JCP Q4 2012 Financial Results (Deleted 98d92b6d9bb8ddf8dcccb933fbcf9f02)
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Transcript of JCP Q4 2012 Financial Results (Deleted 98d92b6d9bb8ddf8dcccb933fbcf9f02)
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welcome
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FINANCIALUPDATE
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$
3
.88
Bsales
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sales metrics
sales
Q1 12 Q2 12 Q3 12
comps*
traffic
conversion
$3.88B
Q4 12
(31.7%)
(17%)
(10%)
*comps for Q4 12 calculated on a 13-week basis and FY 12 calculated on a 52-week basis
$3.15B $3.02B $2.93B
(18.9%) (21.7%)
(10%)
(5%)
(12%)
(8%)
(26.1%)
(12%)
(10%)
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2
3
.8%gaap gross margin
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gross margincause of change
Q4 11 gross margin 30.2%
everyday selling margin impact 0.8%
other (1.1%)
Q4 12 gross margin 23.8%
clearance selling margin impact (1.2%)
cost concessions (0.6%)
clearance mix impact (4.3%)
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selling margin
bps
100QQ4 11
everyday % 43.7% 4
% revenue 86%
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selling margin
bps
(830)clearance % 7.7% (
% revenue 14%
QQ4 11
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selling margin
bps
(490)
QQ4 11
selling margin % 38.2% 3
bps(430)mix impact 86/14% 7
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quarterly selling margin
85%everyday
83%
Q1 12 Q2 12
77%
Q3 12
15%clearance 17% 23%
76%
Q4 12
24%
mix of business
51.6%everyday 51.2% 51.7%
(26.8%)clearance 5.9% (5.9%)
44.7%
(0.6%)
selling margin
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sg&a
$1.21B
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gross sg&a savings
$175M
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marketing ($22M)
sg&a savings
gross savings
shop labor ($6M)
net savings
technology investment ($13M)
Q4 12
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marketing ($22M)
sg&a savings
gross savings
shop labor ($6M)
net savings
technology investment ($13M)
($25M)
($18M)
($25M)
Q4 12 FY 12
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primary pension
primary pension expense $28M
lump sum settlements $148M
Q4 12
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restructuring charges
management transition $5M
other $2M
home office/store severance $4M
home office/store $18Mstore fixtures
Q4 12
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eps
gaap eps
pension $0.49
restructuring $0.08
adjusted (non-gaap) eps
Q4 12
$0.88
$0.83
FY 12
gain on sale of non-core assets $0.00
transition markdowns $0.00
($1.14)
$0.43
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BALANCESHEET
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balance sheet$ in millionsassets
1,507cash and equivalents 525
Q4 11 Q3 12
930
Q4
2,916merchandise inventory 3,362 2,34
168income tax receivable 69 57
245deferred income tax 409 106
245prepaid expenses 265 249
5,176properties 5,493 5,35
1,167other assets 767 745
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balance sheet$ in millions
$405
QQ3 12
cash and equivalents 525
assets
operating cash flow in Q4 of $645M
capex spend in Q4 of $230M
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balance sheet$ in millions
merchandise inventory
assets
(20%)
QQ4 11
2,916
reduced inventory by $575M
reduced weeks of supply and improved aging
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balance sheet$ in millions
deferred income tax
assets
($139)
QQ4 11
245
reclassification of our net operating loss tax benefits to londeferred tax liability
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balance sheet$ in millions
other assets
assets
($422)
QQ4 11
1,167
reduction due to monetization of non-core assets
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balance sheet$ in millionsassets
1,022merch accounts payables 1,408
Q4 11 Q3 12
1,16
Q4
1,503accrued expenses 1,344 1,39
1capital leases/notes payable current 22 26
230current maturities 0 0
2,868long-term debt 2,868 2,86
3capital leases/notes payable non-current 75 88
888long-term deferred tax 786 388
899other liabilities 885 683
4,010equity 3,502 3,17
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balance sheet$ in millions
14%
QQ4 11
merch accounts payables 1,022
liabilities & equity
reduction in inventory weeks of supply
realignment of vendor payment schedules of $129M
one-time deferral of select vendor payments of $85M
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balance sheet$ in millions
($500)
QQ4 11
long-term deferred tax 888
liabilities & equity
increased future benefits from net operating losses
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CASHFLOW
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depreciation 157
gaap net income (552)
cash flow from operating activities$ in millio
restructuring/management transition 19
inventory 1,021
supplier payables (246)
other working capital 211
income/deferred tax (234)
asset impairments & other charges 107
Q4 12
primary pension plan/benefit plans 162
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capital expenditures (230)
cash flow $ in millions
sale of non-core assets 1
investing
capital leases/other (11)
financing
operating
net increase in cash 405
Q4 12
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depreciation 543
gaap net income (985)
cash flow from operating activities$ in millio
restructuring/management transition 121
inventory 575
merch accounts payable 140
other working capital (46)
income/deferred tax (350)
asset impairments & other charges 117
FY 12
primary pension plan/benefit plans 272
gain on sale of non-core assets (397)
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capital expenditures (810)
cash flow $ in millions
sale of non-core assets 526
investing
payment of debt (250)
financing
operating
net decrease in cash (577)
FY 12
acquisition (9)
other (24)
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line of creditfebruary amendment
increased size by $350M to $1.85B
increased accordion feature from $250M to $400M
increased flexibility for third-party financing
no change in covenant structure
updated representations and warranties section acknowledthe business results of the first year of transformation
secured by receivables and inventory
continued support from our banking partners
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liquidity
line of cred
year-end ad
liquidity*
accordion
*does not include $0.3B of outstanding letters of credit
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reduced expenses by $671M
reduced inventory by $575M
monetized $526M of non-core assets
invested $810M of capital
reduced debt by $250M
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q&a
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thank you
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appendix
Reconciliation of Non-GAAP Financial Measures(U dit d)
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ADJUSTED OPERATING INCOME/(LOSS), NON-GAAP FINANCIAL MEASURE
Feb. 2, Jan. 28, Feb. 2, Jan. 28,2013 2012 2013 2012
Operating income/(loss) (745)$ (73)$ (1,310)$ (2)$As a percent of sales (19.2)% (1.3)% (10.1)% (0.0)%
Add: - - 155 -
charges 29 154 298 451
176 22 315 87Less:
assets - - (397) -
(540)$ 103$ (939)$ 536$
As a percent of sales (13.9)% 1.9% (7.2)% 3.1%
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)$
Add:- - 95 -
17 119 182 306
#$9, $122, $34 108 13 193 53
Less:
- - (251) -
(427)$ 45$ (766)$ 207$
Adjusted earnings/(loss) per share - diluted (non-GAAP) (1.95)$ 0.21$ (3.49)$ 0.94$
FINANCIAL MEASURES
Three months ended Twelve months ended
Markdowns - inventory strategy alignment, netof tax of $-, $-, $60 and $-
Restructuring and management transitioncharges, net of tax of $12, $35, $116 and $145
Primary pension plan expense, net of tax of $68,
Net gain on sale or redemption of non-operating
assets, net of tax of $-, $-, $146 and $-
Adjusted net income/loss (non-GAAP)
ADJUSTED NET INCOME/(LOSS) AND ADJUSTED EARNINGS/(LOSS) PER SHARE - DILUTED, NON-GAAP
(Unaudited)(Amounts in millions except per share data)
Three months ended Twelve months ended
Markdowns - inventory strategy alignment
Restructuring and management transition
Primary pension plan expense
Net gain on sale or redemption of non-operating
Adjusted operating income/(loss) (non-GAAP)
We define (1) adjusted operating income/(loss) as operating income/(loss) excluding the impact of markdowns related to the alignment of inventory with ournew strategy, restructuring and management transition charges, the non-cash impact of the primary pension plan expense and the net gain on sale orredemption of non-operating assets and (2) adjusted net income/(loss) and adjusted earnings/(loss) per share - diluted as net income/(loss) and earnings/(loss) per share - diluted, respectively, excluding the after-tax impacts of markdowns related to the alignment of inventory with our new strategy,restructuring and management transition charges, the non-cash impact of the primary pension plan expense and the net gain on sale or redemption of non-operating assets. We believe that the presentation of these non-GAAP financial measures is useful in order to better understand our financial performanceas well as facilitate the comparison of our results to the results of our peer companies. It is important to view each of these non-GAAP financial measuresin addition to, rather that as a substitute for, the GAAP measures of operating income/(loss), net income/(loss) and earnings/(loss) per share - diluted,respectively.
The following table reconciles operating income/(loss), the most directly comparable GAAP measure, to adjusted operating income/(loss), anon-GAAP financial measure:
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:
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:
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FREE CASH FLOW, NON-GAAP FINANCIAL MEASURE
Feb. 2, Jan. 28, Feb. 2,2013 2012 2013
Net cash provided by/(used in) operating activities 645$ # 953$ (10)$ Add: Proceeds from sale of operating assets - 14 -
Less: Capital expenditures (230) # (165) (810)
Dividends paid - # (43) (86)
Free cash flow (non-GAAP) 415$ # 759$ (906)$
(Unaudited)(Amounts in millions except per share data)
The following table reconciles cash flow from operating activities, the most directly comparable GAAP measure, to free cash flow, a non-GAAP fin
Three months ended Twelve mo
Reconciliation of Non-GAAP Financial Measures
Free cash flow is a key financial measure of our ability to generate additional cash from operating our business and in evaluating our financial perfoWe define free cash flow as cash flow from operating activities, less capital expenditures and dividends paid, plus the proceeds from the sale of opassets. Free cash flow is a relevant indicator of our ability to repay matur ing debt, revise our dividend policy or fund other uses of capital that we b
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 drepresent remaining cash flow available for discretionary expenditures due to the fact that the measure does not deduct payments required for debtpay-down of off-balance sheet pension debt, and other obligations or payments made for business acquisitions. Therefore, it is important to view freflow 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 is a key financial measure of our ability to generate additional cash from operating our business and in evaluating our financial perfoWe define free cash flow as cash flow from operating activities, less capital expenditures and dividends paid, plus the proceeds from the sale of opassets. Free cash flow is a relevant indicator of our ability to repay matur ing debt, revise our dividend policy or fund other uses of capital that we b
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 drepresent remaining cash flow available for discretionary expenditures due to the fact that the measure does not deduct payments required for debtpay-down of off-balance sheet pension debt, and other obligations or payments made for business acquisitions. Therefore, it is important to view freflow in addition to, rather than as a substitute for, our entire statement of cash flows and those measures prepared in accordance with GAAP.
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