Kohl's 2011 Annual Report Download - page 27

The decrease in working capital and the current ratio and the increase in the debt/capitalization ratio as of
year-end 2011 compared to year-end 2010 were primarily due to the repurchase of $2.3 billion of our common
stock in 2011. The net increase in our outstanding debt balances also contributed to the increase in the debt/
capitalization ratio. The ratio of earnings to fixed charges was generally consistent with prior years. See Exhibit
12.1 to this Annual Report on Form 10-K for the calculation of this ratio.
The decrease in working capital and the current ratio as of year-end 2010 compared to year-end 2009 was
primarily due to the reclassification of $400 million of debt maturing in 2011 from long-term to short-term and
the repurchase of $1.0 billion of Kohl’s common stock. The debt/capitalization ratio was comparable to 2009, as
share repurchases offset earnings in equity. The increase in the 2010 ratio of earnings to fixed charges was
primarily due to higher earnings.
Our Return on Gross Investment (“ROI”) was 18.8% for 2011, 19.2% for 2010 and 18.2% for 2009. ROI
decreased in 2011 compared to 2010 as investments in stores, distribution centers and technology increased more
than profitability. The increase in 2010 compared to 2009 was primarily due to higher earnings. ROI is a
non-GAAP financial measure which we define as earnings before interest, taxes, depreciation, amortization and
rent (“EBITDAR”) divided by average gross investment. Our ROI calculation may not be comparable to
similarly titled measures reported by other companies. ROI should be evaluated in addition to, and not
considered a substitute for, other financial measures such as return on assets. We believe that ROI measures how
effectively we utilize our assets, excluding cash equivalents and long-term investments, to generate earnings.
The following table includes our ROI and return on assets (the most comparable GAAP measure)
calculations:
2011 2010 2009
(Dollar in Millions)
Net income ............................................ $ 1,167 $ 1,120 $ 973
Rent expense ........................................... 265 264 253
Depreciation and amortization .............................. 778 750 688
Net interest ............................................. 299 304 301
Provision for income taxes ................................. 692 668 585
EBITDAR .............................................. $ 3,201 $ 3,106 $ 2,800
Average:
Total assets (1) ..................................... $14,358 $14,989 $13,527
Cash equivalents and long-term investments (2,3) .......... (1,416) (2,472) (1,434)
Deferred tax assets (2) ................................ (83) (86) (72)
Accumulated depreciation (1) .......................... 4,440 3,948 3,367
Capitalized rent (4) ................................... 2,598 2,546 2,451
Accounts payable (2) ................................. (1,439) (1,441) (1,259)
Accrued liabilities (1) ................................. (1,044) (973) (924)
Other long-term liabilities (1) .......................... (429) (370) (313)
Gross Investment (“AGI”) ............................. $16,985 $16,141 $15,343
Return on Assets (“ROA”) (5) ............................. 8.1% 7.5% 7.2%
Return on Gross Investment (“ROI”) (6) ................... 18.8% 19.2% 18.2%
(1) Represents average of 5 most recent quarter end balances for 2011 and 2010 and the 2 most recent year-end
balances for 2009
(2) Represents average of 5 most recent quarter end balances for all periods
(3) Represents excess cash not required for operations
(4) Represents 10 times store rent expense and 5 times equipment/other rent
(5) Net income divided by Average total assets
(6) EBITDAR divided by Gross Investment
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