Fourth Quarter
Comparable Sales Increase 2.6%
Outstanding
Debt Reduced by Over $600 Million in 2017
PLANO, Texas -
(Mar. 2, 2018) - J. C. Penney Company, Inc. (NYSE: JCP) today
announced financial results for its fiscal fourth quarter and full
year ended Feb. 3, 2018. Comparable sales increased 2.6 % for
the fourth quarter and increased 0.1 % for full year 2017. Fourth
quarter earnings per share was $0.81 and full year net loss per
share was ($0.37). Fourth quarter adjusted earnings per share
was $0.57 and full year adjusted earnings per share was $0.22. A
reconciliation of GAAP to non-GAAP financial measures is included
in the schedules accompanying the consolidated financial statements
in this release.
Marvin R. Ellison, chairman and
chief executive officer said, "We are encouraged by our results for
the fourth quarter and for fiscal 2017. Through the hard work
and dedication of the entire JCPenney team, we delivered our second
consecutive year of positive adjusted earnings. For 2017, we
improved adjusted earnings per share by 175 %, reduced our
outstanding debt levels by over $600 million and generated over
$200 million of free cash flow. During the fourth quarter, we
delivered our strongest positive sales comps and achieved our
largest gross margin improvement for the year. Our fourth
quarter gross margin improvement, combined with our continued
commitment to expense discipline, helped us generate adjusted
earnings per share of $0.57 for the quarter."
Ellison continued, "In 2018, we
will intensify our market share efforts in Appliances, Mattresses
and Furniture, while continuing to take steps to modernize our
apparel assortment and omni-channel. Our strategy and plan is
clear and consistent, and we remain focused on two critical factors
- to operate the business for growth and deliver profitable
earnings. I would like to thank our nearly 100,000 associates
around our company for their hard work and more importantly, for
their commitment to JCPenney."
Fourth Quarter
2017 Results
Total net sales for the 14 weeks
ended Feb. 3, 2018 increased 1.8 % to $4.03 billion compared to
$3.96 billion for the 13 weeks ended Jan. 28, 2017.
Comparable sales increased 2.6 % in the fourth quarter and were on
the same 13 week basis as the fourth quarter last
year.
Jewelry, Home, Sephora, Footwear
and Handbags and Salon were the Company's top performing divisions
during the quarter. Geographically, the Southeast and Gulf Coast
were the best performing regions of the country.
Cost of goods sold, which excludes
depreciation and amortization, was $2.68 billion, or 66.4 % of
sales, compared to $2.65 billion, or 66.9 % of sales in the same
period last year. The improvement was primarily driven by decreased
promotional activity during the quarter resulting from an improved
inventory position. This improvement was partially offset by
the continued growth in the Company's online and major appliance
businesses and higher shrink rates.
SG&A expenses were $943
million compared to $925 million for the same period last
year. As a percentage of sales, SG&A expenses were 23.4 %
and flat compared to last year. Reductions primarily in store
controllable costs and marketing spend were partially offset by
lower credit income and higher incentive compensation.
Net income was $254 million, or
$0.81 per share, compared to net income of $192 million, or $0.61
per share in the same period last year. The improvement was
primarily due to a $75 million tax reform benefit recorded in the
fourth quarter this year.
Adjusted net income was $179
million, or $0.57 per share, for the fourth quarter this
year. Adjusted net income for the fourth quarter last year
was $202 million, or $0.64 per share, which included a gain of $62
million, or $0.20 per share, associated with the sale of the
Company's home office.
Full Year 2017
Results
Total net sales decreased (0.3) %
to $12.51 billion compared to $12.55 billion last year.
Comparable sales increased 0.1 % for full year 2017. The
slight decline in total net sales was primarily due to store
closures in 2017, most of which closed in the first half of
the year, and was partially offset by incremental sales for the
53rd
week.
For the year, cost of goods sold,
which excludes depreciation and amortization, was $8.17 billion, or
65.4 % of sales, compared to $8.07 billion, or 64.3 % of sales last
year. This increase was primarily driven by the liquidation of both
closed store and slow-moving inventory, the continued growth in the
Company's online and major appliance businesses and higher shrink
rates.
SG&A expenses declined 2 % or
$70 million to $3.47 billion, or 27.7 % of sales, a decrease of 50
basis points as a percentage of sales compared to last year.
These savings were primarily driven by reductions in store
controllable costs and marketing efficiencies, which were partially
offset by lower credit income and higher incentive
compensation.
Net loss was ($116) million, or
($0.37) per share, compared to net income of $1 million, or $0.00
per share last year. This reduction was driven primarily by
restructuring charges associated with the fiscal 2017 store
closures and voluntary early retirement program.
Adjusted net income increased $44
million to $68 million, or $0.22 per share, compared to adjusted
net income of $24 million, or $0.08 per share, last
year.
Adjusted EBITDA was $972 million
compared to $1.01 billion last year.
Inventory at year-end was $2.76
billion, a decrease of 3.2 % compared to last year-end.
Capital expenditures for the year, net of landlord allowances, were
$375 million. Free cash flow was a positive $213 million for
full year 2017, an increase of $210 million versus last
year.
Cash and cash equivalents at the
end of year were $458 million. During fiscal 2017, the
Company reduced its outstanding debt position by over $600
million. The Company ended the fiscal year with liquidity in
excess of $2.3 billion.
Outlook
The Company's 2018 full year
guidance is as follows:
Starting in the first quarter of
fiscal 2018, the Company will adopt the new accounting standards,
which relate to revenue recognition and pension accounting. The
Company expects the impact from the accounting changes will not
have a material impact on its 2018 full year earnings
results.
[1]
A reconciliation of non-GAAP forward-looking projections to GAAP
financial measures is not available as the nature or amount of
potential adjustments, which may be significant, cannot be
determined at this time.
Fourth Quarter
and Full Year Earnings Conference Call Details
At 8:30 a.m. ET today, the Company will host a live conference call
conducted by Chairman and Chief Executive Officer Marvin R. Ellison
and Chief Financial Officer Jeffrey Davis. Management will
discuss the Company's performance during the quarter and take
questions from participants. To access the conference call,
please dial (844) 243-9275, or (225) 283-0394 for international
callers, and reference 6887218 conference ID or visit the Company's
investor relations website at http://ir.jcpenney.com.
Supplemental slides will be available on the Company's investor
relations website approximately 10 minutes before the start of the
conference call.
Telephone playback will be
available for seven days beginning approximately two hours after
the conclusion of the conference call by dialing (855) 859-2056, or
(404) 537-3406 for international callers, and referencing 6887218
conference ID.
Investors and others should note
that we currently announce material information using SEC filings,
press releases, public conference calls and webcasts. In the
future, we will continue to use these channels to distribute
material information about the Company and may also utilize our
website and/or various social media to communicate important
information about the Company, key personnel, new brands and
services, trends, new marketing campaigns, corporate initiatives
and other matters. Information that we post on our website or
on social media channels could be deemed material; therefore, we
encourage investors, the media, our customers, business partners
and others interested in our Company to review the information we
post on our website as well as the following social media
channels:
Facebook
(https://www.facebook.com/jcp) and Twitter
(https://twitter.com/jcpnews).
Any updates to the list of social
media channels we may use to communicate material information will
be posted on the Investor Relations page of the Company's website
at www.jcpenney.com.
Media
Relations:
(972) 431-3400 or jcpnews@jcp.com; Follow us @jcpnews
Investor Relations:
(972) 431-5500 or jcpinvestorrelations@jcp.com
About
JCPenney:
J. C. Penney Company, Inc. (NYSE: JCP), one of the nation's largest
apparel and home furnishings retailers, combines an expansive
footprint of approximately 875 stores across the United States and
Puerto Rico with a powerful e-commerce site, jcp.com, to connect
with shoppers how, when and where they prefer to shop. At every
customer touchpoint, she will get her Penney's worth of a broad
assortment of products from an extensive portfolio of private,
exclusive and national brands. Powering this shopping experience is
the customer service and warrior spirit of approximately 100,000
associates across the globe, all driving toward the Company's three
strategic priorities of strengthening private brands, becoming a
world-class omnichannel retailer and increasing revenue per
customer. For additional information, please visit jcp.com.
Forward-Looking
Statements
This release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Words such as "expect" and similar expressions identify
forward-looking statements, which include, but are not limited to,
statements regarding sales, cost of goods sold, selling, general
and administrative expenses, earnings, cash flows and interest
expense. Forward-looking statements are based only on the
Company's current assumptions and views of future events and
financial performance. They are subject to known and unknown risks
and uncertainties, many of which are outside of the Company's
control that may cause the Company's actual results to be
materially different from planned or expected results. Those risks
and uncertainties include, but are not limited to, general economic
conditions, including inflation, recession, unemployment levels,
consumer confidence and spending patterns, credit availability and
debt levels, changes in store traffic trends, the cost of goods,
more stringent or costly payment terms and/or the decision by a
significant number of vendors not to sell us merchandise on a
timely basis or at all, trade restrictions, the ability to monetize
assets on acceptable terms, the ability to implement our strategic
plan including our omnichannel initiatives, customer acceptance of
our strategies, our ability to attract, motivate and retain key
executives and other associates, the impact of cost reduction
initiatives, our ability to generate or maintain liquidity,
implementation of new systems and platforms, changes in tariff,
freight and shipping rates, changes in the cost of fuel and other
energy and transportation costs, disruptions and congestion at
ports through which we import goods, increases in wage and benefit
costs, competition and retail industry consolidations, interest
rate fluctuations, dollar and other currency valuations, the impact
of weather conditions, risks associated with war, an act of
terrorism or pandemic, the ability of the federal government to
fund and conduct its operations, a systems failure and/or security
breach that results in the theft, transfer or unauthorized
disclosure of customer, employee or Company information, legal and
regulatory proceedings and the Company's ability to access the debt
or equity markets on favorable terms or at all. There can be
no assurances that the Company will achieve expected results, and
actual results may be materially less than expectations. Please
refer to the Company's most recent Form 10-Q for a further
discussion of risks and uncertainties. Investors should take such
risks into account and should not rely on forward-looking
statements when making investment decisions. Any
forward-looking statement made by us in this press release is based
only on information currently available to us and speaks only as of
the date on which it is made. We do not undertake to update
these forward-looking statements as of any future date.
###
J. C. PENNEY
COMPANY, INC.
SUMMARY OF OPERATING RESULTS
(Unaudited)
(Amounts in millions except per share data)
|
Three Months
Ended |
|
Twelve Months
Ended |
|
Statements of Operations: |
Feb. 3,
2018 |
|
Jan. 28,
2017 |
|
% Inc. (Dec.) |
|
Feb. 3,
2018 |
|
Jan. 28,
2017 |
|
% Inc. (Dec.) |
|
Total net sales |
$ |
4,031 |
|
|
$ |
3,961 |
|
|
1.8 |
% |
|
$ |
12,506 |
|
|
$ |
12,547 |
|
|
(0.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses/(income): |
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold (exclusive of depreciation and amortization shown
separately below) |
2,676 |
|
|
2,649 |
|
|
1.0 |
% |
|
8,174 |
|
|
8,071 |
|
|
1.3 |
% |
|
Selling, general and administrative (SG&A) |
943 |
|
|
925 |
|
|
1.9 |
% |
|
3,468 |
|
|
3,538 |
|
|
(2.0 |
)% |
|
Pension |
18 |
|
|
14 |
|
|
28.6 |
% |
|
21 |
|
|
19 |
|
|
10.5 |
% |
|
Depreciation and amortization |
150 |
|
|
153 |
|
|
(2.0 |
)% |
|
570 |
|
|
609 |
|
|
(6.4 |
)% |
|
Real
estate and other, net |
(11 |
) |
|
(63 |
) |
|
(82.5 |
)% |
|
(146 |
) |
|
(111 |
) |
|
31.5 |
% |
|
Restructuring and management transition |
8 |
|
|
9 |
|
|
(11.1 |
)% |
|
303 |
|
|
26 |
|
|
100.0 |
% |
+ |
Total
costs and expenses |
3,784 |
|
|
3,687 |
|
|
2.6 |
% |
|
12,390 |
|
|
12,152 |
|
|
2.0 |
% |
|
Operating income/(loss) |
247 |
|
|
274 |
|
|
(9.9 |
)% |
|
116 |
|
|
395 |
|
|
(70.6 |
)% |
|
(Gain)/loss on extinguishment of debt |
(2 |
) |
|
- |
|
|
- |
% |
|
33 |
|
|
30 |
|
|
10.0 |
% |
|
Net interest expense |
81 |
|
|
88 |
|
|
(8.0 |
)% |
|
325 |
|
|
363 |
|
|
(10.5 |
)% |
|
Income/(loss) before income taxes |
168 |
|
|
186 |
|
|
(9.7 |
)% |
|
(242 |
) |
|
2 |
|
|
(100.0 |
)% |
+ |
Income tax expense/(benefit) |
(86 |
) |
|
(6 |
) |
|
100.0 |
% |
+ |
(126 |
) |
|
1 |
|
|
(100.0 |
)% |
+ |
Net
income/(loss) |
$ |
254 |
|
|
$ |
192 |
|
|
32.3 |
% |
|
$ |
(116 |
) |
|
$ |
1 |
|
|
(100.0 |
)% |
+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share - basic |
$ |
0.81 |
|
|
$ |
0.62 |
|
|
30.6 |
% |
|
$ |
(0.37 |
) |
|
$ |
- |
|
|
- |
% |
|
Earnings/(loss) per share - diluted |
$ |
0.81 |
|
|
$ |
0.61 |
|
|
32.8 |
% |
|
$ |
(0.37 |
) |
|
$ |
- |
|
|
- |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Comparable store sales increase/(decrease) (1) |
2.6 |
% |
|
(0.7 |
)% |
|
|
|
0.1 |
% |
|
- |
% |
|
|
|
Ratios as a percentage of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold |
66.4 |
% |
|
66.9 |
% |
|
|
|
65.4 |
% |
|
64.3 |
% |
|
|
|
SG&A expenses |
23.4 |
% |
|
23.4 |
% |
|
|
|
27.7 |
% |
|
28.2 |
% |
|
|
|
Operating income/(loss) |
6.1 |
% |
|
6.9 |
% |
|
|
|
0.9 |
% |
|
3.1 |
% |
|
|
|
Effective income tax rate |
(51.2 |
)% |
|
(3.2 |
)% |
|
|
|
(52.1 |
)% |
|
50.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Issued
and outstanding shares at end of period |
312.0 |
|
|
308.3 |
|
|
|
|
312.0 |
|
|
308.3 |
|
|
|
|
Weighted average shares - basic |
312.4 |
|
|
308.8 |
|
|
|
|
311.1 |
|
|
308.1 |
|
|
|
|
Weighted average shares - diluted |
314.6 |
|
|
313.8 |
|
|
|
|
311.1 |
|
|
313.0 |
|
|
|
|
-
Comparable store sales are
presented on a 52-week basis and include sales from all stores,
including sales from services and commissions earned from our
in-store licensed departments, that have been open for 12
consecutive full fiscal months and Internet sales through
jcpenney.com. Stores closed for an extended period are not
included in comparable store sales calculations, while stores
remodeled and minor expansions not requiring store closure remain
in the calculations. Certain items, such as sales return
estimates and store liquidation sales, are excluded from the
Company's calculation.
SUMMARY BALANCE
SHEETS
(Unaudited)
(Amounts in millions)
Summary Balance Sheets: |
Feb. 3,
2018 |
|
Jan. 28,
2017 |
Current assets: |
|
|
|
Cash
in banks and in transit |
$ |
116 |
|
|
$ |
125 |
|
Cash short-term investments |
342 |
|
|
762 |
|
Cash
and cash equivalents |
458 |
|
|
887 |
|
Merchandise inventory |
2,762 |
|
|
2,854 |
|
Prepaid expenses and other |
190 |
|
|
160 |
|
Total current assets |
3,410 |
|
|
3,901 |
|
Property and equipment, net |
4,281 |
|
|
4,599 |
|
Prepaid pension |
61 |
|
|
- |
|
Other
assets |
661 |
|
|
618 |
|
Total assets |
$ |
8,413 |
|
|
$ |
9,118 |
|
|
|
|
|
Liabilities and stockholders'
equity |
|
|
|
Current liabilities: |
|
|
|
Merchandise accounts payable |
$ |
973 |
|
|
$ |
977 |
|
Other
accounts payable and accrued expenses |
1,119 |
|
|
1,164 |
|
Current maturities of capital leases, financing
obligation and note payable |
8 |
|
|
15 |
|
Current maturities of long-term debt |
232 |
|
|
263 |
|
Total current liabilities |
2,332 |
|
|
2,419 |
|
Long-term capital leases, financing obligation and note
payable |
212 |
|
|
219 |
|
Long-term debt |
3,780 |
|
|
4,339 |
|
Deferred taxes |
143 |
|
|
204 |
|
Other liabilities |
567 |
|
|
583 |
|
Total liabilities |
7,034 |
|
|
7,764 |
|
Stockholders' equity |
1,379 |
|
|
1,354 |
|
Total liabilities and stockholders'
equity |
$ |
8,413 |
|
|
$ |
9,118 |
|
SUMMARY STATEMENTS
OF CASH FLOWS
(Unaudited)
(Amounts in millions)
|
Three Months Ended |
|
Twelve Months Ended |
Statements of Cash Flows: |
Feb. 3,
2018 |
|
Jan. 28,
2017 |
|
Feb. 3,
2018 |
|
Jan. 28,
2017 |
Cash flows from operating
activities: |
|
|
|
|
|
|
|
Net income/(loss) |
$ |
254 |
|
|
$ |
192 |
|
|
$ |
(116 |
) |
|
$ |
1 |
|
Adjustments to reconcile net income/(loss) to net
cash provided by/(used in) operating activities: |
|
|
|
|
|
|
|
Restructuring and management transition |
2 |
|
|
- |
|
|
74 |
|
|
(1 |
) |
Asset impairments and other charges |
(1 |
) |
|
1 |
|
|
6 |
|
|
3 |
|
Net
gain on sale of non-operating assets |
- |
|
|
- |
|
|
- |
|
|
(5 |
) |
Net gain on sale of operating assets |
- |
|
|
(63 |
) |
|
(119 |
) |
|
(73 |
) |
(Gain)/loss on extinguishment of debt |
(2 |
) |
|
- |
|
|
33 |
|
|
30 |
|
Depreciation and amortization |
150 |
|
|
153 |
|
|
570 |
|
|
609 |
|
Benefit plans |
11 |
|
|
2 |
|
|
106 |
|
|
(39 |
) |
Stock-based compensation |
2 |
|
|
8 |
|
|
25 |
|
|
35 |
|
Other
comprehensive income tax benefits |
(14 |
) |
|
(12 |
) |
|
(60 |
) |
|
(12 |
) |
Deferred taxes |
(60 |
) |
|
6 |
|
|
(63 |
) |
|
9 |
|
Change
in cash from: |
|
|
|
|
|
|
|
Inventory |
603 |
|
|
837 |
|
|
92 |
|
|
(133 |
) |
Prepaid expenses and other assets |
51 |
|
|
98 |
|
|
(15 |
) |
|
11 |
|
Merchandise accounts payable |
(369 |
) |
|
(516 |
) |
|
(4 |
) |
|
52 |
|
Income
taxes |
(15 |
) |
|
(1 |
) |
|
(12 |
) |
|
(6 |
) |
Accrued expenses and other (1) |
25 |
|
|
30 |
|
|
(63 |
) |
|
(147 |
) |
Net cash provided by/(used in) operating
activities |
637 |
|
|
735 |
|
|
454 |
|
|
334 |
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
Capital expenditures |
(108 |
) |
|
(145 |
) |
|
(395 |
) |
|
(427 |
) |
Proceeds from sale of non-operating assets |
- |
|
|
- |
|
|
- |
|
|
2 |
|
Proceeds from sale of operating assets |
1 |
|
|
80 |
|
|
154 |
|
|
96 |
|
Joint venture return of investment |
- |
|
|
(2 |
) |
|
9 |
|
|
13 |
|
Insurance proceeds received for damage to property and
equipment |
3 |
|
|
- |
|
|
3 |
|
|
- |
|
Net cash provided by/(used in)
investing activities |
(104 |
) |
|
(67 |
) |
|
(229 |
) |
|
(316 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
- |
|
|
- |
|
|
- |
|
|
2,188 |
|
Proceeds from borrowings under the credit facility |
283 |
|
|
408 |
|
|
804 |
|
|
667 |
|
Payments of borrowings under the credit
facility |
(494 |
) |
|
(570 |
) |
|
(804 |
) |
|
(667 |
) |
Net
proceeds from financing obligation |
- |
|
|
216 |
|
|
- |
|
|
216 |
|
Premium on early retirement of long-term debt |
- |
|
|
- |
|
|
(30 |
) |
|
- |
|
Payments of capital leases, financing obligation and note
payable |
(2 |
) |
|
(5 |
) |
|
(16 |
) |
|
(29 |
) |
Payment of long-term debt |
(47 |
) |
|
(10 |
) |
|
(599 |
) |
|
(2,349 |
) |
Financing costs |
- |
|
|
- |
|
|
(9 |
) |
|
(49 |
) |
Proceeds from stock issued under stock plans |
1 |
|
|
- |
|
|
5 |
|
|
2 |
|
Tax
withholding payments for vested restricted stock |
(1 |
) |
|
(3 |
) |
|
(5 |
) |
|
(10 |
) |
Net cash provided by/(used in)
financing activities |
(260 |
) |
|
36 |
|
|
(654 |
) |
|
(31 |
) |
Net
increase/(decrease) in cash and cash equivalents |
273 |
|
|
704 |
|
|
(429 |
) |
|
(13 |
) |
Cash and cash equivalents at beginning of
period |
185 |
|
|
183 |
|
|
887 |
|
|
900 |
|
Cash and cash equivalents at end of
period |
$ |
458 |
|
|
$ |
887 |
|
|
$ |
458 |
|
|
$ |
887 |
|
-
Includes construction
allowances collected from landlords of $4 million and $20 million
for the three and twelve months ended
February 3, 2018, respectively,
and $32 million and $43 million for the three and twelve months
ended January 28, 2017, respectively.
Reconciliation of
Non-GAAP Financial Measures
(Unaudited)
(Amounts in millions except per share data)
We report our financial information in accordance
with generally accepted accounting principles in the United States
(GAAP). However, we present certain financial measures and
ratios identified as non-GAAP under the rules of the Securities and
Exchange Commission (SEC) to assess our results. We believe
the presentation of these non-GAAP financial measures and ratios is
useful in order to better understand our financial performance as
well as to facilitate the comparison of our results to the results
of our peer companies. In addition, management uses these
non-GAAP financial measures and ratios to assess the results of our
operations. It is important to view non-GAAP financial
measures in addition to, rather than as a substitute for, those
measures and ratios prepared in accordance with GAAP. We have
provided reconciliations of the most directly comparable GAAP
measures to our non-GAAP financial measures presented.
The following non-GAAP financial measures are
adjusted to exclude restructuring and management transition
charges, the impact of our qualified defined benefit pension plan
(Primary Pension Plan), the mark-to-market adjustment for
supplemental retirement plans, the (gain)/loss on extinguishment of
debt, the net gain on the sale of non-operating assets, the
proportional share of net income from our joint venture formed to
develop the excess property adjacent to our home office facility in
Plano, Texas (Home Office Land Joint Venture), the tax impact for
the allocation of income taxes to other comprehensive income items
related to our Primary Pension Plan and interest rate swaps and the
impact of tax reform. Unlike other operating expenses,
restructuring and management transition charges, the (gain)/loss on
extinguishment of debt, the net gain on the sale of non-operating
assets, the proportional share of net income from the Home Office
Land Joint Venture, the tax impact for the allocation of income
taxes to other comprehensive income items related to our Primary
Pension Plan and interest rate swaps and the impact of tax reform
are not directly related to our ongoing core business
operations. Primary Pension Plan expense/(income) and the
mark-to-market adjustment for supplemental retirement plans are
determined using numerous complex assumptions about changes in
pension assets and liabilities that are subject to factors beyond
our control, such as market volatility. Accordingly, we
eliminate our Primary Pension Plan expense/(income) in its entirety
as we view all components of net periodic benefit expense/(income)
as a single, net amount, consistent with its presentation in our
Consolidated Financial Statements. We believe it is
useful for investors to understand the impact of restructuring and
management transition charges, Primary Pension Plan
expense/(income), the mark-to-market adjustment for supplemental
retirement plans, the (gain)/loss on extinguishment of debt, the
net gain on the sale of non-operating assets, the proportional
share of net income from the Home Office Land Joint Venture, the
tax impact for the allocation of income taxes to other
comprehensive income items related to our Primary Pension Plan and
interest swaps and the impact of tax reform on our financial
results and therefore are presenting the following non-GAAP
financial measures: (1) adjusted net income/(loss) before net
interest expense, income tax (benefit)/expense and depreciation and
amortization (adjusted EBITDA); (2) adjusted net
income/(loss); and (3) adjusted earnings/(loss) per
share-diluted.
In addition, we believe that EBITDA is a useful
measure in assessing our operating performance and are therefore
presenting this non-GAAP financial measure in addition to the
non-GAAP financial measures listed above.
ADJUSTED EBITDA, NON-GAAP
FINANCIAL MEASURE:
The following table reconciles net income/(loss),
the most directly comparable GAAP measure, to adjusted EBITDA, a
non-GAAP financial measure:
|
Three Months
Ended |
|
Twelve Months
Ended |
|
Feb. 3,
2018 |
|
Jan. 28,
2017 |
|
Feb. 3,
2018 |
|
Jan. 28,
2017 |
Net income/(loss) |
$ |
254 |
|
|
$ |
192 |
|
|
$ |
(116 |
) |
|
$ |
1 |
|
Add:
Net interest expense |
81 |
|
|
88 |
|
|
325 |
|
|
363 |
|
Add: (Gain)/loss on extinguishment of debt |
(2 |
) |
|
- |
|
|
33 |
|
|
30 |
|
Add:
Income tax expense/(benefit) |
(86 |
) |
|
(6 |
) |
|
(126 |
) |
|
1 |
|
Add: Depreciation and amortization |
150 |
|
|
153 |
|
|
570 |
|
|
609 |
|
Add:
Restructuring and management transition charges |
8 |
|
|
9 |
|
|
303 |
|
|
26 |
|
Add: Primary pension plan expense/(income) |
(9 |
) |
|
1 |
|
|
(11 |
) |
|
1 |
|
Add:
Mark-to-market adjustment for supplemental retirement plans |
25 |
|
|
11 |
|
|
25 |
|
|
11 |
|
Less: Net gain on the sale of non-operating
assets |
- |
|
|
- |
|
|
- |
|
|
(5 |
) |
Less:
Proportional share of net income from joint venture |
(8 |
) |
|
1 |
|
|
(31 |
) |
|
(28 |
) |
Adjusted EBITDA
(non-GAAP) |
$ |
413 |
|
|
$ |
449 |
|
|
$ |
972 |
|
|
$ |
1,009 |
|
ADJUSTED NET INCOME/(LOSS) AND
ADJUSTED EARNINGS/(LOSS) PER SHARE-DILUTED, NON-GAAP FINANCIAL
MEASURES:
The following table reconciles net income/(loss)
and earnings/(loss) per share-diluted, the most directly comparable
GAAP measures, to adjusted net income/(loss) and adjusted
earnings/(loss) per share-diluted, non-GAAP financial measures:
|
Three Months
Ended |
|
Twelve Months
Ended |
|
Feb. 3,
2018 |
|
Jan. 28,
2017 |
|
Feb. 3,
2018 |
|
Jan. 28,
2017 |
Net income/(loss) |
$ |
254 |
|
|
$ |
192 |
|
|
$ |
(116 |
) |
|
$ |
1 |
|
Earnings/(loss) per share-diluted |
$ |
0.81 |
|
|
$ |
0.61 |
|
|
$ |
(0.37 |
) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
Add:
Restructuring and management transition charges(1) |
8 |
|
|
9 |
|
|
303 |
|
|
26 |
|
Add: Primary pension plan
expense/(income)(1) |
(9 |
) |
|
1 |
|
|
(11 |
) |
|
1 |
|
Add:
Mark-to-market adjustment for supplemental retirement
plans(1) |
25 |
|
|
11 |
|
|
25 |
|
|
11 |
|
Add: (Gain)/loss on extinguishment of
debt(1) |
(2 |
) |
|
- |
|
|
33 |
|
|
30 |
|
Less:
Net gain on the sale of non-operating assets(1) |
- |
|
|
- |
|
|
- |
|
|
(5 |
) |
Less: Proportional share of net income from joint
venture(1) |
(8 |
) |
|
1 |
|
|
(31 |
) |
|
(28 |
) |
Less:
Tax impact resulting from other comprehensive income
allocation(2) |
(14 |
) |
|
(12 |
) |
|
(60 |
) |
|
(12 |
) |
Less: Impact of tax reform |
(75 |
) |
|
- |
|
|
(75 |
) |
|
- |
|
Adjusted net income/(loss) (non-GAAP) |
$ |
179 |
|
|
$ |
202 |
|
|
$ |
68 |
|
|
$ |
24 |
|
Adjusted earnings/(loss) per
share-diluted (non-GAAP) |
$ |
0.57 |
|
|
$ |
0.64 |
|
|
$ |
0.22 |
|
|
$ |
0.08 |
|
-
Reflects no tax effect due to
the impact of the Company's tax valuation allowance.
-
Represents the net tax benefit
that resulted from our other comprehensive income allocation
between our Operating loss and Accumulated other comprehensive
income.
Reconciliation of
Non-GAAP Financial Measures
(Unaudited)
(Amounts in millions)
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, less capital
expenditures, plus the proceeds from the sale of operating
assets. Free cash flow is a relevant indicator of our ability
to repay maturing debt, 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, payments made for
business acquisitions or required pension contributions, if
any. 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.
FREE CASH FLOW, NON-GAAP
FINANCIAL MEASURE:
The following table reconciles cash flow from
operating activities, the most directly comparable GAAP measure, to
free cash flow, a non-GAAP financial measure, as well as
information regarding net cash provided by/(used in) investing
activities and net cash provided by/(used in) financing
activities:
|
Three Months
Ended |
|
Twelve Months
Ended |
|
Feb. 3,
2018 |
|
Jan. 28,
2017 |
|
Feb. 3,
2018 |
|
Jan. 28,
2017 |
Net cash provided by/(used in) operating
activities |
$ |
637 |
|
|
$ |
735 |
|
|
$ |
454 |
|
|
$ |
334 |
|
Add: Proceeds from sale of operating assets |
1 |
|
|
80 |
|
|
154 |
|
|
96 |
|
Less: Capital expenditures |
(108 |
) |
|
(145 |
) |
|
(395 |
) |
|
(427 |
) |
Free cash flow (non-GAAP) |
$ |
530 |
|
|
$ |
670 |
|
|
$ |
213 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
Net
cash provided by/(used in) investing activities (1) |
$ |
(104 |
) |
|
$ |
(67 |
) |
|
$ |
(229 |
) |
|
$ |
(316 |
) |
Net cash provided by/(used in) financing
activities |
$ |
(260 |
) |
|
$ |
36 |
|
|
$ |
(654 |
) |
|
$ |
(31 |
) |
-
Net cash provided by/(used in)
investing activities includes capital expenditures and proceeds
from sale of operating assets, which are also included in our
computation of free cash flow.
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: J. C. Penney Company, Inc. via Globenewswire
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