Kmart Promotes President Julian C. Day to Chief Executive Officer As Company Prepares to Emerge from Chapter 11
James B. Adamson to Serve as Non-Executive Chairman Through Final Stages of Reorganization
Kmart Corporation (Pink Sheets: KMRTQ) today announced that President Julian C. Day has been named to the additional post of Chief Executive Officer, effective immediately. This appointment by Kmart's Board of Directors comes as the Company begins to implement a reorganized management structure and an emergence management team in anticipation of Kmart's exit from Chapter 11 reorganization on or about April 30, 2003. The Company said that the timing of this planned announcement was designed to afford Day adequate time to select additional key executives for Kmart's emergence team including a chief merchant and general counsel, as well as permanent finance leadership to succeed the interim services provided by principals of AlixPartners since March 2002.
As CEO, Day succeeds James B. Adamson, who will continue to serve as Chairman through the final stages of the Company's reorganization. Adamson will again serve in the role of non-executive Chairman, as he did in early 2002. The Board first appointed him to that position in January 2002 following disclosure of Kmart's financial difficulties and immediately preceding the commencement of the Company's Chapter 11 reorganization cases. Adamson was named CEO in March 2002, when he replaced former CEO Charles C. Conaway and severed the Company's employment arrangements with the remainder of Conaway's principal direct reports, recruited Day as President and COO, and retained principals from AlixPartners as interim chief financial officer and treasurer.
Kmart's Board of Directors issued the following statement: "We will be forever grateful for Jim Adamson's unwavering dedication to Kmart as an institution as well as its employees and other stakeholders. He answered our call during Kmart's darkest days and placed Kmart on the road to financial recovery.
Julian Day's zest for tackling the challenging operational issues that have plagued Kmart for years has resulted in making this Company stronger, leaner and more efficient as it prepares to exit Chapter 11 and has garnered support from the Company's most substantial stakeholders. Julian played an instrumental role in the development of the five-year business plan approved by the Board last week for presentation to the Company's stakeholders during the plan of reorganization process. His clear commitment, as outlined in that plan, to position Kmart to compete aggressively in the discount retail sector underscores our confidence in his ability, desire and passion to decisively lead this Company going forward."
Chairman James B. Adamson said: "My principal focus when I accepted the CEO role two months into the Company's Chapter 11 reorganization was to lead Kmart through a fast-track reorganization in order to position the Company to execute its longer term business plan outside of Chapter 11 as quickly as possible. My first two decisions as CEO were to enhance the credibility of the finance team and to reach out to a qualified outsider to join Kmart as President and Chief Operating Officer. As we head down the home stretch of our Chapter 11 reorganization case and prepare to emerge, I have great confidence in Julian's ability to lead this Company and its associates to their position as a world-class competitor in the retail landscape."
Day, 50, joined Kmart as President and Chief Operating Officer in March 2002. Prior to that, he had joined Sears in March 1999 as Executive Vice President and CFO and was soon promoted to Chief Operating Officer and a member of the Office of the Chief Executive. Before joining Sears, Day served as Executive Vice President and Chief Financial Officer for Safeway, Inc., the second largest food and drug retailer in North America. During his five-year tenure at Safeway, the company experienced a radical transformation of its store operations and achieved a significant increase in shareholder value. He currently serves on the Board of Petco Inc.
Day said, "I am honored that the Board has asked me to serve as Chief Executive as the Company repositions itself for the future. Having the opportunity to address in the most senior leadership role the challenges Kmart currently faces is indeed exciting to me. I feel fortunate to have had the opportunity to work under Jim Adamson's leadership these past months. He has been an excellent and challenging mentor for me, spending a great deal of time making sure I was ready to navigate the rigorous course that lies ahead."
Day continued: "While the Company struggled to address significant challenges this past year, Kmart is positioned to emerge from Chapter 11 in April with a stronger balance sheet and liquidity position. We have regained the confidence of lenders, creditors and critical vendors, securing needed financing during the Chapter 11 reorganization and, most recently, a new $2 billion exit financing commitment. As we approach the first anniversary of our Chapter 11 reorganization, Kmart has achieved a discernible shift in the Company's internal culture and substantially completed a stewardship review of its former management team; repositioned itself as a high/low retailer of exclusive proprietary brands; launched JOE BOXER, Disney Kids and Martha Stewart Everyday Holiday; secured a new brand licensing agreement with Thalia; and restructured the store base and distribution network to protect and strengthen Kmart's competitive position in key markets."
Kmart's reorganization timetable provides for the initial filing of a plan of reorganization and related disclosure statement on or about January 24, 2003, a Bankruptcy Court hearing on adequacy of the disclosure statement on February 25, 2003, solicitation of votes on the plan from creditors during March 2003, a Bankruptcy Court hearing on confirmation of the reorganization plan in mid-April, and emergence from Chapter 11 by April 30, 2003. Commenting on this timetable, Day said: "I strongly believe Kmart needs to continue to drive its early emergence timetable. The bankruptcy process is costly in a variety of ways, including its impact on employee morale, our reputation with customers, our relationships with key business partners and other creditors, and our ability to successfully implement a long-term business plan that maximizes stakeholder value for all of those parties with a continuing economic interest in the Company. We are also committed to continue to work closely throughout this timetable with the statutory committees appointed in our Chapter 11 case and our major stakeholders towards a fully consensual reorganization plan."
Kmart Corporation is a mass merchandising company that serves America through its Kmart and Kmart SuperCenter retail outlets. The Company's common stock is currently quoted on the Pink Sheets Electronic Quotation Service (http://www.pinksheets.com/) under the symbol KMRTQ.
Cautionary Statement Regarding Forward-Looking Information
Statements made by Kmart which address activities, events or developments that we expect or anticipate may occur in the future are forward-looking statements. Such forward-looking statements are and will be, as the case may be, subject to many risks and uncertainties, including, but not limited to, Kmart's 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 those set forth in Kmart's Annual Report on Form 10-K/A for the fiscal year ended January 30, 2002, Kmart's Quarterly Report on Form 10-Q for the fiscal quarter ended October 30, 2002, 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.
Similarly, these and other factors, including the terms of any reorganization plan ultimately confirmed, can affect the value of our various pre-petition liabilities, common stock and/or other equity securities. No assurance can be given as to what values, if any, will be ascribed in the bankruptcy proceedings to each of these constituencies.
A plan of reorganization could result in holders of Kmart common stock receiving no distribution on account of their interest and cancellation of their interests. As described in the Company's Quarterly Report on Form 10-Q, holders of Kmart common stock should assume that they could receive little or no value as part of a plan of reorganization. In addition, under certain conditions specified in the Bankruptcy Code, a plan of reorganization may be confirmed notwithstanding its rejection by an impaired class of creditors or equity holders and notwithstanding the fact that equity holders do not receive or retain property on account of their equity interests under the plan. In light of the foregoing, the Company considers the value of the common stock to be highly speculative and cautions equity holders that the stock may ultimately be determined to have no value.
Accordingly, the Company urges that appropriate caution be exercised with respect to existing and future investments in Kmart common stock or any claims relating to pre-petition liabilities and/or other Kmart securities.
SOURCE: Kmart Corporation
CONTACT: Lori McTavish, Senior Vice President, Communications, Kmart
Web site: http://www.kmart.com/