<PAGE> 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) November 10,1999
----------------------------------------
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) 643-1000
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS
1. On November 10, 1999, Kmart Corporation issued a press release announcing
earnings for the third quarter 1999; attached hereto as Exhibit 99.1.
2. In accordance with Section 305(b) of the Trust Indenture Act of 1939 and
the rules under this act, the Registrant is filing herewith the Statement
of Eligibility and Qualification on Form T-1 of the Bank of New York to
act as trustee under the senior debt securities indenture in connection
with the Registrant's Registration Statement on Form S-3 (Registration No.
333-74665); attached hereto as Exhibit 99.2.
<PAGE> 3
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)
By: /s/ Nancie W. LaDuke
----------------------------
Nancie W. LaDuke
Vice President and
Secretary
Date: December 3, 1999
<PAGE> 4
Exhibit Index
Exhibit Number Description
------------------- -------------------
99.1 Press Release
99.2 T - 1
<PAGE> 1
EXHIBIT 99.1
[KMART CORPORATION LETTERHEAD]
NEWS RELEASE
RELEASE DATE
November 10, 1999
CONTACTS
Robert M. Burton
Divisional Vice President, Investor Relations
(248) 643-1040
Shawn M. Kahle
Vice President, Corporate Affairs
(248) 637-4201
FOR IMMEDIATE RELEASE
KMART CORPORATION REPORTS 13 PERCENT INCREASE
IN EARNINGS PER SHARE IN 1999 THIRD QUARTER
EARNINGS FROM CONTINUING OPERATIONS UP 37.1 PERCENT YEAR-TO-DATE
TROY, Mich., November 10, 1999--Kmart Corporation (NYSE:KM) today reported a 13
percent increase in net income to $43 million, or $0.09 basic earnings per
share, for the 13 weeks ended October 27, 1999, compared with net income of $38
million, or $0.08 basic earnings per share for the 13 weeks ended October 28,
1998.
"While our third quarter performance was softer than planned, the results extend
our string of improved operating performance to 14 consecutive quarters, " said
Floyd Hall, Chairman, President and CEO.
Total consolidated sales in the third quarter of 1999 were $8.057 billion, an
increase of 5.4% from $7.642 billion for the third quarter of 1998. Comparable
sales for the quarter increased 3.2%. The gross margin rate for the quarter was
21.6% of sales as compared with 22.1% last year. Selling, general and
administrative (SG&A) expenses for the quarter were $1.581 billion compared with
$1.540 billion for 1998, resulting in a SG&A to sales ratio of 19.6% for 1999
versus 20.1% for 1998.
Sales from consolidated operations for the first nine months of 1999 were
$24.958 billion, up 7.2% from $23.273 billion for the first nine months of
fiscal 1998. On a comparable store basis, consolidated sales rose 5.2% for the
same period. Income from continuing operations was $244 million, or $0.49 per
share, for the first nine months of 1999 as compared with net income before
non-recurring items of $178 million, or $0.36 per share in the first nine months
of 1998.
<PAGE> 2
As previously reported, net income for the nine months of 1999 included a
non-recurring, non-cash charge for discontinued operations of $230 million after
tax, relating to the disposition of certain Builders Square operating leases.
Net income for the second quarter 1998 included a non-recurring charge of $13
million after tax, relating to a Voluntary Early Retirement Program (VERP) in
the Company's distribution centers. Including the non-recurring charges, net
income for the first nine months of 1999 was $14 million as compared with net
income of $165 million for the comparable 1998 period.
Under FAS 128, preferred securities are not included in the calculation of
diluted earnings per share for the third quarter of either 1999 or 1998 due to
their anti-dilutive effect. However, consistent with disclosure required by the
Securities and Exchange Commission, if such securities were included in the
calculation, diluted earnings per share would have been $0.10 and $0.09 for the
third quarters of 1999 and 1998, respectively.
Under the Company's previously-announced share repurchase plan initiated in June
1999, at the close of the third quarter Kmart had acquired 10.1 million common
shares through open market purchases for a total of $126 million.
Kmart Corporation serves America with 2,159 Kmart retail outlets. Kmart
Corporation common stock is listed on the New York, Pacific, and Chicago Stock
Exchanges.
<PAGE> 3
KMART CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Dollars in millions, except per share data) 13 Weeks 13 Weeks
Ended Ended
10/27/99 10/28/98
----------------------------------
<S> <C> <C>
Sales $ 8,057 $ 7,642
Cost of sales, buying and occupancy 6,317 5,954
----------------------------------
Gross margin 1,740 1,688
Selling, general and administrative expenses 1,581 1,540
----------------------------------
Income before interest, income taxes and dividends on
convertible preferred securities of subsidiary 159 148
Interest expense, net 76 76
Income tax provision 27 21
Dividends on convertible preferred securities, net of income taxes 13 13
----------------------------------
Net income $ 43 $ 38
==================================
Basic / diluted income per common share $ 0.09 $ 0.08
==================================
Basic weighted average shares (millions) 492.1 492.8
Diluted weighted average shares (millions) 562.2 564.0
</TABLE>
The effect of LIFO adjustments on the third quarter of fiscal 1999 results
was a pre-tax credit of $13 million, compared to a pre-tax credit of $2
million in 1998.
<PAGE> 4
KMART CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Dollars in millions, except per share data) 39 Weeks 39 Weeks
Ended Ended
10/27/99 10/28/98
----------------------------------
<S> <C> <C>
Sales $ 24,958 $ 23,273
Cost of sales, buying and occupancy 19,569 18,198
----------------------------------
Gross margin 5,389 5,075
Selling, general and administrative expenses 4,762 4,550
Voluntary early retirement program - 19
----------------------------------
Income before interest, income taxes and dividends on
convertible preferred securities of subsidiary 627 506
Interest expense, net 206 220
Income tax provision 139 83
Dividends on convertible preferred securities, net of income taxes 38 38
----------------------------------
Income from continuing operations 244 165
Discontinued operations, net of tax: Provision for lease obligations resulting
from guarantee of previously owned Builders Square locations (230) -
----------------------------------
Net income $ 14 $ 165
==================================
Basic / diluted earnings per common share:
Income from continuing operations $ 0.49 $ 0.34
Discontinued operations (0.46) -
----------------------------------
Net income (loss) $ 0.03 $ 0.34
==================================
Basic weighted average shares (millions) 493.8 491.7
Diluted weighted average shares (millions) 566.5 564.8
</TABLE>
The effect of LIFO adjustments on the year to date fiscal 1999 results was a
pre-tax credit of $10 million, compared with a charge of $8 million in 1998.
<PAGE> 5
KMART CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in millions) 10/27/99 10/28/98
----------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 345 $ 350
Merchandise inventories 8,486 8,060
Other current assets 865 844
----------------------------------
Total current assets 9,696 9,254
Property and equipment, net 6,313 5,852
Other assets and deferred charges 489 443
----------------------------------
TOTAL ASSETS $ 16,498 $ 15,549
==================================
LIABILITIES AND EQUITY
Current Liabilities:
Long-term debt due within one year $ 74 $ 60
Trade accounts payable 3,119 3,019
Accrued payroll and other liabilities 1,324 1,242
Taxes other than income taxes 252 240
----------------------------------
Total current liabilities 4,769 4,561
Long-term debt and notes payable 2,730 2,313
Capital lease obligations 1,031 1,114
Other long-term liabilities 1,057 928
Convertible preferred securities, net 985 983
Common stock 487 493
Capital in excess of par value 1,607 1,654
Retained earnings 3,832 3,503
----------------------------------
TOTAL LIABILITIES AND EQUITY $ 16,498 $ 15,549
==================================
</TABLE>
<PAGE> 6
KMART CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in millions) 39 Weeks 39 Weeks
Ended Ended
10/27/99 10/28/98
----------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Income from continuing operations $ 244 $ 165
Adjustments to reconcile income from continuing operations to net cash
used for operating activities:
Depreciation and amortization 568 498
Cash used for store restructuring and other charges (111) (95)
Increase in inventories (1,950) (1,693)
Increase in accounts payable 1,072 1,096
Increase in accounts receivable (181) (176)
Increase in prepaids (35) (69)
Increase in sales tax payable 19 30
Deferred income taxes and taxes payable 73 166
Decrease in other long-term liabilities (23) (2)
Changes in certain assets and liabilities (14) 9
Voluntary early retirement program - 19
----------------------------------
Net cash used for operating activities (338) (52)
----------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of Caldor leases (86) -
Proceeds from sale of Canadian operations - 87
Capital expenditures (997) (722)
----------------------------------
Net cash used for investing activities (1,083) (635)
----------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 1,250 750
Payments on long-term debt (61) (180)
Purchase of common shares (117) (30)
Issuance of common shares 44 64
Payments on capital lease obligations (60) (65)
----------------------------------
Net cash provided by financing activities 1,056 539
----------------------------------
Net decrease in cash and cash equivalents (365) (148)
Cash and cash equivalents at beginning of period 710 498
----------------------------------
Cash and cash equivalents at end of period $ 345 $ 350
==================================
</TABLE>
<PAGE> 1
EXHIBIT 99.2
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
---------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
---------------------------
KMART CORPORATION
(Exact name of obligor 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)
---------------------------
Debt Securities
(Title of the indenture securities)
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
<PAGE> 2
1. ENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- --------------------------------------------
Name Address
- ---------------------------------------------------------------- --------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York, N.Y.
New York 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y.
10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 2nd day of December, 1999.
THE BANK OF NEW YORK
By: /s/MICHAEL CULHANE
----------------------------
Name: MICHAEL CULHANE
Title: VICE PRESIDENT
-3-
<PAGE> 4
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS In Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ... $ 6,394,412
Interest-bearing balances ............................ 3,966,749
Securities:
Held-to-maturity securities .......................... 805,227
Available-for-sale securities ........................ 4,152,260
Federal funds sold and Securities purchased under
agreements to resell ................................. 1,449,439
Loans and lease financing receivables:
Loans and leases, net of unearned
income ...................................37,900,739
LESS: Allowance for loan and
lease losses ................................572,761
LESS: Allocated transfer risk
reserve ......................................11,754
Loans and leases, net of unearned income,
allowance, and reserve ............................. 37,316,224
Trading Assets .......................................... 1,646,634
Premises and fixed assets (including capitalized
leases) .............................................. 678,439
Other real estate owned ................................. 11,571
Investments in unconsolidated subsidiaries and
associated companies ................................. 183,038
Customers' liability to this bank on acceptances
outstanding .......................................... 349,282
Intangible assets ....................................... 790,558
Other assets ............................................ 2,498,658
-----------
Total assets ............................................ $60,242,491
===========
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices ............................ $ 26,030,231
Noninterest-bearing ............................ 11,348,986
Interest-bearing ............................... 14,681,245
In foreign offices, Edge and Agreement
subsidiaries, and IBFs ....................... 18,530,950
Noninterest-bearing ............................ 156,624
Interest-bearing ............................... 18,374,326
Federal funds purchased and Securities sold under
agreements to repurchase ....................... 2,094,678
Demand notes issued to the U.S. Treasury .......... 232,459
Trading liabilities ............................... 2,081,462
Other borrowed money:
With remaining maturity of one year or less .... 863,201
With remaining maturity of more than one year
through three years .......................... 449
With remaining maturity of more than three years 31,080
Bank's liability on acceptances executed and
outstanding .................................... 351,286
Subordinated notes and debentures ................. 1,308,000
Other liabilities ................................. 3,055,031
------------
Total liabilities ................................. 54,578,827
============
EQUITY CAPITAL
Common stock ...................................... 1,135,284
Surplus ........................................... 815,314
Undivided profits and capital reserves ............ 3,759,164
Net unrealized holding gains (losses) on
available-for-sale securities .................. (15,440)
Cumulative foreign currency translation adjustments (30,658)
------------
Total equity capital .............................. 5,663,664
------------
Total liabilities and equity capital .............. $ 60,242,491
============
</TABLE>
<PAGE> 6
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni ]
Alan R. Griffith ] Directors
Gerald L. Hassell ]
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