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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April 30,
2016 |
January 30,
2016 |
May 2,
2015 |
||||||
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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423
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$
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707
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$
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1,195
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Merchandise inventories
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4,084
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4,038
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4,165
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Other
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348
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331
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338
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Total current assets
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4,855
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5,076
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5,698
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Property and equipment, net
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8,230
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8,308
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8,518
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Other assets
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219
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222
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237
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Total assets
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$
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13,304
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$
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13,606
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$
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14,453
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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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1,346
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$
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1,251
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$
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1,645
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Accrued liabilities
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1,126
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1,206
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1,140
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Income taxes payable
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48
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130
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87
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Current portion of capital lease and financing obligations
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127
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127
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113
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Total current liabilities
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2,647
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2,714
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2,985
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Long-term debt
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2,793
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2,792
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2,780
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Capital lease and financing obligations
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1,770
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1,789
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1,840
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Deferred income taxes
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239
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257
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275
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Other long-term liabilities
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558
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563
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556
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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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2,961
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2,944
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2,897
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Treasury stock, at cost
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(9,906
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)
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(9,769
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)
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(8,909
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)
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Accumulated other comprehensive loss
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(16
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)
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(17
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)
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(19
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)
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Retained earnings
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12,254
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12,329
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12,044
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Total shareholders’ equity
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5,297
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5,491
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6,017
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Total liabilities and shareholders’ equity
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$
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13,304
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$
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13,606
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$
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14,453
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Three Months Ended
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April 30,
2016 |
May 2,
2015 |
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Net sales
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$
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3,972
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$
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4,123
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Cost of merchandise sold
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2,560
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2,600
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Gross margin
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1,412
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1,523
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Operating expenses:
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Selling, general and administrative
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1,008
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1,016
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Depreciation and amortization
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234
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227
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Impairments, store closing and other costs
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64
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—
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Operating income
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106
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280
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Interest expense, net
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79
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84
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Income before income taxes
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27
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196
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Provision for income taxes
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10
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69
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Net income
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$
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17
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$
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127
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Net income per share:
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Basic
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$
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0.09
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$
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0.64
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Diluted
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$
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0.09
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$
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0.63
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Dividends declared and paid per share
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$
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0.50
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$
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0.45
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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 January 30, 2016
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370
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$
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4
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$
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2,944
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(184
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)
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$
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(9,769
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)
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$
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(17
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)
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$
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12,329
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$
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5,491
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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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17
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18
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Stock options and awards, net of tax
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2
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—
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17
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—
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(12
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)
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—
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—
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5
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Dividends paid ($0.50 per common share)
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—
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—
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—
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—
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1
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—
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(92
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)
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(91
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)
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Treasury stock purchases
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—
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—
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—
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(3
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)
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(126
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)
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—
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—
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(126
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)
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Balance at April 30, 2016
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372
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$
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4
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$
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2,961
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(187
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)
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$
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(9,906
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)
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$
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(16
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$
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12,254
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$
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5,297
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Three Months Ended
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April 30,
2016 |
May 2,
2015 |
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Operating activities
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Net income
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$
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17
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$
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127
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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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234
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227
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Share-based compensation
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12
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14
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Excess tax benefits from share-based compensation
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—
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(9
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)
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Deferred income taxes
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(18
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)
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(23
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)
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Other non-cash revenues and expenses
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7
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10
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Impairments, store closing and other costs
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64
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—
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Changes in operating assets and liabilities:
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Merchandise inventories
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(44
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)
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(349
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)
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Other current and long-term assets
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(15
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)
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28
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Accounts payable
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95
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134
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Accrued and other long-term liabilities
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(125
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)
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(69
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)
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Income taxes
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(87
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)
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12
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Net cash provided by operating activities
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140
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|
102
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Investing activities
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Acquisition of property and equipment
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(177
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)
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(176
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)
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Other
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3
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1
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Net cash used in investing activities
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(174
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)
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(175
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)
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Financing activities
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Treasury stock purchases
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(126
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)
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(147
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)
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Shares withheld for taxes on vested restricted shares
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(12
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)
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(18
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)
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Dividends paid
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(91
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)
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(90
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)
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Capital lease and financing obligation payments
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(31
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)
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(27
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)
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Proceeds from stock option exercises
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6
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134
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Excess tax benefits from share-based compensation
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—
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9
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Proceeds from financing obligations
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4
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—
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Net cash used in financing activities
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(250
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)
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(139
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)
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Net decrease in cash and cash equivalents
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(284
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)
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(212
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)
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Cash and cash equivalents at beginning of period
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707
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1,407
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Cash and cash equivalents at end of period
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$
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423
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$
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1,195
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Supplemental information
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Interest paid, net of capitalized interest
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$
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50
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$
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63
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|
Income taxes paid
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126
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|
84
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|
||
Non-cash investing and financing activities
|
|
|
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Property and equipment acquired through additional liabilities
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$
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9
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$
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10
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(Dollars in Millions)
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Prior Classification
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Current Classification
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Debt issuance costs
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Other current and long-term assets
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Long-term debt
|
$
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13
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|
Deferred taxes
|
Current deferred tax asset
|
Long-term deferred tax liability
|
129
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|
|
Deferred taxes
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Long-term deferred tax liability
|
Other long-term assets
|
32
|
|
|
Deferred taxes
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Other long-term liabilities
|
Long-term deferred tax liability
|
14
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|
|
April 30, 2016
|
Outstanding
|
|||||||||||
Maturity
|
Effective
Rate
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Coupon Rate
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Outstanding
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January 30, 2016
|
May 2, 2015
|
||||||||
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(Dollars in Millions)
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||||||||||
2021
|
4.81
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%
|
4.00
|
%
|
$
|
650
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|
$
|
650
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|
$
|
650
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|
2023
|
3.25
|
%
|
3.25
|
%
|
350
|
|
350
|
|
350
|
|
|||
2023
|
4.78
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%
|
4.75
|
%
|
300
|
|
300
|
|
300
|
|
|||
2025
|
4.25
|
%
|
4.25
|
%
|
650
|
|
650
|
|
—
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|
|||
2029
|
7.36
|
%
|
7.25
|
%
|
99
|
|
99
|
|
200
|
|
|||
2033
|
6.05
|
%
|
6.00
|
%
|
166
|
|
166
|
|
300
|
|
|||
2037
|
6.89
|
%
|
6.88
|
%
|
150
|
|
150
|
|
350
|
|
|||
2045
|
5.57
|
%
|
5.55
|
%
|
450
|
|
450
|
|
—
|
|
|||
2017
|
—
|
|
—
|
|
—
|
|
—
|
|
650
|
|
|||
|
4.88
|
%
|
|
2,815
|
|
2,815
|
|
2,800
|
|
||||
Unamortized debt discount
|
|
|
(5
|
)
|
(5
|
)
|
(7
|
)
|
|||||
Deferred financing costs
|
|
|
(17
|
)
|
(18
|
)
|
(13
|
)
|
|||||
Long-term debt
|
|
|
$
|
2,793
|
|
$
|
2,792
|
|
$
|
2,780
|
|
|
Stock Options
|
Nonvested Stock Awards
|
Performance Share Units
|
||||||||||||
(Shares and Units in Thousands)
|
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average Grant Date Fair Value
|
Units
|
Weighted
Average Grant Date Fair Value
|
|||||||||
Balance at beginning of period
|
3,076
|
|
$
|
52.65
|
|
2,211
|
|
$
|
57.37
|
|
347
|
|
$
|
67.53
|
|
Granted
|
—
|
|
—
|
|
1,132
|
|
46.97
|
|
4
|
|
67.47
|
|
|||
Exercised/vested
|
(145
|
)
|
41.82
|
|
(646
|
)
|
56.61
|
|
—
|
|
—
|
|
|||
Forfeited/expired
|
(127
|
)
|
58.47
|
|
(113
|
)
|
55.95
|
|
(32
|
)
|
67.98
|
|
|||
Balance at end of period
|
2,804
|
|
$
|
52.94
|
|
2,584
|
|
$
|
53.06
|
|
319
|
|
$
|
67.49
|
|
|
Three Months Ended
|
|||||
(Dollar and Shares in Millions)
|
April 30,
2016 |
May 2,
2015 |
||||
Numerator—Net income
|
$
|
17
|
|
$
|
127
|
|
Denominator—Weighted average shares:
|
|
|
||||
Basic
|
183
|
|
200
|
|
||
Impact of dilutive stock-based awards
|
1
|
|
2
|
|
||
Diluted
|
184
|
|
202
|
|
||
Antidilutive shares
|
4
|
|
—
|
|
•
|
Inventory per store decreased 2%, which was consistent with our expectations.
|
•
|
Gross margin as a percentage of sales decreased 139 bp to 35.5%. The decrease was consistent with our expectations as we reduced selling prices to clear excess inventory.
|
•
|
Selling, general and administrative expenses (“SG&A”) decreased $8 million, or 1%, as every area of our business was able to reduce its planned expenses in response to the decrease in sales.
|
Change in Comparable Sales
|
|
|
Selling price per unit
|
(1.0
|
)%
|
Units per transaction
|
1.9
|
|
Average transaction value
|
0.9
|
|
Number of transactions
|
(4.8
|
)
|
Comparable sales
|
(3.9
|
)%
|
|
2016
|
2015
|
(Decrease)
|
||||||
(Dollars in Millions)
|
$
|
%
|
|||||||
Gross margin
|
$1,412
|
$1,523
|
$
|
(111
|
)
|
(7
|
)%
|
||
As a percent of net sales
|
35.5
|
%
|
36.9
|
%
|
|
(1.39
|
)%
|
|
2016
|
2015
|
Increase/(Decrease)
|
||||||||
(Dollars in Millions)
|
$
|
%
|
|||||||||
Selling, general and administrative expenses
|
$
|
1,008
|
|
$
|
1,016
|
|
$
|
(8
|
)
|
(1
|
)%
|
As a percent of net sales
|
25.4
|
%
|
24.6
|
%
|
|
0.75
|
%
|
|
2016
|
2015
|
Increase/ (Decrease)
|
||||||||
(Dollars in Millions)
|
$
|
%
|
|||||||||
Depreciation and amortization
|
$
|
234
|
|
$
|
227
|
|
$
|
7
|
|
3
|
%
|
Interest expense, net
|
79
|
|
84
|
|
(5
|
)
|
(6
|
)%
|
|||
Impairments, store closing and other costs
|
64
|
|
—
|
|
64
|
|
100
|
%
|
|||
Provision for income taxes
|
10
|
|
69
|
|
(59
|
)
|
(86
|
)%
|
|||
Effective tax rate
|
37.6
|
%
|
35.3
|
%
|
|
|
|
2016
|
2015
|
Decrease
|
||||||||
(Dollars in Millions)
|
$
|
%
|
|||||||||
Net income
|
$
|
58
|
|
$
|
127
|
|
$
|
(69
|
)
|
(55
|
)%
|
Diluted earnings per share
|
$
|
0.31
|
|
$
|
0.63
|
|
$
|
(0.32
|
)
|
(50
|
)%
|
Cash Requirements
|
Sources of Funds
|
• Operational needs, including
salaries, rent, taxes and other
costs of running our business
• Capital expenditures
• Inventory (seasonal and new store)
• Share repurchases
• Dividend payments
|
• Cash flow from operations
• Short-term trade credit, in the form of extended payment terms
• Line of credit under our revolving credit facility
|
|
Moody’s
|
Standard & Poor’s
|
Fitch
|
Long-term debt
|
Baa2
|
BBB
|
BBB
|
(Dollars in Millions)
|
2016
|
2015
|
Increase/(Decrease) in Free Cash Flow
|
||||||
Net cash provided by operating activities
|
$
|
140
|
|
$
|
102
|
|
$
|
38
|
|
Acquisition of property and equipment
|
(177
|
)
|
(176
|
)
|
(1
|
)
|
|||
Capital lease and financing obligation payments
|
(31
|
)
|
(27
|
)
|
(4
|
)
|
|||
Proceeds from financing obligations
|
4
|
|
—
|
|
4
|
|
|||
Free cash flow
|
$
|
(64
|
)
|
$
|
(101
|
)
|
$
|
37
|
|
(Dollars in Millions)
|
April 30, 2016
|
May 2, 2015
|
||||
Working capital
|
$
|
2,208
|
|
$
|
2,713
|
|
Current ratio
|
1.83
|
|
1.91
|
|
||
Debt/capitalization
|
47.0
|
%
|
44.0
|
%
|
(Dollars in Millions)
|
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
|
||||||
January 31 – February 27, 2016
|
1,584,657
|
|
$
|
43.94
|
|
1,575,855
|
|
$
|
574
|
|
February 28 – April 2, 2016
|
783,256
|
|
46.95
|
|
541,157
|
|
548
|
|
||
April 3 – April 30, 2016
|
721,510
|
|
44.36
|
|
702,757
|
|
517
|
|
||
Total
|
3,089,423
|
|
$
|
44.80
|
|
2,819,769
|
|
$
|
517
|
|
|
|
|
Exhibit
Number
|
|
Description
|
10.1
|
|
Form of Chief Executive Officer Restricted Stock Agreement pursuant to the Kohl's Corporation 2010 Long Term Compensation Plan.
|
|
|
|
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 3, 2016
|
/s/ Wesley S. McDonald
|
|
|
Wesley S. McDonald
On behalf of the Registrant and as Chief Financial Officer
(Principal Financial Officer)
|
|
Shares
Vesting
|
1
st
Anniversary Date
|
25%
|
2
nd
Anniversary Date
|
25%
|
3
rd
Anniversary Date
|
25%
|
4
th
Anniversary Date
|
25%
|
(a)
|
Termination Due to Executive’s Death or Disability
. If Executive’s employment is terminated due to Executive’s death or pursuant to Disability, the Restricted Shares shall, upon such termination, immediately vest.
|
(b)
|
Termination Other than Due to Executive’s Death or Disability.
If Executive’s employment is terminated by Executive or the Company for any reason other than due to Executive’s death or pursuant to Disability (defined in the Employment Agreement), the Restricted Shares that are the subject of this Agreement, as well as the Restricted Shares that were the subject of the March 30, 2015 Restricted Stock Award Agreement between Executive and the Company (the “March 30, 2015 RSA”), shall vest only as provided in the Employment Agreement. For the avoidance of doubt, this Section 1.2(b) shall constitute an amendment to the March 30, 2015 RSA.
|
(c)
|
Change of Control
. In the event of a Change of Control, any outstanding Restricted Shares shall be subject to the provisions set forth in Paragraph 19 of the Plan, provided, however, an references to “cause” used in Paragraph 19 of the Plan shall be interpreted by applying the definitions of “cause” set forth in the Employment Agreement.
|
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 3, 2016
|
/s/ Kevin Mansell
|
|
|
Kevin Mansell
|
|
|
Chairman, Chief Executive Officer and President
|
|
|
(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 3, 2016
|
/s/ Wesley S. McDonald
|
|
|
Wesley S. McDonald
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
1.
|
This Quarterly Report on Form 10-Q of the Company for the quarterly period ended
April 30, 2016
(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 3, 2016
|
/s/ Kevin Mansell
|
|
|
Kevin Mansell
|
|
|
Chairman, Chief Executive Officer and President
|
|
|
(Principal Executive Officer)
|
1.
|
This Quarterly Report on Form 10-Q of the Company for the quarterly period ended
April 30, 2016
(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 3, 2016
|
/s/ Wesley S. McDonald
|
|
|
Wesley S. McDonald
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|