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): August 17, 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 August 17, 2004,
announcing its second quarter 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: August 20, 2004
EXHIBIT INDEX
Exhibit Number Description
99.1 J. C. Penney Company, Inc. News Release
issued August 17, 2004
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 SECOND QUARTER OPERATING PROFIT TRIPLES
Sales Momentum Continues into August
Financial Position Strengthened and Cash Flow Trending Positive
PLANO, Texas, August 17, 2004 -- J. C. Penney Company, Inc. (NYSE: JCP)
reported today that second quarter earnings from continuing operations were
$0.23 per share compared to a loss of $0.03 per share last year. Earnings for
the quarter benefited from strong department store sales, continued improvement
in gross margin, and SG&A leverage.
During the quarter, the Company completed its sale of the Eckerd business.
Reflecting sale adjustments and operating losses from this discontinued
operation, as discussed below, the Company had modest net income for the
quarter.
Allen Questrom, Chairman and Chief Executive Officer said, "I am pleased
with second quarter operating results, and our recently announced capital
structure repositioning. Our management team is focused on the customer and
ensuring we are delivering fashionable, trend-right merchandise assortments that
offer quality and value, with the added convenience of our three shopping
channels. The sales and earnings trends we have experienced this year clearly
demonstrate that we are connecting with the customer."
Questrom added, "Early back-to-school results are exceeding our
expectations. A number of external factors, including higher oil prices and
concerns over terrorism, could impact future consumer spending patterns, but we
remain confident that our third quarter sales and operating profits will
improve."
Operating Results
-------------------
Second quarter operating profit nearly tripled to $156 million compared
with $53 million last year, with strong sales, continued improvement in gross
margin and expense leverage. Operating profit increased to 4.0 percent of sales,
an improvement of 260 basis points. Comparable department store sales increased
7.1 percent. Sales reflect strength in both fashion and basic merchandise, and
good customer response to planned marketing events. While Catalog/Internet sales
decreased 1.6 percent, its contribution to profit continued to generate solid
improvement. Internet sales continue to experience strong growth, increasing
over 30 percent for the quarter, and about 40 percent year-to-date.
Gross margin increased by 150 basis points as a percent of sales,
reflecting good sell-through of seasonal product, less clearance merchandise and
consistent execution. Expenses were leveraged by 110 basis points as a percent
of sales.
Discontinued Operations
------------------------
The second quarter loss from discontinued operations was $71 million,
net of taxes, and is comprised of Eckerd's operating loss as well as adjustments
to reflect the final terms of the sale.
Financial Condition and Cash Flow
----------------------------------
As of July 31, 2004, cash investments were $7.4 billion and include the
receipt of gross proceeds from the sale of Eckerd. Long-term debt was $5.1
billion, reflecting the payment of $230 million of long-term debt that matured
during the second quarter. With better than planned results in the first half of
the year and continued improvement anticipated in the second half, free cash
flow for the year is now expected to be positive.
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August Sales and Third Quarter Earnings Guidance
-------------------------------------------------
August Department Store sales have exceeded expectations during the first
two weeks of the period. Operating profit for the quarter is expected to benefit
from continued improvement in gross margin and expense leverage. The Company
currently anticipates that third quarter earnings from continuing operations
will be in the range of $0.35 to $0.40 per share. Earnings guidance has been
reduced to reflect the $0.11 per share impact from the previously announced
one-time charges related to early debt retirements.
Equity and Debt Reduction Program
-----------------------------------
In early August, the Company initiated a major equity and debt reduction
program utilizing $3.5 billion in net cash proceeds from the sale of Eckerd and
$1.1 billion of existing cash balances. To date, the Company has repurchased 1.8
million shares in open market transactions and has taken steps to retire $487
million of long-term debt through early retirements and sinking fund payments,
as follows:
o $200 million of 6.0% Debentures Due 2006 (effective interest rate of
13.2%),
o $92 million of 9.75% Sinking Fund Notes Due 2021, and
o $195 million of 8.25% Sinking Fund Notes Due 2022 (including $37.5
million in sinking fund payments)
As previously announced, the Company expects to complete the equity and
debt reduction program within the next nine to twelve months.
Senior management will host a live conference call and real-time webcast on
Tuesday, August 17, 2004, beginning at 9:30 a.m. EDT. 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 973-341-3080, pin code 4323458. The live webcast may be accessed via
JCPenney's
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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
the Company, is one of America's largest department store, catalog, and
e-commerce retailers, employing approximately 150,000 associates. As of July 31,
2004, J. C. Penney Corporation, Inc. operated 1,018 JCPenney department stores
throughout the United States and Puerto Rico, and 60 Renner department stores in
Brazil. JCPenney Catalog, including e-commerce, is the nation's largest catalog
merchant of general merchandise, and JCPenney.com is one of the largest apparel
and home furnishings sites on the Internet. 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. In addition, non-GAAP terms referenced, such as EBITDA and
free cash flow, are defined and presented in the Company's 2003 Annual Report on
Form 10-K.
# # #
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J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
-----------------------------
(Amounts in millions except per share data)
13 weeks ended 26 weeks ended
----------------------------------- -----------------------------------
July 31, July 26, % Inc. July 31, July 26, % Inc.
2004 2003 (Dec.) 2004 2003 (Dec.)
----------- ----------- -------- ----------- ----------- --------
Comparable department store
sales increase/(decrease) 7.1% 2.3% 8.3% -1.5%
Catalog/Internet sales (decrease)/increase -1.6% 3.9% 2.5% -4.3%
Department Stores and Catalog/Internet
sales, net $ 3,857 $ 3,645 5.8% $ 7,890 $ 7,356 7.3%
Gross margin 1,443 1,310 10.2% 3,058 2,766 10.6%
Selling, general and
administrative (SG&A) expenses 1,287 1,257 2.4% 2,673 2,629 1.7%
----------- ----------- ----------- -----------
Operating profit 156 53 100% + 385 137 100.0% +
Net interest expense 49 70 -30.0% 106 135 -21.5%
Real estate and other (income) (5) (12) N/A (13) (21) N/A
----------- ----------- ----------- -----------
Income/(loss) from continuing operations
before income taxes 112 (5) 100.0% + 292 23 100.0% +
Income tax expense/(benefit) 40 (2) 100.0% + 102 6 100.0% +
----------- ----------- ----------- -----------
Income/(loss) from continuing operations $ 72 $ (3) 100.0% + $ 190 $ 17 100.0% +
----------- ----------- ----------- -----------
Discontinued operations, net of income tax
(benefit)/expense of $(88), $2, $(178) and $27 (71) 3 N/A (148) 44 N/A
----------- ----------- ----------- -----------
Net income $ 1 $ - 100.0% + $ 42 $ 61 -31.1%
=========== =========== =========== ===========
Earnings/(loss) per share from continuing
operations - diluted $ 0.23 $ (0.03) 100.0% + $ 0.62 $ 0.02 100.0% +
(Loss)/earnings per share - diluted $ (0.02) $ (0.02) 0.0% $ 0.14 $ 0.18 -22.2%
FINANCIAL DATA:
Ratios as a % of sales:
Gross margin 37.4% 35.9% 38.8% 37.6%
SG&A expenses 33.4% 34.5% 33.9% 35.7%
Operating profit 4.0% 1.4% 4.9% 1.9%
Depreciation and amortization $ 86 $ 88 (1) $ 173 $ 177 (1)
SUPPLEMENTAL DATA:
Average shares outstanding (basic shares) 282.6 271.5 280.0 271.0
Average shares used for diluted EPS 287.4 271.5 307.9 273.0
Effective income tax rate for
continuing operations 35.5% 46.6% 34.9% 24.7%
(1)Excludes $10 million and $22 million of accelerated depreciation for
catalog facilities for the 13 weeks and 26 weeks ended July 26, 2003,
respectively, which is included in Real Estate and Other.
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J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
-----------------------------
(Amounts in millions except per share data)
July 31, July 26,
2004 2003
----------- -----------
SUMMARY BALANCE SHEETS:
Cash and short-term investments $ 7,414 $ 2,617
Merchandise inventory (net of LIFO reserves of $43 and $49) 3,430 3,343
Other current assets 394 371
Property and equipment,net 3,464 3,498
Other assets 1,874 1,675
Assets of discontinued operations - 6,840
----------- -----------
Total assets $ 16,576 $ 18,344
=========== ===========
Accounts payable and accrued expenses $ 2,802 $ 2,026
Short-term debt 20 25
Current maturities of long-term debt 1,065 626
Taxes payable, current and deferred 896 21
Long-term debt 4,060 5,128
Long-term deferred taxes 1,138 1,207
Other liabilities 993 778
Liabilities of discontinued operations - 2,091
----------- -----------
Total liabilities 10,974 11,902
Stockholders' equity 5,602 6,442
----------- -----------
Total liabilities and stockholders' equity $ 16,576 $ 18,344
=========== ===========
26 weeks ended
--------------------------------------
July 31, July 26,
2004 2003
----------- -----------
SUMMARY STATEMENTS OF CASH FLOWS:
---------------------------------
Net cash provided by/(used in):
Total operating activities $ 221 $ (294)
----------- -----------
Investing activities
Capital expenditures (184) (150)
Proceeds from sale of assets 28 68
Proceeds from the sale of Eckerd 4,666 -
----------- -----------
Total investing activities 4,510 (82)
----------- -----------
Financing activities
Change in debt (236) 574
Change in stock 169 (3)
Dividends paid, preferred and common (81) (80)
----------- -----------
Total financing activities (148) 491
----------- -----------
Cash (paid to)/received from discontinued operations (163) 28
----------- -----------
Net increase in cash and short-term investments 4,420 143
Cash and short-term investments at beginning of period 2,994 2,474
----------- -----------
Cash and short-term investments at end of period $ 7,414 $ 2,617
=========== ===========
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