FORM 10-Q
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Wisconsin
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39-1630919
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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N56 W17000 Ridgewood Drive,
Menomonee Falls, Wisconsin
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53051
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨¬
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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FINANCIAL INFORMATION
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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OTHER INFORMATION
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Item 1A.
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Item 2.
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Item 6.
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May 3,
2014 |
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February 1,
2014 |
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May 4,
2013 |
||||||
Assets
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(Unaudited)
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(Audited)
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(Unaudited)
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Current assets:
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Cash and cash equivalents
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$
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717
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$
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971
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$
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518
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Merchandise inventories
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3,981
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3,874
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3,961
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Deferred income taxes
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137
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142
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138
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Other
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280
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305
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294
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Total current assets
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5,115
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5,292
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4,911
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Property and equipment, net
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8,677
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8,745
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8,822
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Other assets
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341
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341
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317
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Total assets
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$
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14,133
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$
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14,378
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$
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14,050
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Liabilities and Shareholders’ Equity
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Current liabilities:
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Accounts payable
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$
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1,382
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$
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1,365
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$
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1,452
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Accrued liabilities
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1,078
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1,138
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1,023
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Income taxes payable
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49
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94
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117
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Current portion of capital lease and financing obligations
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112
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139
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107
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Total current liabilities
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2,621
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2,736
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2,699
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Long-term debt
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2,792
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2,792
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2,492
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Capital lease and financing obligations
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1,919
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1,930
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1,938
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Deferred income taxes
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382
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382
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368
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Other long-term liabilities
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562
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560
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532
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Shareholders’ equity:
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Common stock
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4
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4
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4
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Paid-in capital
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2,612
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2,598
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2,463
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Treasury stock, at cost
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(8,232
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)
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(8,052
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)
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(7,354
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)
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Accumulated other comprehensive loss
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(33
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)
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(34
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)
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(40
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)
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Retained earnings
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11,506
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11,462
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10,948
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Total shareholders’ equity
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5,857
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5,978
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6,021
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Total liabilities and shareholders’ equity
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$
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14,133
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$
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14,378
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$
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14,050
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Three Months Ended
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May 3,
2014 |
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May 4,
2013 |
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Net sales
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$
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4,070
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$
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4,199
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Cost of merchandise sold
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2,574
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2,671
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Gross margin
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1,496
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1,528
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Operating expenses:
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Selling, general and administrative
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1,000
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997
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Depreciation and amortization
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216
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214
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Operating income
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280
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317
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Interest expense, net
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85
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83
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Income before income taxes
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195
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234
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Provision for income taxes
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70
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87
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Net income
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$
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125
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$
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147
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Net income per share:
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Basic
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$
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0.60
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$
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0.66
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Diluted
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$
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0.60
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$
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0.66
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Dividends declared and paid per share
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$
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0.39
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$
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0.35
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Three Months Ended
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May 3,
2014 |
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May 4,
2013 |
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Net income
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$
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125
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$
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147
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Other comprehensive income, net of tax:
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Unrealized gains on investments
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—
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4
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Reclassification adjustment for interest expense on interest
rate derivative included in net income
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1
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1
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Other comprehensive income
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1
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5
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Comprehensive income
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$
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126
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$
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152
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Common Stock
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Paid-In Capital
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Treasury Stock
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Accumulated Other Comprehensive Loss
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Retained Earnings
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Shares
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Amount
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Shares
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Amount
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Total
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Balance at February 1, 2014
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364
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$
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4
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$
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2,598
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(153
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)
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$
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(8,052
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)
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$
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(34
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$
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11,462
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$
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5,978
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Comprehensive income
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—
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—
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—
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—
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—
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1
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125
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126
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Stock options and awards
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1
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—
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14
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—
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(14
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)
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—
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—
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—
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Dividends paid ($0.39 per common share)
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—
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—
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—
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—
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1
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—
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(81
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)
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(80
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)
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Treasury stock purchases
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—
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—
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—
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(4
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)
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(167
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)
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—
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—
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(167
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)
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Balance at May 3, 2014
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365
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$
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4
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$
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2,612
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(157
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)
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$
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(8,232
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)
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$
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(33
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)
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$
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11,506
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$
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5,857
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Three Months Ended
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||||||
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May 3,
2014 |
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May 4,
2013 |
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Operating activities
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Net income
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$
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125
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$
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147
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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216
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214
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Share-based compensation
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11
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9
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Excess tax benefits from share-based compensation
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(2
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)
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(1
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)
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Deferred income taxes
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5
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(13
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)
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Other non-cash revenues and expenses
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5
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11
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Changes in operating assets and liabilities:
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Merchandise inventories
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(105
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)
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(210
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)
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Other current and long-term assets
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17
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21
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Accounts payable
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17
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145
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Accrued and other long-term liabilities
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(44
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)
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11
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Income taxes
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(66
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)
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(29
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)
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Net cash provided by operating activities
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179
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305
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Investing activities
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|
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|
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Acquisition of property and equipment
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(176
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)
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(135
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)
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Other
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4
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12
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Net cash used in investing activities
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(172
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)
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(123
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)
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Financing activities
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|
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|
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Treasury stock purchases
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(167
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)
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(101
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)
|
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Shares withheld for taxes on vested restricted shares
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(14
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)
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(8
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)
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Dividends paid
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(80
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)
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|
(77
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)
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||
Proceeds from financing obligations
|
3
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—
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Capital lease and financing obligation payments
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(29
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)
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(24
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)
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Proceeds from stock option exercises
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24
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8
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Excess tax benefits from share-based compensation
|
2
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|
1
|
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Net cash used in financing activities
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(261
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)
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|
(201
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)
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Net decrease in cash and cash equivalents
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(254
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)
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|
(19
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)
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Cash and cash equivalents at beginning of period
|
971
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|
|
537
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Cash and cash equivalents at end of period
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$
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717
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$
|
518
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|
Supplemental information:
|
|
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Interest paid, net of capitalized interest
|
$
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65
|
|
|
$
|
61
|
|
Income taxes paid
|
132
|
|
|
128
|
|
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Non-Cash Investing and Financing Activities
|
|
|
|
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Property and equipment acquired through additional liabilities
|
$
|
6
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$
|
23
|
|
|
|
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Outstanding
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||||||||
Maturity
|
Effective
Rate
|
|
Coupon Rate
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May 3, 2014
and
February 1, 2014
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|
May 4, 2013
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||||||
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(Dollars in Millions)
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||||||||
2017
|
6.31
|
%
|
|
6.25
|
%
|
|
$
|
650
|
|
|
$
|
650
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|
2021
|
4.81
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%
|
|
4.00
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%
|
|
650
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|
|
650
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2023
|
3.25
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%
|
|
3.25
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%
|
|
350
|
|
|
350
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2023
|
4.78
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%
|
|
4.75
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%
|
|
300
|
|
|
—
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2029
|
7.36
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%
|
|
7.25
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%
|
|
200
|
|
|
200
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2033
|
6.05
|
%
|
|
6.00
|
%
|
|
300
|
|
|
300
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2037
|
6.89
|
%
|
|
6.88
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%
|
|
350
|
|
|
350
|
|
||
|
5.54
|
%
|
|
|
|
2,800
|
|
|
2,500
|
|
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Unamortized debt discount
|
|
|
|
|
(8
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)
|
|
(8
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)
|
||||
Long-term debt
|
|
|
|
|
$
|
2,792
|
|
|
$
|
2,492
|
|
Level 1:
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Financial instruments with unadjusted, quoted prices listed on active market exchanges.
|
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|
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Level 2:
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Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. The prices for the financial instruments are determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
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Level 3:
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Financial instruments that are not actively traded on a market exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques.
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May 3, 2014
|
|
February 1, 2014
|
|
May 4, 2013
|
||||||||||||||||||
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Pricing Category
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Cost
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Fair Value
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Cost
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Fair Value
|
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Cost
|
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Fair Value
|
||||||||||||
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(In Millions)
|
||||||||||||||||||||||
Cash and cash equivalents
|
Level 1
|
|
$
|
717
|
|
|
$
|
717
|
|
|
$
|
971
|
|
|
$
|
971
|
|
|
$
|
518
|
|
|
$
|
518
|
|
Auction rate securities
|
Level 3
|
|
82
|
|
|
64
|
|
|
82
|
|
|
64
|
|
|
82
|
|
|
57
|
|
||||||
Debt
|
Level 1
|
|
2,792
|
|
|
3,082
|
|
|
2,792
|
|
|
2,988
|
|
|
2,492
|
|
|
2,802
|
|
|
Three Months Ended
|
||||||
|
May 3,
2014 |
|
May 4,
2013 |
||||
|
(In Thousands)
|
||||||
Stock options granted
|
126
|
|
|
414
|
|
||
Restricted shares and units granted, excluding shares earned in lieu of cash dividends
|
730
|
|
|
654
|
|
||
Total stock-based compensation grants
|
856
|
|
|
1,068
|
|
||
Weighted average fair value at grant date:
|
|
|
|
||||
Stock options
|
$
|
12.68
|
|
|
$
|
10.18
|
|
Restricted shares and units
|
$
|
56.75
|
|
|
$
|
46.39
|
|
|
Three Months Ended
|
||||||
|
May 3,
2014 |
|
May 4,
2013 |
||||
|
(In Millions)
|
||||||
Numerator—Net income
|
$
|
125
|
|
|
$
|
147
|
|
Denominator—Weighted average shares:
|
|
|
|
||||
Basic
|
206
|
|
|
222
|
|
||
Impact of dilutive employee stock-based awards
|
2
|
|
|
1
|
|
||
Diluted
|
208
|
|
|
223
|
|
||
Antidilutive shares
|
7
|
|
|
12
|
|
||
|
|
|
|
|
(Dollars and Shares in Millions)
|
||
Net sales
|
$
|
4,070
|
|
Change in:
|
|
||
Net sales
|
(3.1
|
)%
|
|
Comparable sales
|
(3.4
|
)%
|
|
Gross margin as a percent of net sales
|
36.8
|
%
|
|
Selling, general and administrative expenses
|
$
|
1,000
|
|
Net income
|
$
|
125
|
|
Net earnings per diluted share
|
$
|
0.60
|
|
Shares repurchased
|
3.2
|
|
|
Treasury stock purchases
|
$
|
167
|
|
|
|
|
|
|
|||
|
$
|
|
%
|
||||
|
(Dollars In Millions)
|
||||||
Net Sales - 2013
|
$
|
4,199
|
|
|
|
|
|
Comparable sales:
|
|
|
|
|
|||
Stores
|
(184
|
)
|
|
(4.8)
|
|
%
|
|
E-Commerce
|
41
|
|
|
12.3
|
|
|
|
Total
|
(143
|
)
|
|
(3.4)
|
|
|
|
New stores and other revenues
|
14
|
|
|
—
|
|
|
|
Total decrease in net sales
|
(129
|
)
|
|
(3.1)
|
|
%
|
|
Net Sales - 2014
|
$
|
4,070
|
|
|
|
|
Selling price per unit
|
2.6
|
%
|
Units per transaction
|
(1.5
|
)
|
Average transaction value
|
1.1
|
|
Number of transactions
|
(4.5
|
)%
|
Comparable sales
|
(3.4
|
)%
|
|
|
|
|
|
Increase (Decrease)
|
||
|
2014
|
|
2013
|
|
$
|
|
%
|
|
(Dollars in Millions)
|
||||||
Gross margin
|
$1,496
|
|
$1,528
|
|
$(32)
|
|
(2.1)%
|
As a percent of net sales
|
36.8%
|
|
36.4%
|
|
|
|
0.4%
|
|
|
|
Increase
|
|||||||||||
|
2014
|
|
2013
|
|
$
|
|
%
|
|||||||
|
(Dollars in Millions)
|
|||||||||||||
Selling, general and administrative expenses
|
$
|
1,000
|
|
|
$
|
997
|
|
|
$
|
3
|
|
|
—
|
%
|
As a percent of net sales
|
24.6
|
%
|
|
23.7
|
%
|
|
|
|
0.9
|
%
|
|
|
|
Increase (Decrease)
|
|||||||||||
|
2014
|
|
2013
|
|
$
|
|
%
|
|||||||
|
(Dollars in Millions)
|
|||||||||||||
Depreciation and amortization
|
$
|
216
|
|
|
$
|
214
|
|
|
$
|
2
|
|
|
—
|
%
|
Interest expense, net
|
85
|
|
|
83
|
|
|
2
|
|
|
2
|
|
|||
Provision for income taxes
|
70
|
|
|
87
|
|
|
(17
|
)
|
|
(19
|
)
|
|||
Effective tax rate
|
36.0
|
%
|
|
37.0
|
%
|
|
|
|
|
|
|
|
|
|
Decrease in Cash
|
|||||||||
|
2014
|
|
2013
|
|
$
|
|
%
|
|||||||
Net cash provided by (used in):
|
(Dollars in Millions)
|
|||||||||||||
Operating activities
|
$
|
179
|
|
|
$
|
305
|
|
|
$
|
(126
|
)
|
|
(41
|
)%
|
Investing activities
|
(172
|
)
|
|
(123
|
)
|
|
(49
|
)
|
|
(40
|
)%
|
|||
Financing activities
|
(261
|
)
|
|
(201
|
)
|
|
(60
|
)
|
|
(30
|
)%
|
|
2014
|
|
2013
|
|
Increase (Decrease)
|
||||||
|
(In Millions)
|
|
|
||||||||
Net cash provided by operating activities
|
$
|
179
|
|
|
$
|
305
|
|
|
$
|
(126
|
)
|
Acquisition of property & equipment
|
(176
|
)
|
|
(135
|
)
|
|
(41
|
)
|
|||
Capital lease & financing obligation payments
|
(29
|
)
|
|
(24
|
)
|
|
(5
|
)
|
|||
Proceeds from financing obligations
|
3
|
|
|
—
|
|
|
3
|
|
|||
Free cash flow
|
$
|
(23
|
)
|
|
$
|
146
|
|
|
$
|
(169
|
)
|
|
May 3, 2014
|
|
May 4, 2013
|
||||
Working capital
(In Millions)
|
$
|
2,494
|
|
|
$
|
2,212
|
|
Current ratio
|
1.95
|
|
|
1.82
|
|
||
Debt/capitalization
|
45.2
|
%
|
|
43.0
|
%
|
Period
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||||
|
|
|
|
|
|
|
(In Millions)
|
||||||
February 2 – March 1, 2014
|
1,792,031
|
|
|
$
|
50.93
|
|
|
1,764,409
|
|
|
$
|
2,232
|
|
March 2 – April 5, 2014
|
936,471
|
|
|
55.52
|
|
|
721,902
|
|
|
2,192
|
|
||
April 6 – May 3, 2014
|
686,715
|
|
|
54.62
|
|
|
685,142
|
|
|
2,155
|
|
||
Total
|
3,415,217
|
|
|
$
|
52.93
|
|
|
3,171,453
|
|
|
$
|
2,155
|
|
|
|
|
Exhibit
Number
|
|
Description
|
10.1
|
|
Agreement dated as of March 24, 2014 by and between Don Brennan and Kohl's Department Stores, Inc.
|
|
|
|
10.2
|
|
Amendment to Private Label Credit Card Program Agreement dated as of May 13, 2014 by and between Kohl's Department Stores, Inc. and Capital One, National Association.
|
|
|
|
10.3
|
|
Form of Executive Restricted Stock Agreement pursuant to Kohl's Corporation 2010 Long Term Compensation Plan, incorporated herein by reference to Exhibit 99.2 of the Company's Current Report on Form 8-K dated as of January 15, 2014.
|
|
|
|
10.4
|
|
Form of Executive Restricted Stock Agreement pursuant to Kohl's Corporation 2010 Long Term Compensation Plan (March 2014 grant).
|
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
Kohl’s Corporation
(Registrant)
|
|
|
|
Date:
|
June 6, 2014
|
/s/ Wesley S. McDonald
|
|
|
Wesley S. McDonald
On behalf of the Registrant and as Senior Executive Vice President and Chief Financial Officer
(Principal Financial and Chief Accounting Officer)
|
A.
|
Final Pay, Final Expenses
. In accordance with the Company’s current payroll practices, Executive shall receive his regular salary through the Separation Date, at which time Executive shall be removed from the Company’s payroll system and subsequent payments shall be made only as set forth below in 2(B). Executive shall be reimbursed for all documented business expenses that have been incurred by Executive during the course of the performance of his duties while employed by the Company, to the extent such expenses are reimbursable in accordance with the Company’s current business expense reimbursement programs.
|
B.
|
Severance Payments.
Company shall pay Executive severance as follows:
|
(i)
|
Following the Revocation Period described in Section 4(E) below, but in no event later than May 10, 2014, Company shall make a one-time, lump-sum payment to Executive in the amount of Two Million Seven Hundred Fifty Five Thousand Twenty Five and 00/100 Dollars ($2,755,025.00), which is the sum of the following:
|
a.
|
Two Million Two Hundred Twenty Five Thousand Two Hundred Eighty and 00/100 Dollars ($2,225,280.00), which is 2.4 times Executive’s current annual salary ($927,200.00); plus
|
b.
|
Five Hundred Twenty Nine Thousand Seven Hundred Forty Five and 00/100 Dollars ($529,745.00), which the average of the three (3) most recent annual incentive compensation plan payments paid to Executive prior to the Separation Date ($278,160.00; $276,075.00; and $1,035,000.00);
|
(ii)
|
On the date after October 10, 2014 on which Company first issues payroll checks to its associates, Company shall make a one-time, lump-sum payment to Executive in the amount of Two Hundred
|
(iii)
|
Beginning on the date after October 10, 2014 on which Company first issues payroll checks to its associates, Company shall pay to Executive a series of twelve (12) consecutive semi-monthly payments (the “Periodic Severance Payments”), each in the gross amount of:
|
a.
|
Nineteen Thousand Three Hundred Seventeen and 00/100 Dollars ($19,317.00); plus
|
b.
|
Interest on each Periodic Severance Payment calculated from the Separation Date to the date the Periodic Severance Payment is made at the rate of 1.05% per annum.
|
(iv)
|
On or before April 1, 2015, Company shall pay Executive a bonus based on Company's fiscal 2014 financial performance, in the amount which is equal to seventeen percent (17%) of the bonus, if any, that would have otherwise been payable to Executive pursuant to Company's Annual Incentive Plan had Executive been employed in his current position and in good standing at the end of Company’s fiscal year 2014.
|
C.
|
Prior Equity Compensation Awards.
|
(i)
|
Executive’s outstanding stock option awards shall continue to vest in accordance with their original vesting schedules through March 31, 2017. All of Executive’s unvested stock options shall, as of March 31, 2017, be immediately cancelled, null and void.
|
(ii)
|
Executive shall have until June 30, 2017 to exercise all stock options that are vested as of March 31, 2017. As of 3:00 pm Central Time on June 30, 2017, all of Executive’s vested but unexercised stock options shall be cancelled, null and void.
|
(iii)
|
Those shares of restricted stock referenced on EXHIBIT A attached hereto (the “Accelerated Restricted Stock”) shall vest in full on the Termination Date. On the Termination Date or as soon as practicable thereafter, Company shall release the Accelerated Restricted Stock to Executive, net of the shares required to satisfy Executive’s tax withholding obligations. All of Executive’s other unvested restricted stock shall, as of the Termination Date, be immediately cancelled, null and void.
|
(iv)
|
Company shall award no additional stock options or restricted stock to Executive from or after the date of this Agreement.
|
D.
|
Savings Plan.
Company maintains the Kohl's Savings Plan (the 401(k) Plan) for the benefit of eligible employees. The 401(k) Plan is composed of two (2) accounts for each eligible employee: (i) a savings account to which eligible employees are permitted to make voluntary contributions which are matched by Company as provided in the 401(k) Plan; and (ii) a retirement account to which Company makes contributions to eligible employees. In the event Executive has an interest in Company's 401(k) Plan,
|
E.
|
Deferred Compensation.
In the event Executive has an interest in Company's Deferred Compensation Plan (“Deferred Compensation Plan”), Executive’s interest is subject to the terms of redemption contained in the Deferred Compensation Plan.
|
F.
|
Medical Insurance.
Executive may, at his option, continue to participate in Company’s executive health insurance program, as provided to Company’s executives from time to time (the “Health Insurance Benefits”). In the event of Executive’s death, the Health Insurance Benefits shall continue to be provided to Executive’s eligible dependents, in each case for as long as each individual would have continued to qualify as an eligible dependent under the terms of the applicable insurance and medical plans had Executive been living.
|
(1)
|
the Health Insurance Benefits being reasonably available to the Company with respect to Executive and Executive’s Eligible Dependents, as the case may be; and
|
(2)
|
Executive or Executive’s eligible dependants, as the case may be, shall reimburse the Company for all premiums paid for Executive’s Health Insurance Benefits, as determined by the Company in good faith from time to time. The Company shall provide Executive a quarterly invoice for such reimbursement, and amounts due hereunder may be withheld from other amounts payable to Executive. The current premium for Executive’s Health Insurance Benefits is $1,208.51 per month.
|
G.
|
ESOP.
In the event Executive has an interest in Company
'
s Executive Stock Ownership Plan (“ESOP”), Executive’s interest is subject to the terms of redemption contained in the ESOP. Executive shall have the right to redeem all stock and receive prompt and full payment from the Company for the shares, pursuant to the terms of the ESOP.
|
H.
|
Outplacement.
Executive shall be entitled to outplacement services from an outplacement service company of the Company’s choosing at a cost not to exceed Twenty Thousand and no/100 Dollars ($20,000.00), payable directly to such outplacement service company. Such outplacement services must be performed prior
|
A.
|
Waiver and General Release by Executive.
In exchange for the benefits and payments to Executive described in this Agreement and to the extent permitted by law, Executive hereby waives and irrevocably and unconditionally releases, acquits, and fully and forever discharges Company, its related corporations and other businesses and each of their past, current and future agents, servants, officers, directors, stockholders, Executives, and attorneys and their respective successors and assigns (the “Released Parties”) from and against any and all claims, liabilities, debts, suits, demands, causes of action or controversies of any nature whatsoever, for all injuries, losses and damages (including, but not limited to, punitive damages) whether in law or in equity, contract or tort or whether judicial or administrative in nature, which arose prior to the time Executive signs this Agreement. This release covers claims, whether brought by or on behalf of Executive and whether asserted or unasserted, whether known or unknown or anticipated or unanticipated by Executive. Executive further covenants and agrees not to sue Company for any claims referred to in this paragraph. This release includes, but is not necessarily limited to:
|
i.
|
Any and all liability of Company resulting from, arising out of, or connected with the employment relationship existing between Executive and Company or the termination of that relationship, including, but not necessarily limited to, any and all liability based on non-vested salary, vacation, or any other form of compensation or any and all liability related to the termination of the Employment Agreement.
|
ii.
|
To the extent any of the following statutes are applicable to Company, any and all liability of Company based on rights or claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Civil Rights Act of 1991, the Americans With Disabilities Act, the Rehabilitation Act of 1973, the Executive Retirement Income Security Act of 1974, the Fair Labor Standards Act, the National Labor Relations Act, the Labor Management Relations Act, the Federal Family and Medical Leave Act, the employment laws of the state in which Executive is employed by Company, and any other applicable federal, state, or local laws, regulations, and ordinances of any kind;
|
iii.
|
Any and all liability of Company arising under any common law claims of wrongful discharge, breach of any express or implied contract, misrepresentation, defamation, interference with contract, intentional or negligent infliction of emotional distress, and any other tort and tort-type claims based on allegations of injury to Executive’s reputation and any other tort and tort-type personal injuries; and
|
iv.
|
Any and all liability of Company resulting from, arising out of, or connected with any determinations as to the application of Section 409A of the Code to this Agreement, the Employment Agreement or the administration of such agreements based on such determinations.
|
B.
|
Waiver of Reinstatement.
Executive waives any and all rights to reinstatement to employment, and hereby agrees not to reapply for employment with Company, its successors or related and/or affiliated companies.
|
C.
|
Forfeiture of Litigation Benefits.
Executive agrees to waive any monetary or other benefits which may be conferred on Executive in any litigation brought against Company or any of the Released Parties respecting any claims waived or released hereunder.
|
D.
|
Non-Disparagement.
Executive agrees not to engage at any time in any form of conduct or make any statements or representations, or direct any other person or entity to engage in any conduct or make any statements or representations, that disparage, criticize or otherwise impair the reputation of the Company, its affiliates, parents and subsidiaries and their respective past and present officers, directors, stockholders, partners, members, agents and employees. Nothing contained in this Section 3 (D) shall preclude Executive from providing truthful testimony or statements pursuant to subpoena or other legal process or in response to inquiries from any government agency or entity.
|
E.
|
Return of Property.
Executive agrees to immediately return all Company property under Executive’s possession or control, including but not limited to any Company-owned vehicle, computer equipment, corporate credit cards, keys, cellular telephones, and smartphones. Executive shall immediately return to the Company all documents, records, and materials belonging and/or relating to the Company, and all copies of all such materials. Executive further agrees to destroy such records maintained by Executive on Executive’s own computer equipment.
|
F.
|
Voicemail, Email.
Company shall discontinue Executive’s voice mail and e-mail privileges, effective on the Separation Date. Executive shall not have access to non-public portions of any of Company's facilities after the Separation Date. At all times between the Separation Date and the date of the last scheduled Severance Payment, Executive shall provide Company’s Chairman and Human Resources Department with current contact information including home address, email address and home and mobile telephone numbers.
|
G.
|
Covenant Not to Recruit.
Executive hereby covenants and agrees that Executive will not at any time prior to the Separation Date, and for a period of one (1) year thereafter, directly or indirectly, whether as an owner, stockholder, director, officer, partner, employee, agent, provider, consultant, independent contractor or otherwise; (i) solicit or recruit, or attempt to solicit or recruit, or assist others in soliciting or recruiting individuals employed by Company as of the date hereof to accept employment elsewhere; provided, however, that this clause shall not prohibit Executive from soliciting or recruiting individuals who, at the time of solicitation or recruiting, no longer work for Company and whose departure from Company was not attributable directly or indirectly to Executive; or (ii) provide employment references with respect to current executives or Executives of Company.
|
H.
|
Non-Compete.
See Section 10 below.
|
A.
|
Executive agrees and acknowledges that Executive has read this Agreement, understands its contents, and may agree to the terms of this Agreement by signing and dating it and returning the signed and dated document, via mail, hand delivery, or overnight delivery, so that it is received by Richard D. Schepp, Senior Executive Vice President - Human Resources, General Counsel, within 21 days from the date of Executive’s receipt;
|
B.
|
Executive agrees and acknowledges that Executive has been advised by
Company to consult with an attorney and tax consultants prior to signing this Agreement;
|
C.
|
Executive agrees and acknowledges that this Agreement provides Executive with benefits from Company which, in their totality, are greater than those to which Executive otherwise would be entitled;
|
D.
|
Executive understands that this Agreement, at Section 3, above, includes
a final General Release, including a release of all claims under the Age
Discrimination in Employment Act;
|
E.
|
Executive understands that Executive has seven (7) days after signing this Agreement to revoke his acceptance of it. This seven (7) day period is called the “Revocation Period”. Such revocation will not be
|
F.
|
This document will not be binding or enforceable unless Executive has signed and delivered it as provided herein, and has not chosen to exercise Executive’s revocation rights, as described herein; and
|
G.
|
Executive represents and warrants to Company that, in the event Executive chooses to accept the terms of this Agreement by signing below, the date appearing alongside Executive’s name on the last page of this document shall be the actual date and time on which Executive has signed the agreement. Notwithstanding Executive’s failure to execute this Agreement or Executive’s revocation of this Agreement in accordance with this paragraph, the terms of this paragraph will continue to apply.
|
H.
|
An executed original of this Agreement shall be returned to Richard D. Schepp, Senior Executive Vice President - Human Resources, General Counsel, Kohl's Department Stores, Inc., N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin 53051.
|
A.
|
Execution Date.
Executive has executed this Agreement on the date set forth opposite Executive’s name on the signature page hereof; and
|
B.
|
Voluntary and Knowing.
This Agreement has been carefully read by Executive following consultation with his legal counsel, and its contents are known and understood by Executive. Executive has signed this Agreement freely and voluntarily and intends to be bound by it.
|
A.
|
Acknowledgments
. Executive acknowledges and agrees that, as an integral part of its business, the Company has expended a great deal of time, money and effort to develop and maintain confidential, proprietary and trade secret information to compete against similar businesses and that this information, if misused or disclosed, would be harmful to the Company’s business and competitive position in the marketplace. Executive further acknowledges and agrees that in Executive’s position with the Company, the Company provided Executive with access to its confidential, proprietary and trade secret information, strategies and other confidential business information that would be of considerable value to competitive businesses. As a result, Executive acknowledges and agrees that the restrictions contained in this Section 7 are reasonable, appropriate and necessary for the protection of the Company’s confidential, proprietary and trade secret information. For purposes of this Section 7, the term “Company” means Kohl’s Department Stores, Inc. and its parent companies, subsidiaries and other affiliates.
|
B.
|
Confidentiality Obligations
. Executive will not directly or indirectly use or disclose any Trade Secrets unless such information ceases to be deemed a Trade Secret by means of one of the exceptions set forth in Section 7(C)(3), below. For a period of two (2) years following the Separation Date, Executive will not directly or indirectly use or disclose any Confidential Information, unless such information ceases to be deemed Confidential Information by means of one of the exceptions set forth in Section 7(C)(3), below.
|
(i)
|
Trade Secret
. The term “Trade Secret” shall have that meaning set forth under applicable law. This term is deemed by the Company to specifically include all of Company’s computer source, object or other code and any confidential information received from a third party with whom the Company has a binding agreement restricting disclosure of such confidential information.
|
(ii)
|
Confidential Information
. The term “Confidential Information” shall mean all non-Trade Secret or
|
(iii)
|
Exclusions
. Notwithstanding the foregoing, the terms “Trade Secret” and “Confidential Information” shall not include, and the obligations set forth in this Section 7 shall not apply to, any information which: (i) can be demonstrated by Executive to have been known by Executive prior to Executive’s employment by the Company; (ii) is or becomes generally available to the public through no act or omission of Executive; (iii) is obtained by Executive in good faith from a third party who discloses such information to Executive on a non-confidential basis without violating any obligation of confidentiality or secrecy relating to the information disclosed; or (iv) is independently developed by Executive outside the scope of Executive’s employment without use of Confidential Information or Trade Secrets.
|
C.
|
Confidentiality of this Agreement
. Executive agrees that Executive will not disclose, directly or indirectly, any non-public terms of this Agreement to any third party; provided, however, that following Executive’s obtaining a promise of confidentiality for the benefit of the Company from Executive’s tax preparer, accountant, attorney and spouse, Executive may disclose such terms to such of these individuals who have made such a promise of confidentiality. This provision shall not prevent Executive from disclosing such matters in testifying in any hearing, trial or other legal proceeding where Executive is required to do so.
|
A.
|
Acknowledgments
. Executive acknowledges and agrees that the Company is one of the leading retail companies in the United States, with department stores throughout the United States, and that the Company compensates executives like Executive to, among other things, develop and maintain valuable goodwill and relationships on the Company’s behalf (including relationships with customers, suppliers, vendors, employees and other associates) and to maintain business information for the Company’s exclusive ownership and use. As a result, Executive acknowledges and agrees that the restrictions contained in this Section 10 are reasonable, appropriate and necessary for the protection of the Company’s goodwill, customer, supplier, vendor, employee and other associate relationships and Confidential Information and Trade Secrets. Executive further acknowledges and agrees that the restrictions contained in this Section 10 will not pose an undue hardship on Executive or Executive’s ability to find gainful employment. For purposes of this Section 10, the term “Company” means Kohl’s Department Stores, Inc. and its parent companies, subsidiaries and other affiliates.
|
B.
|
Restricted Services Obligation
. During the Initial Term and the Renewal Term and for the one (1) year period following termination, for whatever reason, of Executive’s employment with the Company, Executive will not, directly or indirectly, provide Restricted Services (defined below) for or on behalf of any Competitive Business (defined below) or directly or indirectly, provide any Competitive Business with any advice or counsel in the nature of the Restricted Services.
|
C.
|
Definitions
. For purposes of this Section 10, the following are defined terms:
|
(i)
|
Restricted Services. “Restricted Services” shall mean services of any kind or character comparable to those Executive provided to the Company during the eighteen (18) month period immediately preceding Executive’s last date of employment with the Company.
|
(ii)
|
Competitive Business. “Competitive Business” shall mean each of the following entities: J.C. Penney Company, Inc., Macy’s, Inc., The Gap, Inc., Target Corporation, Sears Holdings Corporation, and any successors, subsidiaries or affiliates of these entities engaged in the operation of national retail department stores.
|
If to the Company:
|
Kohl’s Department Stores, Inc.
|
Grant #
|
Grant Date
|
Originally Scheduled Vest Date
|
# of Shares Subject to Accelerated Vesting
|
|
|
|
|
|
|
1132
|
03/01/2011
|
03/01/2015
|
22,523
|
|
|
|
03/01/2016
|
22,523
|
|
|
|
|
|
|
1551
|
03/28/2011
|
03/28/2015
|
4,972
|
|
|
|
03/28/2016
|
4,972
|
|
|
|
|
|
|
1959
|
03/26/2012
|
03/26/2015
|
3,610
|
|
|
|
03/26/2016
|
3,610
|
|
|
|
03/26/2016
|
3,610
|
|
|
|
|
|
|
3419
|
01/13/2014
|
01/13/2015
|
3,274
|
|
|
|
01/13/2016
|
3,273
|
|
|
|
01/13/2017
|
3,274
|
|
Subtotal
|
|
|
75,641
|
|
Dividend Shares Attributable to Accelerated Shares
|
|
|
5,426
|
|
|
|
|
|
|
Total
|
|
|
81,067
|
|
*
|
In accordance with Section 2(C)(iii) of this Agreement, vesting of these shares will occur on the Separation Date. On that date or as soon as practicable thereafter, Company shall release the Accelerated Restricted Stock to Executive, net of the shares required to satisfy Executive’s tax withholding obligations. All of Executive’s other unvested restricted stock shall, as of the Separation Date, be immediately cancelled, null and void. With the exception of this accelerated vesting, all restricted stock is subject to the terms and conditions of the applicable Long-Term Incentive Plan and the Award Agreement pursuant to which the award was made.
|
1.
|
Section 1.1 (Definitions; Generally)
. The definition of “Enhancement Products” in Section 1.1 of the Agreement is hereby amended by deleting such definition in its entirety and inserting in lieu thereof the following:
|
2.
|
Schedule 4.3 (Bank Obligations)
.
Schedule 4.3
of the Agreement is hereby amended by deleting such Schedule in its entirety and inserting in lieu thereof an amended
Schedule 4.3
in the form attached hereto as
Exhibit A
.
|
3.
|
Schedule 4.6(a) (Risk Management/Credit Standards)
.
Schedule 4.6(a)
of the Agreement is hereby amended as set forth in
Exhibit B
hereto.
|
4.
|
Schedule 4.6(b) (Agreed Risk Management Policies)
.
Schedule 4.6(b)
of the Agreement is hereby amended as set forth in
Exhibit C
hereto.
|
5.
|
Section 4.7/Schedule 4.7(a) (Exception Accounts)
.
|
a.
|
Section 4.7(a) of the Agreement is hereby amended by deleting such Section in its entirety and inserting in lieu thereof the following:
|
b.
|
Schedule 4.7(a)
of the Agreement is amended by deleting such Schedule in its entirety and inserting in lieu thereof an amended
Schedule 4.7(a)
in the form attached hereto as
Exhibit D
.
|
6.
|
Schedule 4.10 (Systems)
.
Schedule 4.10
of the Agreement is hereby amended as set forth in
Exhibit E
.
|
7.
|
Section 5.1 (Kohl’s Responsibility to Market the Program)
. Section 5.1(b) of the Agreement is hereby amended by inserting at the end of such Section the following:
|
8.
|
Schedule 6.3 (Cardholder Data)
.
|
a.
|
Subsection (c) of
Schedule 6.3
of the Agreement is hereby amended as set forth in
Exhibit F
.
|
b.
|
Prior to the first use of Cardholder Data as contemplated by subsection (c)(iii) of
Schedule 6.3
(as amended by this Amendment), the parties agree that the Program Privacy Policy shall be amended to read substantially as set forth in
Exhibit G
(taking into consideration any other changes to the Program Privacy Policy as shall have been made prior to such amendment), or as otherwise agreed by the parties.
|
9.
|
Kohl’s Account Ease
SM
/Schedule 6.3(c) (Bank Enhancement Products)
.
|
a.
|
The debt cancellation or debt deferment service referred to as “Kohl’s Account Ease
SM
” (“KAE”) shall not be offered to new Cardholders or to any existing Cardholders that do not currently subscribe to KAE. In the event that the subscription of any existing Cardholder to KAE expires, Bank shall not offer KAE to any such Cardholder. Notwithstanding the foregoing, Bank shall continue to support KAE for existing subscribed Cardholders.
|
b.
|
The Agreement is hereby amended by deleting
Schedule 6.3(c)
in its entirety.
|
10.
|
Section 7.3 (Customer Service)
. Section 7.3 of the Agreement is hereby amended by inserting a new Section 7.3(g) as follows:
|
11.
|
Section 7.9/Schedule 7.9 (Training)
.
|
a.
|
The Agreement is hereby amended by adding a new Section 7.9 as follows:
|
b.
|
The Agreement is hereby amended to include a new
Schedule 7.9
, in the form attached hereto as
Exhibit H
.
|
12.
|
Section 8.4(b) (Settlement Procedures)
. The Agreement is hereby amended by deleting clause (ii) of Section 8.4(b) in its entirety and inserting in lieu thereof an amended clause (ii) as follows:
|
13.
|
Schedule 9.2 (Compensation)
.
Schedule 9.2
of the Agreement is hereby amended by deleting such Schedule in its entirety and inserting in lieu thereof an amended
Schedule 9.2
in the form attached hereto as
Exhibit I
.
|
14.
|
Section 11.3(i) (General Covenants of Kohl’s)/Schedule 11.3(i) (Incentive-Based Compensation)
.
|
a.
|
Section 11.3 of the Agreement is hereby amended by inserting a new Section 11.3(i), as follows:
|
b.
|
The Agreement is hereby amended to include a new
Schedule 11.3(i)
in the form attached hereto as
Exhibit J
.
|
15.
|
Section 12.2 (Use and Disclosure of Confidential Information)/Schedule 12.2(d) (Use and Disclosure of Confidential Information)
.
|
a.
|
Section 12.2 of the Agreement is hereby amended by adding a new Section 12.2(d) as follows:
|
“(d)
|
The parties further agree as set forth in
Schedule 12.2(d)
with respect to the use of Bank Confidential Information.”
|
b.
|
The Agreement is hereby amended to include a new
Schedule 12.2(d)
in the form attached hereto as
Exhibit K
.
|
16.
|
Section 15.1 (Term)
. Section 15.1 of the Agreement is hereby amended by deleting the first sentence of such Section in its entirety and inserting in lieu thereof the following:
|
17.
|
Section 18.2 (Precautionary Security Interest)/Schedule 18.2 (Deposit of Cardholder Payments)
.
|
a.
|
Section 18.2 of the Agreement is hereby amended by inserting at the end of such Section the following:
|
b.
|
The Agreement is hereby amended to include a new
Schedule 18.2
in the form attached hereto as
Exhibit L
.
|
18.
|
Section 18.6 (Subcontracting)
.
|
a.
|
Section 18.6 of the Agreement is hereby amended by inserting at the end of such Section the following:
|
b.
|
The Agreement shall be amended to include a new
Schedule 18.6
, in the form attached hereto as
Exhibit M
.
|
19.
|
Amendment
. This Amendment may not be amended or otherwise modified except as provided in the Agreement.
|
20.
|
Full Force and Effect
. Except as amended hereby, the terms and conditions of the Agreement shall remain in full force and effect.
|
21.
|
Governing Law
. This Amendment and all rights and obligations hereunder, including matters of construction, validity and performance, shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to internal principles of conflicts of laws, and applicable federal law.
|
22.
|
Counterparts/Facsimiles/PDF E-Mails
. This Amendment may be executed in any number of counterparts, all of which together shall constitute one and the same instrument, but in making proof of this Amendment, it shall not be necessary to produce or account for more than one such counterpart. Any facsimile or PDF e-mailed version of an executed counterpart shall be deemed an original.
|
Executive
Restricted Shares
|
Employee ID
|
Grant Date
|
Number of
|
|
|
|
|
|
Shares
Vesting
|
1
st
Anniversary Date
|
50%
|
2
nd
Anniversary Date
|
50%
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Kohl's Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated:
|
June 6, 2014
|
/s/ Kevin Mansell
|
|
|
Kevin Mansell
|
|
|
Chairman, President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Kohl's Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated:
|
June 6, 2014
|
/s/ Wesley S. McDonald
|
|
|
Wesley S. McDonald
|
|
|
Senior Executive Vice President and Chief Financial Officer
|
|
|
(Principal Financial and Chief Accounting Officer)
|
1.
|
This Quarterly Report on Form 10-Q of the Company for the quarterly period ended
May 3, 2014
(the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
That the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated:
|
June 6, 2014
|
/s/ Kevin Mansell
|
|
|
Kevin Mansell
|
|
|
Chairman, President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
1.
|
This Quarterly Report on Form 10-Q of the Company for the quarterly period ended
May 3, 2014
(the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
That the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated:
|
June 6, 2014
|
/s/ Wesley S. McDonald
|
|
|
Wesley S. McDonald
|
|
|
Senior Executive Vice President and Chief Financial Officer
|
|
|
(Principal Financial and Chief Accounting Officer)
|