-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wzh6zXUOXBok0y3DMOgeEviZafYQoJVOf3j4JsP7vKMOiIxIvGQfojyIXUX3XMkp 85sxbu4i19CyCCblPbYDYg== /in/edgar/work/20000814/0000950124-00-004948/0000950124-00-004948.txt : 20000921 0000950124-00-004948.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950124-00-004948 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000810 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KMART CORP CENTRAL INDEX KEY: 0000056824 STANDARD INDUSTRIAL CLASSIFICATION: [5331 ] IRS NUMBER: 380729500 STATE OF INCORPORATION: MI FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-00327 FILM NUMBER: 695670 BUSINESS ADDRESS: STREET 1: 3100 W BIG BEAVER RD CITY: TROY STATE: MI ZIP: 48084 BUSINESS PHONE: 2486431000 MAIL ADDRESS: STREET 1: 3100 W BIG BEAVER ROAD CITY: TROY STATE: MI ZIP: 48084 FORMER COMPANY: FORMER CONFORMED NAME: KRESGE S S CO DATE OF NAME CHANGE: 19770921 8-K 1 e8-k.txt FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) August 10, 2000 ----------------------------------------------- KMART CORPORATION (Exact Name of Registrant as Specified in its Charter) MICHIGAN (State or Other Jurisdiction of Incorporation) 1-327 38-0729500 (Commission File Number) (I.R.S. Employer Identification No.) 3100 WEST BIG BEAVER ROAD, TROY MICHIGAN 48084 (Address of Principal Executive Offices) (Zip Code) (248) 643-1792 (Registrant's Telephone Number, Including Area Code) N/A (Former Name or Former Address, if Changed Since Last Report) ITEM 5. OTHER EVENTS. 1. On August 10, 2000 Kmart Corporation issued a press release announcing 2000 Second Quarter Earnings. A copy of the press release is attached as Exhibit 99.1 and incorporated by reference herein. ITEM 7. EXHIBITS. Exhibit 99.1 August 10, 2000 press release regarding 2000 Second Quarter Earnings. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. KMART CORPORATION (Registrant) Date: August 10, 2000 By: /s/ Martin E. Welch III ------------------------- Senior Vice President and Chief Financial Officer Exhibit Index Exhibit Number Description - -------------- ----------- 99.1 August 10, 2000 press release regarding 2000 Second Quarter Earnings EX-99.1 2 ex99-1.txt PRESS RELEASE 1 RELEASE DATE Aug. 10, 2000 CONTACTS: Mike Viola Vice President, Treasurer (248) 614-0862 Shawn Kahle Vice President, Corporate Affairs (248) 637-4201 FOR IMMEDIATE RELEASE KMART CORPORATION ANNOUNCES 2000 SECOND QUARTER EARNINGS TROY, MICH., AUGUST 10, 2000 - Kmart Corporation (NYSE: KM) today reported a net loss of $448 million, or $0.93 per share, for the 13 weeks ended July 26, 2000, compared with a net loss of $92 million, or $0.19 cents per share, for the 13 weeks ended July 28, 1999. Total consolidated sales in the second quarter of 2000 were $8.998 billion, an increase of 2.5% from $8.780 billion for the second quarter of 1999. Comparable sales for the same period increased 0.7%. Net income for the 13 weeks ended July 26, 2000, before the pre-tax charge of $740 million ($471 million after-tax) related to strategic actions announced on July 25, 2000, was $23 million, or $0.05 per share. Comparable earnings for the 13 weeks ended July 28, 1999, before the non-recurring charge for discontinued operations of $230 million after-tax, relating to the disposition of certain Builders Square operating leases, were $138 million, or $0.26 per share.
Second Quarter 2000 Second Quarter 1999 ------------------- ------------------- Excluding Excluding Charge For Charge For ($ in millions) As Strategic As Discontinued --------------- Reported Actions Reported Operations -------- ------- -------- ---------- Sales $ 8,998 $ 8,998 $ 8,780 $ 8,780 Gross Margin 1,480 1,845 1,926 1,926 SG&A 2,101 1,726 1,638 1,638 Net income (loss) $ (448) $ 23 $ (92) $ 138 ======= ======= ======= ======= EPS ($ 0.93) $ 0.05 ($ 0.19) $ 0.26 ======= ======= ======= =======
- more - 2 KMART ANNOUNCES SECOND QUARTER EARNINGS 2-2-2-2 Excluding the charges for strategic actions and discontinued operations, the gross margin rate for the second quarter 2000 was 20.5% versus 21.9% last year. Selling, general and administrative (SG&A) expense for the quarter was $1.726 billion compared with $1.638 billion for 1999, resulting in a SG&A to sales ratio of 19.2% for 2000 versus 18.7% for 1999. Commenting on the second quarter, Kmart Chairman and CEO Chuck Conaway said: "Our overall performance fell short in the second quarter primarily due to soft sales in apparel and other seasonal merchandise that resulted in greater clearance markdowns to promote sales of these goods. Additionally, outsourcing of the distribution of consumables and grocery merchandise continued to perform below our expectations and resulted in significantly greater costs." Kmart Corporation serves America with 2,165 Kmart, Big Kmart and Super Kmart retail outlets. In addition to serving all 50 states, Kmart operations extend to Puerto Rico, Guam and the U.S. Virgin Islands. More information about Kmart is available on the World Wide Web at www.bluelight.com in the "About Kmart" section. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION Statements, other than those based on historical facts, which address activities, events, or developments that the company expects or anticipates may occur in the future are forward-looking statements which are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Actual events and results may materially differ from anticipated results described in any forward-looking statements. The company's ability to achieve such results is subject to certain risks and uncertainties, including, but not limited to, economic and weather conditions which affect buying patterns of the company's customers, changes in consumer spending and the company's ability to anticipate buying patterns and implement appropriate inventory strategies, continued availability of capital and financing, competitive factors, and other factors affecting business beyond the company's control. Consequently, all of the forward-looking statements are qualified by the cautionary statements and there can be no assurance that the results or developments anticipated by the company will be realized or that they will have the expected effects on the company or its business operations. - more - 3 KMART ANNOUNCES SECOND QUARTER EARNINGS 3-3-3-3 KMART CORPORATION ----------------- CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in millions, except per share data) 13 Weeks 13 Weeks Ended Ended July 26, 2000 July 28, 1999 ------------- ------------- Sales $ 8,998 $ 8,780 Cost of sales, buying and occupancy 7,518 6,854 ------- --------- Gross margin 1,480 1,926 Selling, general and administrative expenses 2,101 1,638 ------- --------- Income (loss) before interest, income taxes and dividends on convertible preferred securities of subsidiary trust (621) 288 Interest expense, net 65 64 Income tax provision (benefit) (250) 74 Dividends on convertible preferred securities of subsidiary trust, net of income taxes 12 12 ------- --------- Continuing net income (loss) (448) 138 Discontinued operations, net of tax -- (230) ------- --------- Net loss $ (448) $ (92) ======= ========= Basic earnings per common share: Net income (loss) from continuing operations $ (0.93) $ 0.28 Discontinued operations -- (0.47) ------- --------- Net loss $ (0.93) $ (0.19) ======= ========= Diluted earnings per common share: Net income (loss) from continuing operations $ (0.93) $ 0.26 Discontinued operations -- (0.41) ------- --------- Net loss $ (0.93) $ (0.15) ======= ========= Basic weighted average shares (millions) 481.3 495.2 Diluted weighted average shares (millions) 541.8 567.0
- more - 4 KMART ANNOUNCES SECOND QUARTER EARNINGS 4-4-4-4 KMART CORPORATION ----------------- CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in millions, except per share data) 26 Weeks 26 Weeks Ended Ended July 26, 2000 July 28, 1999 ------------- ------------- Sales $ 17,193 $ 16,858 Cost of sales, buying and occupancy 14,012 13,224 -------- -------- Gross margin 3,181 3,634 Selling, general and administrative expenses 3,682 3,177 -------- -------- Income (loss) before interest, income taxes and dividends on convertible preferred securities of subsidiary trust (501) 457 Interest expense, net 134 130 Income tax provision (benefit) (232) 108 Dividends on convertible preferred securities of subsidiary trust, net of income taxes 23 25 -------- -------- Continuing net income (loss) (426) 194 Discontinued operations, net of tax -- (230) -------- -------- Net loss $ (426) $ (36) ======== ======== Basic/Diluted earnings per common share: Net income (loss) from continuing operations $ (0.87) $ 0.39 Discontinued operations -- (0.47) -------- -------- Net loss $ (0.87) $ (0.08) ======== ======== Basic weighted average shares (millions) 481.8 494.6 Diluted weighted average shares (millions) 544.4 567.0
- more - 5 KMART ANNOUNCES SECOND QUARTER EARNINGS 5-5-5-5 KMART CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in millions) July 26, 2000 July 28, 1999 ------------- ------------- ASSETS Current Assets: Cash and cash equivalents $ 333 $ 299 Merchandise inventories 6,586 7,061 Other current assets 862 622 ------- ------- Total current assets 7,781 7,982 Property and equipment, net 6,351 6,114 Other assets and deferred charges 397 538 ------- ------- TOTAL ASSETS $14,529 $14,634 ======= ======= LIABILITIES AND EQUITY Current Liabilities: Long-term debt due within one year $ 38 $ 81 Trade accounts payable 2,488 2,353 Accrued payroll and other liabilities 1,253 1,311 Taxes other than income taxes 268 251 ------- ------- Total current liabilities 4,047 3,996 Long-term debt and notes payable 1,742 1,526 Capital lease obligations 975 1,052 Other long-term liabilities 1,004 1,122 Convertible preferred securities 891 985 Common stock 480 494 Capital in excess of par value 1,551 1,676 Retained earnings 3,839 3,783 ------- ------- TOTAL LIABILITIES AND EQUITY $14,529 $14,634 ======= =======
- more - 6 KMART ANNOUNCES SECOND QUARTER EARNINGS 6-6-6-6 KMART CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in millions) 26 Weeks 26 Weeks Ended Ended July 26, 2000 July 28, 1999 ------------- ------------- CASH FLOW FROM OPERATING ACTIVITIES Net income (loss) from continuing operations $(426) $ 194 Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities: One-time charge for strategic actions 740 -- Depreciation and amortization 395 377 Equity loss in BlueLight.com 25 -- Cash used for store restructuring and other charges (33) (46) Decrease (increase) in inventories 150 (525) Increase in accounts payable 284 330 Increase in accounts receivable (18) (1) Deferred income taxes and taxes payable (329) 22 Decrease in other long-term liabilities (54) (18) Changes in other assets and liabilities (114) 4 ----- ----- Net cash provided by continuing operations 620 337 Net cash used for discontinued operations (60) (40) ----- ----- Net cash provided by operating activities 560 297 ----- ----- CASH FLOW FROM INVESTING ACTIVITIES Capital expenditures (377) (577) Acquisition of Caldor leases -- (86) ----- ----- Net cash used for investing activities (377) (663) ----- ----- CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt -- 44 Purchase of convertible preferred securities (80) -- Purchase of common shares (56) (32) Issuance of common shares 26 34 Payments on long-term debt (45) (52) Payments on capital lease obligations (39) (39) ----- ----- Net cash used for financing activities (194) (45) ----- ----- Net decrease in cash and cash equivalents (11) (411) Cash and cash equivalents, beginning of year 344 710 ----- ----- Cash and cash equivalents, end of period $ 333 $ 299 ===== =====
- more - 7 KMART ANNOUNCES SECOND QUARTER EARNINGS 7-7-7-7 EXHIBIT The following exhibit outlines the impact of the charge for strategic actions on Kmart's Statement of Operations for the second quarter ended July 26, 2000. Charge for Strategic Initiatives On July 25, 2000, Kmart announced a series of strategic actions designed to enhance the productivity of its store base, inventory and information systems. These initiatives include closing stores, accelerating certain inventory reductions and redefining its information technology strategy. As a result of these initiatives, Kmart recorded a pretax charge of $740 million. A total of 66 traditional Kmart and 6 Super Kmart stores will close, most by November 1, 2000. The $740 million pretax charge included $300 million to record a reserve related to the cost of closing store locations and $75 million to reflect the anticipated value of inventory at the closed locations. In addition, an assessment of inventory productivity during the second quarter indicated that certain inventories should be reduced significantly to improve return on investment. To achieve this objective, Kmart began implementing a plan to reduce inventory through chain-wide clearance sales. A pretax charge of $290 million was taken to state the inventory at its net realizable value. Finally, as a result of an ongoing assessment of its information technology infrastructure, Kmart determined in the second quarter 2000 that certain systems previously under development and related hardware were no longer part of its long-term strategy. This action and others resulted in a pretax charge of $75 million. The following table summarizes the significant components and income statement presentation of the charge for strategic actions taken during the second quarter:
Cost of sales, buying and ($ in millions) occupancy SG&A Total --------------- --------- ---- ----- Store closing costs: Lease obligations and maintenance $ - $ 197 $ 197 Asset impairments - 103 103 Inventory write-down 75 - 75 Inventory reduction 290 - 290 Information technology and other - 75 75 -------- ------- ------ Total $ 365 $ 375 $ 740 ======== ======= ======
- more - 8 KMART ANNOUNCES SECOND QUARTER EARNINGS 8-8-8-8 EXHIBIT, CONTINUED The following table presents the Statement of Operations for the quarter ended July 26, 2000 before and after the charge for strategic actions:
13 Weeks Ended July 26, 2000 ---------------------------- Excluding Charge For Charge For ($ in millions) Strategic Strategic - --------------- As Reported Actions Actions ----------- ------- ------- Sales $ 8,998 $ -- $ 8,998 Cost of sales, buying and occupancy 7,518 365 7,153 ------- ------- ------- Gross margin 1,480 (365) 1,845 Selling, general and administrative expense 2,101 375 1,726 ------- ------- ------- Income (loss) before interest, income taxes and dividends on convertible preferred securities of subsidiary trust (621) (740) 119 Interest expense, net 65 -- 65 Income taxes (250) (269) 19 Preferred dividends of subsidiary, net of income taxes 12 -- 12 ------- ------- ------- Net income (loss) $ (448) $ (471) $ 23 ======= ======= ======= Basic and diluted earnings per share $ (0.93) $ (0.98) $ 0.05 ======= ======= =======
INVENTORY As of the end of the second quarter, Kmart reduced its inventory position from January 26, 2000 by $515 million as follows: ($ in millions) --------------- Inventory at January 26, 2000 $ 7,101 Inventory at July 26, 2000 6,586 ------- Decrease in inventory 515 Reduction due to one-time, non-cash charge (365) ------- Reduction through operations $ 150 =======
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