<PAGE> 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 May 1, 1996
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 (810) 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 May 29, 1996 486,058,754 shares of Common Stock of the Registrant were
outstanding.
1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
- ------ --------------------- ------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Condensed Statements of Operations -- 3
Thirteen weeks ended May 1, 1996 and
April 26, 1995
Consolidated Balance Sheets -- 4
May 1, 1996, April 26, 1995 and
January 31, 1996
Consolidated Condensed Statements of Cash Flows -- 5
Thirteen weeks ended May 1, 1996 and
April 26, 1995
Notes to Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis of Results of Operations 7 - 12
and Financial
Condition
PART II OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
KMART CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
-------------------------
MAY 1, APRIL 26,
1996 1996
--------- ----------
<S> <C> <C>
Sales $7,580 $7,443
Cost of merchandise sold, including buying and occupancy costs 5,921 5,788
-------- -------
Gross margin 1,659 1,655
Licensee fees and other income 60 58
Selling, general and administrative expenses 1,662 1,767
Gain on pension curtailment - (124)
--------- -------
Operating income 57 70
Interest expense, net 116 109
-------- -------
Loss from continuing retail operations before income
taxes and equity income (59) (39)
Equity in net income of unconsolidated companies 2 2
Income tax benefit (19) (12)
-------- -------
Net loss from continuing retail operations (38) (25)
Loss from discontinued operations, net of income taxes of $(2) - (3)
Loss on disposal of discontinued operations, net of
income taxes of $(33) (61) -
-------- --------
Net loss $ (99) $ (28)
======== =======
Loss per common share:
Continuing retail operations $(0.08) $(0.06)
Loss from discontinued operations - (0.00)
Loss on disposal of discontinued operations (0.13) -
-------- --------
Net loss $(0.21) $(0.06)
======== =======
Dividends declared per common share $ - $ 0.12
======== =======
Weighted average shares (millions) 482.1 458.8
======== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
The Consolidated Statement of Operations for the prior period has been restated
for discontinued operations.
3
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KMART CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
MAY 1, APRIL 26, JANUARY 31,
1996 1995 1996
------- -------- ----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash (includes temporary investments of $1,082, $41 and
$637, respectively) $ 1,574 $ 333 $ 1,095
Merchandise inventories 7,356 7,294 6,635
Other current assets 1,045 1,468 1,092
Net current assets of discontinued operations 157 340 -
-------- ------- --------
Total current assets 10,132 9,435 8,822
Investments in affiliated retail companies 32 111 94
Property and equipment - net 5,093 5,970 5,301
Other assets and deferred charges 870 262 866
Net long-term assets of discontinued operations - 1,099 314
--------- ------- -------
$16,127 $16,877 $15,397
======== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Long-term debt due within one year $ 248 $ 84 $ 7
Notes payable - 1,294 -
Accounts payable - trade 2,756 3,127 1,993
Accrued payrolls and other liabilities 1,181 1,076 1,076
Taxes other than income taxes 226 330 188
Income taxes 5 83 -
-------- ------- --------
Total current liabilities 4,416 5,994 3,264
Capital lease obligations 1,601 1,754 1,629
Long-term debt 3,674 1,957 3,935
Other long-term liabilities 1,239 1,217 1,289
Shareholders' Equity:
Preferred stock, 10,000,000 shares authorized;
Series C, 790,287 shares authorized; 654,815
shares issued as of April 26, 1995 - 131 -
Common stock, 1,500,000,000 shares authorized; shares issued
486,576,469, 464,770,564 and 486,511,184, respectively 486 465 486
Capital in excess of par value 1,610 1,508 1,624
Retained earnings 3,227 3,989 3,326
Treasury shares and restricted stock (59) (86) (92)
Foreign currency translation adjustment (67) (52) (64)
-------- ------- -------
Total shareholders' equity 5,197 5,955 5,280
-------- ------- -------
$16,127 $16,877 $15,397
======== ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
The Consolidated Balance Sheets for the prior periods have been restated
for discontinued operations.
4
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KMART CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
--------------------------
MAY 1, APRIL 26,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing retail operations $ (38) $ (25)
Adjustments to reconcile net loss from continuing retail operations to net
cash from operating activities:
Depreciation and amortization 159 176
Deferred income taxes 60 80
Undistributed equity income and dividends received 62 (8)
Decrease in other long-term liabilities (52) (313)
Changes in certain assets and liabilities 157 (187)
------ ------
Net cash provided by (used for) continuing retail operations 348 (277)
Discontinued operations 32 130
------ ------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 380 (147)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (51) (123)
Proceeds from sale and divestiture - net 177 22
Other - net (4) 8
------ ------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 122 (93)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt and notes payable - 546
Repayment of long-term debt and notes payable (19) (194)
Reduction in capital lease obligations (25) (26)
Dividends paid - (112)
Other - net 21 6
------ ------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (23) 220
------ ------
NET INCREASE (DECREASE) IN CASH 479 (20)
CASH AT BEGINNING OF YEAR 1,095 353
------ ------
CASH AT END OF PERIOD $1,574 $ 333
====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
The Consolidated Statements of Cash Flows for the prior period has been
restated for discontinued operations.
5
<PAGE> 6
KMART CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(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 1995 Annual Report and Form 10-K filed for
the fiscal year ended January 31, 1996.
Certain reclassifications of prior year balance sheet accounts have been
made to conform to current year presentation. In addition, certain prior year
amounts have been restated for the effect of divested and discontinued
operations and to conform to current year presentation (see note 2).
2.) DISCONTINUED OPERATIONS AND DIVESTITURES
In April 1996, the Company received $62 from the sale of approximately
30% of its investment in the common stock of Thrifty PayLess Holdings, Inc.
("TPH"). In conjunction with the sale, which netted proceeds below the
Company's carrying value of the investment, the Company revalued its remaining
investment and recorded a $61 loss in discontinued operations, net of income
taxes. Subsequent to the first quarter, the Company sold approximately 3% of
its original investment in TPH and received $8 in net proceeds. As a result of
management's intent to dispose of its remaining interest within a one-year time
frame, the Company has accounted for its investment in TPH and in PayLess, which
was sold to TPH in the first quarter of 1994, as a discontinued operation and
has restated its prior period consolidated financial statements and
accompanying notes.
In March 1996, the Company completed the sale of its Czech and Slovak
operations and received net proceeds of $115 which approximates book value.
3.) PENSION CURTAILMENT
Prior to 1996, U.S. Kmart and Builders Square had defined benefit pension
plans covering eligible associates who met certain requirements of age, length
of service and hours worked per year. Effective January 31, 1996, the pension
plans were frozen and associates no longer earn additional benefits under the
plans. Benefits paid to retirees are based upon age at retirement and years of
credited service and earnings as of January 31, 1996. Kmart Canada Limited
associates are covered by a defined contribution plan. Kmart's policy is to
fund at least the minimum amounts required by the Employee Retirement Income
Security Act of 1974. The plans' assets consist primarily of equity
securities, fixed income securities, guaranteed insurance contracts and real
estate.
As a result of freezing the plans, the Company recorded a pretax net
pension curtailment gain of $124 in the first quarter of 1995.
4.) INVENTORIES AND COST OF MERCHANDISE SOLD
A substantial portion of the Company's inventories 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 May 1, 1996, April 26,
1995 and January 31, 1996 were $758, $811 and $751 lower than the amounts that
would have been reported under the first-in, first-out (FIFO) method,
respectively.
6
<PAGE> 7
ITEM 2
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
FOR THE 13 WEEKS ENDED MAY 1, 1996
RESULTS OF OPERATIONS
Store Activity
The Company's store activity for the 13 weeks ended May 1, 1996 is summarized
as follows:
<TABLE>
<CAPTION>
FIRST QUARTER
JANUARY 31, ACTIVITY MAY 1, APRIL 26,
General Merchandise 1996 -------------- 1996 1995
OPENED CLOSED
- ------------------- ----------- -------------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Kmart:
United States 2,161 10 (14) 2,157 2,240
Canada 127 -- -- 127 128
Mexico 4 -- -- 4 4
Singapore 3 -- -- 3 2
Other 2 -- -- 2 17
----- --- ---- ----- -----
Total General Merchandise 2,297 10 (14) 2,293 2,391
Builders Square 167 1 (1) 167 172
----- --- ---- ----- -----
Total Continuing 2,464 11 (15) 2,460 2,563
----- --- ---- ----- -----
Czech and Slovak Republics (a) 13 -- (13) 13
----- --- ---- ----- -----
Total Stores 2,477 11 (28) 2,460 2,576
===== === ==== ===== =====
</TABLE>
(a) The Company completed the sale of its Czech and Slovak Republic stores
during the first quarter.
In addition to the store activity noted above, during the 13 weeks ended
May 1, 1996, U.S. Kmart completed one expansion and one refurbishment as
compared to three expansions and one refurbishment during the 1995 period.
7
<PAGE> 8
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Sales
<TABLE>
<CAPTION>
13 WEEKS ENDED
---------------------------
MAY 1, APRIL 26, % CHANGE
($ Millions) 1996 1995 ---------------------------------
------- -------- ALL STORES COMPARABLE STORES
------------- ------------------
General Merchandise
- -------------------
<S> <C> <C> <C> <C>
United States $6,692 $6,564 2.0 4.5
International 283 249 13.7 4.5(a)
------ ------
Total General Merchandise 6,975 6,813 2.4 4.5
Builders Square 605 630 (4.0) (0.8)
------ ------
Consolidated Sales $7,580 $7,443 1.8 2.3
====== ======
</TABLE>
(a) International comparable store sales change is calculated on sales in
the applicable local currency.
Sales
Sales for the 13 weeks ended May 1, 1996 were $7,580 million, a 1.8%
increase over sales of $7,443 million in the same period of the prior year.
Comparable store sales increased 2.3% over the same period of the prior
year. Management believes this increase resulted from continued
promotional activity and better in-stock positions in the U.S. Kmart
division. The decrease in Builders Square sales reflects ongoing increased
competition in its major markets and generally weak sales in its industry
segment.
Gross Margin
Gross margin for the 13 weeks ended May 1, 1996 was $1,659 million as
compared to $1,655 million in the same period of the prior year. Gross margin
as a percentage of sales was 21.9% and 22.2% in 1996 and 1995, respectively.
Margins for the first quarter of 1996 were affected by increased volumes of
lower-margin goods and consumables, increased promotional markdowns, increased
estimated inventory shrinkage and general softness in higher-margined seasonal
categories, partially offset by a reduction in buying and occupancy costs.
Selling, General and Administrative ("SG&A") Expenses
SG&A expenses for the 13 weeks ended May 1, 1996 were $1,662 million, or
21.9% of sales, as compared to $1,767 million, or 23.7% of sales, in the same
period of the prior year. This decrease, as a percentage of sales, is
primarily the result of cost reduction initiatives and the impact of stores
closed during 1995, partially offset by the typically higher expense rates as a
percent of sales associated with operations of newer stores.
8
<PAGE> 9
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Operating Income (Loss)
<TABLE>
<CAPTION>
13 WEEKS ENDED
-------------------
MAY 1, APRIL 26,
($ Millions) 1996 1995
------- ---------
<S> <C> <C>
General Merchandise
- -------------------
United States $ 58 $ 86
International (1) (5)
------- --------
Total General Merchandise 57 81
Builders Square 0 (11)
------- --------
Consolidated Operating Income $ 57 $ 70
======= ========
</TABLE>
Operating income for the 13 weeks ended May 1, 1996 was $57 million, or
0.8% of sales, as compared to operating income of $70 million, or 0.9% of
sales, in the same period of the prior year. The change in operating income,
net of the first quarter 1995 one-time pension curtailment gain of $124
million, is an increase in operating income of $111 million. This increase was
the direct result of the decrease in selling, general and administrative
expenses.
Interest Expense
Net interest expense for the 13 weeks ended May 1, 1996 was $116 million,
or 1.5% of sales, as compared to $109 million, or 1.5% of sales, for the same
period of the prior year. The net interest expense on borrowings increased as
a result of restrictions on debt repayments in accordance with bank credit
facility and certain real estate related debt agreements and higher interest
rates due to market conditions and lower debt ratings. The increase in
interest expense was partially offset by higher investment interest income
resulting from increased cash levels.
Income Tax Benefit
Income tax benefit for the 13 weeks ended May 1, 1996 was $19 million with
an effective tax rate of 33.3% as compared to a benefit of $12 million with an
effective tax rate of 32.4% in the same period in the prior year.
Discontinued Operations
The loss on disposal of discontinued operations for the
13 weeks ended May 1, 1996 was $61 million and reflects the loss on sale of
approximately 30% of the Company's investment in the common stock of TPH and
the revaluation of its remaining holdings. The loss from discontinued
operations for the 13 weeks ended April 26, 1995 reflects a loss of $5 million
from the operations of the Borders Group, Inc. ("Borders Group"), offset by
equity earnings of $2 million for The Sports Authority, Inc. ("The Sports
Authority") and OfficeMax, Inc. ("OfficeMax").
Net Loss
As the result of the combination of the foregoing factors, primarily the
loss from discontinued operations and reduced gross margin rates, the net loss
for the 13 weeks ended May 1, 1996 was $99 million, or 1.3% of sales, as
compared to net loss of $28 million, or 0.4% of sales, in the same period of
the prior year.
9
<PAGE> 10
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
LIQUIDITY AND FINANCIAL CONDITION
Historically, the Company's primary sources of working capital have been
cash flows from operations and borrowings through its commercial paper program.
The Company had working capital of $5,716, $5,558, $3,441 and $3,562 million
at May 1, 1996, January 31, 1996, April 26, 1995 and January 25, 1995,
respectively. Working capital ratios were 2.3:1, 2.7:1, 1.6:1 and 1.7:1,
respectively, at the same dates. The Company's working capital fluctuates in
relation to (i) profitability, (ii) inventory levels during the course of the
year due to seasonality and (iii) the number and timing of new store openings.
Borrowing and cash levels are higher than usual in 1996 due to restrictions on
debt repayments in accordance with existing bank and puttable debt agreements.
As of May 1, 1996, the Company had $1,982 million borrowed under its
current bank credit facilities. Additional borrowings in excess of repayments
are conditioned upon approval of the banks.
During the second quarter of this year, the Company expects to restructure
its bank credit facilities to enhance its credit, liquidity and financial
flexibility. To that end, the Company has entered into a commitment agreement
with Chemical Bank ("Chemical") and Chase Securities, Inc. (successor to
Chemical Securities, Inc.) ("CSI") pursuant to which CSI has agreed to arrange
a syndicate of financial institutions (which will include Chemical) to provide
$3.7 billion of financing for three years pursuant to a loan commitment (the
"Commitment") upon the terms described under the "New Credit Agreement". The
New Credit Agreement will consist of two credit facilities, a $2.5 billion
revolving credit facility (the "Revolving Credit Facility") and a $1.2 billion
term loan facility (the "Term Loan Facility"). The New Credit Agreement has
not been executed, but the Company announced on May 29th, 1996 that the
Commitment has been over-subscribed by approximately $1 billion and anticipates
that such agreement, if and when executed, will not differ materially from the
description below.
Revolving Credit Facility. Approximately $2.5 billion will be made
available by a syndicate of banks and other financial institutions (the
"Lenders") to the Company under the Revolving Credit Facility. The borrowings
under the Revolving Credit Facility will be used to refinance certain of the
Company's existing indebtedness, fund the Company's working capital and other
operational needs, finance capital expenditures and for other general corporate
purposes. The Revolving Credit Facility will mature three years from the
initial funding thereunder. Amounts borrowed and repaid may be subsequently
reborrowed to the extent of the available commitment under the Revolving Credit
Facility.
The Company will have the option to choose between two interest rates
that will be available for committed loans under the Revolving Credit Facility.
Such rates will be based on a specified margin over base rates. A portion of
the Revolving Credit Facility will be available for the issuance of letters of
credit by Chemical and other issuers to be determined for the benefit of the
Company and its subsidiaries. A commitment fee of 1/2% per annum on the unused
portion of the Commitment available under the Revolving Credit Facility will
be payable in quarterly installments.
The Company may reduce without penalty all or a portion of the Commitment
under the Revolving Credit Facility to an amount not less than the outstanding
borrowings thereunder. Aggregate borrowings under the Revolving Credit
Facility and the Term Loan Facility (discussed below) may not exceed a
specified borrowing base, which will be the sum of 55% of the Company's
eligible inventory, and 60% of the net appraised value of certain of the
Company's owned real estate.
The Revolving Credit Facility will be subject to an annual clean-down,
requiring that no amounts be outstanding thereunder (excluding undrawn letters
of credit) in excess of $750 million for at least 30 consecutive days during
each fiscal year.
10
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KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Term Loan Facility. Pursuant to the Term Loan Facility certain Lenders
will provide a $1.2 billion term loan to the Company. The Term Loan Facility
will mature three years from the initial funding thereunder. The Term Loan
Facility will not amortize, and all principal amounts then outstanding will be
due at maturity.
The applicable interest rates and voluntary prepayment terms under the
Term Loan Facility will be determined in the same manner as under the Revolving
Loan Facility subject to an increase of 0.50% over the applicable interest rate
margin after the first anniversary of the Term Loan Facility.
The Term Loan Facility will be subject to mandatory prepayment from the
following: (i) 100% of the net cash proceeds of the incurrence of certain
indebtedness; (ii) 50% of the net cash proceeds of any sale or transaction
involving certain specified assets as may be agreed by the Company and Chemical
and; (iii) 100% of the net cash proceeds of any sale of any existing
properties.
Security. The Company and each Domestic Subsidiary will grant as security
for the borrowings under the New Credit Agreement a first perfected security
interest in substantially all of the existing and future material United States
assets of the Company and each Domestic subsidiary, subject to certain
exceptions. The Company may elect to cause its obligation to certain vendors
in respect of trade accounts payable to be secured by a perfected security
interest in inventory, which security interest will be subordinate to the
security interest in favor of the Lenders.
Covenants and Events of Default. The New Credit Agreement will contain
several affirmative and negative covenants, including, without limitation, the
following: (i) the granting of security interests in after-acquired property;
(ii) the ratio of Earnings Before Interest, Taxes, Depreciation, Amortization
and Rent ("EBITDAR") to interest and rental expense at the end of each fiscal
quarter calculated on a rolling four quarter basis; (iii) the ratio of funded
debt to capital funds; and (iv) limitations on indebtedness and capital
expenditures.
The New Credit Agreement is subject to consummation of an offering of
convertible preferred securities to be issued by Kmart Financing I, a Delaware
Trust wholly owned by Kmart (the "Convertible Preferred Securities"), as
discussed below, and execution and delivery of the New Credit Agreement and
related documentation.
The Company intends to issue at least $750 million of Convertible Preferred
Securities. The issuance of these securities is contingent upon the closing of
the New Credit Agreement, discussed above, and is expected to close
simultaneously.
11
<PAGE> 12
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Net cash provided by operating activities for the 13 weeks ended May 1,
1996 was $380 million and was primarily comprised of cash from changes in
working capital and dividends received from the equity investment in Meldisco.
Net cash used for operating activities was $147 million for the 13 weeks ended
April 26, 1995 and was primarily comprised of cash used for working capital and
decreases in other long-term liabilities, partially offset by cash from the
discontinued operations of Borders Group, OfficeMax and The Sports Authority.
Merchandise inventories, which are primarily accounted for under the LIFO
method of inventory valuation, increased 0.9% to $7,356 million at May 1, 1996
from $7,294 million at April 26, 1995. On a FIFO basis, inventories were up
0.1%.
Net cash provided by investing activities was $122 million for the 13
weeks ended May 1, 1996 and was primarily comprised of proceeds from the
divestiture of the Czech and Slovak Republics and the partial sale of the
investment in TPH, partially offset by capital expenditures for new stores and
store modernization. Net cash used for investing activities was $93 million
for the 13 weeks ended April 26, 1995 and was primarily comprised of capital
expenditures for new stores and store modernization, partially offset by
proceeds reflecting the payoff of a zero coupon debenture. Both 13-week
periods reflect capital expenditures for store modernization projects completed
and in progress.
Net cash used for financing activities amounted to $23 million during the
13 weeks ended May 1, 1996 and was primarily attributable to payments on
long-term debt and notes payable of $19 million. The $220 million provided by
financing activities during the 13 weeks ended April 26, 1995, was primarily
attributable to a net increase in long-term debt and notes payable of $352
million, partially offset by dividends paid on common and preferred stock. The
decrease in cash provided by the issuance of long-term debt and notes payable
in 1996 as compared to 1995 was primarily attributable to lower borrowings
resulting from (i) cash proceeds received from the sale of interests in the
Czech and Slovak Republics, TPH, Borders Group, OfficeMax, and The Sports
Authority, and (ii) the elimination of all stock dividends at the end of 1995.
12
<PAGE> 13
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 (EDGAR filing only)
(b) Reports on Form 8-K: There were two reports on Form 8-K filed by the
Registrant during the 13 weeks ended May 1, 1996.
The first report, dated March 12, 1996, contained an agreement Kmart
Corporation entered into regarding amendments to certain terms and
conditions of its existing revolving credit facilities and certain real
estate obligations and the establishment of a new committed letter of
credit facility.
The second report, dated March 21, 1996, contained a press release
announcing 1995 year-end and fourth quarter results.
13
<PAGE> 14
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: June 6, 1996
Kmart Corporation
-------------------------------------------
(Registrant)
By: M.E. Welch, III
-------------------------------------------
M.E. Welch, III
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(Duly Authorized Officer,
Principal Financial and Accounting Officer)
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
------- ----------- ----
<S> <C> <C>
11 Information on Computation
of Per Share Earnings
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
<TABLE>
<CAPTION>
($ Millions, except per share data) 13 Weeks Ended
------------------------
May 1, April 26,
1996 1995
--------- ---------
<S> <C> <C>
I. Earnings per common and common equivalent share:
Income (loss) from continuing retail operations $ (38) $ (25)
Less--Series C convertible preferred shares dividend declared - (2)
------- ------
(a) Adjusted income (loss) from continuing retail operations (38) (27)
(b) Discontinued operations, net of income taxes - (3)
(c) Disposal of discontinued operations, net of income taxes (61) -
------- ------
(d) Adjusted net income (loss) $ (99) $ (30)
======= ======
Weighted average common shares outstanding 482.0 458.8
Stock Options --
Common shares assumed issued 0.7 0.2
Less--common shares assumed repurchased (0.6) (0.2)
------- ------
0.1 0.0
------- ------
(e) Applicable common shares, as adjusted 482.1 458.8
======= ======
Earnings per common and common equivalent share:
Adjusted income (loss) from continuing retail operations (a)/(e) $ (0.08) $(0.06)
Discontinued operations, net of income taxes (b)/(e) - 0.00
Disposal of discontinued operations, net of income taxes (c)/(e) (0.13) -
------- ------
Net income (loss) (d)/(e) $ (0.21) $(0.06)
======= ======
II. Earnings per common and common equivalent share
assuming full dilution:
(f) Income (loss) from continuing retail operations $ (38) $ (25)
(g) Discontinued operations, net of income taxes - (3)
(h) Disposal of discontinued operations, net of income taxes (61) -
------- ------
(i) Net income (loss) $ (99) $ (28)
======= ======
Weighted average common shares outstanding 482.0 458.8
Weighted average Series C convertible preferred shares outstanding - 9.1
Stock options--
Common shares assumed issued 1.1 0.2
Less--common shares assumed repurchased (0.9) (0.2)
------- ------
0.2 0.0
------- ------
(j) Applicable common shares, as adjusted 482.2 467.9
====== =======
Earnings per common and common equivalent share
assuming full dilution:
Income (loss) from continuing retail operations (f)/(j) $ (0.08) $(0.05)
Discontinued operations, net of income taxes (g)/(j) - (0.01)
Disposal of discontinued operations, net of income taxes (h)/(j) (0.13) -
------- ------
Net income (loss) (i)/(j) $ (0.21) $(0.06)
======= ======
(1)
</TABLE>
(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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-1997
<PERIOD-END> MAY-01-1996
<CASH> 1,574
<SECURITIES> 0
<RECEIVABLES> 374
<ALLOWANCES> 0
<INVENTORY> 7,356
<CURRENT-ASSETS> 10,132
<PP&E> 9,914
<DEPRECIATION> 4,821
<TOTAL-ASSETS> 16,127
<CURRENT-LIABILITIES> 4,416
<BONDS> 3,674
0
0
<COMMON> 486
<OTHER-SE> 4,711
<TOTAL-LIABILITY-AND-EQUITY> 16,127
<SALES> 7,580
<TOTAL-REVENUES> 7,640
<CGS> 5,921
<TOTAL-COSTS> 5,921
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116
<INCOME-PRETAX> (57)
<INCOME-TAX> (19)
<INCOME-CONTINUING> (38)
<DISCONTINUED> (61)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (99)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
