<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 August 1, 1998
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.
253,968,594 shares of Common Stock of 50c par value, as of August 1, 1998.
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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 53 weeks ended January 31, 1998.
Statements of Income
(Amounts in millions except per share data)
13 weeks ended 26 weeks ended
____________________ ____________________
Aug. 1, July 26, Aug. 1, July 26,
1998 1997 1998 1997
____ ____ ____ ____
Retail sales $ 6,510 $ 6,420 $13,316 $12,901
Direct marketing revenue 251 229 497 453
________ _______ _______ _______
Total revenue 6,761 6,649 13,813 13,354
________ _______ _______ _______
Costs and expenses
Cost of goods sold,
occupancy, buying,
and warehousing costs 4,881 4,711 9,783 9,388
Selling, general, and
administrative expenses 1,488 1,471 3,036 2,985
Costs and expenses of direct
marketing operations 191 175 384 347
Other 23 (19) 20 (29)
Net interest expense and credit
operations 115 122 208 203
Amortization of intangible
assets and minority interest 18 17 53 58
Business acquisition and
consolidation expenses, net -- 25 -- 27
______ _______ _______ _______
Total costs and expenses 6,716 6,502 13,484 12,979
_______ _______ _______ _______
Income before income taxes 45 147 329 375
Income taxes 18 57 128 146
_______ _______ _______ _______
Net income $ 27 $ 90 $ 201 $ 229
======= ======= ======= =======
Earnings per common share:
Net income $ 27 $ 90 $ 201 $ 229
Less: preferred stock dividend (8) (10) (18) (20)
_______ _______ _______ _______
Earnings for Basic EPS 19 80 183 209
Stock options and convertible
preferred stock 8 9 17 18
_______ _______ _______ _______
Earnings for Diluted EPS $ 27 $ 89 $ 200 $ 227
Shares
Average shares outstanding (used
for Basic EPS) 254 249 253 245
Common stock equivalents 18 20 19 20
________ _______ _______ _______
Average diluted
shares outstanding 272 269 272 265
Earnings per share
Basic $ 0.08 $ 0.31 $ 0.73 $ 0.85
Diluted 0.08 0.31 0.72 0.85
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Balance Sheets
(Amounts in millions)
Aug. 1, July 26, Jan.31,
1998 1997 1998
________ ________ ________
ASSETS
Current assets
Cash and short term investments
of $139, $678, and $208 $ 139 $ 703 $ 287
Retained interest in JCP Master
Credit Card Trust 959 806 1,073
Receivables, net 3,358 3,455 3,819
Merchandise inventory (LIFO reserves
of $242, $219, and $225) 6,244 6,224 6,162
Prepaid expenses 138 88 143
________ ________ ________
Total current assets 10,838 11,276 11,484
Properties, net of accumulated
depreciation of $3,161, $3,069,
and $2,945 5,301 5,098 5,329
Investments, primarily direct marketing
operations 1,847 1,682 1,774
Deferred direct marketing policy
acquisition costs 788 704 752
Goodwill and other intangible assets
net of accumulated amortization
of $162, $50, and $108 2,933 3,116 2,940
Other assets 1,225 1,369 1,214
________ ________ ________
$ 22,932 $ 23,245 $ 23,493
======== ======== ========
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Balance Sheets
(Amounts in millions)
Aug. 1, July 26, Jan.31,
1998 1997 1998
________ ________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 3,415 $ 3,215 $ 4,155
Short term debt 1,563 1,241 1,417
Current maturities of long term debt 625 250 449
Deferred taxes 124 81 116
________ _______ ________
Total current liabilities 5,727 4,787 6,137
Long term debt 6,755 7,492 6,986
Deferred taxes 1,355 1,503 1,325
Insurance policy and claims reserves 909 817 872
Other liabilities 815 1,451 816
________ ________ ________
Total liabilities 15,561 16,050 16,136
Stockholders' equity
Preferred stock, without par value:
Authorized, 25 million shares -
issued, 1 million shares of
Series B ESOP convertible preferred 493 547 526
Guaranteed ESOP obligation -- (97) (49)
Common stock, par value 50c:
Authorized, 1,250 million shares -
issued, 254, 249, and 251 million
shares 2,867 2,697 2,766
________ ________ ________
Total capital stock 3,360 3,147 3,423
________ ________ ________
Reinvested earnings and other comprehensive
income at beginning of year 4,114 4,110 4,110
Comprehensive income
Net income 201 229 566
Net unrealized change in debt
and equity securities, and foreign
currency translation adjustments,
net of tax (10) (6) 11
________ ________ ________
Total comprehensive income 191 223 577
Common stock dividends declared (275) (265) (533)
Preferred stock dividends
declared, net of taxes (19) (20) (40)
________ ________ ________
Reinvested earnings and other comprehensive
income at end of period 4,011 4,048 4,114
________ ________ ________
Total stockholders' equity 7,371 7,195 7,357
________ ________ ________
$22,932 $23,245 $23,493
======= ======= =======
The accumulated balances for net unrealized changes in debt and equity
securities were $66, $45, and $66, and for foreign currency translation
adjustments were ($28), ($14), and ($18) as of the respective dates shown.
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Statements of Cash Flows
(Amounts in millions)
26 weeks ended
_______________________________
Aug. 1, July 26,
1998 1997
_________ _________
Operating activities
Net income $ 201 $ 229
Depreciation and amortization,
including intangibles 314 267
Deferred taxes 38 170
Change in cash from:
Customer receivables 541 454
Inventories, net of trade payables (159) (469)
Other assets and liabilities, net (679) (478)
_________ _________
256 173
_________ _________
Investing activities
Capital expenditures (312) (487)
Proceeds from the sale of bank receivables -- 684
Purchases of investment securities (279) (271)
Proceeds from sales of investment securities 201 184
Changes in Retained Interest in
JCP Master Credit Card Trust 114 305
__________ _________
(276) 415
_________ _________
Financing activities
Increase/(decrease) in short term debt 146 (2,709)
Net proceeds from the issuance
of long term debt -- 2,979
Payment of long term debt (50) (45)
Common stock issued, net 100 51
Preferred stock retired (33) (21)
Dividends paid, preferred and common (291) (271)
_________ _________
(128) (16)
_________ _________
Net increase/(decrease) in cash and
short term investments (148) 572
Cash and short term investments at
beginning of year 287 131
_________ _________
Cash and short term investments at
end of second quarter $ 139 $ 703
========= =========
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.
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Operating Segment Information
13 weeks ended 26 weeks ended
____________________ ____________________
Aug. 1, July 26, Aug. 1, July 26,
1998 1997 1998 1997
____ ____ ____ ____
Sales and revenue
Department stores
and catalog $ 4,060 $ 4,144 $ 8,302 $ 8,286
Eckerd drugstores 2,450 2,276 5,014 4,615
Direct marketing 251 229 497 453
_______ _______ ________ _______
Total sales and revenue $ 6,761 $ 6,649 $13,813 $13,354
======= ======= ======= =======
Operating profit - LIFO
Department stores
and catalog $ 155 $ 156 $ 389 $ 318
Eckerd drugstores, excluding
drugstore charges 84 82 206 210
Direct marketing 60 54 113 106
_______ _______ _______ _______
Total operating segments 299 292 708 634
Drugstore charges (1) (114) -- (114) --
Other unallocated (2) (7) 19 (4) 29
_______ _______ _______ _______
Total operating profit 178 311 590 663
Net interest and
credit operations (115) (122) (208) (203)
Other (3) (18) (42) (53) (85)
_______ _______ _______ _______
Income before income taxes $ 45 $ 147 $ 329 $ 375
======= ======= ======= =======
(1) See additional discussion of 1998 drugstore charges on page 8.
(2) Other unallocated operating profit consists principally of gains and
losses on investment and real estate transactions, and results from
real estate operations. In 1998, it also includes relocation
expenses to fill vacancies in JCPenney stores created by the
previously announced early retirement program.
(3) Other consists of amortization of goodwill and other intangible assets,
and business acquisition and consolidation expenses.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Financial Condition
___________________
Merchandise inventory on a FIFO basis totaled $6,486 million at August 1,
1998 compared with $6,443 million a year earlier. Merchandise inventory for
JCPenney stores and catalog totaled $4,452 million at the end of the second
quarter compared with $4,599 million at the end of last year's second
quarter. Eckerd merchandise inventories totaled $2,034 million at the end
of the second quarter compared with $1,844 million at the end of last
year's second quarter.
Properties, net of accumulated depreciation, totaled $5,301 million at
August 1, 1998 compared with $5,098 million a year earlier. As of the end
of the second quarter, the Company operated 1,170 JCPenney stores compared
with 1,226 stores at the end of 1997's second quarter. The decline is
related to the Company's previously announced closing of underperforming
stores. In addition, the Company operated 2,740 Eckerd drugstores at the
end of the quarter, a net decline from 2,798 at last year's second quarter.
The net decline in drugstores is primarily related to the consolidation of
the Company's multiple drugstore chains into Eckerd. Eckerd's new store
opening activity continues to be focused on relocating existing stores to
more productive, free-standing locations. During the first six months of
1998, Eckerd has relocated 73 drugstores compared with the relocation of 52
stores in the comparable 1997 period.
Capital expenditures for the first six months of the year totaled $312
million compared with $487 million in the first half of 1997. Of these
amounts, $114 million related to drugstores in 1998 compared with $169
million in the first half of 1997. The balance of the spending related to
JCPenney stores and catalog.
Goodwill and other intangible assets, net, which is related to the
Company's drugstore acquisitions, totaled $2,933 million at August 1, 1998.
There have been no significant changes in the Company's long term debt
during the first six months of fiscal 1998. Long term debt totaled $6,755
million at the end of the second quarter compared with $6,986 million at
the end of fiscal 1997 and $7,492 million at the end of second quarter
1997. The decrease from both year end and second quarter 1997 balances is
principally related to the reclassification of certain debt issues to
current maturities.
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Results of Operations
_____________________
Ratios useful in analyzing the results of operations are as follows:
13 weeks ended 26 weeks ended
____________________ ____________________
Aug. 1, July 26, Aug. 1, July 26,
1998 1997 1998 1997
____ ____ ____ ____
Sales and revenue, per cent
increase/(decrease)
JCPenney stores (2.9) 3.2 (0.3) 4.5
Eckerd drugstores 7.6 13.2 (1) 8.6 12.2 (1)
Catalog 1.8 4.8 2.3 2.7
Direct marketing 9.6 13.9 9.7 15.3
Comparable store sales,
per cent increase/(decrease)
JCPenney stores (2.5) 2.0 (0.2) 3.3
Eckerd drugstores 9.0 7.8 8.4 7.7
FIFO gross margin,
per cent of sales
JCPenney stores
and catalog 29.6 29.6 30.7 30.3
Eckerd drugstores 21.7 (2) 21.5 22.0 (2) 21.8
LIFO gross margin,
per cent of sales
Eckerd drugstores 21.4 (2) 21.2 21.6 (2) 21.7
Selling, general,
and administrative expenses,
per cent of sales
JCPenney stores
and catalog 25.8 25.8 26.0 26.5
Eckerd drugstores 18.0 17.6 17.5 17.1
FIFO operating profit,
per cent of revenue (3)
JCPenney stores
and catalog 3.8 3.8 4.7 3.8
Eckerd drugstores 3.7 (2) 3.9 4.5 (2) 4.7
Direct marketing 23.9 23.6 22.7 23.4
Effective income tax rate 38.9 38.9 38.8 39.0
(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) Excludes the effects of drugstore charges. Including these charges,
1998 gross margin would decline by 4.0 and 2.0 percentage points for
the 13 and 26 weeks, respectively, and operating profit would decline
by 4.7 and 2.3 percentage points for the 13 and 26 weeks,
respectively.
(3) 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.
Operating profit, which excludes interest and credit operations,
amortization of intangible assets and minority interest, business
acquisition and consolidation expenses, net, and income taxes, totaled $178
million in the second quarter compared with $311 million in last year's
comparable period. Second quarter 1998 results were negatively impacted by
pre-tax charges of $114 million, net, related to the Company's drugstore
operations (see
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discussion below). Net income for the quarter totaled $27 million or 8
cents per diluted share compared with $90 million or 32 cents per share in
last year's period. For the 26 weeks ended August 1, 1998, operating profit
totaled $590 million compared with $663 million in last year's comparable
period. Net income for the six months totaled $201 million or 72 cents per
diluted share compared with $229 million or 85 cents per share last year.
Drugstore Charges, net
During the second quarter, the Company recorded pre-tax charges of $114
million, net, for its drugstore operation which consisted of the following
components:
Merchandise losses $ 126
Cost recoveries (28)
_______
Subtotal - gross profit impact 98
Other integration charges 16
_______
Total drugstore charges, net $ 114
The $126 million in merchandise losses were related to higher than
anticipated losses on the liquidation of merchandise categories that were
eliminated or replaced during the integration process, as well as higher
than expected shrinkage rates. These losses, which were determinable in the
second quarter through the results of physical inventories, primarliy
relate to stores converted to the Eckerd name, merchandise mix, and format.
In total, approximately 1,100 Thrift, Fay's, Kerr, Rite Aid, and Revco
drugstores, as well as three warehouses, were impacted by the conversion.
Cost recoveries represent prescription price litigation settlements which
were received in the second quarter, and are reflected as a gross profit
adjustment in the table above. The balance of the charges represent
cancellation of support contracts and other additional costs incurred in
support of the drugstore integration activities.
JCPenney Stores and Catalog
Sales for JCPenney department stores for the 13 weeks ended August 1, 1998
totaled $3,251 million, a decline of 2.9 per cent from the last year's
second quarter. Sales for comparable stores, those stores open at least a
year, declined 2.5 per cent. Catalog sales totaled $809 million, a 1.8 per
cent increase from last year. FIFO gross margin totaled $1,203 million
compared with $1,227 in last year's second quarter. Selling, general, and
administrative (SG&A) expenses declined $23 million, or 2.1 per cent, in
the quarter from the prior year. Both the gross margin and SG&A ratios
during the quarter were flat with last year at 29.6 and 25.8 per cent of
sales, respectively. Operating profit was $155 million in the second
quarter compared with $156 million in last year's period, and was impacted
primarily by weak sales throughout the quarter.
Sales for JCPenney stores for the 26 weeks ended August 1, 1998 totaled
$6,660 million, down slightly on a total stores and comparable store basis
from last year's first half. Catalog sales for the first half totaled
$1,642, an increase of 2.3 per cent from the prior year. FIFO gross margin
was $2,546 million for the first half, an increase of $35 million, or 1.4
per cent, from 1997's first half. SG&A expenses were $2,157 for the first
six months, a
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decline of $36 million, or 1.6 per cent from the comparable period last
year. As a per cent of sales, gross margin improved by 40 basis points and
SG&A expenses improved by 50 basis points. Operating profit totaled $389
million, an increase of $71 million, or 22.3 per cent from last year.
Eckerd Drugstores
The following narrative discusses drugstore gross margin and operating
profit before the 1998 drugstore charges, net, which are discussed above.
Sales were $2,450 for the 13 weeks ended August 1, 1998, a 7.6 per cent
increase over second quarter 1997. On a comparable store basis, sales
increased by 9.0 per cent. Sales improvement was led by pharmacy sales
which increased by 15.3 per cent during the quarter for comparable stores.
FIFO gross margin totaled $532 million compared with $489 million in last
year's second quarter, an increase of 8.8 per cent. As a per cent of sales,
gross margin improved by 20 basis points, as margin ratios improved for
both pharmacy and front-end merchandise. During the quarter, Eckerd
recorded an $8 million LIFO charge compared with a $7 million charge in
last year's quarter. SG&A expenses were higher during the quarter than in
the comparable period last year primarily as a result of increased
advertising and additional store staffing in regions where store
conversions occurred. The majority of these expenses will become comparable
in the third quarter. FIFO operating profit for the quarter totaled $92
million compared with $89 million in last year's quarter.
Sales for the 26 weeks totaled $5,014 million compared with $4,615 million
in last year's first half, an increase of 8.6 per cent; comparable store
sales increased 8.4 per cent. Sales gains were led by a 14.4 per cent
increase in pharmacy sales. FIFO gross margin for the first half totaled
$1,102 million compared with $1,009 million last year, an increase of 9.2
per cent. Gross margin ratio improved for both pharmacy and front-end
merchandise; however, sales were more heavily weighted towards pharmacy
which carries lower margins. Eckerd recorded a LIFO charge of $17 million
in the first half of 1998 compared with a $7 million charge in last year's
comparable period. SG&A expenses were higher than last year and as a per
cent of sales increased by 40 basis points. FIFO operating profit for
drugstores totaled $223 million, or 4.5 per cent of sales, compared with
$217 million, or 4.7 per cent of sales, in last year's first half.
Direct Marketing Services
Revenue increased by 9.6 per cent in the second quarter compared with last
year's period with all lines of business contributing to the increase.
Operating profit for the period was $60 million, an increase of $6 million,
or 11.1 per cent. For the first half, direct marketing generated a 6.6 per
cent increase in operating profit on a 9.7 per cent increase in revenue.
First half profits were adversely impacted by higher than planned insurance
claims.
Net Interest Expense and Credit Operations
Net interest and credit operations for the second quarter was $115 million
compared with $122 million in last year's second quarter. The decrease was
primarily related to reductions in bad debt. Both bankruptcy and
delinquency trends were positive during the quarter. As of August 1, 1998,
delinquencies were 4.1 per cent of customer receivables compared with 4.8
per cent a year ago. For the first six months, net interest and credit
operations totaled $208
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million compared with $203 in last year's first half. The increase was
primarily related to increased interest costs associated with the Eckerd
acquisition. Total customer receivables serviced at August 1, 1998 totaled
$3,828 million, a decline of $407 million from the comparable period last
year. The decrease is attributable to a decline in the use of the JCPenney
proprietary credit card.
Income taxes
The Company's effective income tax rate was 38.9 per cent in both the
current and last year's second quarter. For the first six months, the
effective income tax rate was 38.8 per cent compared with 39.0 per cent
last year.
Year 2000
The Year 2000 issue exists because many computer systems store and process
dates using only the last two digits of the year. Such systems, if not
changed, may interpret "00" as "1900" instead of the year "2000." The
Company has been working to identify and address Year 2000 issues since
January 1995. The scope of this effort includes internally developed
information technology systems, purchased and leased software, embedded
systems, and electronic data interchange transaction processing.
In October 1996, a companywide task force was formed to provide guidance to
the Company's operating and support departments and to monitor the progress
of efforts to address Year 2000 issues. The Company has also consulted
with various third parties, including, but not limited to, outside
consultants, outside service providers, infrastructure suppliers, industry
groups, and other retail companies and associations to develop industrywide
approaches to the Year 2000 issue, to gain insights to problems, and to
provide additional perspectives on solutions. It is expected that
compliance work will be substantially completed by the end of 1998.
Beginning in January 1999, all systems critical to the Company's core
businesses will be retested. The Company has also focused on the Year 2000
compliance status of its suppliers, and is participating in a National
Retail Federation survey of suppliers and service providers to determine
their Year 2000 readiness.
Despite the significant efforts to address Year 2000 concerns, the Company
could potentially experience disruptions to some of its operations,
including those resulting from noncompliant systems used by third party
business and governmental entities. The Company has developed contingency
plans to address potential Year 2000 disruptions. These plans include
business continuity plans that address accessibility and functionality of
Company facilities as well as steps to be taken if an event causes failure
of a system critical to the Company's core business activities.
Through August 1, 1998, the Company has incurred approximately $22 million
to achieve Year 2000 compliance. The Company's projected cost for Year
2000 remediation is currently estimated to be $43 million. Total costs
have not had, and are not expected to have, a material impact on the
Company's financial results.
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New Accounting Rules
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
__________________________________________
Hedging Activities", which is effective for quarters beginning after June
___________________
15, 1999. The Company has a limited exposure to derivative products and
does not expect these new rules will have a material impact on reported
results.
The American Institute of Certified Public Accountants has issued
Statements of Position (SOP) No. 98-1, "Accounting for the Costs of
___________________________
Computer Software Developed or Obtained for Internal Use" and No. 98-5,
_________________________________________________________
"Reporting on the Costs of Start-Up Activities." The new accounting rules,
________________________________________________
which have been adopted, did not have a material impact on the Company.
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 August 1, 1998 are not necessarily indicative of the
results for the entire year.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
This report 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, and the year 2000 compliance readiness
of the Company's suppliers and service providers as well as government
agencies. Investors should take such risks and uncertainties into account
when making investment decisions.
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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 15,
1998, at which the four 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 2001 Annual Meeting of the Company's stockholders:
NOMINEE FOR AUTHORITY WITHHELD
_______ ___ __________________
M. A. Burns 233,237,751 5,250,202
J. E. Oesterreicher 232,687,481 5,800,472
Francisco
Sanchez-Loaeza 233,061,023 5,426,930
C. S. Sanford, Jr. 233,240,175 5,247,778
(2) The Board of Directors' proposal concerning the employment of
KPMG Peat Marwick LLP as auditors for the fiscal year ending
January 30, 1999:
FOR AGAINST ABSTAIN
___ _______ _______
235,440,277 2,149,673 898,003
(3) A stockholder resolution concerning the elimination of the
classification of the Board of Directors:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
___ _______ _______ _________
98,094,954 124,738,589 3,246,007 12,408,331
(4) A stockholder resolution concerning the submission to a
stockholder vote of the Company's stockholder rights plan:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
___ _______ _______ _________
124,701,374 97,903,799 3,474,449 12,408,331
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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(a) Financial Data Schedule for the six months ended
August 1, 1998.
27(b) Restated Financial Data Schedule for the six months
ended July 26, 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: September 15, 1998
<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)
26 Weeks Ended
_____________________________________________
August 1, 1998 July 26, 1997
______________________ ____________________
Shares Income Shares Income
_________ ________ _______ _________
Basic
-----
Net income $ 201 $ 229
Dividend on Series B ESOP
convertible preferred stock
(after-tax) (18) (20)
_______ _______
Adjusted net income 183 209
Weighted average number of
shares outstanding 252.9 244.5
_____ _______ _____ _______
252.9 $ 183 244.5 $ 209
===== ======= ===== =======
Net income per common share $ 0.73 $ 0.85
======= =======
Diluted
-------
Net income $ 201 $ 229
Tax benefit differential on ESOP
dividend assuming stock is
fully converted - -
Assumed additional contribution
to ESOP if preferred stock is
fully converted (1) (2)
------- -------
Adjusted net income 200 227
Weighted average number of
shares outstanding (basic) 252.9 244.5
Common stock equivalents:
Stock options and other
dilutive effect 2.3 2.2
Convertible preferred stock 17.0 18.6
_____ _______ _____ _______
272.2 $ 200 265.3 $ 227
===== ======= ===== =======
Net income per common share $ 0.72 $ 0.85
======= =======
<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
53 weeks 52 weeks
ended ended
Aug. 1, Jul. 26,
($ Millions) 1998 1997
_________ ____________
Income from continuing operations $ 842 $ 856
(before income taxes, before
capitalized interest, but after
preferred stock dividend)
Fixed charges
Interest (including capitalized
interest) on:
Operating leases 180 110
Short term debt 100 124
Long term debt 559 412
Capital leases 6 7
Credit facility - 19
Other, net (9) (3)
_________ _________
Total fixed charges 836 669
Preferred stock dividend, before taxes 35 47
Combined fixed charges and preferred _________ _________
stock dividend requirement 871 716
Total available income $ 1,713 $ 1,572
========= =========
Ratio of available income to combined
fixed charges and preferred stock
dividend requirement 2.0 2.2
========= =========
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
53 weeks 52 weeks
ended ended
Aug. 1, Jul. 26,
($ Millions) 1998 1997
__________ ____________
Income from continuing operations $ 877 $ 903
(before income taxes and
capitalized interest)
Fixed charges
Interest (including capitalized
interest) on:
Operating leases 180 110
Short term debt 100 124
Long term debt 559 412
Capital leases 6 7
Credit facility - 19
Other, net (9) (3)
_________ _________
Total fixed charges 836 669
_________ _________
Total available income $ 1,713 $ 1,572
========= =========
Ratio of available income to combined
fixed charges and preferred stock
dividend requirement 2.0 2.3
========= =========
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 AUGUST 1, 1998, 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-30-1999
<PERIOD-END> AUG-01-1998
<CASH> 139
<SECURITIES> 959
<RECEIVABLES> 3,439
<ALLOWANCES> 81
<INVENTORY> 6,244
<CURRENT-ASSETS> 10,838
<PP&E> 8,462
<DEPRECIATION> 3,161
<TOTAL-ASSETS> 22,932
<CURRENT-LIABILITIES> 5,727
<BONDS> 6,755
<COMMON> 2,867
0
493
<OTHER-SE> 4,011
<TOTAL-LIABILITY-AND-EQUITY> 22,932
<SALES> 13,316
<TOTAL-REVENUES> 13,813
<CGS> 9,783
<TOTAL-COSTS> 12,819
<OTHER-EXPENSES> 271
<LOSS-PROVISION> 98
<INTEREST-EXPENSE> 296
<INCOME-PRETAX> 329
<INCOME-TAX> 128
<INCOME-CONTINUING> 201
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201
<EPS-PRIMARY> .73
<EPS-DILUTED> .72
</TABLE>
<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> 806
<RECEIVABLES> 3,526
<ALLOWANCES> 71
<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
<COMMON> 2,697
0
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> 218
<LOSS-PROVISION> 110
<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>
