<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 week and 39 week periods Commission File Number 1-4947-1
ended October 25, 1997
J. C. PENNEY FUNDING CORPORATION
_____________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 51-0101524
_____________________________________________________________________________
(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.
500,000 shares of Common Stock of $100 par value, as of October 25, 1997.
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.
<PAGE>
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 25, 1997.
Statements of Income and Reinvested Earnings
(Dollars in millions)
13 weeks ended 39 weeks ended
______________ ______________
Oct. 25, Oct. 26, Oct. 25, Oct. 26,
1997 1996 1997 1996
________ ________ ________ ________
Interest earned from
JCPenney and affiliates $ 35 $ 36 $146 $101
Interest expense 23 24 96 67
_____ ____ _____ ____
Income before income taxes 12 12 50 34
Income taxes 4 4 18 12
____ ____ _____ _____
Net income 8 8 32 22
Reinvested earnings at
beginning of period 989 940 964 926
______ ____ ______ ____
Reinvested earnings at
end of period $ 997 $948 $ 996 $948
______ ____ ______ ____
1
<PAGE>
Balance Sheets
(Dollars in millions)
Oct. 25, Oct. 26, Jan. 27,
1997 1996 1997
________ ________ ________
ASSETS (Current)
Loans to JCPenney and affiliates $3,378 $3,097 $5,062
______ ______ ______
$3,378 $3,097 $5,062
______ ______ ______
LIABILITIES AND EQUITY OF JCPENNEY
Short-term debt $2,218 $2,003 $3,952
Due to JCPenney 19 1 1
______ ______ ______
Total liabilities 2,237 2,004 3,953
Equity of JCPenney:
Common stock (including
contributed capital), par value
$100:
Authorized, 750,000 shares
Issued, 500,000 shares 145 145 145
Reinvested earnings 996 948 964
______ ______ ______
Total equity of JCPenney 1,141 1,093 1,109
______ ______ ______
$3,378 $3,097 $5,062
______ ______ ______
2
<PAGE>
Consolidated Statements of Cash Flows
(Dollars in millions)
39 weeks ended
_______________________
Oct. 25, Oct. 26,
1997 1996
________ ________
Operating Activities
Net Income $ 32 $ 22
Decrease (Increase) in loans to
JCPenney 1,684 (534)
Increase (Decrease) in amount due
to JCPenney 18 (9)
______ ______
1,734 (521)
______ ______
Financing Activities
(Decrease) Increase in short-term
debt (1,734) 521
_______ ______
Increase (Decrease) in cash -0- -0-
Cash at beginning of year -0- -0-
______ _____
Cash at end of second quarter $ -0- $ -0-
______ _____
3
<PAGE>
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 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 third quarter of 1997, despite higher average borrowing rates,
income, expenses, and provision for taxes were approximately equal to the
third quarter of 1996 as a result of lower borrowing levels. Borrowing
levels averaged $1,664 million in the third quarter of 1997 as compared with
$1,804 million during the third quarter of 1996. Average interest rates for
the third quarter of 1997 increased 19 basis points as compared with the
third quarter of 1996. For the nine month period ended October 25, 1997,
income, expenses, and provision for taxes increased as compared to the 1996
comparable period. The increases were the result of higher borrowing levels
and higher average interest rates. Borrowing levels averaged $2,330 million
for the first nine months of 1997 as compared with $1,661 million in the
comparable 1996 period. For the nine month period in 1997, average rates
increased 10 basis points as compared with the same period in 1996. At the
end of the third quarter of 1997, borrowing levels were $2,218 million as
compared with $2,003 million at the end of the 1996 third quarter.
PART II - OTHER INFORMATION
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 nine months ended
Oct. 25, 1997.
(b) Reports on Form 8-K
___________________
None
4
<PAGE>
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 FUNDING CORPORATION
By: /S/ W. J. Alcorn
________________________________
W. J. Alcorn
Vice President and Controller
(Principal Accounting Officer)
Date: December 5, 1997
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 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> 0
<SECURITIES> 0
<RECEIVABLES> 3,378
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,378
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,378
<CURRENT-LIABILITIES> 2,237
<BONDS> 0
<COMMON> 145
0
0
<OTHER-SE> 996
<TOTAL-LIABILITY-AND-EQUITY> 3,378
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (50)
<INCOME-PRETAX> 50
<INCOME-TAX> 18
<INCOME-CONTINUING> 32
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
