Kohl's 2011 Annual Report Download - page 28

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Debt Covenant Compliance. Our debt agreements contain various covenants including limitations on
additional indebtedness and the following leverage ratio as of January 28, 2012:
(Dollars in Millions)
Total Debt ............................................. $ 4,253
Permitted Exclusions ..................................... (9)
Subtotal ............................................... 4,244
Rent x 8 ............................................... 2,117
A Included Indebtedness (A) ................................. $ 6,361
Net Worth ............................................. $ 6,508
Investments (accounted for under equity method) .............. —
Subtotal ............................................... 6,508
Included Indebtedness .................................... 6,361
B Capitalization (B) ........................................ $12,869
Leverage Ratio (A/B) ..................................... 0.49
Maximum permitted Leverage Ratio ......................... 0.70
As of January 28, 2012, we were in compliance with all debt covenants and expect to remain in compliance
during fiscal 2012.
Free Cash Flow. We generated free cash flow of $1.1 billion in 2011 and approximately $900 million in
2010. The increase in free cash flow is primarily a result of higher cash provided by operating activities, as
discussed above. Free cash flow is a non-GAAP financial measure which we define as net cash provided by
operating activities and proceeds from financing obligations (which generally represent landlord reimbursements
of construction costs) less acquisition of property & equipment and capital lease & financing obligation
payments. Free cash flow should be evaluated in addition to, and not considered a substitute for, other financial
measures such as net income and cash flow provided by operating activities. We believe that free cash flow
represents our ability to generate additional cash flow from our business operations.
The following table reconciles net cash provided by operating activities (a GAAP measure) to free cash flow
(a non-GAAP measure).
2011 2010 2009
(Dollars in Millions)
Net cash provided by operating activities ........................ $2,143 $1,756 $2,286
Acquisition of property & equipment ........................... (927) (801) (675)
Capital lease & financing obligation payments .................... (91) (84) (70)
Proceeds from financing obligations ............................ 14 27 10
Free cash flow ............................................. $1,139 $ 898 $1,551
We expect to generate $1 billion of free cash flow in fiscal 2012.
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