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Previous: KMART CORP, 8-K, 2000-08-14 |
Next: PRIMEENERGY CORP, 10QSB, 2000-08-14 |
<PAGE> 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 $0.26 per share.
<TABLE>
<CAPTION>
Second Quarter 2000 Second Quarter 1999
------------------- -------------------
Excluding Excluding
Charge For Charge For
($ in millions) As Strategic As Discontinued
--------------- Reported Actions Reported Operations
-------- ------- -------- ----------
<S> <C> <C> <C> <C>
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
======= ======= ======= =======
</TABLE>
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<PAGE> 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.
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<PAGE> 3
KMART ANNOUNCES SECOND QUARTER EARNINGS 3-3-3-3
KMART CORPORATION
-----------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions, except per share data) 13 Weeks 13 Weeks
Ended Ended
July 26, 2000 July 28, 1999
------------- -------------
<S> <C> <C>
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
</TABLE>
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<PAGE> 4
KMART ANNOUNCES SECOND QUARTER EARNINGS 4-4-4-4
KMART CORPORATION
-----------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions, except per share data) 26 Weeks 26 Weeks
Ended Ended
July 26, 2000 July 28, 1999
------------- -------------
<S> <C> <C>
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
</TABLE>
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<PAGE> 5
KMART ANNOUNCES SECOND QUARTER EARNINGS 5-5-5-5
KMART CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions) July 26, 2000 July 28, 1999
------------- -------------
<S> <C> <C>
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
======= =======
</TABLE>
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<PAGE> 6
KMART ANNOUNCES SECOND QUARTER EARNINGS 6-6-6-6
KMART CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions) 26 Weeks 26 Weeks
Ended Ended
July 26, 2000 July 28, 1999
------------- -------------
<S> <C> <C>
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
===== =====
</TABLE>
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<PAGE> 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 $75 million.
The following table summarizes the significant components and income statement
presentation of the charge for strategic actions taken during the second
quarter:
<TABLE>
<CAPTION>
Cost of sales,
buying and
($ in millions) occupancy SG&A Total
--------------- --------- ---- -----
<S> <C> <C> <C>
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
======== ======= ======
</TABLE>
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<PAGE> 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:
<TABLE>
<CAPTION>
13 Weeks Ended July 26, 2000
----------------------------
Excluding
Charge For Charge For
($ in millions) Strategic Strategic
--------------- As Reported Actions Actions
----------- ------- -------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
INVENTORY
As of the end of the second quarter, Kmart reduced its inventory position from
January 26, 2000 by $515 million as follows:
<TABLE>
<S> <C>
($ 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
=======
</TABLE>
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