J. C. PENNEY COMPANY, INC. REPORTS 2012 FISCAL FOURTH QUARTER AND FULL YEAR RESULTS
2013-02-27 22:32:24 -
PLANO, Texas, Feb. 27, 2013 -- J. C. Penney Company, Inc. (NYSE: JCP) today
announced financial results for its fiscal fourth quarter and full year ended
February 2, 2013. For the quarter, jcpenney reported a net loss of $552 million
or $2.51 per share. Excluding restructuring and management transition charges
and non-cash primary pension plan expense, the Company's adjusted net loss for
the quarter was $427 million or $1.95 per share.
For the year, jcpenney reported a net loss of $985 million or $4.49 per share.
Excluding markdowns related to the alignment of inventory with the Company's
new strategy, restructuring and management transition charges, non-cash primary
pension plan expense and the net gain on the sale or redemption of non-operating
assets, the Company's adjusted net loss for the year was $766 million or $3.49
per share. A reconciliation of GAAP to non-GAAP financial measures is included
in the schedules accompanying the consolidated financial statements included
with this release.
Ron Johnson, chief executive officer of jcpenney said, "Sales and customer
traffic were below our expectations in 2012, but as we execute our ambitious
transformation plan, we are pleased with the great strides we made to improve
jcpenney's cost structure, technology platforms and the overall customer
experience. We have accomplished so much in the last twelve months. We believe
the bold actions taken in 2012 will materially improve the Company's long-term
growth and profitability."
Johnson continued, "Looking ahead, we are energized by our shop roll out plans
for 2013 and the exciting work our teams are undertaking to transform the store.
Combining a new marketing campaign focused on style and value, incredible new
brands and updated merchandise, with continued enhancements to the customer
experience both in our stores and on jcp.com, we are working towards
reconnecting with our core customer while attracting new customers to jcpenney."
Fourth Quarter Results:
Total sales for the fourth quarter, which included $163 million of sales in the
53rd week, decreased 28.4 percent to $3.884 billion. Comparable store sales,
which exclude the 53(rd) week, declined 31.7 percent. Internet sales through
jcp.com were $315 million in the fourth quarter, decreasing 34.4 percent from
last year.
Gross margin was 23.8 percent of sales, compared to 30.2 percent in the same
period last year. Gross margin was impacted by lower than expected sales and a
higher level of clearance merchandise sales related to inventory reductions in
2012.
The Company's SG&A expenses decreased $134 million compared to last year's
fourth quarter.
The Company incurred a charge of $148 million, or $0.41 per share, in the fourth
quarter related to lump-sum settlements from its primary pension plan, elected
by participants who have separated from the Company.
Additionally during the quarter, the Company recognized charges totaling
approximately $86 million, or $0.24 per share, related to the impairment and
write-off of certain store and store-related assets.
For the fourth quarter, the Company incurred $29 million, or $0.08 per share, in
restructuring and management transition charges. These charges comprised the
following:
* Store fixtures $18 million, or $0.05 per share;
* Management transition $5 million, or $0.01 per share;
* Home office and stores $4 million, or $0.01 per share;
* Other $2 million, or $0.01 per share.
Operating cash flow in the fourth quarter was $645 million compared to $953
million in last year's fourth quarter. Investing cash flow was a use of $229
million compared to a use of $455 million in the same quarter last year.
Fiscal 2012 Results:
Total sales for the fiscal year, which included $163 million of sales in the
53(rd) week, decreased 24.8 percent to $12.985 billion. Comparable store sales,
which exclude the 53(rd) week, declined 25.2 percent. Internet sales through
jcp.com were $1.020 billion, decreasing 33.0 percent from last year.
Gross margin was 31.3 percent of sales, compared to 36.0 percent last year.
Gross margin was impacted by lower than expected sales, a higher level of
clearance merchandise sales and markdowns taken during the year to clear
discontinued inventory in preparation for new product and brands being
introduced as part of the transformation.
The Company's SG&A expenses decreased $603 million compared to last year.
As noted above, the Company incurred a charge of $148 million, or $0.41 per
share, related to lump-sum settlements from its primary pension plan, elected by
participants who have separated from the Company.
Additionally, the Company realized net gains on the sale or redemption of non-
operating assets of $397 million and recognized charges totaling approximately
$86 million, or $0.24 per share, related to the impairment and write-off of
certain store and store-related assets.
For the year, the Company incurred $298 million, or $0.83 per share, in
restructuring and management transition charges. These charges comprised the
following:
* Home office and stores $109 million, or $0.30 per share;
* Store fixtures $78 million, or $0.22 per share;
* Management transition $41 million, or $0.12 per share;
* Software and systems $36 million, or $0.10 per share;
* Supply chain $19 million, or $0.05 per share;
* Other $15 million, or $0.04 per share.
Despite the impacts of reduced sales and gross margin and restructuring charges
associated with the Company's transformation throughout 2012, full year
operating cash flow was a use of $10 million. This takes into account the non-
cash nature of a number of restructuring charges, the positive impacts of
reduced expenses, reduction in inventory levels, specific steps taken to improve
overall working capital, including the realignment of vendor payment schedules
of $129 million and a one-time deferral of select vendor payments in the fourth
quarter of $85 million. Investing cash flow for the year was a use of $293
million as capital investments of $810 million were partially offset by cash
from the sale and redemption of non-operating assets. The Company reduced its
debt by $250 million in 2012 and ended the year with $930 million in cash and
cash equivalents.
Spring 2013 Shops Outlook:
During spring 2013, the Company anticipates opening close to 20 shops designated
for home products in 505 stores with brand partners such as Michael Graves,
Jonathan Adler and Sir Terence Conran, among others. In addition to
transforming the home area, the Company will open nearly 700 Joe Fresh(TM)
apparel shops on March 15, 2013 as it transforms nearly 11 million square feet
of retail space in the spring.
During the year, the Company anticipates opening 60 Sephora inside jcpenney
stores, bringing the total to 446.
Earnings Event Today/Webcast Details:
At 5:00 p.m. ET today, the Company will host a live conference call and
streaming video webcast conducted by Chief Executive Officer Ron Johnson and
Chief Financial Officer Ken Hannah. The event will include a formal slide
presentation followed by a live question-and-answer session. The webcast will
be available live on the Company's investor relations website at
ir.jcpenney.com. Replays of the webcast will be available for up to 90
days after the event. To access the conference call, please dial (866)
202-4683, or (617) 213-8846 for international callers, and reference 59362622
participant code.
Telephone playback will be available for seven days beginning approximately two
hours after the conclusion of the meeting by dialing (888) 286-8010, or (617)
801-6888 for international callers, and referencing 81990309 participant code.
For further information, contact:
Investor Relations: (972) 431.5500
jcpinvestorrelations@jcpenney.com
Public Relations: (972) 431.3400
jcpcorpcomm@jcpenney.com
Corporate Website
ir.jcpenney.com
About jcpenney:
More than a century ago, James Cash Penney founded his company on the principle
of the Golden Rule: treat others the way you'd like to be treated - Fair and
Square. His legacy continues to this day, as J. C. Penney Company, Inc. (NYSE:
JCP) boldly transforms the retail experience across 1,100 stores and jcp.com to
become America's favorite store. Focused on making the customer experience
better every day, jcpenney is dreaming up new ways to make customers love
shopping again. On every visit, customers will discover great prices every day
in a unique Shops environment that features exceptionally curated merchandise, a
dynamic presentation and unmatched customer service. For more information, visit
us at jcp.com.
This release may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements, which reflect the Company's current views of future events and
financial performance, involve known and unknown risks and uncertainties 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 spending patterns, credit availability and debt levels, changes
in store traffic trends, the cost of goods, trade restrictions, the impact of
changes designed to transform our business, customer acceptance of our new
strategies, the impact of cost reduction initiatives, 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, 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, a
systems failure and/or security breach that results in the theft, transfer or
unauthorized disclosure of customer, employee or Company information and legal
and regulatory proceedings. Please refer to the Company's most recent Form 10-K
and subsequent filings for a further discussion of risks and uncertainties.
Investors should take such risks into account when making investment decisions.
We do not undertake to update these forward-looking statements as of any future
date.
# # #
SUMMARY OF OPERATING RESULTS
(Unaudited)
J. C. PENNEY COMPANY, INC.
Three months ended ((1)) Twelve months ended ((1))
------------------------------ -----------------------------
Jan. Jan.
Feb. 2, 28, % Inc. Feb. 2, 28, % Inc.
2013 2012 (Dec.) 2013 2012 (Dec.)
STATEMENTS OF
OPERATIONS:
Total net sales $ 3,884 $ 5,425 (28.4)% $ 12,985 $ 17,260 (24.8)%
Cost of goods sold 2,960 3,788 (21.9)% 8,919 11,042 (19.2)%
--------- -------- --------- --------
Gross margin 924 1,637 (43.6)% 4,066 6,218 (34.6)%
Operating
expenses/(income):
Selling, general
and
administrative
(SG&A) 1,209 1,343 (10.0)% 4,506 5,109
(11.8)%
Primary pension
plan 176 22 100+% 315 87 100+%
Supplemental
pension plans 10 11 (9.1)% 38 34 11.8%
--------- -------- --------- --------
Total pension 186 33 100+% 353 121 100+%
Depreciation and
amortization 157 135 16.3% 543 518 4.8%
Real estate and
other, net 88 45 95.6% (324) 21 (100+)%
Restructuring and
management
transition 29 154 (81.2)% 298 451 (33.9)%
--------- -------- --------- --------
Total operating
expenses 1,669 1,710 (2.4)% 5,376 6,220 (13.6)%
--------- -------- --------- --------
Operating
income/(loss) (745) (73) (100+)% (1,310) (2) (100+)%
Net interest
expense 57 57 0.0% 226 227 (0.4)%
--------- -------- --------- --------
Income/(loss)
before income taxes (802) (130) (100+)% (1,536) (229) (100+)%
Income tax
expense/(benefit) (250) (43) (100+)% (551) (77) (100+)%
--------- -------- --------- --------
Net income/(loss) $ (552) $ (87) (100+)% $ (985) $ (152) (100+)%
--------- -------- --------- --------
Earnings/(loss) per
share - basic and
diluted $ (2.51) $ (0.41) (100+)% $$ (4.49) $ (0.70) (100+)%
FINANCIAL DATA:
Comparable store
sales
increase/(decrease) (31.7)% (2) (1.8)% (25.2)% (2) 0.2%
Total net sales
increase/(decrease) (28.4)% (3) (4.9)% (24.8)% (3) (2.8)%
Ratios as a
percentage of
sales:
Gross margin 23.8% 30.2% 31.3% 36.0%
SG&A expenses 31.1% 24.8% 34.7% 29.6%
Total operating
expenses 43.0% 31.5% 41.4% 36.0%
Operating
income/(loss) (19.2)% (1.3)% (10.1)% (0.0)%
Effective income
tax rate 31.2% 33.1% 35.9% 33.6%
COMMON SHARES DATA:
Outstanding shares
at end of period 219.3 215.9 219.3 215.9
Weighted average
shares outstanding
(basic and diluted) 219.5 213.7 219.2 217.4
(1) Three months ended February 2, 2013 and January 28, 2012 contained 14 weeks
and 13 weeks, respectively, and the twelve months ended February 2, 2013 and
January 28, 2012 contained 53 and 52 weeks, respectively.
(2) Comparable store sales are calculated on a 13-week and 52-week basis and
include sales from new and relocated stores that have been opened for 12
consecutive full fiscal months and Internet sales. Stores closed for an extended
period are not included in the comparable stores sales calculation, while stores
remodeled and minor expansions not requiring store closures remain in the
calculation.
(3) Excluding the 53rd week, total net sales decreased 31.4.% and 25.7% for the
three months and twelve months ended February 2, 2013, respectively.
SUMMARY BALANCE SHEETS
(Unaudited)
(Amounts in millions)
Feb. 2, Jan. 28,
2013 2012
SUMMARY BALANCE SHEETS:
Current assets
Cash in banks and in transit $ 121 $ 175
Cash short-term investments 809 1,332
--------- ---------
Cash and cash equivalents 930 1,507
Merchandise inventory 2,341 2,916
Income tax receivable 57 168
Deferred income taxes 106 245
Prepaid expenses and other 249 245
--------- ---------
Total current assets 3,683 5,081
Property and equipment, net 5,353 5,176
Other assets 745 1,167
--------- ---------
Total assets $ 9,781 $ 11,424
--------- ---------
Liabilities and stockholders' equity
Current liabilities
Merchandise accounts payable $ 1,162 $ 1,022
Other accounts payable and accrued expenses 1,395 1,503
Current maturities of capital leases and note
payable 26 1
Current maturities of long-term debt - 230
--------- ---------
Total current liabilities 2,583 2,756
Long-term capital leases and note payable 88 3
Long-term debt 2,868 2,868
Deferred taxes 388 888
Other liabilities 683 899
--------- ---------
Total liabilities 6,610 7,414
Stockholders' equity 3,171 4,010
--------- ---------
Total liabilities and stockholders' equity $ 9,781 $ 11,424
--------- ---------
SUMMARY STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
Twelve months
Three months ended ended
--------------------- -------------------
Feb. 2, Jan. 28, Feb. 2, Jan. 28,
2013 2012 2013 2012
STATEMENTS OF CASH FLOWS:
Cash flows from operating
activities:
Net income/(loss) $ (552) $ (87) $ (985) $ (152)
Adjustments to reconcile
net income/(loss) to net cash
provided by/(used in)
operating activities:
Restructuring and management
transition 19 84 121 314
Asset impairments and other
charges 107 59 117 67
Net gain on sale of
operating assets - (6) - (6)
Net gain on sale or
redemption of non-operating
assets - - (397) -
Depreciation and
amortization 157 135 543 518
Benefit plans 162 9 272 55
Stock-based compensation 12 13 50 46
Excess tax benefits from
stock-based compensation 5 (5) (12) (10)
Deferred taxes (243) (57) (467) (153)
Change in cash from:
Inventory 1,021 1,460 575 297
Prepaid expenses and other
assets 36 19 (5) (67)
Merchandise accounts payable (246) (809) 140 (111)
Current income taxes 9 19 117 (15)
Accrued expenses and other 158 119 (79) 37
--------- ---------- --------- ---------
Net cash provided by/(used
in) operating activities 645 953 (10) 820
--------- ---------- --------- ---------
Cash flows from investing
activities:
Capital expenditures (230) (165) (810) (634)
Proceeds from the sale or
redemption of non-operating
assets 1 - 526 -
Acquisition - (268) (9) (268)
Proceeds from sale of
operating assets - 14 - 15
Cost investment, net - (36) - (36)
Proceeds from joint venture
distribution - - - 53
--------- ---------- --------- ---------
Net cash provided by/(used
in) investing activities (229) (455) (293) (870)
--------- ---------- --------- ---------
Cash flows from financing
activities:
Payment of long-term debt - - (230) -
Payment of capital leases
and note payable (7) - (20)
Financing costs - (5) (4) (20)
Stock repurchase program - - - (900)
Proceeds from issuance of
stock warrant - - - 50
Proceeds from stock options
exercised 1 6 71 18
Other changes in
stockholders' equity (5) (34) (5) (35)
Dividends paid - (43) (86) (178)
--------- ---------- --------- ---------
Net cash provided by/(used
in) financing activities (11) (76) (274) (1,065)
--------- ---------- --------- ---------
Net increase/(decrease) in
cash and cash equivalents 405 422 (577) (1,115)
Cash and cash equivalents at
beginning of period 525 1,085 1,507 2,622
--------- ---------- --------- ---------
Cash and cash equivalents at
end of period $ 930 $ 1,507 $ 930 $ 1,507
--------- ---------- --------- ---------
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. 2, Jan. 28, Feb. 2, Jan. 28,
2013 2012 2013 2012
------------ ------------ ------------ -----------
Net income/(loss) $ (552) $ (87) $ (985) $ (152)
Earnings/(loss) per share
- diluted $ (2.51) $ (0.41) $ (4.49) $ (0.70)
Markdowns -
inventory strategy
Add: alignment, net
of tax of $-, $-
, $60 and $- - - 95 -
Restructuring and
management
transition
charges, net of
tax of $12, $35,
$116 and $145 17 119 182 306
Primary pension
plan expense, net
of tax of $68,
$9, $122, $34 108 13 193 53
Net gain on sale or
redemption of non-
Less: operating
assets, net of
tax of $-, $-,
$146 and $- - - (251) -
------------ ---------- ---------- ----------
Adjusted net income/loss
(non-GAAP) $ (427) $ 45 (766) $ 207
---------- ---------- ---------- ----------
Adjusted earnings/(loss)
per share - diluted (non-
GAAP) $ (1.95) $ 0.21 (3.49) $ 0.94
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Amounts in millions except per share data)
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 and dividends paid, 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, 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.
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:
Three months ended Twelve months ended
----------------------- ----------------------
Feb. 2, Jan. 28, Feb. 2, Jan. 28,
2013 2012 2013 2012
----------- ----------- ----------- ----------
Net cash provided by/(used
in) operating activities $ 645 $ 953 $ (10) $ 820
Proceeds from sale of
Add: operating assets - 14 - 15
Less: Capital expenditures (230) (165) (810) (634)
Dividends paid - (43) (86) (178)
--------- --------- --------- ---------
Free cash flow (non-GAAP) $ 415 $ 759 $ (906) $ 23
--------- --------- --------- ---------
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(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: J. C. Penney Company, Inc. via Thomson Reuters ONE
[HUG#1681754]
