EXHIBIT 99.1
RELEASE DATE
June 16, 2003
CONTACT:
Kmart Media Relations
(248) 463-1021
Kmart Investor Relations
(248) 463-1040
KMART HOLDING CORPORATION REPORTS
FIRST QUARTER 2003 RESULTS
COMPANY CLOSES QUARTER WITH STRONG LIQUIDITY POSITION
TROY, MICHIGAN, JUNE 16, 2003-- Kmart Holding Corporation (NASDAQ: KMRT)
announced today the Company's financial results for the first quarter of fiscal
2003 and the filing of its quarterly report on Form 10-Q with the Securities &
Exchange Commission.
For the 13 weeks ended April 30, 2003, Kmart reported a net loss of $862
million, versus a net loss of $1.44 billion for the 13 weeks ended May 1, 2002.
Loss before interest, reorganization items, income taxes, and discontinued
operations was $32 million for the 13 weeks ended April 30, 2003 versus a loss
of $920 million for the first quarter of last year. Last year's results include
a charge of $542 million recorded in the first quarter of 2002 in connection
with the store closing liquidation sales. This charge is included in cost of
sales, buying and occupancy in the accompanying unaudited Condensed Consolidated
Statements of Operations.
KMART CORPORATION REPORTS FIRST QUARTER 2003 RESULTS 2-2-2
Net sales for the 13 weeks ended April 30, 2003, were $6.18 billion, a decrease
of 13.9 percent from $7.18 billion in 2002. On a same-store basis, sales
declined 3.2 percent from the first quarter of 2002.
Julian C. Day, President and Chief Executive Officer of Kmart, said, "This
management team is very focused on building the financial foundation of the new
Company. We are strengthening our business by driving profitable sales,
identifying opportunities to further improve efficiency and reduce costs, and
enhancing the productivity of our assets. We have increased gross margin,
decreased SG&A and carefully managed our inventory. With the strong support of
our new Board of Directors, we will continue to concentrate on increasing the
long-term value of this enterprise."
As of April 30, 2003, Kmart had approximately $1.23 billion in cash and cash
equivalents, and borrowing availability of approximately $1.5 billion on its $2
billion credit facility, including outstanding letters of credit.
Gross margin increased $674 million to $1.42 billion, for the 13 weeks ended
April 30, 2003, from $745 million for the 13 weeks ended May 1, 2002. Gross
margin, as a percentage of sales, increased to 23.0 percent for the 13 weeks
ended April 30, 2003, from 10.4 percent for the 13 weeks ended May 1, 2002. The
increase in gross margin is primarily related to the previously mentioned charge
of $542 million recorded in the first quarter of 2002 in connection with the
store closing liquidation sales. In addition, the Company's gross margin rate
was favorably impacted by 2003 closing store liquidation sales, a decrease in
sales of food and consumables, which carry lower margins, and a decrease in
promotional markdowns, partially offset by the impact of clearance markdowns.
Selling, general and administrative expenses (SG&A), which includes advertising
costs (net of co-op recoveries of $69 million in fiscal 2002) decreased $249
million for the 13 weeks ended April 30, 2003, to $1.42 billion, or 23.0 percent
of sales, from $1.67 billion, or 23.3 percent of sales, for the 13 weeks ended
May 1, 2002. The dollar decrease in SG&A is primarily the result of the closure
of 283 stores in the second quarter of 2002 and lower payroll and other related
expenses in the first quarter of 2003 stemming from corporate
KMART CORPORATION REPORTS FIRST QUARTER 2003 RESULTS 3-3-3
headquarters cost reduction initiatives. In addition, SG&A was favorably
impacted by a decrease in utility expenses and electronic media advertising, and
lower depreciation expense as a result of the impairment charge recorded in the
fourth quarter of fiscal 2002. These decreases were partially offset by co-op
recoveries recorded to SG&A in 2002 that are recorded to cost of sales, buying
and occupancy in 2003, resulting from the application of EITF 02-16, "Accounting
by a Customer (Including a Reseller) for Certain Consideration Received from a
Vendor," an increase in pension expense, and higher premiums for our workers'
compensation insurance.
FRESH START ACCOUNTING
In connection with the Company's emergence from bankruptcy, the consolidated
financial statements apply the provisions of fresh start accounting in
accordance with Generally Accepted Accounting Principles (GAAP). Under fresh
start accounting, a new reporting entity, the "Successor Company", is deemed to
be created, and the recorded amounts of assets and liabilities are adjusted to
reflect their fair value. As a result, the reported historical financial
statements of the "Predecessor Company" for periods prior to April 30, 2003, as
presented below, generally are not comparable to those of the Successor Company.
In applying fresh start accounting, adjustments to reflect the fair value of
assets and liabilities, on a net basis, and the write-off of the Predecessor
Company's equity accounts resulted in a charge of $5.6 billion. The
restructuring of Kmart's capital structure and resulting discharge of
pre-petition debt resulted in gain of $5.6 billion. The charge for the
revaluation of the assets and liabilities and the gain on the discharge of
pre-petition debt are recorded in Reorganization items, net in the unaudited
Condensed Consolidated Statement of Operations. In addition, the excess of fair
value of net assets over reorganization value ("negative goodwill") was
allocated on a pro-rata basis and reduced non-current assets (property and
equipment, net) to $10 million in accordance with GAAP.
KMART CORPORATION REPORTS FIRST QUARTER 2003 RESULTS 4-4-4
BOARD COMMITTEES
The Board of Directors of Kmart Holding Corporation has established the
following committees: Audit, Compensation and Incentives, Corporate Governance,
and Finance.
The members of the committees are as follows:
o Audit - Ann Reese, Chair, E. David Coolidge III and Brandon Stranzl;
o Compensation and Incentives - Edward S. Lampert, Chair, Ann Reese and
Thomas J. Tisch;
o Corporate Governance - Steven T. Mnuchin, Chair, William Foss and
Thomas J. Tisch; and
o Finance - Edward S. Lampert, Chair, William C. Crowley, Julian C. Day
and Steven T. Mnuchin.
KMART CORPORATION REPORTS FIRST QUARTER 2003 RESULTS 5-5-5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
PREDECESSOR COMPANY
---------------------
13 WEEKS ENDED
APRIL 30, MAY 1,
2003 2002
------- -------
Sales $ 6,181 $ 7,181
Cost of sales, buying and occupancy 4,762 6,436
------- -------
Gross margin 1,419 745
Selling, general and administrative expenses 1,421 1,670
Restructuring, impairment and other charges 37 -
Equity income in unconsolidated subsidiaries 7 5
------- -------
Loss before interest, reorganization items, income taxes and
discontinued operations (32) (920)
Interest expense, net (contractual interest for 13 week periods ended
April 30, 2003 and May 1, 2002 was $124 and $102, respectively) 57 33
Reorganization items, net 769 251
Benefit from income taxes (6) (12)
------- -------
Loss before discontinued operations (852) (1,192)
Discontinued operations (10) (250)
------- -------
Net loss $ (862) $(1,442)
======= =======
Basic/diluted loss before discontinued operations $ (1.63) $ (2.37)
Discontinued operations (0.02) (0.50)
------- -------
Basic/diluted net loss per common share $ (1.65) $ (2.87)
======= =======
Basic/diluted weighted average shares (millions) 522.7 502.9
KMART CORPORATION REPORTS FIRST QUARTER 2003 RESULTS 6-6-6
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
(UNAUDITED)
SUCCESSOR PREDECESSOR
COMPANY COMPANY
----------- --------------------------
APRIL 30, MAY 1, JANUARY 29,
2003 2002 2003
----------- ---------- ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,232 $ 1,829 $ 613
Merchandise inventories 4,431 5,255 4,825
Receivable from Plan Investors 187 - -
Accounts receivable 382 316 473
Other current assets 322 281 191
-------- -------- --------
TOTAL CURRENT ASSETS 6,554 7,681 6,102
Property and equipment, net 10 5,972 4,892
Other assets and deferred charges 96 219 244
-------- -------- --------
TOTAL ASSETS $ 6,660 $ 13,872 $ 11,238
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Long-term debt due within one year $ 8 $ - $ -
Accounts payable 1,160 1,658 1,248
Accrued payroll and other liabilities 1,321 659 710
Taxes other than income taxes 274 237 162
-------- -------- --------
TOTAL CURRENT LIABILITIES 2,763 2,554 2,120
Long-term debt and notes payable 108 - -
Capital lease obligations 415 694 623
Pension obligation 854 - -
Other long-term liabilities 807 140 181
-------- -------- --------
TOTAL LIABILITIES NOT SUBJECT TO COMPROMISE 4,947 3,388 2,924
LIABILITIES SUBJECT TO COMPROMISE - 7,805 7,969
Company obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust holding solely 7 3/4% convertible
junior subordinated debentures of Predecessor Company
(redemption value $898 and $648, respectively) - 889 646
Successor preferred stock 20,000,000 shares authorized;
0 outstanding - - -
Predecessor common stock $1 par value, 1,500,000,000 shares authorized;
502,689,273 and 519,123,988 shares outstanding, respectively - 503 519
Successor common stock $0.01 par value, 500,000,000 shares
authorized, 89,677,509 shares outstanding 1 - -
Capital in excess of par value 1,712 1,697 1,922
Accumulated deficit - (410) (2,742)
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 6,660 $ 13,872 $ 11,238
======== ======== ========
KMART CORPORATION REPORTS FIRST QUARTER 2003 RESULTS 7-7-7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
PREDECESSOR COMPANY
---------------------------
13 WEEKS ENDED
APRIL 30, MAY 1,
2003 2002
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (862) $(1,442)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Discontinued operations non-cash charges 40 247
Restructuring, impairments and other charges 2 558
Reorganization items, net 769 251
Depreciation and amortization 177 181
Equity income in unconsolidated subsidiaries (7) (5)
Dividends received from Meldisco 36 45
Cash used for store closings and other charges (64) (39)
Change in:
Inventories 480 (109)
Accounts payable (117) 1,104
Deferred income taxes and taxes payable (16) (9)
Other assets 125 198
Other liabilities 32 40
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 595 1,020
------- -------
NET CASH (USED FOR) PROVIDED BY REORGANIZATION ITEMS (19) 12
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 64 -
Capital expenditures (4) (52)
------- -------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 60 (52)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on DIP Credit Facility - (300)
Payments on debt (1) (47)
Debt issuance costs - (30)
Payments on capital lease obligations (16) (19)
------- -------
NET CASH USED FOR FINANCING ACTIVITIES (17) (396)
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS 619 584
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 613 1,245
======= =======
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,232 $ 1,829
======= =======
Kmart Corporation is a mass merchandising company that serves America through
Kmart and Kmart SuperCenter retail outlets.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND OTHER MATTERS
Statements made by Kmart which address activities, events or developments that
we expect or anticipate may occur in the future are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 that
reflect the Company's current views with respect to current and future events
and financial performance. Such forward-looking statements are and will be, as
the case may be, subject to many risks and uncertainties, including, but not
limited to, its affiliates having filed for bankruptcy and factors relating to
Kmart's operations and the business environment in which Kmart operates, which
may cause the actual results of Kmart to be materially different from any future
results expressed or implied by such forward-looking statements. Factors that
could cause actual results to differ materially from these forward-looking
statements include 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; the ability of Kmart to attract and retain customers; and those set
forth in Kmart Corporation's Annual Report on Form 10-K for the fiscal year
ended January 29, 2003, or in other filings made, from time to time, by Kmart
with the Securities and Exchange Commission (the "Company Filings"). The
forward-looking statements speak only as of the date when made and Kmart does
not undertake to update such statements.
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