UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition period from ________ to _________
Commission file number
(Exact name of registrant as specified in its charter)
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Accelerated Filer |
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Non-Accelerated Filer |
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Smaller Reporting Company |
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Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: November 25, 2022 Common Stock, Par Value $0.01 per Share,
KOHL’S CORPORATION
INDEX
PART I |
3 |
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Item 1. |
3 |
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3 |
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4 |
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5 |
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6 |
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7 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
14 |
Item 3. |
21 |
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Item 4. |
22 |
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PART II |
23 |
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Item 1. |
23 |
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Item 1A. |
23 |
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Item 2. |
23 |
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Item 5. |
23 |
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Item 6. |
24 |
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25 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KOHL’S CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Millions) |
October 29, 2022 |
January 29, 2022 |
October 30, 2021 |
Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
$ |
$ |
Merchandise inventories |
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Other |
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Total current assets |
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Property and equipment, net |
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Operating leases |
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Other assets |
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Total assets |
$ |
$ |
$ |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable |
$ |
$ |
$ |
Accrued liabilities |
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Borrowings under revolving credit facility |
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— |
— |
Current portion of: |
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Long-term debt |
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— |
— |
Finance leases and financing obligations |
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Operating leases |
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Total current liabilities |
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Long-term debt |
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Finance leases and financing obligations |
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Operating leases |
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Deferred income taxes |
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Other long-term liabilities |
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Shareholders’ equity: |
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Common stock |
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Paid-in capital |
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Treasury stock, at cost |
( |
( |
( |
Retained earnings |
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Total shareholders’ equity |
$ |
$ |
$ |
Total liabilities and shareholders’ equity |
$ |
$ |
$ |
See accompanying Notes to Consolidated Financial Statements
3
KOHL’S CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
Three Months Ended |
Nine Months Ended |
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(Dollars in Millions, Except per Share Data) |
October 29, 2022 |
October 30, 2021 |
October 29, 2022 |
October 30, 2021 |
Net sales |
$ |
$ |
$ |
$ |
Other revenue |
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Total revenue |
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Cost of merchandise sold |
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Operating expenses: |
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Selling, general, and administrative |
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Depreciation and amortization |
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Operating income |
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Interest expense, net |
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Loss on extinguishment of debt |
— |
— |
— |
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Income before income taxes |
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Provision for income taxes |
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Net income |
$ |
$ |
$ |
$ |
Net income per share: |
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Basic |
$ |
$ |
$ |
$ |
Diluted |
$ |
$ |
$ |
$ |
See accompanying Notes to Consolidated Financial Statements
4
KOHL’S CORPORATION
(Unaudited)
|
Three Months Ended |
Nine Months Ended |
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(Dollars in Millions, Except per Share Data) |
October 29, 2022 |
October 30, 2021 |
October 29, 2022 |
October 30, 2021 |
Common stock |
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Balance, beginning of period |
$ |
$ |
$ |
$ |
Stock-based awards |
— |
— |
— |
— |
Balance, end of period |
$ |
$ |
$ |
$ |
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Paid-in capital |
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Balance, beginning of period |
$ |
$ |
$ |
$ |
Stock-based awards |
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Accelerated share repurchase pending final settlement |
( |
— |
( |
— |
Balance, end of period |
$ |
$ |
$ |
$ |
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Treasury stock |
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Balance, beginning of period |
$( |
$( |
$( |
$( |
Treasury stock purchases |
( |
( |
( |
( |
Stock-based awards |
( |
( |
( |
( |
Dividends paid |
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Balance, end of period |
$( |
$( |
$( |
$( |
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Retained earnings |
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Balance, beginning of period |
$ |
$ |
$ |
$ |
Net income |
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Dividends paid |
( |
( |
( |
( |
Balance, end of period |
$ |
$ |
$ |
$ |
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Total shareholders' equity, end of period |
$ |
$ |
$ |
$ |
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Common stock |
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Shares, beginning of period |
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Stock-based awards |
— |
— |
— |
— |
Shares, end of period |
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Treasury stock |
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Shares, beginning of period |
( |
( |
( |
( |
Treasury stock purchases |
( |
( |
( |
( |
Shares, end of period |
( |
( |
( |
( |
Total shares outstanding, end of period |
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Dividends paid per common share |
$ |
$ |
$ |
$ |
See accompanying Notes to Consolidated Financial Statements
5
KOHL’S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
Nine Months Ended |
|
(Dollars in Millions) |
October 29, 2022 |
October 30, 2021 |
Operating activities |
|
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Net income |
$ |
$ |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
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Depreciation and amortization |
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Share-based compensation |
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Deferred income taxes |
( |
( |
Loss on extinguishment of debt |
— |
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Non-cash lease expense |
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Other non-cash expense |
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Changes in operating assets and liabilities: |
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Merchandise inventories |
( |
( |
Other current and long-term assets |
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Accounts payable |
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Accrued and other long-term liabilities |
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Operating lease liabilities |
( |
( |
Net cash (used in) provided by operating activities |
( |
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Investing activities |
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Acquisition of property and equipment |
( |
( |
Proceeds from sale of real estate |
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Net cash used in investing activities |
( |
( |
Financing activities |
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Proceeds from issuance of debt |
— |
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Net borrowings under revolving credit facility |
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— |
Deferred financing costs |
— |
( |
Treasury stock purchases |
( |
( |
Shares withheld for taxes on vested restricted shares |
( |
( |
Dividends paid |
( |
( |
Reduction of long-term borrowings |
— |
( |
Premium paid on redemption of debt |
— |
( |
Finance lease and financing obligation payments |
( |
( |
Proceeds from financing obligations |
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Proceeds from stock option exercises |
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Other |
— |
( |
Net cash used in financing activities |
( |
( |
Net decrease in cash and cash equivalents |
( |
( |
Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ |
$ |
Supplemental information |
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Interest paid, net of capitalized interest |
$ |
$ |
Income taxes paid |
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See accompanying Notes to Consolidated Financial Statements
6
KOHL’S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for fiscal year end Consolidated Financial Statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the Consolidated Financial Statements and related footnotes included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 (Commission File No. 1-11084) as filed with the Securities and Exchange Commission.
Due to the seasonality of the business of Kohl’s Corporation (the “Company,” “Kohl’s,” “we,” “our,” or “us”), results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.
We operate as a single business unit.
Recent Accounting Pronouncements
We do not expect that any recently issued accounting pronouncements will have a material impact on our Consolidated Financial Statements.
2. Revenue Recognition
The following table summarizes net sales by line of business:
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Three Months Ended |
Nine Months Ended |
||
(Dollars in Millions) |
October 29, 2022 |
October 30, 2021 |
October 29, 2022 |
October 30, 2021 |
Women's |
$ |
$ |
$ |
$ |
Men's |
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Home |
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Children's |
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Accessories |
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Footwear |
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Net Sales |
$ |
$ |
$ |
$ |
Unredeemed gift cards and merchandise return card liabilities totaled $
3. Debt
Borrowings under the revolving credit facility, recorded as short-term debt, has $
7
Long-term debt, which excludes borrowings on the revolving credit facility, consists of the following unsecured debt:
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Outstanding |
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Maturity (Dollars in Millions) |
Effective Rate at Issuance |
Coupon Rate |
October 29, |
January 29, |
October 30, |
2023 |
$ |
$ |
$ |
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2023 |
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2025 |
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2025 |
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2029 |
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2031 |
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2033 |
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2037 |
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2045 |
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Outstanding unsecured senior debt |
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Unamortized debt discounts and deferred financing costs |
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( |
( |
( |
Current portion of unsecured senior debt |
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( |
— |
— |
Long-term unsecured senior debt |
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$ |
$ |
$ |
Effective interest rate at issuance |
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Our unsecured senior long-term debt is classified as Level 1, financial instruments with unadjusted, quoted prices listed on active market exchanges. The estimated fair value of our unsecured senior debt was $
In September 2022, Standard & Poor's downgraded our credit rating from BBB- to BB+. As a result of the downgrade, the interest rate on our
Our various debt agreements contain covenants including limitations on additional indebtedness and certain financial tests. As of October 29, 2022, we were in compliance with all covenants of the various debt agreements.
4. Leases
We lease certain property and equipment used in our operations. Some of our store leases include additional rental payments based on a percentage of sales over contractual levels or payments that are adjusted periodically for inflation. Our typical store lease has an initial term of
Lease assets represent our right to use an underlying asset for the lease term. Lease assets are recognized at commencement date based on the value of the lease liability and are adjusted for any lease payments made to the lessor at or before commencement date, minus any lease incentives received and any initial direct costs incurred by the lessee.
Lease liabilities represent our contractual obligation to make lease payments. At the commencement date, the lease liabilities equal the present value of minimum lease payments over the lease term. As the implicit interest rate is not readily identifiable in our leases, we estimate our collateralized borrowing rate to calculate the present value of lease payments.
Leases with a term of 12 months or less are excluded from the balance; we recognize lease expense for these leases on a straight-line basis over the lease term. We combine lease and non-lease components for new and modified leases.
8
Year to date, we opened
The following tables summarize our operating and finance leases and where they are presented in our Consolidated Financial Statements:
Consolidated Balance Sheets |
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(Dollars in Millions) |
Classification |
October 29, |
January 29, |
October 30, |
Assets |
|
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Operating leases |
Operating leases |
$ |
$ |
$ |
Finance leases |
|
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Total operating and finance leases |
|
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Liabilities |
|
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Current |
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Operating leases |
Current portion of operating leases |
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Finance leases |
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Noncurrent |
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Operating leases |
Operating leases |
|
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Finance leases |
|
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Total operating and finance leases |
$ |
$ |
$ |
Consolidated Statement of Operations |
Three Months Ended |
Nine Months Ended |
|||
(Dollars in Millions) |
Classification |
October 29, 2022 |
October 30, 2021 |
October 29, 2022 |
October 30, 2021 |
Operating leases |
Selling, general, and administrative |
$ |
$ |
$ |
$ |
Finance leases |
|
|
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Amortization of leased assets |
Depreciation and amortization |
|
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Interest on leased assets |
Interest expense, net |
|
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Total operating and finance leases |
|
$ |
$ |
$ |
$ |
Consolidated Statement of Cash Flows |
Nine Months Ended |
|
(Dollars in Millions) |
October 29, 2022 |
October 30, 2021 |
Cash paid for amounts included in the measurement of leased liabilities |
|
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Operating cash flows from operating leases |
$ |
$ |
Operating cash flows from finance leases |
|
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Financing cash flows from finance leases |
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|
The following table summarizes future lease payments by fiscal year:
|
October 29, 2022 |
||
(Dollars in Millions) |
Operating Leases |
Finance Leases |
Total |
2022 |
$ |
$ |
$ |
2023 |
|
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2024 |
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2025 |
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2026 |
|
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After 2026 |
|
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Total lease payments |
$ |
$ |
$ |
Amount representing interest |
( |
( |
( |
Lease liabilities |
$ |
$ |
$ |
9
The following table summarizes weighted-average remaining lease term and discount rate:
|
October 29, 2022 |
January 29, 2022 |
Weighted-average remaining term (years) |
|
|
Operating leases |
||
Finance leases |
||
Weighted-average discount rate |
|
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Operating leases |
||
Finance leases |
Other lease information is as follows:
|
Nine Months Ended |
|
(Dollars in Millions) |
October 29, 2022 |
October 30, 2021 |
Property and equipment acquired through exchange of: |
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Finance lease liabilities |
$ |
$ |
Operating lease liabilities |
|
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Financing Obligations
The following tables summarize our financing obligations and where they are presented in our Consolidated Financial Statements:
Consolidated Balance Sheets |
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(Dollars in Millions) |
Classification |
October 29, |
January 29, |
October 30, |
Assets |
|
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Financing obligations |
Property and equipment, net |
$ |
$ |
$ |
Liabilities |
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Current |
Current portion of finance leases and financing obligations |
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Noncurrent |
Finance leases and financing obligations |
|
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Total financing obligations |
$ |
$ |
$ |
Consolidated Statement of Operations |
Three Months Ended |
Nine Months Ended |
|||
(Dollars in Millions) |
Classification |
October 29, 2022 |
October 30, 2021 |
October 29, 2022 |
October 30, 2021 |
Amortization of financing obligation assets |
Depreciation and amortization |
|
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Interest on financing obligations |
Interest expense, net |
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Total financing obligations |
|
$ |
$ |
$ |
$ |
Consolidated Statement of Cash Flows |
Nine Months Ended |
|
(Dollars in Millions) |