Kohl's 2010 Annual Report Download - page 26

Table of Contents
The changes in operating income and operating income as a percent of net sales are due to the factors discussed above.
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Interest expense, net  $124 $111
Net interest expense for 2010 increased $8 million, or 6%, over 2009. The increase is attributable to higher interest on our capital leases in 2010.
Net interest expense for 2009 increased $13 million, or 12%, over 2008. The increase is attributable to lower interest income due to lower interest rates on
our investments, partially offset by higher average investments. A reduction in capitalized interest due to lower capital expenditures in 2009 also contributed to
the increase in interest expense.
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  
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Provision for income taxes  $597 $540
Effective tax rate   37.6% 37.9%
The effective tax rate for 2010 was comparable to the 2009 and 2008 tax rates.
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Although we expect that our operations will be influenced by general economic conditions, including rising food, fuel and energy prices, we do not
believe that inflation has had a material effect on our results of operations. However, there can be no assurance that our business will not be affected by such
factors in the future.
We are beginning to experience inflation in our merchandise, raw material, labor and fuel costs. Such cost increases were not significant in 2010, but we
do expect to see low to mid single-digit cost increases in the first six months of 2011 and low double-digit increases in the last six months of 2011. In our
private and exclusive brands, where we have more control over the production and manufacture of the merchandise, we have historically been able to minimize
inflationary pressures through measures such as committing earlier for fabric and certain other raw materials and shifting production to lower cost markets.
Our third-party brand vendors are also facing the same inflationary pressures. We will continue to work with these vendors in our efforts to minimize the
impact of inflation on our merchandise costs and our selling prices.
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Our primary ongoing cash requirements are for capital expenditures in connection with our expansion and remodeling programs and seasonal and new
store inventory purchases. Our primary sources of funds are cash flow provided by operations, short-term trade credit and our lines of credit. Short-term trade
credit, in the form of extended payment terms for inventory purchases, often represents a significant source of financing for merchandise inventories. Seasonal
cash needs may be met by cash on hand and/or the line of credit available under our revolving credit facility. Our working capital and inventory levels
typically build throughout the fall, peaking during the November and December holiday selling season.
We anticipate that we will be able to satisfy our working capital requirements, planned capital expenditures, dividend payments and debt service
requirements with available cash and cash equivalents, proceeds from cash flows from operations, short-term trade credit, seasonal borrowings under our
revolving credit facility and other
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