Kohl's 2012 Annual Report Download - page 58

KOHL’S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-19
8. Contingencies
At any time, we may be subject to investigations, legal proceedings, or claims related to the on-going operation of our
business, including claims both by and against us. Such proceedings typically involve claims related to various forms of
liability, contract disputes, allegations of violations of laws or regulations or other actions brought by us or others including our
employees, consumers, competitors, suppliers or governmental agencies. We routinely assess the likelihood of any adverse
outcomes related to these matters on a case by case basis, as well as the potential ranges of losses and fees. We establish
accruals for our potential exposure, as appropriate, for significant claims against us when losses become probable and
reasonably estimable. Where we are able to reasonably estimate a range of potential losses relating to significant matters, we
record the amount within that range that constitutes our best estimate. We also disclose the nature of and range of loss for
claims against us when losses are reasonably possible and material. These accruals and disclosures are determined based on the
facts and circumstances related to the individual cases and require estimates and judgments regarding the interpretation of facts
and laws, as well as the effectiveness of strategies or other factors beyond our control.
9. Quarterly Financial Information (Unaudited)
Each quarterly period below was a 13-week accounting period, with the exception of the fourth quarter of 2012, which
was a 14-week period.
2012
First Second Third Fourth
(In Millions, Except per Share Data)
Net sales...................................................................................... $ 4,243 $ 4,205 $ 4,490 $ 6,342
Gross margin............................................................................... $ 1,524 $ 1,642 $ 1,712 $ 2,112
Net income.................................................................................. $ 154 $ 240 $ 215 $ 378
Basic shares................................................................................. 243 238 233 227
Basic net income per share.......................................................... $ 0.63 $ 1.01 $ 0.92 $ 1.66
Diluted shares.............................................................................. 245 239 235 228
Diluted net income per share ...................................................... $ 0.63 $ 1.00 $ 0.91 $ 1.66
2011
First Second Third Fourth
(In Millions, Except per Share Data)
Net sales....................................................................................... $ 4,162 $ 4,248 $ 4,376 $ 6,018
Gross margin................................................................................ $ 1,586 $ 1,728 $ 1,688 $ 2,177
Net income................................................................................... $ 201 $ 299 $ 211 $ 455
Basic shares ................................................................................. 288 276 264 251
Basic net income per share.......................................................... $ 0.70 $ 1.08 $ 0.80 $ 1.82
Diluted shares.............................................................................. 290 278 265 252
Diluted net income per share....................................................... $ 0.69 $ 1.08 $ 0.80 $ 1.81
Due to changes in stock prices during the year and timing of issuance of shares, the sum of quarterly net income per share
may not equal the annual net income per share.
10. Related Party Transactions
One of our directors is also a shareholder of a law firm which performs legal services for us.
We have agreements with Blackhawk Network, Inc. (“Blackhawk”) pursuant to which Blackhawk distributes our prepaid
gift cards for sale in various retail outlets and to which we sell prepaid gift cards for other retailers in our stores. We pay
Blackhawk a fee for Kohl’s gift cards which are sold at other retailers and we receive a fee for selling gift cards for other
retailers in our stores. Blackhawk is a subsidiary of Safeway Inc. (“Safeway”) and one of our directors is Chairman and Chief
Executive Officer of Safeway. This director also holds a small minority ownership interest in Blackhawk. The Blackhawk
agreements were entered into in the ordinary course of our business, and our director was not involved in any negotiations.
Blackhawk is a leading provider of gift card marketing services in the retail industry, and Safeway has confirmed that the terms
of our agreements with Blackhawk are substantially similar to the terms of Blackhawk’s agreements with other similarly
situated national retailers.