March 5, 1997
Robert M. Burton
Director, Investor Relations
(248) 643-1040
Shawn M. Kahle
Vice President, Corporate Affairs
(248) 637-4201
KMART CORPORATION ANNOUNCES 1996 RESULTS; BEST EARNINGS FROM CONTINUING OPERATIONS SINCE 1992
TROY, Mich., March 5, 1997--Kmart Corporation (NYSE:KM) today reported net income from continuing operations of $231 million, or $0.48 per share for the full year ended January 29, 1997, compared to a net loss of $80 million, or $0.18 per share for the full year ended January 31, 1996.
"One year ago we pledged a major financial and strategic restructuring of the Company, said Floyd Hall, Chairman, President and CEO. "We indicated that the financial decline of Kmart had bottomed and that we would return the company to profitability in 1996. These results, which are the best earnings from continuing operations in the past four years, make good on that promise to our shareholders.
"We made tremendous inroads in reducing costs. Our selling, general and administrative expenses (SG&A) in 1996 were $602 million below the prior year. As a percent of sales, SG&A was under 20 percent for the first time in more than 25 years. Sales performance and gross margin rate improvement also represent progress in the right direction, but at a pace below our expectations," he noted. "The challenge for 1997 is clear: we must improve our marketing and operational initiatives to drive increased sales. In the coming year, Kmart will exert every effort to improve its assortments, store appearance, and customer service."
In the fourth quarter of 1996 the Company recognized a $108 million pretax gain on the sale of its holdings of Rite Aid common stock. The Company also recorded a charge of $98 million related to the valuation of its international operations. Current year net income reflected an effective tax rate of 20.5% due to favorable tax treatments on these international operations. In addition, the Company expects its 1997 tax provision to reflect more typical tax rates.
Including the impact of discontinued operations, the Company reported a net loss for the fourth quarter of $164 million, or $0.27 per share compared to a net loss of $420 million, or $0.91 per share, for the fourth quarter of 1995. As previously announced, Kmart reclassified its Builders Square subsidiary as a discontinued operation in the fourth quarter and recorded a non-cash charge of $385 million, net of tax, or $0.69 per share, for the estimated loss on its disposition of Builders Square. 1995 results included $390 million, net of tax, or $0.85 per share, for charges related to the adoption of FAS 121.
FULL YEAR 1996 RESULTS OF OPERATIONS
Total sales for 1996 were $31.437 billion, a decrease of 0.9% from $31.713 billion in the preceding year. Full year 1996 includes sales for 52 weeks whereas 1995 included 53 weeks. On a comparable store basis, consolidated sales were up 2.5% and U.S. Kmart sales were up 2.6%. Gross margin for the year was 22.4% of sales versus 22.2% during 1995. SG&A, as a percentage of sales, for the year was 19.9% in 1996 versus 21.7% in 1995.
FOURTH QUARTER 1996 RESULTS OF OPERATIONS
For the fourth quarter, Kmart reported net income from continuing retail operations of $235 million, or $0.45 per share, compared to net income from continuing retail operations of $32 million, or $0.07 per share, for the fourth quarter of 1995. The 1995 results exclude charges of $150 million, net of tax, relating to the adoption of FAS 121 amounting to $0.33 per share.
Total sales in the 13 week fourth quarter of 1996 were $9.684 billion, a decrease of 2.2% from $9.901 billion for the 14 week fourth quarter of 1995. On a comparable store basis, consolidated sales were up 5.4% and U.S. Kmart sales were up 5.6%. Gross margin for the fourth quarter of 1996 was 21.6% of sales versus 21.0% in the prior year. SG&A, as a percentage of sales, for the fourth quarter was 17.4% in 1996 versus 19.7% in 1995.
Kmart Corporation serves America with 2,134 Kmart and 168 Builders Square retail outlets, and operates 127 stores internationally. Kmart Corporation common stock is listed on the New York, Pacific, and Chicago Stock Exchanges.
| (Millions U.S. $) | |||||||
| United States | $ 9,361 | $ 9,467 | |||||
| International (b) | 323 | 434 | |||||
| Total Kmart | $ 9,684 | $ 9,901 | |||||
(a) Comparable store sales
are based on the 13 week periods ended 1-29-97 and 1-24-96.
(b) International comparable
store sales change is calculated on sales in the applicable local
currency.
| (Millions U.S. $) | |||||
| United States | $ 416 | $ 139 | |||
| International (c) | 5 | (7) | |||
| Total Kmart (c) | $ 421 | $ 132 |
(c) Excludes $162 million
total charges for FAS 121 in the fourth quarter of 1995.
| (Millions U.S. $) | |||||||
| United States | $ 30,378 | $ 30,429 | |||||
| International (b) | 1,059 | 1,284 | |||||
| Total Kmart | $ 31,437 | $ 31,713 | |||||
(a) Comparable store sales
are based on the 52 week periods ended 1-29-97 and 1-24-96.
(b) International comparable
store sales change is calculated on sales in the applicable local
currency
| (Millions U.S. $) | |||||
| United States | $ 790 | $ 300 | |||
| International (c) | (7) | (17) | |||
| Total Kmart (c) | $ 783 | $ 283 |
(c) Excludes $162 million
total charges for FAS 121 in the fourth quarter of 1995.
| (Amounts in millions, except per share data) | |||
| Sales | $ 9,684 | $ 9,901 | |
| Cost of goods sold | 7,590 | 7,821 | |
| Gross margin | 2,094 | 2,080 | |
| Selling, general and administrative expenses | 1,683 | 1,948 | |
| Other (gains) and losses | (10) | 162 | |
| Continuing earnings (loss) before interest, taxes and preferred dividend | 421 | (30) | |
| Interest expense, net | 114 | 124 | |
| Income taxes | 60 | (36) | |
| Preferred dividend, net of taxes | 12 | - | |
| Continuing net income (loss) | 235 | (118) | |
| Loss from discontinued operations, net of taxes | (14) | (250) | |
| Loss on disposal of discontinued operations, net of taxes | (385) | (1) | |
| Extraordinary debt restructuring charges, net of taxes | - | (51) | |
| Net loss | ($ 164) | ($ 420) | |
| Fully Diluted Earnings (loss) per common share: | |||
| Continuing retail operations before asset impairment charges | $ 0.45 | $ 0.07 | |
| Asset impairment charges | - | ( 0.33) | |
| Continuing retail operations | 0.45 | ( 0.26) | |
| Loss from discontinued operations | ( 0.03) | ( 0.54) | |
| Loss on disposal of discontinued operations | ( 0.69) | - | |
| Extraordinary debt restructuring charges | - | ( 0.11) | |
| Net loss | ($ 0.27) | ($ 0.91) | |
| Weighted average shares outstanding - fully diluted | 554.9 | 461.6 |
- The consolidated statement of operations for the prior period has been restated for discontinued operations.
- Gross margin includes LIFO credits of $52 million and $43 million in fiscal 1996 and 1995, respectively.
| (Amounts in millions, except per share data) | |||
| Sales | $31,437 | $31,713 | |
| Cost of goods sold | 24,390 | 24,675 | |
| Gross margin | 7,047 | 7,038 | |
| Selling, general and administrative expenses | 6,274 | 6,876 | |
| Other (gains) and losses | (10) | 41 | |
| Continuing earnings before interest, taxes and preferred dividend | 783 | 121 | |
| Interest expense, net | 453 | 434 | |
| Income taxes | 68 | (83) | |
| Preferred dividend, net of taxes | 31 | - | |
| Continuing net income (loss) | 231 | (230) | |
| Loss from discontinued operations, net of taxes | (5) | (260) | |
| Loss on disposal of discontinued operations, net of taxes | (446) | (30) | |
| Extraordinary debt restructuring charges, net of taxes | - | (51) | |
| Net loss | ($ 220) | ($ 571) | |
| Earnings (loss) per common share: | |||
| Continuing retail operations before asset impairment charges | $ 0.48 | ($ 0.18) | |
| Asset impairment charges | - | ( 0.33) | |
| Continuing retail operations | 0.48 | ( 0.51) | |
| Loss from discontinued operations | ( 0.01) | ( 0.57) | |
| Loss on disposal of discontinued operations | ( 0.92) | ( 0.06) | |
| Extraordinary debt restructuring charges | - | ( 0.11) | |
| Net loss | ($ 0.45) | ($ 1.25) | |
| Weighted average shares outstanding - primary | 486.1 | 459.9 |
- The consolidated statement of operations for the prior period has been restated for discontinued operations.
- Gross margin includes LIFO credits of $45 million and $43 million in fiscal 1996 and 1995, respectively.
| (Amounts in millions) | |||
| Cash Flows From Operating Activities: | |||
| Net income (loss) from continuing operations- | $ 231 | $ (230) | |
| Adjustments to reconcile income (loss) to net cash used for operating activities: | |||
| Extraordinary item | - | (51) | |
| Other (gains) and losses | (10) | 41 | |
| Depreciation and amortization | 654 | 685 | |
| Cash used for store restructuring and other charges | (129) | (171) | |
| Deferred income taxes | 68 | 76 | |
| Undistributed equity income and dividends received | 28 | 14 | |
| Decrease (increase) in other long-term liabilities | (194) | 9 | |
| Decrease (increase) in inventories | (349) | 222 | |
| Increase (decrease) in accounts payable | 215 | (609) | |
| Changes in certain assets and liabilities | 224 | (83) | |
| Net cash provided by (used for) continuing operations | 738 | (97) | |
| Discontinued operations | 30 | (92) | |
| Net cash provided by (used for) operating activities | 768 | (189) | |
| Cash Flows From Investing Activities: | |||
| Capital expenditures | (343) | (540) | |
| Increase in property held for sale | (632) | (474) | |
| Proceeds from asset sales and divestitures, net | 461 | 1,658 | |
| Other, net | 47 | (259) | |
| Net cash provided by (used for) investing activities | (467) | 385 | |
| Cash Flows From Financing Activities: | |||
| Proceeds from long-term debt and notes payable | 1,202 | 1,948 | |
| Refinancing costs related to long-term debt and notes payable | (212) | - | |
| Reductions in long-term debt and notes payable | (2,855) | (983) | |
| Net proceeds from issuance of convertible preferred securities | 971 | - | |
| Reduction in capital lease obligations | (114) | (160) | |
| Dividends paid | - | (283) | |
| Other, net | 30 | 18 | |
| Net cash provided by (used for) financing activities | (978) | 540 | |
| Net change in cash and equivalents: | (677) | 736 | |
| Cash and equivalents at beginning of year | 1,083 | 347 | |
| Cash and equivalents at end of year | $ 406 | $ 1,083 | |
(Amounts in millions) | |||
| ASSETS | |||
| Current Assets: | |||
| Cash and equivalents | $ 406 | $ 1,083 | |
| Merchandise inventories | 6,354 | 6,022 | |
| Other current assets | 973 | 894 | |
| Net current assets of discontinued operations | - | 554 | |
| Total current assets | 7,733 | 8,553 | |
| Property and equipment, net | 5,740 | 5,365 | |
| Property held for resale | 200 | 434 | |
| Other assets and deferred charges | 613 | 526 | |
| Net long-term assets of discontinued operations | - | 155 | |
| TOTAL ASSETS | $ 14,286 | $ 15,033 | |
| LIABILITIES AND EQUITY | |||
| Current Liabilities: | |||
| Long-term debt due within one year | $ 156 | $ 7 | |
| Trade accounts payable | 2,009 | 1,793 | |
| Accrued payrolls and other liabilities | 1,298 | 1,019 | |
| Taxes other than income taxes | 139 | 176 | |
| Total current liabilities | 3,602 | 2,995 | |
| Capital lease obligations | 1,478 | 1,586 | |
| Long-term debt and notes payable | 2,121 | 3,922 | |
| Other long-term liabilities | 1,013 | 1,250 | |
| Convertible preferred securities, net | 980 | - | |
| Common stock | 486 | 486 | |
| Capital in excess of par value | 1,608 | 1,624 | |
| Retained earnings | 3,105 | 3,326 | |
| Treasury shares and restricted stock | (37) | (92) | |
| Foreign currency translation adjustment | (70) | (64) | |
| TOTAL LIABILITIES AND EQUITY | $ 14,286 | $ 15,033 |
| (Amounts in millions, except per share data) | |||
| Sales | $ 6,975 | $ 6,813 | |
| Gross margin | 1,577 | 1,568 | |
| Selling, general and administrative expenses | 1,519 | 1,608 | |
| Other (gains) and losses | - | (121) | |
| Continuing earnings before interest, taxes and preferred dividend | 58 | 81 | |
| Interest expense, net | 113 | 107 | |
| Income taxes | (19) | (7) | |
| Continuing net loss | (36) | (19) | |
| Loss from discontinued operations, net of taxes | (2) | (9) | |
| Loss on disposal of discontinued operations, net of taxes | (61) | - | |
| Net loss | ($ 99) | ($ 28) | |
| Continuing net loss per share - primary | ($ 0.08) | ($ 0.04) |
| (Amounts in millions, except per share data) | |||
| Sales | $ 7,566 | $ 7,682 | |
| Gross margin | 1,691 | 1,795 | |
| Selling, general and administrative expenses | 1,539 | 1,654 | |
| Continuing earnings before interest, taxes and preferred dividend | 152 | 141 | |
| Interest expense, net | 107 | 111 | |
| Income taxes | 16 | 9 | |
| Preferred dividend, net of taxes | 6 | - | |
| Continuing net income | 23 | 21 | |
| Income from discontinued operations, net of taxes | 11 | 2 | |
| Loss on disposal of discontinued operations, net of taxes | - | (77) | |
| Net income (loss) | $ 34 | ($ 54) | |
| Continuing net earnings per share - primary | $ 0.05 | $ 0.04 |
| (Amounts in millions, except per share data) | |||
| Sales | $ 7,212 | $ 7,317 | |
| Gross margin | 1,684 | 1,595 | |
| Selling, general and administrative expenses | 1,533 | 1,666 | |
| Continuing earnings (loss) before interest, taxes and preferred dividend | 151 | (71) | |
| Interest expense, net | 119 | 92 | |
| Income taxes | 11 | (49) | |
| Preferred dividend, net of taxes | 13 | - | |
| Continuing net income (loss) | 8 | (114) | |
| Income (loss) from discontinued operations, net of taxes | 1 | (3) | |
| Gain on disposal of discontinued operations, net of taxes | - | 48 | |
| Net income (loss) | $ 9 | ($ 69) | |
| Continuing net earnings (loss) per share - primary | $ 0.02 | ($ 0.25) |
