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EX-32.2 - EX-32.2 - KOHLS Corpkss-ex322_10.htm
EX-32.1 - EX-32.1 - KOHLS Corpkss-ex321_9.htm
EX-31.2 - EX-31.2 - KOHLS Corpkss-ex312_7.htm
EX-31.1 - EX-31.1 - KOHLS Corpkss-ex311_6.htm
EX-10.1 - EX-10.1 - KOHLS Corpkss-ex101_11.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 4, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from ________ to _________

 

Commission file number 1-11084

KOHL’S CORPORATION

(Exact name of registrant as specified in its charter)

 

Wisconsin

 

39-1630919

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

N56 W17000 Ridgewood Drive,

Menomonee Falls, Wisconsin

 

53051

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code (262) 703-7000

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 * (Do not check if a smaller reporting company)

 

Smaller reporting company

 

 

 

 

 

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 pursuant to Section 13(a) of the Exchange Act.  

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: September 1, 2018 Common Stock, Par Value $0.01 per Share, 166,712,843 shares outstanding.

 

 


Table of Contents

 

KOHL’S CORPORATION

INDEX

 

 

 


Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KOHL’S CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(Dollars in Millions)

August 4,

2018

February 3,

2018

July 29,

2017

Assets

 

 

 

As Adjusted (a)

As Adjusted (a)

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

1,066

 

$

1,308

 

$

552

 

Merchandise inventories

 

3,572

 

 

3,542

 

 

3,853

 

Other

 

404

 

 

530

 

 

381

 

Total current assets

 

5,042

 

 

5,380

 

 

4,786

 

Property and equipment, net

 

7,635

 

 

7,773

 

 

8,068

 

Other assets

 

238

 

 

236

 

 

230

 

Total assets

$

12,915

 

$

13,389

 

$

13,084

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

$

1,404

 

$

1,271

 

$

1,370

 

Accrued liabilities

 

1,174

 

 

1,213

 

 

1,125

 

Income taxes payable

 

70

 

 

99

 

 

43

 

Current portion of capital lease and financing obligations

 

122

 

 

126

 

 

133

 

Total current liabilities

 

2,770

 

 

2,709

 

 

2,671

 

Long-term debt

 

2,273

 

 

2,797

 

 

2,796

 

Capital lease and financing obligations

 

1,537

 

 

1,591

 

 

1,637

 

Deferred income taxes

 

188

 

 

211

 

 

268

 

Other long-term liabilities

 

660

 

 

662

 

 

691

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock

 

4

 

 

4

 

 

4

 

Paid-in capital

 

3,163

 

 

3,078

 

 

3,026

 

Treasury stock, at cost

 

(10,835

)

 

(10,651

)

 

(10,596

)

Accumulated other comprehensive loss

 

(8

)

 

(11

)

 

(12

)

Retained earnings

 

13,163

 

 

12,999

 

 

12,599

 

Total shareholders’ equity

 

5,487

 

 

5,419

 

 

5,021

 

Total liabilities and shareholders’ equity

$

12,915

 

$

13,389

 

$

13,084

 

 

(a)

Refer to Note 2 for details on the adoption of the new revenue recognition accounting standard and the impact on previously reported results.

 

See accompanying Notes to Consolidated Financial Statements

 

3


Table of Contents

 

KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

Three Months Ended

Six Months Ended

(Dollars in Millions, Except per Share Data)

August 4,

2018

July 29,

2017

August 4,

2018

July 29,

2017

 

 

 

 

As Adjusted (a)

 

 

 

As Adjusted (a)

Net sales

$

4,310

 

$

4,147

 

$

8,263

 

$

7,962

 

Other revenue

 

260

 

 

248

 

 

515

 

 

498

 

Total revenue

 

4,570

 

 

4,395

 

 

8,778

 

 

8,460

 

Cost of merchandise sold

 

2,605

 

 

2,525

 

 

5,101

 

 

4,953

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

 

1,272

 

 

1,220

 

 

2,532

 

 

2,434

 

Depreciation and amortization

 

241

 

 

243

 

 

483

 

 

482

 

Operating income

 

452

 

 

407

 

 

662

 

 

591

 

Interest expense, net

 

65

 

 

75

 

 

135

 

 

150

 

Loss on extinguishment of debt

 

 

 

 

 

42

 

 

 

Income before income taxes

 

387

 

 

332

 

 

485

 

 

441

 

Provision for income taxes

 

95

 

 

124

 

 

117

 

 

167

 

Net income

$

292

 

$

208

 

$

368

 

$

274

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.77

 

$

1.24

 

$

2.23

 

$

1.62

 

Diluted

$

1.76

 

$

1.24

 

$

2.21

 

$

1.62

 

 

 

(a)

Refer to Note 2 for details on the adoption of the new revenue recognition accounting standard and the impact on previously reported results.

 

See accompanying Notes to Consolidated Financial Statements

 

4


Table of Contents

 

KOHL’S CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

Common Stock

 

 

 

Treasury Stock

Accumulated Other Comprehensive

Loss

 

 

 

 

 

 

(Dollars in Millions, Except per Share Data)

Shares

 

Amount

 

Paid-In

Capital

Shares

Amount

Retained

Earnings

Total

Balance at February 3, 2018

(previously reported)

 

373

 

$

4

 

$

3,078

 

 

(205

)

$

(10,651

)

$

(11

)

$

13,006

 

$

5,426

 

Change in accounting standard (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

(7

)

Balance at February 3, 2018

(as adjusted)

 

373

 

 

4

 

 

3,078

 

 

(205

)

 

(10,651

)

 

(11

)

 

12,999

 

 

5,419

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

3

 

 

368

 

 

371

 

Stock options and awards, net of tax

 

1

 

 

 

 

85

 

 

 

 

(21

)

 

 

 

 

 

64

 

Dividends paid

($1.22 per common share)

 

 

 

 

 

 

 

 

 

2

 

 

 

 

(204

)

 

(202

)

Treasury stock purchases

 

 

 

 

 

 

 

(2

)

 

(165

)

 

 

 

 

 

(165

)

Balance at August 4, 2018

 

374

 

$

4

 

$

3,163

 

 

(207

)

$

(10,835

)

$

(8

)

$

13,163

 

$

5,487

 

 

(a)

Refer to Note 2 for details on the adoption of the new revenue recognition accounting standard and the impact on previously reported results.

See accompanying Notes to Consolidated Financial Statements

5


Table of Contents

 

KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Six Months Ended

(Dollars in Millions)

August 4,

2018

July 29,

2017

Operating activities

 

 

 

As Adjusted (a)

Net income

$

368

 

$

274

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

483

 

 

482

 

Share-based compensation

 

50

 

 

21

 

Deferred income taxes

 

(25

)

 

(2

)

Loss on extinguishment of debt

 

42

 

 

 

Other non-cash revenues and expenses

 

13

 

 

(5

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Merchandise inventories

 

(24

)

 

(53

)

Accrued and other long-term liabilities

 

(88

)

 

(176

)

Accounts payable

 

133

 

 

(137

)

Other current and long-term assets

 

89

 

 

36

 

Income taxes

 

6

 

 

(64

)

Net cash provided by operating activities

 

1,047

 

 

376

 

Investing activities

 

 

 

 

 

 

Acquisition of property and equipment

 

(312

)

 

(399

)

Other

 

6

 

 

16

 

Net cash used in investing activities

 

(306

)

 

(383

)

Financing activities

 

 

 

 

 

 

Treasury stock purchases

 

(165

)

 

(250

)

Shares withheld for taxes on vested restricted shares

 

(21

)

 

(12

)

Dividends paid

 

(202

)

 

(186

)

Reduction of long-term borrowings

 

(528

)

 

 

Premium paid on redemption of debt

 

(35

)

 

 

Capital lease and financing obligation activity

 

(64

)

 

(67

)

Proceeds from stock option exercises

 

32

 

 

 

Net cash used in financing activities

 

(983

)

 

(515

)

Net decrease in cash and cash equivalents

 

(242

)

 

(522

)

Cash at beginning of period

 

1,308

 

 

1,074

 

Cash at end of period

$

1,066

 

$

552

 

Supplemental information

 

 

 

 

 

 

Interest paid, net of capitalized interest

$

141

 

$

146

 

Income taxes paid

 

164

 

 

233

 

Non-cash investing and financing activities

 

 

 

 

 

 

Property and equipment acquired through additional liabilities

$

7

 

$

37

 

 

(a)

Refer to Note 2 for details on the adoption of the new revenue recognition accounting standard and the impact on previously reported results.

 

See accompanying Notes to Consolidated Financial Statements

 

 

6


Table of Contents

 

KOHL’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for fiscal year end consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018 (Commission File No. 1-11084) as filed with the Securities and Exchange Commission.

Due to the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

We operate as a single business unit.

The following table provides a brief description of issued, but not yet effective, accounting standards:

 

Standard

Description

Effect on our Financial Statements

Leases

(ASC Topic 842)

 

Issued February 2016

 

Effective Q1 2019

Among other things, the new standard requires us to recognize a right-of-use asset and a lease liability on our balance sheet for each lease.  It also changes the presentation and timing of lease-related expenses.

Approximately 5% of our store leases and all of our land leases are not currently recorded on our balance sheet.  Recording right-of-use assets and lease liabilities for these and other non-store leases is expected to have a material impact on our balance sheet.  We are also evaluating the impact that recording right-of-use assets and lease liabilities will have on our income statement and the financial statement impact that the standard will have on leases which are currently recorded on our balance sheet.

In 2017, we recorded provisional amounts for certain income tax effects of the Tax Cuts & Jobs Act (the “Act"), as addressed in Staff Accounting Bulletin No. 118 (“SAB 118”).  During the six months ended August 4, 2018, we made no adjustments to the previously recorded provisional amounts related to the Act.  Additional work is needed to finalize the income tax effects of the Act and we do not expect subsequent adjustments to be material.  Any such adjustments will be recorded as income tax expense in the period in which the adjustment is finalized.

 

2. Revenue Recognition

Effective February 4, 2018, we adopted Revenue from Contracts with Customers (ASC Topic 606) as required.  We adopted the new standard using the full retrospective method. The 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.

Net Sales

Net sales include revenue from the sale of merchandise and shipping revenues. Net sales are recognized when merchandise is received by the customer and we have fulfilled all performance obligations. We do not have any sales that are recorded as commissions.

7


Table of Contents

KOHL’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

 

The following table summarizes net sales by line of business for the periods ended August 4, 2018 and July 29, 2017:

 

 

Three Months Ended

Six Months Ended

(Dollars in Millions)

August 4, 2018

July 29, 2017

August 4, 2018

July 29, 2017

Women's

$

1,439

 

$

1,398

 

$

2,694

 

$

2,633

 

Men's

 

955

 

 

890

 

 

1,745

 

 

1,625

 

Home

 

678

 

 

679

 

 

1,369

 

 

1,320

 

Children's

 

464

 

 

426

 

 

919

 

 

904

 

Footwear

 

445

 

 

415

 

 

871

 

 

815

 

Accessories

 

329

 

 

339

 

 

665

 

 

665

 

Net Sales

$

4,310

 

$

4,147

 

$

8,263

 

$

7,962

 

We maintain various rewards programs whereby customers earn rewards based on their spending and other promotional activities. The rewards are typically in the form of dollar off discounts which can be used on future purchases. These programs create performance obligations which require us to defer a portion of the original sale until the rewards are redeemed. Sales are recorded net of returns. At the end of each reporting period, we record a reserve based on historical return rates and patterns which reverses sales that we expect to be returned in the following period. Revenue from the sale of Kohl's gift cards is recognized when the gift card is redeemed. Liabilities for performance obligations resulting from our rewards programs, return reserves, and unredeemed gift cards and merchandise return cards totaled $358 million as of August 4, 2018, $422 million as of February 3, 2018 and $343 million as of July 29, 2017.

Net sales do not include sales tax as we are considered a pass-through conduit for collecting and remitting sales taxes.

Other Revenue

Other revenue consists primarily of revenue from our credit card operations, unused gift and merchandise return cards (breakage), and other non-merchandise revenues.

Revenue from credit card operations includes our share of the finance charges and interest fees, less charge-offs of the Kohl’s credit card pursuant to the Private Label Credit Card Program Agreement. Expenses related to our credit card operations are reported in SG&A.

Income from unused gift cards and merchandise return cards (breakage) is recorded in proportion and over the time period the cards are actually redeemed.

8


Table of Contents

KOHL’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

The following tables summarize the impact of adoption of the new standard by financial statement line item:

 

Three Months Ended July 29, 2017

(Dollars in Millions, Except per Share Data)

As Previously Reported

New Standard Adjustment

Adjusted

Net sales

$

4,144

 

$

3

 

$

4,147

 

Other revenue

 

 

 

 

248

 

 

248

 

Total revenue

 

 

 

 

251

 

 

4,395

 

Cost of merchandise sold

 

2,511

 

 

14

 

 

2,525

 

Gross margin

 

1,633

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

983

 

 

237

 

 

1,220

 

Depreciation and amortization

 

243

 

 

-

 

 

243

 

Operating income

 

407

 

 

-

 

 

407

 

Interest expense, net

 

75

 

 

-

 

 

75

 

Income before income taxes

 

332

 

 

-

 

 

332

 

Provision for income taxes

 

124

 

 

-

 

 

124

 

Net income

$

208

 

$

-

 

$

208

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

$

1.24

 

$

-

 

$

1.24

 

Diluted

$

1.24

 

$

-

 

$

1.24

 

 

Six Months Ended July 29, 2017

(Dollars in Millions, Except per Share Data)

As Previously Reported

New Standard Adjustment

Adjusted

Net sales

$

7,987

 

$

(25

)

$

7,962

 

Other revenue

 

 

 

 

498

 

 

498

 

Total revenue

 

 

 

 

473

 

 

8,460

 

Cost of merchandise sold

 

4,956

 

 

(3

)

 

4,953

 

Gross margin

 

3,031

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

1,958

 

 

476

 

 

2,434

 

Depreciation and amortization

 

482

 

 

-

 

 

482

 

Operating income

 

591

 

 

-

 

 

591

 

Interest expense, net

 

150

 

 

-

 

 

150

 

Income before income taxes

 

441

 

 

-

 

 

441

 

Provision for income taxes

 

167

 

 

-

 

 

167

 

Net income

$

274

 

$

-

 

$

274

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

$

1.62

 

$

-

 

$

1.62

 

Diluted

$

1.62

 

$

-

 

$

1.62

 

 

9


Table of Contents

KOHL’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

July 29, 2017

(Dollars in Millions)

As Previously Reported

New Standard Adjustment

Adjusted

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

552

 

$

-

 

$

552

 

Merchandise inventories

 

3,853

 

 

-

 

 

3,853

 

Other

 

335

 

 

46

 

 

381

 

Total current assets

 

4,740

 

 

46

 

 

4,786

 

Property and equipment, net

 

8,068

 

 

-

 

 

8,068

 

Other assets

 

230

 

 

-

 

 

230

 

Total assets

$

13,038

 

$

46

 

$

13,084

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

$

1,370

 

$

-

 

$

1,370

 

Accrued liabilities

 

1,069

 

 

56

 

 

1,125

 

Income taxes payable

 

43

 

 

-

 

 

43

 

Current portion of capital lease and financing obligations

 

133

 

 

-

 

 

133

 

Total current liabilities

 

2,615

 

 

56

 

 

2,671

 

Long-term debt

 

2,796

 

 

-

 

 

2,796

 

Capital lease and financing obligations

 

1,637

 

 

-

 

 

1,637

 

Deferred income taxes

 

271

 

 

(3

)

 

268

 

Other long-term liabilities

 

691

 

 

-

 

 

691

 

Total shareholders’ equity

 

5,028

 

 

(7

)

 

5,021

 

Total liabilities and shareholders’ equity

$

13,038

 

$

46

 

$

13,084

 

 

10


Table of Contents

KOHL’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

February 3, 2018

(Dollars in Millions)

As Previously Reported

New Standard Adjustment

Adjusted

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

1,308

 

$

-

 

$

1,308

 

Merchandise inventories

 

3,542

 

 

-

 

 

3,542

 

Other

 

481

 

 

49

 

 

530

 

Total current assets

 

5,331

 

 

49

 

 

5,380

 

Property and equipment, net

 

7,773

 

 

-

 

 

7,773

 

Other assets

 

236

 

 

-

 

 

236

 

Total assets

$

13,340

 

$

49

 

$

13,389

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

$

1,271

 

$

-

 

$

1,271

 

Accrued liabilities

 

1,155

 

 

58

 

 

1,213

 

Income taxes payable

 

99

 

 

-

 

 

99

 

Current portion of capital lease and financing obligations

 

126

 

 

-

 

 

126

 

Total current liabilities

 

2,651

 

 

58

 

 

2,709

 

Long-term debt

 

2,797

 

 

-

 

 

2,797

 

Capital lease and financing obligations

 

1,591

 

 

-

 

 

1,591

 

Deferred income taxes

 

213

 

 

(2

)

 

211

 

Other long-term liabilities

 

662

 

 

-

 

 

662

 

Total shareholders’ equity

 

5,426

 

 

(7

)

 

5,419

 

Total liabilities and shareholders’ equity

$

13,340

 

$

49

 

$

13,389

 

The adoption of the new standard had no impact on our basic or diluted earnings per share or our net cash provided by (used in) operating, financing, or investing activities.

 

3. Store Closure and Restructure Reserve

 

The following table summarizes changes in the store closure and restructure reserve during the six months ended August 4, 2018:

 

(Dollars in Millions)

 

 

 

Balance - February 3, 2018

  $

87

 

Payments and reversals

 

(10

)

Balance - August 4, 2018

  $

77

 

 

11


Table of Contents

KOHL’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

4. Debt

Long-term debt consists of the following unsecured senior debt:

 

 

 

 

 

 

 

 

Outstanding

 

Maturity

(Dollars in Millions)

Effective

Rate

Coupon

Rate

August 4,

2018

February 3,

2018 & July 29, 2017

2021

 

4.81

%

 

4.00

%

$

413

 

$

650

 

2023

 

3.25

%

 

3.25

%

 

350

 

 

350

 

2023

 

4.78

%

 

4.75

%

 

184

 

 

300

 

2025

 

4.25

%

 

4.25

%

 

650

 

 

650

 

2029

 

7.36

%

 

7.25

%

 

42

 

 

99

 

2033

 

6.05

%

 

6.00

%

 

112

 

 

166

 

2037

 

6.89

%

 

6.88

%

 

101

 

 

150

 

2045

 

5.57

%

 

5.55

%

 

435

 

 

450

 

 

 

4.76

%

 

 

 

$

2,287

 

$

2,815

 

 

Long-term debt is net of unamortized debt discounts and deferred financing costs of $14 million at August 4, 2018, $18 million at February 3, 2018, and $19 million at July 29, 2017.

Our long-term debt is classified as Level 1, financial instruments with unadjusted, quoted prices listed on active market exchanges. The estimated fair value of our long-term debt was $2.3 billion at August 4, 2018 and $2.9 billion at both February 3, 2018 and July 29, 2017.

Year to date, we have reduced our outstanding debt by $528 million, including $500 million which was repurchased pursuant to a cash tender offer in the first quarter and $28 million which was repurchased on the open market during the second quarter.  In conjunction with the debt reduction, we recorded a $42 million loss on extinguishment of debt which includes $35 million of premium paid to holders of the debt, $4 million related to an interest rate hedge, and $3 million of deferred financing fees and original issue discounts.

5. Stock-Based Compensation

The following table summarizes our stock-based compensation activity for the six months ended August 4, 2018:

 

 

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 - February 3, 2018

 

1,139

 

$

50.51

 

 

2,811

 

$

45.60

 

 

660

 

$

44.97

 

Granted

 

 

 

 

 

975

 

 

63.63

 

 

179

 

 

66.30

 

Exercised/vested

 

(959

)

 

50.49

 

 

(859

)

 

48.13

 

 

(38

)

 

78.35

 

Forfeited/expired

 

(2

)

 

53.38

 

 

(62

)

 

48.60

 

 

(5

)

 

46.91

 

Balance - August 4, 2018

 

178

 

$

51.36

 

 

2,865

 

$

50.94

 

 

796

 

$

48.17

 

 

6. Contingencies

We are subject to certain legal proceedings and claims arising out of the conduct of our business.  In the opinion of management, the outcome of these proceedings and litigation will not have a material adverse impact on our consolidated financial statements.

12


Table of Contents

KOHL’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

7. Net Income Per Share

Basic net income per share is net income divided by the average number of common shares outstanding during the period. Diluted net income per share includes incremental shares assumed for share-based awards.

The information required to compute basic and diluted net income per share is as follows:

 

 

Three Months Ended

(Dollar and Shares in Millions, Except per Share Data)

August 4,

2018

July 29,

2017

Numerator—Net income

$

292

 

$

208

 

Denominator—Weighted average shares:

 

 

 

 

 

 

Basic

 

165

 

 

168

 

Impact of dilutive stock-based awards

 

1

 

 

 

Diluted

 

166

 

 

168

 

Antidilutive shares

 

 

 

3

 

Net income per share:

 

 

 

 

 

 

Basic

$

1.77