·	Earnings of $0.07 per share

·	Growth initiatives, exclusive attractions and private brands continue to drive sales gains

·	Opened 22 Sephora inside jcpenney boutiques bringing total to 276

·	Expenses tightly controlled during the quarter

·	Strong financial condition, cash and cash equivalents of approximately $1.6 billion

·	Comparable store sales: expected to increase 2 to 3 percent.

·	Total sales: expected to increase approximately 250 basis points less than comparable store sales due to the impact of the Company’s exit of its catalog and related businesses.

·	Gross margin rate: expected to be down slightly when compared to last year.

·	SG&A expenses: expected to be flat to down slightly

·	Depreciation and amortization:  approximately $135 million.

·	Real Estate and Other: net $11 million of expense, including expenses related to restructuring and other cost saving initiatives.

·	Interest expense:  approximately $57 million.

·	Income tax rate: approximately 38 percent.

·	Average shares for EPS calculation: approximately 216 million common shares.

·	Earnings per share: expected to be in the range of $0.15 to $0.20 per share, including restructuring charges of approximately $0.05 per share.  This guidance does not include the impact of the Company’s voluntary early retirement program that was communicated

 

 

 

 

J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
(Unaudited)
(Amounts in millions except per share data)
				Three months ended						Six months ended
				July 30,		July 31,		% Inc.		July 30,		July 31,		% Inc.
				2011		2010		(Dec.)		2011		2010		(Dec.)
STATEMENTS OF OPERATIONS:
Total net sales				$    3,906		$   3,938		(0.8)%		$    7,849		$     7,867		(0.2)%
Gross margin				1,497		1,552		(3.5)%		3,092		3,182		(2.8)%
Operating expenses:
	Selling, general and administrative (SG&A)(1)			1,243		1,275		(2.5)%		2,524		2,567		(1.7)%
	Qualified pension plan			21		55		(61.8)%		43		110		(60.9)%
	Supplemental pension plans			7		8		(12.5)%		14		17		(17.6)%
		Total pension		28		63		(55.6)%		57		127		(55.1)%
	Depreciation and amortization			128		126		1.6%		256		251		2.0%
	Real estate and other, net			17		(7)		(100)%+		13		(13)		(100)%+
	Total operating expenses			1,416		1,457		(2.8)%		2,850		2,932		(2.8)%
Operating income				81		95		(14.7)%		242		250		(3.2)%
Net interest expense				57		57		-		115		116		(0.9)%
Bond premiums and unamortized costs				-		20		-		-		20		-
Income before income taxes				24		18		33.3%		127		114		11.4%
Income tax expense				10		4		100%+		49		40		22.5%
Net income				$         14		$        14		-		$         78		$          74		5.4%
Earnings per share - diluted				$      0.07		$     0.06		16.7%		$      0.35		$       0.31		12.9%
FINANCIAL DATA:
Adjusted earnings per share - diluted (non-GAAP)(2)				$      0.13		$     0.20				$      0.47		$       0.60
Comparable store sales increase				1.5%		0.9%				2.7%		1.3%
Ratios as a percentage of sales:
	Gross margin			38.3%		39.4%				39.4%		40.4%
	SG&A expenses			31.8%		32.4%				32.2%		32.6%
	Total operating expenses			36.2%		37.0%				36.3%		37.2%
	Operating income			2.1%		2.4%				3.1%		3.2%
Effective income tax rate				41.7%		22.2%				38.6%		35.1%
COMMON SHARES DATA:
Outstanding shares at end of period				213.3		236.4				213.3		236.4
Average shares outstanding (basic shares)				213.3		236.4				221.3		236.3
Average shares used for diluted EPS				216.3		237.6				224.2		237.6
(1)	The statement of operations line item for pre-opening expenses has been eliminated due to the immaterial
	nature of such expense over the past several years. Pre-opening expenses for both years is now included in
	SG&A. The impact on the prior year quarter SG&A ratio was an increase of 10 basis points.
(2)	See below for reconcilation of non-GAAP financial measures to the most comparable GAAP measures.

 

J. C. PENNEY COMPANY, INC. SUMMARY BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
						July 30,				July 31,
						2011				2010
SUMMARY BALANCE SHEETS:
Cash in banks and in transit						$      244				$       226
Cash short-term investments						1,307				1,777
	Cash and cash equivalents					1,551				2,003
Merchandise inventory						3,572				3,490
Income taxes receivable						334				499
Prepaid expenses and other						194				205
Property and equipment, net						5,237				5,298
Prepaid pension						788				387
Other assets						753				627
	Total assets					$ 12,429				$  12,509
Merchandise accounts payable						$   1,386				$    1,410
Other accounts payable and accrued expenses						1,381				1,422
Long-term debt						3,099				3,099
Long-term deferred taxes						1,216				982
Other liabilities						644				710
	Total liabilities					7,726				7,623
Stockholders' equity						4,703				4,886
	Total liabilities and stockholders' equity					$ 12,429				$  12,509
						Six months ended
						July 30,				July 31,
						2011				2010
SUMMARY STATEMENTS OF CASH FLOWS:
Net cash provided by/(used in):
	Total operating activities					$      172				$     (379)
	Investing activities:
		Capital expenditures				(295)				(229)
		Proceeds from sale of assets				-				4
	Total investing activities					(295)				(225)
	Financing activities:
		Proceeds from debt				-				392
		Other changes in debt				-				(693)
		Financing costs				(15)				(14)
		Stock repurchase program				(900)				-
		Proceeds from issuance of stock warrants				50				-
		Changes in stock				9				5
		Dividends paid				(92)				(94)
	Total financing activities					(948)				(404)
Net (decrease) in cash and cash equivalents						(1,071)				(1,008)
Cash and cash equivalents at beginning of period						2,622				3,011
Cash and cash equivalents at end of period						$   1,551				$    2,003

J. C. PENNEY COMPANY, INC. Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Amounts in millions except per share data)
ADJUSTED OPERATING INCOME EXCLUDING QUALIFIED PENSION
The following table reconciles operating income, the most directly comparable GAAP measure, to adjusted operating income, a non-GAAP financial measure, which excludes the impact of the qualified pension plan:
				Three months ended						Six months ended
				July 30,		July 31,		% Inc.		July 30,		July 31,		% Inc.
				2011		2010		(Dec.)		2011		2010		(Dec.)
Operating income				$         81		$        95		(14.7)%		$       242		$        250		(3.2)%
	As a percent of sales			2.1%		2.4%				3.1%		3.2%
Add: Qualified pension plan expense				21		55				43		110
Adjusted operating income (non-GAAP)				$       102		$      150		(32.0)%		$       285		$        360		(20.8)%
	As a percent of sales			2.6%		3.8%				3.6%		4.6%
ADJUSTED EARNINGS PER SHARE - DILUTED EXCLUDING QUALIFIED PENSION
The following table reconciles net income and earnings per share, the most directly comparable GAAP measure, to adjusted net income and earnings per share, which excludes the impact of the qualified pension plan, net of tax, a non-GAAP financial measure:
				Three months ended						Six months ended
				July 30,		July 31,		% Inc.		July 30,		July 31,		% Inc.
				2011		2010		(Dec.)		2011		2010		(Dec.)
Net income				$         14		$        14		-		$         78		$          74		5.4%
Earnings per share - diluted				$      0.07		$     0.06		16.7%		$      0.35		$       0.31		12.9%
Add: Qualified pension plan expense net of tax
	of $8, $21, $17 and $41			13		34				26		69
Adjusted net income (non-GAAP)				$         27		$        48		(43.8)%		$       104		$        143		(27.3)%
Adjusted earnings per share - diluted (non-GAAP)				$      0.13		$     0.20		(35.0)%		$      0.47		$       0.60		(21.7)%

 

J. C. PENNEY COMPANY, INC. Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Amounts in millions)
FREE CASH FLOW
Free cash flow is a key financial measure of our ability to generate additional cash from operating our business and in evaluating our financial performance. We define free cash flow as cash flow from operating activities excluding discretionary cash contributions to our primary pension plan, less capital expenditures and dividends paid, plus the proceeds from the sale of assets. Adjustments to exclude discretionary pension plan contributions are more indicative of our ability to generate cash flows from operating activities. We believe discretionary contributions to our pension plan are more reflective of financing transactions to pay-down off- balance sheet debt relating to the pension liability. Free cash flow is a relevant indicator of our ability to repay maturing debt, both on and off-balance sheet, revise our dividend policy or fund other uses of capital that we believe will enhance stockholder value. Free cash flow is considered a non-GAAP financial measure under the rules of the SEC. Free cash flow is limited and does not represent remaining cash flow available for discretionary expenditures due to the fact that the measure does not deduct payments required for debt maturities, pay-down of off-balance sheet pension debt, and other obligations or payments made for business acquisitions. Therefore, it is important to view free cash flow in addition to, rather than as a substitute for, our entire statement of cash flows and those measures prepared in accordance with GAAP.
The following table reconciles cash flow from operating activities, the most directly comparable GAAP financial measure, to free cash flow, a non-GAAP financial measure:
						Six months ended
						July 30,		July 31,
						2011		2010
Net cash provided by/(used in) operating activities						$      172		$    (379)
Add:
	Discretionary pension contribution					-		392
	Proceeds from sale of assets					-		4
Less:
	Capital expenditures					(295)		(229)
	Dividends paid					(92)		(94)
Free cash flow (non-GAAP)						$    (215)		$    (306)

 

 

 

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