<PAGE>
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 and 26 week periods Commission file number 1-777
ended July 26, 1997
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 (972) 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.
248,897,288 shares of Common Stock of 50c par value, as of July 26, 1997.
<PAGE>
-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. 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)
<TABLE>
<CAPTION>
13 weeks ended 26 weeks ended
-------------------------- --------------------------
Jul. 26, Jul. 27, Jul. 26, Jul. 27,
1997 1996 1997 1996
---------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Retail sales $6,420 $4,507 $12,901 $8,959
Insurance revenue 229 201 453 393
------ ------ ------- ------
Total revenue 6,649 4,708 13,354 9,352
------ ------ ------- ------
Costs and expenses
Cost of goods sold, occupancy, buying,
and warehousing costs 4,711 3,195 9,388 6,307
Selling, general, and administrative
expenses 1,471 1,160 2,985 2,314
Costs and expenses of insurance
operations 175 154 347 304
Other (19) (13) (29) (35)
Net interest expense and credit
operations 122 62 203 85
Amortization of intangible assets
and minority interest 17 -- 58 --
Business acquisition and consolidation
expenses, net 25 -- 27 --
------ ------ ------- ------
Total costs and expenses 6,502 4,558 12,979 8,975
------ ------ ------- ------
Income before income taxes 147 150 375 377
Income taxes 57 57 146 142
------ ------ ------- ------
Net income $ 90 $ 93 $ 229 $ 235
====== ====== ======= ======
Net income per common share
Primary $ .32 $ .37 $ .85 $ .95
====== ====== ======= ======
Fully diluted $ .32 $ .37 $ .85 $ .94
====== ====== ======= ======
Weighted average common shares outstanding
Primary 250.7 227.8 246.7 227.6
====== ====== ======= ======
Fully diluted 269.7 247.6 266.3 247.3
====== ====== ======= ======
</TABLE>
<PAGE>
-2-
<TABLE>
<CAPTION>
Balance Sheets
(Amounts in millions)
Jul. 26, Jul. 27, Jan. 25,
1997 1996 1997
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short term investments
of $678, $212, and $131 $ 703 $ 239 $ 131
Receivables, net 4,261 4,563 5,757
Merchandise inventory (LIFO reserves
of $219, $226, and $265) 6,224 4,637 5,722
Prepaid expenses 88 95 102
------- ------- -------
Total current assets 11,276 9,534 11,712
Properties, net of accumulated
depreciation of $3,069, $2,127,
and $2,701 5,098 4,317 5,014
Investments, primarily insurance operations 1,682 1,626 1,605
Deferred insurance policy acquisition costs 704 624 666
Goodwill and other intangible assets 3,116 -- 1,861
Other assets 1,369 1,322 1,230
------- ------- -------
$23,245 $17,423 $22,088
======= ======= =======
</TABLE>
<PAGE>
-3-
<TABLE>
<CAPTION>
Balance Sheets
(Amounts in millions)
Jul. 26, Jul. 27, Jan. 25,
1997 1996 1997
--------- --------- --------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 3,215 $ 2,271 $ 3,738
Short term debt 1,241 1,948 3,950
Current maturities of long term debt 250 -- 250
Deferred taxes 81 106 28
------- ------- -------
Total current liabilities 4,787 4,325 7,966
Long term debt 7,492 4,032 4,565
Deferred taxes 1,503 1,234 1,362
Insurance policy and claims reserves 817 728 781
Other liabilities 1,451 1,219 1,383
------- ------- -------
Total liabilities 16,050 11,538 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 547 581 568
Guaranteed ESOP obligation (97) (186) (142)
Common stock, par value 50c:
Authorized, 1,250 million shares -
issued, 249, 225, and 224 million
shares 2,697 1,154 1,416
------- ------- -------
Total capital stock 3,147 1,549 1,842
------- ------- -------
Reinvested earnings at beginning
of year 4,110 4,397 4,397
Net income 229 235 565
Net unrealized change in debt and
equity securities, and currency
translation adjustments (6) (42) (21)
Retirement of common stock --- -- (320)
Common stock dividends declared (265) (234) (471)
Preferred stock dividends
declared, net of taxes (20) (20) (40)
------- ------- -------
Reinvested earnings at end of
period 4,048 4,336 4,110
------- ------- -------
Total stockholders' equity 7,195 5,885 5,952
------- ------- -------
$23,245 $17,423 $22,088
======= ======= =======
</TABLE>
<PAGE>
-4-
<TABLE>
<CAPTION>
Statements of Cash Flows
(Amounts in millions)
26 weeks ended
-------------------
Jul. 26, Jul. 27,
1997 1996
-------- --------
<S> <C> <C>
Operating activities
Net income $ 229 $ 235
Depreciation and amortization, including
intangibles 267 173
Deferred taxes 170 46
Change in cash from:
Customer receivables 759 693
Inventories, net of trade payables (634) (565)
Other assets and liabilities, net (313) (357)
------- -----
478 225
------- -----
Investing activities
Capital expenditures (487) (295)
Proceeds from the sale of bank receivables 684 --
Purchases of investment securities (271) (235)
Proceeds from sales of investment securities 184 197
------- -----
110 (333)
------- -----
Financing activities
Increase/(decrease) in short term debt (2,709) 439
Net proceeds from the issuance
of long term debt 2,979 --
Payment of long term debt (45) (42)
Common stock issued, net 51 42
Preferred stock retired (21) (22)
Dividends paid, preferred and common (271) (243)
------- -----
(16) 174
------- -----
Net increase in cash and short term
investments 572 66
Cash and short term investments at beginning
of year 131 173
------- -----
Cash and short term investments at end of
second quarter $ 703 $ 239
======= =====
</TABLE>
Non-cash transaction
- --------------------
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.
<PAGE>
-5-
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Financial Condition
- -------------------
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 (completed in 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 (completed in February 1997). The total
value of the acquisition, including Eckerd debt assumed by the Company, was
approximately $3.3 billion.
The pro forma effects of the Company's recent drugstore acquisitions, assuming
the acquisitions had occurred at the beginning of fiscal 1996, for the 13 and 26
weeks ended July 27, 1996 would have been as follows:
($ in millions, except per share information)
<TABLE>
<CAPTION>
13 weeks ended 26 weeks ended
July 27, 1996 July 27, 1996
---------------------- ---------------------
Historical Pro forma Historical Pro forma
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Retail sales $4,507 $6,013 $8,959 $12,068
FIFO EBIT 212 263 462 592
Net income 93 79 235 218
Earnings per share
fully diluted .37 .29 .94 .81
</TABLE>
Merchandise inventory on a FIFO basis totaled $6,443 million at July 26, 1997
compared with $4,863 million a year earlier. The majority of the increase is
related to the Company's drugstore acquisitions. Merchandise inventory for
JCPenney stores and catalog totaled $4,599 million at the end of the 1997 second
quarter compared with $4,434 million at the end of last year's second quarter,
an increase of 3.7 per cent. During the second quarter, the Company cleared
seasonal merchandise and inventory positions are now in line with sales
estimates for the second half of the year. Drugstore merchandise inventories
totaled $1,844 million at the end of the second quarter compared with $429
million at the end of last year's second quarter.
Properties, net of accumulated depreciation, totaled $5,058 million at the end
of the 1997 second quarter compared with $4,317 million a year earlier. The
increase is principally related to the addition of 30 new and relocated JCPenney
stores and the drugstore acquisitions, including Eckerd's second quarter
acquisition of 114 former Revco drugstores in the Norfolk and Richmond, Virginia
markets. As of July 26, 1997, the Company operated 1,226 JCPenney stores and
2,798 drugstores.
Goodwill and other intangible assets, net, which is principally related to the
Company's drugstore acquisitions, totaled $3,116 million at July 26, 1997.
<PAGE>
-6-
Long term debt totaled $7,492 million at the end of the second quarter compared
with $4,032 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 $11.0 billion at July 26,
1997, up $4.1 billion from a year earlier.
Results of Operations
- ---------------------
Ratios useful in analyzing the results of operations are as follows:
<TABLE>
<CAPTION>
13 weeks ended 26 weeks ended
------------------------ -----------------------
Jul. 26, Jul. 27, Jul. 26, Jul. 27,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales and revenue, per cent
increase/(decrease)
JCPenney stores 3.2 1.6 4.5 1.1
Eckerd drugstores 13.2 (1) 10.4 (1) 12.2 (1) 10.6 (1)
Catalog 4.8 (4.7) 2.7 (1.7)
Insurance 13.9 22.7 15.3 22.9
Comparable store sales, per cent
increase/(decrease)
JCPenney stores 2.0 0.4 3.3 (0.2)
Eckerd drugstores 7.8 7.9 7.7 8.5
FIFO gross margin, per cent of sales
JCPenney stores and catalog 29.6 29.9 30.3 30.6
Eckerd drugstores 21.5 21.8 (1) 21.8 22.0 (1)
LIFO gross margin, per cent of sales
Eckerd drugstores 21.2 21.5 (1) 21.7 21.8 (1)
Selling, general, and administrative
expenses, per cent of sales
JCPenney stores and catalog 25.8 26.6 26.5 26.7
Eckerd drugstores 17.6 18.4 (1) 17.1 17.9 (1)
FIFO operating profit, per cent
of revenue (2)
JCPenney stores and catalog 3.8 3.3 3.8 3.9
Eckerd drugstores 3.9 3.4 (1) 4.7 4.1 (1)
Insurance 23.6 23.4 23.4 22.6
Effective income tax rate 38.9 37.5 39.0 37.6
</TABLE>
(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, business acquisition and consolidation expenses, net, and
income taxes.
<PAGE>
-7-
Operating profit, excluding net interest and credit operations, amortization of
intangible assets and minority interest, business acquisition and consolidation
expenses, net, and income taxes (EBIT) totaled $311 million for the 13 weeks
ended July 26, 1997, an increase of $99 million, or 46.7 per cent compared with
the prior year's second quarter. Operating earnings before business acquisition
and consolidation expenses, net, totaled $105 million, or 38 cents per share, in
the second quarter, and net income totaled $90 million, or 32 cents per share
compared with $93 million, or 37 cents per share in last year's second quarter.
For the 26 weeks ended July 26, 1997 EBIT totaled $663 million compared with
$462 million in the prior year, a 43.5 per cent increase. Operating earnings
before business acquisition and consolidation expenses, net, totaled $245
million, or 91 cents per share, and net income totaled $229 million, or 85 cents
per share, compared with $235 million, or 94 cents per share, in last year's
first half. The average number of fully diluted shares increased by 22.1 million
shares for the second quarter, and 19.0 million shares for the first six 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 for the second quarter totaled $3,349 million, an
increase of 3.2 per cent compared with second quarter 1996. On a comparable
store basis, including only stores open at least a year, sales increased 2.0 per
cent for the period. Catalog sales totaled $795 million in the second quarter,
an increase of 4.8 per cent over last year's comparable period. FIFO gross
margin for JCPenney stores and catalog totaled $1,227 million, an increase of
$29 million over last year's second quarter. FIFO gross margin as a per cent of
sales declined by 30 basis points for the quarter compared with last year.
Second quarter margins were impacted by the clearance of seasonal merchandise.
SG&A expenses were well managed and leveraged during the quarter, improving by
80 basis points compared with last year's second quarter. Improvements were
primarily related to reductions in advertising, including printing and paper
costs.
For the six months ended July 26, 1997 sales of JCPenney stores totaled $6,681
million, an increase of 4.5 per cent (3.3 per cent for comparable stores), and
Catalog sales totaled $1,605 million, an increase of 2.7 per cent compared with
the first half of 1996. On a year to date basis, FIFO gross margin increased by
$79 million to $2,511 million. As a per cent of sales, FIFO gross margin
declined by 30 basis points compared with last year, primarily as a result of
clearance activities associated with higher inventory levels. SG&A expenses were
leveraged in the first half, improving by 20 basis points compared with last
year.
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 $2,276 million for the second quarter, an increase of
13.2 per cent compared with last year's second 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 7.8 per cent for the quarter.
FIFO gross margin totaled $489 million for the second quarter, an increase of
<PAGE>
-8-
$52 million, or 11.9 per cent compared with the 1996 period. As a per cent of
sales, FIFO gross margin decreased by 30 basis points for the quarter. Second
quarter margin declines were related primarily to promotional activities,
including the grand re-opening of the former Fay's drugstores. In addition, the
Company recorded a $7 million LIFO charge in the second quarter related to
Eckerd Drugstores. It is anticipated that LIFO adjustments will be recorded on a
quarterly basis going forward to reflect the inflationary environment for
prescription drugs. SG&A expenses were well managed and leveraged during the
quarter, improving as a per cent of sales by 80 basis points.
Drugstore sales for the first six months totaled $4,615 million, an increase of
12.2 per cent over the comparable period last year, with comparable store sales
increasing by 7.7 per cent. For the first half, gross margin totaled $1,009
million, an increase of $105 million, or 11.6 per cent over 1996 first half pro
forma results. For the first six months, gross margin has also been impacted by
higher levels of managed care sales which carry lower margins. SG&A expenses
were leveraged for the first half, improving by 80 basis points as a per cent of
sales.
Insurance
Revenue totaled $229 million in the second quarter, an increase of $28 million,
or 13.9 per cent, over the comparable 1996 period. EBIT for the quarter totaled
$54 million compared with $47 million in last year's second quarter. For the
first six months of 1997, revenue was $453 million, an increase of 15.3 per cent
over the prior year, and EBIT was $106 million, an increase of 19.1 per cent
over 1996's first half. 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 totaled $19 million in the second quarter
compared with $13 million last year, and consisted principally of gains on real
estate and insurance company investment transactions. For the 26 weeks ended
July 26, 1997, the Company had recognized unallocated gains of $29 million
compared with $36 million in last year's first half.
Net Interest Expense and Credit Operations
Net interest expense and credit operations increased for both the second quarter
and for the first half of 1997 compared with last year's comparable periods. The
increase for both the quarter and half was principally attributable to higher
interest costs associated with the drugstore acquisitions and to working capital
requirements for JCPenney stores and catalog. 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 offset increases in credit operating
expenses, including bad debt. Net bad debt, which is the largest single
component of credit costs, has increased by $3 million for the quarter and $10
million for the first half compared with the comparable 1996 periods. The 90-day
delinquency rate for customer receivables at the end of the second quarter was
4.8 per cent, and was level with the comparable period in 1996.
<PAGE>
-9-
Business Acquisition and Consolidation Expenses
Business acquisition and consolidation expenses, net, totaled $25 million for
the second quarter. These expenses were comprised principally of costs
associated with the integration of the drugstore operations which were partially
offset by a supplemental payment related to the 1995 sale of the Company's
Business Services operation. Also, during the quarter, the Company recorded $17
million of amortization of goodwill and other intangible assets in connection
with its drugstore acquisitions.
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 26 weeks
ended July 26, 1997 are not necessarily indicative of the results for the entire
year.
Early Retirement Program
- ------------------------
On August 11, 1997, the Company announced that it is offering a voluntary early
retirement program to approximately 1,500, or about five per cent, of its
management workforce. This program, which will be available to managers in
JCPenney Stores, Catalog, and corporate support functions, will enable the
Company to significantly reduce operating expenses and enhance its competitive
position. The Company expects to record a one-time, pre-tax charge of up to $200
million for the early retirement program later this year, and will reduce its
cost structure by up to $120 million annually if all eligible managers
participate. The size of the charge will be determined by the number of managers
who elect to participate in the program.
New Accounting Rules
- --------------------
The Financial Accounting Standards Board (FASB) has issued several Statements of
Financial Accounting Standards (SFAS) in 1997 which may impact the Company's
accounting treatment and/or disclosure 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. The new rules, which are effective for periods ending after
December 15, 1997, are not expected to have a material impact on the Company.
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. The new
rules, which are effective for fiscal years beginning after December 15, 1997,
are not expected to have a material impact on the Company.
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
<PAGE>
-10-
manner in which operating segments are defined and reported externally to be
consistent with the basis on which they are reported and evaluated internally.
The impact that this statement will have on the Company has not been fully
determined. The new rules are effective for periods beginning after December 15,
1997.
<PAGE>
-11-
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
The Company has no material legal proceedings pending against it.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders of the Company was held on May 16, 1997, at
which the five matters described below were submitted to a vote of
stockholders with the voting results as indicated.
(1) Election of directors for a three-year term expiring at the Year 2000
Annual Meeting of the Company's stockholders:
NOMINEE FOR AUTHORITY WITHHELD
------- --- ------------------
V. E. Jordan, Jr. 230,642,631 4,830,154
J. C. Pfeiffer 233,354,918 2,117,867
R. G. Turner 233,334,710 2,138,075
W. B. Tygart 233,277,081 2,195,704
(2) The Board of Directors' proposal concerning the employment of KPMG Peat
Marwick LLP as auditors for the fiscal year ending January 31, 1998:
FOR AGAINST ABSTAIN
--- ------- -------
232,351,598 2,198,033 923,154
(3) The Board of Directors' proposal concerning the adoption of the J. C.
Penney Company, Inc. 1997 Equity Compensation Plan:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- --------- ------- ---------
203,491,172 15,648,423 3,007,933 13,325,257
(4) A stockholder resolution concerning the elimination of the
classification of the Board of Directors:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- --------- ------- ---------
92,109,655 125,617,837 3,433,079 14,312,214
(5) A stockholder resolution concerning the submission to a stockholder vote
of the Company's stockholder rights plan:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- --------- ------- ---------
113,323,506 103,783,458 4,053,607 14,312,214
<PAGE>
-12-
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.
27 Financial Data Schedule for the six months ended July 26, 1997.
(b) Reports on Form 8-K
-------------------
None.
<PAGE>
-13-
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: September 5, 1997
<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)
<TABLE>
<CAPTION>
26 Weeks Ended
--------------------------------------------------------
July 26, 1997 July 27, 1996
-------------------------- -------------------------
Shares Income Shares Income
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Primary:
- --------
Net income $ 229 $ 235
Dividend on Series B ESOP
convertible preferred stock
(after-tax) (20) (20)
---------- ----------
Adjusted net income 209 215
Weighted average number of
shares outstanding 244.5 224.9
Common stock equivalents:
Stock options and other
dilutive effect 2.2 2.7
---------- ---------- --------- ----------
246.7 $ 209 227.6 $ 215
========== ========== ========= ==========
Net income per common share $0.85 $0.95
===== =====
Fully diluted:
- --------------
Net income $ 229 $ 235
Tax benefit differential on ESOP
dividend assuming stock is
fully converted - (1)
Assumed additional contribution
to ESOP if preferred stock is
fully converted (1) (1)
---------- ----------
Adjusted net income 228 233
Weighted average number of
shares outstanding (primary) 246.7 227.6
Maximum dilution 1 0.1
Convertible preferred stock 18.6 19.6
---------- ---------- --------- ----------
266.3 $ 228 247.3 $ 233
========== ========== ========= ==========
Net income per common share $0.85 $0.94
===== =====
</TABLE>
<PAGE>
Exhibit 12 (a)
J. C. Penney Company, Inc.
and Consolidated Subsidiaries
Computation of Ratios of Available Income to Combined Fixed Charges
and Preferred Stock Dividend Requirement
<TABLE>
<CAPTION>
52 weeks ended
---------------------------------------
Jul. 26 Jul. 27
($ Millions) 1997 1996
------------- ---------------
<S> <C> <C>
Income from continuing operations $ 856 $ 1,218
(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 124 110
Long term debt 412 281
Capital leases 7 6
Credit facility 19 -
Other, net (3) 2
------------- ---------------
Total fixed charges 669 501
Preferred stock dividend, before taxes 47 47
Combined fixed charges and preferred
------------- ---------------
stock dividend requirement 716 548
Total available income $ 1,572 $ 1,766
============= ===============
Ratio of available income to combined
fixed charges and preferred stock
dividend requirement 2.2 3.2
============= ===============
</TABLE>
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
<TABLE>
<CAPTION>
52 weeks ended
---------------------------------------------
Jul. 26 Jul. 27
($ Millions) 1997 1996
------------- ---------------
<S> <C> <C>
Income from continuing operations $ 903 $ 1,265
(before income taxes and
capitalized interest)
Fixed charges
Interest (including capitalized interest) on:
Operating leases 110 102
Short term debt 124 110
Long term debt 412 281
Capital leases 7 6
Credit facility 19 -
Other, net (3) 2
------------- ---------------
Total fixed charges 669 501
------------- ---------------
Total available income $ 1,572 $ 1,766
============= ===============
Ratio of available income to combined
fixed charges and preferred stock
dividend requirement 2.3 3.5
============= ===============
</TABLE>
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 JULY 26, 1997, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JUL-26-1997
<CASH> 703
<SECURITIES> 0
<RECEIVABLES> 4,354
<ALLOWANCES> 93
<INVENTORY> 6,224
<CURRENT-ASSETS> 11,276
<PP&E> 8,167
<DEPRECIATION> 3,069
<TOTAL-ASSETS> 23,245
<CURRENT-LIABILITIES> 4,787
<BONDS> 7,492
2,697
0
<COMMON> 547
<OTHER-SE> 3,951
<TOTAL-LIABILITY-AND-EQUITY> 23,245
<SALES> 12,901
<TOTAL-REVENUES> 13,354
<CGS> 9,388
<TOTAL-COSTS> 12,373
<OTHER-EXPENSES> 201
<LOSS-PROVISION> 127
<INTEREST-EXPENSE> 278
<INCOME-PRETAX> 375
<INCOME-TAX> 146
<INCOME-CONTINUING> 229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
</TABLE>