JCPenney 2004 Annual Report Download - page 38

J.C. PENNEY COMPANY, INC.2 004 ANNUAL REPORT
Notes to the Consolidated Financial Statements
36
Series B Convertible Preferred Stock Redemption
On August 26, 2004, the Company redeemed, through conver-
sion to common stock, all of its outstanding shares of Series B ESOP
Convertible Preferred Stock (Preferred Stock), all of which were held
by the Company’s Savings, Profit-Sharing and Stock Ownership
Plan, a 401(k) savings plan (Savings Plan). Each holder of Preferred
Stock received 20 equivalent shares of JCPenney common stock for
each one share of Preferred Stock in their Savings Plan account in
accordance with the original terms of the Preferred Stock. Preferred
Stock shares, which were included in the diluted earnings/(loss) per
share calculation as appropriate, were converted into approximately
nine million common stock shares.
Common Stock Repurchases
The Company is executing a common stock repurchase program
of up to $3.0 billion, including the repurchase of up to $650 million
of common stock that had been contingent upon the now complet-
ed conversion of JCP’s 5.0% Convertible Subordinated Notes Due
2008. Share repurchases have been and will continue to be made
in open-market transactions, subject to market conditions, legal
requirements and other factors. The Company repurchased and
retired 50.1 million shares of common stock during 2004 at a cost of
approximately $2.0 billion. This represents approximately two-thirds
of the total planned common stock repurchases under the 2004
Capital Structure Repositioning Program. As of January 29, 2005,
approximately $1.0 billion remained authorized for share repur-
chases.
Common Stock Outstanding
During 2004, the number of shares of common stock changed as
follows, primarily as a result of the ongoing capital structure repo-
sitioning program:
Outstanding
(in millions) Common Shares
Balance as of January 31, 2004 274
Repurchases of common stock (50)
Conversion of $650 million of convertible
debt at $28.50 per share 23
Redemption of preferred stock 9
Exercise of stock options 13
Other 2
Balance as of January 29, 2005 271
4EARNINGS PER SHARE
Income from continuing operations and shares used to compute
earnings per share from continuing operations, basic and diluted,
are reconciled below:
($ in millions, except EPS) 2004 2003 2002
Earnings:
Income from continuing
operations $ 667 $ 364 $ 285
Less: preferred stock dividends,
net of tax 12 25 27
Income from continuing
operations, basic $ 655 $ 339 $ 258
Adjustments for assumed
dilution:
Interest on 5% convertible
debt, net of tax 17 22 22
Preferred stock dividends,
net of tax 12 –– ––
Income from continuing
operations, diluted $ 684 $ 361 $ 280
Shares:
Average common shares
outstanding (basic shares) 279 272 267
Adjustments for assumed dilution:
Stock options and
restricted stock units 523
Shares from convertible debt 17 23 23
Shares from preferred stock 6–– ––
Average shares assuming
dilution (diluted shares) 307 297 293
EPS from continuing
operations:
Basic $ 2.35 $ 1.25 $ 0.96
Diluted $ 2.23 $ 1.21 $ 0.95
The following average potential shares of common stock were
excluded from the diluted EPS calculations because their effect
would be anti-dilutive:
(shares in millions) 2004 2003 2002
Stock options(1) 389
Preferred stock –– 11 11
Total anti-dilutive
potential shares 3 19 20
(1) Exercise prices per share for the excluded stock options ranged from $37 to $71, $20 to $71 and $21
to $71 for 2004, 2003 and 2002, respectively.
5SUPPLEMENTAL CASH FLOW INFORMATION
($ in millions) 2004 2003 2002
Total interest paid $ 405 $ 420 $ 422
Less: interest paid attributableto
discontinued operations 95 159 158
Interest paid by continuing
operations $ 310 $ 261 $ 264
Interest received $ 57 $ 29 $ 40
Income taxes paid $ 1,000 $ 91 $ 60
Less: income taxes paid/
(received) attributable to
discontinued operations 822 41 (76)
Income taxes paid by
continuing operations $ 178 $ 50 $ 136