JCPenney 2002 Annual Report Download - page 35

J. C. Penney Company, Inc. 2002 annual report32
Notes to the Consolidated Financial Statements
A summary of stock option activity follows:
(shares in thousands, price is weighted average exercise price)
Outstanding Exercisable
Shares Price Shares Price
January 29, 2000 11,832 $ 43 6,913 $ 48
Granted 7,294(1) 16
Canceled/forfeited (959) 35
January 27, 2001 18,167 $ 33 6,592 $ 48
Granted 3,402 16
Exercised (56) 17
Canceled/forfeited (2,823) 29
January 26, 2002 18,690 $ 30 5,840 $ 48
Granted 4,993 20
Exercised (610) 15
Canceled/forfeited (806) 38
January 25, 2003 22,267 $ 28 14,551 $ 33
(1) Includes 3.5 million options granted to the Company’s chairman pursuant to his
2000 employment agreement at an exercise price of $16.06, while the stock price on
the grant date was $13.63. These options vest over a five-year period.
The following table summarizes stock options outstanding at
January 25, 2003:
(shares in thousands, price is weighted average)
Outstanding Exercisable
Exercise Remaining
price range Shares Price term (years) Shares Price
$9.32-$14.66 2,764 $14.26 7.89 2,457 $14.54
$14.87-$18.29 5,970 16.07 7.35 3,654 16.03
$18.44-$24.80 4,974 20.32 9.05 87 20.57
$25.31-$36.06 4,051 35.31 5.61 3,905 35.59
$36.19-$48.50 2,701 46.14 2.73 2,641 46.18
$50.91-$71.28 1,807 66.60 3.35 1,807 66.60
Tot al 22,267 $28.05 6.62 14,551 $32.82
The Company follows the intrinsic value expense recognition
provisions of APB 25 as permitted by SFAS No. 123. As a result,
no compensation expense is recognized for stock options. As
required by SFAS No. 123, the Company estimates the pro forma
effect of recording the estimated Black-Scholes fair value of stock
options as expense over the vesting period (see Note 1).
Restricted Stock
The Company awarded approximately 227,000, 133,000 and
1.5 million shares of restricted stock with weighted-average grant-
date fair values per share of $20.09, $15.94 and $13.60, respectively,
in 2002, 2001 and 2000, respectively. Total expense recorded for
stock-based employee compensation awards was $5.1 million,
$7.5 million and $6.1 million in 2002, 2001 and 2000, respectively.
13 INTEREST EXPENSE, NET
($ in millions) 2002 2001 2000
Short-term debt $4$—$13
Long-term debt 403 426 464
Short-term investments (41) (50) (45)
Other, net 22 10 (5)
Tot al $ 388 $ 386 $ 427
14 LEASES
The Company conducts the major part of its operations from
leased premises that include retail stores, catalog fulfillment cen-
ters, warehouses, offices and other facilities. Almost all leases will
expire during the next 20 years; however, most leases will be
renewed or replaced by leases on other premises. Rent expense
for real property operating leases totaled $734 million in 2002,
$705 million in 2001 and $711 million in 2000, including contin-
gent rent, based on sales, of $59 million, $58 million and $59 mil-
lion for the three years, respectively.
JCP also leases data processing equipment and other personal
property under operating leases of primarily three to five years.
Rent expense for personal property leases was $147 million in
2002, $128 million in 2001 and $152 million in 2000.
Future minimum lease payments for non-cancelable operating
and capital leases, net of executory costs, principally real estate
taxes, maintenance and insurance, and subleases, as of January 25,
2003, were:
($ in millions) Operating Capital
2003 $ 671 $ 17
2004 611 16
2005 544 12
2006 494 4
2007 455 2
Thereafter 4,128 —
Total minimum lease payments $ 6,903 $ 51
Present value $ 3,581 $ 43
Weighted average interest rate 9.9% 9.2%