UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 22, 2018
KOHL’S CORPORATION
(Exact name of registrant as specified in its charter)
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Wisconsin
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001-11084
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39-1630919
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS 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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Registrant's telephone number, including area code: (262) 703-7000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 2.02.
Results of Operations and Financial Condition
.
On May 22, 2018, Kohl's Corporation issued a press release reporting its earnings for the quarter ended May 5, 2018 and updated its fiscal 2018 guidance. A copy of the press release is attached as Exhibit 99.1 and incorporated by reference herein.
The information in this Item 2.02, including the exhibit attached hereto, is furnished solely pursuant to Item 2.02 of Form 8-K. Consequently, such information is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section. Further, the information in this Item 2.02, including the exhibit, shall not be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933.
Item 7.01.
Regulation FD Disclosure
.
See Item 2.02.
The Company has adopted
Revenue from Contracts with Customers (ASC Topic 606)
. The new standard eliminated the transaction- and industry-specific revenue recognition guidance under prior U.S. GAAP and replaced it with a principles-based approach for revenue recognition and disclosures. Under the standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services.
The new standard has an immaterial impact on the Company's accounting for returns and rewards program such as Kohl’s Cash and our loyalty program. Revenues from the Company's credit card operations, which were previously recorded as a reduction of SG&A expenses, are now included in “Other Revenue” which is a new line on the income statement. This change in presentation had no impact on net income.
The standard was adopted on a retrospective basis. On May 22, 2018, the Company issued a presentation entitled "ASC 606, Revenue from Contracts with Customers," which contains restated quarterly and annual financial information for 2017. The presentation is attached as 99.2 and incorporated by reference herein.
Item 8.01.
Other Events
.
On May 16, 2018 the Kohl's Board of Directors declared a quarterly dividend of $0.61 per common share. The dividend will be paid on June 27, 2018 to shareholders of record at the close of business on June 13, 2018.
Cautionary Statement Regarding Forward-Looking Information
This current report on Form 8-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including 2018 earnings guidance. The Company intends forward-looking terminology such as "believes," "expects," "may," "will," "should," "anticipates," "plans," or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause the Company's actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company's Annual Report on Form 10-K, which is expressly incorporated herein by reference, and other factors as may periodically be described in the Company's filings with the SEC.
Item 9.01.
Financial Statements and Exhibits
.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated: May 22, 2018
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KOHL'S CORPORATION
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By:
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/s/ Jason J. Kelroy
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Jason J. Kelroy
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Executive Vice President,
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General Counsel and Secretary
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Exhibit 99.1
Kohl's Corporation Reports Financial Results
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•
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Comparable sales increase 3.6%
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•
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Outstanding debt reduced $500 million
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•
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Earnings per share guidance raised
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MENOMONEE FALLS, Wis.--(BUSINESS WIRE)—May 22, 2018-- Kohl’s Corporation (NYSE:KSS) today reported results for the quarter ended May 5, 2018.
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($ in millions)
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2018
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2017
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Change
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Total revenue
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$
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4,208
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$
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4,065
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3.5
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%
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Comparable sales
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3.6
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%
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(2.7)
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%
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Gross margin
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36.9
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%
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36.4
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%
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50 bps
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Selling, general, and administrative expenses
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$
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1,259
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$
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1,214
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3.7
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%
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Reported
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Net income
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$
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75
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$
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66
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14
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%
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Diluted earnings per share
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$
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0.45
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$
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0.39
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15
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%
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Excluding loss on extinguishment of debt:
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Net income
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$
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107
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$
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66
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62
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%
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Diluted earnings per share
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$
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0.64
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$
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0.39
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65
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%
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Michelle Gass, Kohl's chief executive officer, said, “We are very pleased with our strong start to fiscal 2018 as we continued to focus on our priorities of driving traffic and operational excellence. We built on our recent momentum and achieved our third consecutive quarter of positive comparable sales, which increased on both a fiscal and a shifted basis. Further, we exceeded the high end of our margin expectations through continued focus on inventory management, while expenses were consistent with our expectations as we continue to make investments to ensure our long-term success. All of this enabled us to achieve adjusted earnings per share of $0.64 for the quarter, an increase of 65% over last year.”
Dividend
On May 16, 2018, Kohl's Board of Directors declared a quarterly cash dividend on the Company's common stock of $0.61 per share. The dividend is payable June 27, 2018 to shareholders of record at the close of business on June 13, 2018.
Revenue Recognition
During the quarter, Kohl’s adopted the new revenue recognition standard. Prior periods have been restated to reflect the new standard which had no impact on the Company’s previously reported net income. Additional details regarding the new standard, including the impact on the Company’s income statement, are available on Kohl’s corporate website at
http://corporate.kohls.com/investors/events-and-presentations
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Loss on Extinguishment of Debt
As previously reported, the Company completed a cash tender offer for $500 million of debt in the first quarter. In conjunction with the tender, the Company reported a $42 million loss on extinguishment of debt.
Guidance Update
The Company now expects its adjusted fiscal 2018 diluted earnings per share to be $5.05 to $5.50, compared to its prior guidance of $4.95 to $5.45. Including the loss on extinguishment of debt, fiscal 2018 diluted earnings per share is expected to be $4.86 to $5.31.
First Quarter 2018 Earnings Conference Call
Kohl's will host its quarterly earnings conference call at 9:00 am ET on May 22, 2018. The phone number for the conference call is (800) 230-1085. Replays of the call will be available for 30 days by dialing (800) 475-6701. The conference ID is 433484
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The conference call and replays are also accessible via the Company's website at
http://corporate.kohls.com/investors/events-and-presentations
.
Cautionary Statement Regarding Forward-Looking Information
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including 2018 earnings guidance. Kohl's intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause Kohl's actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Item 1A in Kohl's Annual Report on Form 10-K, which is expressly incorporated herein by reference, and other factors as may periodically be described in Kohl's filings with the SEC.
About Kohl's
Kohl’s (NYSE: KSS) is a leading omnichannel retailer with more than 1,100 stores in 49 states. With a commitment to inspiring and empowering families to lead fulfilled lives, Kohl’s offers amazing national and exclusive brands, incredible savings and an easy shopping experience in our stores, online at Kohls.com and on Kohl's mobile app. Throughout its history, Kohl's has given nearly $650 million to support communities nationwide. For a list of store locations or to shop online, visit Kohls.com. For more information about Kohl’s impact in the community or how to join our winning team, visit Corporate.Kohls.com or follow @KohlsNews on Twitter.
Contacts
Investor Relations:
Jill Timm, (262) 703-2203,
jill.timm@kohls.com
Media:
Jen Johnson, (262) 703-5241,
jen.johnson@kohls.com
KOHL’S CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended
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(Dollars in Millions, Except per Share Data)
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May 5,
2018
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April 29,
2017
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Net sales
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$
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3,953
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$
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3,815
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Other revenue
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255
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250
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Total revenue
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4,208
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4,065
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Cost of merchandise sold
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2,496
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2,428
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Gross margin rate
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36.9
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%
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36.4
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%
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Operating expenses:
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Selling, general, and administrative
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1,259
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1,214
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As a percent of total revenue
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29.9
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%
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29.9
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%
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Depreciation and amortization
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243
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238
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Operating income
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210
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185
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Interest expense, net
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71
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76
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Loss on extinguishment of debt
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42
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—
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Income before income taxes
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97
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109
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Provision for income taxes
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22
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43
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Net income
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$
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75
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$
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66
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Average number of shares:
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Basic
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165
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170
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Diluted
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167
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171
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Earnings per share:
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Basic
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$
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0.46
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$
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0.39
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Diluted
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$
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0.45
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$
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0.39
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Excluding loss on extinguishment of debt:
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Net income
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$
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107
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$
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66
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Diluted earnings per share
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$
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0.64
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$
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0.39
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KOHL’S CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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(Dollars in Millions)
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May 5,
2018
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April 29,
2017
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Assets
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Current assets:
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Cash and cash equivalents
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$
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822
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$
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625
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Merchandise inventories
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3,726
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3,991
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Other
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435
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378
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Total current assets
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4,983
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4,994
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Property and equipment, net
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7,694
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8,069
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Other assets
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239
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231
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Total assets
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$
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12,916
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$
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13,294
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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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1,454
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$
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1,480
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Accrued liabilities
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1,135
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1,147
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Income taxes payable
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118
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137
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Current portion of capital lease and financing obligations
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123
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134
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Total current liabilities
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2,830
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2,898
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Long-term debt
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2,301
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2,795
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Capital lease and financing obligations
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1,563
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1,657
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Deferred income taxes
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198
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283
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Other long-term liabilities
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668
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674
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Shareholders' equity
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5,356
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4,987
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Total liabilities and shareholders' equity
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$
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12,916
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$
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13,294
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KOHL’S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended
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(Dollars in Millions, Except per Share Data)
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May 5,
2018
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April 29,
2017
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Operating activities
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|
|
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Net income
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$
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75
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$
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66
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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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243
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238
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Share-based compensation
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30
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10
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Deferred income taxes
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(12
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)
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13
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Loss on extinguishment of debt
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42
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—
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Other non-cash revenues and expenses
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2
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(12
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)
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Changes in operating assets and liabilities:
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Merchandise inventories
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(181
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)
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(193
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)
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Accrued and other long-term liabilities
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(107
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)
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(117
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)
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Accounts payable
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183
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(27
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)
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Other current and long-term assets
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68
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42
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Income taxes
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44
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26
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Net cash provided by operating activities
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387
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46
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Investing activities
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Acquisition of property and equipment
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(133
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)
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(216
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)
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Other
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-
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13
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Net cash used in investing activities
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(133
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)
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(203
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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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(70
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)
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(156
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)
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Shares withheld for taxes on vested restricted shares
|
|
(17
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)
|
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(10
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)
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Dividends paid
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(101
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)
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|
(94
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)
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Reduction of long-term borrowings
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(500
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)
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|
—
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Premium paid on redemption of debt
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(35
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)
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|
-
|
|
|
Capital lease and financing obligation activity
|
|
(33
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)
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|
(32
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)
|
|
Proceeds from stock option exercises
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|
16
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|
|
-
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|
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Net cash used in financing activities
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(740
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)
|
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(292
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)
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Net decrease in cash and cash equivalents
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(486
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)
|
|
(449
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)
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Cash at beginning of period
|
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1,308
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|
|
1,074
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|
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Cash at end of period
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$
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822
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|
$
|
625
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|
ASC 606, Revenue from Contracts with Customers Exhibit 99.2 May 22, 2018
In Q1 2018, Kohl’s adopted Revenue from Contracts with Customers (ASC Topic 606), as required. The new standard eliminated the transaction- and industry-specific revenue recognition guidance under prior U.S. GAAP and replaced it with a principles-based approach for revenue recognition and disclosures. Under the standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The new standard has an immaterial impact on our accounting for returns and rewards program such as Kohl’s Cash and our loyalty program. Revenues from our credit card operations, which were previously recorded as a reduction of SG&A expenses, are now included in “Other Revenue” which is a new line on the face of our income statement. This change in presentation had no impact on our net income. The standard was adopted on a retrospective basis. Restated quarterly and annual 2017 income statements are included in these materials. Overview
Accounting Overview Historical Accounting New Accounting Net Sales Included revenue from the sale of merchandise, shipping revenues, unused gift cards (breakage), and other non-merchandise revenues Includes revenue from the sale of merchandise and shipping revenues Other Revenue n/a Includes revenue from credit card operations, unused gift cards (breakage), and other non-merchandise revenues. Returns The cost of anticipated returns was recorded in Cost of Merchandise Sold Sales which we expect to be returned in the following period are reserved. The reserve impacts Net Sales and Cost of Merchandise Sold. Reward Programs, including Kohl’s Cash and Loyalty The cost of anticipated redemptions was recorded in Cost of Merchandise Sold A portion of the sale which earned the reward is deferred until the rewards are redeemed. The reserve impacts Net Sales and Cost of Merchandise Sold. Credit Card Operations Net profit was recorded as a reduction of SG&A expenses Revenue from credit card operations is included in Other Revenue. It includes Kohl’s share of the finance charges and interest fees, less charge-offs of the Kohl’s credit card. Expenses related to credit card operations are reported in SG&A. Gross Margin Reported on face of income statement. Calculated as Net Sales (which included non-merchandise revenue) less Cost of Merchandise Sold. Not reported on face of income statement. Calculated as Net Sales (which excludes Other Revenue) less Cost of Merchandise Sold SG&A Rate Calculated as SG&A as a percentage of Net Sales (which included non-merchandise revenue) Calculated as SG&A as a percentage of Total Revenue (which includes Other Revenue) Balance Sheet Reserves for returns and rewards program were recorded in Accrued Liabilities Reserves for returns and rewards program are recorded in Accrued Liabilities. A Right of Return Asset, which reflects the estimated value of merchandise to be returned by customers, is recorded in Other Current Assets.
Accounting Overview No Change in Accounting Comp Sales Includes revenue from the sale of merchandise in our stores and online as well as shipping revenue. Store sales are included after the store has been open for 12 full months, unless square footage has changed by more than 10%. Excludes accounting adjustments for returns and reward programs. Online Sales Recognized when merchandise is received by customer. Gift Cards Revenue from the sale of Kohl’s gift cards is recognized when the gift card is redeemed. Income from unredeemed cards (breakage) is recorded in proportion and over the time period gift cards are redeemed. Sales Tax Net sales do not include sales tax as we are considered a pass-through conduit for collecting and remitting sales taxes
Income Statement ($ in millions) Gross Margin Rate Gross Margin Rate Gross Margin Rate 36.4% Gross Margin Rate 36.4% (1) bps 39.4% 39.1% (30) bps 33.8% 33.5% (33) bps 36.8% 36.7% (7) bps
Income Statement – Fiscal 2017 ($ in millions) Gross Margin Rate 36.2% 36.0% (19) bps