May 15, 1997
Robert M. Burton
Director, Investor Relations
(248) 643-1040
Shawn M. Kahle
Vice President, Corporate Affairs
(248) 637-4201
KMART CORPORATION REPORTS 1997 FIRST-QUARTER EARNINGS
TROY, Mich., May 15, 1997 -- Kmart Corporation (NYSE: KM) today reported net earnings from continuing operations of $14 million, or $0.03 per share, compared with a net loss from continuing operations of $36 million or $0.08 per share for the first quarter of 1996. The net loss for the first quarter of 1996, adjusting for discontinued operations charges of $63 million, or $0.13 per share, related to Kmart's investments in Thrifty PayLess Holdings, Inc. and Builders Square, was $99 million, or $0.21 per share.
Total sales in the 1997 first quarter were $7.263 billion, an increase of 4.1% from $6.975 billion for the first quarter of 1996. The gross margin for the period was 22.4% of sales versus 22.6% last year. Selling, general and administrative (SG&A) expenses for the quarter were $1.491 billion compared with $1.519 billion for the 1996 period, resulting in a SG&A to sales ratio of 20.5% versus 21.8% for the comparable 1996 period.
Commenting on first quarter results, Floyd Hall, chairman, president and chief executive officer, said, "Kmart's earnings for the first quarter were on plan with good balance between sales, gross margin and expense controls. We saw solid performance in our Big Kmart high frequency conversions and were very pleased with the introduction of the new Martha Stewart Everyday bed and bath lines. Product line extensions for Martha Stewart and the new offering of our Sesame Street line of children's apparel this summer are also expected to enhance our customer appeal."
Kmart Corporation serves America with 2,122 Kmart retail outlets and operates 123 stores internationally. Kmart Corporation common stock is listed on the New York, Pacific, and Chicago Stock Exchanges.
| (Millions U.S. $) | ||||||
| General Merchandise- | ||||||
| United States | $ 7,061 | $ 6,692 | ||||
| International (a)(b) | 202 | 283 | ||||
| Total General Merchandise | $ 7,263 | $ 6,975 | ||||
| (Millions U.S. $) | |||||
| General Merchandise- | |||||
| United States | $ 139 | $ 58 | |||
| International | (4) | - | |||
| Total General Merchandise | $ 135 | $ 58 | |||
(a) International comparable store sales change is calculated on sales in the applicable local currency.
(b) Prior year International sales include 16 locations
that have been sold or closed prior to fiscal 1997.
| (Amounts in millions, except per share data) | |||
| Sales | $ 7,263 | $ 6,975 | |
| Cost of sales, buying and occupancy | 5,637 | 5,398 | |
| Gross margin | 1,626 | 1,577 | |
| Selling, general and administrative expenses | 1,491 | 1,519 | |
| Continuing income before interest, income taxes and dividends
on convertible preferred securities | 135 |
58 | |
| Interest expense, net | 98 | 113 | |
| Income tax provision (credit) | 11 | (19) | |
| Dividends on convertible preferred securities, net of income taxes | 12 | - | |
| Net income (loss) from continuing retail operations | 14 | (36) | |
| Loss from discontinued operations, net of taxes | - | (2) | |
| Loss on disposal of discontinued operations, net of taxes | - | (61) | |
| Net income (loss) | $ 14 | $ (99) | |
| Earnings (loss) per common share: | |||
| Continuing operations | $ 0.03 | $ (0.08) | |
| Loss from discontinued operations | - | - | |
| Loss on disposal of discontinued operations | - | (0.13) | |
| Net income (loss) | $ 0.03 | $ (0.21) | |
| Weighted average shares outstanding | 489.8 | 482.1 |
The consolidated statement of operations for the
prior period has been restated for discontinued operations.
| (Amounts in millions) | |||
| Cash Flows From Operating Activities: | |||
| Net income (loss) from continuing operations- | $ 14 | $ (36) | |
| Adjustments to reconcile net income (loss) to net cash used for
operating activities: | |||
| Depreciation and amortization | 170 | 159 | |
| Deferred income taxes | 13 | 48 | |
| Undistributed equity income and dividends received | 32 | 62 | |
| Increase (decrease) in other long-term liabilities | 3 | (36) | |
| Increase in inventories | (909) | (647) | |
| Increase in accounts payable | 940 | 646 | |
| Changes in certain assets and liabilities | (42) | 100 | |
| Net cash provided by continuing operations | 221 | 296 | |
| Discontinued operations | 2 | 57 | |
| Net cash provided by operating activities | 223 | 353 | |
| Cash Flows From Investing Activities: | |||
| Capital expenditures | (128) | (50) | |
| Decrease in property held for sale | 88 | - | |
| Proceeds from asset sales and divestitures, net | 113 | 177 | |
| Other, net | (27) | 4 | |
| Net cash provided by investing activities | 46 | 131 | |
| Cash Flows From Financing Activities: | |||
| Proceeds from long-term debt and notes payable | 335 | - | |
| Reductions in long-term debt and notes payable | (668) | (19) | |
| Reduction in capital lease obligations | (29) | (24) | |
| Other, net | 3 | 20 | |
| Net cash used for financing activities | (359) | (23) | |
| Net change in cash and equivalents: | (90) | 461 | |
| Cash and equivalents at beginning of year | 406 | 1,083 | |
| Cash and equivalents at end of period | $ 316 | $ 1,544 | |
| (Amounts in millions) | |||||
| ASSETS | |||||
| Current Assets: | |||||
| Cash and equivalents | $ 316 | $ 1,544 | $ 406 | ||
| Merchandise inventories | 7,263 | 6,667 | 6,354 | ||
| Other current assets | 955 | 879 | 973 | ||
| Net current assets of discontinued operations | - | 650 | - | ||
| Total current assets | 8,534 | 9,740 | 7,733 | ||
| Property and equipment, net | 5,667 | 5,156 | 5,740 | ||
| Property held for resale | 200 | 468 | 200 | ||
| Other assets and deferred charges | 490 | 428 | 613 | ||
| TOTAL ASSETS | $ 14,891 | $ 15,792 | $ 14,286 | ||
| LIABILITIES AND EQUITY | |||||
| Current Liabilities: | |||||
| Long-term debt due within one year | $ 104 | $ 248 | $ 156 | ||
| Trade accounts payable | 2,949 | 2,438 | 2,009 | ||
| Accrued payrolls and other liabilities | 1,212 | 1,127 | 1,298 | ||
| Taxes other than income taxes | 232 | 211 | 139 | ||
| Total current liabilities | 4,497 | 4,024 | 3,602 | ||
| Long-term debt and notes payable | 1,839 | 3,661 | 2,121 | ||
| Capital lease obligations | 1,450 | 1,558 | 1,478 | ||
| Other long-term liabilities | 960 | 1,218 | 1,013 | ||
| Net long-term liabilities of discontinued operations | 134 | ||||
| Convertible preferred securities, net | 980 | - | 980 | ||
| Common stock | 488 | 486 | 486 | ||
| Capital in excess of par value | 1,614 | 1,611 | 1,608 | ||
| Retained earnings | 3,119 | 3,227 | 3,105 | ||
| Treasury shares and restricted stock | (26) | (59) | (37) | ||
| Foreign currency translation adjustment | (30) | (68) | (70) | ||
| TOTAL LIABILITIES AND EQUITY | $ 14,891 | $ 15,792 | $ 14,286 |
