JCPenney 2002 Annual Report Download - page 38

2002 annual report J. C. Penney Company, Inc. 35
Notes to the Consolidated Financial Statements
The net periodic post-retirement benefit cost follows:
Post-Retirement Benefit Cost
($ in millions) 2002 2001 2000
Service costs $3$4$3
Interest costs 16 24 26
Net amortization (16) (8) (4)
Net periodic post-
retirement benefit cost $3$20$25
A reconciliation of the benefit obligation follows:
Benefit Obligation
($ in millions) 2002 2001
Accumulated benefit obligation $ 193 $ 235
Net unrecognized losses
and prior service cost 111 80
Net medical and dental liability $ 304 $ 315
The Company’s post-retirement benefit plans were amended
in 2001 to reduce the per capita dollar amount of the benefit
costs that would be paid by the Company. Thus, changes in the
assumed or actual health care cost trend rates do not materially
affect the accumulated post-retirement benefit obligation or the
Company’s annual expense. Company-provided costs for retirees
over age 80 on January 1, 2002 do still increase by up to 5% per
year. The Company has assumed that the full 5% increase will be
granted in each future year.
Defined Contribution Plans
The Company’s Savings, Profit-Sharing and Stock Ownership Plan
is a defined contribution plan available to all eligible associates of
JCP and certain subsidiaries. Additionally, the Company has a Mirror
Plan, which is offered to certain management associates. Associates
who have completed at least 1,000 hours of service within an eligi-
bility period (generally 12 consecutive months) and have attained
age 21 are eligible to participate in the plan. Vesting of Company
contributions occurs over a five-year period. The Company con-
tributes to the plan an amount equal to 4.5% of the Company’s
available profits, which totaled $27 million and $10 million in 2002
and 2001, respectively. Additionally, discretionary matching contri-
butions of Company stock were made totaling $20 million and $48
million in 2002 and 2001, respectively. Associates have the option of
reinvesting matching contributions made in Company stock into a
variety of investment options, primarily mutual funds.
Effective January 1, 2002, Eckerd adopted a new 401(k) plan for all
eligible drugstore associates. Account balances for Eckerd associates
who were participants in the Company’s Savings, Profit Sharing and
Stock Ownership Plan were transferred to the new plan. Eckerd pro-
vides eligible drugstore associates with a guaranteed match of $1.50
for each $1.00 contributed on the first 2% of pay and a $1.00 for $1.00
match on the next 1% of pay, and Eckerd contributions vest imme-
diately. Eckerd matching contributions were $31 million in 2002.
Total Company expense for defined contribution plans for
2002, 2001 and 2000 was $81 million, $69 million and $3 million,
respectively.
16 OTHER UNALLOCATED
Other unallocated contains items that are related to corporate
initiatives or activities, which are not allocated to an operating
segment and consisted of the following:
($ in millions) 2002 2001 2000
Asset impairments,
PVOL and other
unit closing costs $ 105 $ 63 $ 488
Centralized merchandising
process (ACT) costs —36 55
Gains from sale of real estate
partnership interests —(57) —
Real estate activities (41) (31) (42)
Third party fulfillment losses 10 19 —
Eckerd receivables financing 45—
Other 15 11 14
Tot al $93$ 46 $ 515
The Company recorded charges of $105 million in 2002 related
primarily to asset impairments and PVOL for certain department
stores in the United States and Mexico and certain catalog and
other facilities. The impairment charges resulted from the
Company’s ongoing process to evaluate the productivity of its
asset base.
The Company recorded charges of $63 million in 2001, compris-
ing asset impairments and PVOL, and included $21 million of
restructuring charges that principally represented adjustments to
the 2000 store closing plan and a modification to include two addi-
tional units.
In 2000, the Company recorded restructuring charges of $488
million, which included a major store closing plan (2000 plan) for
both department stores and drugstores. The major actions com-
prising the plan to close stores consisted of the identification of
stores that did not meet the Company’s profit objectives, establish-
ment of closing dates (to coincide with termination rights and/or
other trigger dates contained in leases, if applicable) and notifica-
tion of affected parties (e.g., employees, landlords and community
representatives) in accordance with the Company’s store closing
procedures. These closings were over and above normal store clo-
sures within a given year. Substantially all of the stores were leased,
and the Company is not responsible for the disposal of property,
other than fixtures, which for the most part was abandoned.
As part of the 2000 plan, including the 2001 modification, the
Company closed a total of 94 underperforming JCPenney stores
and 279 drugstores. Store closing costs included PVOL, asset