-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, sYnMZqhJwGshvddYIleQE0sh7Lf9A0sDqNkDX7nSUBBL1w3+fu8YIO+0v31cw4AK VmZopHV2ueJy6pHBKBwXIQ== 0000950131-94-000996.txt : 19940616 0000950131-94-000996.hdr.sgml : 19940616 ACCESSION NUMBER: 0000950131-94-000996 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENNEY J C CO INC CENTRAL INDEX KEY: 0000077182 STANDARD INDUSTRIAL CLASSIFICATION: 5311 IRS NUMBER: 135583779 STATE OF INCORPORATION: DE FISCAL YEAR END: 0126 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00777 FILM NUMBER: 94533763 BUSINESS ADDRESS: STREET 1: 6501 LEGACY DRIVE CITY: PLANO STATE: TX ZIP: 75024-3698 BUSINESS PHONE: 2144311000 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 --------------- FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 --------------- For the 13 week period Commission file number 1-777 ended April 30, 1994 J. C. PENNEY COMPANY, INC. - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-5583779 - - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6501 Legacy Drive, Plano, Texas 75024 - 3698 - - ---------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 431-1000 ------------------------- ------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 235,506,528 shares of Common Stock of $0.50 par value, as of April 30, 1994. -1- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements The following interim financial information is unaudited but, in the opinion of the Company, includes all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. Statements of Income (Amounts in millions except per share data)
13 weeks ended ------------------- April 30, May 1, 1994 1993 --------- -------- Retail sales $4,350 $3,964 Other revenue 169 142 ------ ------ Total revenue 4,519 4,106 ------ ------ Costs and expenses Cost of goods sold, occupancy, buying, and warehousing costs 2,955 2,684 Selling, general, and administrative expenses 1,092 1,025 Costs and expenses of other businesses 126 107 Net interest expense and credit operations (17) 14 ------ ------ Total costs and expenses 4,156 3,830 ------ ------ Income before income taxes, extraordinary charge, and cumulative effect of accounting change 363 276 Income taxes 140 104 ------ ------ Income before extraordinary charge and cumulative effect of accounting change 223 172 Extraordinary charge on debt redemption, net of income taxes of $10 -- (17) Cumulative effect of accounting change for income taxes -- 51 ------ ------ Net income $ 223 $ 206 ====== ====== Net income per common share Primary Income before extraordinary charge and cumulative effect of accounting change $ .88 $ .68 Extraordinary charge on debt redemption -- (.07) Cumulative effect of accounting change for income taxes -- .21 ------ ------ Net income $ .88 $ .82 ====== ====== Fully diluted Income before extraordinary charge and cumulative effect of accounting change $ .84 $ .65 Extraordinary charge on debt redemption -- (.06) Cumulative effect of accounting change for income taxes -- .19 ------ ------ Net income $ .84 $ .78 ====== ======
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Balance Sheets (Amounts in millions) April 30, May 1, Jan. 29, 1994 1993 1994 --------- ------ -------- ASSETS Current assets Cash and short term investments of $296, $528, and $156 $ 371 $ 621 $ 173 Receivables, net 4,399 3,487 4,679 Merchandise inventories 3,573 3,270 3,545 Prepaid expenses 129 145 168 ------- ------- ------- Total current assets 8,472 7,523 8,565 Properties, net of accumulated depreciation of $1,924, $1,883, and $2,001 3,801 3,708 3,818 Investments 1,340 1,015 1,182 Deferred insurance policy acquisition costs 441 384 426 Other assets 845 818 797 ------- ------- ------- $14,899 $13,448 $14,788 ======= ======= =======
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Balance Sheets (Amounts in millions) April 30, May 1, Jan. 29, 1994 1993 1994 --------- ------ -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 2,191 $ 2,053 $ 2,139 Short term debt 1,709 884 1,284 Current maturities of long term debt -- 664 348 Deferred taxes 111 87 112 ------- ------- ------- Total current liabilities 4,011 3,688 3,883 Long term debt 2,925 2,514 2,929 Deferred taxes 1,017 911 1,013 Bank deposits 584 547 581 Insurance policy and claims reserves 560 489 540 Other liabilities 462 573 477 ------- ------- ------- Total liabilities 9,559 8,722 9,423 Stockholders' equity Preferred stock, without par value: Authorized, 25 million shares - issued, 1 million shares of Series B ESOP convertible preferred 643 661 648 Guaranteed ESOP obligation (379) (447) (379) Common stock, par value $0.50: Authorized, 500 million shares - issued, 236, 235, and 236 million shares 1,020 966 1,003 ------- ------- ------- Total capital stock 1,284 1,180 1,272 ------- ------- ------- Reinvested earnings at beginning of year 4,093 3,531 3,531 Net income 223 206 940 Net unrealized change in debt and equity securities 24 (1) 1 Retirement of common stock (66) -- -- Common stock dividends declared (198) (169) (339) Preferred stock dividends declared, net of taxes (20) (21) (40) ------- ------- ------- Reinvested earnings at end of period 4,056 3,546 4,093 ------- ------- ------- Total stockholders' equity 5,340 4,726 5,365 ------- ------- ------- $14,899 $13,448 $14,788 ======= ======= =======
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Statements of Cash Flows (Amounts in millions) 13 weeks ended -------------- April 30, May 1, 1994 1993 --------- ------ Operating activities Net income $ 223 $ 206 Extraordinary charge, net of income taxes -- 17 Cumulative effect of accounting change -- (51) Depreciation and amortization 65 73 Amortization of original issue discount 3 12 Deferred taxes 3 (27) Change in cash from: Customer receivables 311 387 Securitized customer receivables amortized -- (85) Inventories, net of trade payables (46) (39) Other assets and liabilities, net (88) (90) ----- ----- 471 403 ----- ----- Investing activities Capital expenditures (106) (90) Purchases of investment securities (161) (92) Proceeds from sales of investment securities 59 68 ----- ----- (208) (114) ----- ----- Financing activities Increase (decrease) in short term debt 425 (23) Payments of long term debt (350) (1) Common stock issued, net 19 11 Retirement of common stock (71) -- Preferred stock retired (5) (5) Dividends paid, preferred and common (83) (76) ----- ----- (65) (94) ----- ----- Net increase in cash and short term investments 198 195 Cash and short term investments at beginning of year 173 426 ----- ----- Cash and short term investments at end of first quarter $ 371 $ 621 ===== =====
-5- Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. Financial Condition - - ------------------- Customer receivables at the end of the first quarter were $3,315 million, $768 million or 30.2 per cent higher than the comparable period in the prior year. Customer receivables increased as a result of the higher sales volume and greater usage of the JCPenney credit card by customers, which increased significantly in the 1993 fourth quarter and continued the trend in the 1994 first quarter. Also, receivables increased due to the amortization of the $425 million Series D Trust Certificates in 1993, of which $85 million was amortized in the 1993 first quarter. Total customer receivables serviced by the Company, including those sold through a Trust, were $4,040 million, $429 million higher than the 1993 comparable period. Merchandise inventories, on a FIFO basis, were $3,819 million at the end of the first quarter, an increase of 7.5 per cent from the comparable period in the prior year, and are in line with recent sales volumes. The current cost of inventories exceeded the amount carried on the balance sheet (valued substantially at LIFO) by approximately $246 million at April 30, 1994, $246 million at January 29, 1994, and $282 million at May 1, 1993. Capital expenditures were $106 million in the 1994 first quarter, as compared with $90 million in the comparable period last year. Investments, at $1,340 million, were $325 million higher than the comparable period in the prior year. The increase was primarily due to the growth in JCPenney Insurance investments. Effective January 30, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This Statement requires that securities be classified as trading, held-to-maturity, or available-for-sale securities. The Company's marketable investment securities, primarily held by JCPenney Insurance, are classified as available-for-sale. Securities classified as available-for-sale are required to be carried at market value, with changes in unrealized gains and losses recorded directly to stockholders' equity, net of applicable income taxes. Adoption of SFAS No. 115 increased investments $39 million, deferred taxes $15 million, and stockholders' equity $24 million, as reflected on the Company's consolidated balance sheet as of April 30, 1994. This represents a substantial reduction in unrealized gains from the amount reported at year end 1993 (January 29, 1994). Adoption of this Statement had no impact on net income. -6- Unrealized gains and losses on available-for-sale marketable investment securities included in stockholders' equity at April 30, 1994 were as follows:
Cost or Gross Net Amortized Market Unrealized Unrealized --------------- Investments (in millions) Cost Value Gains (Losses) Gains - - --------------------------- --------- ------ --------------- ---------- Fixed income securities 769 770 21 (20) 1 Asset-backed certificates 431 469 38 -- 38 Equity securities 90 101 13 (2) 11 ----- ----- -- --- -- 1,290 1,340 72 (22) 50 Deferred income taxes 19 -- Total 31
Other assets were $845 million at the end of the 1994 first quarter, an increase of $27 million from the comparable period in the prior year. The Company made a $99 million contribution to its pension plan in the 1994 first quarter, compared with a $65 million contribution in the 1993 first quarter. These contributions, which increased prepaid pension assets, were the first contributions to the pension plan since 1983. Accounts payable and accrued expenses were $2,191 million on April 30, 1994, $138 million higher than the comparable period in the prior year. Trade payables were $1,017 million, $100 million above last year's level due to higher merchandise inventories. Dividends payable were $220 million, $29 million higher than last year reflecting the increase in the quarterly dividend rate. Total debt on April 30, 1994 was $4,634 million as compared with $4,062 million at May 1, 1993, an increase of $572 million. The increase was primarily due to higher short term borrowings to finance the higher customer receivables and the increased investment in merchandise inventories. In February 1994, $350 million of zero coupon notes yielding 13 per cent matured and were retired. On June 7, 1994, the Company announced a two part, $500 million public offering of debt securities with maturities of five and ten years. The securities include $225 million of 6.875 per cent Notes due June 15, 1999, priced to yield 6.96 per cent and $275 million of 7.375 per cent Notes due June 15, 2004, priced to yield 7.45 per cent. These debt securities may not be redeemed by the Company prior to maturity. The Company will use the proceeds for general corporate purposes. On March 9, 1994, the Board of Directors declared a 16.7 per cent increase in the regular quarterly dividend to 42 cents per share, or an indicated annual rate of $1.68 per share, as compared with $1.44 per share in 1993. The regular quarterly dividend on the Company's outstanding common stock was payable on May 1, 1994, to stockholders of record on April 8, 1994. The Board also approved on March 9, 1994, the purchase of up to 10 million shares of the Company's common stock to offset dilution caused by the issuance of common shares under the Company's equity compensation and benefit plans. During the 1994 first quarter, the Company purchased approximately 1.3 million shares of common stock at a cost of $71 million. All shares were retired and returned to the status of authorized but unissued shares of common stock. At the Company's Annual Meeting of Stockholders held on May 20, 1994, stockholders approved an amendment to the Company's Restated Certificate of Incorporation, as amended, authorizing an increase in the total authorized number of shares of common stock of the Company from 500,000,000 to 1,250,000,000 and an increase in the total authorized number of shares from 525,000,000 to 1,275,000,000. -7- Results of Operations - - --------------------- Ratios useful in analyzing the results of operations are as follows:
13 Weeks Ended ----------------- April 30, May 1, 1994 1993 --------- ------ Retail sales, per cent increase 9.7 4.5 JCPenney stores sales, per cent increase 7.6 5.5 Gross margin, per cent of retail sales FIFO 32.1 32.3 LIFO 32.1 32.3 Selling, general, and administrative expenses, per cent of retail sales 25.1 25.9 Effective income tax rate 38.7 37.8
For the 13 weeks ended April 30, 1994, net income was a Company record for the first quarter at $223 million, or 84 cents per share, as compared with $206 million, or 78 cents per share in the same period last year. Net income in the 1993 first quarter included an extraordinary charge related to debt redemption, and the cumulative effect of an accounting change from adopting SFAS No. 109, "Accounting for Income Taxes." Excluding these items, income in the 1993 first quarter was $172 million, or 65 cents per share. The improvement in earnings in the 1994 first quarter reflected the increased sales performance of both JCPenney stores and catalog and well managed expenses. First quarter total retail sales increased 9.7 per cent to $4,350 million from $3,964 million in last year's comparable period. First quarter sales from JCPenney stores increased 7.6 per cent from the prior year's period. Sales from the Company's catalog operation increased 19.7 per cent in the first quarter while sales of the Thrift Drug store operation improved by 8.1 per cent over the comparable 1993 period. Gross margin dollars improved $115 million or 8.9 per cent in the first quarter compared with the same 1993 period, due to increased sales volume from both stores and catalog. As a per cent of retail sales, gross margin declined 20 basis points from last year's level to 32.1 per cent, reflecting higher promotional activity. Selling, general, and administrative (SG&A) expenses, as a per cent of retail sales, declined to 25.1 per cent in the first quarter from 25.9 per cent in the 1993 comparable period. SG&A expense levels increased 6.4 per cent over last year's first quarter due to planned increases in store and catalog advertising and greater sales incentive compensation in stores. -8- Net interest expense and credit operations, which consists of finance charge revenue from the Company's proprietary credit card, net interest expense, and credit operating costs, was a credit of $17 million in the first quarter compared with a charge of $14 million in the comparable period last year. Finance charge revenue was $162 million, up $31 million over the same period last year due to higher customer receivables. Net interest expense was $56 million, down $6 million compared with last year's first quarter, reflecting the benefits from the Company's debt restructuring programs in 1992 and 1993. Credit operating costs, including bad debt expense, were $89 million in the first quarter compared with $83 million in the same period last year. The Company's life and health insurance business recorded a strong increase in premium income and profitability in the 1994 first quarter. Total revenue, primarily from premium income, was $138 million, an increase of $26 million or 22.8 per cent over the comparable period in the prior year. Pretax income in the 1994 first quarter was $35 million, an increase of $6 million or 17.2 per cent over last year. The effective income tax rate was 38.7 per cent in the 1994 first quarter compared with 37.8 per cent in the same period last year, reflecting the one per cent increase in the statutory Federal corporate tax rate enacted in August 1993. The Company's business depends to a great extent on the last quarter of the year. Historically, sales for that period have averaged approximately one third of annual sales. Accordingly, the results of operations for the 13 weeks ended April 30, 1994 are not necessarily indicative of the results for the entire year. PART II - OTHER INFORMATION Item 1 - Legal Proceedings The Company has no material legal proceedings pending against it. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits -------- The following documents are filed as exhibits to this report: 11 Computation of net income per common share. 12(a) Computation of ratios of available income to combined fixed charges and preferred stock dividend requirement. 12(b) Computation of ratios of available income to fixed charges. (b) Reports on Form 8-K ------------------- None. -9- 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 thereunto duly authorized. J. C. PENNEY COMPANY, INC. By /s/L. A. Gispanski ------------------------------ L. A. Gispanski Vice President and Controller (Principal Accounting Officer) Date: June 10, 1994 EX-11 2 COMPUTATION OF NET INCOME Exhibit 11 J. C. PENNEY COMPANY, INC. and Consolidated Subsidiaries Computation of Net Income Per Common Share ------------------------------------------- (Amounts in millions except per common share data)
13 Weeks Ended --------------------------------------------------------- April 30, 1994 May 1, 1993 ---------------------------- --------------------------- Shares Income Shares Income ------ ------ ------ ------ Primary: - - ------- Income before extraordinary charge and cumulative effect of accounting change $223 $172 Dividend on Series B ESOP convertible preferred stock (after-tax) (10) (10) ---- ---- Adjusted income before extraordinary charge and cumulative effect of accounting change 213 162 Weighted average number of shares outstanding 236.5 235.2 Common stock equivalents: Stock options and other dilutive effects 3.8 2.7 ----- ---- ----- ---- 240.3 213 237.9 162 Income per common share before extraordinary charge and cumulative effect of accounting change $0.88 $ 0.68 Extraordinary charge on debt redemption, net of income taxes -- -- (0.07) (17) Cumulative effect of accounting change -- -- 0.21 51 ----- ----- ---- ----- ------ ---- 240.3 237.9 ===== ===== Net income $213 $196 ==== ==== Net income per common share $0.88 $ 0.82 ===== ====== Fully diluted: - - ------------- Income before extraordinary charge and cumulative effect of accounting change $223 $172 Tax benefit differential on ESOP dividend assuming stock is fully converted (1) (1) Assumed additional contribution to ESOP if preferred stock is fully converted (1) (2) ---- ---- Adjusted income before extraordinary charge and cumulative effect of accounting change 221 169 Weighted average number of shares outstanding (primary) 240.3 237.9 Maximum dilution 0.0 0.3 Convertible preferred stock 21.5 22.1 ----- ---- ----- ---- 261.8 221 260.3 169 Income per common share before extraordinary charge and cumulative effect of accounting change $0.84 $ 0.65 Extraordinary charge on debt redemption, net of income taxes -- -- (0.06) (17) Cumulative effect of accounting change -- -- 0.19 51 ----- ----- ---- ----- ------ ---- 261.8 260.3 ===== ===== Net income $221 $203 ==== ==== Net income per common share $0.84 $ 0.78 ===== ======
EX-12 3 COMPUTATION OF RATIOS Exhibit 12(a) J. C. Penney Company, Inc. (the Company and all subsidiaries) Computation of Ratios of Available Income to Combined Fixed Charges and Preferred Stock Dividend Requirement
52 weeks 53 weeks ended ended -------- --------- April 30, May 1, 1994 1993 -------- --------- ($ Millions) Income from continuing operations (before income taxes, before capitalized interest, but after preferred stock dividend) $1,585 $1,254 ------ ------ Fixed charges Interest (including capitalized interest) On operating leases 97 96 On short term debt 51 41 On long term debt 232 275 On capital leases 9 10 Other, net 0 13 ------ ------ Total fixed charges 389 435 Preferred stock dividend, before taxes 52 52 ------ ------ Combined fixed charges and preferred stock dividend requirement 441 487 ------ ------ Total available income $2,026 $1,741 ====== ====== Ratio of available income to combined fixed charges and preferred stock dividend requirement 4.6 3.6 ====== ======
The interest cost of the LESOP notes guaranteed by the Company is not included in fixed charges above. The Company believes that, due to the seasonal nature of its business, ratios for a period other than a 52 or 53 week period are inappropriate. Exhibit 12(b) J. C. Penney Company, Inc. (the Company and all subsidiaries) Computation of Ratios of Available Income to Fixed Charges
52 weeks 53 weeks ended ended ---------- ---------- April 30, May 1, 1994 1993 ---------- ---------- ($ Millions) Income from continuing operations (before income taxes and before capitalized interest) $1,637 $1,306 ---------- ---------- Fixed charges Interest (including capitalized interest) On operating leases 97 96 On short term debt 51 41 On long term debt 232 275 On capital leases 9 10 Other, net 0 13 ---------- ---------- Total fixed charges 389 435 ---------- ---------- Total available income $2,026 $1,741 ========== ========== Ratio of available income to fixed charges 5.2 4.0 ========== ==========
The interest cost of the LESOP notes guaranteed by the Company is not included in fixed charges above. The Company believes that, due to the seasonal nature of its business, ratios for a period other than a 52 or 53 week period are inappropriate. -----END PRIVACY-ENHANCED MESSAGE-----