 
  1                             PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Financial Statements (Unaudited)  May 4, 2024 and April 29, 2023                      
 
 
 
Penney Intermediate Holdings LLC  Narrative Report    The following discussion, which presents results for the first quarter, should be read in conjunction with  the accompanying Consolidated Financial Statements and notes thereto. Unless otherwise indicated, all  references in Narrative are as of the date presented and the Company does not undertake any obligation  to update these numbers, or to revise or update any statement being made related thereto.    First Quarter Update    During first quarter of Fiscal 2024, JCPenney remained committed to serving America’s hard-working  families and advancing its transformation agenda. With continuing economic pressure weighing on  discretionary income for middle income Americans, the Company focused its efforts on creating a  more rewarding shopping experience while continuing to provide quality, affordable fashion and  merchandise.  Marketing collaborations during the period included an iHeart Radio Country Festival  supporting the launch of a Walker Hayes apparel collection and an in-store 3-point shot contest with  Shaquille O’Neal to promote the launch of the new rewards campaign announced late in the quarter.   The relaunch of the Company’s rewards program in late April allows customers new and faster ways  to earn reward certificates and early results indicate a favorable response from customers. As a result  of these and other marketing efforts, the Company saw an improvement in organic brand search volume  trends on google search, drove double digit increases over prior year in rewards members and reported  improvements in Net Promoter Scores.    Although overall sales remain under pressure, specific categories of merchandise continued to  outperform and exceeded planned results. Overall Women’s business was strong, particularly in the  areas of apparel, handbags, and shoes. Customers continued to seek the quality and value provided by  the Company’s private label brands Liz Claiborne and J. Ferrar, with both brands posting strong results  and exceeding the Company’s first quarter expectations. Continued emphasis on greater availability of  inclusive sizing resonated with consumers and all areas of inclusive sizing (big and tall, plus, and  petite) outperformed during the period. Overall, the Company’s gross profit rates were flat to last year.  Improving inventory efficiency remained a key area of focus and as a result, inventory was down 9%  to last year.      Selling, general, and administrative costs held flat year-over-year as the entire organization continues  to drive greater efficiencies and reduce discretionary spend to offset ongoing sales pressure. Savings  were achieved through lower store expenses, lower overall ecommerce expenses, and lower credit  expenses. Credit income declined over last year, as a direct result of lower participation income and  lower gain share from the profitability of the underlying portfolio.      During the quarter, the Company used cash of $163M primarily to fund seasonal purchases of  inventory and capital expenditures of $52M for projects aimed at driving long-term growth of the  business. The Company reported negative EBITDA of $3M reflecting the impact of the sales declines   that were mostly offset by margin improvement and ongoing cost saving efforts of the Company.    The Company continues to prioritize maintaining a very healthy balance sheet with significant liquidity  of approximately $1.6B as of the end of the period. The Company has less than $500M of outstanding  long-term debt and as of the end of the period had no outstanding borrowings on its line of credit.   
 
 
 
  2  PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Financial Statements   (Unaudited)  May 4, 2024 and April 29, 2023      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  May 4, 2024   Three Months Ended  April 29, 2023  Total net sales $ 1,368  $ 1,489   Credit income  58   73   Total revenues  1,426   1,562        Costs and expenses/(income):     Cost of goods sold (exclusive of depreciation and amortization shown  separately below)  832   909   Selling, general and administrative  597   597   Depreciation and amortization  42   38   Restructuring, impairment, store closing and other costs  —   17   Total costs and expenses  1,471   1,561   Operating income (loss)  (45)  1   Net interest expense  17   17   Loss before income taxes  (62)  (16)  Income tax expense  1   1   Net loss $ (63) $ (17)  Other comprehensive income (loss):     Currency translation adjustment  (1)  (1)  Comprehensive loss $ (64) $ (18)       See accompanying Notes to Consolidated Financial Statements (Unaudited).       
 
 
 
      4  PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Balance Sheets  (Unaudited)  (In millions) May 4, 2024  April 29, 2023  Assets     Current assets:       Cash and cash equivalents $ 205  $ 107     Merchandise inventory  1,674   1,841     Prepaid expenses and other assets  178   251        Total current assets  2,057   2,199   Property and equipment, net  1,085   951   Operating lease assets  1,708   1,657   Financing lease assets  78   78   Other assets  244   287       Total assets $ 5,172  $ 5,172   Liabilities and member’s equity     Current liabilities:       Merchandise accounts payable $ 391  $ 332     Other accounts payable and accrued expenses  439   480     Revolving credit facility borrowings  —   16     Current operating lease liabilities  75   67     Current financing lease liabilities  3   3     Current portion of long-term debt, net  9   11        Total current liabilities  917   909   Noncurrent operating lease liabilities  1,891   1,834   Noncurrent financing lease liabilities  88   84   Long-term debt  474   481   Other liabilities  103   146       Total liabilities  3,473   3,454   Member’s equity     Member’s contributions  300   300   Profits interest plan  6   4   Accumulated other comprehensive loss  (6)  (5)  Reinvested earnings  1,399   1,419   Total member’s equity  1,699   1,718   Total liabilities and member’s equity $ 5,172  $ 5,172     See accompanying Notes to Consolidated Financial Statements (Unaudited).            
 
 
 
      5  PENNEY INTERMEDIATE HOLDINGS LLC  Consolidated Statements of Member’s Equity  (Unaudited)     Three Months Ended April 29, 2023  (In millions)  Member’s  Contributions/  (Distributions)   Profits  Interest Plan  Grants/  (Distributions)   Accumulated  Other  Comprehensive  Income/ (Loss)   Reinvested  Earnings   Total  Member's  Equity  January 29, 2023 $ 300  $ 3  $ (4) $ 1,440  $ 1,739   Member tax distributions  —   —   —   (4)  (4)  Net loss  —   —   —   (17)  (17)  Currency translation adjustment  —   —   (1)  —   (1)  Profits interest plan grants  —   1   —   —   1   April 29, 2023 $ 300  $ 4  $ (5) $ 1,419  $ 1,718               Three Months Ended May 4, 2024  (In millions)  Member’s  Contributions/  (Distributions)   Profits  Interest Plan  Grants/  (Distributions)   Accumulated  Other  Comprehensive  Income/ (Loss)   Reinvested  Earnings   Total  Member's  Equity  February 3, 2024 $ 300  $ 6  $ (5) $ 1,462  $ 1,763   Member tax distributions  —   —   —   —   —   Net loss  —   —   —   (63)  (63)  Currency translation adjustment  —   —   (1)  —   (1)  Profits interest plan grants  —   —   —   —   —   May 4, 2024 $ 300  $ 6  $ (6) $ 1,399  $ 1,699                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) May 4, 2024  April 29, 2023  Cash flows from operating activities:     Net loss $ (63) $ (17)  Adjustments to reconcile net income (loss) to net cash provided (used) by operating  activities:     Restructuring, impairment, store closing and other costs, non-cash  —   4   Gain on insurance proceeds received for damage to property and equipment  (1)  —   Depreciation and amortization  42   38   Change in cash from operating assets and liabilities:    Merchandise inventory  (84)  (1)  Prepaid expenses and other assets  (27)  (42)  Merchandise accounts payable  8   68   Other accounts payable, accrued expenses and other liabilities  16   (43)  Net cash provided (used) by operating activities  (109)  7   Cash flows from investing activities:     Capital expenditures  (52)  (61)  Proceeds from sale of real estate assets  —   1   Insurance proceeds received for damage to property and equipment  1   —   Net cash used by investing activities  (51)  (60)  Cash flows from financing activities:     Payments of long-term debt  (2)  (2)  Proceeds from borrowings under revolving credit facility  —   16   Member tax distributions  —   (4)  Repayments of principal portion of finance leases  (1)  (1)  Net cash provided (used) by financing activities  (3)  9   Net decrease in cash and cash equivalents  (163)  (44)  Cash and cash equivalents at beginning of period  368   151   Cash and cash equivalents at end of period $ 205  $ 107       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 February 3, 2024. 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 its subsidiaries. All significant  inter-company transactions and balances have been eliminated in consolidation. Certain amounts may have been reclassified to  conform with current year presentation, if necessary.     The company is currently impacted by uncertain economic conditions. Because of these uncertain economic conditions and 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. Every sixth year, the  Company's fiscal year consists of 53 weeks ending on the Saturday closest to January 31. As used herein, “three months ended  May 4, 2024” refers to the 13- week period ended May 4, 2024, and “three months ended April 29, 2023” refers to the 13-week  period ended April 29, 2023. Fiscal 2024 and 2023 consist of the 52-week period ending February 1, 2025 and the 53-week  period ending February 3, 2024, respectively.      2. Long-Term Debt       (In millions) May 4, 2024 April 29, 2023  Issue:    ABL Term Loan  327   338   ABL FILO Loan  160  160  Total debt  487   498   Unamortized debt issuance costs  (4)  (6)  Less: current maturities  (9)  (11)  Total long-term debt $ 474  $ 481         3. Revolving Credit Facility     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 May 4, 2024, the Company had $1.52 billion available for borrowing with none   outstanding and $0.17 billion reserved for outstanding standby letters of credit.  After taking into account minimum availability  requirements, the Company had $1.20 billion available for future borrowings.       
 
 
 
      8    4. Litigation and Other Contingencies     The Company is subject to various legal and governmental proceedings involving routine litigation incidental to its business.  While no assurance can be given as to the ultimate outcome of these matters, the Company currently believes that the final  resolution of these actions, individually or in the aggregate, will not have a material adverse effect on results of operations,  financial position, liquidity or capital resources.      5.  Subsequent Events    The Company has evaluated subsequent events from the balance sheet date through June 18, 2024, the date at which the  financial statements were available to be issued.      
 
 
 
STATEMENT OF CONSOLIDATED ADJUSTED EBITDA  (follows this page)  
 
 
 
 PENNEY INTERMEDIATE HOLDINGS LLC Statement of Consolidated Adjusted EBITDA For the Three Months Ended May 4, 2024 (In millions) Net loss $ (63)  Plus: Net interest expense 17  Income tax expense 1  Depreciation and amortization 42  Restructuring, impairment, store closing and other costs —  Minus: Real estate and other, net —  Consolidated adjusted EBITDA $ (3)  Prepared in accordance with the definition of Consolidated Adjusted EBITDA per Section 1.1 of the Credit and  Guaranty Agreement dated December 7, 2020.