 
1 PENNEY INTERMEDIATE HOLDINGS LLC Consolidated Financial Statements Year ended January 29, 2022 (Fiscal 2021) and period from  October 22, 2020 (inception) to January 30, 2021 (Fiscal 2020) (With Independent Auditors’ Report Thereon) 
 
 
 
2  PENNEY INTERMEDIATE HOLDINGS LLC Consolidated Financial Statements January 29, 2022, and January 30, 2021 Table of Contents Page(s) Independent Auditors’ Report 3 Consolidated Statements of Comprehensive Income 5 Consolidated Balance Sheets 6 Consolidated Statements of Member’s Equity 7 Consolidated Statements of Cash Flows 8 Notes to the Consolidated Financial Statements 9 
 
 
 
KPMG LLP  Suite 1400  2323 Ross Avenue  Dallas, TX 75201-2721    KPMG LLP, a Delaware limited liability partnership and a member firm of  the KPMG global organization of independent member firms affiliated with  KPMG International Limited, a private English company limited by guarantee.  The Board of Managers  Penney Intermediate Holdings LLC:  Opinion  We have audited the consolidated financial statements of Penney Intermediate Holdings LLC and its  subsidiaries (the Company), which comprise the consolidated balance sheets as of January 29, 2022 and  January 30, 2021, and the related co cash flows for the year ended January 20, 2022 and the period from October 22, 2020 (inception) to January  30, 2021, and the related notes to the consolidated financial statements.  In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the  financial position of the Company as of January 29, 2022 and January 30, 2021, and the results of its  operations and its cash flows for the year ended January 29, 2022 and the period from October 22, 2020  (inception) to January 30, 2021 in accordance with U.S. generally accepted accounting principles.  Basis for Opinion  We conducted our audits in accordance with auditing standards generally accepted in the United States of  America (GAAS). Our responsibilities under those standards Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to  be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant  ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient  and appropriate to provide a basis for our audit opinion.  Responsibilities of Management for the Consolidated Financial Statements  Management is responsible for the preparation and fair presentation of the consolidated financial statements in  accordance with U.S. generally accepted accounting principles, and for the design, implementation, and  maintenance of internal control relevant to the preparation and fair presentation of consolidated financial  statements that are free from material misstatement, whether due to fraud or error.  In preparing the consolidated financial statements, management is required to evaluate whether there are  conditions or events, considered in the aggregate, that raise substantial doubt  continue as a going concern for one year after the date that the consolidated financial statements are issued.  lidated Financial Statements  Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a  whole are free from material misstatement, whether due to fraud or error, and to iss includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and  therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material  misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher  than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,  misrepresentations, or the override of internal control. Misstatements are considered material if there is a  substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a  reasonable user based on the consolidated financial statements.  
 
 
 
In performing an audit in accordance with GAAS, we:  Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the  Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt abo as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the  planned scope and timing of the audit, significant audit findings, and certain internal control related matters that  we identified during the audit.  Dallas, Texas  March 31, 2022  
 
 
 
5  PENNEY INTERMEDIATE HOLDINGS LLC Consolidated Statements of Comprehensive Income Year ended January 29, 2022, and period from October 22, 2020 (inception) to January 30, 2021 (In millions) Fiscal 2020 Total net sales 7,870$ 1,211$ Credit income and other 366 59  Total revenues 8,236 1,270  Costs and expenses/(income): Cost of goods sold (exclusive of depreciation and amortization shown separately below) 5,064 853  Selling, general and administrative 2,452 330  Depreciation and amortization 211 31  Real estate and other, net (14) - Restructuring, impairment, store closing and other costs 47 34 Total costs and expenses 7,760 1,248  Operating income 476 22  Bargain purchase (gain) - (1,294) Net interest expense 111 15  Loss on extinguishment of debt 5 -  Income before income taxes 360 1,301      Income tax expense 13 2  Net income 347$ 1,299$ Other comprehensive income:     Currency translation adjustment (2) - Comprehensive income 345$ 1,299$ See accompanying Notes to Consolidated Financial Statements. Fiscal 2021 
 
 
 
6 PENNEY INTERMEDIATE HOLDINGS LLC Consolidated Balance Sheets (In millions) January 29, 2022 January 30, 2021 Assets Current assets: Cash and cash equivalents 396$ 275$ Merchandise inventory 1,653 1,520 Prepaid expenses and other assets 270 365 Total current assets 2,319 2,160 Property and equipment, net 860 951 Operating lease assets 1,579 1,667 Financing lease assets 87 39 Other assets 315 376 Total assets 5,160$ 5,193$ Liabilities and member’s equity Current liabilities: Merchandise accounts payable 313 151 Other accounts payable and accrued expenses 665 566 Current operating lease liabilities 49 56 Current financing lease liabilities 3 - Current portion of long-term debt, net 2 20 Total current liabilities 1,032 793 Noncurrent operating lease liabilities 1,768 1,803 Noncurrent financing lease liabilities 89 40 Long-term debt 490 785 Other liabilities 165 173 Total liabilities 3,544 3,594 Member’s equity Member’s contributions 300 300 Profits interest plan 1 - Accumulated other comprehensive income (loss) (2) - Reinvested earnings 1,317 1,299 Total member’s equity 1,616 1,599 Total liabilities and member’s equity 5,160$ 5,193$ See accompanying Notes to Consolidated Financial Statements. 
 
 
 
7 PENNEY INTERMEDIATE HOLDINGS LLC Consolidated Statements of Member’s Equity (In millions) Member’s  Contributions/  (Distributions) Profits Interest  Plan Grants/  (Distributions) Accumulated Other  Comprehensive  Income/(Loss) Reinvested     Earnings Total Member's  Equity October 22, 2020 (inception)  $                         -  $                        -  $                            -  $                        -  $                       -  Member contributions                         300                          -                              -                          -                       300  Net income                           -                          -                              -                    1,299                    1,299  January 30, 2021  $                     300  $                      -    $                          -    $                1,299  $                1,599  Member tax distributions                           -                          -                              -                     (257)                     (257) Net income                           -                          -                              -                       347                       347  Currency translation adjustment                           -                          -                             (2)                          -                         (2) Profits interest plan grants                           -                           1                              -                          -                           1  Purchase price adjustments                           -                          -                              -                       (72)                       (72) January 29, 2022  $                     300  $                       1  $                         (2)  $                1,317  $                1,616  See accompanying Notes to Consolidated Financial Statements. 
 
 
 
8 PENNEY INTERMEDIATE HOLDINGS LLC Consolidated Statements of Cash Flows Year ended January 29, 2022, and period from October 22, 2020 (inception) to January 30, 2021 (In millions) Cash flows from operating activities: Net income 347$ 1,299$ Adjustments to reconcile net income to net cash provided by operating activities: Gain on asset disposition (14) (1) Restructuring, impairment, store closing and other costs, non-cash 15 - Loss on extinguishment of debt 5 - Gain on insurance proceeds received for damage to property (3) - Gain on bargain purchase - (1,294) Depreciation and amortization 211 31 Change in cash from operating assets and liabilities: Merchandise inventory (153) 232 Prepaid expenses and other assets 102 84 Merchandise accounts payable 162 17 Other accounts payable, accrued expenses and other liabilities 91 4 Net cash provided by operating activities 763 372 Cash flows from investing activities: Capital expenditures (76) (9) Proceeds from sale of real estate assets 16 3 Insurance proceeds received for damage to property and equipment 7 - Acquisition of JCPenney net assets, net of cash acquired (See Note 5) - (634) Net cash used by investing activities (53) (640) Cash flows from financing activities: Proceeds from issuance of long-term debt 211 291 Payments of long-term debt (531) - Issuance costs on re-financing of debt (10) (48) Proceeds from borrowings under the revolving credit facility - 445 Payments of borrowings under the revolving credit facility - (445) Proceeds from equity contributions - 300 Member tax distributions (257) - Repayments of principal portion of finance leases (2) - Net cash used by/provided by financing activities (589) 543 Net increase in cash and cash equivalents 121 275 Cash and cash equivalents at beginning of period 275 - Cash and cash equivalents at end of period 396$ 275$ Supplemental non-cash investing and financing activity: Accrued capital expenditures 6$ 1$ Debt issued in satisfaction of debts of seller in net asset acquisition - 520 Contingent consideration liability for net asset acquisition - 105 See accompanying Notes to Consolidated Financial Statements.  Fiscal 2020 Fiscal 2021 
 
 
 
9 PENNEY INTERMEDIATE HOLDINGS LLC Notes to Consolidated Financial Statements 1.  Basis of Presentation and Consolidation Formation and structure Penney Intermediate Holdings LLC and its subsidiaries (the Company), formed on October 22, 2020, is the direct subsidiary of  Penney Holdings LLC (“Holdings”), a direct subsidiary of Copper Retail JV LLC (“Copper”), a Delaware limited liability  company.  The assets of Copper and Holdings consist solely of the 100% ownership in each direct subsidiary.  Copper and its  related legal entity structure were formed to acquire certain operating assets and related liabilities of J.C. Penney Company, Inc.  (“JCPenney”) on December 7, 2020 (the acquisition date).  All acquired assets and liabilities of JCPenney are owned and  operated by the Company and its subsidiaries. Copper is a joint venture formed on October 22, 2020, and initially owned 50% each by Simon Property Group, L.P. (“Simon”)  and Brookfield Asset Management Inc. (“Brookfield”). Through the date of acquisition, Simon and Brookfield each  contributed $150 million in member capital contributions that were contributed through Holdings to the Company.  Subsequent  to the acquisition date, Simon and Brookfield sold 16.67% of the outstanding membership interest in Copper to Authentic  Brands Group, LLC (“ABG”). Nature of Operations The JCPenney brand was founded by James Cash Penney in 1902. We operate the JCPenney brand through the operation of  670 department stores in 49 states and Puerto Rico, as well as through our eCommerce website at jcp.com and our mobile  application. We sell family apparel and footwear, accessories, fine and fashion jewelry, beauty products, and home furnishings.  In addition, our department stores provide services, such as styling salon, optical, and portrait photography.  Basis of Presentation and Consolidation The Consolidated Financial Statements present the results of the Company and our subsidiaries. All significant inter-company  transactions and balances have been eliminated in consolidation. Certain amounts were reclassified to conform with current  year presentation. Fiscal Year The Company’s fiscal year consists of the 52-week period ending on the Saturday closest to January 31.  Every sixth year, the  Company’s fiscal year consists of 53 weeks ending on the Saturday closest to January 31.  Unless otherwise stated, references  to 2021 and 2020 in this report relate to fiscal year rather than calendar year.  Fiscal 2020 is the period from October 22, 2020  (inception) to January 30, 2021, which includes operations beginning on the acquisition date.  Please refer to Note 5  (“Acquisition”) for further details.  Fiscal 2021 is the 52-week period ending January 29, 2022. Use of Estimates and Assumptions The preparation of financial statements, in conformity with generally accepted accounting principles in the United States of  America, requires us to make assumptions and use estimates that affect the reported amounts of assets and liabilities and  disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Such estimates and assumptions are subject to inherent uncertainties, which may result in actual  amounts differing from reported amounts. 2. Significant Accounting Policies 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 product groupings as we believe it best  depicts the nature, amount, timing and uncertainty of revenue and cash flow. Credit income and other encompasses the revenue earned from the agreement with Synchrony Financial Services Company (“Synchrony”) associated with our private label credit card and co-branded MasterCard programs. Merchandise and Service Sales Total net sales are generally recorded when payment is received, and the customer takes control of the merchandise and are  reported net of sales tax.  Service revenue is recorded at the time the customer receives the benefit of the service, such as salon,  portrait and optical.  Shipping and handling fees charged to customers are also included in total net sales with corresponding 
 
 
 
10 costs recorded as cost of goods sold.  Net sales are not recognized for estimated future returns which are estimated based  primarily on historical return rates and sales levels. Gift Card Revenue At the time gift cards are sold a performance obligation is created and no revenue is recognized; rather, a contract liability is  established for our obligation to provide a merchandise or service sale to the customer for the face value of the card.  The  contract liability is relieved, and a net sale is recognized when gift cards are redeemed for merchandise or services.  We  recognize revenue for unredeemed gift cards (gift card breakage) over the expected redemption period of gift cards.  Breakage  is estimated based on historical redemption patterns and the estimates can vary based on changes in the usage patterns of our  customers. Customer Loyalty Rewards Customers who spend with us using our private label card or registered loyalty card can receive points that accumulate towards  earning JCPenney Rewards certificates, which are redeemable for a discount on future purchases.  Points earned by a loyalty  customer do not expire as long as another purchase is made within the next 12 months, however, any certificates earned expire  two months from the date of issuance.  We account for our customer loyalty rewards by deferring a portion of our sales to  loyalty points expected to be earned towards a reward certificate, and then recognize the reward certificate as a net sale when  used by the customer in connection with a merchandise or service sale.  The points earned toward a future reward are valued at  their relative standalone selling price based on historical redemption patterns. Licensing Agreements Our private label credit card and co-branded MasterCard programs are owned and serviced by Synchrony. Under our  agreement, we receive periodic cash payments from Synchrony based upon the consumers’ usage of the co-branded card and  the performance of the credit card portfolio.  We participate in the programs by providing marketing promotions designed to  increase the use of each card, including enhanced marketing offers for cardholders.  Additionally, we accept payments in our  stores from cardholders who prefer to pay in person when they are shopping in our locations.  Revenue related to this  agreement is recognized over the time we have fulfilled our performance obligations and is reflected in Credit income and  other.  Principal Versus Agent We assess principal versus agent considerations depending on our control of the good or service before it is transferred to the  customer.  When we are the principal and have control of the specified good or service, we include as a net sale the gross  amount of consideration to which we expect to be entitled for that specified good or service in revenue.  In contrast, when we are the agent and do not have control of the specified good or service, we include as a net sale the fee or commission to which  we expect to be entitled for the agency service.  In certain instances, the fee or commission might be the net amount retained after paying the supplier.  Cost of Goods Sold (Exclusive of Depreciation and Amortization) Cost of goods sold includes costs directly related to bringing merchandise to its final selling destination. These costs include the  cost of the merchandise (net of discounts or allowances earned), sourcing and procurement costs, buying and brand  development costs, including buyers’ salaries and related expenses, royalties and design fees, freight costs, import duties,  warehouse operating expenses, merchandise examination, inspection and testing, store merchandise distribution center  expenses, including rent, and shipping and handling costs incurred on eCommerce sales.    Vendor Allowances We receive vendor support in the form of cash payments or allowances for a variety of reimbursements such as cooperative  advertising, markdowns, vendor shipping and packaging compliance, defective merchandise, purchase of vendor specific  fixtures and other vendor contributions. We have agreements in place with each vendor setting forth the specific conditions for  each allowance or payment. Depending on the arrangement, we either recognize the allowance as a reduction of current costs or  defer the payment over the period the related merchandise is sold. If the payment is a reimbursement for costs incurred, it is generally offset against those related costs; otherwise, it is treated as a reduction to the cost of merchandise. Vendor compliance credits reimburse us for incremental merchandise handling expenses incurred due to a vendor’s failure to  comply with our established shipping or merchandise preparation requirements. Vendor compliance credits are recorded as a  reduction of Cost of goods sold on the Consolidated Statements of Comprehensive Income. Selling, General and Administrative Expenses (SG&A) SG&A expenses include the following costs, except as related to merchandise buying, sourcing, warehousing, or distribution  activities: salaries, marketing costs, occupancy and rent expense, utilities and maintenance, costs related to information  
 
 
 
11 technology, administrative costs related to our corporate and district and regional operations, real and personal property and  other taxes (excluding income taxes) and credit/debit card fees.    Advertising Advertising costs, which include newspaper, television, internet search marketing, radio, and other media advertising, are  expensed either as incurred or the first time the advertisement occurs.  For cooperative advertising programs offered by national  brands that require proof of advertising to be provided to the vendor to support the reimbursement of the incurred cost, we  offset the allowances against the related advertising expense.  Programs that do not require proof of advertising are monitored  to ensure that the allowance provided by each vendor is a reimbursement of costs incurred to advertise for that vendor’s  label. Total advertising costs, net of cooperative advertising vendor reimbursements, were $406 million in fiscal 2021 and $43  million in fiscal 2020.   Income Taxes The Company is a single member LLC and, therefore, a disregarded entity for U.S. federal and state income tax purposes.  However, some states impose income type taxes on LLC’s. Accordingly, no federal income tax provision, a limited state income  tax provision and a foreign income tax provision have been made in the Company’s financial statements.     The Company’s subsidiaries account for their respective legal entity-level state and foreign income tax provision, which is  comprised primarily of the entity-level Texas Gross Margin tax and foreign income taxes incurred by its foreign and Puerto  Rico subsidiaries. Such income taxes are accounted for using the asset and liability method and the related expense (benefit) is  recorded in Income tax expense (benefit) in the Consolidated Statements of Comprehensive Income.    Certain states impose franchise and gross receipts taxes at the entity level.  These non-income taxes are accounted for within SG&A in the Consolidated Statements of Comprehensive Income. Cash and Cash Equivalents Cash and cash equivalents represent cash in banks and in transit, which include credit card sales transactions that are settled  early in the following period.  Merchandise Inventory Inventories are valued at the lower of cost (using the first-in, first-out or “FIFO” method) or market using the retail inventory  method (RIM). Under RIM, retail values of merchandise groups are converted to a cost basis by applying the specific average  cost-to-retail ratio related to each merchandise grouping. Shrinkage accruals have been estimated as a percent of sales for fiscal 2021 based on historical shrinkage experience. Physical  inventory counts for stores are taken at least annually and cycle count activities for distribution centers and regional warehouses  are executed on a daily basis.  Inventory records and shrinkage accruals are adjusted based on the actual results from physical  inventories and cycle counts.  Property and Equipment, Net  Estimated Useful Lives  ($ in millions) (Years)  January 29, 2022  January 30, 2021 Land N/A 190$                       192$                        Buildings 25 366 341 Furniture and equipment 5 247 238 Leasehold improvements (1) 8 222 197 Finance leases (equipment) 1 2 2 Accumulated depreciation (167) (19) Property and equipment, net 860$                       951$                        (1) Leasehold improvements are depreciated over the shorter of the estimated useful lives of the improvements or the term of the  lease, including renewals determined to be reasonably certain. Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed primarily by using the  straight-line method over the estimated useful lives of the related assets.  
 
 
 
12 We expense routine maintenance and repairs when incurred. We capitalize major replacements and improvements. We remove  the cost of assets sold or retired and the related accumulated depreciation or amortization from the accounts and include any  resulting gain, loss, or impairment in net income/(loss). We recognize a liability for our conditional asset retirement obligations, which are primarily related to asbestos removal, when  probable and if the liability’s value can be reasonably estimated. Capitalized Software Costs We capitalize costs associated with the acquisition or development of major software for internal use in other assets in our  Consolidated Balance Sheets and amortize the asset over the expected useful life of the software, generally between three and  seven years. We only capitalize subsequent additions, modifications, or upgrades to internal-use software to the extent that such  changes allow the software to perform a task it previously did not perform. We expense software maintenance and training costs  as incurred. Cloud computing arrangements are evaluated to determine whether the arrangement includes a software license or is a service  contract.  If determined to be a software license, then the arrangement is capitalized as another asset and amortized over the  expected life of software, generally between three to seven years.  If determined to be a service contract, then the cost of the  arrangement is expensed as the services are provided. Impairment of Long-Lived and Indefinite-Lived Assets We evaluate long-lived assets such as store property and equipment and other corporate assets for impairment whenever events  or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. Factors considered  important that could trigger an impairment review include, but are not limited to, significant underperformance relative to  historical or projected future operating results and significant changes in the manner of use of the assets or our overall business  strategies. Assets or asset groups that trigger an impairment review are tested for recoverability by comparing the estimated undiscounted cash flows expected to result from the use of the asset plus any net proceeds expected from disposition of the  asset to the carrying value of the asset. If the asset or asset group is not recoverable on an undiscounted cash flow basis, the  amount of the impairment loss is measured by comparing the carrying value of the asset or asset group to its fair value and  depending on the transaction any loss is included in Restructuring, impairment, store closing and other costs in the  Consolidated Statements of Comprehensive Income. We estimate fair value based on either a projected discounted cash flow  method using a discount rate that is considered commensurate with the risk inherent in our current business model or appraised value, as appropriate. We also take other factors into consideration in estimating the fair value of our stores, such as local  market conditions, operating environment, mall performance and other trends.   We assess the recoverability of indefinite-lived intangible assets at least annually during the fourth quarter of our fiscal year or  whenever events or changes in circumstances indicate that the carrying amount of the indefinite-lived intangible asset may not  be fully recoverable. Examples of a change in events or circumstances include, but are not limited to, a decrease in the market  price of the asset, a history of cash flow losses related to the use of the asset or a significant adverse change in the extent or  manner in which an asset is being used. We test our indefinite-lived intangible assets utilizing the relief from royalty method to  determine the estimated fair value for each indefinite-lived intangible asset. The relief from royalty method estimates our  theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates,  royalty rates, growth rates, sales projections, and terminal value rates.  Assets acquired (including property and equipment, software, and intangible assets) in connection with the acquisition of J.C.  Penney’s retail and operating assets have been recorded at their fair values as of December 7, 2020, the acquisition date. Please  refer to Note 5 “Acquisition” for details.  No impairments were recorded for the year ended January 29, 2022, or the period  from October 22, 2020, to January 30, 2021. Leases At the lease commencement date, based on certain criteria, we determine if a lease is classified as an operating lease or  financing lease and then recognize a right-of-use lease asset and lease liability on the Consolidated Balance Sheets for all leases  (with the exception of leases that have a term of twelve months or less). The lease liability is measured as the present value of  unpaid lease payments measured based on the reasonably certain lease term and corresponding discount rate. The initial right- of-use lease asset is measured as the lease liability plus certain other costs and is reduced by any tenant allowances collected from the lessor.   The Company assumed certain leases as part of the acquisition of J.C. Penney’s retail and operating assets. Assumed leases  were measured on the acquisition date as if they were new leases using our incremental borrowing rate as of the acquisition  date, including re-assessing the remaining lease term considering options to extend or terminate the lease. Leases that were  modified during the current period were re-assessed for lease classification using the modified terms and conditions. 
 
 
 
13 The right-of-use asset was initially measured at an amount equal to the lease liability, adjusted for favorable or unfavorable  terms of the lease when compared with market terms. Therefore, the right-of-use asset was adjusted downward for any net  unfavorable adjustment and will be amortized over the lease term. Lease payments include fixed and in-substance fixed payments, variable payments based on an index or rate and termination  penalties. Lease payments do not include variable lease components other than those that depend on an index or rate, or any  payments not considered part of the lease (i.e., payment of the lessor’s real estate taxes and insurance). Payments not  considered lease payments are expensed as incurred. Some leases require additional payments based on sales and the related  contingent rent is recorded as rent expense when the payment is probable. As a policy election, we consider fixed lease  payments and all related other fixed payments (i.e., common area maintenance) as one component of a lease.   The reasonably certain lease term includes the non-cancelable lease term and any renewal or termination option periods where  we have economically compelling reasons for future exercise.  The discount rate used in our present value calculations is the rate implicit in the lease, when known, or our estimated  incremental borrowing rate. Our incremental borrowing rate is estimated based on our secured borrowings and our credit risk  relative to the time horizons of other publicly available data points that are consistent with the respective lease term. Whether an operating lease or a financing lease, the lease liability is amortized over the lease term at a constant periodic interest  rate. The right-of-use assets related to operating leases are amortized over the lease term on a basis that renders a straight-line  amount of rent expense which encompasses the amortization and interest component of the lease. With the occurrence of certain  events, the amortization pattern for an operating asset is adjusted to a straight-line basis over the remaining lease term.  The  right-of-use asset related to a financing lease is amortized on a straight-line basis over the lease term. Rent on short-term leases  is expensed on a straight-line basis over the lease term. When a lease is modified or there is a change in lease term, we assess  for any change in lease classification and remeasure the lease liability with a corresponding increase or decrease to the right-of- use asset. Exit or Disposal Activity Costs Costs associated with exit or disposal activities are recorded at their fair values when a liability has been incurred. Severance is  recorded over the service period required to be rendered in order to receive the termination benefits or, if employees will not be  retained to render future service, the cost is recognized when communication has occurred to the affected employees. Other exit  costs are accrued when incurred. 3. Global COVID-19 Pandemic The global COVID-19 pandemic which began in March 2020 has had, and continues to have, an impact on the Company’s  business operations, financial position, liquidity, capital resources and results of operations. The full impact of the pandemic  will continue to depend on future developments, including the continued spread and duration of the pandemic, the emergence of future variant strains of COVID-19, the availability and distribution of effective medical treatments or vaccines as well as any  related federal, state, or local governmental orders, restrictions, or mandates. In addition, numerous uncertainties continue to  surround the pandemic and its ultimate impact on the Company, including the timing and extent of recovery in consumer traffic and spending, potential delays, interruptions and disruptions in the Company’s supply chain, maintenance of temporary  government stimulus programs, labor shortages and intense competition for talent, all of which are highly uncertain and cannot  be predicted. The Company did not experience sustained store closures due to COVID-19 during fiscal 2021. 4. Effect of New Accounting Standards  In November 2021, the Financial Accounting Standards Board (“FASB”) issued No. 2021-09, “Discount Rate for Lessees That  Are Not Public Business Entities”, which provides more flexibility for lessees by allowing them to make the election by class of  underlying asset, rather than at the entity-wide level. The amendments in the update require that a lessee use the rate implicit in  the lease when it is readily determinable, instead of a risk-free rate or incremental borrowing rate. An entity that makes the risk- free rate election is required to disclose which asset classes it has elected to apply a risk-free rate. For entities that have adopted  Topic 842 as of November 11, 2021, the amendments in this Update are effective for fiscal years beginning after December 15,  2021, and interim periods within fiscal years beginning after December 15, 2022. Earlier application is permitted. Entities are  required to apply the amendments on a modified retrospective basis to leases that exist at the beginning of the fiscal year of  adoption of a final update. The adoption of the amendments should not be considered an event that would cause remeasurement  and reallocation of the consideration in the contract (including lease payments) or reassessment of lease term or classification.  We do not anticipate a material impact from the adoption of this new standard. In March 2021, the FASB issued ASU No.  2021-03, “Intangibles—Goodwill and Other (Topic350): Accounting Alternative for  Evaluating Triggering Events”, which will allow private companies and not-for-profit entities to elect not to monitor for  goodwill impairment triggering events during the reporting period and, instead, to evaluate the facts and circumstances as of the  
 
 
 
14 end of the reporting period to determine whether it is more likely than not that goodwill is impaired. The amendments in this  Update are effective on a prospective basis for fiscal years beginning after December 15, 2019. The Company adopted this  guidance and it did not have a material impact on the Company’s consolidated financial statements and related disclosures. 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.  The Company adopted this guidance and it did not have a material impact on the Company’s  consolidated financial statements and related disclosures. 5. Acquisition On October 28, 2020, Copper entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with JCPenney and  certain of its subsidiaries to acquire substantially all of JCPenney’s retail and operating assets, and assume certain of  JCPenney’s obligations associated with such purchased assets, pursuant to Section 363 of the U.S. Bankruptcy Code in  connection with JCPenney’s voluntary chapter 11 cases pending in the United States Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court"). The Asset Purchase Agreement and the transactions contemplated thereby were approved  by the Bankruptcy Court on November 9, 2020. Copper subsequently designated the Company and its subsidiaries as  purchasers under the Asset Purchase Agreement.  The acquisition of substantially all of the retail and operating assets of  JCPenney by the Company and its subsidiaries was completed on December 7, 2020.  Pursuant to the Asset Purchase  Agreement, the Company and its subsidiaries also assumed certain liabilities related to such assets.  The company accounted for the acquisition as a business combination in accordance with Accounting Standards Codification  (“ASC”) 805.  The consideration transferred for the acquisition is as follows: (in millions) December 7, 2020 Cash paid, net of cash acquired of $266 634$ Term loan 520 Estimated contingent consideration 105     Total consideration transferred, net of cash acquired 1,259$ The estimated contingent consideration consists of both (i) an earn-out liability with fair value of $74 million and (ii) a liability  related to any future receipts of credit card company holdback deposits with a fair value of $31 million. The value of the earn- out liability depends on the twelve-month average of the net merchandise accounts payable applicable for fiscal 2021 and fiscal  2022 and was estimated using a Monte Carlo simulation approach. The credit card holdback liability is equal to 50% of any  cash proceeds received in connection with the release of the bankruptcy related credit card company holdbacks.  Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The following  table provides the preliminary estimated fair values which were recorded in the January 30, 2021 consolidated financial  statements of the identifiable assets acquired and liabilities assumed as of the acquisition date: (in millions) December 7, 2020 Merchandise inventory $     1,752 Prepaid expenses and other assets                                      449 Property and equipment                               968 Capitalized software                                      141 Indefinite-lived intangible assets                                      113 Assumed financing lease right-of-use assets                                        40 Assumed operating lease right-of-use assets                               647 Master lease right-of-use assets                                   1,032 Other assets                                        87 Merchandise accounts payable                                    (134) 
 
 
 
15 Other accounts payable and accrued expenses (496) Assumed financing lease liabilities                                      (40) Assumed operating lease liabilities                                    (650) Master lease liabilities                                 (1,215) Other liabilities                             (141) Total net assets excluding cash acquired $                           2,553 We measured property and equipment assets using a combination of the cost, sales comparison, and income approach, which  were primarily based on significant Level 2 and Level 3 inputs, such as market participant assumptions, the highest and best use  assumptions, estimates of reproduction/replacement costs, normal useful lives, long-term growth rates, market values and  discount rates.  The fair value assigned to intangible assets (e.g. capitalized software, indefinite-lived intangible assets) acquired were primarily  derived from Level 2 and Level 3 inputs, such as estimates, assumptions, and other information compiled by management,  including independent valuation that utilized established valuation techniques. The brand names are valued using the relief from  royalty method and the internally developed software is valued using the cost approach. The relief from royalty method  estimates our theoretical royalty savings from ownership of the intangible assets. Key assumptions in determining relief from royalty include, among other things, discount rates, royalty rates, growth rates, sales projections, and terminal value rates. The right-of-use assets were adjusted for unfavorable terms of acquired leases when compared with market terms based on  Level 3 inputs such as discount rate.  The Company has determined the fair value of the identifiable net assets acquired exceeds the fair value of the consideration  transferred. Therefore, the Company reviewed the procedures it used to identify and measure the assets acquired and liabilities  assumed and to measure the fair value of the consideration transferred and concluded that the procedures and resulting  measures were appropriate. Accordingly, we recognized a bargain purchase gain of $1,294 million, which represents the excess  of the fair value of net assets acquired over the consideration transferred, which was recorded in bargain purchase gain in the  Consolidated Statement of Comprehensive Income in fiscal 2020.  The bargain purchase gain is primarily attributable the  distressed nature of the transaction as a result of the JCPenney bankruptcy.  The values reflected in the table above were subject to change as we finalized our assessment of the acquired assets and  liabilities during fiscal 2021.  See further discussion below.  The following table summarizes the fair value of the acquired  identifiable intangible assets and weighted-average useful life: Fair value Weighted average  Asset class (in millions) useful life Capitalized software $             141 3.3 Indefinite-lived intangible assets 113                              N/A      Total fair value of intangible assets $             254                              3.3  In connection with the acquisition, Copper incurred $57.1 million of debt issuance costs associated with the Term Loan (see  Note 13 “Long-Term Debt”), the Revolving Credit Facility (see Note 12 “Revolving Credit Facility”), and the FILO Facility  (see Note 13 “Long-Term Debt”). We recorded the $42.4 million of debt issuance costs related to the Revolving Credit Facility  on the balance sheet as Other assets, and the $5.2 million and $9.5 million of debt issuance costs related to the Term Loan and  the FILO Facility, respectively, was recorded on the balance sheet as a reduction to the face value of the debt incurred. In  addition, we recorded $34 million in Restructuring, impairment, store closing and other costs in our Consolidated Statements of  Comprehensive Income.  These costs included $19 million related to the planning and execution of the acquisition, primarily  for financial advisory, legal, and other professional service fees, $7 million in pre-acquisition retention programs, and $3  million in taxes and earnout fees related to the acquisition. Fiscal 2021 Adjustments related to the Acquisition   The carrying value of the contingent consideration must be remeasured at the end of each reporting period.  As of January 29,  2022, the fair value of the estimated earn-out liability decreased to $68 million and the credit card holdback liability decreased  to $25 million.  The current portion of the earn-out liability and the credit card holdback liability were recorded in Other  accounts payable and accrued expenses in the Consolidated Balance Sheets.  The decrease in the earn-out liability was recorded  as a benefit in Restructuring, impairment, store closing and other costs in the Consolidated Statements of Comprehensive  Income. 
 
 
 
16 As noted above, the assets acquired, and liabilities assumed in connection with the acquisition were recorded at fair value.   Copper could adjust any asset and liability amounts acquired based on new information obtained about facts and circumstances  that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of  that date.   The Company recorded purchase price adjustments for provisional assets and liabilities acquired totaling ($72) million in fiscal  2021, which was recorded as an adjustment to reinvested earnings.  These adjustments noted below related to the acquisition on  December 7, 2020, and reduced the bargain purchase gain to $1,222 million, which represents the excess of the fair value of net  assets acquired over the consideration transferred.  (In millions) Category of Assets/ Liabilities Acquired January 29, 2022 Adjustment on asset held in escrow Other liabilities (62)$ Decommissioning costs Other accounts payable and accrued liabilities (17) Puerto Rico entity deferred tax liabilities Other liabilities (6) Gift card breakage adjustment Other accounts payable and accrued liabilities 11 Other adjustments Property and equipment 2 Total purchase price adjustments (72)$ Bargain purchase gain (original) 1,294 Adjusted bargain purchase gain 1,222$ 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 product groupings as we believe it best  depicts the nature, amount, timing and uncertainty of revenue and cash flow. The components of Total net sales for fiscal 2021 and fiscal 2020 were as follows: Fiscal 2021 Fiscal 2020(1) Women's apparel, accessories and footwear 31% 26% Men's apparel, accessories and footwear 25% 25% Jewelry, Handbags and Beauty 17% 23% Home, services and other 17% 16% Kid's apparel, footwear and toys 10% 10% Total net sales 100% 100% (1) Total net sales are for the period between December 7, 2020, through January 30, 2021.  Net sales during this period may not  be indicative of full year results due to seasonality. Credit income and other encompasses the revenue earned from the agreement with Synchrony associated with our private label  credit card and co-branded MasterCard programs.   The Company has contract liabilities associated with the sales of gift cards and our customer loyalty program.  The liabilities  are included in Other accounts payable and accrued expenses in the Consolidated Balance Sheets and were as follows: ($ in millions) January 29, 2022 January 30, 2021 Gift cards 95$ 110$ Loyalty rewards 32 33 Total contract liability 127$ 143$ The Company has contract liabilities including consideration received for gift card and loyalty related performance obligations  which have not been satisfied as of the balance sheet date.  A rollforward of the amounts included in contract liability for fiscal 2021 is as follows: 
 
 
 
17 ($ in millions) Fiscal 2021 Fiscal 2020 Beginning balance 143$ -$ Liability assumed at the acquisition date December 7, 2020 - 136 Current period gift cards sold and loyalty reward points earned 205 55 Net sales from amounts included in contract liability opening balances (47) (4) Net sales from current period usage (174) (44) Ending balance 127$ 143$ 7.  Related Party Agreements and Transactions Lease Agreements  The Company is party to lease agreements in 74 stores with Simon and Brookfield directly or with mall ventures where Simon  or Brookfield is a related party. The Company also made payments for common area maintenance and other costs in 77 additional stores to malls where Simon or Brookfield is a related party.  The following table summarizes the payments made in  fiscal 2021 and fiscal 2020.  (in millions) Simon Property Group Brookfield Asset Management Total  $                             25                                  28   $                             53  Fiscal 2020  $                                  3                                       3   $                                  6  Fiscal 2021 Licensing and Sourcing Agreements We are party to a licensing and sourcing agreements with ABG. Under the licensing agreement, the Company appointed ABG  as exclusive licensing agent to represent the Company for the purpose of identifying, sourcing, negotiating, drafting, and  managing certain intellectual property. As of January 29, 2022, no transactions had occurred under the licensing agreement.   Under the sourcing agreement, the Company has a good faith efforts agreement to purchase ABG licensed product. One  existing agreement for Shaq branded merchandise was already in place and during fiscal 2021, the Company launched sales of  Juicy by Juicy Couture, Frye & Co, Airwalk and Sports Illustrated, which are also brands through the sourcing agreement with  ABG. During the year ended January 29, 2022, payments to ABG related to these brands totaled $2.6 million, which were  primarily related to royalty payments and marketing fees. Interim CEO The Company’s previous CEO, who assumed that role on January 1, 2021, on an interim basis, is a current executive of Simon  Property Group.  The Company subsequently entered into an employment agreement with the interim CEO retroactive to  January 1, 2021.  As of November 1, 2021, the Company hired a new CEO, and the interim CEO was appointed as the  executive chairman of the Board of Members.   Other As compensation for their work, the Company incurred $600,000 in expense for fees due to the individuals who serve on the  Board of Members.  These individuals are employees of Simon, Brookfield and ABG.  The Company also paid $1 million to  Simon for assistance with the debt refinancing activities in the fourth quarter of fiscal 2021.     8.  Other Assets (in millions)  January 29, 2022  January 30, 2021 Capitalized software, net 104$ 135$ Indefinite-lived intangible assets 113 113 Revolving credit facility unamortized costs, net 28 41 Other 70 87 Total 315$ 376$ 
 
 
 
18 Our indefinite-lived intangible assets primarily consist of one exclusive brand as well as other private label brands developed  by the Company.   9. Other Accounts Payable and Accrued Expenses (in millions)  January 29, 2022  January 30, 2021 Accrued salaries, vacation and bonus 132$ 58$ Gift cards 95 110 Taxes other than income taxes 85 151 Advertising 41 21 Loyalty rewards 32 33 Occupancy and rent related 20 16 Restructuring (Note 15) 19 7 Current portion of workers’ compensation and general liability self-insurance 13 10 Other 228 160   Total 665$ 566$ Other includes contingent consideration related to the acquisition, credit card holdback obligation, sales return reserve, partner  revenue sharing obligation, and other accrued expenses.  10.  Other Liabilities  (in millions)  January 29, 2022  January 30, 2021 Adjustment on asset held in escrow 62$ -$ Long-term portion of workers’ compensation and general liability insurance 59 59 Other 44 114 Total 165$ 173$ Other includes environmental reserves, deferred revenue associated with private label credit card programs, and the long-term  portion of contingent consideration related to the acquisition.  11. Fair Value Disclosures In determining fair value, the accounting standards establish a three-level hierarchy for inputs used in measuring fair value, as  follows: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Significant observable inputs other than quoted prices in active markets for similar assets and liabilities, such as  quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or  can be corroborated by observable market data. • Level 3 — Significant unobservable inputs reflecting our own assumptions, consistent with reasonably available  assumptions made by other market participants. Other Non-Financial Assets Measured on a non-Recurring Basis In connection with the acquisition of JCPenney’s retail and operating businesses, assets acquired, and liabilities assumed were  recorded at their fair values.  Other Financial Instruments As of January 29, 2022, the fair value of long-term debt approximates the carrying value of $500 million since these  instruments bear a market rate of interest and were entered into during the fourth quarter of fiscal 2021. None of these  instruments are held for trading purposes.   As of January 30, 2021, the fair value of long-term debt was $752 million and the carrying value was $820 million as of  January 30, 2021.  The fair value of the debt was estimated by obtaining recent trading values.   As of January 29, 2022, and January 30, 2021, the fair values of cash and cash equivalents, accounts payable and short-term  borrowings approximate their carrying values due to the short-term nature of these instruments. 
 
 
 
19 Concentrations of Credit Risk We have no significant concentrations of credit risk. 12. Revolving Credit Facility During fiscal 2020 and prior to December 16, 2021, the Company had a $2.0 billion senior secured asset-based revolving credit  facility (“2020 Revolving Credit Facility”) due December 7, 2025. The 2020 Revolving Credit Facility was secured by a  perfected first-priority security interest in substantially all of our eligible credit card receivables and merchandise inventory.  The 2020 Revolving Credit Facility was available for general corporate purposes, including the issuance of letters of credit.  The 2020 Revolving Credit Facility was subject to a borrowing base, and pricing was tiered based on our utilization under the  line of credit.  As of January 30, 2021, the applicable interest rates were LIBOR (subject to a 0.75% floor) plus 3.0% or Prime  Rate plus 2.0%.  The applicable rate for standby letters of credit was 2.0%, while the required unused commitment fee was  0.375% for the unused portion of the 2020 Revolving Credit Facility.  As of January 30, 2021, the Company had no borrowings  outstanding under the 2020 Revolving Credit Facility. During the fourth quarter of fiscal 2021, the Company completed a refinancing of its 2020 Revolving Credit Facility.  As result  of the refinancing, the Company currently has a $1.75 billion senior secured asset-based revolving credit facility (“2021  Revolving Credit Facility”) due December 16, 2026. The 2021 Revolving Credit Facility is secured by a perfected first-priority  security interest in substantially all our eligible credit card receivables, merchandise inventory, and eligible cash. The 2021  Revolving Credit Facility is available for general corporate purposes, including the issuance of letters of credit.  The 2021 Revolving Credit Facility is subject to a borrowing base as of January 29, 2022.  The Company had $1.75 billion  available for borrowing with no borrowings outstanding and $0.3 billion reserved for outstanding standby letters of credit.   After taking into account minimum availability requirements of $0.2 billion, the Company had $1.25 billion available for future  borrowings.   Pricing under the 2021 Revolving Credit Facility is tiered based on utilization.  As of January 29, 2022, the applicable interest  rates were LIBOR plus 1.5% or Prime Rate plus 0.5%.  The applicable rate for standby letters of credit was 1.5%, while the  required unused commitment fee was 0.25% for the unused portion of the Revolving Credit Facility. In connection with the refinancing, the Company recorded expense for a portion of the remaining unamortized debt issuance  costs totaling, $9.9 million, which was recorded to Interest expense in the Consolidated Statements of Comprehensive Income.   In addition, $5.2 million of new debt issuance costs were recorded in Other assets on the Consolidated Balance Sheets and will  be amortized through the maturity date as Interest expense in the Consolidated Statements of Comprehensive Income.    13.  Long-Term Debt    $520 Million 2020 Term Loan Payoff Prior to December 1, 2021, the Company had a $520 million term loan that would have matured on December 7, 2026 (“2020  Term Loan”).  It was secured by a first lien on all real property, intellectual property, and other assets and a second lien on the  Company’s merchandise inventory and credit card receivables.  The 2020 Term Loan interest rate was LIBOR (subject to a  1.0% floor) plus 8.5% or Prime Rate plus 7.5%.  The Company had required amortization payments of 1% per year, paid  quarterly. On December 1, 2021, the Company paid the outstanding balance of the 2020 Term Loan.  The payoff amount was $506.4 million which consisted of principal, accrued interest and fees.  In addition, the Company recorded expense for remaining  unamortized debt issuance costs totaling $4.9 million, which is presented on the financial statements as Loss on extinguishment  of debt. $300 Million FILO Facility and $340 Million ABL Term Loan Prior to December 16, 2021, the Company had a $300 million FILO Facility. The FILO Facility was secured by a perfected  second-priority security interest in substantially all of our eligible credit card receivables and merchandise inventory.  The FILO  Facility was subject to a borrowing base calculation and interest at a rate of LIBOR (subject to a 0.75% floor) plus 8.5% or  Prime Rate plus 7.5%. The FILO would have matured on December 7, 2025.  The Company was required to make quarterly  repayments in a principal amount equal to $3.75 million until the maturity date of the facility. 
 
 
 
20 During fiscal 2021, the Company completed a refinancing of the $300 million FILO Facility.  The result of the refinancing was  a $340 million ABL Term Loan which will mature on December 16, 2026. The ABL Term Loan is secured by real estate,  merchandise inventory, credit card receivables, and intellectual property.  The ABL Term Loan is subject to a borrowing base and bears interest at a rate of LIBOR plus 6.5%.  Beginning in January 2023, the Company will be required to make quarterly  repayments in a principal amount equal to $2.1 million until the maturity date of the loan. In connection with the refinancing, the Company recorded expense for a portion of the remaining unamortized debt issuance  costs totaling, $4.4 million, which was recorded to Interest expense in the Consolidated Statements of Comprehensive Income.   In addition, $3.6 million of new debt issuance costs was recorded as a reduction to Long-term debt on the Consolidated Balance  Sheets and will be amortized through the maturity date as Interest expense in the Consolidated Statements of Comprehensive  Income.    $160 Million ABL FILO Facility  In connection with the fiscal 2021 refinancing activities, the Company entered into a $160 million ABL FILO Facility which  will mature on December 16, 2026.  The ABL FILO Facility is subject to a borrowing base.  Pricing on the ABL FILO Facility  is tiered based on the utilization under the Revolving Credit Facility.  As of the end of the fiscal period, the applicable interest  rates were LIBOR plus 2.75% or Prime Rate plus 1.75%.  The Company is not required to make principal repayments until the  maturity date of the facility. The Company recorded $1.1 million of debt issuance costs as a reduction to long-term debt on the consolidated balance sheets  for the ABL FILO Facility that will be amortized through the maturity date as Interest expense in the Consolidated Statements  of Comprehensive Income.    Third-Party Fees In addition to the debt issuance costs discussed above, the Company paid certain third-party fees totaling $5.0 million related to  the refinancing which were expensed as incurred during fiscal 2021. Long-Term Debt: (in millions)  January 29, 2022  January 30, 2021 Issue: 2020 Term Loan Due 2026 -$ 520$ ABL FILO Facility Due 2026 160 - ABL Term Loan Due 2026 (FILO Facility in Fiscal 2020) 340 300 Total debt 500 820 Unamortized debt issuance costs (8) (15) Less: current maturities (2) (20) Total long-term debt 490$ 785$ Weighted-average interest rate at year end 5.4% 9.8% Weighted-average maturity (in years) 4.9 5.6 Scheduled Annual Principal Payments on Debt: (in millions) 2022 2$ 2023 9 2024 9 2025 9 2026 471 Thereafter - Total 500$ 14. Member’s Equity Member’s Contributions 
 
 
 
21 The Company is wholly owned by Penney Holdings LLC, a direct subsidiary of Copper. The initial capital contribution from  Penney Holdings LLC to the Company consisted of a $300 million cash contribution. Member’s Tax Distributions In fiscal 2021, the Company distributed $257 million to members related to their respective share of estimated income taxes.  Profits Interest Awards In October 2021, Penney Management Holdings LLC (“Penney”) was formed to hold Profits Interest Awards as defined in the  Penney Management Holdings LLC Equity Incentive Plan (“Equity Incentive Plan”) to attract and retain officers, directors,  employees, and consultants to participate in the long-term growth and financial success of Copper.  The awards were granted on  November 15, 2021, to certain members of management in the form of Class B-1 (“Time-Vested Awards”) and B-2 (“Performance Awards”) membership interests in Penney, in aggregate “Class B” awards.  The Equity Incentive Plan, among  other things, established the ownership of certain membership units and defined the distribution rights and allocations of profits  and losses associated with those membership units.  Class B awards are subject to both service and performance vesting  conditions and will share in the appreciation of invested capital after Copper’s Class A members receive the agreed upon return  of their invested capital. The Class B awards have no voting rights or board of member representation. The Time-Vested Awards will vest annually at the rate of 20% per year over five years commencing on February 1, 2021, or  grant date for employees promoted or hired into eligible positions after October 1, 2021.  These Awards are payable at the time  of a Corporate Transaction (i.e., change in control, a significant sale or recapitalization or an initial public offering) and are also  permitted to be redeemed with Penney at fair market value beginning six months following the fifth anniversary of the Grant  Date.  All outstanding Time-Vested Awards shall 100% vest immediately prior to the effective date of a change in control, as  defined by the equity awards agreement. Performance Awards will vest based on the return on invested capital multiple that is achieved as defined by the equity awards  agreement. The amount that can be realized by the recipient of the Performance Awards will vary based on specified multiples  that are designed to increase in proportion to the increase in the underlying multiple.  These Awards are payable at the time of a  Corporate Transaction and are also permitted to be redeemed with Penney at fair market value beginning six months following  the seventh anniversary of the Grant Date.  Vesting will not occur unless a minimum performance criteria threshold is achieved.   For both the Time-Vested and Performance Units, if the grantees’ continuous service terminates for any reason, the grantee shall  forfeit all right, title, and interest in and to any unvested units as of the date of such termination, unless the grantees’ continuous  service period is terminated by the Company without cause within the six-month period prior to the date of consummation of  the change in control.  In addition, the grantee shall forfeit all right, title, and interest in and to any vested units if the grantee is  terminated for cause, breaches any post-termination covenants, or fails to execute any general release required to be executed.   The Performance Units are also subject to certain performance criteria which may cause the units not to vest. As of January 29, 2022, Penney granted approximately 22.3 million units and had 11 million total Profit Interest Units reserved  for issuance under the equity plan. The Class B awards issued to Penney’s management have been classified as equity awards and the share-based compensation  expense is recognized based on the grant date fair value of the awards.  On January 29, 2022, the applicable hurdle rate for  these Class B performance units was not met.   Accordingly, the Company determined the fair value of each award on the date of grant using the Black-Scholes Option Pricing Model for the Time-Vested units and the Monte Carlo Simulation model for the Performance-based units with the following  assumptions used for the grants issues for the year ended January 29, 2022: 2021 2021 Time-Vested Performance Expected term (in years) 5 7 Risk-free interest rate 1.26% 1.51% Expected volatility 75% 66% Expected dividend yield 0% 0% The expected term of the incentive units is based on expected future employee service.  The risk-free rate is based on the U.S.  Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date.  Volatility is  based on the historical volatility of guideline public entities that are similar to the Company, as the Company does not have  sufficient historical transactions of its own shares to calculate expected volatility.  As of January 29, 2022, the Company does  not intend to pay dividends or distributions in the future other than for distributions related to member tax obligations. 
 
 
 
22 The Company recorded total compensation expense of $1.1 million related to the awards granted for the year ended January 29,  2022.  The Company has unrecognized compensation expense of $9.2 million related to unvested time and performance units which it will recognize over the weighted average vesting period of 4.8 years. Profits Weighted Average Profits Weighted Average Profits Weighted Average  Interest Grant Date Fair  Interest Grant Date Fair  Interest Grant Date Fair (in thousands) Units Value Units Value Units Value Outstanding, January 30, 2021 - - -      Granted 14,434 0.48 8,111 0.42 22,545 0.46      Vested - - - - - -      Forfeited - - (210) 0.42 (210) 0.42 Outstanding, January 29, 2022 14,434 0.48 7,901 0.42 22,335 0.46 Time-Vested Awards Performance Awards Total Profits Interest 15. Restructuring, Impairment, Store Closing, and Other Costs In fiscal 2021, the Company incurred $47 million, respectively in Restructuring, impairment, store closing, and other costs in the Consolidated Statements of Comprehensive Income.  The components of these costs include: Restructuring – charges for actions to reduce our corporate expenses including employee termination benefits and other  restructuring/reorganization advisory costs.  For fiscal 2021, these costs consisted primarily of third-party services related  to the acquisition and continued transition of the business into the new Copper Retail JV legal entity structure. Impairment – charges for impairments of long-lived assets, offset by net gains associated with insurance payments  received for property losses.   Store closing - costs related to store closures, including liquidation services and employee termination benefits.  For fiscal  2021, these costs are primarily related to liquidation service provider fees, accrued severance costs related to store  associates, offset by gains from the sale of store fixtures.   Other costs – charges related to implementing changes within our management leadership team for both incoming and  outgoing members of management and other non-recurring costs (mostly professional fees) unrelated to the categories  above.  For fiscal 2021, these costs primarily include the impact of re-measurement of the contingent earn-out liability,  expenses related to the refinance of the debt and charges related to implementing changes within our management  leadership team.  For fiscal 2020, these costs primarily included acquisition and transition related costs. (in millions) Fiscal 2020 Restructuring 23$ 5$ Impairment (3) - Store Closing 3 - Other Costs 24 29 Total 47$ 34$ Fiscal 2021 The following table summarizes changes in the restructuring liability during fiscal 2021: (in millions) Balance at inception, October 22, 2020 -$ Assumed liability at December 7, 2020 8 Payments and reversals                                   (5) Additions 5 Balance - January 30, 2021 8$ Payments and reversals (21) Additions 32 Balance - January 29, 2022 19$ Restructuring Liability 
 
 
 
23 16.  Leases We conduct a major part of our operations from leased premises (building or land) that include retail stores, store distribution  centers, warehouses, offices, and other facilities.  Almost all leases include renewal options where we can extend the lease term  from one to 50 years or more. We also rent or sublease certain real estate to third parties. Our lease contracts do not contain any  purchase options or residual value guarantees.  As contemplated by the Asset Purchase Agreement, Copper entered into Master Lease Agreements for 160 retail stores  (RMLA) and 6 distribution centers (DCMLA).  Landlords under the Master Lease Agreements were formed by a group of  JCPenney first lien lenders for the purposes of acquiring the 160 retail stores and 6 distribution centers from JCPenney as part  of its chapter 11 plan for reorganization. Under the Master Lease Agreements, the Company leases the retail locations and  distribution centers for a base term of 20 years beginning December 7, 2020. A net unfavorable adjustment of $183 million was  recorded as of the acquisition date for off-market terms, primarily as a result of the duration of the lease term, which reduced  the right-of-use assets related to leases under the Master Lease Agreements. In fiscal 2021 and fiscal 2020, approximately $9  million and $1.5 million was recorded as a reduction to SG&A in the Consolidated Statements of Comprehensive Income related to this adjustment.   During fiscal 2021, 14 store locations and all 6 distribution center locations were sold subject to our leasehold interest to third  parties.  We entered into lease agreements with respect to 11 of these store locations with unrelated landlords, 2 store locations  with Brookfield and 1 store location with Simon, all on substantially the same terms as the RMLA.  At January 29, 2022, there were 146 remaining retail stores under the RMLA.  The DCMLA was assigned to the purchaser of the 6 distribution centers and we continue to operate such distribution centers as the tenant under the terms of the original lease.   Leases (in millions) Classification January 29, 2022 January 30, 2021 Assets Operating Operating lease assets 1,579$ 1,667$ Finance Financing lease assets (1) 87 39 Total lease assets 1,666$ 1,706$ Liabilities Current: Operating Current operating lease liabilities 49$ 56$ Finance Current financing lease liabilities 3 - Noncurrent: Operating Noncurrent operating lease liabilities 1,768 1,803 Finance Noncurrent financing lease liabilities 89 40 Total lease liabilities 1,909$ 1,899$ (1) Financing lease assets are recorded net of accumulated amortization of $7.0 million and $0.5 million as of January 29, 2022, and January 30, 2021, respectively.  Lease Cost (in millions) Classification Fiscal 2020 Operating lease cost SG&A 280$ 47$ Variable lease cost SG&A 31 10 Finance lease cost Amortization of lease assets Depreciation and amortization 6 1 Interest on finance lease liabilities Net interest expense 7 1 Rental income SG&A (8) - Net lease cost 316$ 59$ Fiscal 2021 
 
 
 
24 As of January 29, 2022, future lease payments were as follows:    (in millions)   Operating Leases    Financing Leases           Total 2022 246$ 13$ 259$ 2023 277 14 291 2024 254 13 267 2025 232 14 246 2026 242 15 257 Thereafter 3,062 173 3,235 Total lease payments 4,313 242 4,555 Less: amounts representing interest (2,496) (150) (2,646) Present value of lease liabilities 1,817$ 92$ 1,909$ Lease term and discount rate are as follows: (in millions) January 29, 2022 January 30, 2021 Weighted-average remaining lease term (years) Operating Leases 17 18 Financing Leases 17 20 Weighted-average discount rate Operating Leases 11% 11% Financing Leases 11% 11% Other information: (in millions) Fiscal 2021 Fiscal 2020 Cash paid for amounts included in the measurement of these liabilities Operating cash flows from operating leases 214 41 Operating cash flows from financing leases 7 1 Financing cash flows from financing leases 2 1 17. Defined Contribution Plans In fiscal 2021, the Company offered two defined contribution plans: Savings, Profit-Sharing and Stock Ownership Plan  (Savings Plan) and the Safe Harbor 401(k) Plan (Safe Harbor Plan). The plans were acquired on December 7, 2020, and  employees continued to participate in the plans based on their eligibility as of December 31, 2020, under the JCPenney  plans. Employees hired or rehired by the Company or a participating employer on or after January 1, 2021, were eligible to  participate in the Safe Harbor Plan. Effective December 31, 2021, the Savings Plan was merged into the Safe Harbor Plan. Savings Plan participants were eligible to receive a fixed matching contribution each pay period equal to 50% of up to 6% of  pay contributed by the employee. Matching contributions were credited to employees’ accounts in accordance with their  investment elections. In the Safe Harbor Plan, participants aged 21 or older become eligible for the Company matching contributions after  completing 1,000 hours of service in an eligibility period. The Company matching contributions under the Safe Harbor Plan are equal to 100% of up to 5% of pay contributed by the employee. Matching contributions are credited to employees' accounts in  accordance with their investment elections and fully vest immediately. The expense for these plans, included in SG&A expenses in the Consolidated Statements of Comprehensive Income, was $29  million in fiscal 2021 and $5 million in fiscal 2020. 
 
 
 
25 18. Supplemental Cash Flow Information (in millions) Fiscal 2021 Fiscal 2020 Income taxes received/(paid), net  $                            (16) -$ Interest on long-term debt received/(paid), net (81)$ (5)$ 19. Litigation and Other Contingencies We are subject to various legal and governmental proceedings involving routine litigation incidental to our business. While no assurance can be given as to the ultimate outcome of these matters, we currently believe that the final resolution of these  actions, individually or in the aggregate, will not have a material adverse effect on our results of operations, financial position,  liquidity, or capital resources. 20. Subsequent Events The Company has evaluated subsequent events through March 31, 2022, the date the financial statements were issued.