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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 19, 1994
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)
(810) 643-1000
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
KMART CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
Kmart Corporation announced plans for public offerings of shares in three of
Kmart's specialty retail businesses. A sale of a majority interest in the
Borders-Walden Group, OfficeMax, Inc., and The Sports Authority, Inc., will be
made through Initial Public Offerings (IPO's). OfficeMax Inc., will be the
first IPO and is expected to be filed within the next few weeks. Others will
follow in an orderly manner dependent upon market conditions.
The consolidated pro forma statements of income give effect to the planned sale
of at least a 51% interest in the Borders-Walden Group, OfficeMax, Inc. and The
Sports Authority, Inc. if such transaction occurs as of January 26, 1993 and
the consolidated pro forma balance sheet, if such transaction occurs, as of
July 27, 1994.
The pro forma statements of consolidated income and consolidated balance sheets
are provided for informational purposes only and should not be construed to be
indications of Kmart Corporation's results of operations or the percentage of
ownership Kmart Corporation will have in Borders-Walden Group, OfficeMax, Inc.,
or The Sports Authority, Inc. had the transactions described above been
consummated on the dates assumed and do not project Kmart Corporation's results
of operations or financial position or those of the Borders-Walden Group,
OfficeMax, Inc., or The Sports Authority, Inc. on a stand alone basis.
<TABLE>
<CAPTION>
KMART CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FISCAL YEAR ENDED JANUARY 26, 1994
(DOLLARS IN MILLIONS)
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
Sales $34,156 ($3,399) (1) $30,757
Licensee fees and rental income 291 (2) 289
Equity in income of affiliated retail companies 110 (37) (2) 73
------- ------- -------
34,557 (3,438) 31,119
------- ------- -------
Cost of merchandise sold, includes buying and occupancy costs 25,646 (2,570) (1) 23,076
Selling, general, and administrative expenses 7,636 (740) (1) 6,896
Store restructuring and other charges 1,348 (218) 1,130
Interest expense
Debt--net 285 (1) (1) 284
Capital lease obligations 192 192
------- ------- -------
35,107 (3,529) 31,578
------- ------- -------
Income (loss) from continuing retail operations before income taxes,
extraordinary item and the effect of accounting changes (550) 91 (459)
Income taxes (222) 52 (1) (170)
------- ------- -------
Net income (loss) from continuing retail operations before extraordinary
item and the effect of accounting changes ($328) $39 (1) ($289)
======= ======= =======
</TABLE>
See accompanying notes to the Unaudited Pro Forma Consolidated Financial Data.
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<TABLE>
<CAPTION
KMART CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
TWENTY-SIX WEEKS ENDED JULY 27, 1994
(DOLLARS IN MILLIONS)
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
Sales $16,638 ($1,783) (1) $14,855
Licensee fees and rental income 133 133
Equity in income of affiliated retail companies 33 (2) 33
------- ------- -------
16,804 (1,783) 15,021
------- ------- -------
Cost of merchandise sold, includes buying and occupancy costs 12,477 (1,365) (1) 11,112
Selling, general, and administrative expenses 3,916 (407) (1) 3,509
Interest expense
Debt--net 124 (1) (1) 123
Capital lease obligations 116 116
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16,633 (1,773) 14,860
------- ------- -------
Income from continuing retail operations before income taxes 171 (10) 161
Income taxes 59 (9) (1) 50
------- ------- -------
Net income from continuing retail operations $112 ($1) (1) $111
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</TABLE>
See accompanying notes to the Unaudited Pro Forma Consolidated Financial Data.
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KMART CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JULY 27, 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
JULY 27, 1994 ADJUSTMENTS (3) PRO FORMA
<S> <C> <C> <C>
ASSETS
Current Assets
Cash $318 ($46) $272
Merchandise Inventories 8,328 (1,085) 7,243
Accounts receivable and other current assets 1,407 (135) 1,272
Discontinued operations 672 672
-------- -------- --------
Total current assets 10,725 (1,266) 9,459
-------- -------- --------
Investment in Affiliated Retail Companies 615 1,421 2,036
Property and Equipment, net 6,174 (405) 5,769
Other Assets and Deferred Charges 322 (47) 275
Goodwill, net of accumulated amortization 686 (661) 25
-------- -------- --------
$18,522 ($958) $17,564
======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Long-term debt due within one year $229 ($4) $225
Notes payable 1,585 1,585
Accounts payable-trade 3,541 (521) 3,020
Accrued payrolls and other liabilities 1,220 (312) 908
Taxes other than income taxes 407 (37) 370
-------- -------- --------
Total Current liabilities 6,982 (874) 6,108
-------- -------- --------
Capital lease obligations 1,791 1,791
Long-term debt 2,042 2,042
Other long-term liabilities 1,696 (84) 1,612
Shareholders' equity 6,011 6,011
-------- -------- --------
$18,522 ($958) $17,564
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</TABLE>
See accompanying notes to the Unaudited Pro Froma Consolidated Financial Data.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(1) Gives effect to the deconsolidation of the fiscal year ended January
26, 1994 and the twenty-six weeks ended July 27, 1994 historical
results of operations of the Borders-Walden Group, OfficeMax, Inc.
and The Sports Authority, Inc.
(2) Gives effect to the sale of 51% of the Borders-Walden Group, OfficeMax,
Inc. and The Sports Authority, Inc. as if they occurred as of January
28, 1993. Because management and the Board of Directors have not yet
determined the actual interest to be sold (at least 51%) or proceeds to
be received, no adjustments to reflect the proceeds of the sales of
these three companies has been reflected in these pro forma
consolidated statements of income other than to reflect Kmart
Corporation's proportionate income (loss) of the operations of each of
these three companies. For the fiscal year ended January 26, 1994, and
for the twenty-six week period ended July 27, 1994, the net income
(loss) for these three companies was $(76) million and $1 million,
respectively. Assuming a sale of 51% interest, Kmart Corporation's
proportionate share of the three companies' net income (loss) for the
fiscal year ended January 26, 1994 and the twenty-six week period ended
July 27, 1994 would be $(37) million and $0.49 million, respectively.
Each incremental 10% change in interest over 51% would decrease equity
earnings for the fiscal year ended January 26, 1994 and the twenty-six
weeks ended July 27, 1994 by $8 million and $0.1 million, respectively.
(3) Gives effect to deconsolidation of the Borders-Walden Group, OfficeMax,
Inc. and The Sports Authority, Inc., as of July 27, 1994, excluding the
effect of any proceeds of at least a 51% sale of the Borders-Walden
Group, OfficeMax, Inc., or The Sports Authority, Inc. as the amounts of
proceeds or percentage to be sold has not yet been determined by the
Board of Directors of Kmart Corporation or management. The adjustment
of $1,421 million to Investment in Affiliated Retail Companies
represents the net book value of the Borders-Walden Group, OfficeMax,
Inc. and The Sports Authority, Inc. as of July 27, 1994.
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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 19, 1994 By: /s/ NANCIE W. LADUKE
Vice President and Secretary
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