Kohl's 2014 Annual Report Download - page 25

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Table of Contents
Our Adjusted Debt to EBITDAR ratio was 2.45 for 2014, 2.42 for 2013, and 2.23 for 2012. The increases are primarily due to lower EBITDAR. Adjusted
Debt to EBITDAR is a non-GAAP financial measure which we define as our adjusted outstanding debt balance divided by EBITDAR. We believe that our
debt levels are best analyzed using this measure. Our current goals are to maintain an Adjusted Debt to EBITDAR ratio of approximately 2.25, to manage
debt levels to maintain a BBB+ investment-grade credit rating and to operate with an efficient capital structure for our size, growth plans and industry. We
exceeded our target goal in 2014 and 2013 to take advantage of a favorable, low interest rate debt environment. We expect to manage our business and debt
levels to get our overall ratio back to our target goal over the next several years. We currently have no plans for new debt in 2015. Our Adjusted Debt to
EBITDAR calculation may not be comparable to similarly-titled measures reported by other companies. Adjusted Debt to EBITDAR should be evaluated in
addition to, and not considered a substitute for, other financial measures such as debt/capitalization. See the key financial ratio calculations section below for
our Adjusted Debt to EBITDAR calculation.
Key financial ratio calculations.
The following table reconciles net cash provided by operating activities (a GAAP measure) to free cash flow (a non-GAAP measure).

Net cash provided by operating activities  
$ 1,884
$ 1,265
Acquisition of property & equipment 
(643)
(785)
Capital lease & financing obligation payments 
(115)
(111)
Proceeds from financing obligations
1
12
Free cash flow $ 1,127 $ 381
The following table includes our ROI and return on assets (the most comparable GAAP measure) calculations:

Operating income  
$ 1,742
$ 1,890
Depreciation and amortization
889
833
Rent expense 270 265
EBITDAR $ 2,901 $ 2,988
Average: (a)
Total assets  
$ 14,335
$ 14,266
Cash equivalents and long-term investments (b) 
(321)
(677)
Deferred tax and other assets 
(149)
(126)
Accumulated depreciation and amortization 
5,457
4,943
Accounts payable 
(1,556)
(1,622)
Accrued liabilities 
(1,082)
(1,079)
Other long-term liabilities 
(538)
(478)
Capitalized rent (c) 
2,625
2,573
Gross Investment (“AGI”)  
$ 18,771
$ 17,800
 (d)  6.2% 6.9%
 (e) 
15.5%
16.8%
(a) Represents average of 5 most recent quarter end balances
(b) Represents excess cash not required for operations
(c) Represents 10 times store rent and 5 times equipment/other rent
(d) Net income divided by average total assets
(e) EBITDAR divided by Gross Investment
25