EXHIBIT 99
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
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Chapter 11
Case No.: 02 B 02474
Hon. Susan Pierson Sonderby
In re
Kmart Corporation, et al.
Debtors.
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MONTHLY OPERATING REPORT FOR THE
PERIOD FEBRUARY 27, 2003 TO MARCH 26, 2003
DEBTORS' ADDRESS: Kmart Corporation, et al.
3100 West Big Beaver Road
Troy, MI 48084
DEBTORS' ATTORNEYS: John Wm. Butler, Jr.
J. Eric Ivester
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606-1285
REPORT PREPARER: Kmart Corporation, et al.
The undersigned, having reviewed the attached report acting as the duly
authorized agent for the Debtors in Possession declares under penalty of perjury
under the laws of the United States that the figures, statements, disbursement
itemizations, and account balances listed in this Monthly Report of the Debtors
are true and correct as of the date of this report to the best of my knowledge,
information and belief.
Date: May 6, 2003
KMART CORPORATION, ET AL.
/s/ A. A. Koch
------------------------------------
A. A. Koch, Chief Financial Officer
KMART CORPORATION, ET AL.
U.S. TRUSTEE MONTHLY OPERATING REPORT
FOR THE FOUR-WEEK PERIOD ENDED MARCH 26, 2003
I. Kmart Corporation Unaudited Consolidated Financial Statements
A. Consolidated Statement of Operations for the four-week period ended March
26, 2003
B. Consolidated Balance Sheet as of March 26, 2003
C. Consolidated Statement of Cash Flows for the four-week period ended March
26, 2003
D. Cash Receipts and Disbursements for the four-week period ended March 26,
2003
E. Schedule of Professional Fees and Expenses for the period January 22,
2002 through March 26, 2003
F. Notes to Unaudited Consolidated Financial Statements
II. Tax Questionnaire
KMART CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
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($ MILLIONS)
FOUR-WEEK
PERIOD ENDED
MARCH 26,
2003
------------
SALES $1,896
Cost of sales, buying & occupancy 1,504
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GROSS MARGIN 392
Selling, general and administrative expenses 445
------------
LOSS BEFORE INTEREST, INCOME TAXES AND
REORGANIZATION ITEMS, NET (53)
Reorganization items, net 412
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LOSS BEFORE INTEREST (465)
Net interest expense 18
------------
NET LOSS $ (483)
============
KMART CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
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($ MILLIONS)
MARCH 26,
2003
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,044
Merchandise inventories 4,742
Other current assets 642
------------
TOTAL CURRENT ASSETS 6,428
Property and equipment, net 4,745
Other assets and deferred charges 245
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TOTAL ASSETS $ 11,418
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 1,451
Accrued payroll and other liabilities 815
Taxes other than income taxes 151
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TOTAL CURRENT LIABILITIES 2,417
Debtor-in-possession credit facility -
Capital lease obligations 613
Other long-term liabilities 190
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TOTAL LIABILITIES NOT SUBJECT TO COMPROMISE 3,220
LIABILITIES SUBJECT TO COMPROMISE 8,391
Company obligated mandatorily redeemable
convertible preferred convertible securities of a
subsidiary trust holding solely 7 3/4% convertible
junior subordinated debentures of Kmart 577
Common stock, $1 par value, 1,500,000,000 shares authorized;
523,781,474 shares issued 524
Capital in excess of par value 1,985
Accumulated deficit (3,279)
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 11,418
============
Memo:
LIABILITIES SUBJECT TO COMPROMISE
Debt and notes payable $ 3,347
Accounts payable 2,361
Pension obligation 754
Closed store reserves 723
Public liability and workers compensation 320
Taxes payable 285
Other liabilities 601
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$ 8,391
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KMART CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
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($ MILLIONS)
FOUR-WEEK
PERIOD ENDED
MARCH 26,
2003
------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (483)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Restructuring, impairments and employee severance 11
Reorganization items, net 412
Depreciation and amortization 54
Equity income in unconsolidated subsidiaries (4)
Changes in:
Inventory (64)
Accounts payable 128
Deferred taxes and other taxes payable 2
Other assets (14)
Other liabilities 49
Cash used for store closings and other charges (40)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 51
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NET CASH USED FOR REORGANIZATION ITEMS (8)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures -
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NET CASH USED FOR INVESTING ACTIVITIES -
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CASH FLOWS FROM FINANCING ACTIVITIES
Payments of debt (1)
Payments on capital lease obligations (5)
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NET CASH USED FOR FINANCING ACTIVITIES (6)
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NET CHANGE IN CASH AND CASH EQUIVALENTS 37
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,007
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CASH AND CASH EQUIVALENTS, END OF PERIOD $1,044
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KMART CORPORATION
CASH RECEIPTS AND DISBURSEMENTS
(Unaudited)
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($ MILLIONS)
FOUR-WEEK
PERIOD ENDED
MARCH 26,
2003
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Cash Receipts:
Store $ 1,975
Other 152
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CASH INFLOWS 2,127
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Cash Disbursements:
Accounts payable 1,546
Fleming 131
Payroll and benefits 295
Taxes 102
Rent 15
Other 1
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CASH OUTFLOWS 2,090
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NET CASH INFLOWS $ 37
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KMART CORPORATION
Schedule of Professional Fees and Expenses
(Unaudited)
FOR THE PERIOD JANUARY 22, 2002 THROUGH MARCH 26, 2003
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BILLED
NAME AMOUNT* PAID UNPAID HOLDBACK ACCRUED** TOTAL
- ---- ------------ ------------ ------------ ------------ ------------ ------------
Abacus Advisory and Consulting
Corporation, LLC $ 3,978,395 $ 3,608,293 $ 370,102 $ - $ - $ 3,978,395
Dewey Ballantine 400,396 - 400,396 37,959 400,396
DKW/ Miller Buckfire & Lewis 3,222,092 3,019,572 202,520 202,500 - 3,222,092
DJM 1,012,794 1,012,794 - - - 1,012,794
Erwin Katz 42,096 38,946 3,150 3,861 42,096
Ernst & Young, Corporate Finance LLC 1,204,238 1,204,238 - - - 1,204,238
FTI Policano & Manzo 7,398,362 6,811,877 586,485 586,485 - 7,398,362
Goldberg, Kohn, Bell 1,215,252 1,112,596 102,656 102,656 - 1,215,252
Jones, Day, Reavis & Pogue 3,629,703 3,377,791 251,912 251,912 - 3,629,703
Jones Day Committee Member Expenses 35,631 35,631 - - - 35,631
KPMG, LLP 6,895,136 6,311,934 583,202 515,099 - 6,895,136
Morgan, Lewis & Bockius LLP 685,123 685,123 - - - 685,123
Otterbourg, Steindler, Houston
& Rosen, PC 5,641,092 4,712,193 928,899 425,468 - 5,641,092
Otterbourg Committee Member Expenses 122,542 113,088 9,454 - - 122,542
PricewaterhouseCoopers LLP 8,449,354 8,264,250 185,104 185,104 - 8,449,354
Rockwood Gemini Advisors 2,640,532 2,460,532 180,000 180,000 - 2,640,532
Saybrook Capital 1,285,763 1,089,988 195,775 119,226 - 1,285,763
Skadden, Arps, Slate, Meagher
& Flom (Illinois) 33,144,275 31,134,770 2,009,505 2,009,505 - 33,144,275
Standard and Poor's 339,666 306,657 33,009 33,009 339,666
Traub, Bonacquist & Fox 1,175,421 1,057,615 117,806 117,806 - 1,175,421
Traub Committee Member Expenses 63,581 49,127 14,454 - - 63,581
Trumbull Services 3,700,245 3,700,245 - - - 3,700,245
U.S. Trustee 470,750 470,750 - - - 470,750
Winston & Strawn 1,637,256 1,516,837 120,419 120,010 - 1,637,256
Accrued - - - - 34,757,989 34,757,989
------------ ------------ ------------ ------------ ------------ ------------
TOTAL $ 88,389,695 $ 82,094,847 $ 6,294,848 $ 4,890,600 $ 34,757,989 $123,147,684
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* Billed amounts include fees and expenses.
** Accrued amount represents services provided, but not yet billed.
KMART CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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1. On January 22, 2002 ("Petition Date"), Kmart Corporation and 37 of its U.S.
subsidiaries filed voluntary petitions for reorganization under Chapter 11
of the federal bankruptcy code ("Bankruptcy Code" or "Chapter 11") in the
United States Bankruptcy Court for the Northern District of Illinois
("Court"). The reorganization is being jointly administered under the
caption "In re Kmart Corporation, et al., Case No. 02 B 02474." Included in
the consolidated financial statements are subsidiaries operating outside of
the United States, which have not commenced Chapter 11 cases or other
similar proceedings elsewhere, and are not debtors ("non-filing
subsidiaries"). The assets and liabilities of such non-filing subsidiaries
are not considered material to the consolidated financial statements. Kmart
Corporation and all of its consolidated subsidiaries, whether or not
considered filing or non-filing subsidiaries, are collectively referred to
herein as "the Company."
2. To supplement operating cash flow during the reorganization process, the
Company secured a $2 billion senior secured debtor-in-possession financing
facility ("DIP Credit Facility") from JP Morgan Chase Bank, Fleet Retail
Finance, Inc., General Electric Capital Corporation, and Credit Suisse
First Boston for the payment of certain pre-petition claims and the funding
of working capital and other general operating needs. The DIP Credit
Facility requires that we restrict future liens, indebtedness, capital
expenditures, dividend payments and sales of assets, and that we maintain
certain financial covenants, one of which requires minimum levels of
cumulative EBITDA (earnings before interest, taxes, depreciation,
amortization and other charges), the amounts of which vary throughout the
year. The DIP Credit Facility was amended as of August 29, 2002, with the
approval of the Court, to provide additional flexibility under the
financial covenant contained therein that requires minimum levels of
cumulative EBITDA. The DIP Credit Facility was again amended on January 9,
2003, with the approval of the Court, to allow for the closure of
additional stores and modifications to the EBITDA covenants. As of March
26, 2003 the Company had no borrowings outstanding and had utilized $395
million of the DIP Credit Facility for letters of credit issued for ongoing
import purchasing operations, contractual and regulatory purposes. Outlined
below is a summary of availability under the DIP Credit Facility:
($ millions)
DIP Credit Facility capacity $2,000
5% Holdback (100)
DIP loans outstanding -
Letters of credit outstanding (395)
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Total Available as of March 26, 2003 $1,505
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3. On January 24, 2003 Kmart received approval from the Court for $2 billion
in exit financing from GE Commercial Finance, Fleet Retail Finance, Inc.
and Bank of America, N.A. This credit facility, which will be
collateralized by inventory, would replace our current $2 billion DIP
Credit Facility on May 6, 2003, the date of our emergence from Chapter 11.
The financing is subject to satisfaction of customary conditions to closing
and would be available to Kmart to help meet its ongoing working capital
needs, including borrowings for seasonal increases in inventory.
4. Comparable store sales for the five-week period ended April 2, 2003 were
7.4% lower than the same period last year. Comparable store sales do not
include the going-out-of-business sales at our 316 closing locations. Due
to the timing of the Easter holiday in 2003, the holiday sales will be
reflected in our April 2003 financial results.
KMART CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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5. Reorganization items, net, of $412 million of expense includes $385 for
pre-petition liabilities related to the rejection of the Fleming contract,
$17 million for stay bonuses under the Key Employee Retention Program
approved by the Court, $9 million of professional fees and $1 million of
other reorganization expenses.
6. On January 24, 2003, we filed a Plan of Reorganization and related
Disclosure Statement with the Court. On or about February 25, 2003, we
filed our First Amended Joint Plan of Reorganization (the "Plan of
Reorganization") and a related amended Disclosure Statement with the Court.
The Plan of Reorganization received the formal endorsement of our statutory
creditors committees and, on February 25, 2003, the Court approved our
amended Plan of Reorganization and Disclosure Statement. All holders of
claims as of February 18, 2003 received the amended Disclosure Statement,
which was mailed to creditors and shareholders on or about March 7, 2003.
7. On February 3, 2003 we announced that we had terminated our supply
relationship with Fleming by means of a rejection of the 2001 contract
through Kmart's Chapter 11 reorganization. Fleming continued to supply food
and consumable products to us until March 8, 2003. Kmart now administers
and manages the supply chain operations related to the supply and
distribution of food, consumable and core pantry products. Kmart has
experienced little business interruption in the transition. As part of the
bankruptcy proceedings, Fleming filed a claim of $1.5 billion as of March
11, 2003. In March, Kmart and Fleming came to an agreement on a settlement
of Fleming's claims, and on March 27, 2003, the Court approved our
settlement of all claims asserted by Fleming. Under the settlement, Kmart
paid Fleming $15 million of Fleming's net post-petition administrative
claim, which exceeded $30 million. Additionally, Fleming's general
unsecured claim was reduced from approximately $1.5 billion to $385
million. A charge for this claim was recorded in Reorganization items, net
in the Consolidated Statement of Operations.
8. On March 31, 2003, we completed the implementation of our previously
announced strategic restructuring actions aimed at aligning our corporate
headquarter and other administrative functions with the Company's on-going
store base and to prepare the organization for emergence from Chapter 11
reorganization in May. As part of the initiative, the Company eliminated
approximately 400 positions at Kmart's corporate headquarters and
approximately 123 nationally located, corporate-support positions. The
Company also eliminated approximately 137 vacant positions. We recorded a
charge for the estimated cost of these actions in our January 2003
Statement of Operations.
9. In accordance with SFAS No. 109, "Accounting for Income Taxes," the Company
has recorded a valuation allowance against net deferred tax assets. Based
on the Company's bankruptcy filing, realization of such assets in future
years is uncertain. Accordingly, the Company has not recognized any tax
benefit from its losses in fiscal 2003.
10. Cash Receipts and Disbursements for the four-week period ended March 26,
2003 are summarized as actual receipts and disbursements during the period,
as compiled from the Company's daily cash records.
11. Subsequent to March 26, 2003, Kmart's Plan of Reorganization, as modified,
was confirmed on April 22, 2003 and the order was docketed on April 23,
2003. Kmart emerged from Chapter 11 on May 6, 2003.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CASE NAME: Kmart Corporation, et al. CASE NO.: 02 B 02474
For Month Ending March 26, 2003
TAX QUESTIONNAIRE
Debtors in possession and trustees are required to pay all taxes
incurred after the filing of their Chapter 11 petition on an as due basis.
Please indicate whether the following post petition taxes or withholdings have
been paid currently.
1. Federal Income Taxes Yes (x) No ( )
2. FICA withholdings Yes (x) No ( )
3. Employee's withholdings Yes (x) No ( )
4. Employer's FICA Yes (x) No ( )
5. Federal Unemployment Taxes Yes (x) No ( )
6. State Income Tax Yes (x) No ( )
7. State Employee withholdings Yes (x) No ( )
8. All other state taxes Yes (x) No ( )
If any of the above have not been paid, state below the tax not paid,
the amount past due and the date of last payment.
KMART CORPORATION
CAUTIONARY STATEMENT
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The Company cautions readers not to place undue reliance upon the information
contained herein. The Monthly Operating Report ("Operating Report") contains
unaudited information, is limited in scope, covers a limited time period and is
in a format prescribed by the applicable bankruptcy laws. There can be no
assurance that the Operating Report is complete. The Operating Report contains
information for periods which may be shorter or otherwise different from those
contained in the Company's reports pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Such information may not be indicative of
the Company's financial condition or operating results for the periods reflected
in the Company's financial statements or in its reports pursuant to the Exchange
Act and readers are cautioned to refer to the Exchange Act filings. Moreover,
the Operating Report and other communications from the Company may include
forward-looking statements subject to various assumptions regarding the
Company's operating performance that may not be realized and are subject to
significant business, economic and competitive uncertainties and contingencies,
including those described in this report, many of which are beyond the Company's
control. Consequently, such matters should not be regarded as a representation
or warranty by the Company that such matters will be realized or are indicative
of the Company's financial condition or operating results for future periods or
the periods covered in the Company's reports pursuant to the Exchange Act.
Actual results for such periods may differ materially from the information
contained in the Operating Report and the Company undertakes no obligation to
update or revise the Operating Report.
The Operating Report, as well as other statements made by the Company, may
contain forward-looking statements that reflect, when made, the Company's
current views with respect to current events and financial performance. Such
forward looking statements are and will be, as the case may be, subject to many
risks, uncertainties, including, but not limited to, Kmart's having filed for
bankruptcy and factors relating to the Company's operations and the business
environment in which Kmart operates, which may cause the actual results of the
Company to be materially different from any future results, express or implied,
by such forward-looking statements. Factors that could cause actual results to
differ materially from these forward-looking statements include, but are not
limited to, Kmart's ability to operate pursuant to its exit financing facility;
the ability of the Company to obtain and maintain normal terms with its vendors
and other service providers; the ability of the Company to attract, motivate
and/or retain key executives and associates; and the ability of the Company to
attract and retain customers. Other risk factors are listed from time to time
in the Company's SEC reports, including, but not limited to the Annual Report on
Form 10-K for the year ended January 29, 2003 and the quarterly report on Form
10-Q for the Company's most recent fiscal quarter. Kmart disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.