Kohl's 2008 Annual Report Download - page 28

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Contractual Obligations
Our contractual obligations as of January 31, 2009 are as follows:
Total
Less Than 1
Year
1-3
Years
3-5
Years
More than 5
Years)
(In Millions)
Recorded contractual obligations:
Long-term debt .............................. $ 1,900 $ — $ 400 $ — $ 1,500
Capital leases ............................... 177 17 27 16 117
2,077 17 427 16 1,617
Unrecorded contractual obligations:
Interest payments:
Long-term debt .......................... 1,861 123 237 194 1,307
Capital leases ........................... 113 13 22 19 59
Operating leases (a) .......................... 11,155 444 913 890 8,908
Royalties ................................... 225 43 94 63 25
Purchase obligations (b) ....................... 2,584 2,584 — — —
Other (c) ................................... 36 36 — — —
15,974 3,243 1,266 1,166 10,299
Total ...................................... $18,051 $3,260 $1,693 $1,182 $11,916
(a) Our leases typically require that we pay real estate taxes, insurance and maintenance costs in addition to the
minimum rental payments included in the table above. Such costs vary from period to period and totaled
$148 million for 2008, $135 million for 2007 and $123 million for 2006.
(b) Our purchase obligations consist mainly of purchase orders for merchandise. Amounts committed under
open purchase orders for merchandise are cancelable without penalty prior to a date that precedes the
vendors’ scheduled shipment date.
(c) Other includes primarily commitments for stores to be opened in 2009.
We adopted the provisions of FIN 48 on February 4, 2007. It is reasonably possible that our unrecognized
tax positions may change within the next 12 months, primarily as a result of ongoing audits. While it is possible
that one or more of these audits may be resolved in the next year, it is not anticipated that payment of any such
amounts in future periods will affect liquidity and cash flows.
Off-Balance Sheet Arrangements
We have not provided any financial guarantees as of year-end 2008.
We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose
of raising capital, incurring debt or operating our business. We do not have any arrangements or relationships
with entities that are not consolidated into the financial statements that are reasonably likely to materially affect
our liquidity or the availability of capital resources.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires us to make estimates and assumptions that affect the reported amounts. A discussion of the
more significant estimates follows. Management has discussed the development, selection and disclosure of these
estimates and assumptions with the Audit Committee of our Board of Directors.
Retail Inventory Method and Inventory Valuation
We value our inventory at the lower of cost or market with cost determined on the first-in, first-out
(“FIFO”) basis using the retail inventory method (“RIM”). RIM is an averaging method that has been widely
used in the retail industry due to its practicality. Under RIM, the valuation of inventories at cost and the resulting
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