 
  1                             PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Financial Statements (Unaudited)  April 30, 2022 and May 1, 2021                                              
 
 
 
  2  PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Financial Statements   (Unaudited)  April 30, 2022 and May 1, 2021      Table of Contents       Page  Consolidated Statements of Comprehensive Income 3  Consolidated Balance Sheets 4  Consolidated Statements of Member’s Equity 5  Consolidated Statements of Cash Flows 6  Notes to the Consolidated Financial Statements 7      
 
 
 
      3                                                             PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Statements of Comprehensive Income  (Unaudited)  (In millions)  Three Months Ended  April 30, 2022   Three Months Ended  May 1, 2021  Total net sales $ 1,654  $ 1,593   Credit income and other  110   76   Total revenues  1,764   1,669        Costs and expenses/(income):     Cost of goods sold (exclusive of depreciation and amortization shown  separately below)  1,012    979   Selling, general and administrative  593   555   Depreciation and amortization  55   52   Real estate and other, net  (2)  —   Restructuring, impairment, store closing and other costs  2   16   Total costs and expenses  1,660   1,602   Operating income  104   67   Net interest expense  13   25   Income before income taxes 91   42   Income tax expense 2   3   Net income $ 89  $ 39   Other comprehensive income (loss):     Currency translation adjustment  (1)  (1)  Comprehensive income  $ 88  $ 38        See accompanying Notes to Consolidated Financial Statements (Unaudited).       
 
 
 
      4  PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Balance Sheets  (Unaudited)  (In millions) April 30, 2022  May 1, 2021  Assets     Current assets:       Cash and cash equivalents $ 147  $ 433     Merchandise inventory  1,928   1,682     Prepaid expenses and other assets  318   356        Total current assets  2,393   2,471   Property and equipment, net  840   920   Operating lease assets  1,576   1,643   Financing lease assets  83   46   Other assets  305   362       Total assets $ 5,197  $ 5,442   Liabilities and member’s equity     Current liabilities:       Merchandise accounts payable $ 413  $ 338     Other accounts payable and accrued expenses  559   593     Current operating lease liabilities  46   56     Current financing lease liabilities  3   —     Current portion of long-term debt, net  4   20        Total current liabilities  1,025   1,007   Noncurrent operating lease liabilities  1,766   1,785   Noncurrent financing lease liabilities  86   47   Long-term debt  488   784   Other liabilities  157   178       Total liabilities  3,522   3,801   Member’s equity     Member’s contributions  300   300   Profits interest plan  2   —   Accumulated other comprehensive loss  (3)  (2)  Reinvested earnings  1,376   1,343   Total member’s equity  1,675   1,641   Total liabilities and member’s equity $ 5,197  $ 5,442     See accompanying Notes to Consolidated Financial Statements (Unaudited).            
 
 
 
      5  PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Statements of Member’s Equity  (Unaudited)    (In millions)  Member’s  Contributions/  (Distributions)   Profits  Interest Plan  Grants/  (Distributions)   Accumulated  Other  Comprehensive  Income/(Loss)   Reinvested  Earnings   Total  Member's  Equity  January 29, 2022 $ 300  $ 1  $ (2) $ 1,317  $ 1,616   Member tax distributions  —   —   —   (30)  (30)  Net income  —   —   —   89   89   Currency translation adjustment  —   —   (1)  —   (1)  Profits interest plan grants  —    1    —    —    1   April 30, 2022 $ 300  $ 2  $ (3) $ 1,376  $ 1,675     See accompanying Notes to Consolidated Financial Statements (Unaudited).                                                                    
 
 
 
      6  PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Statements of Cash Flows  (Unaudited)   Year-to-Date  Year-to-Date  (In millions) April 30, 2022  May 1, 2021  Cash flows from operating activities:     Net income $ 89   $ 39   Adjustments to reconcile net income to net cash provided (used) by operating  activities:     Gain on asset disposition  (1)   —   Restructuring, impairment, store closing and other costs, non-cash  2    —   Gain on insurance proceeds received for damage to property  (1)   —   Depreciation and amortization  55    52   Change in cash from operating assets and liabilities:     Merchandise inventory  (275)   (162)  Prepaid expenses and other assets  (41)   9   Merchandise accounts payable  100    187   Other accounts payable, accrued expenses and other liabilities  (131)   41   Net cash provided (used) by operating activities  (203)   166   Cash flows from investing activities:     Capital expenditures  (25)   (7)  Proceeds from sale of real estate assets  8    —   Insurance proceeds received for damage to property and equipment  2    —   Net cash used by investing activities  (15)   (7)  Cash flows from financing activities:     Payments of long-term debt  —    (1)  Member tax distributions  (30)   —   Repayments of principal portion of finance leases  (1)   —   Net cash used by financing activities  (31)   (1)  Net increase (decrease) in cash and cash equivalents  (249)   158   Cash and cash equivalents at beginning of period 396  275  Cash and cash equivalents at end of period $ 147   $ 433       See accompanying Notes to Consolidated Financial Statements (Unaudited).                              
 
 
 
      7  PENNEY INTERMEDIATE HOLDINGS LLC  Notes to Consolidated Financial Statements  (Unaudited)    1. Basis of Presentation and Consolidation     These Consolidated Financial Statements (Unaudited) have been prepared in accordance with generally accepted accounting  principles in the United States. The accompanying Consolidated Financial Statements (Unaudited), in the Company's 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 for the fiscal year ended January 29, 2022. The same accounting policies  are followed to prepare quarterly financial statements as are followed in preparing annual financial statements. A description of  such significant accounting policies is included in the notes to the Audited Consolidated Financial Statements.     The Consolidated Financial Statements (Unaudited) 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. 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.    Fiscal Year  The Company’s fiscal year consists of the 52-week period ending on the Saturday closest to January 31. As used herein, “three  months ended April 30, 2022” refers to the 13- week period ended April 30, 2022 and “three months ended May 1, 2021” refers  to the 13- week period ended May 1, 2021. Fiscal 2022 and 2021 consist of the 52-week periods ending January 28, 2023 and  January 29, 2022, respectively.    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. 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.  The Company did not  experience sustained store closures due to COVID-19 from January 30, 2022 to April 30, 2022.    2. Revenue    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 the Company's intellectual property by others.   Revenue includes Total net sales and Credit income and other.  Net sales are categorized by merchandise product groupings as  the Company believes it best depicts the nature, amount, timing and uncertainty of revenue and cash flow.    The components of Total net sales for the three months ended April 30, 2022 and May 1, 2021 were as follows:      Three Months Ended  Three Months Ended    April 30, 2022  May 1, 2021  Women's apparel, accessories and footwear   34 %   33 %  Men's apparel, accessories and footwear   24 %   23 %  Jewelry, Handbags, and Beauty   16 %   19 %  Home, services and other   18 %   15 %  Kid's apparel, footwear and toys   8 %   10 %  Total net sales   100 %   100 %    
 
 
 
      8  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)  April 30, 2022  May 1, 2021  Gift cards  $ 83   $ 101   Loyalty rewards   32    31   Total contract liability  $ 115   $ 132     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 are as follows:      Three Months Ended  Three Months Ended  (In millions)  April 30, 2022  May 1, 2021  Beginning balance  $ 127   $ 143   Current period gift cards sold and loyalty reward points earned   48    41   Net sales from amounts included in contract liability opening balances   (21)   (26)  Net sales from current period usage   (39)   (26)  Ending balance  $ 115   $ 132     3. Long-Term Debt       (In millions) April 30, 2022 May 1, 2021  Issue:    2020 Term Loan Due 2026 $ —  $ 519   ABL FILO Facility Due 2026  160   —   ABL Term Loan Due 2026 (FILO Facility in Fiscal 2021)  340  300  Total debt  500   819   Unamortized debt issuance costs  (8)  (15)  Less: current maturities  (4)  (20)  Total long-term debt $ 488  $ 784     The Company is subject to a borrowing base under the $1.75 billion senior secured asset-based revolving credit facility  (“Revolving Credit Facility”).  As of April 30, 2022, the Company had $1.49 billion available for borrowing with no  borrowings outstanding and $0.23 billion reserved for outstanding standby letters of credit.  After taking into account minimum  availability requirements of $0.15 billion, the Company had $1.11 billion available for future borrowings.        4. 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.      
 
 
 
      9  5.  Subsequent Events    The Company has evaluated subsequent events from the balance sheet date through June 14, 2022, the date at which the  financial statements were available to be issued.      
 
 
 
NARRATIVE REPORT  (follows this page)  
 
 
 
    Penney Intermediate Holdings LLC  Narrative Report    (In millions)  Three Months Ended  April 30, 2022   Three Months Ended  May 1, 2021   Increase/  (Decrease)  Total net sales $ 1,654   $ 1,593   $ 61   Credit income and other  110    76    34   Total revenues  1,764    1,669    95          Costs and expenses/(income):       Cost of goods sold (exclusive of  depreciation and amortization shown  separately below)  1,012    979    33   Selling, general and administrative  593    555    38   Depreciation and amortization  55    52    3   Real estate and other, net  (2)   —    (2)  Restructuring, impairment, store closing  and other costs  2    16    (14)  Total costs and expenses  1,660    1,602    58   Operating income  104    67    37   Net interest expense  13    25    (12)  Income before income taxes  91    42    49   Income tax expense  2    3    (1)  Net income $ 89   $ 39   $ 50   Other comprehensive income (loss):         Currency translation adjustment  (1)   (1)   —   Comprehensive income (loss) $ 88   $ 38   $ 50       Summary Results of Operations for Quarter Ended April 30, 2022    Total net sales were $1.7 billion for the quarter ended April 30, 2022 and were $61 million favorable to  the prior year. Total revenues were $1.8 billion or $95 million favorable when compared to the prior year.     Cost of goods sold as a percent of total net sales were 61.2% and 61.5% for the three months ended April  30, 2022 and May 1, 2021, respectively. Selling, general and administrative expenses were $593 million  or 35.9% of total net sales compared to $555 million, or 34.8% for the prior year. Depreciation and  amortization were $55 million compared to $52 million the prior year.      Financial Condition and Liquidity  As of April 30, 2022, the Company had $1.49 billion available for borrowing with no borrowings  outstanding and $0.23 billion reserved for outstanding standby letters of credit. After taking into account  minimum availability requirements of $0.15 billion, the Company had $1.11 billion available for future  borrowings.     
 
 
 
STATEMENT OF CONSOLIDATED ADJUSTED EBITDA  (follows this page) 
 
 
 
              PENNEY INTERMEDIATE HOLDINGS LLC  Statement of Consolidated Adjusted EBITDA  For the Three Months Ended April 30, 2022        (In millions)   Net Income $ 89   Plus:   Net interest expense  13   Income tax expense  2   Depreciation and amortization  55   Restructuring, impairment, store closing and other costs  2   Minus:   Real estate and other, net  (2)  Consolidated adjusted EBITDA $ 159     Prepared in accordance with the definition of Consolidated Adjusted EBITDA per Section 1.1 of the Credit and  Guaranty Agreement dated December 7, 2020.