-----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, OS/qtReusLmFt7SdkHJYoIP2QAzBKqeZA8f8mLbIxDLyoJi/QmbQoyoSiU2SeSbq ppue0uHz3TQ8Ow220SE9Dw== 0000950124-97-006405.txt : 19971212 0000950124-97-006405.hdr.sgml : 19971212 ACCESSION NUMBER: 0000950124-97-006405 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971029 FILED AS OF DATE: 19971211 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KMART CORP CENTRAL INDEX KEY: 0000056824 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 380729500 STATE OF INCORPORATION: MI FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00327 FILM NUMBER: 97736141 BUSINESS ADDRESS: STREET 1: 3100 W BIG BEAVER RD CITY: TROY STATE: MI ZIP: 48084 BUSINESS PHONE: 8106431000 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 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the quarterly period ended October 29, 1997 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 No. 1-327 KMART CORPORATION ----------------- (Exact name of registrant as specified in its charter) Michigan 38-0729500 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3100 West Big Beaver Road - Troy, Michigan 48084 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (248) 643-1000 -------------- 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. Yes X No --- --- As of November 26, 1997, 487,926,842 shares of Common Stock of the Registrant were outstanding. 2 INDEX
PART I FINANCIAL INFORMATION PAGE - ------ --------------------- ------ Item 1. Financial Statements Consolidated Statements of Operations -- 3 13 weeks and 39 weeks ended October 29, 1997 and October 30, 1996 Consolidated Balance Sheets -- 4 October 29, 1997, October 30, 1996 and January 29, 1997 Consolidated Statements of Cash Flows -- 5 39 weeks ended October 29, 1997 and October 30, 1996 Notes to Consolidated Financial 6 - 7 Statements Item 2. Management's Discussion and Analysis of 8 - 14 Results of Operations and Financial Condition PART II OTHER INFORMATION - ------- ----------------- Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS: KMART CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
13 Weeks Ended 39 Weeks Ended -------------------------------- --------------------------- October 29, October 30, October 29, October 30, 1997 1996 1997 1996 -------------- -------------- -------------- ----------- Sales $7,315 $7,212 $22,424 $21,753 Cost of sales, buying and occupancy 5,683 5,528 17,517 16,801 -------- ------- -------- -------- Gross margin 1,632 1,684 4,907 4,952 Selling, general and administrative expenses 1,492 1,533 4,480 4,591 -------- ------- -------- -------- Continuing income before interest, income taxes and dividends on convertible preferred securities of subsidiary trust 140 151 427 361 Interest expense, net 96 119 286 339 Income tax provision 13 11 41 8 Dividends on convertible preferred securities of subsidiary trust, net of income taxes of $7, $7, $20 and $10, respectively 13 13 37 19 -------- ------- -------- -------- Net income (loss) from continuing operations 18 8 63 (5) Discontinued operations, net of income taxes of $1 and $5, respectively - 1 - 10 Loss on disposal of discontinued operations, net of income taxes of $(33) - - - (61) -------- ------- -------- -------- Net income (loss) $ 18 $ 9 $ 63 $ (56) ======== ======= ======== ======== Primary earnings (loss) per common share: Continuing operations $ 0.04 $ 0.02 $ 0.13 $ (0.01) Discontinued operations - - - 0.02 Loss on disposal of discontinued operations - - - (0.13) -------- ------- -------- -------- Net income (loss) $ 0.04 $ 0.02 $ 0.13 $ (0.12) ======== ======= ======== ======== Primary weighted average shares (millions) 493.9 486.9 492.4 485.6
See accompanying Notes to Consolidated Financial Statements. The Consolidated Statements of Operations for the prior periods have been restated for discontinued operations. 3 4 KMART CORPORATION CONSOLIDATED BALANCE SHEETS (DOLLARS IN MILLIONS) (UNAUDITED)
October 29, October 30, January 29, 1997 1996 1997 ----------- ----------- ----------- Current Assets: Cash and equivalents $ 280 $ 459 $ 406 Merchandise inventories 7,793 8,050 6,354 Other current assets 1,111 1,268 973 Net current assets of discontinued operations - 720 - ------- ------- ------- Total current assets 9,184 10,497 7,733 Property and equipment, net 5,442 4,972 5,740 Property held for sale or financing 241 882 200 Other assets and deferred charges 264 444 613 ------- ------- ------- Total Assets $15,131 $16,795 $14,286 ======= ======= ======= Current Liabilities: Long-term debt due within one year $ 76 $ 155 $ 156 Trade accounts payable 2,920 2,841 2,009 Accrued payroll and other liabilities 1,017 1,078 1,298 Taxes other than income taxes 250 234 139 ------- ------- ------- Total current liabilities 4,263 4,308 3,602 Long-term debt and notes payable 2,347 3,564 2,121 Capital lease obligations 1,362 1,505 1,478 Other long-term liabilities 921 1,013 1,013 Net long-term liabilities of discontinued operations - 126 - Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust holding solely 7 3/4 convertible junior subordinated debentures of Kmart (redemption value $1,000 at October 29, 1997) 979 980 980 Common stock, 1,500,000,000 shares authorized; shares issued 488,367,468; 486,966,508 and 486,996,145, respectively 489 487 486 Capital in excess of par value 1,630 1,610 1,608 Retained earnings 3,168 3,270 3,105 Unrealized gains on investments - 45 - Treasury shares and restricted stock (25) (45) (37) Foreign currency translation adjustment (3) (68) (70) ------- ------- ------- Total Liabilities and Shareholders' Equity $15,131 $16,795 $14,286 ======= ======= =======
See accompanying Notes to Consolidated Financial Statements. The Consolidated Balance Sheet as of October 30, 1996 has been restated for discontinued operations. 4 5 KMART CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN MILLIONS) (UNAUDITED)
39 Weeks Ended ---------------------------------- October 29, October 30, 1997 1996 ----------- ----------- CASH FLOW FROM OPERATING ACTIVITIES Net income (loss) from continuing operations $ 63 $ (5) Adjustments to reconcile net income (loss) from continuing operations to net cash used for operating activities: Depreciation and amortization 496 487 Deferred income taxes and taxes payable 25 155 Undistributed equity income and dividends received 14 42 Decrease in other long-term liabilities (46) (215) Increase in inventories (1,439) (2,030) Increase in accounts payable 911 1,050 Increase in accounts receivable (210) (184) Changes in certain assets and liabilities 31 84 ------- ------- Net cash used for continuing operations (155) (616) Discontinued operations 2 59 ------- ------- Net cash used for operating activities (153) (557) ------- ------- CASH FLOW FROM INVESTING ACTIVITIES Capital expenditures (489) (192) (Increase) decrease in property held for sale or financing 123 (583) Proceeds from real estate financing and other 290 5 Proceeds from divestitures, 145 177 Decrease in minority interest (55) (2) Increase in notes receivable (72) - Other - net 2 16 ------- ------- Net cash used for investing activities (56) (579) ------- ------- CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt and notes payable 916 2,013 Refinancing costs related to long-term debt and notes payable (15) (196) Payments on long-term debt and notes payable (770) (2,225) Net proceeds from issuance of trust convertible preferred securities - 971 Payments on capital lease obligations (85) (85) Other - net 37 34 ------- ------- Net cash provided by financing activities 83 512 Net decrease in cash and equivalents (126) (624) Cash and equivalents at beginning of year 406 1,083 ------- ------- Cash and equivalents at end of period $ 280 $ 459 ======= =======
See accompanying Notes to Consolidated Financial Statements. The Consolidated Statement of Cash Flow for the prior period has been restated for discontinued operations. 5 6 KMART CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1.) BASIS OF PRESENTATION These interim unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) necessary for a fair statement of the results for the interim periods. These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's 1996 Annual Report and Form 10-K filed for the fiscal year ended January 29, 1997. Certain reclassifications of the October 30, 1996 consolidated balance sheet have been made to conform to current year presentation. 2.) DISCONTINUED OPERATIONS AND DIVESTITURES In March 1997, the Company completed the sale of its interest in a Mexican joint venture, Kmart Mexico S.A. de C.V., to Controladora Comercial Mexicana, S.A. C.V. for approximately $74 million, which approximated book value. In June 1997, the Company, through two wholly owned subsidiaries, completed the sale of its Canadian operations to an investor group. The Company received approximately $54 million in cash and a Canadian $109 million note and retained a 12.5% non-voting equity interest in Kmart Canada Co. The net proceeds from the sale approximated book value. In September 1997, the Company completed the sale of substantially all of the assets of its subsidiary, Builders Square, Inc., to an affiliate of Leonard Green & Partners, L.P.. The Company received approximately $10 million in cash and other consideration. The net proceeds from the sale approximated book value. 3.) COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES On March 4, 1997 the Company transferred to Troy CMBS Property, L.L.C., an affiliated Delaware limited liability company, 81 store properties (the "Properties") with a net book value of $964 million which were then leased back to the Company. Simultaneously with such transfer of the Properties, Troy CMBS Property, L.L.C. completed a $335 million offering of commercial mortgage pass through certificates, secured by mortgages on the Properties. The mortgages and the mortgage note have been purchased by Kmart CMBS Financing, Inc., a Delaware corporation wholly owned by the Company, and assigned to the trustee of the security holders. The mortgage loan is subject to monthly payments of interest and principal, according to a schedule which amortizes the initial outstanding principal amount over approximately 15 years, and a balloon payment of approximately $260.8 million on the scheduled maturity date in February 2002. The CMBS weighted average floating interest rate is 1 month LIBOR plus 47 basis points. Troy CMBS Property, L.L.C. and Kmart CMBS Financing, Inc. each maintains a separate legal existence from that of Kmart. Neither the assets of Troy CMBS Property, L.L.C., nor the assets of Kmart CMBS Financing, Inc., are commingled with those of Kmart. The assets of Troy CMBS Property, L.L.C. and the assets of Kmart CMBS Financing, Inc. will not be available to satisfy the obligations of either Troy CMBS Property, L.L.C. or Kmart CMBS Financing, Inc. 6 7 4.) INVENTORIES AND COST OF MERCHANDISE SOLD A substantial portion of the Company's inventory is accounted for using the last-in, first-out (LIFO) method. Since LIFO costs can only be determined at the end of each fiscal year when inflation rates and inventory levels are finalized, estimates are used for LIFO purposes in the interim consolidated financial statements. Inventories valued on LIFO at October 29, 1997, October 30, 1996 and January 29, 1997 were $447 million, $495 million and $440 million lower than the amounts that would have been reported under the first-in, first-out (FIFO) method, respectively. 5.) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS PER SHARE" The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 128, "Earnings per Share", ("FAS 128"). This statement establishes standards for computing and presenting earnings per share. The statement is effective for all financial statements issued for periods ending after December 15, 1997, with earlier application not permitted. Based on the Company's preliminary analysis, the adoption of FAS 128 would not have a material effect on the earnings per share reported for the 13 and 39 weeks ended October 29, 1997. 6.) SUBSEQUENT EVENT In November of 1997, the Company announced a voluntary early retirement program for certain Kmart hourly associates who are over 45 years of age with at least 10 years of Kmart service by December 31, 1997. Approximately 28,000 Kmart associates are eligible for this program which would provide an enhanced lump-sum pension benefit. The election for this program must be made by January 2, 1998. As a result of this program, the Company will record a one-time non-cash charge in the fourth quarter. The amount of the pre-tax charge is anticipated to range from $64 million to $192 million, depending on the number of associates who elect to participate in the program. 7 8 ITEM 2 KMART CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE 13 WEEKS ENDED OCTOBER 29, 1997 RESULTS OF OPERATIONS Store Activity The Company's store activity for the 13 weeks ended October 29, 1997 is summarized as follows:
THIRD QUARTER ACTIVITY JULY 30, ---------------- OCTOBER 29, OCTOBER 30, 1997 OPENED CLOSED 1997 1996 --------- -------- ------- ----------- ------------ Kmart: United States 2,122 3 (4) 2,121 2,143 Canada -- -- -- -- 125 -------- ------ ----- ------- ------- 2,122 3 (4) 2,121 2,268 Mexico -- -- -- -- 4 -------- ------ ----- ------- ------- Total Stores 2,122 3 (4) 2,121 2,272 ======== ====== ===== ======= =======
8 9 KMART CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- CONTINUED Sales
13 Weeks Ended % Change -------------------------- --------------------------------- ($ Millions) October 29, October 30, Comparable 1997 1996 All Stores Stores --------- ---------- ----------------- ------------- United States $ 7,315 $ 6,989 4.7 4.7 International - 223 (100.0) (a) - ------- -------- Consolidated Sales $ 7,315 $ 7,212 1.4 4.7 ======= ========
(a) Kmart Corporation completed the divestiture of its remaining international operations in June 1997. Sales Sales for the 13 weeks ended October 29, 1997 were $7,315 million, a 1.4% increase from sales of $7,212 million in the same period of the prior year. Comparable store sales increased 4.7% over the same period of the prior year. The increase in comparable sales resulted from the strong performance in home fashions and decor with the introduction of Martha Stewart Everyday products, strong performance in consumables related to the roll out, during the quarter, of approximately 223 Big Kmart store conversions, previously referred to as high frequency store conversions, and the Sesame Street brand introduction in children's apparel. Gross Margin Gross margin for the 13 weeks ended October 29, 1997 was $1,632 million as compared to $1,684 million in the same period of the prior year. Gross margin as a percentage of sales was 22.3% and 23.3% in the 1997 and 1996 13 week periods, respectively. The 100 basis point gross margin rate decline was the result of higher levels of promotional sales, a mix shift to lower margined sales categories, and increased distribution costs versus the previous year. Selling, General and Administrative ("SG&A") Expenses SG&A expenses decreased $41 million for the 13 weeks ended October 29, 1997 to $1,492 million, or 20.4% of sales, from $1,533 million, or 21.3% of sales, in the same period of the prior year. Of the $41 million net savings, $46 million was due to the absence of the international division. These savings were partially offset by higher expenses associated with comparable U.S. Kmart stores. 9 10 KMART CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- CONTINUED Operating Income
13 Weeks Ended -------------------------------- October 29, October 30, ($ Millions) 1997 1996 ------------ ------------ United States $140 $146 International - 5 ---- ---- Consolidated Operating Income $140 $151 ==== ====
Operating income for the 13 weeks ended October 29, 1997 was $140 million, or 1.9% of sales, as compared to operating income of $151 million, or 2.1% of sales, in the same period of the prior year. Operating income was lower for the third quarter, compared to the prior year, as the 1.4% increase in sales and the $41 million reduction of SG&A expenses were more than offset by the 100 basis point decrease in gross margin. Interest Expense Net interest expense for the 13 weeks ended July 30, 1997 was $96 million, as compared to $119 million for the same period of the prior year. The net interest expense on borrowings decreased as a result of lower levels of borrowings on the revolver, the payoff of the term loan, and improved borrowing spreads. See "Liquidity and Financial Condition". Discontinued Operations Discontinued operations for the 13 weeks ended October 30, 1996 included $1 million of net income of Builders Square, Inc. ("Builders Square"). 10 11 KMART CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- CONTINUED FOR THE 39 WEEKS ENDED OCTOBER 29, 1997 RESULTS OF OPERATIONS Store Activity The Company's store activity for the 39 weeks ended October 29, 1997 is summarized as follows:
YEAR-TO-DATE ACTIVITY JANUARY 29, -------------- OCTOBER 29, OCTOBER 30, 1997 OPENED CLOSED 1997 1996 ----------- ----- ------ ----------- ----------- Kmart: United States 2,134 7 (20) 2,121 2,143 Canada 123 - (123) (a) - 125 --------- ---- ------ ----------- ----------- 2,257 7 (143) 2,121 2,268 Mexico 4 - (4) (a) - 4 --------- ---- ------ ----------- ----------- Total Stores 2,261 7 (147) 2,121 2,272 ========= ==== ====== =========== ===========
(a) Represents the disposition of the Canadian operations in June 1997 and the Mexican operations in March of 1997. 11 12 KMART CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- CONTINUED Sales
39 Weeks Ended % Change ------------------------------ -------------------------- October 29, October 30, Comparable ($ Millions) 1997 1996 All Stores Stores ----------------- ----------- ------------- ----------- United States $ 22,125 $ 21,017 5.3 5.3 International 299 736 (59.3) (a) - -------------- ------------- Consolidated Sales $ 22,424 $ 21,753 3.1 5.3 ============== =============
(a) Kmart Corporation completed the divestiture of its remaining international operations in June 1997. Sales Sales for the 39 weeks ended October 29, 1997 were $22,424 million, a 3.1% increase over sales of $21,753 million in the same period of the prior year. Comparable store sales increased 5.3% over the same period of the prior year. The increase in comparable sales resulted from the strong performance in home fashions and decor, led by the Martha Stewart Everyday products, and strong performance in consumables related to the roll out during the year of approximately 448 Big Kmart store conversions, previously referred to as high frequency store conversions, and the Sesame Street brand introduction in children's apparel. Gross Margin Gross margin for the 39 weeks ended October 29, 1997 was $4,907 million as compared to $4,952 million in the same period of the prior year. Gross margin as a percentage of sales was 21.9% and 22.8% in the 1997 and 1996 periods, respectively. The 90 basis point gross margin rate decline was the result of higher mix of promotional sales and a continued shift in sales towards lower margin consumables and commodities. Selling, General and Administrative ("SG&A") Expenses SG&A expenses decreased $111 million for the 39 weeks ended October 29, 1997 to $4,480 million, or 20.0% of sales, from $4,591 million, or 21.1% of sales, in the same period of the prior year. Of the $111 million net savings, $60 million was related to stores closed since the prior year period, $87 million was due to the absence of the international division and $8 million resulted from reductions in expenses for comparable U.S. Kmart stores. These savings were partially offset by higher incremental expenses associated with new stores. 12 13 KMART CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- CONTINUED Operating Income
39 Weeks Ended ----------------------------------- ($ Millions) October 29, October 30, 1997 1996 ---------------- ---------------- United States $ 430 $ 372 International (3) (11) ---------------- ---------------- Consolidated Operating Income $ 427 $ 361 ================ ================
Operating income for the 39 weeks ended October 29, 1997 was $427 million, or 1.9% of sales, as compared to operating income of $361 million, or 1.7% of sales, in the same period of the prior year. This increase is the direct result of the 3.1% increase in sales and the $111 million reduction of SG&A expenses offset by the 90 basis point decrease in gross margin. Interest Expense Net interest expense for the 39 weeks ended October 29, 1997 was $286 million, as compared to $339 million for the same period of the prior year. The net interest expense on borrowings decreased as a result of lower levels of debt partially offset by lower levels of interest income and the refinancing of certain debt with trust convertible preferred securities in June of 1996. See "Liquidity and Financial Condition". Discontinued Operations Discontinued operations for the 39 weeks ended October 30, 1996 included $10 million of net income of Builders Square. and a net loss of $61 million related to the sale of a portion of the Company's investment in Thrifty PayLess Holdings, Inc. together with the revaluation of the Company's remaining holdings at that time. 13 14 KMART CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION CONTINUED LIQUIDITY AND FINANCIAL CONDITION Kmart's primary sources of working capital are cash flows from operations and borrowings under its credit facilities. The Company had working capital of $4,921; $6,189 and $4,131 million at October 29, 1997, October 30, 1996 and January 29, 1997, respectively. The Company's working capital fluctuates in relation to profitability, seasonal inventory levels net of trade accounts payable and the level of new store openings and closings. In March 1997, the Company issued, through a subsidiary, $335 million in Commercial Mortgage Pass Through Certificates ("CMBS"). The CMBS weighted average floating interest rate is 1 month LIBOR plus 47 basis points. Net proceeds were used to repay a portion of the term loan under the credit facility, with the repayment of the remaining portion of the term loan in April 1997 with accumulated cash from operations. In May 1997, the Company amended its revolving credit agreement. The amendment primarily involved an extension of the term by one year, a reduction in interest rate spreads, commitment and letter of credit fees and revised covenants to provide the Company with more operational flexibility. Net cash used by operating activities for the 39 weeks ended October 29, 1997 was $153 million as compared to net cash used of $557 million for the same period of 1996. The decrease in cash used by operating activities compared to the prior period was primarily the result of increased earnings, a decrease in cash used for inventory net of accounts payable and the change in certain long term liabilities, partially offset by a decrease in cash from discontinued operations and deferred income taxes and taxes payable. Net cash used for investing activities was $56 million for the 39 weeks ended October 29, 1997 compared to $579 million for the 39 weeks ended October 30, 1996. The decrease in cash used for investing activities was mainly caused by a decrease in the cash used for property held for sale or financing and an increase in the cash provided from real estate financing and other, partially offset by an increase in capital expenditures, primarily related to the rollout of the Big Kmart store concept in approximately 448 stores during the period, and an increase in notes receivable related to the sale of the Canadian operations. Net cash provided by financing activities amounted to $83 million during the 39 weeks ended October 29, 1997 compared to $512 million for the 39 weeks ended October 30, 1996. The decrease in cash provided by financing activities is primarily due to lower levels of borrowings under the revolving credit facility in the current year compared to the prior year. Management believes the funds generated by operations, together with funds available under existing credit arrangements, are sufficient to meet the Company's currently anticipated funding requirements. 14 15 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed as a part of this report: Exhibit 11 - Information on Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: No reports were filed on Form 8-K by the Registrant during the 13 weeks ended October 29, 1997. 15 16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. The signatory hereby acknowledges and adopts the typed form of his name in the electronic filing of this document with the Securities and Exchange Commission. Date: December 10, 1997 Kmart Corporation ------------------------------------------ (Registrant) By: M.E. Welch, III ------------------------------------------ M.E. Welch, III SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (Duly Authorized Officer, Principal Financial Officer) By: William C. Najdecki ------------------------------------------ William C. Najdecki VICE PRESIDENT, CONTROLLER (Duly Authorized Officer, Principal Accounting Officer) 16 17 Exhibit Index Exhibit No. Description - ----------- ----------- Exhibit 11 - Information on Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule EX-11 2 EXHIBIT 11 1 EXHIBIT 11 KMART CORPORATION INFORMATION ON COMPUTATION OF EARNINGS PER SHARE
($ Millions, except per share data) 13 Weeks Ended 39 Weeks Ended ------------ ------------ ----------- ----------- October 29, October 30, October 29, October 30, 1997 1996 1997 1996 ------------ ------------ ----------- ----------- I. Earnings per common and common equivalent share: Income from continuing operations $ 31 $ 21 $ 100 $ 14 Deduct trust convertible preferred dividends (13) (13) (37) (19) ---------- ---------- --------- --------- (a) Adjusted net income (loss) from continuing operations 18 8 63 (5) (b) Discontinued operations, net of income taxes 0 1 0 10 (c) Disposal of discontinued operations, net of income taxes 0 0 0 (61) ---------- ---------- --------- --------- (d) Adjusted net income (loss) $ 18 $ 9 $ 63 $ (56) ========== ========== ========= ========= Weighted average common shares outstanding 488.0 484.0 486.8 483.3 Common shares assumed issued and repurchased, net 5.9 2.9 5.6 2.3 ---------- ---------- --------- --------- (e) Applicable common shares, as adjusted 493.9 486.9 492.4 485.6 ========== ========== ========= ========= Earnings per common and common equivalent share: Income (loss) from continuing operations (a)/(e) $ 0.04 $ 0.02 $ 0.13 $ (0.01) Discontinued operations, net of income taxes (b)/(e) 0.00 0.00 0.00 0.02 Disposal of discontinued operations, net of income taxes (c)/(e) 0.00 0.00 0.00 (0.13) ---------- ---------- --------- --------- Net income (loss) (d)/(e) $ 0.04 $ 0.02 $ 0.13 $ (0.12) ========== ========== ========= ========= II. Earnings per common and common equivalent share assuming full dilution: (f) Income (loss) from continuing operations $ 31 $ 21 $ 100 $ 14 (g) Discontinued operations, net of income taxes 0 1 0 10 (h) Disposal of discontinued operations, net of income taxes 0 0 0 (61) ---------- ---------- --------- --------- (i) Net income (loss) $ 31 $ 22 $ 100 $ (37) ========== ========== ========= ========= Weighted average common shares outstanding 488.0 484.0 486.8 483.3 Weighted average assumed common shares outstanding upon conversion of trust convertible preferred shares outstanding 66.7 66.7 66.7 33.0 Common shares assumed issued and repurchased, net 5.9 2.9 5.6 2.3 ---------- ---------- --------- --------- (j) Applicable common shares, as adjusted 560.6 553.6 559.1 518.6 ========== ========== ========= ========= Earnings per common and common equivalent share assuming full dilution: Income (loss) from continuing operations (f)/(j) $ 0.06 $ 0.04 $ 0.18 $ 0.03 Discontinued operations, net of income taxes (g)/(j) 0.00 0.00 0.00 0.02 Disposal of discontinued operations, net of income taxes (h)/(j) 0.00 0.00 0.00 (0.12) ---------- ---------- --------- --------- Net income (loss) (i)/(j) $ 0.06 $ 0.04 $ 0.18 $ (0.07) ========== ========== ========= ========= (1) (1) (1) (1)
(1) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS JAN-28-1998 OCT-29-1997 280 0 601 0 7,793 9,184 7,676 (3,400) 15,131 4,263 2,423 979 0 489 4,770 15,131 22,424 22,424 17,517 17,517 0 0 286 141 41 63 0 0 0 63 .13 .18
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