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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 period Commission File Number 1-4947-1
ended April 29, 2000
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 April 29, 2000.
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 29,
2000.
Statements of Income and Reinvested Earnings
(Dollars in millions)
13 weeks ended
____________________
April 29, May 1,
2000 1999
__________ ________
Interest earned from
JCPenney and affiliates $ 5 $ 47
Interest expense 3 31
___ ___
Income before income taxes 2 16
Income taxes 1 6
____ ___
Net income 1 10
Reinvested earnings at
beginning of period 1,088 1,042
_____ ______
Reinvested earnings at
end of period 1,089 1,052
===== ======
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Balance Sheets
(Dollars in millions)
April 29, May 1, Jan. 29,
2000 1999 2000
________ ________ ________
ASSETS
Loans to JCPenney and affiliates $ 1,277 $ 3,217 $ 1,588
________ _______ ________
$ 1,277 $ 3,217 $ 1,588
======== ======= ========
LIABILITIES AND EQUITY OF JCPENNEY
Short-term debt $ 18 $ 1,995 $ 330
Due to JCPenney 25 25 25
________ _______ ________
Total liabilities 43 2,020 355
Equity of JCPenney:
Common stock (including
contributed capital), par value
$100:
Authorized, 750,000 shares
Issued, 500,000 shares 145 145 145
Reinvested earnings 1,089 1,052 1,088
______ ______ ______
Total equity of JCPenney 1,234 1,197 1,233
______ ______ ______
$ 1,277 $ 3,217 $ 1,588
======== ======= ========
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Consolidated Statements of Cash Flows
(Dollars in millions)
13 weeks ended
____________________
April 29, May 1,
2000 1999
__________ ________
Operating Activities
Net income $ 1 $ 10
(Increase)Decrease in loans to
JCPenney 311 (88)
(Decrease)Increase in amount due to
JCPenney 0 7
________ ________
312 (71)
________ ________
Financing Activities
Increase (Decrease) in short-term debt (312) 71
________ ________
Increase in cash 0 0
Cash at beginning of year 0 0
________ ________
Cash at end of first quarter $ 0 $ 0
======== ========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Funding derives earnings on loans to JCPenney under the terms of the loan
agreement which provides for unsecured loans to be made by Funding to
JCPenney. Additionally, in order to maintain Funding's income at defined
coverage ratios, Funding s income is supplemented by 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.
Funding issues commercial paper through Credit Suisse First Boston
Corporation, J.P. Morgan Securities Inc., Merrill Lynch Money Markets
Inc., and Morgan Stanley Dean Witter to corporate and institutional
investors in the domestic market. The commercial paper is guaranteed by
JCPenney on a subordinated basis. The commercial paper is rated "A2" by
Standard & Poor's Corporation, "P2" by Moody's Investors Service, and "F2"
by Fitch Investors Service, Inc.
Funding's borrowing levels have been substantially reduced as a result of
loan repayments by JCPenney in connection with the sale of JCPenney's
credit card receivables and credit facilities to General Electric Capital
Corporation (GECC) on December 6, 1999. JCPenney used a part of the
proceeds to repay a portion of its loan from Funding. Funding in turn used
the proceeds to pay down its short term commercial paper debt.
For the first quarter of 2000, income, expenses, and provision for taxes
decreased as compared with the first quarter of 1999, as a result of lower
average borrowing levels. Borrowing levels averaged $208 million during the
2000 first quarter as compared with $2,397 million during the comparable
1999 period. At the end of the first quarter of 2000, borrowing levels
were $18 million as compared with $1,995 million at the end of the first
quarter of 1999. For the first quarter of 2000, average interest rates
increased 101 basis points as compared with the same period in 1999.
Subsequent Events
_________________
On May 2, 2000, the Company announced that it was exploring strategic
alternatives related to its J. C. Penney Direct Marketing Services, Inc.
(DMS) subsidiary, including, but not limited to, a sale or joint venture of
the business. It is currently expected that the DMS transaction will be
completed by the end of fiscal 2000, and that proceeds will be used to pay
down debt and repurchase common stock.
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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
April 29, 1999.
(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 FUNDING CORPORATION
By: /s/ W. J. Alcorn
______________________________________
W. J. Alcorn
Controller
(Principal Accounting Officer)
Date: June 12, 2000
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