SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 17, 2005
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
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13d-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
J. C. Penney Company, Inc. issued a news release on May 17, 2005,
announcing its first 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: May 18, 2005
EXHIBIT INDEX
Exhibit Number Description
99.1 J. C. Penney Company, Inc.
News Release issued May 17, 2005
Exhibit 99.1
JCPENNEY FIRST QUARTER EARNINGS PER SHARE INCREASE 66 PERCENT
Operating Profit Increases 37 Percent to 7.5 Percent of Sales
Business Fundamentals Continue to Improve
PLANO, Texas, May 17, 2005 -- J. C. Penney Company, Inc. (NYSE: JCP) first
quarter earnings per share from continuing operations increased 66 percent to
$0.63 per share from $0.38 per share in last year's period. On a dollar basis,
income from continuing operations increased to $172 million from $118 million
last year. Earnings per share increased primarily as the result of continued
improvement in sales productivity, growth in gross margin and leverage of SG&A
expenses, and also benefited from the company's ongoing stock buyback program.
Net income for the quarter was $0.63 per share compared to $0.13 per share last
year.
Myron E. (Mike) Ullman, III, Chairman and Chief Executive Officer said, "Our
first quarter performance demonstrates that the fundamentals of our business
continue to improve, driven by the positive response of the moderate customer to
our merchandise, marketing and shopping experience initiatives. Operating profit
increased significantly, and we are pleased that despite difficult comparisons
to last year, we delivered increased sales."
Ullman added, "Our vision is to become the preferred shopping choice for middle
America, a customer segment that continues to show that it is resilient and
rewards retailers that meet or exceed customers' expectations. We believe that
we have identified the initiatives that can make this vision a reality and have
the team in place to execute our recently announced 2005 to 2009 Long-Range
Plan. Our Plan is focused on making an emotional connection with the customer,
creating an easy and exciting shopping environment, becoming a leader in
performance and execution, and making JCPenney a great place to work - and we
believe it will drive continued growth for the company."
Operating Results
------------------
During the first quarter, sales were at the high end of guidance. Comparable
department store sales increased 3.0 percent on top of a 9.5 percent increase in
last year's first quarter, while total department store sales increased 3.7
percent. Improvement in sales was broad-based, with increases in all merchandise
divisions and all regions of the country. Catalog/Internet sales increased 5.4
percent on top of a 6.5 percent increase last year. Internet sales increased
approximately 35 percent for the quarter as we continue to attract new, younger
customers to jcpenney.com.
For the first quarter, gross margin improved by 120 basis points, to 41.3
percent of sales, reflecting continued benefits of the company's centralized
business model, including: improved merchandise assortments, better initial
merchandise allocations and replenishment, and improved seasonal transitions and
clearance. SG&A expenses increased 2.2 percent on a dollar basis and were
leveraged, declining by 60 basis points as a percent of sales. SG&A expenses
include a charge of $19 million, or approximately $0.05 per share, related to
the expensing of employee stock options. This charge reflects the early adoption
of the final accounting rules to recognize compensation expense over the
employee service period, which is the earlier of the retirement eligibility date
or the normal vesting period.
First quarter operating profit was $313 million or 7.5 percent of sales,
compared with $229 million, or 5.7 percent of sales, last year. This represents
an increase of nearly 37 percent, or 180 basis points as a percent of sales.
Other Charges and Credits
--------------------------
The company reported $22 million of income as real estate and other, principally
related to a gain from the sale of real estate. In addition, during the quarter,
the company incurred pre-tax charges of $13 million related to the repurchase of
debt in open market transactions. Net interest expense was $53 million during
the quarter, which was better than original expectations, and benefited from
increased cash balances throughout the quarter and higher short-term interest
rates on cash investments.
Financial Condition
--------------------
JCPenney's financial condition remains strong. As of April 30, 2005, the company
had cash investments of $4.1 billion, which will be reduced over the balance of
the year as the capital structure repositioning program is completed. Long-term
debt totaled $3.7 billion, including $264 million of current maturities. Free
cash flow for the quarter was a negative $106 million, which was in line with
expectations. The company continues to expect to generate about $100 million of
positive free cash flow for the full year.
Capital Structure Repositioning
-------------------------------
During the first quarter, the company repurchased 7.7 million shares of its
common stock. Since inception of the capital structure repositioning program in
August 2004, the company has repurchased approximately 58 million shares for
$2.3 billion, or about 60 percent of the $3.75 billion authorized under the
program. The company continues to expect to complete the program by the end of
2005. In addition, the company purchased $194 million of long-term debt in open
market transactions during the first quarter. The company has authorization to
repurchase an additional $56 million of its long-term debt.
Earnings Guidance
------------------
For the second quarter, comparable store sales are expected to increase
low-single digits with catalog/Internet sales expected to increase low- to
mid-single digits. The company expects earnings from continuing operations to be
in the range of $0.25 to $0.30 per share in the second quarter, based on an
average diluted share count of 263 million to 266 million shares. For the full
year management now expects earnings from continuing operations in the range of
$2.96 to $3.08 per share based on 255 million to 260 million average fully
diluted shares. Second quarter and full year earnings assume charges of
approximately $7 million, or $0.02 per share, and $20 million, or $0.05 per
share, respectively, related to premiums on open market debt retirements and $4
million, or $0.01 per share, and $33 million, or $0.08 per share, respectively,
for the expensing of employee stock options.
Earnings per share for the balance of the year reflect improvement in both gross
margin and SG&A expense as a percent of sales, coupled with benefits derived
from lower share counts as compared with last year.
Senior management will host a live conference call and real-time webcast on May
17, 2005, beginning at 9:30 a.m. ET. 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 5717169. The live webcast may be accessed via JCPenney's
Investor Relations page (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.
For further information, contact:
Investor Relations
------------------
Bob Johnson; (972) 431-2217; rvjohnso@jcpenney.com
Ed Merritt; (972) 431-8167; emerritt@jcpenney.com
Public Relations
------------------
Quinton Crenshaw; (972) 431-5581; qcrensha@jcpenney.com
Tim Lyons; (972) 431-4834; tmlyons@jcpenney.com
About JCPenney
--------------
J. C. Penney Corporation, Inc., the wholly-owned operating subsidiary of J. C.
Penney Company, Inc., is one of America's largest department store, catalog, and
e-commerce retailers, employing approximately 150,000 associates. As of April
30, 2005, J. C. Penney Corporation, Inc. operated 1,017 JCPenney department
stores throughout the United States and Puerto Rico, and 62 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, changes in
management, and government activity. Please refer to the Company's most recent
Form 10-K and subsequent filings for a further discussion of risks and
uncertainties. Investors should take such risks into account when making
investment decisions. Non-GAAP terms, such as EBITDA and free cash flow, are
defined and presented in the company's most recent Annual Report on Form 10-K.
The company does not undertake to update these forward-looking statements as of
any future date.
# # #
J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
(Unaudited)
(Amounts in millions except per share data)
13 weeks ended
----------------------------
April 30, May 1, Inc.
2005 2004 (Dec.)
---------------------------- -----------
SALES PERCENTAGES:
Comparable department store sales increase 3.0% 9.5%
Catalog/Internet sales increase 5.4% 6.5%
STATEMENTS OF OPERATIONS:
Department Stores and Catalog/Internet
sales, net $ 4,192 $ 4,033 3.9%
Gross margin 1,729 1,615 7.1%
Selling, general and administrative
(SG&A) expenses 1,416 1,386 2.2%
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Operating profit 313 229 36.7%
Net interest expense 53 57 (7.0)%
Bond premiums and unamortized costs 13 - N/A
Real estate and other (income) (22) (8) N/A
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Income from continuing operations
before income taxes 269 180 49.4%
Income tax expense 97 62 56.5%
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Income from continuing operations $ 172 $ 118 45.8%
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Discontinued operations, net of income tax
(benefit) of $0 and $(90) - (77) N/A
------------ ------------
Net income $ 172 $ 41 100.0% +
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Earnings per share from continuing
operations - diluted $ 0.63 $ 0.38 65.8%
Earnings per share - diluted $ 0.63 $ 0.13 100.0% +
FINANCIAL DATA:
---------------
Ratios as a % of sales:
Gross margin 41.3% 40.1%
SG&A expenses 33.8% 34.4%
Operating profit 7.5% 5.7%
Depreciation and amortization $ 90 $ 87
Effective income tax rate for continuing operations 36.0% 34.5%
COMMON SHARES DATA:
Outstanding shares at end of period 266.6 281.7
Average shares outstanding (basic shares) 271.3 277.7
Average shares used for diluted EPS 274.0 305.8
Shares repurchased 7.7 -
Total cost of shares repurchased $ 360 $ -
J. C. PENNEY COMPANY, INC.
SUMMARY BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
April 30, May 1,
2005 2004
------------ ------------
SUMMARY BALANCE SHEETS:
Cash and short-term investments $ 4,147 $ 3,027
Merchandise inventory (net of LIFO reserves of $25 and $43) 3,293 3,338
Other current assets 555 446
Property and equipment, net 3,636 3,462
Other assets 2,068 1,810
Assets of discontinued operations - 6,077
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Total assets $ 13,699 $ 18,160
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Accounts payable and accrued expenses $ 2,640 $ 2,411
Short-term debt 111 34
Current maturities of long-term debt 264 243
Current income taxes, payable and deferred 102 875
Long-term debt 3,461 5,113
Long-term deferred taxes 1,328 1,204
Other liabilities 1,031 819
Liabilities of discontinued operations - 1,863
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Total liabilities 8,937 12,562
Stockholders' equity 4,762 5,598
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Total liabilities and stockholders' equity $ 13,699 $ 18,160
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13 weeks ended
----------------------------
April 30, May 1,
2005 2004
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SUMMARY STATEMENTS OF CASH FLOWS:
---------------------------------
Net cash provided by/(used in):
Total operating activities $ 12 $ (20)
Investing activities
Capital expenditures (99) (64)
Proceeds from sale of assets 16 19
------------ ------------
Total investing activities (83) (45)
Financing activities
Change in debt (121) 13
Stock repurchase program (318) -
Other changes in stock 75 130
Dividends paid (35) (34)
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Total financing activities (399) 109
Cash (paid to) discontinued operations (70) (11)
------------ ------------
Net (decrease)/increase in cash and short-term investments (540) 33
Cash and short-term investments at beginning of period 4,687 2,994
------------ ------------
Cash and short-term investments at end of period $ 4,147 $ 3,027
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