-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KcWPkgt5l9BpVP+xlc7tYwUBAP6P9aEU/9SE4AiKiQQmdLbfvQSQ1IDtZjUDjhUC 7P55MJTnqAuzSjHTw11OxQ== 0001166126-04-000003.txt : 20040227 0001166126-04-000003.hdr.sgml : 20040227 20040227165714 ACCESSION NUMBER: 0001166126-04-000003 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040226 ITEM INFORMATION: FILED AS OF DATE: 20040227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: J C PENNEY CO INC CENTRAL INDEX KEY: 0001166126 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 260037077 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15274 FILM NUMBER: 04636099 BUSINESS ADDRESS: STREET 1: 6501 LEGACY DRIVE CITY: PLANO STATE: TX ZIP: 75024-3698 BUSINESS PHONE: 9722431100 FORMER COMPANY: FORMER CONFORMED NAME: J C PENNEY HOLDINGS INC DATE OF NAME CHANGE: 20020128 8-K 1 jcpcompany8k22704.txt 8-K J. C. PENNEY COMPANY, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- FORM 8-k CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): February 26, 2004 J. C. PENNEY COMPANY, INC. (Exact name of registrant as specified in its charter) Delaware 1-15274 26-0037077 (State or other jurisdiction (Commission File No.) (I.R.S. Employer of incorporation ) Identification No.) 6501 Legacy Drive Plano, Texas 75024-3698 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (972) 431-1000 Item 12. Results of Operations and Financial Condition. J. C. Penney Company, Inc. issued a news release on February 26, 2004, announcing its fiscal 2004 consolidated earnings. This information is attached as exhibit 99.1. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. J. C. PENNEY COMPANY, INC. By: /s/ Robert B. Cavanaugh ----------------------------------- Robert B. Cavanaugh Executive Vice President, Chief Financial Officer Date: February 27, 2004 EXHIBIT INDEX Exhibit Number Description 99.1 J. C. Penney Company, Inc. News Release issued February 26, 2004 EX-99 4 pressrelease22704.txt PRESS RELEASE Exhibit 99.1 JCPenney News Release CONTACT Tim Lyons Quinton Crenshaw Eli Akresh Bob Johnson Public Relations Public Relations Investor Relations Investor Relations (972) 431-4834 (972) 431-5581 (972) 431-2207 (972) 431-2217 tmlyons@jcpenney.com qcrensha@jcpenney.com eakresh@jcpenney.com rvjohnso@jcpenney.com - -------------------- --------------------- -------------------- ---------------------
JCPENNEY REPORTS FOURTH QUARTER EARNINGS Earnings Per Share from Continuing Operations Increase 43 Percent Financial Condition Continues to Strengthen PLANO, Texas, February 26, 2004 - J. C. Penney Company, Inc. (NYSE: JCP) reported today that fourth quarter earnings per share from continuing operations increased 43 percent to $0.83 versus comparable earnings of $0.58 per share last year. Full year earnings per share from continuing operations increased 27 percent to $1.21 versus comparable earnings of $0.95 per share last year. In accordance with current accounting rules, Eckerd drugstores and Mexico department store operations are being reported as discontinued operations, resulting in a net loss for the quarter and full year of $3.42 and $3.13 per share, respectively (see discussion below). Allen Questrom, Chairman and Chief Executive Officer said, "I am pleased with our continuing progress in the department store and catalog/Internet business. Department stores generated a comparable store sales increase for the third consecutive year. Catalog/Internet had its first sales gain after several years of repositioning, with very strong Internet sales, and a significant improvement in its contribution to results. We continue to focus on providing our customers with a compelling value across all three channels - department stores, catalog and Internet - through improved merchandise assortments, integrated marketing programs, and an enhanced shopping experience. We have implemented the majority of our centralization initiatives and are now positioned to turn our attention to improving execution and consistency, as well as creating a more competitive expense structure." Looking ahead to 2004, Questrom added, "We anticipate a much better consumer environment this year, and the first half is expected to be especially strong. Last year's first quarter was impacted by a number of adverse factors. In 2004, higher refunds and lower withholding rates from the President's tax package, together with the current low-interest rate environment, will benefit the moderate customer. We expect our business to continue to generate sales and profit improvement, and are encouraged by recent business trends. I am confident that we are on track to achieve our operating profit goal of six to eight percent of sales in 2005." Addressing Eckerd, Questrom stated, "We have concluded that a sale of Eckerd, at an appropriate price, is in the best interest of our customers, associates and shareholders, and will allow both JCPenney and Eckerd to maximize their potential. We are in active negotiations with interested parties and continue to make progress on a sale transaction. I appreciate all of the hard work and dedication that have created this valuable customer franchise, and know Eckerd associates will continue to serve customers in the highest professional manner, regardless of any change in ownership." Department Stores and Catalog/Internet - -------------------------------------- Fourth quarter operating profit increased 28 percent to $445 million compared with $349 million in last year's period. Operating profit was 7.3 percent of sales, an increase of 120 basis points. Operating profit reflects the continuation of substantial increases in the gross margin ratio as well as significant growth in catalog/Internet's profit contribution. Comparable department store sales increased 3.2 percent on a 13-week basis, representing the third consecutive year with strong holiday sales gains, and catalog/Internet sales increased 8.7 percent on a 13-week basis. Internet sales continue to experience strong growth, increasing by about 50 percent for both the fourth quarter and full year, and exceeded $600 million in sales for the full year. 2 Department Stores and Catalog gross margin increased by 190 basis points as a percent of sales in the quarter, and continues to benefit from better execution in a centralized environment. The acceleration of gross margin over the last several years reflects the Company's focus on providing the customer with fashionable, trend-right product that delivers compelling quality and value for the moderate customer. Since converting to a centralized organization, improvements in operating results reflect the leverage of centralized buying, significantly improved marketing, more effective store presentations, a repositioning of the catalog model and the exceptional growth of Internet. SG&A expenses increased as a result of planned increases in advertising, costs associated with the store distribution center network, and higher non-cash pension expense, as well as expenses related to this year's 53rd week. In addition, operating expenses include the previously announced charge of $20 million for contract cancellations and separation benefits associated with the first phase of the Company's cost savings initiative. The cost reduction program is expected to result in annualized cost savings in excess of $200 million when fully implemented. Discontinued Operations - ----------------------- During 2003, the Company evaluated strategic alternatives for all of its businesses, including Eckerd. In the fourth quarter, the Company's Board of Directors concluded that a plan to sell Eckerd, at an appropriate price, is in the best interest of the Company's shareholders. Having met the criteria of Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," Eckerd's net assets were classified as "held for sale" and its results of operations and financial position reported as a discontinued operation beginning in the fourth quarter of 2003. The accounting rules also require the recording of certain financial estimates related to a prospective sale, even though a definitive agreement has not been reached. This year's fourth quarter includes a non-cash charge of $450 million to reflect the Company's investment in Eckerd, as well as goodwill, at their estimated fair values. In addition, the Company was required to recognize a non-cash charge of $875 million to reflect the deferred tax liability for the excess of fair value over the tax basis of Eckerd. The tax basis of Eckerd is lower than its book basis because the Company's drugstore acquisitions were largely tax-free transactions. 3 Also included in discontinued operations is the loss on the November 2003 sale of the Company's Mexico department store operation. More specific information on the components of discontinued operations is shown on the attached financial schedules. The Company has also conformed prior period financial results to reflect Eckerd and Mexico as discontinued operations (see attached schedules). Financial Condition - -------------------- The Company's financial condition and liquidity continued to strengthen in 2003. Free cash flow from continuing operations was approximately $375 million for the year, substantially higher than original guidance (free cash flow is defined as cash flow from operating activities, less dividends and capital expenditures, net of proceeds from the sale of assets). Cash flow benefited from improved operating results and capital expenditure management. In addition, cash flow also reflects the Company's $300 million cash contribution to the pension plan in the third quarter. At year-end, cash investments were approximately $3 billion and represented in excess of 50 percent of the Company's $5.4 billion of consolidated long-term debt. The Company's strong financial position continues to provide the resources to maintain strong liquidity and financial flexibility as it focuses on improving the performance of department stores and catalog/Internet. Guidance - -------- At this time, the Company is only providing 2004 guidance for department stores and catalog/Internet operating profit and first quarter earnings per share from continuing operations. For the year, operating profit is expected to improve by approximately 80 basis points to the area of 5.2 percent of sales, with contributions from both gross margin and SG&A. For the first quarter, earnings from continuing operations are expected to be in the range of $0.09 to $0.12 per share compared with last year's $0.05 per share. 4 Senior management will host a live conference call and real-time webcast on Thursday, February 26, 2004, beginning at 9:30 a.m. EST. Access to the conference call is open to the press and general public in a listen only mode. To access the conference call, please dial 973-935-2035 and reference the JCPenney Quarterly Earnings Conference Call. The telephone playback will be available for two days beginning approximately two hours after the conclusion of the call by dialing 402-220-2910. The live webcast may be accessed via JCPenney's Investor Relations website (at JCPenney.net), or on StreetEvents.com (for members) and FullDisclosure.com (for media and individual investors). Replays of the webcast will be available for up to 90 days after the event. J. C. Penney Corporation, Inc., the wholly-owned operating subsidiary of J. C. Penney Company, Inc., (the "Company") is one of America's largest department store, catalog, and e-commerce retailers, employing approximately 150,000 associates. As of January 31, 2004, J. C. Penney Corporation, Inc. operated 1,019 JCPenney department stores throughout the United States and Puerto Rico, and 58 Renner department stores in Brazil. JCPenney Catalog, including e-commerce, is the nation's largest catalog merchant of general merchandise. J. C. Penney Corporation, Inc. is a contributor to JCPenney Afterschool Fund, a charitable organization committed to providing children with high quality after school programs to help them reach their full potential. This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which reflect the Company's current views of future events and financial performance, involve known and unknown risks and uncertainties that may cause the Company's actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to, competition, consumer demand, seasonality, economic conditions, and government activity. Investors should take such risks into account when making investment decisions. # # # 5 J. C. PENNEY COMPANY, INC. SUMMARY OF OPERATING RESULTS ----------------------------- --------------------------------------- ---------------------------------- 14 weeks 13 weeks 53 weeks 52 weeks ended ended ended ended Jan. 31, Jan. 25, Inc. Jan. 31, Jan. 25, Inc. 2004 2003 (Dec.) 2004 2003 (Dec.) --------------------------------------- ---------------------------------- Comparable department store sales increase (1) 3.2% 1.9% 0.9% 2.7% Department Stores and Catalog/Internet net sales $ 6,098 $ 5,743 6.2% $ 17,786 $ 17,633 0.9% Gross margin 2,188 1,950 12.2% 6,620 6,334 4.5% Selling, general and administrative (SG&A) expenses (1,743) (1,601) 8.9% (5,830) (5,634) 3.5% ------- ------- ------- ------- Operating profit 445 349 27.5% 790 700 12.9% Net interest expense (62) (62) 0.0% (261) (226) 15.5% Real estate and other - (43) 100.0% + 17 (59) 100.0% + ------- ------- ------- ------- Income from continuing operations before income taxes 383 244 57.0% 546 415 31.6% Income taxes (130) (70) 85.7% (182) (130) 40.0% ------- ------- ------- ------- Income from continuing operations 253 174 45.4% 364 285 27.7% Discontinued operations (1,322) 28 N/A (1,292) 120 N/A ------- ------- ------- ------- Net (loss)/income $ (1,069) $ 202 -100.0% + $ (928) $ 405 -100.0% + ======= ======= ======= ======= Earnings per share from continuing operations - diluted $ 0.83 $ 0.58 43.1% $ 1.21 $ 0.95 27.4% Net (loss)/earnings per share - diluted $ (3.42) $ 0.68 -100.0% + $ (3.13) $ 1.36 -100.0% +
(1) The Company's fiscal year ending January 31, 2004 includes a 53rd week. Comparable store sales for the fourth quarter and full year of 2003 excludes the effects of the additional week. 1 J. C. PENNEY COMPANY, INC. SUMMARY OF OPERATING RESULTS ----------------------------- -------------------------------- ---------------------------- 14 weeks 13 weeks 53 weeks 52 weeks ended ended ended ended Jan. 31, Jan. 25, Jan. 31, Jan. 25, 2004 2003 2004 2003 -------------------------------- ---------------------------- DEPARTMENT STORES AND CATALOG/INTERNET FINANCIAL DATA: - -------------------------------- Ratios as a % of sales: Gross margin 35.9% 34.0% 37.2% 35.9% SG&A expenses 28.6% 27.9% 32.8% 32.0% Operating profit 7.3% 6.1% 4.4% 3.9% Operating profit dollars $ 445 $ 349 $ 790 $ 700 LIFO (credit)/charge (6) 6 (6) 6 Depreciation and amortization 103 91 372 (2) 365 SUPPLEMENTAL DATA: - ------------------ Average shares outstanding (basic shares) 273.3 268.4 271.9 267.5 Average shares used for diluted EPS 311.1 294.5 297.5 293.0 Effective income tax rate for continuing operations 33.7% 29.1% 33.2% 31.5% BALANCE SHEET HIGHLIGHTS: - -------------------------- Cash and short-term investments $ 2,994 $ 2,474 Department Stores and Catalog/Internet FIFO inventory 3,199 3,019 Long-term debt, including current maturities 5,356 5,173 Portion of long-term debt attributable to Eckerd - discontinued operations 1,213 1,151 DISCONTINUED OPERATIONS: - ------------------------ Eckerd operating profit $ 85 $ 160 $ 291 $ 412 Interest expense (44) (35) (163) (161) Acquisition amortization (15) (17) (40) (42) Other (2) (2) (7) (5) ------- ------- ------- ------- Pretax income 24 106 81 204 Income taxes (9) (39) (31) (75) Fair value/goodwill impairment adjustment (3) (450) - (450) - Deferred tax effect of book/tax basis difference (875) - (875) - ------- ------- ------- ------- Total Eckerd (1,310) 67 (1,275) 129 Mexico and other, net of income tax of $(30), $7, $(30) and $(26), respectively (12) (39) (17) (9) ------- ------- ------- ------- Total discontinued operations $ (1,322) $ 28 $ (1,292) $ 120 ======= ======= ======= ======= Eckerd Financial Data: LIFO (credit)/charge $ (4) $ (13) $ 21 $ 20 Depreciation and amortization 86 68 301 253 FIFO Inventory 2,362 2,318
(2) Excludes $22 million of accelerated depreciation for catalog facilities for the 53 weeks ended January 31, 2004, which is included in Real estate and other. (3) Represents the non-cash charge to reflect the Company's investment in Eckerd, as well as goodwill, at their estimated fair values. Additional information for this charge will be included in the Company's Annual Report on Form 10-K. 2 JCPenney Company, Inc. Income/(Loss) from Continuing Operations Fiscal 1999 to 2003 (in millions, except per share data) Q1 2003 Q2 2003 Q3 2003 Q4 2003 Fiscal 2003 -------- -------- -------- -------- ----------- Retail sales, net Department Stores $ 3,124 $ 3,084 $ 3,666 $ 5,214 $ 15,088 Catalog/Internet 587 561 666 884 2,698 ------ ------ ------ ------ ------ Total 3,711 3,645 4,332 6,098 17,786 Margins and expenses - -------------------- Gross margin 1,456 1,310 1,666 2,188 6,620 Selling, general and administrative expenses (1,372) (1,257) (1,458) (1,743) (5,830) ------ ------ ------ ------ ------ Operating profit 84 53 208 445 790 Net interest expense (65) (70) (64) (62) (261) Real estate and other 9 12 (4) - 17 Income/(loss) from continuing operations before income taxes 28 (5) 140 383 546 Income taxes (8) 2 (46) (130) (182) ====== ====== ====== ====== ====== Income/(loss) from continuing operations $ 20 $ (3) $ 94 $ 253 $ 364 Diluted earnings/(loss) per share from continuing operations $ 0.05 $ (0.03) $ 0.31 $ 0.83 $ 1.21 Average shares used for diluted earnings/(loss) per share 273 271 298 311 297 Department Stores and Catalog/Internet Financial Results: - --------------------------------------------------------- Ratios as a % of sales Gross margin 39.2% 35.9% 38.5% 35.9% 37.2% SG&A expenses 37.0% 34.5% 33.7% 28.6% 32.8% Operating profit 2.2% 1.4% 4.8% 7.3% 4.4% LIFO credit/(charge) $ - $ - $ - $ 6 $ 6 Depreciation and amortization 89 (1) 88 (1) 92 103 372 (1) FIFO inventory 3,176 3,155 3,977 3,199 3,199 Effective income tax rate for continuing operations 28.2% -46.6% 33.6% 33.7% 33.2%
(1) Q1, Q2 and full year of 2003 excludes $12 million, $10 million and $22 million, respectively, of accelerated depreciation, which is included in Real estate and other. 3 JCPenney Company, Inc. Income/(Loss) from Continuing Operations Fiscal 1999 to 2003 (in millions, except per share data) Q1 2002 Q2 2002 Q3 2002 Q4 2002 Fiscal 2002 -------- -------- -------- -------- ----------- Retail sales, net Department Stores $ 3,330 $ 3,066 $ 3,654 $ 4,971 $15,020 Catalog/Internet 660 540 640 772 2,613 ------ ------ ------ ------ ------ Total 3,990 3,606 4,294 5,743 17,633 Margins and expenses - -------------------- Gross margin 1,507 1,302 1,575 1,950 6,334 Selling, general and administrative expenses (1,350) (1,279) (1,404) (1,601) (5,634) ------ ------ ------ ------ ------ Operating profit 157 23 171 349 700 Net interest expense (54) (52) (58) (62) (226) Real estate and other (8) (3) (5) (43) (59) ------ ------ ------ ------ ------ Income/(loss) from continuing operations before income taxes 95 (32) 108 244 415 Income taxes (33) 12 (39) (70) (130) Income/(loss) from continuing operations $ 62 $ (20) $ 69 $ 174 $ 285 ====== ====== ====== ====== ====== Diluted earnings/(loss) per share from continuing operations $ 0.20 $ (0.10) $ 0.23 $ 0.58 $ 0.95 Average shares used for diluted earnings/(loss) per share 269 268 269 294 293 Department Stores and Catalog/Internet Financial Results: - --------------------------------------------------------- Ratios as a % of sales Gross margin 37.7% 36.1% 36.7% 34.0% 35.9% SG&A expenses 33.8% 35.5% 32.7% 27.9% 32.0% Operating profit 3.9% 0.6% 4.0% 6.1% 3.9% LIFO credit/(charge) $ - $ - $ - $ (6) $ (6) Depreciation and amortization 91 94 89 91 365 FIFO inventory 2,961 3,078 3,865 3,019 3,019 Effective income tax rate for continuing operations 35.2% -38.9% 35.9% 29.1% 31.5%
4 JCPenney Company, Inc. Income/(Loss) from Continuing Operations Fiscal 1999 to 2003 (in millions, except per share data) Q1 2001 Q2 2001 Q3 2001 Q4 2001 Fiscal 2001 -------- -------- -------- -------- ----------- Retail sales, net Department Stores $ 3,171 $ 3,155 $ 3,534 $ 4,882 $ 14,743 Catalog/Internet 878 687 812 973 3,349 ------ ------ ------ ------ ------ Total 4,049 3,842 4,346 5,855 18,092 Margins and expenses - --------------------- Gross margin 1,456 1,274 1,534 1,818 6,082 Selling, general and administrative expenses (1,324) (1,262) (1,384) (1,559) (5,529) ------ ------ ------ ------ ------ Operating profit 132 12 150 259 553 Net interest expense (64) (51) (57) (59) (231) Real estate and other 12 (23) (15) (22) (48) ------ ------ ------ ------ ------ Income/(loss) from continuing operations before income taxes 80 (62) 78 178 274 Income taxes (25) 31 (23) (75) (92) ------ ------ ------ ------ ------ Income/(loss) from continuing operations $ 55 $ (31) $ 55 $ 103 $ 182 ====== ====== ====== ====== ====== Diluted earnings/(loss) per share from continuing operations $ 0.18 $ (0.14) $ 0.18 $ 0.34 $ 0.57 Average shares used for diluted earnings/(loss) per share 264 263 268 291 267 Department Stores and Catalog/Internet Financial Results: - ------------------------------------------------------------ Ratios as a % of sales Gross margin 36.0% 33.1% 35.3% 31.0% 33.6% SG&A expenses 32.7% 32.8% 31.8% 26.6% 30.5% Operating profit 3.3% 0.3% 3.5% 4.4% 3.1% LIFO credit/(charge) $ - $ - $ - $ 9 $ 9 Depreciation and amortization 101 94 86 87 368 FIFO inventory 3,386 3,415 4,195 2,959 2,959 Effective income tax rate for continuing operations 32.1% -50.7% 28.5% 42.2% 33.4%
5 JCPenney Company, Inc. Income/(Loss) from Continuing Operations Fiscal 1999 to 2003 (in millions, except per share data) Fiscal 2000 Fiscal 1999 Retail sales, net Department Stores $ 14,520 $ 14,987 Catalog/Internet 4,173 4,290 ------ ------ Total 18,693 19,277 Margins and expenses - -------------------- Gross margin 5,940 6,529 Selling, general and administrative expenses (5,692) (5,864) ------ ------ Operating profit 248 665 Net interest expense (213) 28 Real estate and other (333) (53) ------ ------ Income/(loss) from continuing operations before income taxes (298) 640 Income taxes 123 (204) ------ ------ Income/(loss) from continuing operations $ (175) $ 436 ====== ====== Diluted earnings/(loss) per share from continuing operations $ (0.79) $ 1.54 Average shares used for diluted earnings/(loss) per share 262 260 Department Stores and Catalog/Internet Financial Results: - ---------------------------------------------------------- Ratios as a % of sales Gross margin 31.8% 33.9% SG&A expenses 30.5% 30.4% Operating profit 1.3% 3.5% LIFO credit/(charge) $ (14) $ 9 Depreciation and amortization 359 385 FIFO inventory 3,274 3,798 Effective income tax rate for continuing operations -41.2% 32.0%
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