November 12, 1998
Robert M. Burton
Divisional Vice President, Investor Relations
(248) 643-1040
Shawn M. Kahle
Vice President, Corporate Affairs
(248) 637-4201
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KMART CORPORATION ANNOUNCES THIRD QUARTER 1998 NET INCOME
TROY, Mich., November 12, 1998-- Kmart Corporation (NYSE:KM) today reported net income of $38 million, or $0.08 basic earnings per share, for the third quarter, compared with net income of $18 million, or $0.04 basic earnings per share for the third quarter of 1997.
Total consolidated sales in the 1998 third quarter were $7.642 billion, an increase of 4.5% from $7.315 billion for the third quarter of 1997, while comparable store sales for the quarter increased 4.2%. The gross margin rate for the period was 22.1% of sales versus 22.3% last year. Selling, general and administrative (SG&A) expenses for the quarter were $1.540 billion compared with $1.492 billion for the 1997 period, resulting in a SG&A to sales ratio of 20.1% versus 20.4%.
"With our tenth consecutive quarter of increased earnings per share, the turnaround at Kmart continues on track," said Floyd Hall, Chairman, President and CEO. "Sales increases in consumables and hardlines areas, such as pharmacy, health and beauty care, and home-related items, offset weakness in apparel caused by unseasonably warm weather in late September and October. Selling, general and administrative expense ratios improved by 30 basis points in the quarter, continuing the favorable trend year to date. Interest expense was also favorable, reflecting lower levels of borrowings."
Net income for the first nine months of 1998 increased 162 percent over 1997 to $165 million, or $0.34 basic earnings per share, as compared with net income of $63 million, or $0.13 basic earnings per share in the first nine months of 1997.
Under FAS 128, preferred securities are not included in the calculation of diluted earnings per share for the third quarter of either 1997 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 $0.09 and $0.06 for the third quarters of 1998 and 1997, and $0.36 and $0.18 for the first nine months of 1998 and 1997, respectively.
Kmart Corporation serves America with 2,154 Kmart retail outlets, including 45 stores that opened October 29, 1998. Kmart Corporation common stock is listed on the New York, Pacific, and Chicago Stock Exchanges.
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KMART CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
|
| (Amounts in millions, except per share data) |
13 Weeks
Ended
10-28-98 |
13 Weeks
Ended
10-29-97 |
| Sales |
$ 7,642 |
$ 7,315 |
| Cost of sales, buying and occupancy |
5,954 |
5,683 |
| Gross margin |
1,688 |
1,632 |
| Selling, general and administrative expenses |
1,540 |
1,492 |
| Income before interest, income taxes and dividends on convertible preferred securities |
148 |
140 |
| Interest expense, net |
76 |
96 |
| Income tax provision |
21 |
13 |
| Dividends on convertible preferred securities, net of income taxes |
13 |
13 |
| Net income |
$ 38 |
$ 18 |
| |
| Basic / diluted income per common share |
$ 0.08 |
$ 0.04 |
| |
| Basic weighted average shares outstanding |
492.8 |
488.0 |
| Diluted weighted average shares outstanding |
564.0 |
560.5 |
KMART CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
|
| (Amounts in millions, except per share data) |
39 Weeks
Ended
10-28-98 |
39 Weeks
Ended
10-29-97 |
| Sales |
$ 23,273 |
$ 22,424 |
| Cost of sales, buying and occupancy |
18,198 |
17,517 |
| Gross margin |
5,075 |
4,907 |
| Selling, general and administrative expenses |
4,550 |
4,480 |
| Voluntary early retirement program |
19 |
- |
| Income before interest, income taxes and dividends on convertible preferred securities |
506 |
427 |
| Interest expense, net |
220 |
286 |
| Income tax provision |
83 |
41 |
| Dividends on convertible preferred securities, net of income taxes |
38 |
37 |
| Net income |
$ 165 |
$ 63 |
| |
| Basic / diluted income per common share |
$ 0.34 |
$ 0.13 |
| |
| Basic weighted average shares outstanding |
491.7 |
486.8 |
| Diluted weighted average shares outstanding |
564.8 |
559.0 |
KMART CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| |
39 Weeks Ended |
| (Amounts in millions) |
10-28-98 |
10-29-97 |
| Cash Flows From Operating Activities: |
| Net income from retail operations |
$ 165 |
$ 63 |
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
| Voluntary early retirement charge |
19 |
- |
| Depreciation and amortization |
498 |
496 |
| Increase in accounts receivable |
(213) |
(114) |
| Increase in operating supplies and prepaids |
(62) |
(37) |
| Increase in inventories |
(1,693) |
(1,439) |
| Increase in accounts payable |
1,096 |
815 |
| Deferred income taxes and taxes payable |
156 |
25 |
| Decrease in other long-term liabilities |
(56) |
(46) |
| Changes in certain assets and liabilities |
20 |
85 |
| Net cash used for operating activities |
(70) |
(152) |
| |
| Cash Flows From Investing Activities: |
|
| Proceeds from divestitures |
87 |
145 |
| Proceeds from real estate financing and other |
23 |
413 |
| Capital contributions from minority interests |
- |
(55) |
| Capital expenditures |
(745) |
(489) |
| Other, net |
(-) |
(70) |
| Net cash used for investing activities |
(635) |
(56) |
| |
| Cash Flows From Financing Activities: |
|
| Proceeds from issuance of long-term debt and notes payable |
750 |
901 |
| Changes in common stock and treasury stock |
52 |
36 |
| Payments on capital lease obligations |
(65) |
(85) |
| Payments on long-term debt and notes payable |
(180) |
(770) |
| Net cash provided by financing activities |
557 |
82 |
| |
| Net change in cash and equivalents: |
(148) |
(126) |
| Cash and equivalents at beginning of year |
498 |
406 |
| Cash and equivalents at end of period |
$ 350 |
$ 280 |
| |
KMART CORPORATION
CONSOLIDATED BALANCE SHEETS
|
| (Amounts in millions) |
10-28-98 |
10-29-97 |
1-28-98 |
| ASSETS |
|
| Current Assets: |
|
| Cash and equivalents |
$ 350 |
$ 280 |
$ 498 |
| Merchandise inventories |
8,060 |
7,793 |
6,367 |
| Other current assets |
844 |
1,015 |
611 |
| Total current assets |
9,254 |
9,088 |
7,476 |
| |
| Property and equipment, net |
5,852 |
5,442 |
5,472 |
| Property held for resale |
207 |
241 |
271 |
| Other assets and deferred charges |
236 |
264 |
339 |
| TOTAL ASSETS |
$ 15,549 |
$ 15,035 |
$ 13,558 |
LIABILITIES AND EQUITY |
|
| Current Liabilities: |
|
| Long-term debt due within one year |
$ 60 |
$ 76 |
$ 78 |
| Trade accounts payable |
3,019 |
2,824 |
1,923 |
| Accrued payrolls and other liabilities |
1,242 |
1,017 |
1,064 |
| Taxes other than income taxes |
240 |
250 |
209 |
| Total current liabilities |
4,561 |
4,167 |
3,274 |
| |
| Long-term debt and notes payable |
2,313 |
2,347 |
1,725 |
| Capital lease obligations |
1,114 |
1,362 |
1,179 |
| Other long-term liabilities |
928 |
921 |
965 |
| Convertible preferred securities, net |
983 |
979 |
981 |
| Common stock |
493 |
489 |
489 |
| Capital in excess of par value |
1,654 |
1,605 |
1,605 |
| Retained earnings |
3,503 |
3,165 |
3,340 |
| TOTAL LIABILITIES AND EQUITY |
$ 15,549 |
$ 15,035 |
$ 13,558 |
