<PAGE> 1
Filed Pursuant to Rule 424B5
Registration No. 333-23339
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 21, 1997.
$2,500,000,000
JCPenney
J. C. Penney Company, Inc.
$325,000,000 6.95% Notes Due April 1, 2000
$700,000,000 7.25% Notes Due April 1, 2002
$425,000,000 7.60% Notes Due April 1, 2007
$300,000,000 7.95% Debentures Due April 1, 2017
$350,000,000 8.125% Debentures Due April 1, 2027
$400,000,000 7.40% Debentures Due April 1, 2037
Interest Payable April 1 and October 1
------------------
The Notes and the Debentures are collectively referred to herein as the "Debt
Securities." The Notes Due 2000, the Notes Due 2002, the Notes Due 2007, the
Debentures Due 2017, and the Debentures Due 2037 may not be redeemed by the
Company prior to maturity. The Debentures Due 2027 may be redeemed, at the
option of the Company, in whole or in part, on or after April 1, 2007, at
the redemption prices set forth herein plus accrued interest to the date
of redemption. The registered holder of each Debenture Due 2037 may
elect to have that Debenture, or any portion of the principal amount
thereof that is a multiple of $1,000, repaid on April 1, 2005 at 100%
of the principal amount thereof, together with accrued and unpaid
interest to April 1, 2005. Such election, which is irrevocable when
made, must be made within the period commencing on February 1,
2005 and ending at the close of business on March 1, 2005. No
similar right is available to the holders of the Notes Due 2000,
the Notes Due 2002, the Notes Due 2007, the Debentures Due
2017, or the Debentures Due 2027. See "Description of Debt
Securities."
Each of the Debt Securities 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,
Debt Securities in definitive form will not be issued. See "Description of Debt
Securities -- Form of Debt Securities."
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 REPRESENTATION 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 6.95% Note Due 2000........................... 99.919% 0.400% 99.519%
Per 7.25% Note Due 2002........................... 99.958% 0.600% 99.358%
Per 7.60% Note Due 2007........................... 100.000% 0.650% 99.350%
Per 7.95% Debenture Due 2017...................... 99.520% 0.875% 98.645%
Per 8.125% Debenture Due 2027..................... 97.553% 0.875% 96.678%
Per 7.40% Debenture Due 2037...................... 99.924% 0.625% 99.299%
Total............................................. $2,489,134,250 $16,450,000 $2,472,684,250
</TABLE>
(1) Plus accrued interest, if any, from April 14, 1997.
(2) Before deduction of expenses payable by the Company, estimated at $900,000.
The Debt Securities 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 Debt Securities, in book-entry form, will be made through the
facilities of The Depository Trust Company on or about April 14, 1997, against
payment in immediately available funds.
Underwriters for the Debentures
CREDIT SUISSE FIRST BOSTON MERRILL LYNCH & CO.
<TABLE>
<CAPTION>
BT SECURITIES CORPORATION CHASE SECURITIES INC. CITICORP SECURITIES, INC.
<C> <C> <C>
</TABLE>
Underwriters for the Notes
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
<TABLE>
<CAPTION>
BANCAMERICA SECURITIES, INC. BEAR, STEARNS & CO. INC. NATIONSBANC CAPITAL MARKETS, INC.
<C> <C> <C>
</TABLE>
Prospectus Supplement dated April 9, 1997.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
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 SUPPLEMENT OR THE PROSPECTUS.
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 25, 1997.
Total sales for the Company for the five weeks ended April 5, 1997
increased 36.5 per cent to $2,543 million from $1,863 million in the comparable
1996 period. Sales of JCPenney stores for the month decreased 2.6 per cent to
$1,292 million from $1,326 million in the 1996 period. On a comparable store
basis, that is stores open at least a year, sales decreased 3.7 per cent.
Comparable sales of drugstores for the five week period increased 6.7 per cent.
For the four week period ended March 29, consistent with the drugstore industry
reporting practice, comparable sales increased 10.9 per cent. For the nine weeks
ended April 5, 1997, sales of JCPenney stores increased 3.3 per cent to $2,256
million from $2,183 million for the same period a year earlier. On a comparable
store basis, sales increased 2.2 per cent.
THE COMPANY
The Company is a major retailer operating over 1,200 JCPenney 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 JCPenney stores
market predominantly family apparel, jewelry, shoes, accessories and home
furnishings. The Company also operates a chain of drugstores. With the
completion of its acquisition of Eckerd on February 27, 1997, the Company's
drugstore operations total approximately 2,700 stores located predominantly
throughout the northeast, southeast, and Sunbelt regions of the United States.
Additionally, the Company owns and operates several insurance companies, which
market life, health, accident and credit insurance. The Company finances a
portion of its operations through J. C. Penney 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 Supplement, except as otherwise indicated by the
context, the term "Company" means J. C. Penney Company, Inc. and its
consolidated subsidiaries.
RATIOS OF AVAILABLE INCOME TO FIXED CHARGES
FOR THE COMPANY AND ALL SUBSIDIARIES
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
---------------------------------------- --------------
JAN. 25 JAN. 27 JAN. 28 JAN. 29 JAN. 30
1997 1996 1995 1994 1993
------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
Ratios of available income to fixed
charges.............................. 2.7 3.7 5.1 4.9 3.8
Ratios of available income to combined
fixed charges and preferred stock
dividend requirement................. 2.4 3.4 4.5 4.3 3.4
</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 the preferred stock dividend requirement, fixed charges are further
increased by the preferred stock dividend requirement. The interest portion of
the LESOP notes guaranteed by the Company is not included in fixed charges.
S-2
<PAGE> 3
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.
DRUGSTORE OPERATIONS; ACQUISITION OF ECKERD CORPORATION
The Company, through its subsidiary Thrift Drug, Inc. ("Thrift"), has owned
and operated drugstores for 28 years. The combination of the Thrift drugstores
with the drugstores acquired pursuant to the 1995 acquisition of Kerr Drug
Stores, Inc. and the October 1996 acquisition of Fay's Incorporated ("Fay's")
created the nation's eighth largest drugstore chain, with stores located
primarily in the northeastern and southeastern United States.
With its February 1997 acquisition of Eckerd, the Company now operates the
nation's fourth largest drugstore chain, with approximately 2,700 stores in 23
states located primarily in the northeast, southeast and Sunbelt regions, in
addition to the Company's institutional and mail-order pharmacy businesses. The
Company expects that all of its drugstores will be doing business under the
Eckerd name by Fall 1997.
ACQUISITION OF ECKERD
In November 1996 the Company entered into a definitive agreement to acquire
Eckerd in a two-step cash and stock transaction. The aggregate transaction
value, including the assumption of $760 million of Eckerd debt, was
approximately $3.3 billion. The transaction was effected through a two-step
process consisting of (i) a cash tender offer, which was completed in December
1996, at a price of $35.00 per share (the "Offer") for approximately 35.3
million shares of Eckerd common stock, or 50.1 per cent of the total number of
outstanding shares, for a total consideration of approximately $1.2 billion, and
(ii) the February 1997 exchange of approximately 23.2 million shares of Company
common stock for the remaining 35.1 million shares of Eckerd common stock at a
conversion rate of 0.6604 of a share of Company common stock for each Eckerd
share of common stock, for a total consideration valued at approximately $1.3
billion, including the cash out of certain outstanding Eckerd employee stock
options.
DESCRIPTION OF ECKERD'S BUSINESS
Eckerd operates one of the largest drugstore chains in the United States.
As of March 1, 1997, the Eckerd chain consisted of 1,748 stores in 13 states
located primarily in the Sunbelt. Over its 44-year history, Eckerd has built a
strong market position in areas where demographic characteristics are favorable
to drugstore growth. Eckerd's stores are concentrated in 10 of the 12
metropolitan statistical areas with the largest per cent growth in population
from 1980 to 1990, and, according to industry sources, Eckerd ranks first or
second in drugstore sales in 20 of the major metropolitan markets in which it
operates.
The primary focus of Eckerd drugstores is the sale of prescription and
over-the-counter drugs. During fiscal 1996, Eckerd filled more than 108 million
prescriptions, and sales of prescriptions and over-the-counter drugs generated
approximately 63 per cent of Eckerd's sales. During the period from fiscal 1992
through fiscal 1996, Eckerd's dollar volume of sales of prescription drugs
increased at a compound annual growth rate of 15.3 per cent. The Company expects
that Eckerd's prescription and over-the-counter drug business will provide
significant opportunities for profitable growth primarily as a result of the
continued shift to managed health care in the United States and the aging of the
American population.
The Company believes that Eckerd is well positioned to take advantage of
the growth in managed health care. Eckerd's extensive store base within its
markets, strong third-party payor marketing program, advanced pharmacy computer
systems, and experience and reputation in the industry provide Eckerd with
advantages over independent drugstores, small drugstore chains and mass
merchandisers in attracting third-party payor sales. In fiscal 1996, sales to
third-party payors, such as insurance companies, health maintenance
organizations, preferred provider organizations, other managed care providers,
and government agencies or private employers, represented approximately 75.6 per
cent of Eckerd's total prescription drug sales.
The Company also expects Eckerd to benefit from the aging of the
population, as approximately 60 per cent of its drugstores are located in
Florida and Texas, two of the fastest growing states in terms of the number of
persons over age 65. According to industry studies, persons over age 65 purchase
over twice as many prescription drugs and approximately 50 per cent more
over-the-counter drugs than the national average.
S-3
<PAGE> 4
Another significant focus of Eckerd drugstores is photofinishing. Eckerd
offers overnight photofinishing services in all of its stores and, as of March
1, 1997, operated Eckerd Express Photo one-hour photofinishing mini-labs in 595
of its stores.
THE COMPANY'S REASONS FOR THE ACQUISITION
The Company believes that the Eckerd acquisition provides a unique
opportunity for the Company's growth in the drugstore industry. The addition of
Eckerd's stores in 13 states in the Sunbelt to the Company's existing drugstores
in the northeastern and southeastern United States makes the Company a stronger
and more effective competitor in the rapidly consolidating drugstore industry.
The addition of the Eckerd drugstore chain not only significantly expands the
geographic reach of the Company's drugstore operations, but it is also expected
that there will be significant synergy between Eckerd's and the Company's
drugstore operations in the form of both cost savings and revenue enhancements.
The Company believes that cost savings from the Eckerd acquisition should be at
least $100 million per year once the operations are fully integrated, and will
result from, among other things, enhanced purchasing efficiencies and the
reduction of administrative, information systems, advertising and distribution
expenditures. See "-- Certain Forward-Looking Information."
CERTAIN FORWARD-LOOKING INFORMATION
This Prospectus Supplement contains certain forward-looking information,
including information provided in "-- Description of Eckerd's Business," "-- The
Company's Reasons for the Acquisition," and "Unaudited Pro Forma Combined
Financial Information." The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for forward-looking information to encourage companies
to provide prospective information about their companies without fear of
litigation so long as such information is identified as forward-looking and is
accompanied by meaningful cautionary statements identifying important factors
that could cause actual results to differ materially from those projected in the
information. The Company identifies the following important factors which could
cause the Company's and Eckerd's actual results to differ materially from any
such results which might be projected, forecast, estimated or budgeted by the
Company in forward-looking information. All of such factors are difficult to
predict and many are beyond the control of the Company and Eckerd. Accordingly,
while the Company believes that the assumptions underlying the forward-looking
information are reasonable for purposes of the development of estimates of cost
savings and revenue enhancements, there can be no assurance that such
assumptions will approximate actual experience or that all such cost savings and
revenue enhancements will be realized, and in such event, actual results could
differ materially from the predictions herein. These important factors include:
(i) future economic conditions in the regional and national markets in which the
Company and Eckerd compete, including, among other things, changes in inflation
rates, (ii) government regulation of the health care industry, including, among
other things, legislation and regulation affecting the sale and distribution of,
and reimbursement for, prescription drugs, and (iii) the ability to carry out
marketing and sales plans.
S-4
<PAGE> 5
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Set forth below is certain selected historical consolidated financial
information with respect to Eckerd. As it relates to 1992 through 1995, such
information was excerpted or derived from financial information contained in
Eckerd's Annual Report on Form 10-K for the year ended February 3, 1996
("Eckerd's Form 10-K"). Regarding fiscal 1996, such information, which is
unaudited, is excerpted from financial information contained in the Company's
Annual Report on Form 10-K for the 52 weeks ended January 25, 1997 ("Company's
Form 10-K"). The information below represents Eckerd's continuing operations,
and excludes certain costs incurred by Eckerd in connection with the Company's
acquisition of Eckerd, the results of Insta-Care Holdings, Inc. (sold November
15, 1994), the Vision Group Operations (sold effective January 30, 1994) and any
reserves established for future store closings. In addition, the financial
information for fiscal 1995 is presented on a comparable 52-week basis. More
comprehensive financial information is included in Eckerd's Form 10-K and other
documents filed by Eckerd with the Securities and Exchange Commission. The
financial information that follows is qualified in its entirety by reference to
Eckerd's Form 10-K and such other documents, including the financial statements
and related notes therein and the Company's Form 10-K.
ECKERD CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales and other operating
revenue........................ $5,376,221 $4,902,789 $4,446,728 $4,060,614 $3,770,879
Gross profit..................... 1,183,373 1,101,174 1,020,868 955,880 935,478
Earnings before interest expense
and taxes...................... 210,450 196,441 171,615 150,277 128,063
OTHER OPERATING AND DRUGSTORE
DATA:
EBITDA(1)........................ 304,636 279,592 247,985 231,280 216,695
Comparable drugstore sales
growth......................... 7.8% 8.8% 8.1% 6.1% 3.1%
Average sales per selling square
foot (in dollars).............. 383 336 325 302 283
</TABLE>
- ---------------
(1) EBITDA represents earnings before interest, taxes, depreciation, and
amortization. While the Company believes that EBITDA is a key measure of
assessing operating performance and cash flow, EBITDA is not intended as a
substitute for other statement of operations data prepared in accordance
with generally accepted accounting principles ("GAAP").
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Debt
Securities will be used to refinance, on a long-term basis, $1.9 billion of
short-term debt incurred by the Company in connection with its acquisition of
Eckerd. This short-term debt consists of commercial paper which, at March 13,
1997, had a weighted average interest rate of approximately 5.34 per cent per
annum and an average maturity of 78 days.
The remainder of the net proceeds will be used for general corporate
purposes, which may include working capital, capital expenditures, repayment of
borrowings and investments. Except as specified herein, specific allocations of
the proceeds will not have been made at the date of this 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.
S-5
<PAGE> 6
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Financial Information ("Pro
Forma Financial Information") gives effect to (i) the acquisition of the
remaining 49.9 per cent of the outstanding common stock of Eckerd as if such
acquisition occurred on January 25, 1997 in the case of the Unaudited Pro Forma
Combined Balance Sheet, and (ii) the acquisition of Eckerd as if such
acquisition occurred as of January 28, 1996 in the case of the Unaudited Pro
Forma Combined Statement of Income for the 52 weeks ended January 25, 1997. The
Company's historical balance sheet as of January 25, 1997 and historical
statement of income for the 52 weeks ended January 25, 1997 include the
financial position and results of operations of Fay's since October 11, 1996,
the date that the Company acquired Fay's. The Unaudited Pro Forma Combined
Statement of Income for the 52 weeks ended January 25, 1997 gives effect to the
acquisition of Fay's as if such acquisition had occurred on January 28, 1996.
Both the Eckerd acquisition and the Fay's acquisition are being accounted for
under the purchase method of accounting for business combinations. In connection
with these acquisitions, the Company recorded a one-time, non-recurring charge
totalling approximately $320 million ($207 million net of tax) in the fourth
quarter of 1996. Additionally, the Company expects to incur future costs
totalling approximately $50 million to $100 million ($35 million to $65 million
net of tax) associated with the integration of Eckerd and Fay's into its
drugstore operations.
The Pro Forma Financial Information below is presented for illustrative
purposes only and may not necessarily be indicative of what the actual financial
position and results of operations of the Company would have been had the
respective acquisitions of Eckerd and Fay's occurred on such dates. The Pro
Forma Financial Information does not give effect to the Company's or Eckerd's
results of operations since January 25, 1997, nor does it reflect any cost
savings expected from the Eckerd acquisition, which the Company believes should
be at least $100 million per year once the drugstore operations are fully
integrated. Additionally, the Pro Forma Financial Information does not reflect
any revenue enhancements that may be realized as a result of the Eckerd
acquisition. See "Drugstore Operations; Acquisition of Eckerd Corporation -- The
Company's Reasons for the Acquisition" and "-- Certain Forward-Looking
Information." Accordingly, the Pro Forma Financial Information does not purport
to be indicative of the Company's financial position or results of operations
for any historical period presented herein or any future period subsequent to
the date of this Prospectus Supplement.
The Pro Forma Financial Information is based on the historical financial
statements of the Company and Eckerd and should be read in conjunction with such
historical financial statements, the related notes and the other information
contained elsewhere in this Prospectus Supplement or incorporated by reference
herein.
S-6
<PAGE> 7
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JANUARY 25, 1997
($ IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL -------------------------
JCPENNEY ADJUSTMENTS COMBINED
---------- ----------- --------
<S> <C> <C> <C>
Current Assets
Cash and short term investments........................... $ 131 $ 131
Receivables, net.......................................... 5,757 5,757
Merchandise inventory..................................... 5,722 53 (a) 5,775
Prepaid expenses.......................................... 102 102
------- -------
Total current assets.............................. 11,712 11,765
Properties, net............................................. 5,014 5 (a) 5,019
Investments, primarily insurance operations................. 1,605 1,605
Deferred insurance policy acquisition costs................. 666 666
Goodwill and other intangible assets........................ 1,861 1,230 (b) 3,092
(28)(a)
(79)(c)
108 (d)
Other assets................................................ 1,230 1,230
------- ------ -------
Total Assets...................................... $22,088 $1,289 $23,377
======= ====== =======
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C>
Current Liabilities
Accounts payable and accrued expenses.................. $ 3,738 $ 3,738
Short term debt........................................ 3,950 3,950
Current maturities of long term debt................... 250 250
Deferred taxes......................................... 28 28
------- -------
Total current liabilities......................... 7,966 7,966
Long term debt.............................................. 4,565 10 (a) 4,575
Deferred taxes.............................................. 1,362 16 (a) 1,486
108 (d)
Insurance policy and claims reserves........................ 781 781
Other liabilities........................................... 1,383 4 (a) 1,387
Minority interest in Eckerd................................. 79 (79)(c) --
Stockholders' Equity........................................ 5,952 1,230 (b) 7,182
------- ------ -------
Total Liabilities and Stockholders' Equity........ $22,088 $1,289 $23,377
======= ====== =======
</TABLE>
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<PAGE> 8
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
52 WEEKS ENDED JANUARY 25, 1997
($ IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------- -----------------------
JCPENNEY ECKERD ADJUSTMENTS COMBINED
-------- ------ ----------- --------
<S> <C> <C> <C> <C>
Retail Sales........................................ $22,653 $5,376 $ 715 (e) $28,028
(716)(f)
Revenue of other businesses......................... 996 996
------- ------ ----- -------
Total Revenue.................................. 23,649 5,376 (1) 29,024
Cost of goods sold, occupancy, buying, and
warehousing costs................................. 16,043 4,193 563 (e) 20,294
(505)(f)
Selling, general, and administrative expenses....... 5,239 973 139 (e) 6,138
(176)(f)
(37)(g)
Amortization of goodwill and other intangible
assets............................................ 23 -- 2 (e) 107
(23)(f)
(2)(g)
107 (g)
Costs and expenses of other businesses.............. 803 -- 803
Net interest expense and credit operations.......... 278 61 5 (e) 458
(10)(f)
124 (h)
Business acquisition and consolidation expenses..... 354 -- 354
------- ------ ----- -------
Total costs and expenses....................... 22,740 5,227 187 28,154
------- ------ ----- -------
Income before income taxes and extraordinary
items............................................. 909 149 (188) 870
Income taxes........................................ 344 351 (i)
------- -------
Income before extraordinary items................... $ 565 $ 519
======= =======
Income before extraordinary items per common share
Primary........................................ $ 2.29 $ 1.92
======= =======
Fully diluted.................................. $ 2.25 $ 1.91
======= =======
</TABLE>
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<PAGE> 9
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF JANUARY 25, 1997:
(a) Adjusts the Company's historical balance sheet to recognize the
remaining 49.9 per cent of the estimated fair value of Eckerd assets acquired
and liabilities assumed. This adjustment reflects the step-up of Eckerd
inventory, fixed assets, and Eckerd's 9.25% Senior Subordinated Notes Due 2004
to reflect their estimated fair value, and the recognition of the associated
deferred tax impact of these adjustments. The resulting increase in Eckerd's net
assets is reflected as a $28 million net decrease to goodwill and other
intangible assets.
(b) Reflects the completion of the Eckerd acquisition through the exchange
of approximately 23.2 million shares of the Company's common stock for the
remaining 35.1 million shares of Eckerd common stock at a rate of 0.6604 of a
share of the Company's common stock for each remaining share of Eckerd common
stock, valued at $35.00, or a total value of approximately $1.2 billion. This
pro forma adjustment resulted in increased Stockholders' Equity and goodwill and
other intangible assets.
(c) Reflects the elimination of the minority interest in Eckerd as shown on
the historical consolidated balance sheet of the Company.
(d) Records the remaining 49.9 per cent, or $108 million of deferred income
taxes related to identifiable intangible assets acquired in the Eckerd
acquisition, consisting of the trade name, favorable lease rights, prescription
files, and computer software. The effect of this adjustment is an increase in
deferred taxes and goodwill and other intangible assets.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE 52 WEEKS ENDED JANUARY
25, 1997:
(e) Reflects results of operations of Fay's for the period January 28, 1996
to October 11, 1996.
(f) Eliminates results of operations of Eckerd's six weeks ended January
25, 1997 which are included in the Company's historical results for the 52 weeks
ended January 25, 1997.
(g) Eliminates historical amortization of Eckerd and Fay's intangible
assets and certain non-recurring expenses, and reflects the amortization of
intangible assets and goodwill arising from the acquisitions. Identifiable
intangible assets, other than the trade name, will be amortized over five to
seven years; the trade name and goodwill will be amortized over a 40 year
period.
(h) Records interest expense arising from acquisition debt consisting of
approximately $1.2 billion related to the Offer, $366 million related to the
Company's repurchase between November 2, 1996 and January 21, 1997 of an
aggregate of 7.5 million shares of the Company's common stock at an average
purchase price of $48.82 per share, $81 million related to the cash out of
certain outstanding Eckerd employee stock options, and $30 million related to
transaction costs ($20 million for the Company and $10 million for Eckerd), at
an assumed interest rate of 7.25 per cent.
(i) Reflects income taxes at a rate of 40.4 per cent which represents the
pro forma income tax rate for fiscal year 1996 assuming completion of the Eckerd
and Fay's acquisitions on January 28, 1996.
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<PAGE> 10
DESCRIPTION OF DEBT SECURITIES
GENERAL
The 6.95% Notes Due 2000 (the "2000 Notes") offered hereby will be limited
to $325,000,000 aggregate principal amount and will mature on April 1, 2000. The
2000 Notes will bear interest from April 14, 1997 at the rate of 6.95% per
annum. Interest on the 2000 Notes will be payable semi-annually on April 1 and
October 1 of each year, commencing October 1, 1997, to the persons in whose
names the 2000 Notes are registered on the fifteenth day of March or September
preceding such April 1 or October 1. Interest shall be computed on the basis of
a 360-day year consisting of twelve 30-day months. The 2000 Notes will be issued
in fully registered form and in denominations of $1,000 and integral multiples
thereof. The 2000 Notes may not be redeemed by the Company prior to maturity.
Except as provided herein, individual 2000 Notes will not be issued. See
"-- Form of Debt Securities."
The 7.25% Notes Due 2002 (the "2002 Notes") offered hereby will be limited
to $700,000,000 aggregate principal amount and will mature on April 1, 2002. The
2002 Notes will bear interest from April 14, 1997 at the rate of 7.25% per
annum. Interest on the 2002 Notes will be payable semi-annually on April 1 and
October 1 of each year, commencing October 1, 1997, to the persons in whose
names the 2002 Notes are registered on the fifteenth day of March or September
preceding such April 1 or October 1. Interest shall be computed on the basis of
a 360-day year consisting of twelve 30-day months. The 2002 Notes will be issued
in fully registered form and in denominations of $1,000 and integral multiples
thereof. The 2002 Notes may not be redeemed by the Company prior to maturity.
Except as provided herein, individual 2002 Notes will not be issued. See
"-- Form of Debt Securities."
The 7.60% Notes Due 2007 (the "2007 Notes") offered hereby will be limited
to $425,000,000 aggregate principal amount and will mature on April 1, 2007. The
2007 Notes will bear interest from April 14, 1997 at the rate of 7.60% per
annum. Interest on the 2007 Notes will be payable semi-annually on April 1 and
October 1 of each year, commencing October 1, 1997, to the persons in whose
names the 2007 Notes are registered on the fifteenth day of March or September
preceding such April 1 or October 1. Interest shall be computed on the basis of
a 360-day year consisting of twelve 30-day months. The 2007 Notes will be issued
in fully registered form and in denominations of $1,000 and integral multiples
thereof. The 2007 Notes may not be redeemed by the Company prior to maturity.
Except as provided herein, individual 2007 Notes will not be issued. See
"-- Form of Debt Securities."
The 7.95% Debentures Due 2017 (the "2017 Debentures") offered hereby will
be limited to $300,000,000 aggregate principal amount and will mature on April
1, 2017. The 2017 Debentures will bear interest from April 14, 1997 at the rate
of 7.95% per annum. Interest on the 2017 Debentures will be payable
semi-annually on April 1 and October 1 of each year, commencing October 1, 1997,
to the persons in whose names the 2017 Debentures are registered on the
fifteenth day of March or September preceding such April 1 or October 1.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months. The 2017 Debentures will be issued in fully registered form and
in denominations of $1,000 and integral multiples thereof. The 2017 Debentures
may not be redeemed by the Company prior to maturity. Except as provided herein,
individual 2017 Debentures will not be issued. See "-- Form of Debt Securities."
The 8.125% Debentures Due 2027 (the "2027 Debentures") offered hereby will
be limited to $350,000,000 aggregate principal amount and will mature on April
1, 2027. The 2027 Debentures will bear interest from April 14, 1997 at the rate
of 8.125% per annum. Interest on the 2027 Debentures will be payable
semi-annually on April 1 and October 1 of each year, commencing October 1, 1997,
to the persons in whose names the 2027 Debentures are registered on the
fifteenth day of March or September preceding such April 1 or October 1.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months. The 2027 Debentures will be issued in fully registered form and
in denominations of $1,000 and integral multiples thereof. The 2027 Debentures
may be redeemed at the option of the Company at any time on or after April 1,
2007 at the prices given below. See "-- Redemption at the Option of the
Company." Except as provided herein, individual 2027 Debentures will not be
issued. See "-- Form of Debt Securities."
S-10
<PAGE> 11
The 7.40% Debentures Due 2037 (the "2037 Debentures") offered hereby will
be limited to $400,000,000 aggregate principal amount and will mature on April
1, 2037. The 2037 Debentures will bear interest from April 14, 1997 at the rate
of 7.40% per annum. Interest on the 2037 Debentures will be payable
semi-annually on April 1 and October 1 of each year, commencing October 1, 1997,
to the persons in whose names the 2037 Debentures are registered on the
fifteenth day of March or September preceding such April 1 or October 1.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months. The 2037 Debentures will be issued in fully registered form and
in denominations of $1,000 and integral multiples thereof. The 2037 Debentures
may not be redeemed by the Company prior to maturity. The 2037 Debentures may be
redeemed at the option of the holder under the conditions listed below. See
"-- Repayment at the Option of the Holder." Except as provided herein,
individual 2037 Debentures will not be issued. See "-- Form of Debt Securities."
REDEMPTION AT THE OPTION OF THE COMPANY
The 2027 Debentures will not be redeemable prior to April 1, 2007. On and
after that date, the 2027 Debentures are redeemable at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days notice
at the following redemption prices (expressed as a percentage of the principal
amount) if redeemed during the 12-month period beginning April 1 of the years
indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2007........................................................ 102.839%
2008........................................................ 102.555
2009........................................................ 102.271
2010........................................................ 101.987
2011........................................................ 101.703
2012........................................................ 101.420
2013........................................................ 101.136
2014........................................................ 100.852
2015........................................................ 100.568
2016........................................................ 100.284
</TABLE>
and thereafter at 100 per cent of the principal amount thereof, together in each
case with accrued interest thereon to the date of redemption. If less than all
of the 2027 Debentures are to be redeemed, the Company will give the Trustee
notice not less than 75 days prior to the date of redemption as to the aggregate
principal amount of the 2027 Debentures to be redeemed and the Trustee shall
select, by such method as it shall deem fair and appropriate, the 2027
Debentures or portions thereof to be redeemed. The 2027 Debentures, if redeemed
in part, will be redeemed in multiples of $1,000.
No similar right of redemption is available to the Company for the 2000
Notes, the 2002 Notes, the 2007 Notes, the 2017 Debentures, or the 2037
Debentures.
REPAYMENT AT THE OPTION OF THE HOLDER
The 2037 Debentures will not be redeemable at the option of the Company but
repayment may be required on April 1, 2005 at the option of the registered
holders thereof, at 100 per cent of their principal amount, together with
accrued and unpaid interest to April 1, 2005. In order for a holder to exercise
this option, the Company must receive at its office or agency in New York, New
York, during the period beginning on February 1, 2005 and ending at 5:00 p.m.
(New York City time) on March 1, 2005 (or, if March 1, 2005 is not a Business
Day, the next succeeding Business Day), the 2037 Debenture with the form
relating to such option on the 2037 Debenture duly completed. Any such notice
received by the Company during the period beginning on February 1, 2005 and
ending at 5:00 p.m. (New York City time) on March 1, 2005 shall be irrevocable.
The repayment option may be exercised by the holder of a 2037 Debenture for less
than the entire principal amount of the 2037 Debenture held by each such holder,
so long as the principal amount that is to be repaid is equal to $1,000 or an
integral multiple of $1,000. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any 2037
S-11
<PAGE> 12
Debenture for repayment will be determined by the Company, whose determination
will be final and binding. As used herein, the term "Business Day" means a day
on which federally chartered banks located in New York, New York are required or
authorized to open for business (other than a Saturday or Sunday) under the laws
of the United States.
Failure by the Company to repay the 2037 Debentures when required as
described in the preceding paragraph will result in an Event of Default under
the Indenture.
No similar right of repayment is available to holders of the 2000 Notes,
the 2002 Notes, the 2007 Notes, the 2017 Debentures, or the 2027 Debentures.
FORM OF DEBT SECURITIES
Each of the Debt Securities 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 Debt Securities 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 Debt
Securities for all purposes of such Debt Securities and for all purposes under
the Indenture. Except as set forth below, owners of beneficial interests in a
Global Security will not be entitled to have the Debt Securities represented by
such Global Security registered in their names, will not receive or be entitled
to receive physical delivery of Debt Securities in definitive form and will not
be considered to be the owners or holders of any Debt Securities 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 Debt Securities 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
Debt Securities 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 Debt Securities 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,
S-12
<PAGE> 13
or payments made on account of, beneficial ownership interests in a Global
Security for any Debt Securities 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 Debt Securities 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.
Debt Securities represented by a Global Security will be exchangeable for
Debt Securities 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 Debt Securities evidenced by such Global Security. Any Global Security that
is exchangeable pursuant to the preceding sentence is exchangeable for Debt
Securities 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 Debt Securities 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 its 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 (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.
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 any of the
Debt Securities by depositing in trust with the Trustee money or U.S. Government
Obligations. The 2037 Debentures, however, are not subject to satisfaction and
discharge until after April 1, 2005. For United States federal income tax
purposes, it is likely that any such deposit and discharge with respect to any
of the Debt Securities will be treated as a taxable exchange of such Debt
Securities 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.
S-13
<PAGE> 14
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
Debt Securities 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 Debt Securities and that will hold the Debt
Securities as capital assets. It does not address the tax considerations
applicable to Non-U.S. Holders if income or gain in respect of the Debt
Securities is effectively connected with the conduct of a trade or business in
the United States.
Generally, payments of interest made with respect to the Debt Securities 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 per cent 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 Debt Security 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 DEBT SECURITIES 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 DEBT
SECURITIES.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder of the Debt Securities may be subject to information reporting and
backup withholding at a rate of 31 per cent on certain amounts paid to the
holder unless such holder provides proof of an applicable exemption (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.
S-14
<PAGE> 15
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
relating to the Debentures (the "Debenture Underwriting Agreement"), the Company
has agreed to sell to the Underwriters named below (the "Debenture
Underwriters"), for whom Credit Suisse First Boston Corporation is acting as
Representative (the "Representative"), and the Debenture Underwriters have
severally agreed to purchase from the Company, the following respective
principal amounts of Debentures:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF 2017 DEBENTURES OF 2027 DEBENTURES OF 2037 DEBENTURES
----------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Credit Suisse First Boston
Corporation........................ $126,000,000 $147,000,000 $168,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............. 126,000,000 147,000,000 168,000,000
BT Securities Corporation............ 16,000,000 18,750,000 21,500,000
Chase Securities Inc................. 16,000,000 18,750,000 21,250,000
Citicorp Securities, Inc............. 16,000,000 18,500,000 21,250,000
------------ ------------ ------------
Total...................... $300,000,000 $350,000,000 $400,000,000
============ ============ ============
</TABLE>
Subject to the terms and conditions set forth in the Underwriting Agreement
relating to the Notes (the "Notes Underwriting Agreement," and together with the
Debenture Underwriting Agreement, the "Underwriting Agreements"), the Company
has agreed to sell to the Underwriters named below (the "Notes Underwriters"),
for whom Credit Suisse First Boston Corporation is acting as Representative, and
the Notes Underwriters have severally agreed to purchase from the Company the
following respective principal amounts of Notes:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF 2000 NOTES OF 2002 NOTES OF 2007 NOTES
----------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Credit Suisse First Boston
Corporation....................... $ 91,000,000 $196,000,000 $119,000,000
J.P. Morgan Securities Inc.......... 91,000,000 196,000,000 119,000,000
Morgan Stanley & Co. Incorporated... 91,000,000 196,000,000 119,000,000
BancAmerica Securities, Inc......... 17,500,000 37,500,000 22,750,000
Bear, Stearns & Co. Inc............. 17,250,000 37,250,000 22,750,000
NationsBanc Capital Markets, Inc.... 17,250,000 37,250,000 22,500,000
------------ ------------ ------------
Total..................... $325,000,000 $700,000,000 $425,000,000
============ ============ ============
</TABLE>
Each Underwriting Agreement provides that the obligations of the
Underwriters named therein are subject to certain conditions precedent, and that
the Underwriters will be obligated to purchase all of the Debt Securities
described therein if any are purchased. The closing with respect to the sale of
the Debt Securities sold pursuant to each Underwriting Agreement is a condition
to the closing with respect to the sale of Debt Securities sold pursuant to the
other Underwriting Agreement.
S-15
<PAGE> 16
The Company has been advised by the Underwriters that they propose to offer
the Debt Securities 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 per Debt Security (expressed as a percentage of the
principal amount) as indicated in the table below; that the Underwriters and
such dealers may allow a discount per Debt Security (expressed as a percentage
of the principal amount) as indicated in the table below 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.
<TABLE>
<CAPTION>
CONCESSION DISCOUNT
---------- --------
<S> <C> <C>
Per 2000 Note............................................... 0.250% 0.200%
Per 2002 Note............................................... 0.350% 0.250%
Per 2007 Note............................................... 0.400% 0.250%
Per 2017 Debenture.......................................... 0.500% 0.250%
Per 2027 Debenture.......................................... 0.500% 0.250%
Per 2037 Debenture.......................................... 0.375% 0.250%
</TABLE>
The Company has been advised by the Underwriters that they intend to make a
market in the Debt Securities, but that they are not obligated to do so and that
any one of them may discontinue making a market in the Debt Securities at any
time without notice. The Debt Securities 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 Debt Securities.
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. In addition, M. Anthony Burns, a director of the Company, is also a
director of The Chase Manhattan Corporation and its wholly owned subsidiary, The
Chase Manhattan Bank. Chase Securities Inc., an Underwriter, is a wholly owned
subsidiary of The Chase Manhattan Corporation.
The Representative, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act. Over-
allotment involves syndicate sales in excess of the offering size, which creates
a syndicate short position. Syndicate covering transactions involve purchases of
the Debt Securities in the open market after the distribution has been completed
in order to cover syndicate short positions. Penalty bids permit the
Representative to reclaim a selling concession from a syndicate member when the
Debt Securities originally sold by such syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the prices of the Debt Securities to be higher than they would otherwise
be in the absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Debt Securities 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 Debt Securities are effected. Accordingly, any resale of the
Debt Securities 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 Debt Securities.
S-16
<PAGE> 17
REPRESENTATIONS OF PURCHASERS
Each purchaser of Debt Securities 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 Debt Securities without
the benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that 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 (ONTARIO PURCHASERS)
The Debt Securities 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.
ENFORCEMENT OF LEGAL RIGHTS
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 Canadian 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 Debt Securities 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 Debt Securities acquired by such purchaser pursuant to the offering of Debt
Securities 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 Debt Securities acquired on the same date and under the same prospectus
exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Debt Securities should consult their own legal and
tax advisers with respect to the tax consequences of an investment in the Debt
Securities in their particular circumstances and with respect to the eligibility
of the Debt Securities for investment by the purchaser under relevant Canadian
legislation.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities 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
March 31, 1997, Mr. Lotter owned 31,161 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 March 31, 1997, Mr. Lotter had
outstanding options to purchase 85,540 shares of common stock.
S-17
<PAGE> 18
- --------------------------------------------------------------------------------
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 $3,000,000,000 (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 MARCH 21, 1997
<PAGE> 19
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 13 weeks ended
April 27, 1996, (iv) the Company's Quarterly Report on Form 10-Q for the 13 and
26 weeks ended July 27, 1996, (v) the Company's Quarterly Report on Form 10-Q
for the 13 and 39 weeks ended October 26, 1996, (vi) Funding Corporation's
Quarterly Report on Form 10-Q for the 13 weeks ended April 27, 1996, (vii)
Funding Corporation's Quarterly Report on Form 10-Q for the 13 and 26 weeks
ended July 27, 1996, (viii) Funding Corporation's Quarterly Report on Form 10-Q
for the 13 and 39 weeks ended October 26, 1996, (ix) the Company's Current
Report on Form 8-K dated August 14, 1996, (x) the Company's Current Report on
Form 8-K dated November 3, 1996, (xi) the Company's Current Report on Form 8-K
dated February 20, 1997, and (xii) the Company's Current Report on Form 8-K
dated February 21, 1997. 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> 20
THE COMPANY
The Company is a major retailer operating over 1,200 JCPenney 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 JCPenney stores
market predominantly family apparel, jewelry, shoes, accessories and home
furnishings. The Company also operates a chain of drugstores. With the
completion of its acquisition of Eckerd Corporation on February 27, 1997, the
Company's drugstore operations total approximately 2,700 stores located
predominantly throughout the northeast, southeast, and Sunbelt regions of the
United States. Additionally, the Company owns and operates several insurance
companies, which market life, health, accident and credit insurance. 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 to refinance, on a long-term basis, $1.9 billion of
short-term debt incurred by the Company in connection with its acquisition of
Eckerd Corporation. This short-term debt consists of commercial paper which, at
March 13, 1997, had a weighted average interest rate of approximately 5.34% per
annum and an average maturity of 78 days.
The remainder of net proceeds 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
---------------------------------------- -------------- --------------
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 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 stock 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> 21
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> 22
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> 23
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> 24
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> 25
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> 26
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 February 28, 1997, Mr. Lotter owned 31,162 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
February 28, 1997, he had outstanding options to purchase 85,540 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
9
<PAGE> 27
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> 28
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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.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PROSPECTUS SUPPLEMENT
<S> <C>
Recent Developments................... S-2
The Company........................... S-2
Ratios of Available Income to Fixed
Charges for the Company and All
Subsidiaries........................ S-2
Drugstore Operations; Acquisition of
Eckerd Corporation.................. S-3
Use of Proceeds....................... S-5
Unaudited Pro Forma Combined Financial
Information......................... S-6
Description of Debt Securities........ S-10
Certain United States Federal Income
Tax Consequences.................... S-14
Underwriting.......................... S-15
Notice to Canadian Residents.......... S-16
Validity of Debt Securities........... S-17
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
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</TABLE>
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JCPenney
$325,000,000
6.95% Notes Due 2000
$700,000,000
7.25% Notes Due 2002
$425,000,000
7.60% Notes Due 2007
$300,000,000
7.95% Debentures Due 2017
$350,000,000
8.125% Debentures Due 2027
$400,000,000
7.40% Debentures Due 2037
PROSPECTUS SUPPLEMENT
Underwriters for the Debentures
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
BT SECURITIES CORPORATION
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
Underwriters for the Notes
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
BANCAMERICA SECURITIES, INC.
BEAR, STEARNS & CO. INC.
NATIONSBANC CAPITAL MARKETS, INC.
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