KSS Kohls Corporation

Kohl's Corporation (NYSE:KSS). Kohl's Corporation today reported results for the three months ended April 29, 2006. First Quarter Results Kohl's Corporation reported a 34.1 percent increase in net income for the quarter ended April 29, 2006. Net income was $167.2 million, or $0.48 per diluted share, compared with $124.7 million or $0.36 per diluted share a year ago. Net sales increased to $3.2 billion from $2.7 billion a year ago, an increase of 16.1 percent for the quarter. Comparable store sales increased 6.9 percent for the same period. Larry Montgomery, Kohl's chairman and chief executive officer, said, "We are extremely pleased with our performance for the first quarter. We exceeded our guidance for both sales and net income. All lines of business posted strong results as did all regions of the country. At the same time, we saw continued improvement in our gross margin rate and experienced significant expense leverage on our sales increase." Montgomery added, "I am very proud of our associates and the role they played in delivering a great quarter and want to thank them for their hard work, loyalty and dedication to serving our customers. They are the reason you can continue to 'expect great things' from Kohl's." Sale of Credit Card Receivables During the quarter, the Company completed the sale of its private label credit card accounts and the outstanding balances associated with the accounts to JPMorgan Chase for a purchase price of approximately $1.6 billion. As previously reported, Kohl's plans to use the net proceeds to repurchase its common stock, to fund store expansion, and for general corporate purposes. The Company has entered into a multi-year program agreement with Chase whereby Kohl's will continue to handle all customer service functions and will continue to be responsible for all advertising and marketing related to its credit card customers. In return for these services, Kohl's will receive on-going payments related to the profitability of the program. Share Repurchase During the first quarter, Kohl's board of directors authorized a $2 billion share repurchase program. The Company expects to execute this share repurchase program primarily in open market transactions, subject to market conditions, and expects to complete the program in approximately two to three years. Earnings Guidance As a result of its first quarter performance and the benefit of the investment of the proceeds from the sale of the receivables, the Company is raising its full-year earnings guidance from $2.74 to $2.87 per diluted share to $2.91 to $3.02 per diluted share for fiscal 2006. This would result in an increase in earnings per share of 20 percent to 24 percent over last year. The Company issued guidance for the second fiscal quarter of $0.61 to $0.64 per diluted share. Expansion Update During the first quarter, the Company successfully opened 17 new stores, including its entry into the Portland, OR market with four stores. The Company now operates 749 stores in 43 states, compared with 669 stores in 40 states at the same time last year. The Company will open the balance of its planned 85 stores for 2006 in the third and fourth quarters. The Company will make its initial entry into the state of Washington with stores in the Seattle market and will continue its expansion into Florida. First Quarter Earnings Conference Call Investors will have the opportunity to listen to the first quarter earnings conference call today at 5:00 PM (EDT) by dialing (847) 619-6368 ten minutes prior to the start of the call. In addition, the call will be web cast live over the Internet through the Company's web site located at http://www.kohls.com (see "Company News"), or through Broadcast Networks' Vcall web site located at http://www.vcall.com. To listen to the call, please go to either web site at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a telephone replay will be available beginning shortly after the call and continuing through June 10, 2006. To access this replay, simply dial (630) 652-3018, and use Pass Code: 14332432#. 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 guidance on the Company's targeted sales and earnings. 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. -0- *T KOHL'S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Millions, except per share data) (Unaudited) 13 Weeks Ended ------------------------------------------- April 29, % to April 30, % to 2006 Net Sales 2005 Net Sales ------------------------------------------- Net sales $3,184.7 $2,742.8 Cost of merchandise sold 2,036.5 63.9% 1,759.6 64.2% ---------- ---------- Gross margin 1,148.2 36.1% 983.2 35.8% Operating expenses: Selling, general and administrative 761.7 23.9% 672.9 24.5% Depreciation and amortization 93.3 2.9% 80.0 2.9% Preopening expenses 11.0 0.4% 12.6 0.5% ---------- ---------- Operating income 282.2 8.9% 217.7 7.9% Interest expense, net 14.2 0.5% 17.2 0.6% ---------- ---------- Income before income taxes 268.0 8.4% 200.5 7.3% Provision for income taxes 100.8 3.1% 75.8 2.8% ---------- ---------- Net income $167.2 5.3% $124.7 4.5% ========== ========== Basic net income per share $0.48 $0.36 Avg. number of shares 345.3 343.5 Diluted net income per share $0.48 $0.36 Avg. number of shares 347.3 345.9 Kohl's Corporation ------------------ Condensed Consolidated Statements of Cash Flows ----------------------------------------------- (In Thousands) (Unaudited) Subject to Reclassification 13 Weeks Ended ------------------------- April 29, April 30, 2006 2005 ------------ ------------ Operating activities Net income $167,245 $124,734 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 93,407 80,189 Amortization of debt discount 36 53 Deferred income taxes 19,709 47,775 Share-based compensation 9,918 9,608 Excess tax benefits from share-based compensation (6,952) (3,564) Changes in operating assets and liabilities: Accounts receivable, net 1,652,065 80,329 Merchandise inventories (110,323) (165,776) Other current and long-term assets (95,895) (58,766) Accounts payable 38,720 (17,912) Accrued and other long-term liabilities 47,453 (88,068) Income taxes payable (65,798) (117,657) ------------ ------------ Net cash provided by (used in) operating activities 1,749,585 (109,055) Investing activities Acquisition of property and equipment and favorable lease rights (280,635) (176,332) Net (purchases) sales of short-term investments (1,241,059) 88,767 Other (2,576) (233) ------------ ------------ Net cash used in investing activities (1,524,270) (87,798) Financing activities Proceeds from short-term debt 0 175,000 Net borrowing under credit facilities 0 15,000 Repayments of other long-term debt, net (101,689) (1,020) Excess tax benefits from share-based compensation 6,952 3,564 Treasury stock purchases (77,247) 0 Proceeds from issuances of common shares 15,032 7,321 ------------ ------------ Net cash (used in) provided by financing activities (156,952) 199,865 Net increase in cash and cash equivalents 68,363 3,012 Cash and cash equivalents at beginning of period 126,839 116,717 ------------ ------------ Cash and cash equivalents at end of period $195,202 $119,729 ============ ============ Kohl's Corporation ------------------ Condensed Consolidated Balance Sheets ------------------------------------- (In Thousands) (Unaudited) Subject to Reclassification April 29, April 30, 2006 2005 ------------ ------------ Assets Current assets: Cash and cash equivalents $195,202 $119,729 Short-term investments 1,401,136 0 Accounts receivable trade, net 0 1,309,303 Merchandise inventories 2,347,891 2,112,753 Deferred income taxes 0 3,322 Other current assets 176,129 106,060 ------------ ------------ Total current assets 4,120,358 3,651,167 Property and equipment, net 4,791,447 4,179,569 Favorable lease rights, net 209,225 221,775 Goodwill 9,338 9,338 Other assets 52,500 38,729 ------------ ------------ Total assets $9,182,868 $8,100,578 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Accounts payable $868,691 $686,743 Accrued liabilities 662,954 477,720 Income taxes payable 94,158 55,961 Deferred income taxes 3,210 0 Short-term debt 0 190,000 Current portion of long-term debt and capital leases 8,440 105,038 ------------ ------------ Total current liabilities 1,637,453 1,515,462 Long-term debt and capital leases 1,043,952 1,018,033 Deferred income taxes 210,623 226,428 Other long-term liabilities 211,457 161,490 Shareholders' equity 6,079,383 5,179,165 ------------ ------------ Total liabilities and shareholders' equity $9,182,868 $8,100,578 ============ ============ *T