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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 week and 26 week periods Commission file number 1-4947-1
ended July 27, 1996
J. C. PENNEY FUNDING CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 51-0101524
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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 214-431-1000
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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.
500,000 shares of Common Stock of $100 par value, as of July 27, 1996.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1) (a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH
THE REDUCED DISCLOSURE FORMAT.
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
--------------------
The following interim financial information of J. C. Penney Funding Corporation
("Funding"), a wholly owned subsidiary of J. C. Penney Company, Inc.
("JCPenney"), is unaudited; however, in the opinion of Funding, it includes all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation. The financial information should be read in conjunction with the
audited financial statements included in Funding's Annual Report on Form 10-K
for the 52 weeks ended January 27, 1996.
Statements of Income and Reinvested Earnings
(Dollars in millions)
<TABLE>
<CAPTION>
13 weeks ended 26 weeks ended
------------------- ------------------
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest earned from
JCPenney and affiliates $ 33 $ 48 $ 65 $ 96
Interest expense 22 32 43 63
---- ---- ---- ----
Income before income taxes 11 16 22 33
Income taxes 4 6 8 12
---- ---- ---- ----
Net income 7 10 14 21
Reinvested earnings at
beginning of period 933 894 926 883
---- ---- ---- ----
Reinvested earnings at
end of period $940 $904 $940 $904
==== ==== ==== ====
</TABLE>
1
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Balance Sheets
(Dollars in millions)
<TABLE>
<CAPTION>
July 27, July 29, Jan. 27,
1996 1995 1996
-------- -------- --------
<S> <C> <C> <C>
ASSETS (Current)
Loans to JCPenney and affiliates $2,959 $3,209 $2,563
------ ------ ------
$2,959 $3,209 $2,563
====== ====== ======
LIABILITIES AND EQUITY OF JCPENNEY
Short-term debt $1,872 $2,149 $1,482
Due to JCPenney 2 11 10
------ ------ ------
Total liabilities 1,874 2,160 1,492
Equity of JCPenney:
Common stock (including contributed
capital), par value $100:
Authorized, 750,000 shares
Issued, 500,000 shares 145 145 145
Reinvested earnings 940 904 926
------ ------ ------
Total equity of JCPenney 1,085 1,049 1,071
------ ------ ------
$2,959 $3,209 $2,563
====== ====== ======
</TABLE>
2
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Consolidated Statements of Cash Flows
(Dollars in millions)
<TABLE>
<CAPTION>
26 Weeks Ended
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July 27, July 29,
1996 1995
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<S> <C> <C>
Operating Activities
Net income $ 14 $ 21
(Increase) Decrease in loans to JCPenney (396) (95)
(Decrease) Increase in amount due to JCPenney (8) (1)
------ ------
(390) ( 75)
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Financing Activities
Increase in short-term debt 390 75
------ ------
Increase (Decrease) in cash -0- -0-
Cash at beginning of year -0- -0-
------ ------
Cash at end of second quarter $ -0- $ -0-
====== ======
</TABLE>
3
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Under the terms of the loan agreement which provides for unsecured loans to be
made by Funding to JCPenney and the receivables agreement pursuant to which
Funding may purchase an undivided interest in certain JCPenney customer
receivables, Funding derives earnings on loans to JCPenney and income from
charges to JCPenney. This income, when combined with other income of Funding,
is designed to cover Funding's fixed charges (interest expense) at a coverage
ratio mutually agreed upon by Funding and JCPenney. The earnings to fixed
charges coverage ratio has historically been at least one and one-half times.
Since 1986, Funding has provided financing to JCPenney in accordance with the
loan agreement and no receivable balances have been purchased.
Funding is not and has not been involved in the administration of JCPenney's
retail credit operation and does not bear any expenses or receive any finance
charge revenue connected therewith.
For the 1996 second quarter and the six-month period, income, expenses, and
provision for taxes decreased, as compared with the same periods of 1995, as a
result of both lower interest rates and lower average borrowing levels.
Borrowing levels averaged $1,634 million in the second quarter and $1,590
million during the first half of 1996 as compared with $2,099 million and
$2,076 million during the comparable 1995 periods. At the end of the second
quarter of 1996, borrowing levels were $1,872 million as compared with $2,149
million at the end of the 1995 second quarter. For the second quarter and six-
month periods in 1996, average interest rates decreased 62 basis points and 63
basis points, respectively, as compared with the same periods in 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
The following document is filed as an exhibit to this
report:
27 Financial Data Schedule for the six months ended July 27, 1996.
(b) Reports on Form 8-K
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None
4
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SIGNATURES
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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 FUNDING CORPORATION
By: /s/ W. J. Alcorn
--------------------------------
W. J. Alcorn
Controller
(Principal Accounting Officer)
Date: September 6, 1996
5
<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 FUNDING CORPORATION AS OF JULY 27, 1996, 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-25-1997
<PERIOD-END> JUL-27-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,959
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,959
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,959
<CURRENT-LIABILITIES> 1,874
<BONDS> 0
0
0
<COMMON> 145
<OTHER-SE> 940
<TOTAL-LIABILITY-AND-EQUITY> 2,959
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (22)
<INCOME-PRETAX> 22
<INCOME-TAX> 8
<INCOME-CONTINUING> 14
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
