J. C. Penney Company, Inc. (NYSE: JCP) today announced financial
results for its fiscal quarter and full year period ended Feb. 1,
2020:
Fourth Quarter:
- Comparable store sales decreased 7.0%
- Adjusted comparable store sales decreased 4.7%
- Cost of goods sold, as a rate of net sales, improved
approximately 200 basis points over prior year
- Net income of $0.08 per share; Adjusted net income of $0.13 per
share
Full Year:
- Comparable store sales decreased 7.7%
- Adjusted comparable store sales decreased 5.6%
- Cost of goods sold, as a rate of net sales, improved
approximately 210 basis points over prior year
- Adjusted EBITDA of $583 million, 2.6% growth over prior
year
- Free Cash Flow of $145 million
- Inventory declined 11.1% to $2.17 billion
- Strong liquidity position of approximately $1.8 billion at
year-end
“In Fiscal 2019, we met or exceeded all five
financial guidance metrics for the year, and we delivered our third
consecutive quarter of meaningful gross-margin improvement in the
fourth quarter,” said Jill Soltau, chief executive officer of
JCPenney. “I am encouraged by our progress, especially in our
women’s apparel businesses. We knew it would take time to restore
discipline and return growth to JCPenney. As we move into Fiscal
2020, we remain focused on the key tenets of retail as we continue
rebuilding the Company and implementing our Plan for Renewal.”
Fourth Quarter 2019 Results
The following financial results reflect the 13
weeks ended Feb. 1, 2020 for fiscal 2019 and Feb. 2, 2019 for
fiscal 2018.
Total net sales for the 2019 fourth quarter
decreased 7.7% to $3.38 billion compared to $3.67 billion for the
fourth quarter last year. Comparable store sales decreased 7.0% for
the quarter. Adjusted comparable store sales, which exclude the
impact of the Company’s exit from major appliance and in-store
furniture categories, decreased 4.7% for the quarter. Credit income
was $109 million for the fourth quarter this year compared to $121
million in the fourth quarter last year.
Cost of goods sold, which excludes depreciation
and amortization, was $2.26 billion, or 66.7% of net sales, in the
fourth quarter this year compared to $2.52 billion, or 68.7% of net
sales, in the same period last year. The 200-basis point
improvement as a rate of net sales was primarily driven by improved
enterprise clearance selling margins from lower permanent
markdowns, the exit from the major appliance and in-store furniture
categories earlier this year and improved shrink results.
SG&A expenses for the quarter were $1.01
billion, or 29.7% of net sales, this year compared to $1.01
billion, or 27.5% of net sales, last year. While SG&A dollars
were flat to last year, lower advertising and store controllable
expenses helped offset higher incentive compensation.
Additionally, in connection with the adoption of the new Lease
Accounting Standard at the beginning of fiscal 2019, SG&A
expenses in the fourth quarter this year included approximately $5
million related to the Company’s home office lease. Last year, the
home office lease related expense was recorded as elements of
depreciation and amortization and interest expense.
Net income for the fourth quarter was $27
million, or $0.08 per share, compared to net income of $75 million,
or $0.24 per share, in the same period last year.
Adjusted net income was $43 million, or $0.13
per share, this year compared to adjusted net income of $57
million, or $0.18 per share, last year.
A reconciliation of GAAP to non-GAAP financial
measures is included in the schedules accompanying the consolidated
financial statements in this release.
Full Year 2019 Results
The following financial results reflect the 52
weeks ended Feb. 1, 2020 for fiscal 2019 and Feb. 2, 2019 for
fiscal 2018.
For fiscal 2019, total net sales decreased 8.1%
to $10.72 billion compared to $11.66 billion for fiscal 2018.
Comparable store sales decreased 7.7% for the year. Adjusted
comparable store sales, which exclude the impact of the Company’s
exit from major appliance and in-store furniture categories,
decreased 5.6% for the year. Credit income was $451 million this
year compared to $355 million last year.
Cost of goods sold, which excludes depreciation
and amortization, was $7.01 billion, or 65.4% of net sales, this
year compared to $7.87 billion, or 67.5% of net sales, last year.
The 210-basis point improvement as a rate of net sales was
primarily driven by an increase in both store and online selling
margins, improved shrink results and the exit from the major
appliance and in-store furniture categories earlier this year.
SG&A expenses for the year were $3.59
billion, or 33.5% of net sales, this year compared to $3.60
billion, or 30.8% of net sales, last year. The decrease in SG&A
dollars this year was primarily due to lower advertising and store
controllable expenses, which were offset by slightly higher
incentive compensation. Last year, the Company recorded an
approximate $70 million benefit in SG&A expenses primarily
related to the buyout of two store leasehold interests.
Additionally, in connection with the adoption of the new Lease
Accounting Standard at the beginning of fiscal 2019, SG&A
expenses this year included approximately $20 million related to
the Company’s home office lease. Last year, the home office lease
related expense was recorded as elements of depreciation and
amortization and interest expense.
For the year, the Company’s net loss was $268
million, or ($0.84) per share, compared to a net loss of $255
million, or ($0.81) per share, last year.
Adjusted net loss improved to $257 million, or
($0.80) per share, this year compared to an adjusted net loss of
$296 million, or ($0.94) per share, last year.
Cash and cash equivalents at the end of fiscal
2019 were $386 million. Free cash flow was $145 million for fiscal
2019, an increase of $34 million compared to the same period last
year.
Inventory at the end of the fiscal year was
$2.17 billion, down 11.1% compared to the end of fiscal 2018 and
down 22.7% when compared to the end of the fiscal 2017.
The Company ended fiscal 2019 with liquidity of
approximately $1.8 billion.
2020 Store Closures Update
The Company expects to close at least six store locations in
fiscal 2020. The Company will share more details of future
real estate plans during its Analyst Day on April 7, 2020.
2020 Financial Guidance
The Company has provided financial guidance for full year fiscal
2020, which does not include any potential impact from the current
coronavirus (COVID-19) situation, as follows:
- Comparable store sales: expected to be in a range of (3.5)% to
(4.5)%;
- Cost of goods sold, as a rate of net sales: expected to improve
100 to 130 basis points compared to last year;
- Adjusted EBITDA1 dollars: expected to increase 5% to 10%
compared to last year; and
- Free Cash Flow1: expected to be positive
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 now.
2019 Fourth Quarter and Full Year
Earnings Conference Call DetailsAt 8:30 a.m. ET today, the
Company will webcast a live conference call conducted by chief
executive officer Jill Soltau and chief financial officer Bill
Wafford. Management will discuss the Company's performance. To
access the webcast and related slide presentation, visit the
Company’s investor relations website at
www.jcpennney.com/investors. Analysts and investors may call
in on (844) 243-9275, or (225) 283-0394 for international callers,
and reference conference ID 3526039.
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 3526039 conference ID.
Investors and others should note that the
Company currently announces material information using SEC filings,
press releases, public conference calls and webcasts. In the
future, the Company will continue to use these channels to
distribute material information about the Company and may also
utilize its 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 is posted on its
website or on social media channels could be deemed material;
therefore, the Company encourages investors, the media, our
customers, business partners and others interested in the Company
to review the information posted on its 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
the Company 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 retailers, combines an expansive footprint of approximately
850 stores across the United States and Puerto Rico with a powerful
e-commerce site, jcp.com, to deliver style and value for all
hard-working American families. At every touchpoint, customers will
discover stylish merchandise at incredible value from an extensive
portfolio of private, exclusive and national brands. Reinforcing
this shopping experience is the customer service and warrior spirit
of approximately 90,000 associates across the globe, all driving
toward the Company's mission to help customers find what they love
for less time, money and effort. For additional information, please
visit the website.
Forward-Looking StatementsThis
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
liquidity. 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
non-core 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, the Company’s ability to access the debt or
equity markets on favorable terms or at all, the Company's ability
to comply with the continued listing criteria of the NYSE, risks
arising from the potential suspension of trading of the Company's
common stock on that exchange, and the impact of natural disasters,
public health crises, or other catastrophic events on our financial
results. 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: |
February 1, 2020 |
|
February 2, 2019 |
|
% Inc. (Dec.) |
|
February 1, 2020 |
|
February 2, 2019 |
|
% Inc. (Dec.) |
|
Total net sales |
$ |
3,384 |
|
|
$ |
3,665 |
|
|
(7.7 |
)% |
|
$ |
10,716 |
|
|
$ |
11,664 |
|
|
(8.1 |
)% |
|
Credit income and other |
109 |
|
|
121 |
|
|
(9.9 |
)% |
|
451 |
|
|
355 |
|
|
27.0 |
% |
|
Total revenues |
3,493 |
|
|
3,786 |
|
|
(7.7 |
)% |
|
11,167 |
|
|
12,019 |
|
|
(7.1 |
)% |
|
Costs and
expenses/(income): |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of depreciation and amortization
shown separately below) |
2,257 |
|
|
2,519 |
|
|
(10.4 |
)% |
|
7,013 |
|
|
7,870 |
|
|
(10.9 |
)% |
|
Selling, general and administrative (SG&A) |
1,005 |
|
|
1,007 |
|
|
(0.2 |
)% |
|
3,585 |
|
|
3,596 |
|
|
(0.3 |
)% |
|
Depreciation and amortization |
129 |
|
|
137 |
|
|
(5.8 |
)% |
|
544 |
|
|
556 |
|
|
(2.2 |
)% |
|
Real estate and other, net |
(12 |
) |
|
(6 |
) |
|
100.0 |
% + |
|
(15 |
) |
|
(19 |
) |
|
(21.1 |
)% |
|
Restructuring and management transition |
12 |
|
|
2 |
|
|
100.0 |
% + |
|
48 |
|
|
22 |
|
|
100.0 |
% + |
|
Total costs and expenses |
3,391 |
|
|
3,659 |
|
|
(7.3 |
)% |
|
11,175 |
|
|
12,025 |
|
|
(7.1 |
)% |
|
Operating income/(loss) |
102 |
|
|
127 |
|
|
(19.7 |
)% |
|
(8 |
) |
|
(6 |
) |
|
(33.3 |
)% |
|
Other components of net periodic pension cost/(income) |
4 |
|
|
(14 |
) |
|
(100.0 |
)% + |
|
(35 |
) |
|
(71 |
) |
|
(50.7 |
)% |
|
(Gain)/loss on extinguishment of debt |
— |
|
|
— |
|
|
— |
% |
|
(1 |
) |
|
23 |
|
|
100.0 |
% + |
|
Net interest
expense |
73 |
|
|
78 |
|
|
(6.4 |
)% |
|
293 |
|
|
313 |
|
|
(6.4 |
)% |
|
Income/(loss) before income taxes |
25 |
|
|
63 |
|
|
(60.3 |
)% |
|
(265 |
) |
|
(271 |
) |
|
2.2 |
% |
|
Income tax
expense/(benefit) |
(2 |
) |
|
(12 |
) |
|
(83.3 |
)% |
|
3 |
|
|
(16 |
) |
|
(100.0 |
)% + |
|
Net income/(loss) |
$ |
27 |
|
|
$ |
75 |
|
|
(64.0 |
)% |
|
$ |
(268 |
) |
|
$ |
(255 |
) |
|
(5.1 |
)% |
|
Earnings/(loss) per share -
basic |
$ |
0.08 |
|
|
$ |
0.24 |
|
|
(66.7 |
)% |
|
$ |
(0.84 |
) |
|
$ |
(0.81 |
) |
|
(3.7 |
)% |
|
Earnings/(loss) per share -
diluted |
$ |
0.08 |
|
|
$ |
0.24 |
|
|
(66.7 |
)% |
|
$ |
(0.84 |
) |
|
$ |
(0.81 |
) |
|
(3.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Comparable store sales
increase/(decrease) (1) |
(7.0 |
)% |
|
(6.0 |
)% |
|
|
|
(7.7 |
)% |
|
(3.1 |
)% |
|
|
|
Ratios as a percentage of
total net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
66.7 |
% |
|
68.7 |
% |
|
|
|
65.4 |
% |
|
67.5 |
% |
|
|
|
SG&A expenses |
29.7 |
% |
|
27.5 |
% |
|
|
|
33.5 |
% |
|
30.8 |
% |
|
|
|
Operating income/(loss) |
3.0 |
% |
|
3.5 |
% |
|
|
|
(0.1 |
)% |
|
(0.1 |
)% |
|
|
|
Effective income tax rate |
(8.0 |
)% |
|
(19.0 |
)% |
|
|
|
1.1 |
% |
|
(5.9 |
)% |
|
|
|
Common Shares
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding shares
at end of period |
320.5 |
|
|
316.1 |
|
|
|
|
320.5 |
|
|
316.1 |
|
|
|
|
Weighted average shares -
basic |
322.8 |
|
|
316.9 |
|
|
|
|
320.2 |
|
|
315.7 |
|
|
|
|
Weighted average shares -
diluted |
323.7 |
|
|
317.1 |
|
|
|
|
320.2 |
|
|
315.7 |
|
|
|
|
(1) Comparable store sales are presented
on a 52-week basis and include sales from all stores, including
sales from services, that have been open for 12 consecutive full
fiscal months and Internet sales. 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. Our definition
and calculation of comparable store sales may differ from other
companies in the retail industry.
SUMMARY BALANCE
SHEETS(Unaudited)(Amounts in millions)
Summary Balance
Sheets: |
February 1, 2020 |
|
February 2, 2019 |
Current assets: |
|
|
|
Cash in banks and in transit |
$ |
108 |
|
|
$ |
109 |
|
Cash short-term investments |
278 |
|
|
224 |
|
Cash and cash equivalents |
386 |
|
|
333 |
|
Merchandise inventory |
2,166 |
|
|
2,437 |
|
Prepaid expenses and other |
174 |
|
|
189 |
|
Total current assets |
2,726 |
|
|
2,959 |
|
Property and equipment,
net |
3,488 |
|
|
3,938 |
|
Operating lease assets |
998 |
|
|
— |
|
Prepaid pension |
120 |
|
|
147 |
|
Other assets |
657 |
|
|
677 |
|
Total
assets |
$ |
7,989 |
|
|
$ |
7,721 |
|
|
|
|
|
Liabilities and
stockholders' equity |
|
|
|
Current liabilities: |
|
|
|
Merchandise accounts payable |
$ |
786 |
|
|
$ |
847 |
|
Other accounts payable and accrued expenses |
931 |
|
|
995 |
|
Current operating lease liabilities |
67 |
|
|
— |
|
Current maturities of finance leases and note payable |
1 |
|
|
8 |
|
Current maturities of long-term debt |
147 |
|
|
92 |
|
Total current liabilities |
1,932 |
|
|
1,942 |
|
Noncurrent operating lease
liabilities |
1,108 |
|
|
— |
|
Long-term finance leases and
note payable |
— |
|
|
204 |
|
Long-term debt |
3,574 |
|
|
3,716 |
|
Deferred taxes |
116 |
|
|
131 |
|
Other liabilities |
430 |
|
|
558 |
|
Total
liabilities |
7,160 |
|
|
6,551 |
|
Stockholders'
equity |
829 |
|
|
1,170 |
|
Total liabilities and
stockholders' equity |
$ |
7,989 |
|
|
$ |
7,721 |
|
SUMMARY STATEMENTS OF CASH
FLOWS(Unaudited)(Amounts in millions)
|
Twelve
Months Ended |
Statements of Cash
Flows: |
February 1, 2020 |
|
February 2, 2019 |
Cash flows from
operating activities: |
|
|
|
Net income/(loss) |
$ |
(268 |
) |
|
$ |
(255 |
) |
Adjustments to reconcile net income/(loss) to net cash provided
by/(used in) operating activities: |
|
|
|
Restructuring and management transition |
23 |
|
|
(3 |
) |
Asset impairments and other charges |
— |
|
|
56 |
|
Net gain on sale of non-operating assets |
(1 |
) |
|
— |
|
Net gain on sale of operating assets |
(8 |
) |
|
(67 |
) |
(Gain)/loss on extinguishment of debt |
(1 |
) |
|
23 |
|
Depreciation and amortization |
544 |
|
|
556 |
|
Benefit plans |
(37 |
) |
|
(65 |
) |
Stock-based compensation |
11 |
|
|
10 |
|
Other comprehensive income tax benefits |
— |
|
|
(11 |
) |
Deferred taxes |
(6 |
) |
|
(13 |
) |
Change in cash from: |
|
|
|
Inventory |
271 |
|
|
366 |
|
Prepaid expenses and other assets |
(9 |
) |
|
1 |
|
Merchandise accounts payable |
(61 |
) |
|
(126 |
) |
Accrued expenses and other (1) |
(30 |
) |
|
(113 |
) |
Net cash provided by/(used in) operating
activities |
428 |
|
|
359 |
|
Cash flows from
investing activities: |
|
|
|
Capital expenditures |
(309 |
) |
|
(392 |
) |
Proceeds from sale of non-operating assets |
1 |
|
|
— |
|
Proceeds from sale of operating assets |
26 |
|
|
144 |
|
Joint venture return of investment |
— |
|
|
3 |
|
Insurance proceeds received for damage to property and
equipment |
6 |
|
|
1 |
|
Net cash provided by/(used in) investing
activities |
(276 |
) |
|
(244 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds from issuance of long-term debt |
— |
|
|
400 |
|
Proceeds from borrowings under the credit facility |
2,645 |
|
|
3,895 |
|
Payments of borrowings under the credit facility |
(2,645 |
) |
|
(3,895 |
) |
Premium on early retirement of long-term debt |
— |
|
|
(20 |
) |
Payments of finance leases and note payable |
(3 |
) |
|
(6 |
) |
Payments of long-term debt |
(97 |
) |
|
(607 |
) |
Financing costs |
— |
|
|
(7 |
) |
Proceeds from stock issued under stock plans |
2 |
|
|
3 |
|
Tax withholding payments for vested restricted stock |
(1 |
) |
|
(3 |
) |
Net cash provided by/(used in) financing
activities |
(99 |
) |
|
(240 |
) |
Net increase/(decrease) in
cash and cash equivalents |
53 |
|
|
(125 |
) |
Cash and cash equivalents at
beginning of period |
333 |
|
|
458 |
|
Cash and cash
equivalents at end of period |
$ |
386 |
|
|
$ |
333 |
|
(1) Includes construction allowances
collected from landlords of $10 million and $23 million for the
twelve months ended February 1, 2020 and February 2, 2019,
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, other
components of net periodic pension cost/(income), the (gain)/loss
on extinguishment of debt, 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) and the tax impact for the allocation of income
taxes to other comprehensive income items related to our pension
plans and interest rate swaps. Unlike other operating
expenses, restructuring and management transition charges, other
components of net periodic pension cost/(income), the (gain)/loss
on extinguishment of debt, the proportional share of net income
from the Home Office Land Joint Venture and the tax impact for the
allocation of income taxes to other comprehensive income items
related to our pension plans and interest rate swaps are not
directly related to our ongoing core business operations, which
consist of selling merchandise and services to consumers through
our department stores and our website at jcpenney.com.
Further, our non-GAAP adjustments are for non-operating associated
activities such as closed store impairments included in
restructuring and management transition charges and such as joint
venture earnings from the sale of excess land included in the
proportional share of net income from our Home Office Land Joint
Venture. Additionally, other components of net periodic
pension cost/(income) is determined using numerous complex
assumptions about changes in pension assets and liabilities that
are subject to factors beyond our control, such as market
volatility. We believe it is useful for investors to
understand the impact of restructuring and management transition
charges, other components of net periodic pension cost/(income),
the (gain)/loss on extinguishment of debt, the proportional share
of net income from the Home Office Land Joint Venture and the tax
impact for the allocation of income taxes to other comprehensive
income items related to our pension plans and interest swaps 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.
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 |
|
February 1, 2020 |
|
February 2, 2019 |
|
February 1, 2020 |
|
February 2, 2019 |
Net income/(loss) |
$ |
27 |
|
|
$ |
75 |
|
|
$ |
(268 |
) |
|
$ |
(255 |
) |
Add: Net interest expense |
73 |
|
|
78 |
|
|
293 |
|
|
313 |
|
Add: (Gain)/loss on
extinguishment of debt |
— |
|
|
— |
|
|
(1 |
) |
|
23 |
|
Add: Income tax
expense/(benefit) |
(2 |
) |
|
(12 |
) |
|
3 |
|
|
(16 |
) |
Add: Depreciation and
amortization |
129 |
|
|
137 |
|
|
544 |
|
|
556 |
|
Add: Restructuring and
management transition charges |
12 |
|
|
2 |
|
|
48 |
|
|
22 |
|
Add: Other components of net
periodic pension cost/(income) |
4 |
|
|
(14 |
) |
|
(35 |
) |
|
(71 |
) |
Less: Net gain on the sale of
non-operating assets |
— |
|
|
— |
|
|
(1 |
) |
|
— |
|
Less: Proportional share of
net income from joint venture |
— |
|
|
— |
|
|
— |
|
|
(4 |
) |
Adjusted EBITDA (non-GAAP) |
$ |
243 |
|
|
$ |
266 |
|
|
$ |
583 |
|
|
$ |
568 |
|
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 |
|
February 1, 2020 |
|
February 2, 2019 |
|
February 1, 2020 |
|
February 2, 2019 |
Net income/(loss) |
$ |
27 |
|
|
$ |
75 |
|
|
$ |
(268 |
) |
|
$ |
(255 |
) |
Earnings/(loss) per
share-diluted |
$ |
0.08 |
|
|
$ |
0.24 |
|
|
$ |
(0.84 |
) |
|
$ |
(0.81 |
) |
|
|
|
|
|
|
|
|
Add: Restructuring and
management transition charges(1) |
12 |
|
|
2 |
|
|
48 |
|
|
22 |
|
Add: Other components of net
periodic pension cost/(income)(1) |
4 |
|
|
(14 |
) |
|
(35 |
) |
|
(71 |
) |
Add: (Gain)/loss on
extinguishment of debt(1) |
— |
|
|
— |
|
|
(1 |
) |
|
23 |
|
Less: Net gain on the sale of
non-operating assets(1) |
— |
|
|
— |
|
|
(1 |
) |
|
— |
|
Less: Proportional share of
net income from joint venture(1) |
— |
|
|
— |
|
|
— |
|
|
(4 |
) |
Less: Tax impact resulting
from other comprehensive income allocation(2) |
— |
|
|
(6 |
) |
|
— |
|
|
(11 |
) |
Adjusted net income/(loss)
(non-GAAP) |
$ |
43 |
|
|
$ |
57 |
|
|
$ |
(257 |
) |
|
$ |
(296 |
) |
Adjusted earnings/(loss) per
share-diluted (non-GAAP) |
$ |
0.13 |
|
|
$ |
0.18 |
|
|
$ |
(0.80 |
) |
|
$ |
(0.94 |
) |
- 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)
Comparable store sales is a key performance indicator used by
numerous retailers to measure the sales growth of its underlying
operations. Comparable store sales is considered to be a GAAP
measure as the key performance indicator is measured based on GAAP
net sales. Comparable store sales that excludes the impact of
major appliance and in-store furniture categories is considered a
non-GAAP measure. Given our elimination of these categories
from our merchandise assortment, we believe that providing a
comparable store sales metric that excludes the impact of major
appliance and in-store furniture categories is useful for investors
to evaluate the impact of these changes to our sales
performance.
ADJUSTED COMPARABLE STORE SALES INCREASE/(DECREASE),
NON-GAAP FINANCIAL MEASURE:
The following table reconciles comparable store sales
increase/(decrease), the most directly comparable GAAP measure, to
adjusted comparable store sales increase/(decrease), a non-GAAP
measure.
|
Three Months Ended |
|
Twelve Months Ended |
|
February 1, 2020 |
|
February 2, 2019 |
|
February 1, 2020 |
|
February 2, 2019 |
Comparable store sales
increase/(decrease) |
(7.0 |
)% |
|
(6.0 |
)% |
|
(7.7 |
)% |
|
(3.1 |
)% |
Impact related to major
appliance and in-store furniture categories |
2.3 |
% |
|
1.5 |
% |
|
2.1 |
% |
|
0.8 |
% |
Adjusted comparable store
sales increase/(decrease) (non-GAAP) |
(4.7 |
)% |
|
(4.5 |
)% |
|
(5.6 |
)% |
|
(2.3 |
)% |
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:
|
Twelve Months Ended |
|
February 1, 2020 |
|
February 2, 2019 |
Net cash provided by/(used in)
operating activities |
$ |
428 |
|
|
$ |
359 |
|
Add: Proceeds from sale of operating assets |
26 |
|
|
144 |
|
Less: Capital expenditures |
(309 |
) |
|
(392 |
) |
Free cash flow (non-GAAP) |
$ |
145 |
|
|
$ |
111 |
|
|
|
|
|
Net cash provided by/(used in)
investing activities (1) |
$ |
(276 |
) |
|
$ |
(244 |
) |
Net cash provided by/(used in)
financing activities |
$ |
(99 |
) |
|
$ |
(240 |
) |
(1) 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.
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