Kmart to Restate Financial Results
Kmart Corp. said Monday that it would restate financial results from 1999-2002 because of errors in how it recorded leases and payments to vendors, but it stressed the changes would not hurt liquidity.
“We do not expect this restatement to affect our ability to conduct business,” Chief Financial Officer Al Koch said.
Kmart, facing a Securities and Exchange Commission probe, had said it would have to restate earnings because of other accounting issues.
Kmart, which filed for Chapter 11 bankruptcy protection in January after weak holiday sales and stiff pricing competition left it strapped for cash, also said it has begun repaying lenders who gave it the debtor-in-possession financing that allowed it to stock merchandise for the 2002 holiday season.
As of Friday, Troy, Mich.-based Kmart had $495 million of borrowings outstanding and had used $330 million of its debtor-in-possession credit facility for letters of credit.
The company had $1.07 billion in debtor-in-possession financing available as of Friday.
Although the discovery of new accounting problems came as a surprise, one analyst said it reflected problems under Kmart’s previous management, not the managers currently trying to fix the company.
“At least we know that things are being fixed at the new Kmart,” said Richard Hastings, chief economist at Cyber Business Credit, a New York-based retail advisory firm.
The restatements will decrease Kmart’s net loss for the first half of 2002 by less than $100 million, the company said.
They will cause results over the last three fiscal years to be less than $100 million worse than previously reported.
In September, Kmart reported a $1.83-billion loss for the first half of 2002.
In reviewing its financial results, Kmart discovered it had not properly accounted for some of its leases, which will lead to an accounting adjustment to reduce future rent, Koch said.
It also discovered that it failed to properly record payments made to one unnamed vendor because of a computer error.
Kmart shares fell 2 cents to 54 cents on the New York Stock Exchange.
