<PAGE>
(CONFORMED COPY)
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the 13 and 39 week periods Commission file number 1-777
ended October 25, 1997
J. C. PENNEY COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-5583779
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6501 Legacy Drive, Plano, Texas 75024 - 3698
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 431-1000
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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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
249,941,785 shares of Common Stock of 50c par value, as of October 25, 1997.
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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. Certain amounts have been
reclassified to conform with the current period presentation. The financial
information should be read in conjunction with the audited consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the 52 weeks ended January 25, 1997.
Statements of Income
(Amounts in millions except per share data)
13 weeks ended 39 weeks ended
------------------- -------------------
Oct. 25, Oct. 26, Oct. 25, Oct. 26,
1997 1996 1997 1996
-------- -------- -------- --------
Retail sales $ 7,207 $ 5,537 $ 20,109 $ 14,496
Insurance revenue 233 208 686 601
-------- -------- -------- --------
Total revenue 7,440 5,745 20,795 15,097
-------- -------- -------- --------
Costs and expenses
Cost of goods sold, occupancy, buying,
and warehousing costs 5,169 3,837 14,558 10,144
Selling, general, and administrative
expenses 1,554 1,251 4,539 3,565
Costs and expenses of insurance
operations 182 161 529 465
Other (5) (7) (34) (42)
Net interest expense and credit
operations 152 92 355 177
Amortization of intangible assets
and minority interest 14 -- 72 --
Restructuring and business integration
expenses, net 190 34 217 34
-------- -------- -------- --------
Total costs and expenses 7,256 5,368 20,236 14,343
-------- -------- -------- --------
Income before income taxes 184 377 559 754
Income taxes 71 141 217 283
-------- -------- -------- --------
Net income $ 113 $ 236 $ 342 $ 471
======== ======== ======== ========
Net income per common share
Primary $ .40 $ .98 $ 1.25 $ 1.93
======== ======== ======== ========
Fully diluted $ .40 $ .95 $ 1.25 $ 1.89
======== ======== ======== ========
Weighted average common shares outstanding
Primary 251.9 229.2 248.7 228.3
======== ======== ======== ========
Fully diluted 270.7 248.8 267.6 248.1
======== ======== ======== ========
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Balance Sheets
(Amounts in millions)
Oct. 25, Oct. 26, Jan. 25,
1997 1996 1997
-------- -------- --------
ASSETS
Current assets
Cash and short term investments
of $172, $180, and $131 $ 208 $ 180 $ 131
Receivables, net 4,614 4,987 5,757
Merchandise inventory (LIFO reserves
of $227, $226, and $265) 7,249 5,748 5,722
Prepaid expenses 78 118 102
-------- -------- --------
Total current assets 12,149 11,033 11,712
Properties, net of accumulated
depreciation of $3,148, $2,320,
and $2,701 5,130 4,450 5,014
Investments, primarily insurance operations 1,737 1,711 1,605
Deferred insurance policy acquisition costs 728 644 666
Goodwill and other intangible assets 3,061 -- 1,861
Other assets 1,387 1,532 1,230
-------- -------- --------
$ 24,192 $ 19,370 $ 22,088
======== ======== ========
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Balance Sheets
(Amounts in millions)
Oct. 25, Oct. 26, Jan. 25,
1997 1996 1997
-------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 3,859 $ 2,968 $ 3,738
Short term debt 2,218 2,120 3,950
Current maturities of long term debt -- -- 250
Deferred taxes 92 96 28
-------- -------- --------
Total current liabilities 6,169 5,184 7,966
Long term debt 7,487 4,663 4,565
Deferred taxes 1,500 1,259 1,362
Insurance policy and claims reserves 849 744 781
Other liabilities 981 1,223 1,383
-------- -------- --------
Total liabilities 16,986 13,073 16,057
Minority interest in Eckerd -- -- 79
Stockholders' equity
Preferred stock, without par value:
Authorized, 25 million shares -
issued, 1 million shares of
Series B ESOP convertible preferred 535 574 568
Guaranteed ESOP obligation (96) (186) (142)
Common stock, par value 50c:
Authorized, 1,250 million shares -
issued, 250, 226, and 224 million
shares 2,727 1,446 1,416
-------- -------- --------
Total capital stock 3,166 1,834 1,842
-------- -------- --------
Reinvested earnings at beginning
of year 4,110 4,397 4,397
Net income 342 471 565
Net unrealized change in debt and
equity securities, and currency
translation adjustments 7 (34) (21)
Retirement of common stock -- -- (320)
Common stock dividends declared (399) (351) (471)
Preferred stock dividends
declared, net of taxes (20) (20) (40)
-------- -------- --------
Reinvested earnings at end of
period 4,040 4,463 4,110
-------- -------- --------
Total stockholders' equity 7,206 6,297 5,952
-------- -------- --------
$ 24,192 $ 19,370 $ 22,088
======== ======== ========
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Statements of Cash Flows
(Amounts in millions)
39 weeks ended
-------------------
Oct. 25, Oct. 26,
1997 1996
-------- --------
Operating activities
Net income $ 342 $ 471
Gain on the sale of bank assets (52) --
Depreciation and amortization, including
intangibles 410 363
Deferred taxes 177 63
Change in cash from:
Customer receivables 633 399
Inventories, net of trade payables (1,039) (1,100)
Other assets and liabilities, net (562) (288)
-------- --------
(91) (92)
-------- --------
Investing activities
Capital expenditures (581) (592)
Proceeds from the sale of bank assets, net 276 --
Purchases of investment securities (339) (353)
Proceeds from sales of investment securities 215 247
-------- --------
(429) (698)
-------- --------
Financing activities
Increase/(decrease) in short term debt (1,732) 571
Net proceeds from the issuance
of long term debt 2,979 599
Payment of long term debt (295) (42)
Common stock issued, net 82 56
Preferred stock retired (33) (29)
Dividends paid, preferred and common (404) (358)
-------- --------
597 797
-------- --------
Net increase in cash and short term
investments 77 7
Cash and short term investments at beginning
of year 131 173
-------- --------
Cash and short term investments at end of
third quarter $ 208 $ 180
========= ========
Non-cash transaction
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On February 27, 1997, the Company completed the acquisition of Eckerd
Corporation through the exchange of 23.2 million shares of JCPenney common
stock for the remaining 49.9 per cent of the outstanding common stock of
Eckerd. The value of the non-cash portion of the acquisition was approximately
$1.3 billion.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Financial Condition
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The Company completed the acquisition of Eckerd Corporation (Eckerd) on February
27, 1997. The acquisition was accomplished through a two step transaction
consisting of a cash tender offer for 50.1 per cent of the outstanding Eckerd
common stock (December 1996), followed by the exchange of approximately 23.2
million shares of JCPenney common stock for the remaining 49.9 per cent of
Eckerd common stock (February 1997). The total value of the acquisition,
including Eckerd debt assumed by the Company, was approximately $3.3 billion.
The pro forma effects of the Company's recent drugstore acquisitions, assuming
the acquisitions had occurred at the beginning of fiscal 1996, for the 13 and 39
weeks ended October 26, 1996 would have been as follows:
($ in millions, except per share information)
13 weeks ended 39 weeks ended
------------------ ------------------
Oct. 26, 1996 Oct. 26, 1996
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Historical Pro forma Historical Pro forma
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Retail sales $ 5,537 $ 7,031 $ 14,496 $ 19,099
FIFO operating profit 508 542 965 1,139
Net income 236 208 471 430
Earnings per share
fully diluted .95 .77 1.89 1.59
Merchandise inventory for JCPenney stores and catalog totaled $5,174 million at
the end of the 1997 third quarter, a decrease of $143 million, or 2.7 per cent,
compared with third quarter 1996 levels. Inventories have been reduced through
management of purchases, and inventory positions are now in line with current
sales estimates for the holiday season. Drugstore merchandise inventories
totaled $2,302 million at the end of the third quarter compared with $657
million at the end of last year's third quarter. The increase in drugstore
inventories is primarily a result of the Eckerd acquisition. In total,
merchandise inventory on a FIFO basis was $7,476 million at October 25, 1997
compared with $5,974 million a year earlier.
Properties, net of accumulated depreciation, totaled $5,130 million at October
25, 1997 compared with $4,450 million a year earlier. The increase is
principally related to the addition of 31 new and relocated JCPenney stores and
the expansion of its drugstore operations. As of the end of the third quarter
the Company operated 1,220 JCPenney stores and 2,769 drugstores.
Goodwill and other intangible assets, net, which is principally related to the
Company's drugstore acquisitions, totaled $3,061 million at October 25, 1997.
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Long term debt totaled $7,487 million at the end of the third quarter compared
with $4,663 million a year earlier. The Company issued $3.0 billion of debt
securities in the first quarter of 1997, with the proceeds used principally to
fund the Eckerd acquisition. The new debt lowered the average interest rate and
extended the average maturity for the Company's aggregate outstanding long term
debt. Total debt, both on and off-balance sheet, was $11.7 billion at October
25, 1997, up $3.9 billion from a year earlier.
Results of Operations
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Ratios useful in analyzing the results of operations are as follows:
13 weeks ended 39 weeks ended
------------------- -------------------
Oct. 25, Oct. 26, Oct. 25, Oct. 26,
1997 1996 1997 1996
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Sales and revenue, per cent
increase/(decrease)
JCPenney stores (1.5) 8.2 2.2 3.7
Eckerd drugstores (1) 10.6 11.0 11.7 10.7
Catalog 2.6 (0.8) 2.7 (1.4)
Insurance 12.0 17.8 14.1 21.1
Comparable store sales, per cent
increase/(decrease)
JCPenney stores (2.5) 6.2 1.2 2.1
Eckerd drugstores 7.2 6.8 7.5 8.1
FIFO gross margin, per cent of sales
JCPenney stores and catalog 31.9 31.7 30.9 31.0
Eckerd drugstores 21.0 20.9 (1) 21.6 21.6 (1)
LIFO gross margin, per cent of sales
Eckerd drugstores 20.6 20.6 (1) 21.3 21.4 (1)
Selling, general, and administrative
expenses, per cent of sales
JCPenney stores and catalog 23.3 23.0 25.3 25.3
Eckerd drugstores 17.8 18.2 (1) 17.4 18.0 (1)
FIFO operating profit, per cent
of revenue (2)
JCPenney stores and catalog 8.6 8.7 5.6 5.7
Eckerd drugstores 3.2 2.7 (1) 4.2 3.6 (1)
Insurance 21.9 22.6 22.9 22.6
Effective income tax rate 38.6 37.4 38.9 37.5
(1) The percentage shown has been calculated using 1996 pro forma data,
assuming the Company's drugstore acquisitions had occurred at
the beginning of fiscal 1996.
(2) FIFO operating profit by segment excludes net interest and credit
operations, amortization of intangible assets and minority interest,
LIFO adjustments, restructuring and business integration expenses, net,
and income taxes.
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Operating profit, which represents net income excluding net interest and credit
operations, amortization of intangible assets and minority interest,
restructuring and business integration expenses, net, and income taxes, totaled
$540 million for the 13 weeks ended October 25, 1997, an increase of $37
million, or 7.4 per cent compared with the prior year's third quarter. Operating
earnings before restructuring and business integration expenses, net, totaled
$229 million, or 85 cents per share, in the third quarter compared with $257
million, or $1.03 per share last year, and net income totaled $113 million, or
40 cents per share compared with $236 million, or 95 cents per share in last
year's third quarter. For the 39 weeks ended October 25, 1997 operating profit
totaled $1,203 million compared with $965 million in the prior year, a 24.7 per
cent increase. Operating earnings before restructuring and business integration
expenses, net, totaled $474 million, or $1.76 per share compared with $492
million, or $1.97 per share, last year, and net income totaled $342 million, or
$1.25 per share, compared with $471 million, or $1.89 per share, in last year's
comparable period. The average number of fully diluted shares increased by 21.9
million shares for the third quarter, and 19.5 million shares for the first nine
months compared with the prior year, principally as a result of the exchange of
common stock in the Eckerd acquisition.
JCPenney Stores and Catalog
Sales of JCPenney stores totaled $3,946 million for the third quarter, a
decrease of 1.5 per cent compared with third quarter 1996. On a comparable store
basis, including only those stores open at least a year, sales decreased 2.5 per
cent for the period. Catalog sales totaled $980 million in the third quarter, an
increase of 2.6 per cent over last year's comparable period. FIFO gross margin
for JCPenney stores and catalog totaled $1,569 million, down slightly from last
year's third quarter as a result of lower sales volumes. FIFO gross margin as a
per cent of sales improved by 20 basis points for the quarter compared with last
year. SG&A expenses in the third quarter were at about the same level as last
year.
For the nine months ended October 25, 1997 sales of JCPenney stores totaled
$10,628 million, an increase of 2.2 per cent (1.2 per cent for comparable
stores), and Catalog sales totaled $2,585 million, an increase of 2.7 per cent
compared with the comparable 1996 period. On a year to date basis, FIFO gross
margin increased by $73 million to $4,080 million, but as per cent of sales,
declined by 10 basis points compared with last year. Gross margin for the nine
months has been impacted by a higher volume of clearance activities in the first
half of 1997 compared with last year, which has been partially offset by
improvement in mark-up. SG&A expenses as a per cent of sales were unchanged for
the first nine months of 1997 compared with 1996 levels.
Eckerd Drugstores
The following discussion of operations compares 1997 results with 1996 pro forma
results, assuming the drugstore acquisitions had occurred at the beginning of
fiscal 1996.
Drugstore sales totaled $2,281 million for the third quarter, an increase of
10.5 per cent compared with last year's third quarter. The increase is primarily
related to increases in prescription sales, in particular managed care sales,
store acquisitions and new store expansion, and increased sales productivity
from stores which have been relocated to free standing locations. On a
comparable store basis, sales increased by 7.2 per cent for the quarter.
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Sales in the northeast were below total drugstore results due to transition
activities related to the conversion to the Eckerd name and format. FIFO gross
margin totaled $477 million for the third quarter, an increase of $46 million,
or 10.7 per cent compared with the 1996 period. As a per cent of sales, FIFO
gross margin improved by 10 basis points for the quarter, reflecting some of the
synergy savings anticipated in the Eckerd acquisition. Drugstore results reflect
an $8 million LIFO charge in the third quarter. LIFO adjustments are being
recorded on a quarterly basis for Eckerd to reflect the inflationary environment
for prescription drugs. SG&A expenses continued to be well managed and leveraged
during the quarter, improving as a per cent of sales by 40 basis points. These
results were achieved during a period of significant transition and integration
activities. By the end of the quarter, all stores had been converted to the
Eckerd format.
Drugstore sales for the first nine months totaled $6,896 million, an increase of
11.6 per cent over the comparable period last year, with comparable store sales
increasing by 7.5 per cent. For the first nine months, FIFO gross margin totaled
$1,485 million, an increase of $149 million, or 11.1 per cent over the
comparable period in 1996. As a per cent of sales, FIFO gross margin for the
first nine months of the year was even with last year. SG&A expenses were
leveraged through the third quarter, improving by 60 basis points as a per cent
of sales.
Insurance
Revenue totaled $233 million in the third quarter, an increase of $25 million,
or 12.0 per cent, over the comparable 1996 period. Operating profit for the
quarter totaled $51 million, an increase of 8.5 per cent, compared with $47
million in last year's third quarter. Third quarter results were impacted by
adverse claims activity in the early part of the quarter. For the first nine
months, revenue was $686 million, an increase of 14.1 per cent over the prior
year, and operating profit was $157 million, an increase of 15.4 per cent over
1996 levels. These results continue the strong performance that has been
experienced over the past five years, and are primarily attributable to
successful marketing programs with businesses which offer credit cards,
principally banks, oil companies, and retailers.
Other
Other unallocated operating profits, a category which consists principally of
real estate and investment activities, totaled $5 million in the third quarter
compared with $7 million last year. For the 39 weeks ended October 25, 1997, the
Company had recognized unallocated gains of $34 million, including $20 million
in gains on the sale of securities held by the Company's insurance companies,
compared with $42 million in last year's first half.
Net Interest Expense and Credit Operations
Net interest expense and credit operations increased for both the third quarter
and for the first nine months of 1997 compared with last year's periods. The
increase for both periods was principally attributable to higher interest costs
associated with the drugstore acquisitions. Finance charge revenue has increased
in 1997 compared with 1996 levels as a result of modifications made to credit
terms in selected states, and has generally offset increases in credit operating
expenses, including bad debt. Net bad debt, which is the largest single
component of credit costs, increased by $20 million, or 28 per cent, for the
quarter and $30 million, or 15 per cent, through the October
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period compared with the comparable 1996 periods. The 90-day delinquency rate
for customer receivables at the end of the third quarter was 4.8 per cent, up
from 4.1 per cent for the comparable period in 1996. Delinquencies and personal
bankruptcies continue to be above expected levels.
Restructuring and Business Integration Expenses, net
Restructuring and business integration expenses, net, totaled $190 million in
the third quarter. These expenses included $158 million in costs associated with
the Company's previously announced voluntary early retirement program.
Approximately 1,250 of the 1,575 eligible management associates accepted early
retirement under the program. The Company expects to realize annual benefits of
approximately $85 to $90 million as a result of the retirements. In addition,
the Company recorded $50 million of other integration expenses, principally
related to the drugstore operations, which were partially offset by an $18
million gain realized on the sale of the remaining assets of the Company's
consumer banking operation.
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 and 39
weeks ended October 25, 1997 are not necessarily indicative of the results for
the entire year.
New Accounting Rules
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The Financial Accounting Standards Board (FASB) has issued several Statements of
Financial Accounting Standards (SFAS's) in 1997 which may impact the Company's
accounting treatment and/or disclosure. None of these new standards are expected
to have a material impact on the Company. The new standards are as follows:
SFAS No. 128, "Earnings Per Share" was issued in February 1997 and supersedes
Accounting Principles Board Opinion No. 15, "Earnings Per Share". The new rules
will replace primary and fully diluted earnings per share with basic and diluted
earnings per share. SFAS No. 128 is effective for periods ending after December
15, 1997. Previously reported per share amounts will be restated upon adoption.
SFAS No. 130, "Reporting Comprehensive Income" was issued in June 1997. The new
rules establish standards for reporting and displaying comprehensive income and
its components in a full set of general-purpose financial statements. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information" was issued in June 1997 and supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise". The new rules change the
manner in which operating segments are defined and reported externally to be
consistent with the basis on which they are reported and evaluated internally.
SFAS No. 131 is effective for periods beginning after December 15, 1997.
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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:
10(a) J. C. Penney Company, Inc. 1997 Equity Compensation Plan
(incorporated by reference to Exhibit A to the Company's
definitive Proxy Statement for its Annual Meeting of Stockholders
held on May 16, 1997).
10(b) July 1997 Amendment to Supplemental Retirement Program for
Management Profit-Sharing Associates of J. C. Penney Company,
Inc.
10(c) July 1997 Amendment to J. C. Penney Company, Inc. Benefit
Restoration Plan.
10(d) April 1997 Amendment to J. C. Penney Company, Inc. Deferred
Compensation Plan.
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.
27 Financial Data Schedule for the nine months ended October 25,
1997.
(b) Reports on Form 8-K
-------------------
None.
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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/W. J. Alcorn
-------------------------------
W. J. Alcorn
Vice President and Controller
(Principal Accounting Officer)
Date: December 5, 1997
<PAGE>
Exhibit 10(b)
AMENDMENTS TO
SUPPLEMENTAL RETIREMENT PROGRAM FOR
MANAGEMENT PROFIT-SHARING ASSOCIATES OF
J. C. PENNEY COMPANY, INC.
Adopted by Benefit Plans Review Commitee
July 9, 1997
<PAGE>
RESOLVED that pursuant to Paragraph (2) of Article VIII of
the Supplemental Retirement Program for Management Profit-Sharing
Associates of J. C. Penney Company, Inc. ("Program"), the Program
be, and it hereby is, amended as follows:
1. Subparagraph (b)(ii) of paragraph (1) (At Early,
Traditional, or Delayed Retirement Date) of Article IV
(Benefits) shall be amended effective September 15, 1997 to
delete the words "as of the Valuation Date which is the
Eligible Management Associate's date of Separation from
Service" and to substitute the words "as of the Valuation
Date which is the next trading date of the New York Stock
Exchange following the Associate's Separation from Service"
therefor.
2. Paragraph (1) (Additional Credited Service and other
Adjustments) of Article VIII (Miscellaneous) shall be
amended effective January 1, 1997 to add three sentences to
the last paragraph as follows:
For the purpose of determining life insurance coverage under
paragraph (5) of Article IV, an Eligible Management
Associate deemed to have attained Traditional Retirement Age
in the event of a unit closing described in (a) of the
preceding subparagraph shall be entitled to coverage
effective on the first day of the month following his
Separation from Service. The amount of such coverage shall
be equal to 100% of the amount being provided to him at
Company expense immediately prior to his Separation from
Service. Said amount shall be reduced in accordance with
paragraph (5) of Article IV starting with the first day of
the month following his attainment of age 61.
3. Paragraph (6) (Cessation and Recalculation of Benefits) of
Article VIII (Miscellaneous) shall be amended effective
January 1, 1998 to retitle the paragraph, to delete sentence
one and to substitute a new sentence one therefor as
follows:
(6) Benefits for Reemployed Eligible Management
___________________________________________
Associates: If a retired Eligible Management Associate
__________
subsequently is reemployed by a Participating Employer, the
payment of benefits hereunder shall continue.
RESOLVED that, in order to carry out the intent and
effectuate the purposes of the Amendments, the appropriate
officers of the Company, with the approval of counsel for the
Company, be, and they hereby are, authorized to make such
technical changes, corrections, and amendments to the Program as
they deem necessary and the Vice President and Director of
Personnel is authorized to approve amendments necessary because
1
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of the outsourcing of benefits administration to Hewitt
Associates; provided, however, that no such change, correction,
or amendment may substantially increase the cost of the Program
to the Company or diminish substantially the payments and
benefits provided for in the Program, and that any such change,
correction, or amendment be reported, as soon as reasonably
possible, to the Personnel Committee of the Management Committee
of the Company; and
RESOLVED that officers of the Company and its counsel be,
and they hereby are, authorized to take all such action and to
execute and deliver all such instruments and documents, in the
name and on behalf of the Company, and under its corporate seal
or otherwise, as shall in their judgment be necessary, proper, or
advisable in order fully to carry out the intent and to
effectuate the purposes of the foregoing resolutions and each of
them.
2
<PAGE>
Exhibit 10(c)
AMENDMENTS TO
J. C. PENNEY COMPANY, INC.
BENEFIT RESTORATION PLAN
Adopted by Benefit Plans Review Committee
July 9, 1997
<PAGE>
RESOLVED that, pursuant to Article VIII, Paragraph 1 of the J. C.
Penney Company, Inc. Benefit Restoration Plan, ("Plan"), the Plan
be, and it hereby is, amended as follows:
1. Paragraph (3) (Death Benefits) of Article IV (Benefits) is
amended effective January 1, 1997 to revise sentence two as
follows:
Notwithstanding the preceding sentence, if the Participant
at the time of his death (a) was 55 years of age or more,
(b) had 15 years or more of service, as defined by the
Pension Plan, and (c) Separates from Service by reason of
death, the joint and survivor annuity payable to the Spouse
will be in the form of a 100% (75% if death occurs prior to
January 1, 1996) joint and survivor annuity without payment
certain.
2. Paragraph (1) (Optional Forms and Commencement of Benefit
Payments) is amended effective January 1, 1997 to delete the
following sentence two:
For purposes of the benefit provided by Paragraph (1)
of Article IV, a Participant shall receive the annual
benefit payable under Paragraph (1) of Article IV in
such form and at such time and actuarially adjusted in
such a manner as the benefit payable under the
Supplemental Retirement Program.
And to revise sentence three and to add a new sentence four
as follows:
For purposes of the benefit provided by Paragraph (1)
of Article IV, the Participant shall receive the annual
benefit payable under Paragraph (1) of Article IV in
such a form and at such time and actuarially adjusted
in such a manner as the benefit payable under the
Pension Plan. Payment of such benefit may be deferred
to a date no later than the Participant's attainment of
age 65 only if the Participant has elected to defer
receipt of benefits under the Pension Plan.
RESOLVED that, in order to carry out the intent and
effectuate the purposes of the Amendments, the appropriate
officers of the Company, with the approval of counsel for the
Company, be, and they hereby are, authorized to make such
technical changes, corrections, and amendments to the Plan as
they deem necessary and the Vice President and Director of
Personnel is authorized to approve amendments necessary because
of the outsourcing of benefits administration to Hewitt
Associates; provided, however, that no such change, correction,
or amendment may substantially increase the cost of the Plan to
1
<PAGE>
the Company or diminish substantially the payments and benefits
provided for in the Plan, and that any such change, correction,
or amendment be reported, as soon as reasonably possible, to the
Personnel Committee of the Management Committee of the Company;
and
RESOLVED that the officers of the Company and its counsel
be, and they hereby are, authorized to take all such further
actions, and to execute and deliver all such further instruments
and documents in the name and on behalf of the Company, and under
its corporate seal or otherwise, and to pay all such expenses as
shall in their judgment be necessary, proper, or advisable in
order fully to carry out the intent and effectuate the purposes
of the foregoing resolutions and each of them.
2
<PAGE>
Exhibit 10(d)
AMENDMENTS TO
J. C. PENNEY COMPANY, INC.
1995 DEFERRED COMPENSATION PLAN
Adopted April 4, 1997
<PAGE>
1. The definition of Eligible Associate in Section 2 shall be
__________________
amended effective January 1, 1998 in its entirety as
follows:
Eligible Associate means any associate of an Employer whose
__________________
Earnings in the preceding Plan Year (or in the calendar year
ended December 31, 1994, in the case of the first Plan Year)
equalled or exceeded the applicable Earnings Dollar Limit.
2. Section 5 shall be amended effective January 1, 1998 to
revise sentence one of paragraph two as follows:
The Election to Defer shall be stated as a whole percentage
of the total of Base Salary, COMP, and PUP, and the deferral
percentage shall be the same for each such form of
compensation.
3. Section 7 shall be amended effective August 1, 1997 to
revise the paragraph entitled Interest as follows:
________
Each Participant's Account shall be credited with interest
on a daily basis using an interest rate equal to the Moody's
Single A Corporate Bond Yield in effect as of the last day
of a month, except as otherwise provided in Section 10
hereof. The interest rate determined as of the last day of
a month shall be used to credit interest to each
Participant's Account for the period beginning on the fifth
business day of the next month through the fourth business
day of the next following month. Interest at the applicable
rate, as stated above, shall continue to accrue and be
credited to a Participant's Account in accordance with the
above provisions until the Account is fully distributed.
The Personnel and Compensation Committee may amend or change
the annual effective interest rate at any time and from time
to time.
2
<PAGE>
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)
39 Weeks Ended
______________________________________________
October 25, 1997 October 26, 1996
___________________ ___________________
Shares Income Shares Income
________ _______ ________ ________
Primary:
________
Net income $ 342 $ 471
Dividend on Series B ESOP
convertible preferred stock
(after-tax) (30) (30)
_______ _______
Adjusted net income 312 441
Weighted average number of
shares outstanding 246.3 225.5
Common stock equivalents:
Stock options and other
dilutive effect 2.4 2.8
_____ _____
248.7 $ 312 228.3 $ 441
===== ====== ===== ======
Net income per common share $ 1.25 $ 1.93
====== ======
Fully diluted:
______________
Net income $ 342 $ 471
Tax benefit differential on ESOP
dividend assuming stock is
fully converted (1) (2)
Assumed additional contribution
to ESOP if preferred stock is
fully converted (1) (1)
______ _______
Adjusted net income 340 468
Weighted average number of
shares outstanding (primary) 248.7 228.3
Maximum dilution 0.5 0.3
Convertible preferred stock 18.4 19.5
_____ ______ _____ ______
267.6 340 248.1 $ 468
===== ====== ===== ======
Net income per common share $ 1.25 $ 1.89
====== ======
<PAGE>
Exhibit 12 (a)
J. C. Penney Company, Inc.
and Consolidated Subsidiaries
Computation of Ratios of Available Income to Combined Fixed Charges
and Preferred Stock Dividend Requirement
52 weeks ended
________________________________
Oct. 25 Oct. 26
($ Millions) 1997 1996
_________ ____________
Income from continuing operations $ 665 $ 1,212
(before income taxes, before
capitalized interest, but after
preferred stock dividend)
Fixed charges
Interest (including capitalized
interest) on:
Operating leases 110 102
Short term debt 122 101
Long term debt 473 298
Capital leases 7 5
Credit facility 19 -
Other, net (14) 4
____________ ___________
Total fixed charges 717 510
Preferred stock dividend, before taxes 46 47
Combined fixed charges and preferred ____________ ___________
stock dividend requirement 763 557
Total available income $ 1,428 $ 1,769
============ ============
Ratio of available income to combined
fixed charges and preferred stock
dividend requirement 1.9 3.2
============ ============
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 of time other than a 52 week period are inappropriate.
<PAGE>
Exhibit 12 (b)
J. C. Penney Company, Inc.
and Consolidated Subsidiaries
Computation of Ratios of Available Income to Fixed Charges
52 weeks ended
________________________________
Oct. 25 Oct. 26
($ Millions) 1997 1996
_________ ____________
Income from continuing operations $ 711 $ 1,259
(before income taxes and
capitalized interest)
Fixed charges
Interest (including capitalized
interest) on:
Operating leases 110 102
Short term debt 122 101
Long term debt 473 298
Capital leases 7 5
Credit facility 19 -
Other, net (14) 4
___________ ___________
Total fixed charges 717 510
____________ ___________
Total available income $ 1,428 $ 1,769
========== ============
Ratio of available income to combined
fixed charges and preferred stock
dividend requirement 2.0 3.5
=========== ===========
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 of time other than a 52 week period are inappropriate.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED STATEMENT OF INCOME
OF J. C. PENNEY COMPANY, INC. AND SUBSIDIARIES AS OF OCTOBER 25, 1997, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-25-1997
<CASH> 208
<SECURITIES> 0
<RECEIVABLES> 4,721
<ALLOWANCES> 107
<INVENTORY> 7,247
<CURRENT-ASSETS> 12,149
<PP&E> 8,278
<DEPRECIATION> 3,148
<TOTAL-ASSETS> 24,192
<CURRENT-LIABILITIES> 6,169
<BONDS> 7,487
<COMMON> 2,727
0
535
<OTHER-SE> 3,944
<TOTAL-LIABILITY-AND-EQUITY> 24,192
<SALES> 20,109
<TOTAL-REVENUES> 20,795
<CGS> 14,558
<TOTAL-COSTS> 19,097
<OTHER-EXPENSES> 496
<LOSS-PROVISION> 218
<INTEREST-EXPENSE> 425
<INCOME-PRETAX> 559
<INCOME-TAX> 217
<INCOME-CONTINUING> 342
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 342
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
