<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 period Commission File Number 1-4947-1
ended May 2, 1998
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 May 2, 1998.
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 53 weeks ended January 31,
1998.
Statements of Income and Reinvested Earnings
(Dollars in millions)
13 weeks ended
_________________________
May 2, April 26,
1998 1997
__________ __________
Interest earned from
JCPenney and affiliates $ 34 $ 82
Interest expense 22 54
____ ___
Income before income taxes 12 28
Income taxes 4 10
____ ____
Net income 8 18
Reinvested earnings at
beginning of period 1,007 964
_____ ____
Reinvested earnings at
end of period $1,015 $ 982
====== ======
1
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Balance Sheets
(Dollars in millions)
May 2, April 26, Jan. 31,
1998 1997 1998
________ ________ ________
ASSETS
Loans to JCPenney and affiliates $2,663 $3,717 $2,591
______ ______ ______
$2,663 $3,717 $2,591
====== ====== ======
LIABILITIES AND EQUITY OF JCPENNEY
Short-term debt $1,499 $2,580 $1,416
Due to JCPenney 4 10 23
______ ______ ______
Total liabilities 1,503 2,590 1,439
Equity of JCPenney:
Common stock (including
contributed capital), par value
$100:
Authorized, 750,000 shares
Issued, 500,000 shares 145 145 145
Reinvested earnings 1,015 982 1,007
______ ______ ______
Total equity of JCPenney 1,160 1,127 1,152
______ ______ ______
$2,663 $3,717 $2,591
====== ====== =======
2
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Consolidated Statements of Cash Flows
(Dollars in millions)
13 weeks ended
_________________________
May 2, April 26,
1998 1997
__________ __________
Operating Activities
Net income $ 8 $ 18
(Increase)Decrease in loans to
JCPenney (72) 1,345
(Decrease)Increase in amount due to
JCPenney (19) 9
_____ _____
(83) 1,372
_____ _____
Financing Activities
(Increase)Decrease in short-term debt (83) 1,372
______ _____
Increase in cash 0 0
Cash at beginning of year 0 0
_____ _____
Cash at end of first quarter $ 0 $ 0
====== ======
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. The 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 first quarter of 1998, income, expenses, and provision for taxes
decreased as compared with the first quarter of 1997, as a result of lower
average borrowing levels. Borrowing levels averaged $1,585 million during
the 1998 first quarter as compared with $3,938 million during the
comparable 1997 period. At the end of the first quarter of 1998, borrowing
levels were $1,499 million as compared with $2,580 million at the end of
the first quarter of 1997. For the first quarter of 1998, average interest
rates increased 16 basis points as compared with the same period in 1997.
4
<PAGE>
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 three months ended
May 2, 1998.
(b) Reports on Form 8-K
___________________
None
5
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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 FUNDING CORPORATION
By: /s/ W. J. Alcorn
_____________________________
W. J. Alcorn
Controller
(Principal Accounting Officer)
Date: June 12, 1998
6
<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 MAY 2, 1998, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> MAY-02-1998
<CASH> 0
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<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,663
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,663
<CURRENT-LIABILITIES> 1,503
<BONDS> 0
<COMMON> 145
0
0
<OTHER-SE> 1,015
<TOTAL-LIABILITY-AND-EQUITY> 2,663
<SALES> 0
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