carolina and Michigan. Net sales increased $318.4 million or 35.0% to $1,228.7 million for the three months ended April 29, 2000 from $910.3 million for the three months ended May 1, 1999. Of the increase, $257.1 million is attributable to the inclusion of 46 new stores opened in 1999 and 39 new stores opened in 2000. The remaining $61.3 million is attributable to comparable store sales growth of 6.9%. Gross margin for the three months ended April 29, 2000 was 34.7% compared to 34.4% in the three months ended May 1, 1999. This increase is primarily attributable to a change in merchandise mix and improvements related to inventory management. Selling, general and administrative expenses declined to 23.1% of net sales for the three months ended April 29, 2000 from 23.7% of net sales for the three months ended May 1, 1999. The decrease was a result of leverage achieved on the increase in net sales. Depreciation and amortization for the three months ended April 29, 2000 was $27.2 million compared to $18.6 million for the three months ended May 1, 1999. The increase is primarily attributable to capital spending related to new store openings. Preopening expense for the three months ended April 29, 2000 was $19.1 million compared to $7.9 million for the three months ended May 1, 1999. The increase is primarily due to an increase in the number of new stores opened. For new stores opened in March and April, 2000 approximately $7.4 million in preopening costs was expensed in fiscal 1999 and $19.1 million was expensed during the three months ended April 29, 2000 for a total average cost per store of approximately $0.7 million. Preopening 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. 9

As a result of the above factors, operating income for the three months ended April 29, 2000, increased $24.7 million or 35.7% over the three months ended May 1, 1999. Net income for the three months ended April 29, 2000, increased 33.8% to $52.6 million from $39.3 million for the three months ended May 1, 1999. Earnings were $0.16 per diluted share for the three months ended April 29, 2000 compared to $0.12 per diluted share for the three months ended May 1, 1999. Seasonality & Inflation - ----------------------- The Company's business, like that of most retailers, is subject to seasonal influences, with the major portion of sales and income realized during the last half of each fiscal year, which includes the back-to-school and holiday seasons. Approximately 17% and 30% of sales occur during the back-to-school and holiday seasons, respectively. Because of the seasonality of the Company's business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. In addition, quarterly results of operations depend significantly upon the timing and amount of revenues and costs associated with the opening of new stores. The Company does not believe that inflation has had a material effect on the results during the periods presented. However, there can be no assurance that the Company's business will not be affected in the future. Financial Condition and Liquidity - --------------------------------- The Company's primary ongoing cash requirements are for inventory purchases, growth in outstanding accounts receivable, capital expenditures in connection with expansion and remodeling programs and pre-opening expenses. The Company's primary sources of funds for its business activities are cash flow from operations, sale of its proprietary accounts receivable, borrowings under its $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 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 debentures on June 1, 1999. At April 29, 2000, the Company's merchandise inventories had increased $200.1 million over the January 29, 2000 balance and 10

$272.5 million over the May 1, 1999 balance. These increases reflect the purchase of summer inventory as well as inventory for new stores. The Company's working capital increased to $757.5 million at April 29, 2000 from $732.1 million at January 29, 2000 and $670.3 million at May 1, 1999. Of the $87.2 million increase from May 1, 1999, $83.6 million is attributable to higher credit card receivables, net of related short-term debt, as the Company internally financed a higher percentage of receivables. The remaining increase was primarily the result of higher merchandise inventory levels required to support existing stores and incremental new store locations offset in part by increased accounts payable. Cash used in operating activities was $120.1 million for the three months ended April 29, 2000 compared to $58.4 million for the three months ended May 1, 1999. Excluding changes in operating assets and liabilities, cash provided by operating activities was $90.9 million for the three months ended April 29, 2000 compared to $62.7 million for the three months ended May 1, 1999. 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. Capital expenditures for the three months ended April 29, 2000 were $151.1 million compared to $203.3 million for the same period a year ago. The decrease in expenditures is primarily attributable to the timing of spending on new stores. The Company anticipates that it will be able to satisfy its current operating needs, planned capital expenditures and debt service requirements with current working capital, cash flows from operations, seasonal borrowings under its $300 million revolving credit facility, short-term trade credit and other sources of financing. Information in this document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to debt service requirements and planned capital expenditures. Forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "should" or "anticipates" or the negative thereof or other variations thereon. No assurance can be given that the future results covered by the forward-looking statements will be achieved. 11

PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders of Kohl's Corporation was held on May 23, 2000: 1. To elect four directors to serve for a three-year term. 2. To ratify the appointment of Ernst & Young LLP as independent auditors. 3. To consider and act upon a shareholder proposal. 4. To act upon any other business that may properly come before the meeting or any adjournment thereof. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitations. All of management's nominees for directors as listed in the proxy statement were elected. The results of the voting were as follows: 1. Election of directors Jay H. Baker For - 141,513,684 shares Withheld - 3,443,731 shares Kevin B. Mansell For - 147,512,636 shares Withheld - 3,444,779 shares Herbert Simon For - 146,818,038 shares Withheld - 4,139,377 shares Peter M. Sommerhauser For - 146,825,253 shares Withheld - 4,132,162 shares 2. Ratification of Ernst & Young LLP as independent auditors For - 150,779,674 shares Against - 116,261 shares Abstain - 61,480 shares 12

3. To consider and act upon a shareholder proposal. For - 10,548,340 shares Against - 111,444,418 shares Abstain - 18,493,247 shares Broker no votes - 10,471,410 shares 13

Item 6. Exhibits (a) Exhibits 12.1 Statement regarding calculation of ratio of earnings to fixed charges. 27.1 Financial Data Schedule - Article 5 of Regulation S-X, 3 Months ended April 29, 2000. 27.2 Financial Data Schedule - Articles of Regulation S-X, 3 Months ended May 1, 1999, (restated) 14

SIGNATURES ---------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Kohl's Corporation (Registrant) Date: /s/ William Kellogg ----------------------------------- William Kellogg Chairman Date: /s/ Arlene Meier ----------------------------------- Arlene Meier Executive Vice President - Finance Chief Financial Officer 15

Exhibit 12.1 Kohl's Corporation Ratio of Earnings to Fixed Charges ($000s) 13 Weeks Ended ------------------- Fiscal Year (1) April 29, May 1, ------------------------------------------------------- 2000 1999 1999 1998 1997 1996 1995 -------- ------- -------- -------- ---------- --------- -------- Earnings - -------- Income before income taxes and extraordinary items $ 85,765 $64,142 $421,112 $316,749 $235,063 $171,368 $122,729 Fixed charges (3) 26,281 17,252 82,835 63,135 57,446 42,806 30,649 Less interest capitalized during period (1,014) (719) (4,405) (1,878) (2,043) (2,829) (1,287) ------- ------- -------- -------- -------- -------- -------- $111,032 $80,675 $499,542 $378,006 $290,466 $211,345 $152,091 ======== ======= ======== ======== ======== ======== ======== Fixed Charges - ------------- Interest (expensed or capitalized) (3) $ 11,673 $ 6,139 $ 33,813 $ 24,550 $ 26,304 $ 20,574 $ 14,774 Portion of rent expense representative of interest 14,542 11,063 48,769 38,385 30,798 22,031 15,798 Amortization of deferred financing fees 66 50 253 200 344 201 77 ------- ------- -------- -------- -------- -------- -------- $ 26,281 $17,252 $ 82,835 $ 63,135 $57,446 $ 42,806 $ 30,649 ======== ======= ======== ======== ======== ======== ======== Ratio of earnings to fixed charges 4.22 4.68 6.03 5.99 5.06 4.94 4.96(2) ======== ======= ======== ======== ======== ======== ======== (1) Fiscal 1999, 1998, 1997 and 1996 are 52 week years and fiscal 1995 is a 53 week year. (2) Excluding the credit operations non-recurring expense of $14,052, the ratio of earnings to fixed charges would be 5.40. (3) Interest expense for fiscal 1997, 1996, and 1995 has been restated to properly reflect interest expense included on the Consolidated Statements of Income.

  

5 1,000 3-MOS FEB-03-2001 JAN-30-2000 APR-29-2000 3,639 0 552,055 7,727 994,493 1,593,307 1,782,960 303,333 3,269,600 835,838 520,654 0 0 3,294 1,804,557 3,269,600 1,228,666 1,228,666 802,746 1,134,671 0 0 8,230 85,765 33,147 52,618 0 0 0 52,618 0.16 0.16
  

5 1,000 3-MOS JAN-29-2000 JAN-31-1999 MAY-01-1999 2,960 15,000 239,769 4,005 721,955 1,017,037 1,208,992 224,161 2,195,489 346,693 308,878 0 0 3,256 1,451,472 2,195,489 910,256 910,256 597,128 840,982 0 0 5,132 64,142 24,823 39,319 0 0 0 39,319 0.12 0.12