00011661261/302020Q2FALSEAugust 1, 2020320.5320.500011661262020-02-022020-08-01xbrli:shares00011661262020-09-04iso4217:USD00011661262020-05-032020-08-0100011661262019-05-052019-08-0300011661262019-02-032019-08-03iso4217:USDxbrli:shares00011661262020-08-0100011661262019-08-0300011661262020-02-010001166126us-gaap:CommonStockMember2020-02-010001166126us-gaap:AdditionalPaidInCapitalMember2020-02-010001166126us-gaap:RetainedEarningsMember2020-02-010001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-02-010001166126us-gaap:CommonStockMember2020-02-022020-05-020001166126us-gaap:AdditionalPaidInCapitalMember2020-02-022020-05-020001166126us-gaap:RetainedEarningsMember2020-02-022020-05-020001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-02-022020-05-0200011661262020-02-022020-05-0200011661262020-05-020001166126us-gaap:CommonStockMember2020-05-020001166126us-gaap:AdditionalPaidInCapitalMember2020-05-020001166126us-gaap:RetainedEarningsMember2020-05-020001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-05-020001166126us-gaap:CommonStockMember2020-05-032020-08-010001166126us-gaap:AdditionalPaidInCapitalMember2020-05-032020-08-010001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-05-032020-08-010001166126us-gaap:RetainedEarningsMember2020-05-032020-08-010001166126us-gaap:CommonStockMember2020-08-010001166126us-gaap:AdditionalPaidInCapitalMember2020-08-010001166126us-gaap:RetainedEarningsMember2020-08-010001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-08-0100011661262019-02-020001166126us-gaap:CommonStockMember2019-02-020001166126us-gaap:AdditionalPaidInCapitalMember2019-02-020001166126us-gaap:RetainedEarningsMember2019-02-020001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-02-020001166126us-gaap:CommonStockMember2019-02-032019-05-040001166126us-gaap:AdditionalPaidInCapitalMember2019-02-032019-05-040001166126us-gaap:RetainedEarningsMember2019-02-032019-05-040001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-02-032019-05-0400011661262019-02-032019-05-0400011661262019-05-040001166126us-gaap:CommonStockMember2019-05-040001166126us-gaap:AdditionalPaidInCapitalMember2019-05-040001166126us-gaap:RetainedEarningsMember2019-05-040001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-05-040001166126us-gaap:CommonStockMember2019-05-052019-08-030001166126us-gaap:AdditionalPaidInCapitalMember2019-05-052019-08-030001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-05-052019-08-030001166126us-gaap:RetainedEarningsMember2019-05-052019-08-030001166126us-gaap:CommonStockMember2019-08-030001166126us-gaap:AdditionalPaidInCapitalMember2019-08-030001166126us-gaap:RetainedEarningsMember2019-08-030001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-08-030001166126jcp:J.C.PenneyCorporationIncMember2020-02-022020-08-010001166126jcp:J.C.PenneyCompanyInc.Member2020-02-022020-08-01xbrli:pure00011661262020-08-012020-08-0100011661262020-05-1500011661262020-06-070001166126us-gaap:SeniorNotesMember2020-08-010001166126us-gaap:FacilityClosingMember2020-08-01jcp:store00011661262020-03-1900011661262020-04-3000011661262020-05-3100011661262020-06-300001166126srt:ScenarioForecastMember2020-10-310001166126us-gaap:SubsequentEventMember2020-08-310001166126jcp:WomensapparelMember2020-05-032020-08-010001166126jcp:WomensapparelMember2019-05-052019-08-030001166126jcp:WomensapparelMember2020-02-022020-08-010001166126jcp:WomensapparelMember2019-02-032019-08-030001166126jcp:MensapparelandaccessoriesMember2020-05-032020-08-010001166126jcp:MensapparelandaccessoriesMember2019-05-052019-08-030001166126jcp:MensapparelandaccessoriesMember2020-02-022020-08-010001166126jcp:MensapparelandaccessoriesMember2019-02-032019-08-030001166126jcp:WomensaccessoriesincludingSephoraMember2020-05-032020-08-010001166126jcp:WomensaccessoriesincludingSephoraMember2019-05-052019-08-030001166126jcp:WomensaccessoriesincludingSephoraMember2020-02-022020-08-010001166126jcp:WomensaccessoriesincludingSephoraMember2019-02-032019-08-030001166126jcp:HomeMember2020-05-032020-08-010001166126jcp:HomeMember2019-05-052019-08-030001166126jcp:HomeMember2020-02-022020-08-010001166126jcp:HomeMember2019-02-032019-08-030001166126jcp:FootwearandhandbagsMember2020-05-032020-08-010001166126jcp:FootwearandhandbagsMember2019-05-052019-08-030001166126jcp:FootwearandhandbagsMember2020-02-022020-08-010001166126jcp:FootwearandhandbagsMember2019-02-032019-08-030001166126jcp:ChildrensincludingtoysMember2020-05-032020-08-010001166126jcp:ChildrensincludingtoysMember2019-05-052019-08-030001166126jcp:ChildrensincludingtoysMember2020-02-022020-08-010001166126jcp:ChildrensincludingtoysMember2019-02-032019-08-030001166126jcp:JewelryMember2020-05-032020-08-010001166126jcp:JewelryMember2019-05-052019-08-030001166126jcp:JewelryMember2020-02-022020-08-010001166126jcp:JewelryMember2019-02-032019-08-030001166126jcp:ServicesandotherMember2020-05-032020-08-010001166126jcp:ServicesandotherMember2019-05-052019-08-030001166126jcp:ServicesandotherMember2020-02-022020-08-010001166126jcp:ServicesandotherMember2019-02-032019-08-030001166126jcp:TotalMember2020-05-032020-08-010001166126jcp:TotalMember2019-05-052019-08-030001166126jcp:TotalMember2020-02-022020-08-010001166126jcp:TotalMember2019-02-032019-08-030001166126jcp:GiftCardsMember2020-08-010001166126jcp:GiftCardsMember2019-08-030001166126jcp:GiftCardsMember2020-02-010001166126jcp:LoyaltyRewardsMember2020-08-010001166126jcp:LoyaltyRewardsMember2019-08-030001166126jcp:LoyaltyRewardsMember2020-02-010001166126jcp:TotalMember2020-08-010001166126jcp:TotalMember2019-08-030001166126jcp:TotalMember2020-02-010001166126jcp:InterestRateSwapAgreementMaturedMay72020Member2020-05-020001166126jcp:InterestRateSwapAgreementMaturedMay72020Member2020-02-022020-05-020001166126jcp:InterestRateSwapAgreementSeptember42018Member2020-05-020001166126jcp:InterestRateSwapAgreementSeptember42018Member2020-05-032020-08-010001166126us-gaap:InterestRateSwapMember2020-05-070001166126us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2020-08-010001166126us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2019-08-030001166126us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2020-02-010001166126jcp:OtherAccountsPayableandAccruedExpensesMember2020-08-010001166126jcp:OtherAccountsPayableandAccruedExpensesMember2019-08-030001166126jcp:OtherAccountsPayableandAccruedExpensesMember2020-02-010001166126us-gaap:OtherAssetsMember2020-08-010001166126us-gaap:OtherAssetsMember2019-08-030001166126us-gaap:OtherAssetsMember2020-02-010001166126us-gaap:OtherLiabilitiesMember2020-08-010001166126us-gaap:OtherLiabilitiesMember2019-08-030001166126us-gaap:OtherLiabilitiesMember2020-02-010001166126jcp:LongLivedAssetsMember2020-05-032020-08-010001166126jcp:RightToUseLeaseAssetsMember2020-05-032020-08-010001166126jcp:LongLivedAssetsMember2020-02-022020-05-020001166126jcp:RightToUseLeaseAssetsMember2020-02-022020-05-020001166126us-gaap:IndefinitelivedIntangibleAssetsMember2020-02-022020-05-020001166126jcp:SeniorNotes8.125due2019Member2020-08-010001166126jcp:SeniorNotes8.125due2019Member2019-08-030001166126jcp:SeniorNotes8.125due2019Member2020-02-010001166126jcp:SeniorNotesFivePointSixFivePercentDue2020Member2020-08-010001166126jcp:SeniorNotesFivePointSixFivePercentDue2020Member2019-08-030001166126jcp:SeniorNotesFivePointSixFivePercentDue2020Member2020-02-010001166126jcp:A2016TermLoanFacilityMember2020-08-010001166126jcp:A2016TermLoanFacilityMember2019-08-030001166126jcp:A2016TermLoanFacilityMember2020-02-010001166126jcp:SeniorSecuredNotesFivePointEightSevenFivePercentDue2023Member2020-08-010001166126jcp:SeniorSecuredNotesFivePointEightSevenFivePercentDue2023Member2019-08-030001166126jcp:SeniorSecuredNotesFivePointEightSevenFivePercentDue2023Member2020-02-010001166126jcp:DebenturesSevenPointOneTwoFivePercentDue2023Member2020-08-010001166126jcp:DebenturesSevenPointOneTwoFivePercentDue2023Member2019-08-030001166126jcp:DebenturesSevenPointOneTwoFivePercentDue2023Member2020-02-010001166126jcp:SeniorSecuredSecondPriorityNotes8.625due2025Member2020-08-010001166126jcp:SeniorSecuredSecondPriorityNotes8.625due2025Member2019-08-030001166126jcp:SeniorSecuredSecondPriorityNotes8.625due2025Member2020-02-010001166126jcp:NotesSixPointNinePercentDue2026Member2020-08-010001166126jcp:NotesSixPointNinePercentDue2026Member2019-08-030001166126jcp:NotesSixPointNinePercentDue2026Member2020-02-010001166126jcp:SeniorNotesSixPointThreeSevenFivePercentDue2036Member2020-08-010001166126jcp:SeniorNotesSixPointThreeSevenFivePercentDue2036Member2019-08-030001166126jcp:SeniorNotesSixPointThreeSevenFivePercentDue2036Member2020-02-010001166126jcp:DebenturesSevenPointFourPercentDue2037Member2020-08-010001166126jcp:DebenturesSevenPointFourPercentDue2037Member2019-08-030001166126jcp:DebenturesSevenPointFourPercentDue2037Member2020-02-010001166126jcp:NotesSevenPointSixTwoFivePercentDue2097Member2020-08-010001166126jcp:NotesSevenPointSixTwoFivePercentDue2097Member2019-08-030001166126jcp:NotesSevenPointSixTwoFivePercentDue2097Member2020-02-010001166126jcp:SuperprioritySeniorSecuredDebtorInPossessionCreditAndGuarantyAgreementMember2020-06-050001166126jcp:SuperprioritySeniorSecuredDebtorInPossessionCreditAndGuarantyAgreementMember2020-06-082020-06-080001166126jcp:SuperprioritySeniorSecuredDebtorInPossessionCreditAndGuarantyAgreementMember2020-07-092020-07-090001166126jcp:SuperprioritySeniorSecuredDebtorInPossessionCreditAndGuarantyAgreementMember2020-06-080001166126jcp:SuperprioritySeniorSecuredDebtorInPossessionCreditAndGuarantyAgreementMember2020-07-090001166126jcp:SuperprioritySeniorSecuredDebtorInPossessionCreditAndGuarantyAgreementMember2020-06-052020-06-050001166126jcp:NetActuarialGainLossMember2020-02-010001166126jcp:PriorServiceCreditCostMember2020-02-010001166126us-gaap:AccumulatedTranslationAdjustmentMember2020-02-010001166126us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-02-010001166126jcp:NetActuarialGainLossMember2020-02-022020-08-010001166126jcp:PriorServiceCreditCostMember2020-02-022020-08-010001166126us-gaap:AccumulatedTranslationAdjustmentMember2020-02-022020-08-010001166126us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-02-022020-08-010001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-02-022020-08-010001166126jcp:NetActuarialGainLossMember2020-08-010001166126jcp:PriorServiceCreditCostMember2020-08-010001166126us-gaap:AccumulatedTranslationAdjustmentMember2020-08-010001166126us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-08-010001166126us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-02-022020-05-020001166126jcp:NetActuarialGainLossMember2019-02-020001166126jcp:PriorServiceCreditCostMember2019-02-020001166126us-gaap:AccumulatedTranslationAdjustmentMember2019-02-020001166126us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2019-02-020001166126jcp:NetActuarialGainLossMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-02-020001166126srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberjcp:PriorServiceCreditCostMember2019-02-020001166126srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccumulatedTranslationAdjustmentMember2019-02-020001166126srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2019-02-020001166126us-gaap:AccumulatedOtherComprehensiveIncomeMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-02-020001166126jcp:NetActuarialGainLossMember2019-02-032019-08-030001166126jcp:PriorServiceCreditCostMember2019-02-032019-08-030001166126us-gaap:AccumulatedTranslationAdjustmentMember2019-02-032019-08-030001166126us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2019-02-032019-08-030001166126us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-02-032019-08-030001166126jcp:NetActuarialGainLossMember2019-08-030001166126jcp:PriorServiceCreditCostMember2019-08-030001166126us-gaap:AccumulatedTranslationAdjustmentMember2019-08-030001166126us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2019-08-0300011661262020-05-152020-05-15jcp:employee0001166126jcp:VoluntaryEarlyRetirementProgramMember2020-04-300001166126jcp:VoluntaryEarlyRetirementProgramMember2020-05-292020-05-290001166126jcp:VoluntaryEarlyRetirementProgramMember2020-05-032020-08-010001166126jcp:PrimaryPensionPlanMemberjcp:VoluntaryEarlyRetirementProgramMember2020-05-032020-08-010001166126jcp:SupplementalPensionPlanMemberjcp:VoluntaryEarlyRetirementProgramMember2020-05-032020-08-010001166126jcp:PrimaryPensionPlanMemberjcp:VoluntaryEarlyRetirementProgramMember2020-02-022020-08-010001166126jcp:SupplementalPensionPlanMemberjcp:VoluntaryEarlyRetirementProgramMember2020-02-022020-08-010001166126jcp:VoluntaryEarlyRetirementProgramMember2020-02-010001166126jcp:VoluntaryEarlyRetirementProgramMember2020-08-010001166126jcp:PrimaryPensionPlanMemberjcp:VoluntaryEarlyRetirementProgramMember2020-08-010001166126us-gaap:OtherPensionPlansPostretirementOrSupplementalPlansDefinedBenefitMember2020-08-010001166126jcp:TangibleAssetsMember2020-02-022020-05-020001166126jcp:LongLivedAssetsMember2020-02-022020-05-020001166126jcp:RightToUseAssetsMember2020-02-022020-05-020001166126jcp:TangibleAssetsMember2020-05-032020-08-010001166126jcp:LongLivedAssetsMember2020-05-032020-08-010001166126jcp:RightToUseAssetsMember2020-05-032020-08-010001166126jcp:IntangibleAssetsMember2020-02-022020-05-020001166126jcp:HomeOfficeAndStoresMember2020-05-032020-08-010001166126jcp:HomeOfficeAndStoresMember2019-05-052019-08-030001166126jcp:HomeOfficeAndStoresMember2020-02-022020-08-010001166126jcp:HomeOfficeAndStoresMember2019-02-032019-08-030001166126jcp:HomeOfficeAndStoresMember2020-08-010001166126jcp:ManagementTransitionMember2020-05-032020-08-010001166126jcp:ManagementTransitionMember2019-05-052019-08-030001166126jcp:ManagementTransitionMember2020-02-022020-08-010001166126jcp:ManagementTransitionMember2019-02-032019-08-030001166126jcp:ManagementTransitionMember2020-08-010001166126jcp:OtherRestructuringAndManagementTransitionMember2020-05-032020-08-010001166126jcp:OtherRestructuringAndManagementTransitionMember2019-05-052019-08-030001166126jcp:OtherRestructuringAndManagementTransitionMember2020-02-022020-08-010001166126jcp:OtherRestructuringAndManagementTransitionMember2019-02-032019-08-030001166126jcp:OtherRestructuringAndManagementTransitionMember2020-08-010001166126jcp:TotalMember2020-05-032020-08-010001166126jcp:TotalMember2019-05-052019-08-030001166126jcp:TotalMember2020-02-022020-08-010001166126jcp:TotalMember2019-02-032019-08-030001166126jcp:TotalMember2020-08-010001166126jcp:HomeOfficeAndStoresMember2020-02-010001166126jcp:ManagementTransitionMember2020-02-010001166126jcp:TotalMember2020-02-010001166126jcp:FederalStateAndForeignMember2020-02-022020-08-010001166126jcp:FederalStateAndForeignMember2020-05-032020-08-010001166126jcp:AmortizationOfCertainIndefiniteLivedIntangibleAssetsMember2020-05-032020-08-010001166126jcp:AmortizationOfCertainIndefiniteLivedIntangibleAssetsMember2020-02-022020-08-010001166126us-gaap:DomesticCountryMember2020-08-010001166126us-gaap:StateAndLocalJurisdictionMember2020-08-01
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 1-15274
 jcp-20200801_g1.jpg
J. C. PENNEY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware26-0037077
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
6501 Legacy DrivePlanoTexas75024 - 3698
(Address of principal executive offices)(Zip Code)
(972) 431-1000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 322,663,112 shares of Common Stock of 50 cents par value, as of September 4, 2020.


J. C. PENNEY COMPANY, INC.
(Debtor-in-Possession)
FORM 10-Q
For the Quarterly Period Ended August 1, 2020
INDEX

 Page










Table of Contents
Part I. Financial Information
Item 1. Unaudited Interim Consolidated Financial Statements


J. C. PENNEY COMPANY, INC.
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedSix Months Ended
(In millions)August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Total net sales$1,390 $2,509 $2,472 $4,948 
Credit income and other69 110 183 226 
Total revenues1,459 2,619 2,655 5,174 
Costs and expenses/(income):
Cost of goods sold (exclusive of depreciation and amortization shown separately below)919 1,585 1,732 3,215 
Selling, general and administrative (SG&A)470 870 1,042 1,726 
Depreciation and amortization161 137 296 284 
Real estate and other, net(5)3 (7)(2)
Restructuring and management transition67 7 222 27 
Total costs and expenses1,612 2,602 3,285 5,250 
Operating income/(loss)(153)17 (630)(76)
Other components of net periodic pension cost/(income)77 (13)54 (26)
(Gain)/loss on extinguishment of debt (1) (1)
Net interest expense67 74 142 147 
Loss due to discontinuance of hedge accounting  77  
Reorganization items, net
108  108  
Income/(loss) before income taxes(405)(43)(1,011)(196)
Income tax expense/(benefit)(7)5 (67)6 
Net income/(loss)$(398)$(48)$(944)$(202)
Earnings/(loss) per share:
Basic$(1.23)$(0.15)$(2.91)$(0.63)
Diluted$(1.23)$(0.15)$(2.91)$(0.63)
Weighted average shares – basic324.6 319.4 324.2 318.6 
Weighted average shares – diluted324.6 319.4 324.2 318.6 
See the accompanying notes to the unaudited interim Consolidated Financial Statements.


1

Table of Contents
J. C. PENNEY COMPANY, INC.
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
 Three Months EndedSix Months Ended
(In millions)August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Net income/(loss)$(398)$(48)$(944)$(202)
Other comprehensive income/(loss), net of tax:
Currency translations (1)
  (1) 
Cash flow hedges (2)
 (30) (43)
Net actuarial gain/(loss) arising during the period (3)
(41) (41) 
Prior service credit/(cost) arising during the period (4)
4 4 
Amortization of pension prior service (credit)/cost (5)
2 2 3 4 
Total other comprehensive income/(loss), net of tax(35)(28)(35)(39)
Total comprehensive income/(loss), net of tax$(433)$(76)$(979)$(241)

(1)Net of $0 million of tax in the six months ended August 1, 2020.
(2)Net of $0 million in tax in the three and six months ended August 3, 2019.
(3)Net of $0 million of tax in the three and six months ended August 1, 2020.
(4)Net of $0 million 0f tax in the three and six months ended August 1, 2020.
(5)Net of $0 million of tax in each of the three and six months ended August 1, 2020, and August 3, 2019. Pre-tax amounts of $2 million and $2 million in the three months ended August 1, 2020, and August 3, 2019, respectively, were recognized in Other components of net periodic pension cost/(income) in the unaudited interim Consolidated Statements of Operations. Additionally, pre-tax amounts of $3 million and $4 million in the six months ended August 1, 2020, and August 3, 2019, were recognized in Other components of net periodic pension cost/(income) in the unaudited interim Consolidated Statements of Operations.

See the accompanying notes to the unaudited interim Consolidated Financial Statements.

2

Table of Contents
J. C. PENNEY COMPANY, INC.
(Debtor-in-Possession)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
August 1,
2020
August 3,
2019
February 1,
2020
(In millions, except per share data)(Unaudited)(Unaudited) 
Assets
Current assets:
Cash in banks and in transit$205 $163 $108 
Cash short-term investments826 12 278 
Restricted cash452   
Cash, cash equivalents and restricted cash1,483 175 386 
Merchandise inventory1,891 2,471 2,166 
Prepaid expenses and other464 275 174 
Total current assets3,838 2,921 2,726 
Property and equipment (net of accumulated depreciation of $3,622, $3,167 and $3,095)
3,169 3,591 3,488 
Operating lease assets772 925 998 
Prepaid pension27 166 120 
Other assets597 657 657 
Total Assets$8,403 $8,260 $7,989 
Liabilities and Stockholders’ Equity
Current liabilities:
Merchandise accounts payable$236 $878 $786 
Other accounts payable and accrued expenses812 970 931 
Current operating lease liabilities 84 68 
Debtor-in-possession financing
900   
Current portion of long-term debt1,204 197 147 
Total current liabilities3,152 2,129 1,932 
Noncurrent operating lease liabilities 1,090 1,108 
Long-term debt 3,589 3,574 
Deferred taxes39 121 116 
Other liabilities251 368 430 
Total liabilities not subject to compromise3,442 7,297 7,160 
Liabilities subject to compromise5,050   
Stockholders’ (Deficit) Equity
Common stock (1)
161 159 160 
Additional paid-in capital4,721 4,719 4,723 
Reinvested earnings/(accumulated deficit)(4,613)(3,601)(3,667)
Accumulated other comprehensive income/(loss)(358)(314)(387)
Total Stockholders’ (Deficit) Equity(89)963 829 
Total Liabilities and Stockholders’ (Deficit) Equity$8,403 $8,260 $7,989 

(1)1.25 billion shares of common stock are authorized with a par value of $0.50 per share. The total shares issued and outstanding were 322.4 million, 317.7 million and 320.5 million as of August 1, 2020, August 3, 2019, and February 1, 2020, respectively.
See the accompanying notes to the unaudited interim Consolidated Financial Statements.

3

Table of Contents
J. C. PENNEY COMPANY, INC.
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
(Unaudited)
(In millions)Number of Common SharesCommon StockAdditional Paid-in CapitalReinvested Earnings/(Accumulated Deficit)Accumulated Other Comprehensive Income/(Loss)Total Stockholders' (Deficit) Equity
February 1, 2020320.5 $160 $4,723 $(3,667)$(387)$829 
Net income /(loss)   (546) (546)
Discontinuance of hedge accounting    64 64 
Stock-based compensation and other1.4 1 2 (2) 1 
May 2, 2020321.9 161 4,725 (4,215)(323)348 
Net income/(loss)   (398) (398)
Other comprehensive income/(loss)    (35)(35)
Stock-based compensation and other0.5  (4)  (4)
August 1, 2020322.4 $161 $4,721 $(4,613)$(358)$(89)

(In millions)Number of Common SharesCommon StockAdditional Paid-in CapitalReinvested Earnings/(Accumulated Deficit)Accumulated Other Comprehensive Income/(Loss)Total Stockholders' Equity
February 2, 2019316.1 $158 $4,713 $(3,373)$(328)$1,170 
ASC 842 (Leases) and ASU 2018-02 (Stranded Taxes) adoption (1)   (26)53 27 
Net Income /(loss)   (154) (154)
Other comprehensive income /(loss)    (11)(11)
Stock-based compensation and other0.7 2   2 
May 4, 2019316.8 158 4,715 (3,553)(286)1,034 
Net income/(loss)   (48) (48)
Other comprehensive income/(loss)    (28)(28)
Stock-based compensation and other0.9 1 4   5 
August 3, 2019317.7 $159 $4,719 $(3,601)$(314)$963 
(1)Represents the cumulative-effect adjustments

See the accompanying notes to the unaudited interim Consolidated Financial Statements.

4

Table of Contents
J. C. PENNEY COMPANY, INC.
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months Ended
($ in millions)August 1,
2020
August 3,
2019
Cash flows from operating activities
Net income/(loss)$(944)$(202)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Restructuring and management transition162 17 
Reorganization items, net17  
Net (gain)/loss on sale of non-operating assets (1)
Net (gain)/loss on sale of operating assets 3 
(Gain)/loss on extinguishment of debt (1)
Discontinuance of hedge accounting77  
Depreciation and amortization296 284 
Benefit plans63 (29)
Stock-based compensation(2)6 
Deferred taxes(69) 
Change in cash from:
Inventory275 (34)
Prepaid expenses and other(286)(82)
Merchandise accounts payable(48)31 
Income taxes  
Accrued expenses and other14 9 
Net cash provided by/(used in) operating activities(445)1 
Cash flows from investing activities
Capital expenditures(43)(146)
Net proceeds from sale of non-operating assets 1 
Net proceeds from sale of operating assets1 12 
Net cash provided by/(used in) investing activities(42)(133)
Cash flows from financing activities
Proceeds from debtor-in-possession financing450  
Proceeds from borrowings under the credit facility2,675 946 
Payments of borrowings under the credit facility(1,471)(946)
Payments of finance leases and note payable(1)(1)
Payments of long-term debt(19)(26)
Debtor-in-possession financing fees(50) 
Proceeds from stock issued under stock plans 1 
Net cash provided by/(used in) financing activities1,584 (26)
Net increase/(decrease) in cash, cash equivalents and restricted cash1,097 (158)
Cash and cash equivalents at beginning of period386 333 
Cash, cash equivalents and restricted cash at end of period$1,483 $175 
Supplemental cash flow information
Income taxes received/(paid), net$(2)$(6)
Interest received/(paid), net(164)(139)
Supplemental non-cash investing and financing activity
Increase/(decrease) in other accounts payable related to purchases of property and equipment and software2 (15)
Remeasurement of leased assets and lease obligations(107)52 

See the accompanying notes to the unaudited Interim Consolidated Financial Statements.
5

Table of Contents
J. C. PENNEY COMPANY, INC.
(Debtor-In-Possession)
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Consolidation
Basis of Presentation
J. C. Penney Company, Inc. is a holding company whose principal operating subsidiary is J. C. Penney Corporation, Inc. (JCP). JCP was incorporated in Delaware in 1924, and J. C. Penney Company, Inc. was incorporated in Delaware in 2002, when the holding company structure was implemented. The holding company has no independent assets or operations, and no direct subsidiaries other than JCP. The holding company and its consolidated subsidiaries, including JCP, are collectively referred to in this quarterly report as “we,” “us,” “our,” “ourselves” or the “Company,” unless otherwise indicated.
J. C. Penney Company, Inc. is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCP’s outstanding debt securities. The guarantee of certain of JCP’s outstanding debt securities by J. C. Penney Company, Inc. is full and unconditional.
These unaudited interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). The accompanying unaudited interim Consolidated Financial Statements, in our opinion, include all material adjustments necessary for a fair presentation and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 (2019 Form 10-K). We follow the same accounting policies to prepare quarterly financial statements as are followed in preparing annual financial statements. A description of such significant accounting policies is included in the 2019 Form 10-K. The February 1, 2020, financial information was derived from the audited Consolidated Financial Statements, with related footnotes, included in the 2019 Form 10-K. Because of the seasonal nature of the retail business, operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

As discussed further in Note 2, on May 15, 2020 (the "Petition Date"), the Company and certain of its subsidiaries (collectively, the "Debtors") commenced voluntary cases (the "Chapter 11 Cases") under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court"). The Company considered impacts related to the Chapter 11 Cases and the COVID-19 pandemic (see Note 3) to its use of any estimates, as appropriate, within its unaudited interim Consolidated Financial Statements. Such estimates and assumptions are subject to inherent uncertainties, which may result in actual amounts differing from reported amounts.

Fiscal Year
Our fiscal year ends on the Saturday closest to January 31. As used herein, “three months ended August 1, 2020” and “second quarter of 2020” refer to the 13-week period ended August 1, 2020, and “three months ended August 3, 2019” and “second quarter of 2019” refer to the 13-week period ended August 3, 2019. "Six months ended August 1,
2020" and "six months ended August 3, 2019" refer to the 26-week periods ended August 1, 2020 and August 3, 2019, respectively. Fiscal years 2020 and 2019 contain 52 weeks.
Basis of Consolidation
All significant inter-company transactions and balances have been eliminated in consolidation. Certain reclassifications were made to prior period amounts to conform to the current period presentation.
Ability to Continue as a Going Concern
The unaudited interim Consolidated Financial Statements included in this Quarterly Report on Form 10-Q have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. As a result of the Chapter 11 Cases, the realization of assets and the satisfaction of liabilities are subject to significant uncertainty. While operating as a debtor-in-possession pursuant to the Bankruptcy Code, we may sell, or otherwise dispose of or liquidate, assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business, for amounts other than those reflected in the accompanying unaudited interim Consolidated Financial Statements. Further, a Chapter 11 plan of reorganization is likely to materially change the amounts and classifications of assets and liabilities reported in our unaudited interim Consolidated Balance Sheet as of August 1, 2020. In addition, the COVID-19 pandemic (see Note 3) has, and continues to have, a material impact on the Company’s business operations, financial position, liquidity, capital resources and results of operations. The risks and uncertainties surrounding the Chapter 11 Cases and the COVID-19 pandemic, the defaults under our debt agreements
6

Table of Contents
(see Note 9), and our financial condition, raise substantial doubt as to the Company’s ability to continue as a going concern. Our future plans, including those in connection with the Chapter 11 Cases, are not yet finalized, fully executed or approved by the Bankruptcy Court, and therefore cannot be deemed probable of mitigating this substantial doubt within 12 months of the date of issuance of these financial statements. Our consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Bankruptcy Accounting
The unaudited interim Consolidated Financial Statements included herein have been prepared as if we are a going concern and in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic No. 852 – Reorganizations (ASC 852). As a result, we have segregated liabilities and obligations whose treatment and satisfaction are dependent on the outcome of the Chapter 11 Cases and have classified these items as Liabilities Subject to Compromise on our unaudited interim Consolidated Balance Sheets. In addition, we have classified all income, expenses, gains or losses that were incurred or realized as a direct result of the Chapter 11 Cases since filing as Reorganization items in our unaudited interim Consolidated Statement of Operations.

Certain subsidiary entities are not debtors under the Chapter 11 Cases. However, condensed combined financial statements of the Debtors are not presented in the notes to the unaudited interim Consolidated Financial Statements as the assets and liabilities, operating results and cash flows of the non-debtor entities included in the unaudited interim Consolidated Financial Statements are insignificant and, therefore, the unaudited interim Consolidated Financial Statements presented herein materially represent the condensed combined financial statements of the debtor entities for all periods presented. As of August 1, 2020, total assets, total liabilities and net income of the non-debtor entities represents 0.6%, 0.2%, and (0.8)% of total consolidated assets, liabilities and net income, respectively. As of August 1, 2020, the non-debtor entities have intercompany receivables and intercompany payables from/to the debtor entities of $17.6 million and $0.0 million, respectively.

Restricted Cash
Amounts included in restricted cash represent those required to be set aside by a contractual agreement or requirements of the Bankruptcy Court. Amounts included in restricted cash include:

(In Millions)August 1, 2020
DIP financing funded to escrow pending resolution of contingencies (see Note 9)$225 
Cash collateral in escrow under the requirements of the 2017 Revolving Credit Facility156 
Cash deposited into escrow to pay bankruptcy professional fees upon emergence
52 
Other19 
Total restricted cash
$452 
2. Chapter 11 Cases

Voluntary Petition for Reorganization
On the Petition Date, the Debtors filed voluntary petitions in the Bankruptcy Court seeking relief under the Bankruptcy Code. Pursuant to order of the Bankruptcy Court, the Chapter 11 Cases are being jointly administered under the caption In re: J. C. Penney Company, Inc. et al., Case No. 20-20182 (DRJ) Documents. Documents filed on the docket of and other information related to the Chapter 11 Cases are available free of charge online at https://cases.primeclerk.com/JCPenney.

Pursuant to Section 362 of the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed most actions against the Debtors, including actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Debtors' property. Subject to certain exceptions under the Bankruptcy Code, the filing of the Debtors' Chapter 11 Cases also automatically stayed the filing of most legal proceedings and other actions against or on behalf of the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Debtors' bankruptcy estates, unless and until the Court modifies or lifts the automatic stay as to any such claim.

The Debtors continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. Following the Petition Date, the Bankruptcy Court entered certain interim and final orders facilitating the Debtors’ operational transition into Chapter 11. These orders authorized the Debtors to, among other things, access cash collateral, pay employee wages and
7

Table of Contents
benefits, honor customer programs and pay vendors and suppliers in the ordinary course for all goods and services provided after the Petition Date. These orders are significant because they allow us to operate our businesses in the normal course.

Prior to the commencement of the Chapter 11 Cases, on May 15, 2020, the Debtors entered into a Restructuring Support Agreement (together with all exhibits and schedules thereto, the “RSA”) with members of an ad hoc group of lenders and noteholders (the “Ad Hoc Group”) that held approximately 70 percent of the Debtors’ first lien debt as of such date. On or about June 7, 2020, additional lenders and noteholders (collectively, and together with the Ad Hoc Group, the “Consenting Stakeholders”) executed the RSA. As of such date, the Consenting Stakeholders held approximately 93 percent of the Debtors’ prepetition first lien debt. The RSA contemplates a restructuring process that will establish both a financially sustainable operating company and a real estate investment trust. On September 10, 2020, the Company entered into a non-binding letter-of-intent (“LOI”) with the Ad Hoc Group, Simon Property Group and Brookfield Property Group that is generally consistent with the framework of the restructuring process contemplated in the RSA. Because the LOI is non-binding, and subject to definitive documentation that must be agreed upon by all parties and subsequently approved by the Bankruptcy Court, there is no assurance that the existing LOI will ultimately result in a final, approved sale or plan of reorganization.

Financing During the Chapter 11 Cases
See Note 9 for discussion of the DIP Credit Agreement, which provides up to $450 million in senior secured, super-priority new money financing, subject to the terms, conditions, and priorities set forth in the applicable definitive documentation and orders of the Bankruptcy Court.

Liabilities Subject to Compromise
As a result of the Chapter 11 Cases, the payment of pre-petition liabilities is generally subject to compromise pursuant to a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Debtors authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of the Debtors’ business and assets. Among other things, the Bankruptcy Court authorized, but did not require, the Debtors to pay certain pre-petition claims relating to employee wages and benefits, taxes, critical vendors and debt.

Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for different amounts. The amounts classified as liabilities subject to compromise may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determination of secured status of certain claims, the determination as to the value of any collateral securing claims, proof of claims or other events.

The following table presents liabilities subject to compromise as reported in the unaudited interim Consolidated Balance Sheet at August 1, 2020:

(In millions)August 1, 2020
Debt (1)
$3,289 
Operating leases942 
Merchandise accounts payable503 
Other accounts payable and accrued expenses167 
Other liabilities115 
Accrued interest34 
Total liabilities subject to compromise
$5,050 
(1) Please see Note 9 for details of the pre-petition debt reported as liabilities subject to compromise.

Executory Contracts
Subject to certain exceptions, under the Bankruptcy Code the Debtors may assume, assign or reject executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and fulfillment of other applicable conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such contract and, subject to certain exceptions, relieves the Debtors from performing future obligations under such contract but entitles the counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Alternatively, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease, if any, and provide adequate assurance of future performance. Accordingly, any description of an executory
8

Table of Contents
contract or unexpired lease with the Debtors in this report, including where applicable quantification of the Company’s obligations under such executory or unexpired lease of the Debtors, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code.


Reorganization Items, Net
Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of the following for the quarter ended August 1, 2020:
Three Months 
Ended
(In millions)August 1, 2020
Advisor fees$64 
Debtor-in-possession financing fees50 
Write-off of pre-petition unamortized debt issuance costs33 
Employee retention21 
Gains on lease termination(66)
Other6 
Total reorganization items, net (1)
$108 
(1) Cash paid for reorganization items, net for the three months ended August 1, 2020, was $79 million, which includes $2 million in prepaid expenses and the $50 million for DIP financing fees.

Store Asset Related Charges/Gains
In conjunction with our restructuring process that began toward the end of the first quarter of 2020 and continued into the second quarter with the bankruptcy proceedings, the Company has identified certain properties to be considered, and designated, for closing. Additionally, the filing of the Chapter 11 Cases and other restructuring considerations have resulted in various impairment analyses, the reassessment and remeasurement of certain reasonably certain lease terms and the reconsideration of the amortization periods for leasehold improvements and related fixed assets. The effects of these actions, both in the first and second quarters of 2020, resulted in multiple adjustments to store-related and other assets, including right-of-use lease assets and lease liabilities for the three-month and six-month periods ended August 1, 2020. These adjustments included impairments of long-lived assets, impairments of operating lease assets, remeasurement of certain operating lease assets and liabilities based on a reassessment of the reasonably certain lease term, and the rejection of certain leases through the Bankruptcy Court. Since these accounting write offs are primarily related to the eventual closure of stores and other properties, the Company has summarized the impact on the unaudited interim Consolidated Statement of Operations in the table below for the three-month and six-month periods ended August 1, 2020, including the caption in which each item is recorded in the unaudited interim Consolidated Statement of Operations.

Three Months EndedSix Months Ended
(In millions)August 1, 2020August 1, 2020Statement of Operations Line Item
Impairments of long-lived assets (see note 13)$26 $75 Restructuring and management transition
Impairments of operating lease assets (see note 13)2 50 Restructuring and management transition
Write off of closed store assets1 1 Restructuring and management transition
Accelerated amortization of operating lease assets (see note 11)11 11 SG&A
Accelerated depreciation of long-lived assets (1)
28 28 Depreciation and amortization
Gain on remeasurement of operating lease assets and operating lease liabilities (see notes 11 and 13)(20)(20)Restructuring and management transition
Gain on store lease terminations from rejection of leases (see note 11)(61)(61)Reorganization items, net
Gain on sale of closing store fixtures(1)(1)Restructuring and management transition
  Total$(14)$83 
9

Table of Contents

(1) Represents the incremental depreciation expense recorded during the respective period due to the reduced estimated useful life of the underlying long-lived assets

The accounting standards applicable to these adjustments to long-lived assets and operating lease assets and liabilities are based on various facts and circumstances over the period from a decision to close a store (as an indicator of impairment) to the cease use date and lease rejection approval from the Bankruptcy Court. These events drive the timing of recognition and the presentation location in the unaudited interim Consolidated Statement of Operations. At the point that an operating lease for a closing store is rejected and the Company ceases use of the property, all the store’s related long-lived assets will be written-off to their residual value and the store’s operating lease assets and liabilities will be written down to zero. However, under the applicable accounting standards, the write down of these assets and liabilities occurs at different points in time as these stores are eventually closed and the related store leases progress toward rejection. As of August 1, the Company has additional net long-lived assets of $50 million and net operating lease liabilities of $79 million, recorded on the unaudited interim Consolidated Balance Sheet, all related to stores that are currently scheduled for closing. These amounts are expected to be recorded as charges/gains to the statement of operations in future periods through the cease use date and Bankruptcy Court approval of the rejection of the lease, which is currently scheduled for October and November 2020.

3.  Global COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared a global pandemic related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The COVID-19 pandemic has significantly impacted the economic conditions in the U.S. and globally. The Company announced the temporary closing of all stores effective March 19, 2020, along with most of its supply chain facilities; however, we continued to operate jcp.com and fulfill orders via three eCommerce fulfillment centers. Additionally, subsequent to temporarily closing all stores, the Company furloughed approximately 80,000 associates, including store and supply chain associates, as well as some corporate office associates

In late April 2020, the Company began re-opening stores with limited operating hours and staffing. The Company re-opened 11 stores in fiscal April, 464 stores in fiscal May and 366 stores in fiscal June. All open stores and facilities have implemented enhanced safety procedures and enhanced cleaning protocols to protect the health of our customers and associates. The majority of our stores continue to operate with limited hours and staffing. As of August 1, the Company has completed the closing of 7 stores and is in the process of closing 146 stores, has commenced going out of business sales in most of these stores and expects the majority of the total 153 stores to close by the end of October, with the remaining stores closing in November. As of August 31, 2020, approximately 18,000 associates remain on furlough.

The COVID-19 pandemic has, and continues to have, a material impact on the Company’s business operations, financial position, liquidity, capital resources and results of operations, including the Company’s filing of the Chapter 11 Cases. Because it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, or the outcome of the Chapter 11 Cases, current financial information may not be indicative of future operating results.

4. Effect of New Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting,” which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. ASU No. 2020-04 is effective as of March 12, 2020, through December 31, 2022, and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. We do not anticipate a material impact from the adoption of this new standard.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. This standard will be effective for public entities for fiscal years, and interim periods within those fiscal years,
10

Table of Contents
beginning after December 15, 2020; however, early adoption is permitted. We have adopted this new standard beginning February 2, 2020, and the adoption did not have a material impact on the unaudited Interim Consolidated Financial Statements.

5. Earnings/(Loss) per Share
Net income/(loss) and shares used to compute basic and diluted earnings/(loss) per share (EPS) are reconciled below:
 Three Months EndedSix Months Ended
(In millions, except per share data)August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Earnings/(loss)
Net income/(loss)$(398)$(48)$(944)$(202)
Shares
Weighted average common shares outstanding (basic shares)324.6 

319.4 324.2 318.6 
Adjustment for assumed dilution:
Stock options and restricted stock awards    
Weighted average shares assuming dilution (diluted shares)324.6 319.4 324.2 318.6 
EPS
Basic$(1.23)$(0.15)$(2.91)$(0.63)
Diluted$(1.23)$(0.15)$(2.91)$(0.63)
The following average potential shares of common stock were excluded from the diluted EPS calculation because their effect would have been anti-dilutive: 
 Three Months EndedSix Months Ended
(Shares in millions)August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Stock options and restricted stock awards9.9 24.7 15.1 23.6 
6. Revenue

Our contracts with customers primarily consist of sales of merchandise and services at the point of sale, sales of gift cards to a customer for a future purchase, customer loyalty rewards that provide discount rewards to customers based on purchase activity, and certain licensing and profit-sharing arrangements involving the use of our intellectual property by others.
Revenue includes Total net sales and Credit income and other. Net sales are categorized by merchandise and service sale groupings as we believe it best depicts the nature, amount, timing and uncertainty of revenue and cash flow.

The following table provides the components of Net sales for the three and six months ended August 1, 2020 and August 3, 2019:
11

Table of Contents
Three Months EndedSix Months Ended
($ in millions)August 1, 2020August 3, 2019August 1, 2020August 3, 2019
Women’s apparel$271 19 %$558 22 %$487 19 %$1,073 21 %
Men’s apparel and accessories289 21 %537 21 %50220 %1,015 21 %