(numbers in millions)Statement <strong>of</strong> Cash Flows 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Net income (loss) $371 $364 $667 $1,088 $1,153 $1,220 $1,293 $1,371 $1,453 $1,540 $1,633 $1,731 $1,834 $1,944 $2,061Loss (income) from discontinued operations - - - ($111) ($19)<strong>As</strong>set impair, PVOL & other unit closing costs $104 $35 $19 $12 $4Restructuring & other charges, net - - - - -Depreciation & amortization $667 $394 $368 $372 $389Net gains on sale <strong>of</strong> assets ($18) ($51) ($8) ($27) ($8)Real estate (gain) - - - - -Co contributions to savings & pr<strong>of</strong>its sharing $47 - - - -Benefit plans expense (income) $30 $135 $45 $49 ($51)Pension contribution ($300) ($300) ($300) - ($300)Stock-based compensation $4 $9 $23 $38 $60Tax benefits on stock options exercised - - - - $6Deferred stock compensation - - - - -Deferred taxes $141 $137 $1 $15 ($6)Receivables ($6) $3 ($34) ($44) $29Sale <strong>of</strong> drugstore receivables - - - - -Other receivables - - - - -Inventory $82 ($100) ($13) ($67) ($190)Prepaid expenses & other assets ($36) ($36) $9 ($16) ($37)Other assets - - - - -Accounts payable $138 - $33 - -Trade payables - - - $28 $195Accounts payable & accrued expenses - $94 - - -Current income taxes payable $3 ($17) $182 ($124) ($1)Accrued expenses & other liabilities - - $135 $124 $31Other liabilities $102 $145 - - -Net cash flows from operating activities $1,329 $812 $1,127 $1,337 $1,255 $1,414 $1,498 $1,588 $1,684 $1,785 $1,892 $2,005 $2,125 $2,253 $2,388Cash Flows From Investments ($277) ($239) $4,302 ($221) ($752) ($260) ($272) ($289) ($307) ($326) ($346) ($367) ($390) ($414) ($439)99
Common Size Cash Flow Statement 2002 2003 2004 2005 2006 AVG AVG 05-06Net income (loss) 27.92% 44.83% 59.18% 81.38% 91.87% 61.04% 86.62%Loss (income) from discontinued operations 0.00% 0.00% 0.00% -8.30% -1.51% -4.91% -4.91%<strong>As</strong>set impair, PVOL & other unit closing costs 7.83% 4.31% 1.69% 0.90% 0.32% 3.01% 0.61%Restructuring & other charges, net 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Depreciation & amortization 50.19% 48.52% 32.65% 27.82% 31.00% 38.04% 29.41%Net gains on sale <strong>of</strong> assets -1.35% -6.28% -0.71% -2.02% -0.64% -2.20% -1.33%Real estate (gain) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Co contributions to savings & pr<strong>of</strong>its sharing 3.54% 0.00% 0.00% 0.00% 0.00% 0.71% 0.00%Benefit plans expense (income) 2.26% 16.63% 3.99% 3.66% -4.06% 4.50% -0.20%Pension contribution -22.57% -36.95% -26.62% 0.00% -23.90% -22.01% -11.95%Stock-based compensation 0.30% 1.11% 2.04% 2.84% 4.78% 2.21% 3.81%Tax benefits on stock options exercised 0.00% 0.00% 0.00% 0.00% 0.48% 0.10% 0.24%Deferred stock compensation 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Deferred taxes 10.61% 16.87% 0.09% 1.12% -0.48% 5.64% 0.32%Receivables -0.45% 0.37% -3.02% -3.29% 2.31% -0.82% -0.49%Sale <strong>of</strong> drugstore receivables 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Other receivables 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Inventory 6.17% -12.32% -1.15% -5.01% -15.14% -5.49% -10.08%Prepaid expenses & other assets -2.71% -4.43% 0.80% -1.20% -2.95% -2.10% -2.07%Other assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Accounts payable 10.38% 0.00% 2.93% 0.00% 0.00% 2.66% 0.00%Trade payables 0.00% 0.00% 0.00% 2.09% 15.54% 3.53% 8.82%Accounts payable & accrued expenses 0.00% 11.58% 0.00% 0.00% 0.00% 2.32% 0.00%Current income taxes payable 0.23% -2.09% 16.15% -9.27% -0.08% 0.99% -4.68%Accrued expenses & other liabilities 0.00% 0.00% 11.98% 9.27% 2.47% 4.74% 5.87%Other liabilities 7.67% 17.86% 0.00% 0.00% 0.00% 5.11% 0.00%Net cash flows from operating activities 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%100
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J. C. Penney Company, Inc. Equity V
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Industry AnalysisIn 1902, James Cas
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Financial Analysis, Forecast Financ
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Business & Industry AnalysisCompany
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Industry OverviewThe retail industr
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Five Forces ModelThe Five Forces Mo
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ConcentrationThe level of concentra
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capable of offering lower prices th
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If a firm wishes to shut down, it m
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Legal BarriersMany industries have
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These costs include issues such as
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Bargaining Power of SuppliersThe de
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The relative bargaining power of th
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Competitive StrategiesIn order to a
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Department stores have to focus on
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The Big PicturePlayers in this indu
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Lower Input CostsJ. C. Penney is at
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in the last five years. This trend
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convenient for different consumers
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transactions have been improperly s
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Penney does state in its annual rep
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Operating and Capital LeasesOperati
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Potential Accounting FlexibilityA f
- Page 50 and 51: truly are. J. C. Penney, however, h
- Page 52 and 53: Qualitative Analysis of DisclosureT
- Page 54 and 55: we can see why targeting the strong
- Page 56 and 57: manipulation diagnostics for J. C.
- Page 58 and 59: Net Sales/Net Accounts ReceivableNe
- Page 60 and 61: Net Sales/Unearned Revenue1200Net S
- Page 62 and 63: Below is a chart of sales manipulat
- Page 64 and 65: As for the industry, all the compan
- Page 66 and 67: Pension Expense/SG&APension Expense
- Page 68 and 69: Below is a chart of all expense man
- Page 70 and 71: discount rates in respect to pensio
- Page 72 and 73: Financial Analysis, Forecast Financ
- Page 74 and 75: paying off their short-term obligat
- Page 76 and 77: ecause many firms in this segment o
- Page 78 and 79: Penney’s inventory turnover is in
- Page 80 and 81: ConclusionAnalysis through liquidit
- Page 82 and 83: operating efficiency because the fi
- Page 84 and 85: Return on AssetsReturn on Assets0.1
- Page 86 and 87: Capital Structure AnalysisWhen look
- Page 88 and 89: however, in 2006, J. C. Penney show
- Page 90 and 91: Sustainable Growth RateSustainable
- Page 92 and 93: average of only years 2005 and 2006
- Page 94 and 95: (reported in millions)Annual Income
- Page 96 and 97: We then began to look at the equity
- Page 98 and 99: Common Size Balance Sheet 2002 2003
- Page 102 and 103: ConclusionOverall, it appears that
- Page 104 and 105: Inc. We set these averages equal to
- Page 106 and 107: Price to BookPPS BPS P/B IndustryAv
- Page 108 and 109: Price Earnings GrowthPPS EPS PEG In
- Page 110 and 111: y J. C. Penney’s EBITDA. Then we
- Page 112 and 113: Regression Analysis3 Month Rate 72
- Page 114 and 115: Intrinsic ValuationsIntrinsic valua
- Page 116 and 117: amount in the eye’s of shareholde
- Page 118 and 119: This particular stock price in our
- Page 120 and 121: esidual income or converge. Future
- Page 122 and 123: To find our long run return on equi
- Page 124 and 125: Sensitivity AnalysisGrowth Rates0 -
- Page 126 and 127: for this large difference between s
- Page 128 and 129: Analyst RecommendationAfter careful
- Page 130 and 131: AppendixLiquidity RatiosCurrent rat
- Page 132 and 133: Capital Structure RatioDebt to equi
- Page 134 and 135: SUMMARY OUTPUT3 Month Regression72
- Page 136 and 137: SUMMARY OUTPUT6 Month Regression72
- Page 138 and 139: SUMMARY OUTPUT2 Year Regression72 M
- Page 140 and 141: SUMMARY OUTPUT5 Year Regression72 M
- Page 142 and 143: SUMMARY OUTPUT10 Year Regression72
- Page 144 and 145: Cost of Equity 0.1361Estimated Pric
- Page 146 and 147: Discount Dividends Model0 1 2 3 4 5
- Page 148 and 149: Residual Income Model WACC(AT) 0.07
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Z-Score AnalysisZ-Score=1.21.43.320
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