<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-06883
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 2, 1996.
$500,000,000
[JCPENNEY LOGO]
J. C. Penney Company, Inc.
7 5/8% Debentures Due 2097
Interest payable March 1 and September 1 Due March 1, 2097
------------------
The 7 5/8% Debentures ("Debentures") will mature on March 1, 2097. The
Debentures will be redeemable in whole or in part, at the option of the Company
at any time, at a redemption price equal to the greater of (i) 100% of the
principal amount of such Debentures and (ii) the sum of the present values of
the Remaining Scheduled Payments (as defined herein) discounted to the
redemption date on a semiannual basis at the Treasury Rate (as defined herein)
plus 20 basis points, together in either case with accrued interest to the date
of redemption. Upon the occurrence of a Tax Event (as defined herein), the
Company will have the right (x) to shorten the maturity of the Debentures to the
extent required so that the interest paid on the Debentures will be deductible
for United States federal income tax purposes or (y) under certain circumstances
to redeem the Debentures in whole (but not in part) at a redemption price equal
to the greater of (i) 100% of the principal amount of the Debentures and (ii)
the sum of the present values of the Remaining Scheduled Payments discounted to
the redemption date on a semiannual basis at the Treasury Rate plus 40 basis
points, together in either case with accrued interest to the date of redemption.
See "Description of Debentures -- Optional Redemption" and "-- Conditional Right
to Shorten Maturity."
The Debentures will be represented by one or more Global Securities (as defined
herein) registered in the name of the nominee of The Depository Trust Company.
Except as provided herein and in the accompanying Prospectus, Debentures in
definitive form will not be issued. See "Description of Debentures -- Form of
Debentures."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions Company(1)(2)
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Debenture........................................ 100% 1.125% 98.875%
Total................................................ $500,000,000 $5,625,000 $494,375,000
</TABLE>
(1) Plus accrued interest, if any, from February 25, 1997.
(2) Before deduction of expenses payable by the Company, estimated at $200,000.
The Debentures are offered by the several Underwriters when, as and if
issued by the Company, delivered to and accepted by the Underwriters and subject
to their right to reject orders in whole or in part. It is expected that
delivery of the Debentures, in book-entry form, will be made through the
facilities of The Depository Trust Company on or about February 25, 1997,
against payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
Prospectus Supplement dated February 20, 1997.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT
APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT.
RECENT DEVELOPMENTS
The following financial information should be read in conjunction with the
financial information contained in the Company's Annual Report on Form 10-K for
the 52 weeks ended January 27, 1996 and the Company's Quarterly Report on Form
10-Q for the 13 and 39 weeks ended October 26, 1996.
The Company's earnings from operations for the quarter ended January 25,
1997, before non-recurring charges, was $1.20 per share. Including the effects
of non-recurring charges of 84 cents per share, net income was $94 million, or
36 cents per share, as compared with $326 million, or $1.31 per share, in the
1995 fourth quarter. For the year ended January 25, 1997, earnings before
non-recurring charges was $793 million, or $3.17 per share, compared with $838
million, or $3.33 per share, in fiscal 1995. Net income for fiscal 1996 was $565
million or $2.25 per share.
In the fourth quarter, the Company recorded one-time, non-recurring charges
of $207 million on an after-tax basis, which are classified as "Business
Acquisition and Consolidation Expenses." These charges are primarily related to
the integration of drug store acquisitions, including the closing of drug stores
and certain support functions, and the write-down of certain assets.
FIFO gross margin dollars for the quarter increased $273 million, or 14.0
percent, compared with the 1995 fourth quarter, principally as a result of
higher sales from the recently acquired drug stores. As a percent of sales,
margins decreased in the quarter. The gross margin ratio in the quarter was also
impacted by the increased sales contribution from drug stores, which carry a
lower gross margin than department stores and catalog.
Selling, general, and administrative ("SG&A") expenses were well controlled
during the quarter and well leveraged. As a percent of sales, total SG&A
expenses were 20.7 percent in the 1996 fourth quarter compared with 21.7 percent
in the previous year. The SG&A expense ratio was favorably impacted by drug
stores, which carry lower operating expense margins.
Net interest expense and credit costs for the quarter increased to $101
million compared with $60 million in last year's fourth quarter. The increase is
principally related to bad debt and interest expense. Bad debt expense and
provisions for future losses increased by $12 million primarily due to continued
high levels of delinquencies and consumer bankruptcies. Interest expense
increased $30 million for the quarter compared with 1995 levels because of
increases in working capital and capital expenditures, as well as the recent
acquisition of Eckerd Corporation and the Company's share repurchase program.
The Company purchased 7.5 million shares of its common stock during the fourth
quarter at a cost of $366 million. The Company will issue approximately 23
million shares of its common stock in the first quarter of 1997 to complete the
acquisition of Eckerd Corporation.
During the 1996 fourth quarter, profits from insurance operations continued
at a strong pace, with revenues increasing 18.2 percent to $221 million, and
profits increasing 34.2 percent to $51 million compared with the 1995 fourth
quarter. Bank operations generated a $6 million loss for the quarter compared
with a $4 million gain in last year's fourth quarter. The Company announced the
sale of the credit card portfolio of the JCPenney National Bank in a transaction
which is expected to be completed in the first quarter of 1997.
S-2
<PAGE> 3
RATIOS OF AVAILABLE INCOME TO FIXED CHARGES
FOR THE COMPANY AND ALL SUBSIDIARIES
<TABLE>
<CAPTION>
53 52
WEEKS WEEKS
52 WEEKS ENDED ENDED ENDED
-------------------------------------- ------- -------
OCT. 26 JAN. 27 JAN. 28 JAN. 29 JAN. 30 JAN. 25
1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ratios of available income to fixed charges...... 3.5 3.7 5.1 4.9 3.8 2.1
Ratios of available income to combined fixed
charges and preferred stock dividend
requirement.................................... 3.2 3.4 4.5 4.3 3.4 1.8
</TABLE>
For purposes of computing the ratios of available income to fixed charges,
available income is determined by adding fixed charges to income before income
taxes and before capitalized interest. For purposes of computing the ratios of
available income to combined fixed charges and preferred stock dividend
requirement, available income is determined by adding fixed charges and the
preferred stock dividend requirement to income before taxes, before capitalized
interest, but after the preferred stock dividend requirement. Fixed charges are
interest expense and a portion of rental expense representative of interest. The
interest cost of the LESOP notes guaranteed by the Company is not included in
fixed charges.
The Company believes that due to the seasonal nature of its business,
ratios for a period other than a 52 or 53 week period are inappropriate.
DESCRIPTION OF DEBENTURES
GENERAL
The Debentures offered hereby will be limited to $500,000,000 aggregate
principal amount and will mature on March 1, 2097. The Debentures will bear
interest from February 25, 1997 at the rate of 7 5/8% per annum. Interest on the
Debentures will be payable semiannually on March 1 and September 1 of each year,
commencing September 1, 1997, to the persons in whose names the Debentures are
registered on the fifteenth day of February or August preceding such March 1 or
September 1. Interest shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. The Debentures will be issued in fully
registered form and in denominations of $1,000 and integral multiples thereof.
Except as provided herein, individual Debentures will not be issued. See
"-- Form of Debentures."
FORM OF DEBENTURES
The Debentures will be represented by one or more global securities (each a
"Global Security") registered in the name of The Depository Trust Company, as
Depositary (the "Depositary") or a nominee of the Depositary. Except as set
forth below, a Global Security may be transferred in whole and not in part, only
to the Depositary or another nominee of the Depositary or to a successor of the
Depositary or its nominee.
Upon the issuance of a Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debentures represented by such Global Security to the accounts of
institutions that have accounts with the Depositary or its nominee
("Participants"). The accounts to be credited will be designated by the
Underwriters, dealers or agents. Ownership of beneficial interests in a Global
Security will be limited to Participants or persons that may hold interests
through Participants. Ownership of interests in such Global Security will be
shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depositary (with respect to Participants'
interests) and such Participants (with respect to the owners of beneficial
interests in such Global Security). The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in a Global Security.
So long as the Depositary or its nominee is the registered holder and owner
of such Global Security, the Depositary or such nominee, as the case may be,
will be considered the sole registered owner and holder of the related
Debentures for all purposes of such Debentures and for all purposes under the
Indenture. Except as set
S-3
<PAGE> 4
forth below, owners of beneficial interests in a Global Security will not be
entitled to have the Debentures represented by such Global Security registered
in their names, will not receive or be entitled to receive physical delivery of
Debentures in definitive form and will not be considered to be the owners or
holders of any Debentures under the Indenture or such Global Security.
Accordingly, each person owning a beneficial interest in a Global Security
must rely on the procedures of the Depositary and, if such person is not a
Participant, on the procedures of the Participant through which such person owns
its interest, to exercise all rights of a holder of Debentures under the
Indenture or such Global Security. The Company understands that under existing
industry practice, in the event the Company requests any action of holders of
Debentures or an owner of a beneficial interest in a Global Security desires to
take any action that the Depositary, as the holder of such Global Security, is
entitled to take, the Depositary would authorize the Participants to take such
action, and that the Participants would authorize beneficial owners owning
through such Participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Payment of principal and interest on Debentures represented by a Global
Security will be made to the Depositary or its nominee, as the case may be, as
the registered owner and holder of such Global Security.
The Company expects that the Depositary, upon receipt of any payment of
principal or interest, will immediately credit the accounts of the Participants
with such payment in amounts proportionate to their respective holdings in
principal amount of beneficial interest in the Global Security as shown in the
records of the Depositary. Payments by Participants to owners of beneficial
interests in a Global Security held through such Participants will be governed
by standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in "street name," and
will be the responsibility of such Participants. The Company and the Trustee
will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in a
Global Security for any Debentures or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests or for any other
aspect of the relationship between the Depositary and its Participants or the
relationship between such Participants and the owners of beneficial interests in
such Global Security owned through such Participants.
Unless and until it is exchanged in whole or in part for Debentures in
definitive form, a Global Security may not be transferred except as a whole by
the Depositary to a nominee of such Depositary, by a nominee of such Depositary
to such Depositary or another nominee of such Depositary, or to a successor of
the Depositary or its nominee.
Debentures represented by a Global Security will be exchangeable for
Debentures in definitive form of like tenor as such Global Security in
denominations of $1,000 and in any greater amount that is an integral multiple
thereof if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Global Security or the Depositary
ceases to be a clearing agency registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (ii) the Company executes and delivers to
the Trustee a Company Order that such Global Security shall be so transferable,
registrable and exchangeable and such transfers shall be registrable or (iii)
there shall have occurred and be continuing an Event of Default with respect to
the Debentures evidenced by such Global Security. Any Global Security that is
exchangeable pursuant to the preceding sentence is exchangeable for Debentures
issuable in authorized denominations and registered in such names as the
Depositary shall direct and an owner of a beneficial interest in a Global
Security will be entitled to physical delivery of such Debentures in definitive
form. Subject to the foregoing, a Global Security is not exchangeable except for
a Global Security or Global Securities of the same aggregate denominations to be
registered in the name of the Depositary or its nominee.
The Depositary has advised the Company and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of Participants and to facilitate the
clearance and settlement of securities transactions among the Participants,
thereby eliminating the need for physical delivery of securities and
certificates. Participants include securities brokers and dealers
S-4
<PAGE> 5
(including the Underwriters), banks, trust companies, clearing corporations and
certain other organizations, some of which (and/or their representatives) own
the Depositary. Access to the Depositary's book-entry system is also available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with Participants, either directly or
indirectly ("Indirect Participants"). Persons who are not Participants may
beneficially own securities held by the Depositary only through Participants or
Indirect Participants. The rules applicable to the Depositary and the
Participants are on file with the Securities and Exchange Commission. The
Depositary currently accepts only notes denominated and payable in U.S. dollars.
CONDITIONAL RIGHT TO SHORTEN MATURITY
The Company intends to deduct interest paid on the Debentures for United
States federal income tax purposes. The Clinton Administration's budget proposal
for Fiscal Year 1998, however, which was released on February 6, 1997, contains
a series of proposed tax law changes that, if enacted, would prohibit an issuer
from deducting interest payments on debt instruments that have a maturity of
more than 40 years, such as the Debentures described herein. The
Administration's proposal specifies that the changes would be effective for debt
instruments issued on or after the date of first Congressional committee action.
There can be no assurance that legislation affecting the Company's ability to
deduct interest paid on the Debentures will not be enacted in the future or that
any such legislation would not be effective retroactively.
Upon the occurrence of a Tax Event (as defined below), the Company will
have the right, without the consent of the holders of the Debentures, to shorten
the maturity of the Debentures to the minimum extent required, in the opinion of
nationally recognized independent tax counsel, such that, after the shortening
of the maturity, interest paid on the Debentures will be deductible for United
States federal income tax purposes or, if such counsel is unable to opine
definitively as to such minimum period, the minimum extent so required as
determined in good faith by the Board of Directors of the Company, after receipt
of an opinion of such counsel regarding the applicable legal standards. There
can be no assurance that the Company would not exercise its right to shorten the
maturity of the Debentures upon the occurrence of such a Tax Event and no
assurance as to the period by which such maturity would be shortened. In the
event that the Company elects to exercise its right to shorten the maturity of
the Debentures on the occurrence of a Tax Event, the Company will mail a notice
of shortened maturity to each holder of the Debentures by first-class mail not
more than 60 days after the occurrence of such Tax Event, stating the new
maturity date of the Debentures. Such notice shall be effective immediately upon
mailing.
The Company believes that the Debentures should constitute indebtedness for
United States federal income tax purposes under current law and, in that case,
an exercise of its right to shorten the maturity of the Debentures would not be
a taxable event to holders for such purposes. Prospective investors should be
aware, however, that the Company's exercise of its right to shorten the maturity
of the Debentures would be a taxable event to holders for United States federal
income tax purposes if the Debentures are treated as equity for such purposes
before the maturity is shortened and the Debentures of shortened maturity are
treated as debt for such purposes.
"Tax Event" means that the Company shall have received an opinion of
nationally recognized independent tax counsel to the effect that, as a result of
(a) any amendment to, clarification of, or change (including any announced
prospective amendment, clarification or change) in any law, or any regulation
thereunder, of the United States, (b) any judicial decision, official
administrative pronouncement, ruling, regulatory procedure or regulation,
including any notice or announcement of intent to adopt or promulgate any
ruling, regulatory procedure or regulation (any of the foregoing, an
"Administrative or Judicial Action"), or (c) any amendment to, clarification of,
or change in any official position with respect to, or any interpretation of, an
Administrative or Judicial Action or a law or regulation of the United States
that differs from the theretofore generally accepted position or interpretation,
in each case, occurring on or after February 20, 1997, there is more than an
insubstantial increase in the risk that interest paid by the Company on the
Debentures is not, or will not be, deductible, in whole or in part, by the
Company for United States federal income tax purposes.
S-5
<PAGE> 6
OPTIONAL REDEMPTION
The Debentures will be redeemable in whole or in part, at the option of the
Company at any time and from time to time, on not less than 30 or more than 60
days' prior notice mailed to holders thereof, at a redemption price equal to the
greater of (i) 100% of the principal amount of the Debentures to be redeemed and
(ii) the sum of the present values of the Remaining Scheduled Payments thereon
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 20 basis points,
together in either case with accrued interest on the principal amount being
redeemed to the date of redemption.
In addition, if a Tax Event occurs and in the opinion of nationally
recognized independent tax counsel there would, notwithstanding any shortening
of the maturity of the Debentures, be more than an insubstantial risk that
interest paid by the Company on the Debentures is not, or will not be,
deductible, in whole or in part, by the Company for United States federal income
tax purposes, the Company will have the right, within 90 days following the
occurrence of such Tax Event, to redeem the Debentures in whole (but not in
part), on not less than 30 or more than 60 days' prior notice mailed to the
holders thereof, at a redemption price equal to the greater of (i) 100% of the
principal amount of the Debentures and (ii) the sum of the present values of the
Remaining Scheduled Payments thereon discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus 40 basis points, together in either case with accrued
interest on the principal amount being redeemed to the date of redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity (computed as of the
second business day immediately preceding such redemption date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Debentures. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest of such Reference Treasury Dealer Quotations,
or (B) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer as of 3:30 p.m., New York City time, on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc., and Morgan Stanley & Co. Incorporated and their respective
successors and two other nationally recognized investment banking firms that are
Primary Treasury Dealers specified from time to time by the Company; provided,
however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another nationally recognized investment
banking firm that is a Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Debenture to be
redeemed, the remaining scheduled payments of the principal thereof and interest
thereon that would be due after the related redemption
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<PAGE> 7
date but for such redemption; provided, however, that if such redemption date is
not an interest payment date with respect to such Debenture, the amount of the
next succeeding scheduled interest payment thereon will be reduced by the amount
of interest accrued thereon to such redemption date.
On and after any redemption date, interest will cease to accrue on the
Debentures or any portion thereof called for redemption. Prior to any redemption
date, the Company shall deposit with a paying agent money sufficient to pay the
redemption price of and accrued interest on the Debentures to be redeemed on
such date. If less than all the Debentures are to be redeemed, the Debentures to
be redeemed shall be selected by the Trustee by such method as the Trustee shall
deem fair and appropriate in accordance with methods generally used at the time
of selection by fiduciaries in similar circumstances.
SATISFACTION AND DISCHARGE PRIOR TO MATURITY
Pursuant to an election by the Company under the Indenture, the Company has
the right at any time to satisfy and discharge its obligations under the
Debentures by depositing in trust with the Trustee money or U.S. Government
Obligations. For United States federal income tax purposes, it is likely that
any such deposit and discharge with respect to any Debentures will be treated as
a taxable exchange of such Debentures for interests in the trust. For a
description of the applicable provisions and the tax effects, see "Description
of Securities -- Satisfaction and Discharge Prior to Maturity" in the
Prospectus.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Non-U.S. Holders
The following summary describes certain United States federal income tax
consequences under current law that may be relevant to a beneficial owner of the
Debentures that is not (i) a citizen or resident of the United States, (ii) a
corporation created or organized under the laws of the United States or any
State thereof or the District of Columbia or (iii) a person otherwise subject to
United States federal income taxation on its worldwide income (any of the
foregoing, a "Non-U.S. Holder"). This summary deals only with Non-U.S. Holders
that are initial holders of the Debentures and that will hold the Debentures as
capital assets. It does not address the tax considerations applicable to
Non-U.S. Holders if income or gain in respect of the Debentures is effectively
connected with the conduct of a trade or business in the United States.
Generally, payments of interest made with respect to the Debentures to a
Non-U.S. Holder will not be subject to United States federal income or
withholding tax, provided that (i) the Non-U.S. Holder does not actually or
constructively own 10 percent or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (ii) the Non-U.S. Holder is
not a controlled foreign corporation for United States tax purposes that is
directly or indirectly related to the Company through stock ownership, (iii) the
Non-U.S. Holder is not a bank described in Section 881(c)(3)(A) of the Internal
Revenue Code of 1986, as amended, and (iv) the Non-U.S. Holder complies with
applicable certification requirements.
Any capital gain realized on the sale, exchange, retirement or other
disposition of a Debenture by a Non-U.S. Holder will not be subject to United
States federal income or withholding taxes unless such Non-U.S. Holder is an
individual who is present in the United States for a period or periods
aggregating 183 days or more in the taxable year of such sale, exchange,
retirement or other disposition and meets certain additional requirements.
PURCHASERS OF DEBENTURES SHOULD CONSULT THEIR OWN TAX ADVISERS WITH RESPECT
TO THE POSSIBLE APPLICABILITY OF UNITED STATES FEDERAL INCOME, WITHHOLDING AND
OTHER TAXES UPON INCOME AND GAIN REALIZED IN RESPECT OF THE DEBENTURES.
Information Reporting and Backup Withholding
A holder of the Debentures may be subject to information reporting and
backup withholding at a rate of 31 percent on certain amounts paid to the holder
unless such holder provides proof of an applicable exemption
S-7
<PAGE> 8
(including a general exemption for Non-U.S. Holders and for corporations) or
correct taxpayer identification number, and otherwise complies with applicable
requirements of the information reporting and backup withholding rules. Any
amount withheld under the backup withholding rules may be allowed as a refund or
a credit against such holder's United States federal income tax liability,
provided that the required information is furnished to the Internal Revenue
Service.
Proposed Regulations
On April 22, 1996, the United States Treasury Department published proposed
regulations relating to withholding, backup withholding and information
reporting that, if adopted in their current form, would, among other things,
unify current certification procedures and forms and clarify certain reliance
standards. The regulations are proposed to be effective for payments made after
December 31, 1997 but provide that certificates issued on or before the date
that is 60 days after the proposed regulations are published in final form will
continue to be valid until such certificates expire. The proposed regulations,
however, are subject to change prior to their publication in final form.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
relating to the Debentures, the Company has agreed to sell to the Underwriters
named below ("Underwriters") and the Underwriters have severally agreed to
purchase from the Company, the following respective principal amounts of
Debentures:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ----------------
<S> <C>
Credit Suisse First Boston Corporation...................... $125,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... 125,000,000
J.P. Morgan Securities Inc.................................. 125,000,000
Morgan Stanley & Co. Incorporated........................... 125,000,000
------------
Total............................................. $500,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the Debentures if any are
purchased.
The Company has been advised by the Underwriters that they propose to offer
the Debentures to the public initially at the offering price set forth on the
cover page of this Prospectus Supplement and to certain dealers at such price
less a concession of .675% of the principal amount per Debenture; that the
Underwriters and such dealers may allow a discount of .25% of such principal
amount per Debenture on sales to other dealers; and that, after the initial
public offering, the public offering price and concessions and discounts to
dealers may be changed by the Underwriters.
The Company has been advised by the Underwriters that they intend to make a
market in the Debentures, but that they are not obligated to do so and that any
one of them may discontinue making a market in the Debentures at any time
without notice. The Debentures are a new issue of securities with no established
trading market. No assurance can be given as to the liquidity of the trading
market for the Debentures.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or contribute to payments which any Underwriter may be required to make
in respect thereof.
In the ordinary course of their respective businesses, certain affiliates
of the Underwriters have engaged, and may in the future engage, in commercial
banking and investment banking transactions with the Company and affiliates of
the Company.
S-8
<PAGE> 9
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Debentures in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Debentures are effected. Accordingly, any resale of the
Debentures in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or pursuant
to a discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the Debentures.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Debentures in Canada who receives a purchase confirmation
will be deemed to represent to the Company and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Debentures without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, such purchaser is purchasing as principal and not as agent, and
(iii) such purchaser has reviewed the text above under "-- Resale Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The Debentures being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the United States federal securities laws.
All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
Company or such persons. All or a substantial portion of the assets of the
Company and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the Company or such persons in
Canada or to enforce a judgment obtained in Canadian courts against the Company
or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Debentures to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Debentures acquired by such purchaser pursuant to the offering of Debentures
contemplated hereby. Such report must be in the form attached to British
Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be
obtained from the Company. Only one such report must be filed in respect of
Debentures acquired on the same date and under the same prospectus exemption.
VALIDITY OF DEBENTURES
The validity of the Debentures will be passed upon for the Company by C. R.
Lotter, Executive Vice President, Secretary and General Counsel of the Company,
and for the Underwriters by Dewey Ballantine, New York, New York. As of January
31, 1997, Mr. Lotter owned 31,162 shares of common stock and common stock voting
equivalents of the Company, including shares credited to his account under the
Company's Savings and Profit-Sharing Retirement Plan and the Savings,
Profit-Sharing and Stock Ownership Plan. As of January 31, 1997, Mr. Lotter had
outstanding options to purchase 73,540 shares of common stock.
S-9
<PAGE> 10
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
JCPenney
J. C. PENNEY COMPANY, INC.
DEBT SECURITIES
AND
WARRANTS TO PURCHASE DEBT SECURITIES
------------------------
J. C. Penney Company, Inc. ("Company") may offer from time to time in one
or more series up to $1,500,000,000 (or the equivalent thereof denominated in
foreign currency or composite currencies such as the European Currency Unit
("ECU")) aggregate principal amount of its senior debt securities consisting of
unsecured debentures, notes and/or other evidences of indebtedness ("Debt
Securities"), each series of which will be offered on terms to be determined at
the time of sale. The Company from time to time may also offer Debt Securities
with warrants ("Warrants") to purchase Debt Securities (Debt Securities and
Warrants being hereinafter collectively called "Securities"). A Supplement to
this Prospectus ("Prospectus Supplement") will be delivered together with this
Prospectus in respect of any Debt Securities, including any related Warrants,
then being offered and will set forth certain specific terms with respect to
such Securities, which may include, among other items:
- title;
- authorized denominations;
- aggregate principal amount;
- initial public offering price;
- maturity;
- currency or currency unit in which the Debt Securities will be
denominated;
- rate or rates or formula to determine such rate or rates, and time
or times of payment of interest, if any;
- redemption and sinking fund terms, if any;
- exercise prices and expiration dates of any Warrants;
- listing, if any, on a securities exchange;
- underwriter or underwriters, if any, respective amounts to be
purchased by them, their compensation and the resulting net
proceeds to the Company.
Securities may be sold to underwriters for public offering pursuant to
terms of offering fixed at the time of sale. In addition, Securities may be sold
by the Company directly or through agents. See "Plan of Distribution".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JULY 2, 1996
<PAGE> 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT IN
CONNECTION WITH ANY OFFERING MADE THEREBY, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED THEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE THEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("1934 Act") and in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission ("Commission"). Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N. W., Room 1024, Washington, D. C. 20549; and
at the Commission's Regional Offices in Chicago (Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661) and New York (Seven World
Trade Center, 13th Floor, New York, N.Y. 10048). Copies of such material can
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N. W., Washington, D. C. 20549 at prescribed rates. In addition,
the Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements, and other information regarding registrants
that file electronically with the Commission. Reports, proxy statements and
other information concerning the Company can also be inspected at the office of
The New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended ("1933
Act"). This Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the Securities offered pursuant hereto. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference (i) its Annual Report on Form
10-K for the fiscal year ended January 27, 1996, (ii) the J. C. Penney Funding
Corporation ("Funding Corporation") Annual Report on Form 10-K for such fiscal
year, (iii) the Company's Quarterly Report on Form 10-Q for the thirteen weeks
ended April 27, 1996, and (iv) Funding Corporation's Quarterly Report on Form
10-Q for the thirteen weeks ended April 27, 1996. The aforesaid reports have
heretofore been filed by the Company and Funding Corporation with the Commission
pursuant to applicable provisions of the 1934 Act.
All reports and any definitive proxy or information statements filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act,
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Securities, shall be deemed to be incorporated in this
Prospectus by reference and to be a part hereof from the date of the filing of
such documents.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL
REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS WHICH HAVE
BEEN OR MAY BE INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
SUCH DOCUMENTS). WRITTEN REQUESTS SHOULD BE DIRECTED TO: J. C. PENNEY COMPANY,
INC., PUBLIC INFORMATION, P. O. BOX 10001, DALLAS, TEXAS 75301-4302. TELEPHONE
REQUESTS SHOULD BE DIRECTED TO (972) 431-1488.
2
<PAGE> 12
THE COMPANY
The Company is a major retailer, with department stores in all 50 states,
Puerto Rico, Mexico and Chile. The major portion of the Company's business
consists of providing merchandise and services to consumers through department
stores that include catalog departments. The Company markets predominantly
family apparel, shoes, jewelry, accessories and home furnishings. The Company
finances a portion of its operations through Funding Corporation, a wholly-owned
consolidated subsidiary.
The Company was founded by James Cash Penney in 1902 and incorporated in
Delaware in 1924. Its principal executive offices are located at 6501 Legacy
Drive, Plano, Texas 75024-3698, and its telephone number is (972) 431-1000. As
used in this Prospectus, except as otherwise indicated by the context, the term
"Company" means J. C. Penney Company, Inc. and its consolidated subsidiaries.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Securities will be used for general corporate purposes, which may include
working capital, capital expenditures, repayment of borrowings and investments.
Unless otherwise specified in the Prospectus Supplement accompanying this
Prospectus, specific allocations of the proceeds will not have been made at the
date of the Prospectus Supplement. Pending any specific application, the net
proceeds may be initially invested in short term marketable securities or
applied to the reduction of short term indebtedness.
The Company or its subsidiaries may from time to time borrow additional
funds or issue additional equity securities, as appropriate. The amounts, terms
and timing of any such financings or issuances will depend upon a number of
factors, including the operations of the Company and the condition of the
financial markets.
RATIOS OF AVAILABLE INCOME TO FIXED CHARGES
FOR THE COMPANY AND ALL SUBSIDIARIES
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
---------------------------------------- -------------- --------------
APR. 27 JAN. 27 JAN. 28 JAN. 29 JAN. 30 JAN. 25
1996 1996 1995 1994 1993 1992
------- ------- ------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratios of available
income to fixed
charges............... 3.6 3.7 5.1 4.9 3.8 2.1
Ratios of available
income to combined
fixed charges and
preferred stock
dividend
requirement........... 3.3 3.4 4.5 4.3 3.4 1.8
</TABLE>
For purposes of computing the ratios of available income to fixed charges,
available income is determined by adding fixed charges to income from continuing
operations before income taxes and before capitalized interest. Fixed charges
are interest expense and a portion of rental expense representative of interest.
For purposes of computing the ratios of available income to combined fixed
charges and preferred dividend requirement, fixed charges are further increased
by the preferred stock dividend requirement. The interest cost of the LESOP
notes guaranteed by the Company is not included in fixed charges.
The Company believes that due to the seasonal nature of its business,
ratios for a period other than a 52 or 53 week period are inappropriate.
3
<PAGE> 13
DESCRIPTION OF SECURITIES
DEBT SECURITIES
The Debt Securities are to be issued under an Indenture, dated as of April
1, 1994 (said Indenture being herein called the "Indenture"), between the
Company and First Trust of California, National Association, Successor Trustee
to Bank of America National Trust and Savings Association ("Trustee"). The
Indenture in the form in which it was executed is incorporated by reference as
an exhibit to the Registration Statement of which this Prospectus forms a part.
The following statements are subject to the detailed provisions of the
Indenture, including the definitions therein of certain terms used herein
without definition. Wherever particular provisions of the Indenture are referred
to below, such provisions are incorporated by reference as a part of the
statement made, and the statement is qualified in its entirety by such
reference.
GENERAL
The Indenture does not limit the amount of Debt Securities which can be
issued thereunder. Under the Indenture, Debt Securities may be issued in one or
more series, each in an aggregate principal amount (in U.S. dollars or the
equivalent thereof denominated in foreign currency or composite currencies such
as the ECU) authorized by the Company prior to issuance.
Reference is made to the Prospectus Supplement for certain specified terms
with respect to the Debt Securities being offered hereby, including, but not
limited to (1) the terms set forth on the cover page of this Prospectus; (2) the
obligation, if any, of the Company to redeem or purchase the Debt Securities
pursuant to any sinking fund or analogous provisions or at the option of the
holder thereof and the period or periods within and the price or prices at which
the Debt Securities will be redeemed or purchased, in whole or in part, pursuant
to such obligation, and the other detailed terms and provisions of such
obligation; (3) if the amount of payments of principal of or any premium or
interest on any of the Debt Securities may be determined with reference to an
index, the manner in which such amounts shall be determined; and (4) whether any
of the Debt Securities shall be issuable in whole or in part in the form of one
or more Global Securities (as described below) and, if so, the Depository for
such Global Security or Securities, and the circumstances under which any such
Global Security or Securities may be exchanged for Debt Securities registered in
the name of, and any transfer of such Global Security or Securities may be
registered to, a person other than such Depository or its nominee.
The Debt Securities offered hereby will be unsecured and will rank pari
passu with all other unsecured and unsubordinated indebtedness of the Company.
Unless otherwise provided in the Prospectus Supplement, the Debt Securities
will be issued only in registered form without coupons and may be issued (in the
case of dollar denominated Debt Securities) in denominations of $1,000 and any
integral multiple thereof. The Debt Securities of a series may be represented,
in whole or in part, by one or more permanent Global Securities in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Global Security or Securities. Any such Global Security deposited with a
Depository or its nominee and bearing the legend required by the Indenture may
not be surrendered for transfer or exchange except by the Depository for such
Global Security or any nominee of such Depository, except if the Depository
notifies the Company that it is unwilling or unable to continue as Depository,
or the Depository ceases to be qualified as required by the Indenture, or the
Company instructs the Trustee in accordance with the Indenture that such Global
Security shall be so registrable and exchangeable, or there shall exist such
other circumstances, if any, as may be specified in the applicable Prospectus
Supplement.
The specific terms of the depository arrangement with respect to any
portion of a series of Debt Securities to be represented by one or more Global
Securities will be described in the applicable Prospectus Supplement. Beneficial
interests in Global Securities will only be evidenced by, and transfers thereof
will only be effected through, records maintained by the Depository and the
institutions that are participants in the Depository.
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Debt Securities of any series will
be exchangeable for other Debt Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. The Debt
Securities may be
4
<PAGE> 14
transferred or exchanged without payment of any service charge, other than any
tax or other governmental charge payable in connection therewith. (Article Two)
The principal of (and premium, if any) and interest, if any, on the Debt
Securities will be payable, and the transfer of the Debt Securities will be
registrable, at the agency or agencies maintained by the Company; provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
Security Register. (Sections 2.07 and 2.10)
Some of the Debt Securities may be issued as discounted Debt Securities
(bearing no interest or bearing interest at a rate which at the time of issuance
is below market rate) to be sold at a substantial discount below their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any such discounted Debt Securities will be
described in the Prospectus Supplement relating thereto. Debt Securities may
also be issued under the Indenture upon the exercise of Warrants. See "Warrants"
below.
RESTRICTIVE COVENANTS
Limitations on Liens. The Indenture provides that the Company may not, nor
may it permit any Restricted Subsidiary to, issue, assume or guarantee evidences
of indebtedness for money borrowed which are secured by any mortgage, security
interest, pledge or lien ("mortgage") of or upon any Principal Property or of or
upon any shares of stock or evidences of indebtedness for borrowed money issued
by any Restricted Subsidiary and owned by the Company or any Restricted
Subsidiary, whether owned at the date of the Indenture or thereafter acquired,
without effectively providing that the Principal Amount of the Debt Securities
from time to time Outstanding shall be secured equally and ratably by such
mortgage, except that this restriction will not apply to (1) mortgages on any
property existing at the time of its acquisition; (2) mortgages on property of a
corporation existing at the time such corporation is merged into or consolidated
with, or disposes of substantially all its properties (or those of a division)
to, the Company or a Restricted Subsidiary; (3) mortgages on property of a
corporation existing at the time such corporation first becomes a Restricted
Subsidiary; (4) mortgages securing indebtedness of a Restricted Subsidiary to
the Company or to another Restricted Subsidiary; (5) mortgages to secure the
cost of acquisition, construction, development or substantial repair, alteration
or improvement of property if the commitment to extend the credit secured by any
such mortgage is obtained within 12 months after the later of the completion or
the placing in operation of the acquired, constructed, developed or
substantially repaired, altered or improved property; (6) mortgages securing
current indebtedness (as defined); or (7) any extension, renewal or replacement
(or successive extensions, renewals or replacements), in whole or in part, of
any mortgage referred to in clauses (1) through (6) provided, however, that the
principal amount of indebtedness secured thereby and not otherwise authorized by
said clauses (1) to (6), inclusive, shall not exceed the principal amount of
indebtedness, plus any premium or fee payable in connection with any such
extension, renewal or replacement, so secured at the time of such extension,
renewal or replacement. However, the Company or any Restricted Subsidiary may
issue, assume or guarantee indebtedness secured by mortgages which would
otherwise be subject to the foregoing restriction in any aggregate amount which,
together with all other such indebtedness outstanding, all attributable debt
outstanding under the provisions described in the last sentence under
Limitations on Sale and Lease-Back Transactions below and all Senior Funded
Indebtedness issued, assumed or guaranteed by any Restricted Subsidiary, does
not exceed 5% of Stockholders' Equity. (Section 5.08)
Limitations on Sale and Lease-Back Transactions. The Indenture provides
that neither the Company nor any Restricted Subsidiary may enter into any Sale
and Lease-Back Transaction with respect to any Principal Property (except for
transactions involving leases for a term, including renewals, of not more than
three years and except for transactions between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries), if the purchaser's commitment is
obtained more than 12 months after the later of the acquisition or completion or
the placing in operation of such Principal Property or of such Principal
Property as constructed or developed or substantially repaired, altered or
improved. This restriction will not apply if either (a) the Company or such
Restricted Subsidiary would be entitled pursuant to the provision described in
the first sentence under Limitations on Liens above to issue, assume or
guarantee debt secured by a mortgage on such Principal Property without equally
and ratably securing the Debt Securities from time to time outstanding or (b)
the Company applies within 180 days an amount equal to, in the case of a sale or
transfer for cash, the net proceeds (not exceeding the net book value) and,
otherwise, an amount equal to the fair value (as determined by its Board of
Directors) of the
5
<PAGE> 15
Principal Property so leased to the retirement of Debt Securities or other
Senior Funded Indebtedness of the Company or a Restricted Subsidiary, subject to
reduction as set forth in the Indenture in respect of Debt Securities and other
Senior Funded Indebtedness retired during such 180-day period otherwise than
pursuant to mandatory sinking fund or prepayment provisions and payments at
maturity. The Company or any Restricted Subsidiary, however, may enter into a
Sale and Lease-Back Transaction which would otherwise be subject to the
foregoing restriction so as to create an aggregate amount of attributable debt
(as defined) which, together with all other such attributable debt outstanding,
all indebtedness outstanding under the provision described in the last sentence
under Limitations on Liens above and all Senior Funded Indebtedness issued,
assumed or guaranteed by any Restricted Subsidiary, does not exceed 5% of
Stockholders' Equity. (Section 5.09)
Waiver of Covenants. The Indenture provides that the Holders of a majority
(unless a greater requirement with respect to any series of Debt Securities is
specified for this purpose, in which case the requirement specified) in
Principal Amount of the Outstanding Debt Securities of a particular series may
waive compliance as to such series with certain covenants or conditions set
forth in the Indenture, including those described above. (Section 5.10)
Consolidation, Merger or Sale of Assets of the Company. The Indenture
provides that the Company may not consolidate with or merge into any other
corporation or sell its assets substantially as an entirety, unless (1) the
corporation formed by such consolidation or into which the Company is merged or
the Person which acquires its assets is a corporation organized in the United
States and expressly assumes the due and punctual payment of the principal of
(and premium, if any) and interest, if any, on all the Debt Securities and the
performance of every covenant of the Indenture on the part of the Company, and
(2) immediately after giving effect to such transaction, no Event of Default,
and no event which, after notice or lapse of time, or both, would become an
Event of Default, shall have happened and be continuing. Upon any such
consolidation, merger or sale, the successor corporation formed by such
consolidation or into which the Company is merged or to which such sale is made
will succeed to, and be substituted for, the Company under the Indenture, and
the predecessor corporation shall be released from all obligations and covenants
under the Indenture and the Debt Securities. (Article Eleven)
Unless otherwise provided in the Prospectus Supplement, the covenants
contained in the Indenture and the Debt Securities would not necessarily afford
Holders of the Debt Securities protection in the event of a highly leveraged or
other transaction involving the Company that may adversely affect such Holders.
DEFINITIONS
"Principal Amount" means, when used with respect to any Debt Security, the
amount of principal thereof that could then be declared due and payable as a
result of an Event of Default with respect to such Debt Security. "Principal
Property" means all real and tangible property owned by the Company or a
Restricted Subsidiary constituting a part of any store, warehouse or
distribution center located within the United States, exclusive of motor
vehicles, mobile materials-handling equipment and other rolling stock, cash
registers and other point of sale recording devices and related equipment, and
data processing and other office equipment, provided the net book value of all
real property (including leasehold improvements) and store fixtures constituting
a part of such store, warehouse or distribution center exceeds 0.25% of
Stockholders' Equity. "Restricted Subsidiary" means any Subsidiary (as defined)
of the Company or of a Restricted Subsidiary which the Company designates as a
Restricted Subsidiary, which designation shall not have been canceled. However,
no subsidiary for which the designation of Restricted Subsidiary has been
canceled may be redesignated as such if during any period following cancellation
of its previous designation as a Restricted Subsidiary, such Subsidiary shall
have entered into a Sale and Lease-Back Transaction which would have been
prohibited had it been a Restricted Subsidiary at the time of such Transaction.
"Senior Funded Indebtedness" of the Company means any Funded Indebtedness of the
Company unless in any instruments evidencing or securing such Funded
Indebtedness it is provided that such Funded Indebtedness is subordinate in
right of payment to the Debt Securities to the extent provided in the Indenture.
"Senior Funded Indebtedness" of a Restricted Subsidiary means Funded
Indebtedness of the Restricted Subsidiary and the aggregate preference on
involuntary liquidation of preferred stock of such Subsidiary. "Funded
Indebtedness" of a corporation means the principal of (a) indebtedness for money
borrowed or evidenced by an instrument given in connection with an acquisition
which is not payable on demand and which
6
<PAGE> 16
matures, or which such corporation has the right to renew or extend to a date,
more than one year after the date of determination, (b) any indebtedness of
others of the kinds described in the preceding clause (a) for the payment of
which such corporation is responsible or liable as a guarantor or otherwise, and
(c) amendments, renewals and refundings of any such indebtedness. For the
purposes of the definition of "Funded Indebtedness", the term "principal" when
used at any date with respect to any indebtedness means the amount of principal
of such indebtedness that could be declared to be due and payable on that date
pursuant to the terms of such indebtedness. "Stockholders' Equity" means the
aggregate of (a) capital and reinvested earnings, after deducting the cost of
shares of capital stock of the Company held in its treasury, of the Company and
consolidated Subsidiaries plus (b) deferred tax effects. (Section 1.01)
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that if an Event of Default shall have occurred and
be continuing with respect to any series of Debt Securities at the time
Outstanding, either the Trustee or the Holders of not less than 25% (unless a
different percentage with respect to any series of Debt Securities is specified
for this purpose, in which case the percentage specified) in Outstanding
Principal Amount of such series may declare to be due and payable immediately
the Principal Amount (or specified portion thereof) of such series, together
with interest, if any, accrued thereon. (Section 7.02)
The Indenture defines an Event of Default with respect to any series of
Debt Securities as any one of the following events: (a) default for 30 days in
payment of any interest due with respect to any Debt Security of such series;
(b) default for 30 days in making any sinking fund payment due with respect to
any Debt Security of such series; (c) default in payment of principal of (or
premium, if any, on) any Debt Security of such series when due; (d) default for
90 days after notice to the Company by the Trustee or by Holders of not less
than 25% in Principal Amount of the Debt Securities then Outstanding of such
series in the performance of any other covenant for the benefit of such series;
(e) certain events of bankruptcy, insolvency and reorganization; and (f) any
additional event specified as an "Event of Default" for the benefit of such
series. (Section 7.01) No Event of Default with respect to a particular series
of Debt Securities issued under the Indenture necessarily constitutes an Event
of Default with respect to any other series of Debt Securities issued
thereunder.
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default, give to the Holders of the Debt Securities of each
series as to which such default has occurred notice of such default known to it,
unless cured or waived; provided that, except in the case of default in the
payment of principal of (or premium, if any) or interest, if any, or in the
payment of any sinking fund installment in respect of any of the Debt
Securities, the Trustee will be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interests of
the Holders of the series as to which such default has occurred. The term
"default" for the purpose of this provision means any event which is, or after
notice or lapse of time, or both, would become, an Event of Default. (Section
8.02)
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during the continuance of an Event of Default to act with
the required standard of care, to be indemnified by the Holders of Debt
Securities before proceeding to exercise any right or power under the Indenture
at the request of such Holders. (Section 8.03) The Indenture provides that the
Holders of a majority (unless a greater requirement with respect to any series
of Debt Securities is specified for this purpose, in which case the requirement
specified) in Outstanding Principal Amount of a series of Debt Securities may,
subject to certain exceptions, on behalf of the Holders of the Debt Securities
of such series direct the time, method and place of conducting proceedings for
remedies available to the Trustee, or exercising any trust or power conferred on
the Trustee. (Section 7.12)
The Indenture includes a covenant that the Company will file annually with
the Trustee a certificate of no default, or specifying any default that exists.
(Section 5.06)
In certain cases, the Holders of a majority (unless a greater requirement
with respect to any series of Debt Securities is specified for this purpose, in
which case the requirement specified) in Outstanding Principal Amount of a
series of Debt Securities may on behalf of the Holders of the Debt Securities of
such series rescind, as to such series, a declaration of acceleration or waive,
as to such series, any past default or Event of Default relating to the Debt
Securities of such series, except a default not theretofore cured in payment of
the principal of (or
7
<PAGE> 17
premium, if any) or interest, if any, on any of such Debt Securities or in
respect of a provision which under the Indenture cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security of such
series. (Sections 7.02 and 7.13)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of 66 2/3% (unless a different percentage with
respect to any series of Debt Securities is specified for this purpose, in which
case the percentage specified) in Principal Amount of the Outstanding Debt
Securities of each series affected by such modification, to execute supplemental
indentures adding any provisions to or changing or eliminating any provisions of
the Indenture or modifying the rights of the Holders of such Debt Securities,
except that no such supplemental indenture may, without the consent of all
Holders of affected Debt Securities, (i) change the Stated Maturity of any Debt
Security or reduce the principal payable at Stated Maturity or which could be
declared due and payable prior thereto or change any redemption price thereof,
(ii) reduce the rate of interest payable on any Debt Security, (iii) adversely
affect the terms and provisions, if any, applicable to the conversion or
exchange of any Debt Securities, (iv) reduce the aforesaid percentage of Debt
Securities of any series or the percentage of Debt Securities of any series
specified in Section 5.10 or 7.13, (v) change any place or the currency of
payment of principal of (or premium, if any) or interest, if any, on any Debt
Security, or (vi) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security. (Section 10.02)
SATISFACTION AND DISCHARGE PRIOR TO MATURITY
The Company may elect to provide with respect to any series of Debt
Securities that the Company may satisfy its obligations with respect to any
payment of principal (and premium, if any) or interest due on such series of
Debt Securities by depositing in trust with the Trustee money or U.S. Government
Obligations or a combination thereof sufficient to make such payment when due.
If such deposit is sufficient to make all payments of (1) interest on such
series of Debt Securities prior to their redemption or maturity, as the case may
be, and (2) principal of (and premium, if any) and interest on such series of
Debt Securities when due upon redemption or at maturity, as the case may be, all
the obligations of the Company under such series of Debt Securities and the
Indenture as it relates to such series of Debt Securities will be discharged and
terminated except as otherwise provided in the Indenture. "U.S. Government
Obligations" are defined to mean (i) securities backed by the full faith and
credit of the United States and (ii) depository receipts issued by a bank or
trust company as custodian and evidencing ownership by the holders of such
depository receipts of future payments of interest or principal, or both, on
such securities backed by the full faith and credit of the United States held by
such custodian.
For United States income tax purposes, it is likely that any such deposit
and discharge with respect to any Debt Securities will be treated as a taxable
exchange of such Debt Securities for interests in the trust. In that event, a
Holder will recognize gain or loss equal to the difference between the Holder's
cost or other tax basis for the Debt Securities and the value of the Holder's
interest in such trust; and thereafter will be required to include in income a
share of the income, gain and loss of the trust. Purchasers of the Debt
Securities should consult their own advisers with respect to the tax
consequences to them of such deposit and discharge, including the applicability
and effect of tax laws other than the United States income tax law.
In addition, the Company may elect to provide with respect to any series of
Debt Securities that the Company may be released from certain of its covenants
upon the satisfaction of certain conditions applicable to the securities of such
series.
WARRANTS
The Company may issue with any Debt Securities being offered by it Warrants
for the purchase of other Debt Securities. Each issue of Warrants will be issued
under, and will be governed by, a Warrant Agreement ("Warrant Agreement"), to be
entered into between the Company and a warrant agent ("Warrant Agent"), to be
described in the Prospectus Supplement relating to the Debt Securities with
which the Warrants are to be issued. The proposed Warrant Agreement, including
the form of proposed Warrant Certificate representing the Warrants,
8
<PAGE> 18
substantially in the form in which it is to be executed, is incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
forms a part. The following summaries of certain provisions of the Warrant
Agreement and Warrant Certificates do not purport to be complete and are subject
to and qualified in their entirety by reference to all the provisions set forth
in the Warrant Agreement and Warrant Certificates, respectively, including the
definitions thereof of certain terms.
Reference is made to the Prospectus Supplement relating to the Securities,
the Warrant Agreement relating to the Warrants and the Warrant Certificates
representing the Warrants for certain specific terms of the Warrants, which may
include: (1) designation, aggregate principal amount and terms of the Debt
Securities purchasable upon exercise of the Warrants; (2) designation and terms
of any related Debt Securities with which the Warrants are issued and the number
of Warrants issued with each such Debt Security; (3) date, if any, on and after
which the Warrants and the related Debt Securities will be separately
transferable; (4) principal amount of Debt Securities purchasable upon exercise
of one Warrant and the price at which such principal amount of Debt Securities
may be purchased upon such exercise; (5) date on which the right to exercise the
Warrants shall commence ("Commencement Date") and date on which such right shall
expire ("Expiration Date"); and (6) whether the Warrants represented by the
Warrant Certificates will be issued in registered or bearer form.
Warrant Certificates will be exchangeable for new Warrant Certificates of
different denominations, and Warrants may be exercised, at the agency or
agencies maintained for such purposes. Prior to the exercise of their Warrants,
holders of Warrants will not have any of the rights of Holders of the Debt
Securities purchasable upon such exercise and will not be entitled to payments
of principal of (or premium, if any) or interest, if any, on the Debt Securities
purchasable upon such exercise.
Each Warrant will entitle the holder to purchase for cash such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth, or be determinable as set forth, in the Prospectus Supplement relating to
the Securities. Each Warrant may be exercised in whole but not in part at any
time on and after the Commencement Date and up to the close of business on the
Expiration Date set forth in the Prospectus Supplement relating to the
Securities. After the close of business on the Expiration Date, unexercised
Warrants will become void.
The exercise price of the Warrants will be that price applicable on the
date of receipt of payment therefor determined as set forth in the Prospectus
Supplement relating to the Securities. Upon receipt of payment of the exercise
price and the Warrant Certificate properly completed and duly executed at the
agency or agencies maintained by the Company for such purpose, the Company will,
as soon as practicable, forward the Debt Securities purchasable upon such
exercise. If less than all of the Warrants represented by such Warrant
Certificate are exercised, a new Warrant Certificate will be issued for the
Warrants remaining unexercised.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company by C. R.
Lotter, Executive Vice President, Secretary and General Counsel of the Company,
and for any underwriters, agents or purchasers by Dewey Ballantine, New York,
New York. As of April 30, 1996, Mr. Lotter owned 31,591 shares of Common Stock
and Common Stock voting equivalents of the Company, including shares credited to
his accounts under the Company's Savings and Profit-Sharing Retirement Plan and
Savings, Profit-Sharing and Stock Ownership Plan. As of April 30, 1996, he had
outstanding options to purchase 73,540 shares of Common Stock.
EXPERTS
The financial statements and schedules as of January 27, 1996, January 28,
1995 and January 29, 1994, and for each of the years then ended contained or
incorporated by reference in (a) the Company's Annual Report on Form 10-K for
the fiscal year ended January 27, 1996 and (b) Funding Corporation's Annual
Report on Form 10-K for the fiscal year ended January 27, 1996 have been
incorporated herein by reference in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants (which reports each dated
February 22, 1996 are incorporated herein by reference to the aforementioned
Annual Reports on Form 10-K), and upon the authority of said firm as experts in
accounting and auditing. The Independent Auditors' Reports of
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<PAGE> 19
KPMG Peat Marwick LLP covering the aforementioned consolidated financial
statements and schedules of the Company refer to the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes, adopted by the Company in 1993, to the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities, adopted by the Company in 1994, and to the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, adopted by the Company in 1995. To the
extent that KPMG Peat Marwick LLP audits and reports on financial statements of
the Company and Funding Corporation issued at future dates, and consents to the
use of their reports thereon, such financial statements also will be
incorporated by reference herein in reliance upon their reports and said
authority.
PLAN OF DISTRIBUTION
The Company may offer the Securities from time to time (i) through
underwriters or dealers, (ii) directly to one or more institutional purchasers,
or (iii) through agents.
Sales of Securities through underwriters may be through underwriting
syndicates led by one or more managing underwriters. The specific managing
underwriter or underwriters which may act with respect to the offer and sale of
any series of Securities are set forth on the cover of the Prospectus Supplement
in respect of such series and the members of the underwriting syndicate, if any,
are named in such Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. In connection with the sale of Securities, underwriters may
be deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Securities for whom they may act as agents. Underwriters may sell
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, are set forth in
the Prospectus Supplement. Underwriters, dealers and agents participating in the
distribution of the Securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the Securities may be deemed to be underwriting discounts and
commissions, under the 1933 Act.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize underwriters, dealers or agents to solicit offers by certain
institutions to purchase Securities from the Company pursuant to delayed
delivery contracts. The Prospectus Supplement relating thereto will also set
forth the price to be paid for Securities pursuant to such contracts, the
commissions payable for solicitation of such contracts, the date or dates in the
future for delivery of Securities pursuant to such contracts and any conditions
to which such contracts will be subject.
Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the 1933 Act.
Underwriters and agents may engage in transactions with, or perform
services for, the Company in the ordinary course of business.
10
<PAGE> 20
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
<S> <C>
Recent Developments.................... S-2
Ratios of Available Income to Fixed
Charges for the Company and All
Subsidiaries......................... S-3
Description of Debentures.............. S-3
Certain United States Federal Income
Tax Consequences..................... S-7
Underwriting........................... S-8
Notice to Canadian Residents........... S-9
Validity of Debentures................. S-9
PROSPECTUS
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
The Company............................ 3
Use of Proceeds........................ 3
Ratios of Available Income to Fixed
Charges for the Company and All
Subsidiaries......................... 3
Description of Securities.............. 4
Validity of Securities................. 9
Experts................................ 9
Plan of Distribution................... 10
</TABLE>
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[JCPENNEY LOGO]
$500,000,000
7 5/8% Debentures Due 2097
PROSPECTUS SUPPLEMENT
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
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