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Calculating a Contribution Format Income Statement KMART

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Calculating a Contribution Format Income Statement KMART Powered By Docstoc
					KMART CORPORATION
  HISTORICAL ANALYSIS




          FIN 6425
        March 10, 2000


      Debbie Hilderbrandt
        Joyce Hinrichs
         David Holton
                                           Index


Note: All dollar values used in this analysis in relation to the financial statements are in

millions unless otherwise noted.



   Section                                                            Pages

Historical Analysis                                                   1-36


Appendix                                                              37


Table 1 – Income Statement                                            1

Table 2 - Balance Sheet                                               2

Table 3 – Cash Flow Statement                                         3

Table 4 – Common-size Income Statement                                4

Table 5 – Common-size Balance Sheet                                   5

Table 6 – Financial Ratios                                            6

Table 7 – Other Key Ratios                                            7


RMA Industry Data

Bibliography




                                              2
                                     Introduction

       Attention Kmart shoppers, all 180 million of you! Kmart Corporation is the

second largest discount retailer in the nation and third largest general merchandise

retailer. Kmart’s primary lines of business are name brand and private label general

merchandise with approximately 2,161 stores, including 100 Super Kmart Centers. Kmart

has a retail presence in all 50 states, Puerto Rico, the U.S. Virgin Islands, and Guam.

Kmart owns 110 stores and leases approximately 2,051 stores.             Kmart’s primary

competitors from the discount retail sector include Wal-mart, Target, Shopko and Costco.

From the department store sector, J.C Penny and Sears are the main competitors. The

primary factors in maintaining a competitive advantage are price, quality, service,

product mix and convenience.

       Kmart stores are generally one-floor, freestanding units ranging from 40,000 to

180,000 square feet. Kmart’s diversification into specialty retailing brought it close to

bankruptcy in 1995. Restructuring efforts have resulted in the conversion of many older

stores into the Big Kmart format featuring grocery sections, brighter décor and an

expanded selection of merchandise. These stores feature an expanded selection of

merchandise including private labels such as Martha Stewart, Sesame Street, Jaclyn

Smith and Kathy Ireland. In addition, new marketing concepts featuring the TV

celebrities Rosie O’Donnell and Penny Marshall are seen in almost every Kmart

commercial.

       The Super Kmart center is a new store prototype for the discount retailer that

features a full assortment of groceries as well as a broad selection of general merchandise

and apparel found at traditional Kmart stores. The offerings include fresh and frozen



                                            3
food, bakery and meats. There are also one-stop conveniences such as video rental, hair

salons, florists, banking, and one-hour photo processing. The Super Kmart centers are

open 24 hours a day and seven days a week. There were 102 Super Kmart centers as of

1998.

        Prior to 1996, Kmart had diversified into specialty retailing and international

operations in Mexico, Canada and Singapore, which nearly put them on the brink of

bankruptcy. During late 1995 and into 1996, they began a company wide restructuring

that included the divestiture of these international operations. Additionally, in 1997

Kmart discontinued operations of several subsidiaries including: Building Square, Border

Group, OfficeMax, Sport’s Authority, Thrifty Payless Holdings, Inc. Coles Myer, Ltd.

and Furr’s/Bishops, Inc.

        An additional part of the restructuring effort involved the availability of a private

label Kmart Credit Card to credit worthy customers. The credit card is offered though

Beneficial National Bank USA who now owns the accounts receivables and under the

terms of the purchase agreement, retains all of the credit risk associated with the credit

card.

        Kmart over the last few years have been restructuring their organization and as a

result has become the second largest discount retailer in the nation. This restructuring

has not been without financial cost in their performance. Kmart’s performance over the

1996-1998 period will be examined in detail in the remaining sections of the paper.

        Financial ratios are calculated from income statements and balance sheets to

evaluate Kmart’s management of assets to produce revenue. The ratios were compared to

industry averages cited from the Robert Morris Associates (RMA) for the year 1998.




                                              4
Kmart, Wal-Mart, and Target have captured 80% of the discount retail market share.

Consequently, the upper quartile should be used to analyze Kmart’s financial position.

However, RMA common size numbers generate the median ratios.                Therefore, this

analysis uses the median ratios to ensue proper comparison to the industry numbers.

Where RMA data was not available, median peer comparisons from Wal-Mart, Target,

Shopko, Ames and Costco were used provided by Bank of America Retail Peer Analysis

for 1998. The remainder of the paper will examine these financial ratios to provide a

benchmark and trend analysis for Kmart for the fiscal years 1996-1998. (Note: See

Appendix for Tables 1-7 for financial statements and ratio calculations).




                                            5
                                     Ratio Analysis

Liquidity Ratios

       Liquidity ratios measure a firm’s ability to meet its financial obligations. The

overall health of a firm has traditionally been measured by these ratios. The usefulness of

liquidity ratios is now changing as more companies are holding fewer current assets to

generate revenue. These ratios are still a good measure for this industry because the

discount retail industry does rely on a large amount of current assets to generate revenue.

The meaning of high and low ratios are judged based on the relevant industry norms.



                                       Current Ratio


       Current Ratio = Total Current Assets
                       Total Current Liabilities

Items in this table represent percentages of total assets.

               Account                         1996            1997      1998     RMA
 Cash & Equivalents                           2.88%           3.67%     5.01%     14.3%
 Merchandise Inventories                      45.11           46.96     46.14       36
 Other Current Assets                          6.91             4.51      4.12      .8
 Total Current Assets                         54.9%          55.14%    55.27%    53.60%
 Current Maturities of Long-term debt         1.09%            .58%      .54%      2%
 Trade Accounts Payable                       14.06           14.18     14.45      17.3
 Accrued Payroll & Other Liabilities           9.09           7.85      9.59      7.9
 Taxes other than income taxes                  .97           1.54      1.47      N/A
 Total Current Liabilities                    25.21%         24.15%    26.06%    33.8%
 Current Ratio                                 2.15           2.28      2.12      1.6


       The current ratio is a measure of total current assets to total current liabilities.

This indicates a firm’s ability to meet its current obligations with cash, inventories or




                                              6
other liquid current assets. A high ratio usually indicates that a firm is better able to meet

liability obligations.

Benchmark:

        Kmart’s current ratio is 27% above the industry norm. It appears that Kmart is in

a better position to meet its obligations than the industry. The company’s common sized

statements relative to the industry can explain this relation to the industry. Current assets

are 3% greater than the industry; while the current liabilities are 23% lower than the

industry. Thus, the current ratio is greater than the industry.

        A closer look into the elements of the ratio indicates a heavy reliance on

inventory, which is 28% above the industry norm. The company also has in comparison

to the industry low cash balances (64% less). Kmart’s current assets are 3% greater than

the industry. The most significant feature of current liabilities is trade accounts payable

at 16% less than the industry. In addition, current maturities of long term debt of accrued

payroll are less then the industry in relative common-size figures. Thus, the current

liabilities of Kmart are 23% lower than the industry.         Although Kmart is carrying

significantly less current liabilities it is also carry much less cash and much more

inventory than the industry.

        However, Kmart’s cash management appears to be adequate even with the stated

lower cash balances. In reviewing the cash flow statement, net cash after operations was

a positive $2,011M for fiscal year end 1998. Kmart had adequate cash flow coverage to

pay their current maturities of long term debt, interest expense and income tax expense.

Kmart’s net capital expenditures of $1,113M were also covered by cash flow. Kmart’s

remaining cash balance was $710M for the year 1998. However, it is important to note




                                              7
that net cash flow operations had been on a 52% decline for the three year period 1996-

1998. In addition, Kmart has a revolving credit agreement of $2.5 billion that provides

Kmart the continued flexibility in their cash management practices.

         Taking into consideration both common size and cash flow statements it appears

that inventory management may be the primary problem. As seen later in the inventory

ratios, Kmart holds above the average norm of inventory resulting in their higher costs of

goods sold. In order to better evaluate Kmart’s liquidity, the quick ratio will be reviewed

below.

Trend:

         The current ratio over the last three years has remained stable due to the stability

of the current assets and current liabilities as a percentage of total assets.    Current assets

grew 1% while current liabilities grew 2% over the entire period and thus, the 1998 ratio

is somewhat less than the 1996 ratio.

                                         Quick Ratio


         Quick Ratio = Cash and Equivalents - Inventory
                             Total Current Liabilities


                Account                         1996         1997         1998        RMA
 Cash & Equivalents                            2.88%        3.67%        5.01%       14.03%
 Trade Accounts receivable                        0             0            0          2.5
 Other Current Assets                           6.91          4.51         4.12          .8
 Total Current Assets less inventory           9.72%        8.18%        9.13%        17.6%
 Current Maturities of Long-term debt          1.09%         .58%         .54%         2.0%
 Trade Accounts Payable                        14.06        14.18        14.45         17.3
 Accrued Payroll & Other Liabilities            9.09          7.85         9.59         7.9
 Taxes other than income taxes                   .97          1.54         1.47        N/A
 Total Current Liabilities                    25.21%       24.15%       26.06%        33.8%
 Quick Ratio                                     .38           .34          .35          .4


                                               8
        The quick ratio is considered a more accurate measure of a firm’s ability to meet

its current liabilities.   In calculating this ratio, inventory is subtracted from the total

current assets because it is the most commonly inflated and least liquid current asset.

Benchmark:

        Kmart’s quick ratio of .35 relative to the industry ratio of .4 indicates that the

company is reliant on inventory to meet its obligations. Kmart’s current assets minus

inventory is 9.13% of total assets in comparison to the industries 17.6%. This reliance

upon inventory to meet current obligation is usually a bad situation. Kmart’s lower quick

ratio compared to the industry can be further explained by the fact that Kmart’s inventory

represents 83% of its current assets, which is significantly higher than the industry

average of 67%.

        The current liabilities are lower than the industry and have been discussed

previously in the current ratio. While, the current liabilities is only 23% less than the

industry, the current assets minus inventory is 48% is less than the industry.

Consequently, the quick ratio is less than the industry by 12.5%.

Trend:

        The quick ratio over the last three years overall has remained stable due to the

stability of the current assets and current liabilities as a percentage of total assets.

However, with a 6% drop in current assets minus inventory and a 2% increase in current

liabilities, the ratio has slightly declined over the three year period. In addition to

liquidity ratios, asset management ratios will highlight the company’s strengths and

weaknesses.




                                              9
Management Ratios

                                  Sales Receivable Ratio

       Sales / Receivable = Net Sales
                          Trade Receivables


       This ratio measures the number of times receivables turn over in a year relative to

sales. This determines the time between a sale and actual collection. The credit terms

and quality of receivables can be measured using this ratio relative to the industry.

Another way to view this ratio is in the number of days the receivable remains on the

company’s books. This ratio will be discussed with the Days in Accounts Receivable

ratio below.



                                  Days Receivable Ratio


       Days Receivables =            365
                              Sales/ Receivables Ratio

       Day’s Receivables ratio tells how many days on average it takes to collect on

sales. If this number is high, it indicates that there are some accounts that are aging and

may never be collected. It may also indicate loose credit policies and poor collection

processes. In some extreme cases, it can reveal poor internal controls and processes in

accounting such as cash collection and reconcilement of accounts. Kmart does not carry

any account receivable due to the sale of their credit card to Beneficial National Bank

USA. According to the terms of the sale, Beneficial retains all credit risk for credit card

receivables. Because of Kmart’s zero trade receivables these ratios are not relevant to our

analysis other than to note that Kmart is atypical of their peers.



                                             10
                                       Inventory Growth

                Account                       1996       1997        1998       RMA
   Inventory percent to total assets         44.48%     46.96%     46.14%      36.00%
   Inventory                                $6,354M    $6,367M    $6,536M       N/A
   Inventory Growth                           N/A        .20%       2.65%       N/A

       Inventory has remained relatively stable for the past three years. However, in

comparison to the industry as seen in the above table, they are holding excessive

inventory.    Inventory days on hand (inventory turnover) is approximately 30 days

(4.06x) greater than (less than) the industry average of 61 days (5.0) as seen below.



                              Cost of Sale Inventory Ratio


       Cost of sales / Inventory = Cost of sales
                                    Inventory


                Account                    1996        1997       1998        RMA
     Cost of goods sold                   77.58%      78.15%     78.16%      67.60%
     Inventory                            44.48%      46.96%     46.14%      36.00%
     Cost of Sales/Inventory Ratio         3.84        3.95       4.06         5.0


       This ratio measures the number of times inventory is turned over during the year

in terms of dollars.   High and low turnover relative to the industry could mean either

poor inventory management (high turnover) or poor utilization of related resources (low

turnover).


                            Days Inventory Ratio (INVDOH)


       Days Inventory =                 365
                              Cost of Sales/Inventory



                                              11
          Account                    1996         1997        1998      RMA
          Turnover Ratio              3.84         3.95        4.03      6.0
          (INVDOH)                   95.09        92.40       90.64      73

       Inventory days on hand measures how long the company holds inventory before it

is sold. Kmart’s 90.64 days is (18 days longer than the industry) shows a very serious

problem that ripples through the entire company’ financial statements and operations.

This ratio supports previous evidence that the company is experiencing inventory control

and management problems.

Benchmark:

       The cost of sales is 15% higher than the industry average; a significant difference

that could be attributed to a poor distribution system, poor sales management and

ineffective purchasing practices. Inventory is 28% above the industry average indicating

Kmart may be experiencing inventory management problems. Since inventory exceeds

the industry by a greater magnitude than cost of sales exceeds the industry, the cost of

sales/inventory ratio is less than the industry and as a result inventory days on hand is

greater than the industry average.

Trend:

       Inventory days on hand has been declining due to a 7.9% growth in cost of sales

versus a 2.9% growth in inventory over the 1996-1998 period.

                              Cost of Sales Payables Ratio

       Cost of Sales / Payables = Cost of sales
                                Trade Payables


Account                                       1996         1997     1998     RMA
Cost of Sales                                77.58%       78.15%   78.16%   67.60%
Accounts Payables – Trade                    14.06%       14.18%   14.45%   17.30%
Cost of Sales Payable Turnover Ratio          12.14        13.08    12.86    10.9


                                             12
       This measurement of liquidity measures the number of times account payables

turnover in one year and can provide numerous insights into the operations of a company

including how well they are working with vendors in its supply chain.         A downward

trend or a low ratio compared to industry standard may be indicative of cash flow

problems or turmoil between the corporation and its suppliers.



                             Days Payable Ratio (APDOH)


       APDOH =                        365
                       Cost of Sales/Payables


           Account                      1996       1997       1998        RMA
           Cost of Sales               77.58%     78.15%     78.16%      67.60%
           Payable Turnover Ratio       12.14      13.08      12.86       18.6
           APDOH                        30.06      27.91      28.39       33.0


       The cost of sales/payable ratio is utilized to derive the number of days payable

which provides a measurement of the length of time between the purchase on account and

the time the account is settled. It is not uncommon for companies to take liberties with

the payment of accounts, stretching the credit terms or riding their trade.

Benchmark:

       Cost of sales is trending upwards to 78.16% in 1998 which is 16% above industry

average.   As seen in the accounts payable common size percentages, Kmart is holding

approximately 16.5% lower on average than the industry standard. Since the cost of sales

is greater than industry average and accounts payables are less than the industry average;




                                             13
cost of sales/payable ratio for Kmart is greater than the industry and accounts payable

days on hand is less than the industry.

Trend:

         Cost of sales has grown 7.9% over 1996-1998 while accounts payable increased

1.9% over the same period. As a result, the turnover got larger and the days got smaller

over the three year period.    Per notes to the 1998 financial statements, Kmart reported

higher promotional and occupancy cost as a contributing factor for the increase in cost of

sales.     Because Kmart is paying their trade payables 4.61 days quicker than the industry

Kmart is using approximately $319 more cash than they would if they were more in-line

with the industry average of 33 days.

         Kmart’s accounts payable days on hand are less than the industry average. They

are paying an average of 14% faster, with an average of 29 days relative to the industries

33 days.


                                      Operating Cycle


Accounts Receivable Days on Hand (ARDOH) + Inventory Days on Hand (INVDOH)


                                  Cash Conversion Cycle


Accounts Receivable Days on Hand (ARDOH) + Inventory Days on Hand (INVDOH) –
Accounts Payable Days on Hand (APDOH)

Elements                        1996              1997           1998            RMA
ARDOH                             0                 0              0               2
INVDOH                          95.09             92.40          90.64            73
APDOH                           30.06             27.91          28.39            33
Operating Cycle                 95.09             92.40          90.64            75
Cash Conversion Cycle           65.02             64.49          62.25            42



                                             14
Operating Cycle

         The operating cycle is the time to acquire or to manufacture inventory, sell the

product and collect the cash. The operating cycle is usually less than one year for most

industries. As seen in the Kmart’s operating cycle of 90.64 days and the industry

standard of 75 days, the discount retail industry is an example of a shorter operating

cycle.

Benchmark:

         Kmart’s operating cycle is 20.85% longer than the RMA industry average. The

operating cycle for 1998 is 90.64 days in comparison to the industry of 75 days.

Trend:

         Inventory days on hand has been declining due to a 7.9% growth in cost of sales

versus a 2.9% growth in inventory over the 1996-1998 period which has caused the

operating cycle days to improve the 4.68% as indicated above. As previously stated

Kmart does not retain credit risk on their credit card receivables therefore ARDOH is

zero.

                                 Cash conversion cycle:

 The amount of time expressed in number of days required to sell inventory and collect

accounts receivable less the number of days credit is extended by suppliers.

Benchmark:

         The cash conversion cycle is 48.21% longer than the RMA industry average. The

cash conversion cycle for 1998 is 62.45 days in comparison to the industry of 42 days.




                                            15
Trend:

       With INVDOH declining at 5% and APDOH also declining at 6% for the period,

the cash conversion cycle has decreased. The operating cycle is, as stated above is also

longer than the industry having a 20.85% impact on the cash conversion cycle. Kmart’s

accounts payable days on hand are less than the industry average. They paying an

average of 14% faster to pay, with an average of 29 days relative to the industries 33

days. Kmart's cash conversion cycle has improved by 4.45% over the three year period

1996-1998, however still remaining 20.45 days longer than the industry.



                            Sales / Net Working Capital Ratio

       Sales / Working Capital =         Net sales
                                       Net working capital


Account                                   1996     1997               1998          RMA
Net Sales                               $31,437M $32,193M          $33,674M        See note
Total Current Assets                     54.13%   55.14%             55.27%        53.60%
Total Current Liabilities                25.21%   24.15%             26.06%        33.80%
Net Working Capital                      28.92%   30.99%             29.21%        19.80%
Sales/Net Working Capital Ratio           7.61      7.66              8.14          12.7
Note: RMA sales data was not input because it was not comparable to Kmart which is one of the
top three retailers making up 80% of the discount retail market share.

       This ratio provides a measurement of how well working capital, the difference

between current assets and current liabilities, is being utilized within the organization. In

essence this ratio tells us for every dollar of new working capital invested in 1998 $8.12

of sales were generates revenues compared to the industry $12.40 in sales. The long-

term survival of an organization is partially dependent on how well it manages current

operations. The firm must strategically plan for a targeted range of current assets and

plan for their financing.



                                             16
Benchmark:

       The sales/net working capital ratio has tracked below the industry average for the

past three years. The ratio has increased from 7.61x in 1996 to 8.14x in 1998 in

comparison to 12.7x to the industry. Sales/net working capital ratio is 35.91% lower than

the industry.

       Current assets are slightly higher than the industry while current liabilities were

29% lower than the industry standard. As a result, Kmart’s sales to net working capital

ratio is less than the industry.    This disparity in current assets and current liabilities

relative to the industry could indicate that financing of current assets may be taking place

with long- term liabilities.   As a result of Kmart’s net working capital is 48% greater

than the industry. This large net working capital is driving the ratio down relative to the

RMA industry average.

       The working capital of the discount store industry can fluctuate due to seasonal

levels net of trade accounts payable, profitability, and the level of store openings and

closings. Kmart ended 1998 with an increase in its number of stores for the first time in

five years. Kmart’s primary sources of working capital are cash flows from operations

and borrowings under its credit facilities.

Trend:

       Sales increased by 7%, while net working capital only increased by.2% for the

1996-1998 period, resulting in an increase in the sales/net working capital ratio.




                                              17
                                  Sales / Net Fixed Assets

       Account                 1996                 1997                 1998             RMA
Net Sales                    $31,437M             $32,183M             $33,674M          See note
Net Fixed Assets          34.4%/ $5,740M       40.2%/ $5,472M       40.4%/ $5,914M       37.5%
Net Sales/Net Fixed            5.48                 5.88                 5.69             8.5
Assets Ratio
 Note: RMA sales data was not input because it was not comparable to Kmart which is one of the
 top three retailers making up 80% of the discount retail market share.


        This ratio shows the effectiveness of the use of fixed assets in a business to

 produce sales. There is not a serious distortion in the yearly ratios from year to year,

 which represents fixed assets not being largely depreciated or fixed assets are being

 replaced/added at the same rate as depreciation. Surprisingly, the intense use of labor in

 this form of business has not affected or distorted the ratios from year to year. When

 compared to the industry the ratio is considerably low. This may be the result of an over

 investment of its fixed assets or a large amount of leasehold improvements. Since

 leasehold improvements can only be depreciated on a straight-line basis and not at an

 accelerated basis. If Kmart held a large percentage of leasehold improvements versus the

 percentage of buildings, the net fixed assets would be larger than their peers attributing to

 the discrepancy in the ratio.

        Care must be taken when using this ratio to compare other firms. Inflation may

 have caused the values of some of the older assets to be seriously understated. Older

 assets may have also been depreciated by a greater amount. The result of such a

 comparison is that an older firm who acquired its assets years ago at lower prices may

 have a higher turnover ratio of fixed assets. In addition, firms using an accelerated

 depreciation versus a straight-line method would have a higher turnover ratio.




                                              18
Benchmark:

       Net fixed assets are 40.4% to total assets while the industry is only 37.5%.

Because of Kmart’s reliance on net fixed assets relative to the industry, the net sales/net

fixed assets ratio is 33.06% lower than the industry.

       Kmart leases 95% of all their facilities while the peers in the industry own the

majority of their facilities. It appears that due to this ownership difference, the peers in

the industry are able to depreciate their fixed assets on an accelerated depreciation

method versus the straight-line amortization on leasehold improvements used by Kmart.

As a result, Kmart’s net fixed assets are higher than the industry as previously stated

above. Refer to above Net Fixed Assets/Tangible Net Worth ratio for further details

regarding Net fixed Assets.

Trend:

       Sales increased by 7% while net fixed assets increased by 3.9% over the three

year period. As a result, sales/total net fixed assets has increased over the three year

period. Sales increased faster than Kmart’s net fixed assets is again indicative of Kmart’s

leasing rather than owning stores.



                                  Net Sales / Total Assets

              Account                   1996          1997          1998         RMA
    Net Sales                         $31,437M      $32,183M      $33,674M       See note
    Total Assets                      $14,286M      $13,558M      $14,166M       See Note
    Net Sales/Total Assets Ratio        2.20          2.37          2.38           2.6
Note: RMA sales and assets data was not input because it was not comparable to Kmart which is
one of the top three retailers making up 80% of the discount retail market share.




                                             19
         Again, this ratio is a measure of management's ability to utilize its assets, in this

case all of its assets.   It appears that Kmart is only able to generate $2.38 versus their

industry peers generating $2.60 in sales for every $1 of assets. Thus, it appears that

Kmart is somewhat less efficient. This ratio is slightly lower than the industry average

due to the higher inventory and low cash balances. As stated above an effort should be

made however to increase sales volume to improve the ratio. Another option for

improvement would be to improve its current asset turnover by improving inventory

management, which will improve its total asset turnover, thus improving the net sales-

total asset ratio.

Benchmark:

         The net sales/total assets ratio is 8.46% less than the industry average.

Trend:

         Sales increased by 7% while net total assets decreased by 1% over the three year

period. As a result, sales/total net fixed assets has increased over the three year period by

8.18%. With the new Big-K format, sales have increased with the introduction of new

lines. In addition, total assets have decreased slightly due to the other assets listed on the

financial statements. The notes to the financial statements did not include an explanation

as to what is comprised in the other asset accounts, both short-term and long-term.




Coverage Ratios

         Coverage ratios measure the ability to service debt from operations.

                                       EBIT / Interest

         EBIT/Interest =        EBIT____
                               Interest


                                              20
  Account/Item                             1996       1997        1998       RMA
  Earnings Before Interest and Taxes      2.49%      2.43%       3.24%       5.5%
  Interest                                1.44%      1.13%        .87%        .5%
  EBIT/Interest Ratio                      1.73       2.15         3.72      12.2


       This ratio shows how well a firm is able to meet interest payments.    In 1998,

Kmart’s operating income would cover their interest cost 3.72 times relative to the

industry norm of 12.2 times.

Benchmark:

       The EBIT/Interest ratio is 3.72x in comparison to the industry average of 12.2x.

Earnings before interest and taxes has tracked below the RMA average for the three-year

period. In 1998, Kmart’s EBIT was at 3.24% versus the industry average of 5.5%. In

addition, interest has decreased by 39.6% over the past three years. However, interest

expense of .87% for 1998 remains above the industry standard of .5%. With EBIT

significantly below the industry norm of interest near the norm, the coverage ratio is

significantly below the RMA average of 12.2.

Trend:

       EBIT increased 30% while interest decreased 39.6% over the 1996-1998 period.

Therefore, TIE increased by 115%. This is further validated by total debt dropping from

57.5% to 50.5% of total assets.



                                       Total Debt / EBIT

              Account                    1996      1997        1998       Median Peer
                                                                          Comparison
Total Liabilities                      57.50%     52.68%     50.85%          N/A
EBIT                                    2.49%      2.43%      3.24%          N/A
Total Debt/EBIT Ratio                   10.49       9.15        6.6           4.3


                                           21
       Total debt to earning before interest and taxes indicates the amount of debt the

company has it relates to the EBIT (operating income). For example, in 1996, Kmart had

$10.49 of debt to every one dollar of EBIT, $9.15 and $6.60 for 1997 and 1998

respectively. In essence in 1998, it took $6.60 of debt to generate $1 of operating

income. This ratio remains high in comparison to the median peer comparison.

       Kmart’s improvement by continued reduction of total liabilities was due to the use

of cash from operations to pay down their term debt, mortgage notes and medium term

notes. This reduction of liabilities was offset by the issuance of Commercial Mortgage

Pass Through Certificates (CMBS) mortgage loans, which are subject to interest and

principal payments with a maturity date of February 2002. Total debt also includes a

$2.5 billion revolving credit agreement; however, no outstandings were reported for

1996-1998. However, the revolving credit agreement allows Kmart to carry much lower

cash balances than their peers.


                              Debt Service Coverage Ratio

                     Account                       1996         1997        1998
    Net Income                                   $(189M)       $298M       $568M
    Depreciation                                    654          660         671
    Amortization                                     0            0           0
    Interest Expense                                453          363         293
    Total Cash Available for Debt Service         $913M       $1,321M     $1,532M
    CMLTD                                          $156          $78         $77
    Interest Expense                                453          363         293
    TOTAL DEBT Service                            $609M        $441M       $370M
    Cash After Debt Service                       $304M        $880M      $1,902M
    Debt Service Coverage Ratio                    1.49         2.99        4.14


Traditional Debt Service:      Operating Income + Deprec .+ Amort .+ Interest Expense
                               Current Maturity Long Term Debt + Interest Expense


                                            22
       Traditional debt service coverage is the measurement of a company’s ability to

service its current maturities of long-term debt and interest owed on that debt. Kmart

debt service coverage of 1.49,2.99 and 4.14 for fiscal years ending 96-98 respectively has

improved for the last three years. This increase in the ratio is attributed to the large

growth in net income of 213.08% and 108.03% coupled with the decrease in total debt

service of 16%.

       Kmart leases 2,051 of their facilities. The terms of the leases are 25 years with

multiple five year renewal options the allows the company to extend the life of the lease

up to 50 years beyond the initial term. The following ratios illustrates the companies

ability to repay their debt taking rental expense or lease expense into consideration rather

than the traditional debt service coverage ratio above.


                    EBITDAR / Interest Expense + Rental Expense

                   Account                         1996          1997          1998
    EBIT                                          $783M         $781M        $1,091M
    Depreciation                                    654           660           671
    Amortization                                     0             0             0
    Rent/Lease Expense                              442           478           524
    EBITDAR                                      $1,879M       $1,919M       $2,286M
    Interest Expense                                453           363           293
    Rental/Lease Expense                            442           478           524
    TOTAL                                         $895M         $841M         $817M
    EBITDAR/(Interest +Rent Expense)               2.10x         2.28x         2.80x

       This ratio represents the amount of coverage the company has in order to pay their

interest expense and lease expense. This ratio is adding back non-cash expense of

depreciation and amortization besides the cash expense of rent to calculate total

EBITDAR. The continuing trend is a positive trend due to increased EBIT, EBITDAR



                                            23
and the decreased in total interest expense. The lower interest expense is due to the

paydown of long term debt, is more than offsetting the increasing lease expense.



                      EBITR / Interest Expense + Rental Expense

                 Account                    1996         1997        1998    Median
                                                                               for
                                                                              Peers
   Net Income                              $783M       $781M       $1,091M     N/A
   Rent/Lease Expense                        442         478          524      N/A
   EBITR                                  $1,225M     $1,259M      $1,615M     N/A
   Interest Expense                          453         363          293      N/A
   Rental/Lease Expense                      442         478          524      N/A
   TOTAL                                   $895M       $841M        $817M      N/A
   EBITR/Interest +Rent Expense             1.37        1.50         1.98      3.4

       This ratio represents the amount of coverage the company has in order to pay their

interest expense and lease expense. This ratio does not add back non-cash expenses as

seen above.    This ratio is also a standard industry ratio for discount retail stores.

Although, Kmart’s ratio is trending towards a positive direction, in comparison to the

median for the peers in the industry that include; Wal-mart, Dayton Hudson, Costco,

Shopko and Ames, they are significantly lower. The median peer EBIT margin is

approximately 3.9% versus Kmart’s 3.24% margin. The lower ratio in comparison to

their peers is attributed to the lower EBIT margin. The peer analysis of the expense side

of the ratio was not available for comparative purposes for this analysis.




Leverage Ratios

       Leverage ratios measure the extent of the organization’s financing with debt. It is

a measurement of the capacity and ability to meet long-term obligations. The leverage




                                            24
ratios compare the funds supplied by business owners with financing supplied by

creditors. This debt financing involves risk associated with the payment of principal and

interest. However, the firm may earn more on these investments than it pays in interest

that results in the return of the owner’s capital being favorably leveraged. Debt financing

also has the advantage of not diluting stockholder ownership.



                                        Fixed / Worth

        Fixed / Worth =      Net fixed assets
                            Tangible net worth


                Account                   1996       1997        1998         RMA
       Net Fixed Assets                  40.18%     40.36%      41.75%       37.50%
       Net worth                         42.50%     47.32%      49.15%        48.0%
       Less Intangible Assets                0          0           0            0
       Tangible Net Worth                42.50%     47.32%     49.15%          48%
       Fixed Assets/ TNW                   0.95       0.85        0.85         0.80


        This shows to what extent the company has invested its capital into the fixed

assets of plant and equipment. A smaller ratio shows a relatively small investment into

these fixed assets, providing more liquidity for creditors.       A higher number would

indicate a greater risk to these creditors.

        Kmart’s Fixed/Worth ratio is only slightly larger than the industry standard and

may be attributed to the number of stores in the chain compared to the industry. Per

notes to the financial statements Kmart’s fixed assets are comprised of 40% capital leases

and leasehold improvements, and 48% is invested in furniture and fixtures.               The

concentration of fixed assets in furniture and fixtures is attributed to the investment in the

Big Kmart stores, which require additional refrigeration equipment for the grocery



                                              25
section (The Pantry). As stated previously, Kmart leases 95% of their facilities also

attributed to the higher fixed assets compared to the industry because the amortization

method used for financial statement purposes is straight-line method over the estimated

useful life of the assets.

Benchmark:

        Net fixed assets are 11.3% greater than the RMA and tangible net worth is 2.4%

greater than the RMA. Since net fixed assets exceed the industry average the fixed

assets/total net worth is greater (.85) than the industry average (.80).

Trend:

        The tangible net worth has shown an upward trend for the past few years with an

increase of 15.65 % from 1996 to 1998. The net fixed assets during the same period has

only increased by 3.9%. Since the total net worth increased faster than net fixed assets

over the period, this ratio has declined.



                                        Debt / Worth


        Debt / Worth = Total Liabilities
                      Tangible Net Worth


                 Account                1996         1997       1998        RMA
         Total Liabilities             57.5%        52.68%     50.85%      52.00%
         Tangible Net Worth            42.5%        47.32%    49.15%        48.0%
         Total Debt/TNW Ratio           1.35         1.11       1.03         1.08


        This ratio shows the capital contribution relationship between creditors and

owners and is sometimes referred to as the degree of advantage. A highly leveraged firm

will not have as much flexibility to borrow in the future as one with a higher debt/worth


                                               26
ratio. A higher ratio indicates that the corporation is utilizing a large amount of debt to

finance its business operations on a daily basis. It would appear that Kmart is marginally

below their peers in the usage of debt.

Benchmark:

         Total liabilities are 2.2% lower than the RMA industry average and tangible net

worth is 2.4% higher than the RMA average. As a result, Kmart’s debt/worth ratio of

1.03x similar to the 1.08x RMA average.

Trend:

         As a result of total liabilities decreasing by 12% while net worth has increased by

16% over this period. Kmart’s debt/worth ratio has improved by 23.7% during the three

year period 1996-1998.

         The company has paid down their long-term notes with cash, but also issuing

convertible preferred securities. These securities are convertible to 3.33 shares of Kmart

stock.    Kmart also has a $2.5 billion dollar Revolving Credit Agreement that was

amended in 1997 with maturity extensions and reduced interest rate spreads. In 1998, the

company believed that its current financing arrangements would be sufficient to meet

their liquidity needs for operations and capital.



Profitability Ratios

         Profitability ratios are a useful tool in the evaluation of management performance.

                                  Net Income Growth Rate

                        Account                       1996      1997       1998
          Net Income                                $(220)M    $249M      $518M
          Net Income Growth Rate                      61%     213.18%    108.03%



                                             27
       Net income growth rate as seen in the table above improved significantly for

years 96, 97 and 98. The loss in 1996 is attributed to a decrease of .9% in sales from the

previous year which can be attributed to the sale of the Mexican and Canadian

international operations. Kmart also closed 48 stores in 1996, which was offset partially

by the opening of 21 new stores. In addition, FYE 1996 had one less week during fiscal

year 1996 decreased sales. In addition Kmart at FYE 1996 reported a net loss of $451

from discontinued operations from the sales of the Builders Square subsidiary and also

the sale of a portion of an investment in Thrifty Payless Holdings.

       Net income for 1997 increased at a rate of 213.18%; primarily due to the opening

of the Big Kmart stores, the introduction of the Martha Stewart lines, Sesame Street kids

line and increased promotional activities. The net income increase was due to not only

the sales increase but to expense control. However, most of the large percentage increase

in net income was due to an 83% decrease in voluntary early retirement programs and a

91% decrease in interest expense. Sales increased by 2.37% for the FYE97. In addition,

SG&A expenses decreased by .89% due to the sale of the international operations and

management control of expenses by focusing on the core business lines.

       Net income for 1998 increased a second year in a row with the growth of

108.03% over 1997. This increase in attributed to a 4.63% growth in sales for FYE98

from the new Big Kmart store concept, the Martha Stewart lines, Sesame Street kids line

and private label Kathy Ireland line. In addition, SG&A expenses decreased by .52% for

the year, again for the reasons stated in the preceding paragraph.




                                            28
Although Kmart is reporting not only positive net income levels, but positive trends for

the past two years, their gross margins are significantly lower than industry as stated

above.



Margins

                           Gross Margin and Operating Margin

             Account                   1996          1997           1998        RMA
     Net Sales                      $31,437M      $32,183M       $33,67M       See Note
     Less COGS                         77.9          77.6           78.2         67.6
     Gross Margin                    22.42%        21.85%         21.84%       32.40%
     Less Operating Expenses          23.3%         20.0%          19.4%        26.9%
     Operating Margin                 2.46%         2.78%          3.30%        5.50%
Note: RMA sales data was not input because it was not comparable to Kmart which is one of the
top three retailers making up 80% of the discount retail market share.


          The Gross Margin and the Operating Margin both represent a company's ability

to translate sales dollars into profit. These margins are calculated at different stages of

measurement.

         The gross margin is the relationship between sales and the cost of product sold.

It is an accurate measurement in terms of the company's ability to control costs of goods

sold. Consideration is given to the company's ability to pass unavoidable price increases

to the customers. In most recent years, Kmart has remained consistent in its gross

margin, but it is substantially lower than the industry standard as seen above. The lower

gross margin can be attributed to Kmart's costs of goods sold being significantly higher

than industry standards.

         The operating profit margin measures overall operating efficiency. It incorporates

all expenses associated with the operations of the business. Kmart has been successful at



                                             29
improving its operating margin due to controlling operating expenses.         Operating

expenses were 19.4% in comparison to 26.9% industry average. Although, the operating

expenses were lower than industry, Kmart’s operating margin of 3.30x remains below

industry average of 5.50x. This again can be attributed to costs of goods sold exceeding

industry by 10.6%.



                                  EBITDA / Revenue


            Account               1996           1997        1998      Median Peer
                                                                       Comparison
   EBIT                          $783M         $781M        $1,091M        N/A
   Depreciation                   654           660           671          N/A
   EBITDA                       $1,437M       $1,441M       $1,762M        N/A
   Revenue                      $31,437       $32,183       $33,674        N/A
   EBITDA / Revenue               4.57          4.48          5.23         6.0


       The EBITDA or Earnings Before Interest, Taxes, Depreciation and Amortization

to Revenue ratio has become a valuable barometer to a company's success. EBITDA is a

measure of cash flow from the company’s operation. The assumption is that as EBITDA

steadily improves, debt will be repaid and a company's balance sheet is acceptable and

portrays a successfully run business. This ratio shows the raw earning power of the

business.

       Kmart has continued to improve this ratio and is .77 from meeting the "median

peer comparison". This comparison is made up of the top six retailers in the industry.

Contributions to Kmart's success in this ratio include better merchandising and improved

inventory management. Consumers are attracted to this form of the retail industry,

because of their value of brand names at discount prices.




                                            30
                 % Profit Before Taxes / Tangible Net Worth

                 Item                 1996           1997      1998       RMA
         Earnings Before Taxes       1.05%          1.30%     2.37%       5.00%
         Tangible Net Worth          42.5%         47.32%    49.15%        48%
         % EBT/TNW Ratio             5.43%          6.52%    11.46%       31.9%

       EBIT divided by tangible net worth reflects the rate of return on tangible assets

within an organization. When combined with other ratios, it can be a useful management

tool but is more effective when compared to other ratios that provide a more detailed

analysis. A high number is usually indicative of successful management but may be a

false assumption if degree of capitalization and other factors are not considered.

Benchmark:

       Kmart’s EBT is approximately 52.6% below industry average due to the higher

COGS, which also resulted in lower gross and operating margins. The tangible net worth

is 2.4% higher than the industry average. Consequently, Kmart’s %EBT/TNW is

considerably lower than the industry average.

Trend:

       Kmart’s EBT/TNW has improved by 111% for the three year period ending 1996-

1998. This large growth has been due to EBT growing115% over the three year period

1996-1998 while TNW has only grown by 16%. However, as stated above Kmart is still

well below the industry norm. The upward trend of this ratio may be partially due to the

corporate goal to get themselves in the position of being able to direct large amounts of

capital into new opportunities without add debt.




                                             31
                            Profit Before Taxes / Total Assets

                 Item                  1996            1997            1998       RMA
    Earnings Before Taxes             1.05%           1.30%           2.37%       5.00%
                                     $330M           $418M           $798M
    Total Assets                    $14,286M        $13,558M        $14,166M       N/A
    % EBT/Total Assets Ratio          2.31%           3.08%           5.63%       12.3%
Note: RMA asset data was not input because it was not comparable to Kmart which is one of the
top three retailers making up 80% of the discount retail market share.



       This ratio is a representation of management's ability to utilize the resources

available. It expresses the ratio of pre-tax returns on total assets.

Benchmark:

       Earning before taxes of 2.3% is considerable lower than the industry average.

The low EBT is the major factor behind the EBT/Total Assets ratio being less than the

industry. EBT is approximately 52.6% below industry average due to the higher COGS,

which also resulted in lower gross and operating margins.

Trend:

       Kmart’s EBT/Total Assets ratio is trending upward since 1996; earnings before

taxes have increased over the 1996-1998 period by 142% while total assets decreased of

1%. As a result, EBT/Total Assets has been above the industry during this period.



Supplemental Key Industry Ratios

                                      Same Store Sales

                                                       1997         1998
                   K-Mart                              4.8x         4.8x
                   Wal-Mart                             6.0          9.0
                   Dayton-Hudson (Target)               5.0          6.1
                   Median Peer Comparison               4.8          6.5




                                              32
       Success with customers is measured by yearly sales gains. The Same Store Sales

quantitative indicator is one of the most closely watched indicators. It is defined as the

increase or decrease from the preceding year in sales at stores that have been open at least

one year. New stores are excluded since first year openings are often spikes in the

statistics for company’s sales history. The same store sales is an excellent barometer of

basic demand. Trends in this factor give a better indication of the state of the business

rather than a single month's number would. Kmart has had the same increase in sales for

the last two years.   Kmart’s same store sales has remained stagnant even though they

have been opening new stores. This stable ratio has been because Kmart, although

opening new stores, has also been closing stores at the same time in their effort to

restructure the company.

       Due to the lack of an upward trend in the rate of sales growth, management may

need to reevaluate new store positions and locations, which can impact this data. The

below median peer comparison also reflects stagnation in the growth of the company as

well as slow profit when compared to the other major players in the retail industry.


                              Sales / Square Foot (millions)

                                                   1997         1998
                  K-Mart                          $211M      $222(S)M
                  Wal-Mart                          347        371(G)
                  Dayton-Hudson (Target)            230        244(S)
                  Median Peer Comparison         $216M         $221M
                      (S) Designates sq. footage vs. (G) gross

       The Sales to Square Foot ratio is a measurement of how efficient the retailer is

using its assets. It gives credit to the designers/architects who design the buildings that

house the retailers as well as to the management and marketing staff who control its




                                            33
product presentation. It indicates how effective space, in this case square footage for

selling, is utilized. If the sales per square foot is low relative to other retailers in the same

sector a problem may exist. Some of the factors contributing to this problem are the sales

associate's performance, the customer base or the physical location of the business.

        Kmart's numbers in this ratio are impressive in that they have demonstrated

improvements and are presently slightly above the median peer comparison. It appears

they are utilizing their assets effectively; however, their lack of growth overall in the

market may be contributed to their lack of profitability from their product mix. Please

note: the s referred to in the table above denotes selling space per square foot while the

“G” represent gross square footage. For example: Kmart is reporting their selling per

square footage, (only the space used to sell) versus Wal-mart is reporting their

selling/square foot from their gross store square footage. The gross number is including

non-selling space, which inflates Wal-mart numbers in the peer comparison.




                                               34
Conclusion
The following table identifies key strengths and weaknesses identified through the
historical analysis of Kmart.
                     Strengths                                             Weaknesses
Cash: Kmart is maintaining positive net cash after         Cash: Cash balances are 64% less than the
operations to service their debt. However, net cash        industry. In addition, net cash after operations
after operations has declined 52% over the three year      has declined 52% over the three year period
period 1996-1998. The cash position could be views         1996-1998.
as a strength or weakness.
Kmart has a $2.5 billion revolving credit agreement.
Accounts Payable: APDOH is 4.61 shorter than the           Inventory: Kmart is carrying 28% above the
industry average resulting in Kmart paying 14%             inventory norm. INVDOH is 17.64 days longer
faster than the industry resulting in the use of cash of   than the industry resulting in a longer operating
approximately $319.                                        and cash conversion cycles resulting in the use of
                                                           cash of approximately $1,222.
EBIT/Interest: EBIT increased 30% while interest           Cost of Goods Sold: Cost of goods sold is 16%
decreased 39.6% over the 1996-1998 period resulting        above the industry average resulting in a lower
TIE increasing by 115%.                                    gross margin of 21.84% in comparison to
                                                           32.40% industry average.         In addition, the
                                                           operating margin is affected by cost of goods
                                                           sold at 3.30% versus the 5.50% industry average.
Sales Growth: Sales growth has improved 7.12%              Sales/net working capital ratio: Sales/net
over the three year period 1996-1997.                      working capital ratio is 35.91% greater than the
                                                           industry. It appears that Kmart is financing
                                                           current assets with long-term debt.
%EBT/Total Assets: Earnings before taxes of 2.3%           Same store sales: Same store sales remained
is considerable lower than the industry average. The       constant for 1997 and 1998 and was lower (4.8x)
%EBT/Total Assets ratio is less than the industry.         than the industry 6.5x for 1998.
EBT is approximately 52.6% below industry average
due to the higher COGS which resulting in lower
gross margins and operating margins. Earnings
before taxes have increased over the 1996-1998
period by 142%.
EBITR/ Interest Expense+Rent Expense: The                  Sales/net fixed assets: Sales increased by 7%
median peer EBIT margin is approximately 3.9%              while net fixed assets increased by 3.9% over the
versus Kmart’s 3.24% margin. The lower ratio in            three year period. As a result, sales/total net
comparison to their peers is attributed to the lower       fixed assets has increased over the three year
EBIT margin.                                               period.
Income growth: Income grew 201% over the three             Leases vs. Own: Kmart leases 2,051 and owns
year period. However, due to expenses associated           110 of their facilities.
with divesting subsidiaries, Kmart reported losses for
fiscal year ended 1996. In addition, Kmart booked
expenses for early retirement programs.
Debt Service Coverage: Debt service coverage is
4.14x for 1998 versus 2.99x. This increase in the
ratio is attributed to the large growth in net income of
213.08% and 108.03% coupled with the decrease in
total debt service of 16%.
       Kmart’s income grew 201% over the past three years due to improved

merchandise assortments and roll out of the Big-K format. Additionally, the absence of a

$114M expense for voluntary early retirement was a contributing factor to the income

growth. Although cash balances are significantly lower than the industry, Kmart appears

to manage their cash position with reported positive net cash after operations for the past

three years.

       Kmart’s performance is trending upward for the past three years in comparison to

1995 when they were on the verge of bankruptcy. Sales have continued to increase an

average 7.12% for the past three years. In addition, Kmart has reduced interest expense

through debt restructuring and pay downs of long-term debt.             Although Kmart is

improving their debt structure, asset management practices could be improved.

       Kmart’s primary weakness is their inventory management practices. As seen in

the analysis and above table, inventory has slightly declined in the past year, however

they are still above the industry average by 28%. In addition, cost of good sold is 16%

higher than the industry. This has resulted in a higher INVDOH by 17.64 days greater

than the industry resulting in an effect of $1,222M. Kmart’s management needs to focus

on examining the problem in inventory management control. Inventory management is a

critical aspect in the discount retail industry because it is their primary source of revenue

generation. In addition, Kmart is paying their trade payables faster than the industry by

4.61 days resulting in a $319 use of cash.

       Kmart leases 95% of their facilities. The remaining competitors in the industry

own the majority of their facilities. Because of differences in depreciation methods of

straight-line amortization (leases) and accelerated (owning the building), Kmart’s net




                                             36
fixed assets are higher than the industry. Kmart has signed 25 year leases with 5 year

renewable options. It appears the new store opening are being bought, rather than leased,

and are included in the 110 stores owned.

        Kmart’s same store sales are also lower than the industry caused by recent store

closings and openings. Kmart has closed many stores, while opening others utilizing the

Super K centers. As a result, Kmart’s ratio has been biased down since the new stores

are not included in the ratio. This discount retail industry ratio subtracts out the current

year sales of the new stores to determine same store sales. This ratio ensures that new

store opening do not inflate store sales figures each year. Therefore, this ratio is a critical

part of historical analysis for the discount retail industry.

        This historical analysis provides a financial overview of the companies

performance over the past three years 1996-1998. The main strengths and weaknesses of

Kmart are identified in the above table, which were validated in the ratio analysis

throughout the paper. The fourth stage of this industry analysis project will provide

projections for the next three year period.

        We expect Kmart to grow at approximately 6.5% increasing at a rate of 2% each

year. This increase is expected due to the opening of the Big K format stores during the

next three years. Cost of goods sold will continue to increase at the rate of sales also

contributed from the opening of new stores for the next three years. Overall net income

will increase due to the increase in sales, controlled SG&A expenses and the absence of

loss of discontinued operations. The sale of all Kmart’s discontinued operations should

be completed by the end of 2000.




                                               37
       Due to the sales increase and cost of goods sold and new store openings;

inventory on the balance will increase at the rate of sales. The continued change of

Kmart’s format into the Big-K layout will result in an increase in fixed assets contributed

to the refrigeration equipment and expansion of facilities. Kmart has also entered into a

new revolving credit agreement of $40.6MM for working capital will result in continued

decreasing cash balances. Overall, Kmart is expected to continue to report positive

results for the next three years. The main resources used in this paper were the 1996-

1998 audited financial statements, RMA industry data and Bank of America Retail Peer

Analysis.




                                            38
APPENDIX
Financial Statements and Ratios




              39
                                   Bibliography

Laney, Janice. Bank of America Retail Peer Analysis, 1998. Pgs. 62-70.

Kmart Corporation. Audited Financial Statements, 1996-1998.

Robert Morris and Associates Industry Data., 1998. Pgs. 654-655.




                                          40

				
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