As filed with the Securities and Exchange Commission on November 29, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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J. C. PENNEY COMPANY, INC.
(Exact same of registrant as specified in its charter)
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DELAWARE 13-5583779
(State of Incorporation) (L.R.S. Employer Identification No.)
6501 LEGACY DRIVE
PLANO, TEXAS 75024-3698
(214) 431-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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C. R. LOTTER, ESQ.
Executive Vice President, Secretary and General Counsel
J. C. PENNEY COMPANY, INC.
6501 Legacy Drive, Plano, Texas 75024-3698
(214) 431-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of Each Class of Securities To be Registered Amount to be Registered Price Per Unit Offering Price Registration Fee
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5% Convertible Subordinated Notes Due 2008.... $650,000,000 $1123.80(1) 650,000,000 $182,618
Common Stock, 50c par value................... 22,807,005 shares(2) N/A N/A None(3)
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(1)Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average bid and ask prices of
the 5% Convertible Subordinated Notes due 2008 on the PORTAL system on
November 21, 2001.
(2)The shares of common stock registered hereunder are issuable upon conversion
of the notes at the rate of 35.0877 shares of common stock per $1000
principal amount of the notes. Pursuant to Rule 416, such number of shares
of common stock registered hereby shall include an indeterminate number of
shares of common stock that may be issued in connection with a stock split,
stock dividend, recapitalization or similar event.
(3)Pursuant to Rule 457(i), there is no additional filing fee with respect to
the shares of common stock issuable upon conversion of the notes because no
additional consideration will be received in connection with the exercise of
the conversion privilege.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8
(a), may determine.
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SUBJECT TO COMPLETION DATED NOVEMBER 29, 2001
PROSPECTUS
[LOGO]
J. C. Penney Company, Inc.
$650,000,000
5% Convertible Subordinated Notes Due 2008
and
Shares of Common Stock issuable upon Conversion of the Notes
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We issued the notes in a private placement in October 2001. This prospectus
will be used by the selling securityholders to resell their notes or common
stock issuable upon conversion of the notes.
We will pay interest on the notes on April 15 and October 15 of each year.
The first interest payment will be made on April 15, 2002. The notes will
mature on October 15, 2008. The notes are convertible at any time prior to
maturity, unless previously redeemed, at the option of the holders into shares
of J. C. Penney Company, Inc. common stock at a conversion price of $28.50 per
share, subject to certain adjustments. The notes are subordinated to our senior
indebtedness and structurally subordinated
to all indebtedness and other liabilities of our subsidiaries.
We may redeem the notes on or after October 20, 2004. Holders may require us
to repurchase the notes upon a change in control.
Our common stock is listed on the New York Stock Exchange under the symbol
"JCP." The last reported sale price of our common stock on The New York Stock
Exchange Composite Tape on November 27, 2001 was $27.10 per share. The notes
are eligible for trading in The Portal/SM/ Market ("Portal"), a subsidiary of
The Nasdaq Stock Market, Inc.
Investing in the notes involves risks. See "Risk Factors" on page 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities Exchange Commission is effective. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
The date of this prospectus is November , 2001.
TABLE OF CONTENTS
Page
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SUMMARY................................ 1
RISK FACTORS........................... 8
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS........... 12
USE OF PROCEEDS........................ 13
PRICE RANGE OF COMMON STOCK AND
DIVIDENDS............................ 13
SELECTED CONSOLIDATED FINANCIAL AND
OTHER DATA........................... 14
Page
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DESCRIPTION OF THE NOTES.............. 16
DESCRIPTION OF CAPITAL STOCK.......... 29
SELLING SECURITYHOLDERS............... 36
PLAN OF DISTRIBUTION.................. 39
U.S. FEDERAL INCOME TAX CONSIDERATIONS 40
LEGAL MATTERS......................... 45
INDEPENDENT AUDITORS.................. 46
WHERE YOU CAN FIND MORE INFORMATION... 46
INCORPORATION BY REFERENCE............ 46
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You should rely only on the information contained in this prospectus or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This prospectus may be used only where it is
legal to sell these securities. The information in this prospectus may be
accurate only on the date of this prospectus, regardless of the time of
delivery of this prospectus.
i
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information that
you should consider before investing in the notes. You should read the entire
prospectus carefully, including the "Risk Factors" section and the financial
statements and notes to these statements contained or incorporated by reference
in this prospectus. All references in this prospectus to "we," "us," "our" or
"JCPenney" mean J. C. Penney Company, Inc. and its subsidiaries, unless
indicated otherwise.
Company Overview
JCPenney was founded by James Cash Penney in 1902 and has grown to be a
major retailer, operating approximately 1,080 JCPenney department stores in all
50 states, Puerto Rico, and Mexico. In addition, we operate approximately 50
Renner department stores in Brazil. The major portion of our business consists
of providing merchandise and services to customers through department stores,
catalog departments and the Internet. The catalog and Internet business
processes over 68 million customer orders annually. We market predominantly
family apparel, jewelry, shoes, accessories, and home furnishings.
In addition, through our subsidiary Eckerd Corporation, we operate a chain
of approximately 2,640 drugstores located throughout the Southeast, Sunbelt,
and Northeast regions of the United States. Eckerd drugstores sell prescription
drugs as well as general merchandise items such as over-the-counter drugs,
beauty products, photo processing services, greeting cards and convenience food.
Business Strategy -- JCPenney
Our primary objective in our department store and catalog business is to
offer fashion-right, quality merchandise at competitive prices. We are
implementing the following initiatives to achieve this objective as well as to
increase sales and improve profitability:
. Enhancing our Merchandise Offering. Our objective is to differentiate our
merchandise assortments from our competitors by offering quality,
fashionable merchandise at competitive prices for both national and
private brands. Critical to the execution of this objective was the change
from a decentralized to centralized merchandising process, which was
formally transitioned in February 2001. Centralized merchandising allows
us to create a consistent product message in all of our stores, improve
in-stock positions, narrow product assortments, increase inventory turns
and shorten product lead times. We believe centralized merchandising will
significantly improve the product assortments in our stores while
optimizing supply chain efficiencies.
. Establishing a National Marketing Campaign. Our advertising strategy is
being refocused to communicate a nationally consistent "value" message
that directly targets our core customer, the middle market consumer. In
2001, we implemented aggressive marketing programs to recapture our
customer and drive store traffic, including increasing the frequency and
consistency of our printed communications. In addition, the change to a
centralized merchandising process allows us to leverage our national
presence and make our marketing and promotions more visible and effective.
. Redesigning our Stores. We are currently updating and refreshing our
stores to be contemporary, exciting and easy-to-shop. Our in-store
redesigns include improved signage and lighting, wider aisles,
1
better adjacencies and attractive merchandise statements. We have
updated approximately 20 percent of our stores to date and plan to have
refreshed 35-40 percent of the stores by the end of fiscal 2002. We
believe that the new look of our stores will complement our merchandising
and marketing initiatives as well as improve our customers' shopping
experience.
. Improving our Catalog and Internet Business. We are developing several
strategies that are expected to improve the profitability of our catalog
and Internet business. Our objectives include reducing merchandise
assortments, implementing competitive pricing specific to the catalog and
Internet operations, rebuilding and expanding the customer file and
improving the cost structure. We have recently hired two experienced
catalog executives to lead these operations. We believe we have the
infrastructure and experience to be a leader in direct-to-consumer retail.
. Leveraging our New Management Team. In September 2000, Allen Questrom
joined as Chairman and CEO with 35 years of retail experience, including
as Chairman and CEO of Federated Department Stores and Barney's New York.
Vanessa Castagna, Executive Vice President, President and COO of Stores,
Catalog and Internet, joined in August 1999 with a 20-year retailing
background, including senior merchandising positions at Wal-Mart. John
Irvin, Senior Vice President and President of Catalog and Internet, joined
in February 2001 from Spiegel, Inc. where he was CEO of catalog
operations. John Budd, Senior Vice President and Chief Marketing Officer
for Stores and Catalog, joined in February 2001 from Macy's West and was
formerly with the May Company. In addition, we have enhanced JCPenney's
management infrastructure with numerous recent experienced hires in the
merchandising area.
Business Strategy -- Eckerd
The strategy in our Eckerd operations is to provide customers with a
convenient, competitively priced drugstore shopping experience. Management, led
by new CEO Wayne Harris, is focused on improving sales growth and profitability
through the following initiatives:
. Reducing Front-end Prices. We have implemented a new competitive pricing
plan at Eckerd to make our front-end general merchandise categories more
competitive. We have completed price reductions throughout our front-end,
the most dramatic of which were in highly visible categories such as
cosmetics, beverages, hygiene products, baby care, over-the-counter
products, snacks and photo. The new pricing plan is supported by a
consistent marketing and weekly circular strategy that emphasizes value
and highlights product areas that drive traffic. We believe competitive
pricing is central to improving front-end sales growth and enhancing
Eckerd's value image.
. Rolling-out New Store Layout. We have designed a new store layout and
signage that emphasizes high margin, high turnover categories and
encourages customers to shop the entire store. Early sales and
profitability results from the new store format are promising. For
example, reconfigured stores are experiencing 12 percent front-end sales
increases, greater than 20 percent sales improvements in certain key
front-end categories and higher than expected pharmacy sales increases. To
date over 350 stores have been reconfigured and approximately 1,500 resets
are expected to be completed by the end of fiscal 2002. Eckerd is also
improving same store sales by continuing to relocate its strip-center
stores to more productive free-standing locations.
. Improving Technology Infrastructure. We are working to strengthen our
information systems infrastructure to improve customer service as well as
increase efficiency and productivity. Recently, our information technology
staff has been brought in-house. This will increase our ability to quickly
improve the productivity of our pharmacy systems as well as the overall
efficiency of our supply chain management. We expect our initiatives to
reduce pharmacy wait times, raise generic dispensing rates, increase
inventory turns and improve in-stock positions.
2
. Reducing Expenses. We are aggressively reducing expenses at Eckerd in
order to improve our cost structure. To date our initiatives have reduced
regional and district store management, distribution, information
technology and headquarters overhead. The realized savings have been
partially used to improve the customer service in our stores. Continued
expense reduction efforts are focusing on administrative overhead and
supply chain efficiencies.
Recent Developments
The following financial information should be read in conjunction with the
financial information contained in the Company's Annual Report on Form 10-K for
the 52 weeks ended January 27, 2001, incorporated by reference herein.
Summary of operating results of J. C. Penney Company, Inc. and its
subsidiaries for the third quarter, ended October 27, 2001, is as follows.
(Amounts in millions
except per share data)
39 weeks ended
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Oct. 28, 2000 Oct. 27, 2001
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Total retail sales.............................................................
Department stores and catalog.............................................. $12,671 $12,277
Eckerd drugstores.......................................................... 9,602 10,185
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Total...................................................................... 22,273 22,462
Margins and expenses...........................................................
Gross margin - LIFO............................................................
Department stores and catalog.............................................. 4,421 4,279
Eckerd drugstores.......................................................... 2,077 2,275
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Total...................................................................... 6,498 6,554
Selling, general and administrative (SG&A) expenses............................
Department stores and catalog.............................................. 4,099 3,987
Eckerd drugstores.......................................................... 2,163 2,153
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Total...................................................................... 6,262 6,140
Segment operating profit/(loss) - LIFO.........................................
Department stores and catalog.............................................. 322 292
Eckerd drugstores.......................................................... (86) 122
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Total...................................................................... 236 414
Other unallocated.............................................................. 22 9
Net interest expense........................................................... 325 285
Acquisition amortization....................................................... 76 73
Restructuring and other charges, net........................................... 204 14
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Income/(loss) from continuing operations before income taxes................... 391 33
Income taxes................................................................... (146) 14
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Income/(loss) from continuing operations....................................... (245) 19
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Discontinued operations, net of income tax..................................... 120 (16)
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Net income/(loss).............................................................. $ (125) $ 3
======= =======
Earnings/(loss) per share from continuing operations........................... $ (1.03) $ (0.01)
Earnings/(loss) per share from continuing operations before the effects of non-
comparable items:............................................................. $ (0.26)(1) $ 0.04(2)
(1)Excludes restructuring and other charges, net, as well as $113 million in
other non-comparable items, consisting of charges related to incremental
store closing costs included in Eckerd segment results and ACT that are
included in other unallocated.
(2)Excludes restructuring and other charges, net as well as a net charge of $6
million, consisting of charges related to ACT, real estate gains and asset
impairments, all of which are included in other unallocated, and an Eckerd
pension curtailment gain and information technology transition costs
included in Eckerd segment results.
It is not possible to predict the medium or long-term effects of the
September 11, 2001 terrorist attacks on the economy or on consumer confidence
in the United States, or the impact, if any, on our future results of
operations.
3
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Our principal offices are located at 6501 Legacy Drive, Plano, Texas
75024-3698. Our telephone number is (972) 431-1000. We maintain a Web site on
the Internet at www.jcpenney.com. Our Web site, and the information contained
on it, are not to be considered part of this prospectus.
The Offering
Issuer...................... J. C. Penney Company, Inc.
Securities offered.......... $650,000,000 aggregate principal amount of 5%
Convertible Subordinated Notes due October 15,
2008; or, if converted, 22,807,005 shares of our
common stock (see ''Conversion Right'' below).
Interest.................... The notes will bear interest at an annual rate of
5%. Interest is payable on April 15 and October
15 of each year, beginning April 15, 2002.
Maturity date............... October 15, 2008.
Conversion rights........... Holders may convert all or some of their notes,
unless previously redeemed, into shares of our
common stock at any time prior to the close of
business on the business day immediately
preceding the maturity date at a conversion price
of $28.50 per share. The initial conversion price
is equivalent to a conversion rate of 35.0877
shares per $1,000 principal amount of notes. The
conversion price is subject to adjustment. Upon
conversion, you will not receive any cash
representing accrued interest.
Optional redemption......... We may redeem the notes on or after October 20,
2004, at the redemption prices set forth in this
prospectus.
Change in control........... Upon a change in control, we may be required to
make an offer to purchase each holder's notes at
a price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the date of purchase.
Subordination............... The notes are unsecured obligations of J. C.
Penney Company, Inc. The notes are subordinated
in right of payment to all existing and future
senior indebtedness and structurally subordinated
to all existing and other indebtedness and other
liabilities of our subsidiaries. As of July 28,
2001, J. C. Penney Company, Inc. had senior
indebtedness of approximately $5.5 billion. The
indenture governing the notes will not limit our
or our subsidiaries' ability to incur senior
indebtedness or other debt.
4
Use of proceeds............. We will not receive any of the proceeds from the
sale by the selling securityholders of the notes
or the common stock underlying the notes.
Trading..................... The notes are eligible for trading in Portal.
However, we cannot give any assurance as to the
liquidity of, or trading market for, the notes.
Common stock................ Our common stock is listed on the New York Stock
Exchange under the symbol "JCP."
Risk Factors
Investment in the notes involves certain risks. You should carefully
consider the information under "Risk Factors" and all other information
included in this prospectus before investing in the notes.
JCPenney and Eckerd are our registered service marks. This prospectus
contains other trade names, trademarks and service marks of JCPenney and of
other companies.
5
Summary Consolidated Financial and Other Data
(dollars in millions, except per share and other operating data)
Please read the summary consolidated financial and other data set forth
below in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with our consolidated financial
statements and notes, all incorporated herein by reference. Our fiscal year is
comprised of 52 or 53 weeks, ending on the last Saturday in January. As used in
this section "fiscal 1998" represents the 52 weeks ended January 30, 1999,
"fiscal 1999" represents the 52 weeks ended January 29, 2000 and "fiscal 2000"
represents the 52 weeks ended January 27, 2001. The following table sets forth
historical summary data for the fiscal years 1998 through 2000 and the 26 weeks
ended July 29, 2000 and July 28, 2001. This data, other than the 26 weeks ended
July 29, 2000 and July 28, 2001, has been derived from our consolidated
financial statements that have been audited by KPMG LLP, independent certified
public accountants, and are incorporated herein by reference. The summary
consolidated data for the 26 week periods ended July 29, 2000 and July 28, 2001
are derived from our unaudited consolidated financial statements which are
incorporated herein by reference. Our historical operating results are not
necessarily indicative of our operating results for any future period.
26 Weeks Ended/(1)/
- ---------------------
Fiscal Year
--------------------------------- July 29, July 28,
1998 1999 2000 2000 2001
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(unaudited)
Income Statement Data:
Department stores and catalog sales.......... $19,436 $19,316 $18,758 $ 8,269 $ 7,917
Eckerd drugstore sales....................... 10,325 12,427 13,088 6,466 6,816
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Total retail sales.......................... 29,761 31,743 31,846 14,735 14,733
Department store and catalog operating
profit..................................... 920 670 254 241 144
Eckerd drugstores operating profit/(loss).... 254 183 (76) (23) 92
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Total segment operating profit/ (2)/........ 1,174 853 178 218 236
Restructuring and other charges, net......... (22) 169 488 207 12
Income/(loss) from continuing operations..... 438 174 (568) (175) (12)
Per Share Data:
Diluted income/(loss) from continuing
operations before effects of non-comparable
items...................................... $ 1.81/(3)/ $ 1.36/(4)/ $ (0.44)/(5)/ $ (0.02)/(6)/ $ (0.09)/(7)/
Diluted income/(loss) from continuing
operations................................. $ 1.58 $ 0.54 $ (2.29) $ (0.73) $ (0.10)
Other Operating Data:
Comparable store sales (decrease)/increase
Department stores........................... (1.9)% (1.1)% (2.4)% (2.5)% 1.7%
Eckerd pharmacy............................. 15.0% 15.6% 14.0% 13.2% 13.3%
Eckerd drugstores total..................... 9.2% 10.7% 8.5% 8.3% 8.7%
Number of stores (at period end)
Department stores........................... 1,169 1,178 1,160 1,162 1,131
Eckerd drugstores........................... 2,756 2,898 2,640 2,641 2,635
6
26 Weeks Ended/(1)/
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Fiscal Year
- ------------------------- July 29, July 28,
1998 1999 2000 2000 2001
------- ------- ------- -------- --------
(unaudited)
Balance Sheet Data:
Cash and short-term investments.......... $ 49 $ 1,155 $ 944 $ 483 $ 1,696
Working capital.......................... 5,022 3,902 3,022 3,630 3,530
Total assets/(8)/........................ 23,605 20,908 19,742 20,080 17,296
Long-term debt........................... 7,143 5,844 5,448 5,411 4,545
Stockholders' equity..................... 7,102 7,228 6,259 6,953 6,088
Other Financial Data:
Department stores and catalog EBITDA/(9)/ $ 1,524 $ 1,389 $ 706 $ 431 $ 340
Eckerd drugstores EBITDA/(9)/............ 507 495 253 153 196
------- ------- ------- ------- --------
Total segments EBITDA/(9)/.............. 2,031 1,884 959 584 536
Capital expenditures..................... 743 669 699 276 313
Cash dividends per common share.......... 2.18 1.92 0.83 0.58 0.25
Ratio of earnings to fixed charges....... 1.80x 1.29x -/(10)/ -/(10)/ 0.91x//
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(1)The Company's business depends to a great extent on the last quarter of the
year. Historically, sales for that period have averaged approximately
one-third of annual sales. Accordingly, the results of operations for the 26
weeks ended July 28, 2001 are not necessarily indicative of the results for
the entire year.
(2)Department stores and catalog segment results for 2000 and 1999 include
certain non-comparable items, which are explained in the Company's Annual
Report on Form 10-K for the fiscal year ended January 27, 2001 ("2000
10-K"). In addition, Eckerd drugstores results for all periods shown include
certain non-comparable items, which are explained in the Company's Quarterly
Report on Form 10-Q for the 13 and 26 weeks ended July 28, 2001, the 2000
10-K, and the Company's Annual Report on Form 10-K for the fiscal year ended
January 30, 1999.
(3)Excludes restructuring and other charges, net, as well as $114 million in
other non-comparable items, consisting of inventory adjustments and
incremental integration costs in Eckerd drugstores.
(4)Excludes restructuring and other charges, net, as well as $139 million in
other non-comparable items, consisting of inventory adjustments and
incremental integration costs in Eckerd drugstores, and a charge in
department stores and catalog related to the adoption of SEC Staff
Accounting Bulletin No. 101, "Revenue Recognition."
(5)Excludes restructuring and other charges, net, as well as $263 million in
other non-comparable items, consisting of inventory adjustments and
incremental markdowns in department stores and Eckerd drugstores,
incremental Eckerd integration and other costs, and charges related to the
centralized merchandising process (ACT) that are included in other
unallocated, and a net credit in Eckerd included in gross margin.
(6)Excludes restructuring and other charges, net, as well as $98 million in
other non-comparable items, consisting of charges related to incremental
store closing costs and ACT that are included in other unallocated.
(7)Excludes restructuring and other charges, net, as well as a net credit of $9
million in other non-comparable items, consisting of charges related to ACT
and real estate gains, both of which are included in other unallocated, and
a net credit in Eckerd related principally to a curtailment gain associated
with the replacement of certain pension benefits.
(8)Includes assets of discontinued operations (in millions) of $2,737, $2,847,
and $3,027 at year-end 1998, 1999, and 2000, respectively, and $3,052 and $0
at July 29, 2000 and July 28, 2001, respectively.
(9)EBITDA includes segment operating profit before depreciation and
amortization and non-comparable items, and includes credit operating results
for years prior to 2000. EBITDA is provided as an alternative assessment of
operating performance. It is not intended to be a substitute for GAAP
measurements, and the items excluded in determining EBITDA are significant
components in understanding and assessing financial performance.
Calculations of EBITDA may vary for other companies.
(10)Income from continuing operations was not sufficient to cover fixed charges
by $887 million for fiscal 2000 and $281 million for the 26 weeks ended
July 29, 2000.
7
RISK FACTORS
You should carefully consider the risks described below before purchasing
the notes or common stock underlying the notes. If any of the following risks
actually occurs, our business, financial condition or results of operations
could be materially and adversely affected. In that case, the trading price of
the notes and our common stock could decline, and you could lose all or part of
your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
Risk Factors Relating To Our Business
Our department store and catalog business is dependent upon fashion trends,
customer preferences and other fashion-related factors.
The retail industry is subject to changing fashion trends and customer
preferences. We cannot guarantee that our merchandise selection will accurately
reflect customer preferences at any given time or that we will be able to
identify and respond quickly to fashion changes, particularly given the long
lead times for ordering much of our merchandise from vendors. If we fail to
accurately anticipate either the market for the merchandise or the customers'
purchasing habits, we may be required to sell a significant amount of unsold
inventory at discounted prices or even below cost, which could have a material
adverse effect on our business, financial condition and results of operations.
Our drugstore operations are subject to trends in the healthcare industry,
including the availability of licensed pharmacists.
Pharmacy sales represent a significant and growing percentage of our total
sales. Pharmacy sales accounted for 64 percent of total drugstore sales for
fiscal 2000. Eckerd's pharmacy sales have lower margins than non-pharmacy sales
and are also subject to increasing margin pressure, as managed care
organizations, insurance companies, employers and other third party payors,
which collectively we call third party plans, become more prevalent and as
these plans continue to seek cost containment. Also, any substantial delays in
reimbursement, or a significant reduction in coverage or payment rates from
third party plans, can have a material adverse effect on our drugstore
business. Pharmacy sales to third party plans accounted for 89 percent of
Eckerd's total pharmacy sales for fiscal 2000.
The success of our drugstore operations is also dependent in part on our
ability to attract and retain licensed pharmacists. There currently exists an
industry-wide shortage of pharmacists. Eckerd has taken steps to address this
shortage, including replacing certain pension benefits with an enhanced 401(k)
savings program that is more competitive in the drugstore industry and is
designed to attract and retain qualified personnel, especially pharmacists.
While this shortage has not to date had an adverse impact on Eckerd's
operations or earnings, there is no guarantee that Eckerd's operations and
earnings will not be adversely affected by a pharmacist shortage in the future.
The businesses in which we operate are highly competitive.
We compete primarily with department stores, drug stores, and mass
merchandisers, many of which are units of national or regional chains that have
significant financial and marketing resources. The principal competitive
factors in our markets are price, quality, selection of merchandise,
reputation, store location, advertising and customer service. We cannot assure
you that we will continue to be able to compete successfully against existing
or future competitors. Our expansion into markets served by our competitors and
entry of new competitors or expansion of existing competitors into our markets
could have a material adverse effect on our business, financial condition and
results of operations.
8
Although we sell merchandise via the Internet through "jcpenney.com," a
significant shift in customer buying patterns to purchasing merchandise via the
Internet could have a material adverse effect on us.
We depend on mall traffic and suitable store locations.
JCPenney department store sales are dependent in part on a high volume of
mall traffic. Our stores are primarily located in enclosed regional and
neighborhood malls. Mall traffic may be adversely affected by, among other
things, economic downturns or changes in customer preferences. A decline in the
popularity of mall shopping among target customers could have a material
adverse effect on our business.
To take advantage of customer traffic and the shopping preferences of our
customers, we need to maintain or acquire stores in desirable locations such as
in regional and neighborhood malls. There is no assurance that desirable
locations will continue to be available.
We depend on consumers' discretionary purchases of our products.
Our sales results depend on consumer spending, which is influenced by
general economic conditions and the availability of discretionary income.
Accordingly, we may experience declines in sales during economic downturns. Any
material decline in the amount of discretionary spending could have a material
adverse effect on our sales, results of operations, business and financial
condition.
Our operations and growth strategy depend on the availability of adequate
capital.
Our operations and growth strategy require adequate capital, the
availability of which depends on our ability to generate cash flow from
operations, borrow funds on satisfactory terms and raise funds in the capital
markets. We may need additional seasonal borrowing capacity in addition to the
funds currently available under our revolving credit facility to fund our
working capital requirements. The inability to obtain adequate capital could
have a material adverse effect on our business and results of operations.
We may experience fluctuations in our comparable store and catalog sales
results.
Our comparable store and catalog sales have fluctuated in the past on an
annual, quarterly and monthly basis, and we expect that they will continue to
fluctuate in the future. A variety of factors affect comparable store and
catalog sales results, including, among others, fashion trends, the highly
competitive retail store and catalog (including Internet) environment, economic
conditions, timing of promotional events, changes in merchandise mix, calendar
shifts of holiday periods and weather conditions. These factors may cause our
comparable store and catalog sales results to differ materially from prior
periods and from expectations.
Our business is highly seasonal.
Our business is highly seasonal with sales and earnings generally highest in
the fourth quarter and lowest in the first quarter. During 2000, approximately
30 percent of our sales were generated in the fourth quarter. In particular,
our results of operations depend significantly upon the holiday selling season
in the fourth quarter. If we experience less than satisfactory net sales during
the fourth quarter, we may not be able to sufficiently compensate for lower
fourth quarter revenues during the first three quarters of the year.
We may not be able to retain key executives or other personnel.
Our success is largely dependent on the performance of our management team
and other key employees. Our operations could be materially adversely affected
if any of our senior executives or other key personnel ceased working for us.
9
Risk Factors Relating To The Offering
If we are unable to pay all of our debts, you will receive payment on your
notes only if we have funds remaining after we have paid our existing and
future senior indebtedness.
The notes are unsecured and subordinated in right of payment to all of our
existing and future senior indebtedness. The indenture defines senior
indebtedness as all indebtedness of J. C. Penney Company, Inc. other than any
indebtedness that expressly states that it is subordinated to the notes. In the
event of our bankruptcy, liquidation or reorganization or upon acceleration of
the notes due to an event of default under the indenture and in certain other
events, our assets will be available to pay obligations on the notes only after
all senior indebtedness has been paid. As a result, there may not be sufficient
assets remaining to pay amounts due on any or all of the outstanding notes. The
notes are also structurally subordinated to all liabilities, including trade
payables, of our subsidiaries. The indenture governing the notes does not limit
our or our subsidiaries' ability to incur debt, including senior indebtedness.
In addition, there are no financial covenants in the indenture. If we or our
subsidiaries were to incur additional debt or liabilities, our ability to pay
our obligations on the notes could be adversely affected. As of July 28, 2001,
J. C. Penney Company, Inc. had approximately $5.5 billion of senior
indebtedness outstanding. See "Description of the Notes -- Subordination of
Notes."
If an active trading market for the notes does not develop, then the market
price of the notes may decline or you may be unable to sell your notes.
The initial purchasers have advised us that they currently intend to make a
market in the notes. However, the initial purchasers are not obligated to make
a market and may discontinue this market-making activity at any time without
notice. In addition, market-making activity by the initial purchasers will be
subject to the limits imposed by U.S. federal securities laws. As a result, we
cannot assure you that any market for the notes will develop or, if one does
develop, that it will be maintained. In addition, the notes may only be
transferred or resold in transactions registered under, or exempt from, U.S.
federal and applicable state securities laws. If an active market for the notes
fails to develop or be sustained, the trading price of the notes could decline
significantly.
The market price of the notes and our common stock may be lower than you
expected.
The trading price of our common stock has been, and in the future the
trading prices of the notes and our common stock could be, subject to
substantial fluctuations because of:
. changing market conditions in the retail business;
. quarterly variations in operating results;
. monthly variations in comparable store sales results;
. adverse business developments;
. changes in financial estimates by securities analysts;
. changes in rating agency outlook for JCPenney or the industry in general;
. new merchandise or strategies introduced by us or our competitors;
. the timing of new store openings or reconfigurations; and
. announcements of technological innovations.
The stock market has from time to time experienced extreme price and volume
fluctuations which have often been unrelated to the operating performance of
particular companies. Our stock has also experienced significant price
fluctuations. In addition, any announcement with respect to any variance in
revenue or earnings
10
from levels generally expected by securities analysts for a given period could
have an immediate and significant effect on the trading price of our common
stock and the notes. Fluctuations specific to us and/or our industry may
materially and adversely harm the price of our common stock and the notes.
We may be unable to purchase the notes upon a change in control.
Upon a change in control, you may require us to purchase all or a portion of
your notes. If a change in control were to occur, we may not have enough funds
to pay the purchase price for all tendered notes. Our current senior credit
facility permits a change in control in certain circumstances. Future senior
credit facilities, however, may provide that a change in control triggers
credit obligations to become immediately due and owing, which would affect the
funds we have available to service debt obligations. Any failure on our part to
purchase tendered notes would constitute an event of default under the
indenture, which might constitute a default under the terms of our other debt.
In such circumstances, or if a change in control would constitute an event of
default under our senior indebtedness, the subordination provisions of the
indenture would restrict payments to you. The term "change in control" is
limited to certain specified transactions and may not include other events that
might harm our financial condition. Our obligation to offer to purchase the
notes upon a change in control may not preserve the value of the notes in the
event of a highly leveraged transaction, reorganization, merger or similar
transaction involving us. See "Description of the Notes -- Purchase of Notes at
Your Option Upon a Change in Control."
We have Charter and Bylaw provisions that could delay or prevent a change in
control, even if it would be beneficial to you.
Our Charter, Bylaws and stockholder rights agreement and Delaware corporate
law contain provisions that could delay or make more difficult the removal of
incumbent directors as well as a merger, tender offer or proxy contest, even if
these events could be viewed as beneficial by our stockholders. These
provisions may make it more difficult or expensive for a third party to acquire
a majority of our outstanding common stock. Among other things, our board of
directors has the power to issue preferred stock in one or more series with
designations, relative voting rights, dividend rates, liquidation and other
rights, preferences and limitations that the board may fix without stockholder
approval. Issuance of this "blank check" preferred stock could materially limit
the rights of the holders of our common stock and render more difficult or
discourage an attempt to obtain control of us by means of a tender offer,
merger, proxy contest or otherwise. In addition, our Charter and Bylaws contain
provisions that could impede a takeover or change in control, including, among
other things, a classified board of directors and a requirement that the
provisions relating to the classified board of directors be amended only by the
affirmative vote of holders of at least 80 percent of the voting power of our
outstanding common stock. These provisions may delay, prevent or deter a
merger, acquisition, tender offer, proxy contest or other transaction that
might otherwise result in holders of our common stock receiving a premium over
the market price for their common stock, which could depress the market price
of our common stock and the notes. See "Description of Capital Stock."
11
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus, including the section entitled "Summary," and the documents
incorporated herein by reference contain forward-looking statements. These
statements relate to future events or our future financial performance, and
involve known and unknown risks, uncertainties, and other factors that may
cause our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance
or achievements expressed or implied by these forward-looking statements. These
risks and other factors include, among other things, those listed above in
"Risk Factors" and elsewhere in this prospectus and the documents incorporated
herein by reference. In some cases, you can identify forward-looking statements
by terminology such as "may," "should," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," "continue," or
the negative of these terms or other comparable terminology. These statements
are only predictions. Actual events or results may differ materially. In
evaluating these statements, you should specifically consider various factors,
including the risks outlined above in "Risk Factors." These factors may cause
our actual results to differ materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of
the forward-looking statements after the date of this prospectus.
12
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by the selling
securityholders of the notes or the common stock underlying the notes.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed on the New York Stock Exchange under the symbol
"JCP." The following table sets forth for the periods indicated the high and
low sales prices of our common stock, as reported on the New York Stock
Exchange Composite Tape, and our cash dividend declared for each such period.
High Low Dividend
------ ------ --------
Fiscal year ended January 29, 2000
First Quarter......................... $48.38 $35.38 $0.5450
Second Quarter........................ 54.44 43.75 0.5450
Third Quarter......................... 44.88 25.31 0.5450
Fourth Quarter........................ 27.50 17.69 0.2875
Fiscal year ended January 27, 2001
First Quarter......................... $19.75 $12.88 $0.2875
Second Quarter........................ 19.69 14.00 0.2875
Third Quarter......................... 18.25 8.69 0.1250
Fourth Quarter........................ 13.38 8.63 0.1250
Fiscal year ending January 26, 2002
First Quarter......................... $20.73 $12.98 $0.1250
Second Quarter........................ 29.50 19.30 0.1250
Third Quarter......................... 28.85 18.64 0.1250
Fourth Quarter (to November 27, 2001). 27.88 20.90 *
On November 27, 2001, the last reported sale price of our common stock on
the New York Stock Exchange Composite Tape was $27.10. As of November 27, 2001,
we had 50,788 holders of record of common stock.
*All dividends are at the sole discretion of J. C. Penney Company, Inc.'s
board of directors. The board bases its dividend decisions primarily on the
financial condition, results of operations and business requirements of
JCPenney.
RATIO OF EARNINGS TO FIXED CHARGES
Fiscal Year 26 Weeks Ended
--------------------------- ------------------
July 29, July 28,
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- -------- --------
(unaudited)
Ratio of earnings to fixed charges 2.30x 1.83x 1.80x 1.29x --/(1)/ --/(1)/ 0.91x
---------------------
(1)Income from continuing operations was not sufficient to cover fixed charges
of $887 million for fiscal 2000 and $281 million for the 26 weeks ended July
29, 2000.
13
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(dollars in millions, except per share and other operating data)
Please read the selected consolidated financial and other data set forth
below in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with our consolidated financial
statements and notes, all incorporated herein by reference. Our fiscal year is
comprised of 52 or 53 weeks, ending on the last Saturday in January. As used in
this section "fiscal 1996" represents the 52 weeks ended January 25, 1997,
"fiscal 1997" represents the 53 weeks ended January 31, 1998, "fiscal 1998"
represents the 52 weeks ended January 30, 1999, "fiscal 1999" represents the 52
weeks ended January 29, 2000 and "fiscal 2000" represents the 52 weeks ended
January 27, 2001. The following table sets forth historical summary data for
the fiscal years 1998 through 2000 and the 26 weeks ended July 29, 2000 and
July 28, 2001. This data, other than the 26 weeks ended July 29, 2000 and July
28, 2001, has been derived from our consolidated financial statements that have
been audited by KPMG LLP, independent certified public accountants, and are
incorporated herein by reference. The selected consolidated data for the 26
week periods ended July 29, 2000 and July 28, 2001 are derived from our
unaudited consolidated financial statements which are incorporated herein by
reference. Our historical operating results are not necessarily indicative of
our operating results for any future period.
Fiscal Year
------------------------------------------------------------
1996 1997 1998 1999 2000
-------- ------- ------- ------- -------
Income Statement Data:
Department stores and catalog sales............ $19,644 $20,133 $19,436 $19,316 $18,758
Eckerd drugstore sales......................... 3,160 9,663 10,325 12,427 13,088
-------- ------- ------- ------- -------
Total retail sales.......................... 22,804 29,796 29,761 31,743 31,846
Cost of goods sold............................. 15,257 20,361 20,621 22,286 23,031
Gross profit................................... 7,547 9,435 9,140 9,457 8,815
Selling, general and administrative expenses... 6,359 7,813 7,966 8,604 8,637
-------- ------- ------- ------- -------
Total segment operating profit/(2)/......... 1,188 1,622 1,174 853 178
Other unallocated.............................. (38) (18) (18) (13) 27
Net interest expense and credit operations..... 184 454 387 294 427
Acquisition amortization....................... 23 117 112 125 122
Restructuring and other charges, net........... 303 379 (22) 169 488
-------- ------- ------- ------- -------
Income/(loss) from continuing operations before
income taxes.................................. 716 690 715 278 (886)
Provision/(benefit) for income taxes........... 276 277 277 104 (318)
-------- ------- ------- ------- -------
Income/(loss) from continuing operations....... 440// 413 438 174 (568)
Per Share Data:
Income/(loss) from continuing operations before
effects of non-comparable items
Basic....................................... $ 2.72/(3)/ $ 2.56/(4)/ $ 1.81/(5)/ $ 1.36/(6)/ $ (0.44)/(7)/
Diluted..................................... $ 2.62/(3)/ $ 2.49/(4)/ $ 1.81/(5)/ $ 1.36/(6)/ $ (0.44)/(7)/
Income/(loss) from continuing operations
Basic....................................... $ 1.77 $ 1.51 $ 1.58 $ 0.54 $ (2.29)
Diluted..................................... $ 1.75 $ 1.49 $ 1.58 $ 0.54 $ (2.29)
Weighted average common shares
Basic....................................... 226.4 247.4 252.8 259.4 261.8
Diluted..................................... 248.5 268.1 254.0 259.4 261.8
Other Operating Data:
Comparable store sales increase/(decrease)
Department stores........................... 3.4% (0.3)% (1.9)% (1.1)% (2.4)%
Eckerd pharmacy............................. N/A 12.5% 15.0% 15.6% 14.0%
Eckerd drugstores total..................... 7.7% 7.4% 9.2% 10.7% 8.5%
Number of stores (at period end)
Department stores........................... 1,228 1,203 1,169 1,178 1,160
Eckerd drugstores........................... 2,699 2,778 2,756 2,898 2,640
26 Weeks Ended/(1)/
---------------------
July 29, July 28,
2000 2001
-------- --------
(unaudited)
Income Statement Data:
Department stores and catalog sales............ $ 8,269 $ 7,917
Eckerd drugstore sales......................... 6,466 6,816
------- -------
Total retail sales.......................... 14,735 14,733
Cost of goods sold............................. 10,406 10,462
Gross profit................................... 4,329 4,271
Selling, general and administrative expenses... 4,111 4,035
------- -------
Total segment operating profit/(2)/......... 218 236
Other unallocated.............................. 18 (6)
Net interest expense and credit operations..... 215 192
Acquisition amortization....................... 58 56
Restructuring and other charges, net........... 207 12
------- -------
Income/(loss) from continuing operations before
income taxes.................................. (280) (18)
Provision/(benefit) for income taxes........... (105) (6)
------- -------
Income/(loss) from continuing operations....... (175) (12)
Per Share Data:
Income/(loss) from continuing operations before
effects of non-comparable items
Basic....................................... $ (0.02)/(8)/ $ (0.09)/(9)/
Diluted..................................... $ (0.02)/(8)/ $ (0.09)/(9)/
Income/(loss) from continuing operations
Basic....................................... $ (0.73) $ (0.10)
Diluted..................................... $ (0.73) $ (0.10)
Weighted average common shares
Basic....................................... 261.4 263.1
Diluted..................................... 261.4 263.1
Other Operating Data:
Comparable store sales increase/(decrease)
Department stores........................... (2.5)% 1.7%
Eckerd pharmacy............................. 13.2% 13.3%
Eckerd drugstores total..................... 8.3% 8.7%
Number of stores (at period end)
Department stores........................... 1,162 1,131
Eckerd drugstores........................... 2,641 2,635
14
Fiscal Year 26 Weeks Ended/(1)/
--------------------------------------- ------------------
July 29, July 28,
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- -------- --------
(unaudited)
Balance Sheet Data:
Cash and short-term investments........... $ 91 $ 227 $ 49 $ 1,155 $ 944 $ 483 $ 1,696
Working capital........................... 3,956 5,274 5,022 3,902 3,022 3,630 3,530
Total assets/(10)/........................ 22,013 23,405 23,605 20,908 19,742 20,080 17,296
Long-term debt............................ 4,565 6,986 7,143 5,844 5,448 5,411 4,545
Stockholders' equity...................... 5,885 7,290 7,102 7,228 6,259 6,953 6,088
Other Financial Data:
Department stores and catalog EBITDA/(11)/ $ 1,576 $ 1,768 $ 1,524 $ 1,389 $ 706 $ 431 $ 340
Eckerd drugstores EBITDA/(11)/............ 171 504 507 495 253 153 196
------- ------- ------- ------- ------- ------- -------
Total segments EBITDA/(11)/............. 1,747 2,272 2,031 1,884 959 584 536
Capital expenditures...................... 783 803 743 669 699 276 313
Cash dividends per common share........... 2.08 2.14 2.18 1.92 0.83 0.58 0.25
---------------------
(1) The Company's business depends to a great extent on the last quarter of
the year. Historically, sales for that period have averaged approximately
one-third of annual sales. Accordingly, the results of operations for the
26 weeks ended July 28, 2001 are not necessarily indicative of the results
for the entire year.
(2) Department stores and catalog segment results for 2000 and 1999 include
certain non-comparable items, which are explained in the Company's Annual
Report on Form 10-K for the fiscal year ended January 27, 2001 ("2000
10-K"). In addition, Eckerd drugstores results for all periods shown
include certain non-comparable items, which are explained in the Company's
Quarterly Report on Form 10-Q for the 13 and 26 weeks ended July 28, 2001,
the 2000 10-K, and the Company's Annual Report on Form 10-K for fiscal
year ended January 30, 1999.
(3) Excludes restructuring and other charges, net, as well as $31 million in
other non-comparable items, consisting of inventory integration costs in
Eckerd drugstores.
(4) Excludes restructuring and other charges, net, as well as $45 million in
other non-comparable items, consisting of inventory adjustments in Eckerd
drugstores.
(5) Excludes restructuring and other charges, net, as well as $114 million in
other non-comparable items, consisting of inventory adjustments and
incremental integration costs in Eckerd drugstores.
(6) Excludes restructuring and other charges, net, as well as $139 million in
other non-comparable items, consisting of inventory adjustments and
incremental integration costs in Eckerd drugstores, and a charge in
department stores and catalog related to the adoption of SEC Staff
Accounting Bulletin No. 101, "Revenue Recognition."
(7) Excludes restructuring and other charges, net, as well as $263 million in
other non-comparable items, consisting of inventory adjustments and
incremental markdowns in department stores and Eckerd drugstores,
incremental Eckerd integration and other costs, and charges related to the
centralized merchandising process (ACT) that are included in other
unallocated, and a net credit in Eckerd included in gross margin.
(8) Excludes restructuring and other charges, net, as well as $98 million in
other non-comparable items, consisting of charges related to incremental
store closing costs and ACT that are included in other unallocated.
(9) Excludes restructuring and other charges, net, as well as a net credit of
$9 million in other non-comparable items, consisting of charges related to
ACT and real estate gains, both of which are included in other
unallocated, and a net credit in Eckerd related principally to a
curtailment gain associated with the replacement of certain pension
benefits.
(10) Includes assets of discontinued operations (in millions) of $2,030;
$2,323; $2,737; $2,847; and $3,027 at year-end 1996, 1997, 1998, 1999 and
2000, respectively, and $3,052 and $0 at July 29, 2000 and July 28, 2001,
respectively.
(11) EBITDA includes segment operating profit before depreciation and
amortization and non-comparable items, and includes credit operating
results for years prior to 2000. EBITDA is provided as an alternative
assessment of operating performance. It is not intended to be a substitute
for GAAP measurements, and the items excluded in determining EBITDA are
significant components in understanding and assessing financial
performance. Calculations of EBITDA may vary for other companies.
15
DESCRIPTION OF THE NOTES
The notes were issued under an indenture dated as of October 15, 2001,
between us and The Bank of New York, as trustee. The following summarizes some,
but not all, provisions of the notes and the indenture. We urge you to read the
indenture because it, and not this description, defines your rights as a holder
of the notes. A copy of the form of indenture and note is available to you upon
request. In this section entitled "Description of the Notes," when we refer to
"JCPenney," "we," "our," or "us," we are referring to J. C. Penney Company,
Inc., and not any of its subsidiaries.
General
We issued notes with a principal amount of $650,000,000. The notes are
unsecured general obligations of JCPenney and are subordinated in right of
payment as described under "-- Subordination of Notes." The notes are
convertible into common stock as described under "-- Conversion of Notes." The
notes have been and will be issued only in denominations of $1,000 or in
multiples of $1,000. The notes will mature on October 15, 2008, unless earlier
redeemed at our option by us or purchased by us at your option upon a change in
control.
The indenture does not limit our or our subsidiaries' ability to pay
dividends, incur debt or issue or repurchase securities. In addition, there are
no financial covenants in the indenture. You are not protected under the
indenture in the event of a highly leveraged transaction or a change in control
of JCPenney, except to the extent described under "Purchase of Notes at Your
Option Upon a Change in Control."
The notes bear interest at the annual rate of 5% subject to increase as
described in "-- Registration Rights" below. Interest will be payable on April
15 and October 15 of each year, beginning April 15, 2002, subject to limited
exceptions if the notes are converted, redeemed or purchased prior to the
interest payment date. The record dates for the payment of interest are April 1
and October 1. We may, at our option, pay interest on the notes by check mailed
to the holders. However, a holder with an aggregate principal amount in excess
of $2 million will be paid by wire transfer in immediately available funds at
its election. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
We will maintain an office in The City of New York where the notes may be
presented for registration, transfer, exchange or conversion. This office
initially will be an office or agency of the trustee.
Conversion of Notes
You have the right, at your option, to convert your notes into shares of
common stock at any time prior to maturity, unless previously redeemed or
purchased, at the conversion price of $28.50 per share, subject to the
adjustments described below.
Except as described below, we will not make any payment or other adjustment
for accrued interest or dividends on any common stock issued upon conversion of
the notes. If you submit your notes for conversion between a record date and
the opening of business on the next interest payment date, you must pay funds
equal to the interest payable on the converted principal amount, except if the
submitted notes or portions of notes are called for redemption or are subject
to purchase following a change in control on a date during the period from the
close of business on a record date and ending on the opening of business on the
first business day after the next interest payment date, or if this interest
payment date is not a business day, the second business day after the interest
payment date. As a result of the foregoing provisions, if the exception
described in the preceding sentence does not apply and you surrender notes for
conversion on a date that is not an interest payment date, you will not receive
any interest for the period from the interest payment date next preceding the
date of conversion to the date of conversion or for any later period.
16
We will not issue fractional shares of common stock upon conversion of
notes. Instead, we will pay a cash amount based upon the closing market price
of the common stock on the last trading day prior to the date of conversion.
If the notes are called for redemption or are subject to purchase following
a change in control, your conversion rights on the notes called for redemption
or so subject to purchase will expire at the close of business on the last
business day before the redemption date or purchase date, as the case may be,
unless we default in the payment of the redemption price or purchase price. If
you have submitted your notes for purchase upon a change in control, you may
only convert your notes if you withdraw your election in accordance with the
indenture.
The conversion price will be adjusted upon the occurrence of:
(1)the issuance of shares of our common stock as a dividend or distribution
on our common stock;
(2)the subdivision or combination of our outstanding common stock;
(3)the issuance to all or substantially all holders of our common stock of
rights or warrants entitling them for a period of not more than 60 days
to subscribe for or purchase our common stock, or securities convertible
into our common stock, at a price per share or a conversion price per
share less than the then current market price per share;
(4)the distribution to all or substantially all holders of our common stock
of shares of our capital stock, evidences of indebtedness or other
non-cash assets, or rights or warrants, excluding:
. dividends, distributions and rights or warrants referred to in clauses
(1) or (3) above; and
. dividends or distributions exclusively in cash referred to in clause
(5) below;
(5)the dividend or distribution to all or substantially all holders of our
common stock of all-cash distributions in an aggregate amount that
together with (A) any cash and the fair market value of any other
consideration payable in respect of any tender offer (within the meaning
of the U.S. federal securities laws) by us or any of our subsidiaries
for our common stock consummated within the preceding 12 months not
triggering a conversion price adjustment and (B) all other all-cash
distributions to all or substantially all holders of our common stock
made within the preceding 12 months not triggering a conversion price
adjustment, exceeds an amount equal to 10 percent of our market
capitalization on the business day immediately preceding the day on
which we declare such dividend or distribution; and
(6)the purchase of our common stock pursuant to a tender offer (within the
meaning of the United States federal securities laws) made by us or any
of our subsidiaries to the extent that the same involves aggregate
consideration that together with (A) any cash and the fair market value
of any other consideration payable in respect of any tender offer by us
or any of our subsidiaries for our common stock consummated within the
preceding 12 months not triggering a conversion price adjustment and (B)
all-cash distributions to all or substantially all holders of our common
stock made within the preceding 12 months not triggering a conversion
price adjustment, exceeds an amount equal to 10 percent of our market
capitalization on the expiration date of such tender offer.
In the event of:
. any reclassification of our common stock, or
. a consolidation, merger or combination involving JCPenney, or
. a sale or conveyance to another person of the property and assets of
JCPenney as an entirety or substantially as an entirety,
in which holders of our outstanding common stock would be entitled to receive
stock, other securities, other property, assets or cash for their common stock,
holders of the notes will generally be entitled to convert their
17
notes into the same type of consideration received by common stockholders
immediately prior to one of these types of events. This change could
substantially lessen or eliminate the value of the conversion privilege
associated with the notes in the future. For example, if we were acquired in a
cash merger, each note would become convertible into cash and would no longer
be convertible into securities whose value would vary depending on our future
prospects and other factors.
We are permitted to reduce the conversion price of the notes by any amount
for a period of at least 20 days if our board of directors determines that such
reduction would be in the best interest of JCPenney. We are required to give at
least 15 days prior notice of any reduction in the conversion price. We also
may reduce the conversion price to avoid or diminish income tax to holders of
our common stock in connection with a dividend or distribution of stock or
similar event.
You may, in some circumstances, be deemed to have received a distribution or
dividend subject to U.S. federal income tax as a result of an adjustment or the
nonoccurrence of an adjustment to the conversion price.
No adjustment in the conversion price will be required unless it would
result in a change in the conversion price of at least one percent. Any
adjustment not made will be taken into account in subsequent adjustments.
Except as stated above, we will not adjust the conversion price for the
issuance of our common stock or any securities convertible into or exchangeable
for our common stock or the right to purchase our common stock or such
convertible or exchangeable securities.
Subordination of Notes
The indebtedness evidenced by the notes is subordinated to the extent
provided in the indenture to the prior payment in full, in cash or other
payment satisfactory to holders of senior indebtedness, of all senior
indebtedness.
Upon any distribution of our assets upon any dissolution, winding-up, total
or partial liquidation or reorganization, whether voluntary or involuntary, or
in bankruptcy, insolvency, receivership or similar proceedings, payment of the
principal of, premium, if any, and interest on the notes is to be subordinated
in right of payment to the prior payment in full, in cash or other payment
satisfactory to holders of senior indebtedness, of all senior indebtedness.
In the event of any acceleration of the notes because of an event of
default, the holders of any senior indebtedness then outstanding would be
entitled to payment in full, in cash or other payment satisfactory to holders
of senior indebtedness, of all obligations with respect to such senior
indebtedness before the holders of the notes are entitled to receive any
payment or other distribution. We are required to promptly notify holders of
senior indebtedness if payment of the notes is accelerated because of an event
of default.
We also may not make any payment on the notes if:
. a default in the payment of any senior indebtedness occurs and is
continuing; or
. any other default occurs and is continuing with respect to any senior
indebtedness that permits holders of the senior indebtedness to accelerate
its maturity and the trustee receives a notice of such default, which we
refer to as a payment blockage notice, from any person permitted to give
this notice under the indenture.
We may resume making payments on the notes:
. in the case of a payment default, when the default is cured or waived or
ceases to exist; and
. in the case of a nonpayment default, the earlier of (1) when the default
is cured or waived or ceases to exist, or (2) 179 days after receipt of
the payment blockage notice.
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No new period of payment blockage may be commenced pursuant to a payment
blockage notice unless and until 365 days have elapsed since our receipt of the
prior payment blockage notice.
No default that existed on the date of delivery of any payment blockage
notice to the trustee will be the basis for a subsequent payment blockage
notice.
By reason of the subordination provisions described above, in the event of
our bankruptcy, dissolution or reorganization, holders of senior indebtedness
may receive more, ratably, and holders of the notes may receive less, ratably,
than the other creditors of JCPenney. These subordination provisions will not
prevent the occurrence of any event of default under the indenture. The
indenture does not limit our ability to incur additional indebtedness,
including senior indebtedness. The incurrence of significant amounts of
additional debt could adversely affect our ability to service our debt,
including the notes.
A portion of our operations is conducted through subsidiaries. As a result,
our cash flow and our ability to service our debt, including the notes, may
depend upon the earnings of our subsidiaries. In addition, we could be
dependent on the distribution of earnings, loans or other payments by our
subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the notes or to provide us with
funds for our payment obligations, whether by dividends, distributions, loans
or other payments. In addition, any payment of dividends, distributions, loans
or advances by our subsidiaries to us could be subject to statutory or
contractual restrictions. Payments to us by our subsidiaries also will be
contingent upon our subsidiaries' earnings.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
notes to participate in those assets, will be effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors. In addition,
even if we were a creditor of any of our subsidiaries, our rights as a creditor
would be subordinate to any security interest in the assets of our subsidiaries
and any indebtedness of our subsidiaries senior to that held by us.
As of July 28, 2001, we had approximately $5.5 billion of indebtedness
outstanding that would constitute senior indebtedness. The indenture does not
limit our ability to incur senior indebtedness or any other indebtedness.
Certain Definitions
"indebtedness" means:
(1) all of our indebtedness, obligations and other liabilities, contingent
or otherwise for borrowed money, including:
. overdrafts, foreign exchange contracts, currency exchange agreements,
interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments, or
. credit or loan agreements, bonds, debentures, notes or similar
instruments, including indebtedness given in connection with the
acquisition of any business, properties or assets (including
securities), whether or not the recourse of the lender is to all of
our assets or to only a portion thereof, other than any account
payable or other accrued current liability or obligation incurred in
the ordinary course of business in connection with the obtaining of
materials or services;
(2) all of our reimbursement obligations and other liabilities, contingent
or otherwise, with respect to letters of credit, bank guarantees or
bankers' acceptances;
(3) all of our obligations and liabilities, contingent or otherwise, in
respect of leases required, in conformity with generally accepted
accounting principles, to be accounted for as capitalized lease
obligations on our balance sheet;
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(4)all of our obligations and other liabilities, contingent or otherwise,
under any lease or related document, including a purchase agreement, in
connection with the lease of real property which provides that we are
contractually obligated to purchase or cause a third party to purchase
the leased property and thereby guarantee a residual value of leased
property to the lessor and all of our obligations under such lease or
related document to purchase or to cause a third party to purchase the
leased property (whether or not such lease transaction is characterized
as an operating lease or a capitalized lease in accordance with
generally accepted accounting principles);
(5)all of our obligations, contingent or otherwise, with respect to an
interest rate, currency or other swap, cap, floor or collar agreement,
hedge agreement, forward contract, or other similar instrument or
agreement or foreign currency hedge, exchange, purchase or similar
instrument or agreement;
(6)all of our direct or indirect guaranties or similar agreements to
purchase or otherwise acquire or otherwise assure a creditor against
loss in respect of indebtedness, obligations or liabilities of another
person of the kind described in clauses (1) through (5); and
(7)any and all deferrals, renewals, extensions and refundings of, or
amendments, modifications, supplements to, any indebtedness, obligation
or liability of the kind described in clauses (1) through (6).
"senior indebtedness" means the principal of, premium, if any, interest
including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding, and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, indebtedness of J. C. Penney Company, Inc.
whether outstanding on the date of the indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by J. C. Penney Company,
Inc., including all deferrals, renewals, extensions or refundings of, or
amendments, modifications or supplements to, the foregoing.
Senior indebtedness does not include any obligation for federal, state,
local or other taxes or any indebtedness of J. C. Penney Company, Inc. to any
subsidiary of J. C. Penney Company, Inc., other than indebtedness to J. C.
Penney Funding Corporation which arises in connection with third party
borrowings by J. C. Penney Funding Corporation and is incurred to finance
operations of J. C. Penney Company, Inc. (unless in the case of any particular
indebtedness the instrument creating or evidencing the same or the assumption
or guarantee thereof expressly provides that such indebtedness will not be
senior in right of payment to the notes or expressly provides that such
indebtedness is on the same basis or junior to the notes).
Optional Redemption by JCPenney
We may redeem the notes on or after October 20, 2004, on at least 20 days
and no more than 60 days prior written notice, in whole or in part, at the
following redemption prices expressed as percentages of the principal amount of
the notes:
Redemption
Period Price
------ ----------
Beginning on October 20, 2004 and ending on October 14, 2005 102.500%
Beginning on October 15, 2005 and ending on October 14, 2006 101.667%
Beginning on October 15, 2006 and ending on October 14, 2007 100.833%
Beginning on October 15, 2007 and thereafter................ 100.000%
In each case, we will pay accrued interest to, but excluding, the redemption
date. If the redemption date is an interest payment date, interest will be paid
to the record holder on the relevant record date.
If we decide to redeem fewer than all of the notes, the trustee will select
the notes to be redeemed by lot, or in its discretion, on a pro rata basis. If
any note is to be redeemed in part only, a new note in principal amount equal
to the unredeemed principal portion will be issued. If a portion of your notes
is selected for partial redemption and you convert a portion of your notes, the
converted portion will be deemed to be of the portion selected for redemption.
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No sinking fund is provided for the notes.
Purchase of Notes at Your Option Upon a Change in Control
If a change in control of JCPenney occurs, you will have the right to
require us to purchase all or any part of your notes 30 business days after the
occurrence of a change in control at a purchase price equal to 100 percent of
the principal amount of the notes plus accrued and unpaid interest to, but
excluding, the purchase date. Notes submitted for purchase must be in a
principal amount of $1,000 or multiples of $1,000.
We will mail to the trustee and to each holder a written notice of the
change in control within ten business days after the occurrence of a change in
control. This notice will state:
. the terms and conditions of the change in control;
. the procedures required for exercise of the purchase option upon a change
in control;
. that the holder has the right to require JCPenney to purchase the notes;
and
. the name and address of the paying agent.
You must deliver written notice of your exercise of this purchase right to a
paying agent at any time prior to the close of business on the business day
prior to the change in control purchase date. The written notice must specify
the notes for which the purchase right is being exercised. If you wish to
withdraw this election, you must provide a written notice of withdrawal to the
paying agent at any time prior to the close of business on the business day
prior to the change in control purchase date.
A change in control will be deemed to have occurred if any of the following
occurs:
. any "person" or "group" is or becomes the "beneficial owner," directly or
indirectly, of shares of voting stock of JCPenney representing 50 percent
or more of the total voting power of all outstanding classes of voting
stock of JCPenney or has the power, directly or indirectly, to elect a
majority of the members of the board of directors of JCPenney;
. JCPenney consolidates with, or merges with or into, another person or
JCPenney sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of the assets of JCPenney, or any person
consolidates with, or merges with or into, JCPenney, in any such event
other than pursuant to a transaction in which the persons that
"beneficially owned," directly or indirectly, the shares of voting stock
of JCPenney immediately prior to such transaction "beneficially own,"
directly or indirectly, shares of voting stock of JCPenney, representing
at least a majority of the total voting power of all outstanding classes
of voting stock of the surviving or transferee person; or
. JCPenney is dissolved or liquidated;
unless, in the case of a merger or consolidation, all of the consideration
excluding cash payments for fractional shares in the merger or consolidation
constituting the change in control consists of common stock traded on a United
States national securities exchange or quoted on the Nasdaq National Market (or
which will be so traded or quoted when issued or exchanged in connection with
such change in control) and as a result of such transaction or transactions the
notes become convertible solely into such common stock.
For purposes of this change in control definition:
. "person" or "group" have the meanings given to them for purposes of
Sections 13(d) and 14(d) of the Exchange Act or any successor provisions,
and the term "group" includes any group acting for the purpose of
acquiring, holding or disposing of securities within the meaning of Rule
13d-5(b)(1) under the Exchange Act, or any successor provision;
. a "beneficial owner" will be determined in accordance with Rule 13d-3
under the Exchange Act, as in effect on the date of the indenture, except
that the number of shares of voting stock of JCPenney will be deemed to
include, in addition to all outstanding shares of voting stock of JCPenney
and unissued shares deemed to be held by the "person" or "group" or other
person with respect to which the change in control determination is being
made, all unissued shares deemed to be held by all other persons;
21
. "beneficially owned" has a meaning correlative to that of beneficial owner;
. "unissued shares" means shares of voting stock not outstanding that are
subject to options, warrants, rights to purchase or conversion privileges
exercisable within 60 days of the date of determination of a change in
control; and
. "voting stock" means any class or classes of capital stock pursuant to
which the holders of capital stock under ordinary circumstances have the
power to vote in the election of the board of directors, managers or
trustees of any person or other persons performing similar functions
irrespective of whether or not, at the time capital stock of any other
class or classes will have, or might have, voting power by reason of the
happening of any contingency.
The term "all or substantially all" as used in the definition of change in
control will likely be interpreted under applicable state law and will be
dependent upon particular facts and circumstances. There may be a degree of
uncertainty in interpreting this phrase. As a result, we cannot assure you how
a court would interpret this phrase under applicable law if you elect to
exercise your rights following the occurrence of a transaction which you
believe constitutes a transfer of "all or substantially all" of our assets.
We will:
. comply with the provisions of Rule 13e-4 and Rule 14e-1, if applicable,
under the Exchange Act;
. file a Schedule TO (tender offer form -- SEC) or any successor or similar
schedule if required under the Exchange Act; and
. otherwise comply with all federal and state securities laws in connection
with any offer by us to purchase the notes upon a change in control.
This change in control purchase feature may make more difficult or
discourage a takeover of JCPenney and the removal of incumbent management.
However, we are not aware of any specific effort to accumulate shares of our
common stock or to obtain control of us by means of a merger, tender offer,
solicitation or otherwise. In addition, the change in control purchase feature
is not part of a plan by management to adopt a series of anti-takeover
provisions. Instead, the change in control purchase feature is a result of
negotiations between us and the initial purchasers of the notes.
We could, in the future, enter into certain transactions, including
recapitalizations, that would not constitute a change in control but would
increase the amount of indebtedness, including senior indebtedness, outstanding
or otherwise adversely affect a holder. Neither we nor our subsidiaries are
prohibited from incurring debt, including senior indebtedness, under the
indenture. The incurrence of significant amounts of additional debt could
adversely affect our ability to service our debt, including the notes.
If a change in control were to occur, we may not have sufficient funds to
pay the change in control purchase price for the notes tendered by holders. In
addition, we may in the future incur debt that has similar change of control
provisions that permit holders of that debt to accelerate or require us to
repurchase that debt upon the occurrence of events similar to a change in
control.
We may not repurchase any note at any time when the subordination provisions
of the indenture otherwise would prohibit us from making such repurchase.
Certain of our other debt agreements may provide that a change in control
constitutes an event of default or may prohibit our redemption or repurchase of
the notes. Our failure to repurchase the notes tendered upon a change in
control will result in an event of default under the indenture, whether or not
the purchase is permitted by the subordination provisions of the indenture.
Events of Default
Each of the following will constitute an event of default under the
indenture:
(1)we fail to pay principal or premium, if any, on any note when due,
whether or not prohibited by the subordination provisions of the
indenture;
(2)we fail to pay any interest on any note when due if the failure
continues for 30 days, whether or not prohibited by the subordination
provisions of the indenture;
22
(3)we fail to perform any other covenant or warranty required of us in the
indenture if the failure continues for 90 days after notice is given to
us by the trustee or to us and the trustee by the holders of not less
than 25 percent in aggregate principal amount of the outstanding notes;
(4)we fail to pay the purchase price of any note when due, whether or not
prohibited by the subordination provisions of the indenture;
(5)we fail to provide timely notice of a change in control; or
(6)certain events in bankruptcy, insolvency or reorganization of JCPenney.
If an event of default occurs and is continuing, either the trustee or the
holders of at least 25 percent in aggregate principal amount of the outstanding
notes may declare the principal amount of the notes to be due and payable
immediately. Any payment by us on the notes following any such acceleration
will be subject to the subordination provisions described above.
After any such acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of the
notes may, under certain circumstances, rescind and annul such acceleration if
all overdue payments of principal of, premium, if any, and interest on the
notes, other than the non-payment of accelerated principal, have been paid and
all events of default have been cured or waived.
Subject to the trustee's duties in the case of an event of default, the
trustee will not be obligated to exercise any of its rights or powers at the
request of the holders, unless the holders have offered to the trustee
reasonable indemnity. Subject to the trustee's indemnification, the holders of
a majority in aggregate principal amount of the outstanding notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee with respect to the notes.
No holder will have any right to institute any proceeding under the
indenture, or for the appointment of a receiver or a trustee, or for any other
remedy under the indenture unless:
. the holder has previously given to the trustee written notice of a
continuing event of default;
. the holders of at least 25 percent in aggregate principal amount of the
outstanding notes have made a written request and have offered reasonable
indemnity to the trustee to institute such proceeding as trustee; and
. the trustee has failed to institute such proceeding, and has not received
from the holders of a majority in aggregate principal amount of the
outstanding notes a direction inconsistent with such request within 60
days after such notice, request and offer.
However, these limitations do not apply to a suit instituted by a holder for
the enforcement of payment of the principal of or any premium or interest on
any note or the right to convert the note on or after the applicable due date.
Generally, the holders of not less than a majority of the aggregate
principal amount of outstanding notes may waive any default or event of default
unless:
. we fail to pay principal of, or any, premium, if any, or interest on any
note when due;
. we fail to convert any note into common stock; or
. we fail to comply with any of the provisions of the indenture that would
require the consent of the holder of each outstanding note affected.
We are required to furnish to the trustee, on an annual basis, a statement
by our officers as to whether or not JCPenney, to the officers' knowledge, is
in default in the performance or observance of any of the terms, provisions and
conditions of the indenture, specifying any known defaults.
Modification and Waiver
We and the trustee may make certain modifications and amendments to the
indenture or the notes without notice to or the consent of any holder,
including modifications or amendments to comply with the merger provisions
described in the indenture, to provide for uncertificated notes in addition to
or in place of certificate notes, to comply with the provisions of the Trust
Indenture Act, to appoint a successor trustee, to cure any ambiguity, defect or
inconsistency, or to make any other change not inconsistent with the indenture
that does not adversely affect the rights of the holders.
23
We and the trustee may make modifications and amendments to the indenture or
the notes with the consent of the holders of at least two-thirds in aggregate
principal amount of the outstanding notes.
However, neither we nor the trustee may make any modification or amendment
without the consent of the holder of each outstanding note if such modification
or amendment would:
. change the stated maturity of the principal of or interest on any note;
. reduce the principal amount of or any premium or interest on any note;
. reduce the amount of principal payable upon acceleration of the maturity
of any note;
. change the place or currency of payment of principal of or any premium or
interest on any note;
. impair the right to institute suit for the enforcement of any payment on,
or with respect to, any note;
. modify the subordination provisions in a manner materially adverse to the
holders of notes;
. adversely affect the right of holders to convert notes other than as
provided in or under the indenture;
. reduce the percentage in principal amount of outstanding notes required
for modification or amendment of the indenture;
. reduce the percentage in principal amount of outstanding notes necessary
for waiver of compliance with certain provisions of the indenture or for
waiver of certain defaults; or
. modify such provisions with respect to modification and waiver.
Consolidation, Merger and Sale of Assets
We may not consolidate with or merge into any other person, in a transaction
in which we are not the surviving corporation, or convey, transfer or lease our
properties and assets substantially as an entirety to any successor person,
unless:
. the successor person, if any, is a corporation or limited liability
company organized and existing under the laws of the United States, or any
state of the United States, and assumes our obligations on the notes and
under the indenture;
. immediately after giving effect to the transaction, no default or event of
default will have occurred and be continuing; and
. other conditions specified in the indenture are met.
Registration Rights
The registration statement of which this prospectus forms a part has been
filed under the terms of a registration rights agreement which we entered into
with the initial purchasers of the notes. The following summary of the
registration rights provided in the registration rights agreement and the notes
is not complete. You should refer to the registration rights agreement and the
notes for a full description of the registration rights that apply to the notes
and underlying shares of common stock. In the registration rights agreement we
agreed to file a shelf registration statement under the Securities Act within
90 days after the first date of original issuance of the notes to register
resales of the notes and the shares of common stock into which the notes are
convertible, referred to as registrable securities. We will use our best
efforts to have this shelf registration statement declared effective within 180
days after the first date of original issuance of the notes, and to keep it
effective until the earliest of:
(1) two years after the effective date;
(2) the date when all registrable securities have been registered under the
Securities Act and disposed of; and
(3) the date on which all registrable securities (other than those held by
affiliates of JCPenney) are eligible to be sold to the public pursuant
to Rule 144(k) under the Securities Act.
24
We will be permitted to suspend the use of the prospectus which is a part of
the registration statement for a period not to exceed 45 consecutive days or an
aggregate of 120 days in any 12-month period under certain circumstances
relating to pending corporate developments, public filings with the SEC and
similar events.
A holder of registrable securities that sells registrable securities
pursuant to the shelf registration statement generally will be required to
provide information about itself and the specifics of the sale, be named as a
selling security holder in the related prospectus and deliver a prospectus to
purchasers, be subject to relevant civil liability provisions under the
Securities Act in connection with such sales and be bound by the provisions of
the registration rights agreements which are applicable to such holder.
If:
(1)on or prior to the 90th day after the first date of original issuance of
the notes the shelf registration statement has not been filed with the
SEC;
(2)on or prior to the 180th day after the first date of original issuance
of the notes the shelf registration statement has not been declared
effective by the SEC;
(3)we fail with respect to a note holder that supplies the questionnaire
described below to supplement the shelf registration statement in a
timely manner in order to name the note holder as additional selling
securities holder; or
(4)after the shelf registration statement has been declared effective such
shelf registration statement ceases to be effective or usable (unless we
have suspended the use of the shelf registration as described in the
third paragraph of this section or the inability to use the registration
statement does not exceed 30 days and is the result of our filing a
post-effective amendment to incorporate annual financial statements) in
connection with resales of notes and the common stock issuable upon the
conversion of the notes in accordance with and during the periods
specified in the registration rights agreement;
(each such event referred to in clauses (1) through (4), a "registration
default"), additional interest will accrue on registrable securities over and
above the rate set forth in the title of the notes, from and including the date
on which any such registration default occurs to, but excluding, the date on
which all registration defaults have been cured, at the rate per year equal to
0.5 percent for the notes and, if applicable, on an equivalent basis per share
(subject to adjustment in the case of stock splits, stock recombinations, stock
dividends and the like) of common stock constituting registrable securities,
while a registration default is continuing and until all registration defaults
have been cured.
We will give notice to all holders of the filing and effectiveness of the
shelf registration statement. You will need to complete a selling
securityholder notice and questionnaire prior to any intended distribution of
your registrable securities pursuant to the shelf registration statement. You
are required to deliver the questionnaire prior to the effectiveness of the
shelf registration statement so that you can be named as selling
securityholders in the prospectus. Upon receipt of your completed questionnaire
after the effectiveness of the shelf registration statement, we will, as
promptly as practicable, file any amendments or supplements to the shelf
registration statement so that you may use the prospectus. We will pay
additional interest to you if we fail to make this filing in the required time.
If this filing requires a post-effective amendment to the shelf registration
statement we will pay additional interest if this amendment is not declared
effective within 45 business days of the filing of the post-effective
amendment. Under the registration rights agreement you will be required to
deliver a prospectus to purchasers and will be bound by the provisions of the
agreement.
We will pay all expenses of the shelf registration statement, provide each
holder that is selling registrable securities pursuant to the shelf
registration statement copies of the related prospectus and take other actions
as are required to permit, subject to the foregoing, unrestricted resales of
the registrable securities.
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Satisfaction and Discharge
We may discharge our obligations under the indenture while notes remain
outstanding if (1) all outstanding notes will become due and payable at their
scheduled maturity within 90 days, or (2) all outstanding notes have been
called for redemption within 90 days and in either case we have deposited with
the trustee an amount sufficient to pay and discharge all outstanding notes on
the date of their scheduled maturity or the scheduled date of redemption.
Transfer and Exchange
We have initially appointed the trustee as security registrar, paying agent
and conversion agent acting through its corporate trust office. We reserve the
right to:
. vary or terminate the appointment of the security registrar, paying agent
or conversion agent;
. appoint additional paying agents or conversion agents; or
. approve any change in the office through which any security registrar or
any paying agent or conversion agent acts.
Purchase and Cancellation
All notes surrendered for payment, redemption, registration of transfer or
exchange or conversion shall, if surrendered to any person other than the
trustee, be delivered to the trustee. All notes delivered to the trustee will
be cancelled promptly by the trustee. No notes will be authenticated in
exchange for any notes cancelled as provided in the indenture.
We may, to the extent permitted by law, purchase notes in the open market or
by tender offer at any price or by private agreement. Any notes purchased by us
may, to the extent permitted by law, be reissued or resold or may, at our
option, be surrendered to the trustee for cancellation. Any notes surrendered
for cancellation may not be reissued or resold and will be promptly cancelled.
Replacement of Notes
We will replace mutilated, destroyed, stolen or lost notes at your expense
upon delivery to the trustee of the mutilated notes, or evidence of the loss,
theft or destruction of the notes satisfactory to the trustee and us. In the
case of a lost, stolen or destroyed note, indemnity satisfactory to the trustee
and us may be required at the expense of the holder of such note before a
replacement note will be issued.
Governing Law
The indenture and the notes will be governed by, and construed in accordance
with, the law of the State of New York, without regard to conflicts of laws
principles.
Concerning the Trustee
The Bank of New York has agreed to serve as the trustee under the indenture.
The trustee will be permitted to deal with us and any of our affiliates with
the same rights as if it were not trustee. However, under the Trust Indenture
Act, if the trustee acquires any conflicting interest and there exists a
default with respect to the notes, the trustee must eliminate such conflict or
resign.
The holders of a majority in principal amount of all outstanding notes will
have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy or power available to the trustee.
However, any such direction may not conflict with any law or the indenture, may
not be unduly prejudicial to the rights of another holder or the trustee and
may not involve the trustee in personal liability.
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Book-Entry, Delivery and Form
Initially, the notes have been issued in the form of two global securities.
The global securities have been deposited with the trustee as custodian for DTC
and registered in the name of a nominee of DTC. Except as set forth below, the
global security may be transferred, in whole and not in part, only to DTC or
another nominee of DTC. You may hold your beneficial interests in the global
security directly through DTC if you have an account with DTC or indirectly
through organizations which have accounts with DTC. Notes in definitive
certificated form (called "certificated securities") will be issued only in
certain limited circumstances described below.
DTC has advised us that it is:
. a limited purpose trust company organized under the laws of the State of
New York;
. 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.
DTC was created to hold securities of institutions that have accounts with
DTC (called "participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, which may include the
initial purchasers, banks, trust companies, clearing corporations and certain
other organizations. Access to DTC's book-entry system also is available to
others such as banks, brokers, dealers and trust companies (called "indirect
participants") that clear through or maintain a custodial relationship with a
participant, whether directly or indirectly.
We expect that pursuant to procedures established by DTC, upon the deposit
of the global security with DTC, DTC will credit on its book-entry registration
and transfer system the principal amount of notes represented by such global
security to the accounts of participants. The accounts to be credited will be
designated by the initial purchasers. Ownership of beneficial interests in the
global security will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests in the global
security will be shown on, and the transfer of those ownership interests will
be effected only through, records maintained by DTC (with respect to
participants' interests), the participants and the indirect participants. The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. These limits and
laws may impair the ability to transfer or pledge beneficial interests in the
global security.
Beneficial owners of interests in global securities who desire to convert
their interests into common stock should contact their brokers or other
participants or indirect participants through whom they hold such beneficial
interests to obtain information on procedures, including proper forms and
cut-off times, for submitting requests for conversion.
So long as DTC, or its nominee, is the registered owner or holder of a
global security, DTC or its nominee, as the case may be, will be considered the
sole owner or holder of the notes represented by the global security for all
purposes under the indenture and the notes. In addition, no beneficial owner of
an interest in a global security will be able to transfer that interest except
in accordance with the applicable procedures of DTC. Except as set forth below,
as an owner of a beneficial interest in the global security you will not be
entitled to have the notes represented by the global security registered in
your name, will not receive or be entitled to receive physical delivery of
certificated securities and will not be considered to be the owner or holder of
any notes under the global security. We understand that under existing industry
practice if an owner of a beneficial interest in the global security desires to
take any action that DTC, as the holder of the global security, is entitled to
take, DTC would authorize the participants to take such action and 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.
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We will make payments of principal, premium, if any, and interest on the
notes represented by the global security registered in the name of and held by
DTC or its nominee to DTC or its nominee, as the case may be, as the registered
owner and holder of the global security. Neither we, the trustee nor any paying
agent will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the global security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
of, premium, if any, or interest on the global security, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global security
as shown on the records of DTC or its nominee. We also expect that payments by
participants or indirect participants to owners of beneficial interests in the
global security held through such participants or indirect participants will be
governed by standing instructions and customary practices and will be the
responsibility of such participants or indirect participants. We will not have
any responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the global
security for any note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests or for any other aspect of the
relationship between DTC and its participants or indirect participants or the
relationship between such participants or indirect participants and the owners
of beneficial interests in the global security owning through such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more participants to whose
account the DTC interests in the global security is credited and only in
respect of such portion of the aggregate principal amount of notes as to which
such participant or participants has or have given such direction. However, if
DTC notifies us that they are unwilling to be a depository for the global
security or ceases to be a clearing agency or there is an event of default
under the notes, DTC will exchange the global security for certificated
securities which it will distribute to its participants and which will be
legended, if required, as set forth under the heading "Transfer Restrictions."
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the global security among participants of
DTC, they are under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither we nor
the trustee will have any responsibility or liability for the performance by
DTC or the participants or indirect participants of their respective
obligations under the rules and procedures governing their respective
operations.
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DESCRIPTION OF CAPITAL STOCK
As of November 27, 2001, our authorized capital stock consisted of
25,000,000 shares of preferred stock, without par value, of which 613,351
shares were issued and outstanding, and 1,250,000,000 shares of common stock,
par value 50c per share, of which 263,787,019 shares were issued and
outstanding. The descriptions set forth below of the common stock, preferred
stock and preferred stock purchase rights (as hereinafter described) constitute
brief summaries of certain provisions of J. C. Penney Company, Inc.'s Restated
Certificate of Incorporation, as amended, referred to in this document as our
Charter, and of our Bylaws and rights agreement, and are qualified in their
entirety by reference to the relevant provisions of such documents, all of
which are incorporated herein by reference.
Common Stock
Holders of common stock are entitled to one vote per share with respect to
each matter submitted to a vote of the stockholders of JCPenney, including the
election of directors, subject to voting rights that may be established for
shares of preferred stock. Shares of common stock vote as a class together with
the shares of Series A preferred stock (as hereinafter described), if any such
shares of Series A preferred stock are issued, and Series B preferred stock (as
hereinafter described). Our board of directors is divided into three classes to
be as nearly equal in number as possible. One third of the directors are
elected every year and serve three-year terms. Holders of common stock do not
have the right to cumulate votes in the election of directors and have no
preemptive or subscription rights. Shares of common stock are neither
redeemable nor convertible, and there are no sinking fund provisions relating
to these shares.
Subject to the prior rights of any outstanding shares of preferred stock,
holders of common stock are entitled to receive such dividends as may be
lawfully declared from time to time by our board of directors. Upon any
voluntary or involuntary liquidation, dissolution or winding up of JCPenney,
holders of common stock will be entitled to receive such assets as are
available for distribution to stockholders after there shall have been paid or
set apart for payment the full amounts necessary to satisfy any preferential or
participating rights to which the holders of preferred stock are entitled.
The outstanding shares of common stock are, and any shares of common stock
to be issued upon conversion of the notes will be, fully paid and
nonassessable. Additional shares of common stock may be issued, as authorized
by our board of directors from time to time, without stockholder approval,
except any stockholder approval required by the NYSE.
Preferred Stock
Our Charter authorizes 25,000,000 shares of preferred stock, without par
value. Our board of directors has designated 1,600,000 shares of preferred
stock as Series A Junior Participating Preferred Stock, referred to in this
document as Series A preferred stock, and has authorized such shares for
issuance pursuant to the exercise of the rights (see below). As of November 27,
2001, no shares of Series A preferred stock had been issued. In addition,
1,400,000 shares of preferred stock have been designated Series B ESOP
Convertible preferred stock, also referred to as Series B preferred stock. As
of November 27, 2001, 613,351 shares of Series B preferred stock were issued
and outstanding.
Rights: Series A Junior Participating Preferred Stock
We have issued preferred stock purchase rights to all holders of our common
stock under a rights agreement, dated as of March 26, 1999, between JCPenney
and Mellon Shareholder Services LLC, as rights agent. Each preferred stock
purchase right entitles the holder to purchase shares of Series A preferred
stock under conditions described in the rights agreement. The preferred stock
purchase rights expire on March 26, 2009.
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Under the rights agreement, a right entitles the holder to purchase one
one-thousandth of a share of Series A preferred stock, at a purchase price of
$140 upon the occurrence of a distribution date. A "distribution date" will
occur upon the earlier of:
. the tenth day (or an earlier or later day determined by our board of
directors) after a public announcement that a person or group of
affiliated or associated persons other than us, any of our subsidiaries,
or any of our or our subsidiaries' employee benefit plans (an "acquiring
person") has acquired beneficial ownership of 15 percent or more of the
voting power of all the shares of common stock of JCPenney; or
. the tenth business day (or a later day determined by our board of
directors) following the commencement of or announcement of the intention
to commence a tender or exchange offer that would result in such person or
group beneficially owning 15 percent or more of the voting power of all
the shares of common stock of JCPenney.
Until the distribution date, the rights will not be represented by a
separate certificate and may be transferred only with common stock.
Unless the rights are earlier redeemed, if any person or group becomes an
acquiring person, a right will entitle its holder other than any acquiring
person (whose rights will thereupon become null and void) to purchase, at the
Series A preferred stock purchase price, a number of one one-thousandths of a
share of Series A preferred stock with a market value equal to twice such
purchase price.
After the rights have been triggered, the board of directors may exchange
the rights, other than rights owned by an acquiring person, at an exchange
ratio of one share of common stock per one right, subject to adjustment. The
board of directors may not exercise this right of exchange if any person has
acquired 50 percent or more of the voting power of all the shares of common
stock of JCPenney.
Unless the rights are earlier redeemed, if, following the time a person
becomes an acquiring person:
. JCPenney is acquired in a merger or other business combination transaction
and JCPenney is not the surviving corporation;
. Any person consolidates or merges with JCPenney and all or part of the
common stock is converted or exchanged for securities, cash or property of
any other person or of JCPenney; or
. 50 percent or more of JCPenney's assets or earning power is sold or
transferred,
each right will entitle its holder, other than any acquiring person, to
purchase, for the Series A preferred stock purchase price, a number of shares
of common stock of the surviving entity in any such merger, consolidation or
other business combination of or the purchaser in any such sale or transfer
with a market value equal to twice the Series A preferred stock purchase price.
The rights will expire on March 26, 2009, unless we extend or terminate them
as described below.
At any time until the close of business on the tenth day following a public
announcement that an acquiring person has become such, our board of directors
may redeem all of the rights at a price of $0.005 per right. On the redemption
date, the right to exercise the rights will terminate and the only right of the
holders of rights will be to receive such redemption price.
So long as the rights are redeemable as described in the preceding
paragraph, the board of directors may, without the approval of any holders of
rights, supplement or amend any provisions of the rights agreement in any
manner, whether or not such supplement or amendment is adverse to any holders
of the rights. At such time as the rights are not redeemable, the board of
directors may, without the approval of any holders of rights, supplement or
amend the rights agreement:
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. to cure any ambiguity;
. to correct or supplement any provision that may be defective or
inconsistent with any other provision; or
. in any manner that it may deem necessary or desirable and which does not
materially adversely affect the interest of the holders of rights.
The rights agreement contains provisions designed to prevent the inadvertent
triggering of the rights. A person will not be deemed an acquiring person if
our board of directors approved the acquisition by such person of shares of
common stock prior to such person otherwise becoming an acquiring person. In
addition, the rights agreement gives a person who has inadvertently acquired 15
percent or more of the voting power of all the shares of common stock of
JCPenney and does not have any intention of changing or influencing the control
of JCPenney the opportunity to sell a sufficient number of shares so that such
acquisition would not trigger the rights. In addition, the rights will not be
triggered and a divestiture of shares will not be required by our repurchase of
shares of common stock outstanding which could raise the proportion of voting
power held by a person to over the applicable 15 percent threshold. However,
any person who exceeds such threshold as a result of our stock repurchases will
trigger the rights if the person subsequently acquires an additional one
percent of the voting power of all the shares of common stock.
The rights agreement contains a provision obligating our board of directors
to appoint a committee of the board referred to as the "TIDE Committee." The
TIDE Committee is composed of directors of JCPenney who are not officers,
employees or affiliates of JCPenney. At least every three years the TIDE
Committee will review and evaluate the rights agreement to determine whether it
continues to be in the interests of JCPenney, its stockholders and any other
relevant constituencies of JCPenney. A review could be instituted sooner if any
person shall have made a proposal or taken any other action which could cause
that person to become an acquiring person, if a majority of the members of the
TIDE Committee deem such review to be appropriate. Following such review the
TIDE Committee will communicate its conclusions to the full board of directors,
including any recommendations as to whether the amended and restated rights
agreement should be modified or the rights redeemed.
The Series A preferred stock is nonredeemable and, unless otherwise provided
in connection with the creation of a subsequent series of preferred stock is:
. subordinate to any other series of JCPenney preferred stock; and
. senior to the common stock.
The Series A preferred stock may not be issued except upon exercise of
rights. Each share of Series A preferred stock will be entitled to receive
when, as and if declared, a quarterly dividend in an amount equal to (i) 1,000
times the cash dividends declared on the common stock, and (ii) a preferential
cash dividend, if any, in preference to holders of common stock in an amount
equal to $50.00 per share of Series A preferred stock less the per share amount
of all cash dividends declared on the Series A preferred stock pursuant to
clause (i) since the immediately preceding quarterly dividend payment date. In
addition, Series A preferred stock is entitled to 1,000 times any noncash
dividends (other than dividends payable in equity securities) declared on the
common stock, in like kind.
In the event of our liquidation, the holders of Series A preferred stock
will be entitled to receive, for each share of Series A preferred stock, a
payment in an amount equal to the greater of $1.00 per one one-thousandth of a
share plus accrued and unpaid dividends and distributions thereon or 1,000
times the payment made per share of common stock. Each share of Series A
preferred stock will have 1,000 votes, voting together with the common stock.
In the event of any merger, consolidation or other transaction in which
common stock is exchanged, each share of Series A preferred stock will be
entitled to receive 1,000 times the amount received per share of common stock.
The rights of Series A preferred stock as to dividends, liquidation and voting
are protected by
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anti-dilution provisions. If the dividends accrued on the Series A preferred
stock for four or more quarterly dividend periods, whether consecutive or not,
shall not have been declared and paid or irrevocably set aside for payment, the
holders of record of the Series A preferred stock (voting together with the
holders of record of any other series of preferred stock then having the right
to elect directors) will have the right to elect two members to the board of
directors.
The number of shares of Series A preferred stock issuable upon exercise of
the rights is subject to certain adjustments from time to time in the event of
a stock dividend on, or a subdivision or combination of, the common stock. The
exercise price for the rights is subject to adjustment in the event of
extraordinary distributions of cash or other property to holders of common
stock.
Fractions of shares of Series A preferred stock (other than fractions which
are integral multiples of one one-thousandth of a share) may, at our election,
be evidenced by depositary receipts. We may also issue cash in lieu of
fractional shares which are not integral multiples of one one-thousandth of a
share.
Until a right is exercised, the holder, as such, will have no rights as a
stockholder of JCPenney, including, without limitation, the right to vote or to
receive dividends.
The rights will cause substantial dilution to a person or group who attempts
to acquire us on terms not approved by the board of directors. The rights
should not interfere with any merger or other business combination approved by
the board of directors since the rights may be redeemed by JCPenney at $0.005
per right at any time until the close of business on the tenth day (unless
extended) after a public announcement that a person has become an acquiring
person.
Series B Preferred Stock
Restrictions on Transfer. Pursuant to the certificate of designations
respecting the Series B preferred stock, shares of Series B preferred stock may
be issued only to a trustee, referred to as the Plan Trustee, acting on behalf
of an employee stock ownership plan or other employee benefit plan of JCPenney.
In the event of any transfer of shares of Series B preferred stock, other than
to the Plan Trustee, the shares of Series B preferred stock so transferred,
upon such transfer and without any further action by us or the holder, will be
automatically converted into shares of common stock on the terms provided for
such conversion (described below) and no such transferee will have any of the
voting powers, preferences and relative, participating, optional or special
rights ascribed to shares of Series B preferred stock but, rather, only the
rights and powers pertaining to the common stock (described above) into which
such shares of Series B preferred stock are so converted.
Liquidation Rights: Dividends. Shares of Series B preferred stock have a
liquidation preference of $600.00 per share (plus accumulated and unpaid
dividends) and pay cumulative dividends semi-annually in an amount per share
equal to $47.40 per share per annum. So long as shares of Series B preferred
stock remain outstanding, no dividend may be declared or paid or set apart for
payment on any other series of our stock ranking on a parity with the Series B
preferred stock as to dividends unless like dividends have been declared and
paid or set apart for payment on shares of Series B preferred stock. Moreover,
except with respect to: (i) dividends payable solely in shares of our stock,
ranking, as to dividends or as to distributions upon the liquidation,
dissolution or winding-up of JCPenney, referred to as liquidation
distributions, junior to the Series B preferred stock; or (ii) the acquisition
of any shares of our stock ranking, as to dividends or as to liquidation
distributions, junior to the Series B preferred stock either (a) pursuant to
any of our employee or director incentive or benefit plans or arrangements
(including any employment, severance or consulting agreement) or (b) in
exchange solely for shares of our stock ranking junior to the Series B
preferred stock, if full cumulative dividends on the shares of Series B
preferred stock have not been declared and paid or set apart for payment when
due, we are prohibited from declaring or paying or setting apart for payment
any dividends or making any distributions in respect of, or, making any
payments on account of, the purchase, redemption or other retirement of any
other class of our stock or series thereof ranking, as to dividends or as to
liquidation distributions, junior to the Series B preferred stock, until full
cumulative dividends on the shares of Series B preferred stock shall have been
paid or declared and provided for.
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Redemption. Generally, shares of Series B preferred stock may be redeemed,
in whole or in part, at our option at a redemption price (payable in cash or
securities or a combination thereof) of $600.00 per share, plus an amount equal
to all dividends accumulated and unpaid on such shares to the date fixed for
redemption.
However, under certain circumstances a holder of shares of Series B
preferred stock (for example, a Plan Trustee) may, upon not less than five
days, written notice, elect to require to redeem such shares at a redemption
price of $600.00 per share plus an amount equal to all dividends accumulated
and unpaid on such shares to the date fixed for redemption.
Conversion Rights. Shares of Series B preferred stock are, at any time prior
to the close of business on the date fixed for redemption of such shares,
convertible into shares of common stock, at a conversion rate of 20 shares of
common stock for each share of Series B preferred stock subject to
anti-dilution adjustment under certain circumstances. Whenever we issue shares
of common stock upon conversion of shares of Series B preferred stock, we will
issue together with each such share of common stock an associated right under
the rights agreement.
Voting Rights. Holders of the Series B preferred stock are entitled to vote
upon all matters submitted to a vote of the holders of common stock voting
together with the holders of common stock as a single class. Each share of
Series B preferred stock carries the number of votes equal to the number of
shares of common stock into which such share of Series B preferred stock could
be converted on the record date for determining the stockholders entitled to
vote, rounded to the nearest one-tenth of a vote. Currently each share of
Series B preferred stock has a common stock voting equivalent of 20 votes per
share. Holders of shares of Series B preferred stock enjoy no special voting
rights and their consent is not specially required for the taking of any
corporate action; provided, however, that the vote of the holders of at least
66 2/3 percent of the outstanding shares of Series B preferred stock, voting
separately as a series, is necessary before certain actions may be taken which
would adversely affect the rights of the Series B preferred stock.
Additional Rights. Holders of shares of Series B preferred stock have
certain additional rights if we should:
. consummate a merger, consolidation or similar transaction pursuant to
which the outstanding shares of common stock are, by operation of law,
exchanged solely for, or changed, reclassified or converted solely into,
stock of any successor or resulting company (including JCPenney), which
stock constitutes "employer securities" with respect to a holder of Series
B preferred stock (within the meaning of Section 409(l) of the Code, or
any successor provisions of law) and "qualifying employer securities" with
respect to a holder of Series B preferred stock (within the meaning of
Section 407(d)(5) of ERISA, or any successor provisions of law);
. consummate a merger, consolidation or similar transaction pursuant to
which the outstanding shares of common stock are, by operation of law,
exchanged for, or changed, reclassified or converted into, other stock,
securities, cash or any other property or any combination thereof; or
. enter into any agreement providing for a merger, consolidation or similar
transaction pursuant to which the outstanding shares of common stock
would, upon consummation thereof, be, by operation of law, exchanged for,
or changed, reclassified or converted into, other stock, securities, cash
or any other property, or any combination thereof, other than any such
consideration constituted solely of qualifying employer securities and
cash payments in lieu of fractional shares, as the case may be.
Certain Charter, Bylaw and Delaware Law Provisions
Our Charter, Bylaws, and Delaware Corporate Law contain several provisions
that may make the acquisition or control of us by means of a tender offer, open
market purchases, proxy fight or otherwise more difficult.
Classified Board of Directors; Removal of Directors; Action by Written Consent
Our Charter provides that our board of directors shall be divided into three
classes and shall consist of such number of directors as is set in our Bylaws.
The Bylaws provide that the board of directors will be divided into
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three classes of an approximately equal number of directors with each class of
directors having a three-year terms of office. The provisions in the Charter
and Bylaws described in this paragraph may only be amended by a vote of 80
percent of the voting power of all classes of our voting stock.
Our Charter provides that members of our board of directors may be removed,
with or without cause, only upon the vote of 80 percent of the voting power of
all classes of our voting stock.
Our Charter and Bylaws provide that stockholders may only take action at an
annual or special meeting of the stockholders and not by written consent of
stockholders. The provisions regarding action by written consent require the
vote of 80 percent of the voting power of all classes of our common stock in
order to remove or amend them.
The effect of the provisions regarding classification of our board of
directors, removal of directors and action by written consent may have the
effect of discouraging anyone from attempting to acquire control of us and
thereby of deterring open market purchases of the common stock.
Business Combinations with Interested Stockholders
Our Charter provides that business combinations with interested stockholders
will require the vote of 80 percent of the voting power of all classes of our
common stock to approve such transaction.
An "interested stockholder" is defined in our Charter as a person who or
which:
. is the beneficial owner of ten percent or more of the voting power of all
classes of our common stock;
. is our affiliate and at any time within the two-year period before the
date in question owned or was the beneficial owner of ten percent or more
of the voting power of all classes of our common stock; or
. is an assignee of shares of common stock which were owned by an interested
stockholder in the preceding two years.
A "business combination" is defined in our Charter to mean:
. a merger or consolidation with an interested stockholder;
. a sale of our property having a fair market value of $100 million or more
to an interested stockholder or a purchase by us from an interested
stockholder of property having such fair market value;
. any recapitalization that has the effect of increasing the voting power of
an interested stockholder; and
. transactions having a similar effect to those listed above.
A business combination will not need to receive the 80 percent vote outlined
above if it meets one of the following tests:
. the business combination is approved by a majority of the members of the
board of directors who are not affiliated with the interested stockholder
and who were board members prior to the interested stockholder becoming an
interested stockholder; or
. the consideration to be paid by the interested stockholder in the business
combination meets various tests set forth in the Charter designed to
ensure that the form and amount of consideration to be paid by the
interested stockholder is fair to the other stockholders.
The business combination provisions outlined above may have the effect of
discouraging anyone from attempting to acquire control of us and thereby of
deterring open market purchases of common stock.
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Stockholder Proposals and Nominations
Our Bylaws provide that any stockholder may present a nomination for a
directorship at an annual meeting of stockholders only if advance notice of
such nomination has been delivered to us not less than 90 days prior to the
meeting. If an election of directors is to be held at a special meeting of
stockholders, notice by the stockholder must be received not later than seven
days after the notice of such meeting was given to stockholders. Similarly, any
stockholder may present a proposal at an annual meeting only if advance notice
of the proposal has been delivered to us not less than 90 days prior to the
meeting. The foregoing notices must describe the proposal to be brought at the
meeting or the nominee for director, as applicable, as well as provide personal
information regarding the stockholder giving the notice, the number of shares
owned by the stockholder, his or her interest in such proposal and, with
respect to nominations for directorships, such information with respect to the
nominees as would be required to be included in a proxy statement filed by us
with the SEC. In addition, the Bylaws provide that only the board of directors
can call special meetings of stockholders and that the only business that may
be brought before a special meeting is such business specified by the board of
directors in the notice of such meeting. These procedural requirements could
have the effect of delaying or preventing the submission of matters proposed by
any stockholder to a vote of the stockholders. The provision of the Bylaws
containing the procedural requirements regarding advance notice of nominations
for our board of directors may only be amended by a vote of 80 percent of the
voting power of all classes of our common stock.
Delaware Law
Section 203 of the General Corporation Law of the State of Delaware applies
to us. Under certain circumstances, Section 203 limits the ability of an
interested stockholder to effect various business combinations with the Company
for a three-year period following the time that such stockholder became an
interested stockholder. An "interested stockholder" is defined as a holder of
15 percent or more of the outstanding voting stock.
An interested stockholder may engage in a business combination transaction
with the Company within the three-year period only if:
. our board of directors approved the transaction before the stockholder
became an interested stockholder or approved the transaction in which the
stockholder became an interested stockholder;
. upon consummation of the transaction in which the stockholder became an
interested stockholder, the interested stockholder owns at least 85
percent of our voting stock (excluding shares owned by officers, directors
or certain employee stock purchase plans); or
. our board of directors and the holders of shares entitled to cast
two-thirds of the votes entitled to be cast by all of the outstanding
voting shares held by all disinterested stockholders approve the
transaction.
Limitations on Directors' Liability
Our Charter eliminates the personal liability of a director to us and our
stockholders for certain breaches of his or her fiduciary duty as a director.
This provision does not, however, eliminate or limit the personal liability of
a director:
. for any breach of such director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under the Delaware statutory provision making directors personally liable,
under a negligence standard, for unlawful dividends or unlawful stock
repurchases or redemptions; or
. for any transaction from which the director derived an improper personal
benefit.
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This provision officers persons who serve on our board of directors
protection against awards of monetary damages resulting from breaches of their
fiduciary duty (except as indicated above), including grossly negligent
business decisions made in connection with takeover proposals for us and limits
our ability or the ability of one of our stockholders to prosecute an action
against a director for a breach of fiduciary duty. However, the provision does
not affect the availability of equitable remedies such as an injunction or
rescission. The SEC has taken the position that the provision will have no
effect on claims arising under the federal securities laws.
Our Bylaws provide that we may indemnify any of our officers or directors
who, by reason of the fact that he or she is an officer or director, to the
fullest extent permitted by the Delaware General Corporation Law.
Transfer Agent and Registrar
Mellon Investor Services LLC is the transfer agent and registrar of the
common stock. Mellon Investor Services LLC's principal executive officers are
located at P.O. Box 3316, South Hackensack, New Jersey 07606
SELLING SECURITYHOLDERS
We originally issued the notes in a private placement in October 2001.
Selling securityholders may offer and sell the notes and the underlying common
stock pursuant to this prospectus.
The following table contains information with respect to selling
securityholders and the principal amount of notes and underlying common stock
beneficially owned by each of the selling securityholders that may be offered
using this prospectus. Because the selling securityholders may offer all or
some of their notes or the underlying common stock from time to time, we cannot
estimate the amount of the notes or underlying common stock that will be held
by the selling securityholders upon the termination of any particular offering.
The selling securityholders listed in the following table may have sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act, some or all of their notes since the date on which the
information in the table below is presented. Information about the selling
securityholders may change over time. Any change in this information will be
set forth in prospectus supplements, if required.
Number of
Number of shares of
Principal Percentage shares into common stock Percentage of
amount of of notes which notes owned before common stock
Name notes/(1)/ outstanding/(1)/ are convertible(2) the offering outstanding/(3)(4)/
---- ----------- --------------- ------------------ ------------ ------------------
Alpine Associates.................... $12,000,000 1.85% 421,052 0 *
Alpine Partners, L.P................. $ 2,000,000 * 70,175 0 *
American Fidelity Assurance
Company............................ $ 250,000 * 8,771 0 *
American Samoa Government............ $ 50,000 * 1,754 0 *
Associated Electric and Gas Insurance
Services Limited................... $ 800,000 * 28,070 0 *
Aventis Pension Master Trust......... $ 310,000 * 10,877 0 *
Boilermaker--Blacksmith Pension
Trust.............................. $ 1,950,000 * 68,421 0 *
BNP Paribas Equity Strategies, SNC... $23,303,000 3.59% 817,649 86,748 *
BP Amoco, PLC Master Trust........... $ 739,000 * 25,929 0 *
Calamos Convertible Fund--Calamos
Investment Trust................... $ 6,000,000 * 210,526 0 *
36
Number of
Number of shares of
Principal Percentage shares into common stock Percentage of
amount of of notes which notes owned before common stock
Name notes/(1)/ outstanding/(1)/ are convertible(2) the offering outstanding/(3)(4)/
---- ----------- --------------- ------------------ ------------ ------------------
Calamos Convertible Growth and
Income Fund--Calamos Investment
Trust............................. $ 2,900,000 * 101,754 0 *
Calamos Convertible Portfolio--
Calamos Advisors Trust............ $ 135,000 * 4,736 0 *
Calamos Global Convertible Fund--
Calamos Investment Trust.......... $ 220,000 * 7,719 0 *
Calamos Market Neutral Fund--
Calamos Investment Trust.......... $ 9,925,000 1.53% 348,245 0 *
City of Albany Pension Plan......... $ 170,000 * 5,964 0 *
City of Knoxville Pension System.... $ 410,000 * 14,385 0 *
Clarica Life Insurance Co.--U.S..... $ 490,000 * 17,192 0 *
Consulting Group Capital Markets
Funds............................. $ 750,000 * 26,315 0 *
Delta Airlines Master Trust......... $ 3,250,000 * 1,140,350 0 *
Delta Pilots Disability and
Survivorship Trust................ $ 650,000 * 22,807 0 *
Dorinco Reinsurance Company......... $ 1,150,000 * 40,350 0 *
Dow Chemical Company Employees'
Retirement Plan................... $ 3,850,000 * 135,087 0 *
Drury University.................... $ 60,000 * 2,105 0 *
Durango Investments, L. P........... $ 2,000,000 * 70,175 0 *
Estate of James Campbell............ $ 147,000 * 5,157 0 *
Fidelity Investments................ $53,900,000 8.29% 1,891,228 0 *
First Union International Capital
Markets........................... $14,000,000 2.15% 491,228 0 *
First Union Securities, Inc......... $ 7,400,000 1.14% 259,649 0 *
Genesee County Employees'
Retirement System................. $ 375,000 * 13,157 0 *
Global Bermuda Limited Partnership.. $ 900,000 * 31,578 0 *
Greek Catholic Union................ $ 35,000 * 1,228 0 *
Greek Catholic Union II............. $ 25,000 * 877 0 *
HFR Master Fund..................... $ 75,000 * 2,631 0 *
Highbridge International, LLC....... $27,500,000 4.23% 964,912 0 *
H. K. Porter Company, Inc........... $ 50,000 * 1,754 0 *
Hotel Union & Hotel Industry of
Hawaii............................ $ 535,000 * 18,771 0 *
Jackson County Employees'
Retirement System................. $ 200,000 * 7,017 0 *
James Campbell Corp................. $ 193,000 * 6,771 0 *
Jefferies and Company, Inc.......... $ 12,000 * 421 0 *
Jefferies and Company, Inc.......... $ 500,000 * 17,543 0 *
JPMorgan Securities Inc............. $ 8,050,000 1.24% 282,456 128,238 *
Kettering Medical Center Funded
Depreciation Account.............. $ 120,000 * 4,210 0 *
Knoxville Utilities Board Retirement
System............................ $ 280,000 * 9,824 0 *
37
Number of
Number of shares of
Principal Percentage shares into common stock Percentage of
amount of of notes which notes owned before common stock
Name notes/(1)/ outstanding/(1)/ are convertible(2) the offering outstanding/(3)(4)/
---- ---------- --------------- ------------------ ------------ ------------------
Lakeshore International............ $3,600,000 * 126,315 0 *
LDG Limited........................ $1,000,000 * 35,087 0 *
Louisiana Workers' Compensation
Corp............................. $ 500,000 * 17,543 0 *
Macomb County Employees'........... $ 475,000 * 16,666 0 *
Retirement System..................
NORCAL Mutual Insurance
Company.......................... $ 375,000 * 13,157 0 *
Port Authority of Allegheny County. $2,050,000 * 71,929 0 *
RAM Trading, LTD................... $7,500,000 1.54% 263,157 0 *
SCI Endowment Care Common Trust
Fund--First Union................ $ 60,000 * 2,105 0 *
SCI Endowment Care Common
Trust Fund--National Fiduciary
Services......................... $ 225,000 * 7,894 0 *
SCI Endowment Care Common Trust
Fund--Suntrust................... $ 65,000 * 2,280 0 *
Southern Farm Bureau Life Insurance
Co............................... $1,000,000 * 35,087 0 *
Southdown Pension Plan............. $ 200,000 * 7,017 0 *
SPT................................ $2,400,000 * 84,210 0 *
The Cockrell Foundation............ $ 100,000 * 3,508 0 *
The Fondren Foundation............. $ 120,000 * 4,210 0 *
TQA Master Fund, LTP............... $5,500,000 * 192,982 0 *
TQA Master Plus Fund............... $4,000,000 * 140,350 0 *
Tribeca Investments................ $5,000,000 * 175,438 0 *
Union Carbide Retirement Account... $2,750,000 * 96,491 0 *
United Food and Commercial
Workers Local 1262 and Employers
Pension Fund..................... $ 900,000 * 31,578 0 *
Viacom Inc., Pension Plan Master
Trust............................ $ 24,000 * 842 0 *
Vopak USA Inc., Retirement Plan.... $ 470,000 * 16,491 0 *
Zurich Institutional Benchmarks.... $ 250,000 * 8,771 0 *
Unknown/(6)/
---------------------
* Less than 1%.
(1) The information set forth herein is as of November 27, 2001 and is based
upon $650,000,000 aggregate principal amount of notes outstanding.
(2) Assumes conversion of the full amount of notes held by such selling
securityholder at the initial conversion price of $28.50 per share of
JCPenney common stock; such conversion price is subject to adjustment as
described under "Description of Notes -- Conversion of Notes." Accordingly,
the number of shares issuable upon conversion of the notes may increase or
decrease from time to time. Fractional shares will not be issued upon
conversion of the notes; cash will be paid in lieu of fractional shares, if
any.
(3) Does not include shares issuable upon conversion of the notes.
(4) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using 263,787,019
shares of common stock of JCPenney outstanding as of November 27, 2001.
Assumes the number of shares of common stock issuable upon conversion of
all of a particular holder's notes are outstanding. However, this does not
include the conversion of any other holder's notes.
(5) Information about other selling securityholders will be set forth in
prospectus supplements, if requested.
38
(6) The name "Unknown" represents the remaining selling securityholders. We are
unable to provide the names of these securityholders because some of the
notes are currently evidenced by a global note which has been deposited
with DTC and registered with the name of Cede & Co. as DTC's nominee.
We prepared this table based on the information supplied to us by the
selling securityholders named in the table.
Other than their ownership of our securities, none of the selling
securityholders has had any material relationship with us within the past three
years. The selling securityholders purchased all of the notes in private
transactions. All of the notes and the shares of common stock into which the
notes are convertible are "restricted securities'' under the Securities Act.
PLAN OF DISTRIBUTION
We are registering the notes and the shares of our common stock issuable
upon conversion of the notes to permit public secondary trading of these
securities by the holders from time to time after the date of this prospectus.
We have agreed, among other things, to bear all expenses, other than
underwriting discounts and selling commissions, in connection with the
registration and sale of the notes and the shares of our common stock issuable
upon conversion of the notes covered by this prospectus.
We will not receive any of the proceeds from the offering of the notes or
the shares of our common stock issuable upon conversion of the notes by the
selling securityholders. The notes and shares of common stock issuable upon
conversion of the notes may be sold from time to time directly by any selling
securityholder or, alternatively, through underwriters, broker-dealers or
agents. If notes or shares of common stock issuable upon conversion of the
notes are sold through underwriters or broker-dealers, the selling
securityholder will be responsible for underwriting discounts or commissions or
agents' commissions.
The notes or shares of common stock issuable upon conversion of the notes
may be sold:
. in one or more transactions at fixed prices,
. at prevailing market prices at the time of sale,
. at varying prices determined at the time of sale, or
. at negotiated prices.
These sales may be effected in transactions, which may involve block trades
or transactions in which the broker acts as agent for the seller and the buyer:
. on any national securities exchange or quotation service on which the
notes or shares of common stock issuable upon conversion of the notes
may be listed or quoted at the time of sale,
. in the over-the-counter market,
. in transactions otherwise than on a national securities exchange or
quotation service or in the over-the-counter market, or
. through the writing of options.
In connection with sales of the notes or shares of common stock issuable
upon conversion of the notes or otherwise, any selling securityholder may:
. enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the notes or shares of common stock issuable
upon conversion of the notes in the course of hedging the positions they
assume,
39
. sell short and deliver notes or shares of common stock issuable upon
conversion of the notes to close out the short positions, or
. loan or pledge notes or shares of common stock issuable upon conversion
of the notes to broker-dealers that in turn may sell the securities.
The outstanding common stock is publicly traded on the New York Stock
Exchange. We do not intend to apply for listing of the notes on the New York
Stock Exchange or any securities exchange. Accordingly, we cannot assure that
any trading market will develop or have any liquidity.
The selling securityholders and any broker-dealers, agents or underwriters
that participate with the selling securityholders in the distribution of the
notes or the shares of common stock issuable upon conversion of the notes may
be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any commissions received by these broker-dealers, agents or
underwriters and any profits realized by the selling securityholders on the
resales of the notes or the shares may be deemed to be underwriting commissions
or discounts under the Securities Act.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144, Rule 144A or any other available exemption from
registration under the Securities Act may be sold under Rule 144, Rule 144A or
any of the other available exemptions rather than pursuant to this prospectus.
There is no assurance that any selling securityholder will sell any or all
of the notes or shares of common stock issuable upon conversion of the notes
described in this prospectus, and any selling securityholder may transfer,
devise or gift the securities by other means not described in this prospectus.
We originally sold the notes to the initial purchasers in October 2001 in a
private placement.
We agreed pursuant to the registration rights agreement to use reasonable
efforts to cause the registration statement to which this prospectus relates to
become effective within 180 days after the date the notes were originally
issued and to keep the registration statement effective until the earlier of:
. the sale of all the securities registered under the registration rights
agreement,
. the expiration of the holding period applicable to the securities under
Rule 144 (k) under the Securities Act with respect to persons who are
not our affiliates, and
. two years from the date the notes were originally issued.
The registration rights agreement provides that we may suspend the use of
this prospectus in connection with sales of notes and shares of common stock
issuable upon conversion of the notes by holders for a period not to exceed 45
consecutive days or an aggregate 120 days in any twelve-month period under
certain circumstances relating to pending corporate developments, public
filings with the SEC and other similar events.
U. S. FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes the material U.S. federal income tax considerations
relating to the purchase, ownership, conversion, and disposition by purchaser
of the notes and of common stock into which the notes may be converted. This
summary does not provide a complete analysis of all potential tax
considerations. The information provided below is based on existing
authorities. These authorities may change, or the Internal Revenue Service (the
"IRS") might interpret the existing authorities differently. In either case,
the tax consequences of purchasing, owning, converting or disposing of notes or
common stock could differ from those described below. Except as specifically
stated below, the summary applies only to "U.S. Holders" that hold the notes or
common stock as "capital assets" (generally, for investment). For this purpose,
U.S. Holders include
40
individual citizens or residents of the United States and corporations (or
entities treated as corporations for U.S. federal income tax purposes)
organized under the laws of the United States or any state or the District of
Columbia. Trusts are U.S. Holders if they are subject to the primary
supervision of a U.S. court and the control of one or more U.S. persons with
respect to substantial trust decisions, or, for certain trusts, if they were in
existence on August 20, 1996, and elected to continue to be treated as a U.S.
person. An estate is a U.S. Holder if the income of the estate is subject to
U.S. federal income taxation regardless of the source of the income. Special
rules apply to nonresident alien individuals and foreign corporations, estates
and trusts ("Non-U.S. Holders"). This summary describes some, but not all, of
these special rules. The tax treatment of a holder of notes or common stock may
vary depending on such holder's particular situation. This summary does not
address all of the tax consequences that may be relevant to you in light of
your particular circumstances, such as the application of the alternative
minimum tax or rules applicable to taxpayers in special circumstances. Special
rules may apply, for instance, to banks and financial institutions, insurance
companies, S-corporations, broker-dealers, tax-exempt organizations, persons
who hold notes or common stock as part of a hedge, conversion, constructive
sale, straddle or other risk reduction transaction, U.S. Holders that have a
"functional currency" other than the U.S. dollar, or persons subject to
taxation as expatriates. Furthermore, in general, this discussion does not
address the tax consequences applicable to holders that are treated as
partnerships or other pass-through entities for U.S. federal income tax
purposes. This summary is based on the U.S. federal income tax law in effect as
of the date hereof, which is subject to change, possibly on a retroactive
basis. Finally, the summary does not describe the effect of the federal estate
tax (except as set forth below with respect to Non-U.S. Holders), or gift tax
laws, or the effects of any other federal or any applicable foreign, state, or
local laws.
Please consult your own tax advisor regarding the application of the U.S
federal income tax laws to your particular situation and the consequences of
other federal tax laws, foreign, state, or local laws, and tax treaties.
U.S. Holders
Payments of Interest. You will be required to recognize as ordinary income
any interest received or accrued on the notes, in accordance with your regular
method of accounting for U.S. federal income tax purposes. If you purchase
notes between interest payment dates, a portion of the amount paid for the
notes will be attributed to interest accrued from the prior payment date. You
will not be required to recognize as ordinary income the collection of interest
accrued prior to the date you purchased the notes. In certain circumstances, we
may be obligated to pay holders of the notes amounts in excess of stated
interest or principal. First, we may redeem the notes at a premium under the
rules described under "Optional Redemption by JCPenney." Second, in the event
of registration default additional interest will accrue. Under the contingent
payment debt rule of the original issue discount regulations, certain possible
payments are not treated as contingencies or are excepted (for example, in
cases in which the possible payments are remote, incidental, or fit certain
other exceptions). We do not plan to treat the possible payments described
above as contingent payments that are subject to the contingent payment debt
rules. Our determination in this regard is binding on U.S. Holders unless they
disclose their contrary position. Our determination is not, however, binding on
the IRS, and it is possible that the IRS may take a different position
regarding these payments or potential payments, in which case the timing and
amount of income with respect to a note may be different and, in certain
circumstances, a U.S. Holder could be required to treat as interest income all
or a portion of any gain recognized on the disposition of a note. Prospective
purchasers should consult their own tax advisors as to the tax considerations
that relate to these payments or potential payments.
Market Discount and Bond Premium. Holders other than initial purchasers may
be considered to have acquired their notes with market discount or bond premium
if they purchase their notes at a price lower or higher than the principal
amount. The market discount rules generally require Holders to treat gain on
the disposition of a market discount bond as ordinary income to the extent it
does not exceed accrued market discount. Holders of notes with bond premium may
be able to elect to offset a portion of the bond premium against the interest
income from the notes. Holders of notes with market discount or bond premium
are advised to consult their tax advisors as to the income tax consequences of
the acquisition, ownership, and disposition of the notes.
41
Sale, Redemption or Exchange of Notes. You will generally recognize capital
gain or loss if you dispose of a note in a sale, redemption or exchange other
than a conversion of the note into common stock. Your gain or loss will equal
the difference between the proceeds received by you and your adjusted tax basis
in the note. The proceeds received by you will include the amount of any cash
and the fair market value of any other property received for the note. The
portion of any proceeds that is attributable to accrued interest will not be
taken into account in computing your capital gain or loss. Instead, that
portion will be recognized as ordinary interest income to the extent that you
have not previously included the accrued interest in income. The gain or loss
recognized by you on a disposition of the note will be long-term capital gain
or loss if you held the note for more than one year. Long-term capital gains of
noncorporate taxpayers are generally taxed at a lower maximum marginal rate
than the maximum marginal rate applicable to ordinary income. The maximum
marginal tax rate for capital gains is further reduced for property held for
more than five years. The deductibility of capital losses is subject to
limitation.
The registration of the notes pursuant to the Registration Rights Agreement
will not constitute a taxable transaction for U.S. federal income tax purposes.
Conversion of the Notes. You generally will not recognize any income, gain
or loss on converting a note into common stock. If you receive cash in lieu of
a fractional share of stock, however, you would be treated as if you received
the fractional share and then had the fractional share redeemed for the cash.
You would recognize gain or loss equal to the difference between the cash
received and that portion of your basis in the stock attributable to the
fractional share. Your aggregate basis in the common stock will equal your
adjusted basis in the note (less the basis allocable to the fractional share).
Your holding period for the stock will include the period during which you held
the note.
Dividends on Common Stock. If, after you convert a note into common stock,
we make a distribution in respect of that stock, the distribution will be
treated as a dividend, taxable to you as ordinary income, to the extent it is
paid from our current and accumulated earnings and profits. If the distribution
exceeds our current and accumulated earnings and profits, the excess will be
treated first as a tax-free return of your investment, up to your basis in the
common stock. Any remaining excess will be treated as capital gain. If you are
a U.S. corporation, you may be able to claim a deduction equal to a portion of
any dividends received.
Adjustment of Conversion Price. The terms of the notes allow for changes in
the conversion price of the notes in certain circumstances. A change in
conversion price that allows noteholders to receive more shares of common stock
on conversion may increase the noteholders' proportionate interests in our
earnings and profits or assets. In that case, the noteholders would be treated
as though they received a dividend in the form of our stock. Such a
constructive stock dividend could be taxable to the noteholders, although they
would not actually receive any cash or other property. A taxable constructive
stock dividend would result, for example, if the conversion price is adjusted
to compensate noteholders for distributions of cash or property to our
shareholders. Not all changes in conversion price that allow noteholders to
receive more stock on conversion, however, increase the noteholders'
proportionate interests in us. For instance, a change in conversion price could
simply prevent the dilution of the noteholders' interests upon a stock split or
other change in capital structure. Changes of this type, if made by a bona
fide, reasonable adjustment formula, are not treated as constructive stock
dividends. Conversely, if an event occurs that dilutes the noteholders'
interests and the conversion price is not adjusted, the resulting increase in
the proportionate interests of our shareholders could be treated as a taxable
stock dividend to them. Any taxable constructive stock dividends resulting from
a change to, or failure to change, the conversion price would be treated like
dividends paid in cash or other property. They would result in ordinary income
to the recipient, to the extent of our current or accumulated earnings and
profits, with any excess treated as a tax-free return of capital up to the
recipient's tax basis and then as capital gain.
Sale of Common Stock. You will generally recognize capital gain or loss on a
sale or exchange of common stock. Your gain or loss will equal the difference
between the proceeds received by you and your adjusted tax basis in the stock,
which will generally be your adjusted basis in the note immediately before a
conversion of the
42
note into common stock. The proceeds received by you will include the amount of
any cash and the fair market value of any other property received for the
stock. The gain or loss recognized by you on a sale or exchange of stock will
be long-term capital gain or loss if your holding period for the stock (which
would include the holding period for the note) is more than one year. Long-term
capital gains of noncorporate taxpayers are generally taxed at a lower maximum
marginal rate than the maximum marginal rate applicable to ordinary income. The
maximum marginal rate for capital gains is further reduced for property held
for more than five years. The deductibility of capital losses is subject to
limitation.
Special Tax Rules Applicable to Non-U.S. Holders
The following rules apply to you if you are a Non-U.S. Holder.
Payments of Interest. Payments of interest on the notes to a Non-U.S. Holder
will generally be subject to U.S. federal income tax at a rate of 30 percent,
collected by means of withholding by the payor. Payments of interest on the
notes to most Non-U.S. Holders, however, will qualify as "portfolio interest,"
and thus will be exempt from the withholding tax, if the holders certify their
nonresident status as described below. The portfolio interest exception will
not apply to payments of interest to you if:
. you own, directly or indirectly, actually or by attribution, ten percent
or more of the total combined voting power of all classes of our stock
entitled to vote; or
. you are a "controlled foreign corporation" that is related to us, actually
or by attribution, through stock ownership.
In general, a foreign corporation is a controlled foreign corporation if
more than 50 percent of the total combined voting power of all classes of stock
of such corporation entitled to vote or 50 percent of the total value of the
stock of such corporation is owned, actually or by attribution, by one or more
U.S. persons on any day during the taxable year of such foreign corporation
that each owns, actually or by attribution, ten percent or more of the total
combined voting power of all classes of stock entitled to vote. If you are a
bank investing in the notes on an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of your trade or business, please
consult your tax advisor regarding your investment in the notes. Even if the
portfolio interest exemption does not apply, U.S. federal withholding tax may
be reduced or eliminated under an applicable treaty assuming you properly
certify your entitlement to the benefit under the treaty.
The portfolio interest exception applies only if you certify your
nonresident status. You can meet this certification requirement by providing a
Form W-8BEN or appropriate substitute form to us, or our paying agent. If you
hold the note through a financial institution or other agent acting on your
behalf, you will be required to provide appropriate documentation to the agent.
Your agent will then be required to provide certification to us or our paying
agent, either directly or through other intermediaries. For payments made to a
foreign partnership, the certification requirements will generally apply to the
partners rather than the partnership, and the partnership will be required to
provide certain other information.
As described above, we may be required to pay additional interest to
Non-U.S. Holders of notes in certain circumstances. It is unclear whether the
payment of additional interest to a Non-U.S. Holder would be subject to U.S.
federal income tax or any withholding thereof. We intend to withhold U.S.
federal income tax from any payment of additional interest to a Non-U.S. Holder
at a rate of 30 percent unless a tax treaty between the United States and the
country of residence of the Non-U.S. Holder reduces or eliminates the
withholding tax and the Non-U.S. Holder complies with the applicable procedures
for claiming treaty benefits. Prospective purchasers should consult their own
tax advisors as to the tax considerations that relate to the potential payment
of additional interest.
Sale, Redemption or Exchange of Notes. You generally will not be subject to
U.S. federal income tax on any gain realized on the sale, exchange, or other
disposition of notes. This general rule, however, is subject to several
exceptions. For example, the gain would be subject to U.S. federal income tax
if:
. the gain is effectively connected with the conduct by you of a U.S. trade
or business; or
43
. you are an individual present in the United States for a period or periods
aggregating 183 days or more in the year of such sale, exchange or
disposition and certain other requirements are met.
Conversion of the Notes. You generally will not recognize any income, gain
or loss on converting a note into common stock. Any gain recognized as a result
of your receipt of cash in lieu of a fractional share of stock would also
generally not be subject to U.S. federal income tax.
Dividends. Dividends paid to you on common stock received on conversion of a
note (and any deemed dividends resulting from an adjustment to the conversion
rate (see "U.S. Holders -- Adjustment of Conversion Price" above)) will
generally be subject to U.S. withholding tax at a 30 percent rate. The
withholding tax might not apply, however, or might apply at a reduced rate,
under the terms of a tax treaty between the United States and your country of
residence. In order to claim the benefits of a tax treaty, you must demonstrate
your entitlement by certifying your nonresident status and eligibility for
treaty benefits.
Sale of Common Stock. You will generally not be subject to U.S. federal
income tax on any gain realized on the sale, exchange, or other disposition of
common stock. This general rule, however, is subject to exceptions, some of
which are described above under "Special Tax Rules Applicable to Non-U.S.
Holders -- Sale, Exchange or Redemption of Notes."
Income or Gains Effectively Connected With a U.S. Trade or Business. The
preceding discussion of the tax consequences of the purchase, ownership or
disposition of notes or common stock by a Non-U.S. Holder assumes that the
holder is not engaged in a U.S. trade or business, and that the gain is not
attributable to a permanent establishment of the Non-U.S. Holder in the U.S. If
any interest on the notes, dividends on common stock, or gain from the sale,
exchange or other disposition of the notes or stock is effectively connected
with a U.S. trade or business conducted by you, then the income or gain will be
subject to U.S. federal income tax at the regular graduated rates. If you are
eligible for the benefits of a tax treaty between the United States and your
country of residence, any "effectively connected" income or gain generally will
be subject to U.S. federal income tax only if it is also attributable to a
permanent establishment maintained by you in the United States. Payments of
dividends that are effectively connected with a U.S. trade or business, and
therefore included in your gross income, will not be subject to the 30 percent
withholding tax. To claim this exemption from withholding, you must certify
your qualification, which can be done by filing a Form W-8ECI. If you are a
foreign corporation, your income effectively connected with a U.S. trade or
business would generally be subject to an additional "branch profits tax." The
branch profits tax rate is generally 30 percent, although an applicable tax
treaty might provide for a lower rate.
United States Real Property Holding Corporation Status. The Foreign
Investment in Real Property Tax Act ("FIRPTA") rules may apply to a sale,
exchange or other disposition of notes or common stock if we are, or were
within five years before the transaction, a "United States real property
holding corporation" ("USRPHC"). In general, we would be a USRPHC if interests
in U.S. real estate comprised the majority of our assets. We do not believe
that we are a USRPHC or that we will become one in the future. The FIRPTA rules
would apply to a disposition by you only if we otherwise were a USRPHC and (i)
in the case of (a) common stock, or (b) notes that become regularly traded on a
securities market, you owned, actually or by attribution, more than five
percent of such common stock or regularly-traded notes within five years before
the disposition of such common stock or notes and (ii) in the case of notes
that were not regularly traded, you owned, actually or by attribution, such
notes which, as of any date on which any notes were acquired by you, had a fair
market value greater than the fair market value on that date of five percent of
our common stock (or, possibly, of the regularly traded class of stock with the
lowest fair market value). If all of these conditions were met, and the FIRPTA
rules applied to the sale, exchange, or other disposition of notes or common
stock by you, then any gain recognized by you would be treated as effectively
connected with a U.S. trade or business, and would thus be subject to U.S.
federal income tax.
44
U.S. Federal Estate Tax. The estates of nonresident alien individuals are
subject to U.S. federal estate tax on property with a U.S. situs. The notes
will not be U.S. situs property as long as interest on the notes would have
qualified as portfolio interest (as described above under "Special Tax Rules
Applicable to Non-U.S. Holders- Taxation of Interest") were it received by the
decedent at the time of death. Because we are a U.S. corporation, our common
stock will be U.S. situs property, and therefore will be included in the
taxable estate of a nonresident alien decedent. The U.S. federal estate tax
liability of the estate of a nonresident alien may be affected by a tax treaty
between the United States and the decedent's country of residence.
Backup Withholding and Information Reporting
The Internal Revenue Code and the Treasury regulations require those who
make specified payments to report the payments to the IRS. Among the specified
payments are interest, dividends, and proceeds paid by brokers to their
customers. The required information returns enable the IRS to determine whether
the recipient properly included the payments in income. This reporting regime
is reinforced by "backup withholding" rules. These rules generally require the
payors to withhold tax at a specified rate from payments subject to information
reporting if the recipient fails to cooperate with the reporting regime, fails
to provide a correct taxpayer identification number to the payor, or the IRS or
a broker informs the payor that withholding is required. The information
reporting and backup withholding rules generally do not apply to payments to
corporations, whether domestic or foreign.
If you are an individual U.S. Holder of notes or common stock, payments of
interest or dividends to you will generally be subject to information
reporting, and will be subject to backup withholding unless you provide us with
a correct taxpayer identification number and neither the IRS nor a broker
informs us that withholding is required.
The information reporting and backup withholding rules do not apply to
payments that are subject to the 30 percent withholding tax on dividends or
interest paid to Non-U.S. Holders, or to payments that are subject to a reduced
rate of, or exempt from, withholding tax under an applicable tax treaty or
special exception. Therefore, payments of dividends on common stock, or
interest on notes, will generally not be subject to information reporting or
backup withholding.
If you are a U.S. Holder payments made to you by a broker upon a sale of
notes or common stock will generally be subject to information reporting and
possible backup withholding. If you are a Non-U.S. Holder payments made to you
by a broker upon a sale of notes or common stock will not be subject to
information reporting or backup withholding, in certain circumstances, as long
as you certify your foreign status.
Any amounts withheld from a payment to a holder of notes or common stock
under the backup withholding rules can be credited against any U.S. federal
income tax liability of the holder, if any, or will otherwise be refunded,
provided the required information is furnished to the IRS.
The preceding discussion of material U.S. federal income tax considerations
is for general information only. It is not tax advice. You should consult your
own tax advisor regarding the particular U.S. federal, state, local, and
foreign tax consequences of purchasing, holding, converting and disposing of
our notes or common stock, including the consequences of any proposed change in
applicable laws.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
JCPenney by Charles R. Lotter, Executive Vice President, Secretary and General
Counsel of JCPenney. Miller & Chevalier, Chartered, Washington, D.C., has acted
as counsel for JCPenney in connection with tax matters relating to this
offering. As of November 27, 2001, Mr. Lotter owned 22,569 shares of common
stock. As of November 27, 2001 he had outstanding options to purchase 196,000
shares of common stock.
45
INDEPENDENT AUDITORS
The consolidated financial statements of J. C. Penney Company, Inc.
appearing in our Annual Report (Form 10-K) for the year ended January 27, 2001,
have been audited by KPMG LLP, independent auditors, as set forth in their
report thereon, included therein and incorporated herein by reference.
The consolidated financial statements of J. C. Penney Funding Corporation
appearing in its Annual Report (Form 10-K) for the year ended January 27, 2001,
have been audited by KPMG LLP, independent auditors, as set forth in their
report thereon, included therein and incorporated herein by reference.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information for JCPenney and annual, quarterly and special reports, and other
information for JCPenney Funding Corporation, a wholly-owned subsidiary of
JCPenney, with the SEC under the Exchange Act. The Exchange Act file numbers
for our SEC filings is 1-777 for JCPenney and 1-4947 for JCPenney Funding
Corporation. You may read and copy any document we file at the following SEC
public reference rooms:
Public Reference Room 500 West Madison Street
450 Fifth Street, N.W. Suite 1400
Rm. 1024 Chicago, Illinois 60661
Washington, D.C. 20549
You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. We file information
electronically with the SEC. Our SEC filings are available from the SEC's
Internet site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding issuers that file
electronically. You may also inspect our SEC reports and other information at
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
INCORPORATION BY REFERENCE
We can disclose important information to you by referring you to those
documents that we have previously filed with the SEC or documents that we will
file with the SEC in the future. The information incorporated by reference is
considered to be part of this prospectus, and information in documents that we
file later with the SEC will automatically update and supersede information in
this prospectus. We incorporate by reference the documents listed below into
this prospectus, and any future filings made by us with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until we close this offering and
the option we have granted to the initial purchasers expires or is exercised.
The documents we incorporate by reference are:
J. C. Penney Company, Inc.
1. Annual report on Form 10-K for the fiscal year ended January 27, 2001;
2. Quarterly reports on Form 10-Q for the fiscal quarters ended April 28,
2001 and July 28, 2001;
3. Current reports on Form 8-K dated June 18, 2001, September 10, 2001,
September 21, and October 9, 2001; and
4. Definitive proxy materials on Schedule 14A as filed with the SEC on
April 11, 2001.
J. C. Penney Funding Corporation
1. Annual report on Form 10-K for the fiscal year ended January 21, 2001;
and
2. Quarterly reports on Form 10-Q for the fiscal quarters ended April 28,
2001 and July 28, 2001.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and number: J. C. Penney Company, Inc.,
P.O. Box 10001, Dallas, Texas 75301; telephone number (972) 431-2207,
Attention: Investor Relations.
We furnish our stockholders with annual reports that contain audited
financial statements.
46
[LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table itemizes the expenses incurred by us in connection with
the resale of the notes and common stock being registered. All amounts shown
are estimates except the Securities and Exchange Commission ("SEC")
registration fee.
Securities and Exchange Commission registration fee $182,618
*Legal fees and expenses............................ 5,000
*Printing fees and expenses......................... 20,000
Trustee fees and expenses.......................... 15,000
*Accounting fees and expenses....................... 5,000
Rating agency fees................................. 300,000
*Miscellaneous expenses............................. 10,000
--------
Total........................................... $537,618
========
---------------------
* Estimated
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law permits indemnification
of our directors and officers in a variety of circumstances which may include
liabilities under the Securities Act.
Article X of our Bylaws provides in substance, for indemnification by the
Company of our directors and officers in accordance with the provisions of the
Delaware General Corporation Law. We have entered into indemnification
agreements with our current directors and certain of our current officers which
generally provide for indemnification by the Company except as prohibited by
applicable law. To provide some assurance of payment of amounts to which these
directors and officers may become entitled pursuant to these agreements, the
Company has funded a trust.
In addition, we have purchased insurance coverage under policies which
insure the Company for amounts which the Company is required or permitted to
pay as indemnification of these directors and officers, and which insure these
directors and officers against liabilities which might be incurred and for
which they are not entitled to indemnification by the Company.
II-1
Item 16. Exhibits.
4(a) Indenture, dated as of October 15, 2001, between the Company and The Bank of New York.
(b) Form of note.
5 Opinion of C. R. Lotter with respect to the validity of the securities.
12 Computation of ratios (Computation of Ratios of Available Income to Combined Fixed Charges and
Preferred Stock Dividend Requirements and Computation of Ratios of Available Income to Fixed
Charges for the 52 weeks ended July 28, 2001, and for each of the years ended January 27, 2001,
January 29, 2000, January 30, 1999, January 31, 1998, and January 25, 1997, respectively, were filed as
Exhibits 12 (a) and 12(b), respectively, to the Registrant's Quarterly Report on Form 10-Q for the
13 weeks ended July 28, 2001, and the Registrant's Annual Reports on Form 10-K for each of the years
ended January 27, 2001, January 29, 2000, January 30, 1999, January 31, 1998, and January 25, 1997,
respectively (SEC File No. 1-777), which Reports are incorporated herein by reference).
23(a) Consent of KPMG LLP.
(b) Consent of C. R. Lotter (see Exhibit 5).
(c) Consent of Miller & Chevalier
24 Powers of Attorney.
25 Statement of Eligibility on Form T-1 of The Bank of New York, as trustee under the Indenture pursuant
to which the notes registered hereunder are to be issued.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registrations statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or give,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Plano and State of Texas, on the 28th day of
November, 2001.
J. C. PENNEY COMPANY, INC.
By: /S/ R. B. CAVANAUGH
__________________________________
R. B. Cavanaugh
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
A. QUESTROM* Chairman of the Board and Chief November 28, 2001
--------------------------- Executive Officer, Director
A. Questrom
/S/ R. B. CAVANAUGH Executive Vice President and Chief November 28, 2001
--------------------------- Financial Officer (principal
R. B. Cavanaugh financial officer)
W. J. ALCORN* Vice President and Controller November 28, 2001
--------------------------- (principal accounting officer)
W. J. Alcorn
M. A. BURNS* Director November 28, 2001
---------------------------
M. A. Burns
T. J. ENGIBOUS* Director November 28, 2001
---------------------------
T. J. Engibous
K. B. FOSTER* Director November 28, 2001
---------------------------
K. B. Foster
V. E. JORDAN, JR.* Director November 28, 2001
---------------------------
V. E. Jordan, Jr.
J. C. PFEIFFER.* Director November 28, 2001
---------------------------
J. C. Pfeiffer
A. W. RICHARDS* Director November 28, 2001
---------------------------
A. W. Richards
C. S. SANFORD, JR.* Director November 28, 2001
---------------------------
C. S. Sanford, Jr.
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Signatures Title Date
---------- ----- ----
R. G. TURNER* Director November 28, 2001
-------------------------------
R. G. Turner
*By: /s/ R. B. CAVANAUGH
-------------------------------
R. B. Cavanaugh
Attorney-in-Fact
Copies of powers of attorney authorizing W. J. Alcorn, R. B. Cavanaugh, M.
P. Dastague, and C. R. Lotter, and each of them, to sign this registration
statement on behalf of the above named directors and officers, are being filed
with the Securities and Exchange Commission simultaneously herewith.
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
4(a) Indenture, dated as of October 15, 2001, between the Company and The Bank of New York.
(b) Form of note.(See Exhibit 4(a))
5 Opinion of C. R. Lotter with respect to the validity of the securities.
12 Computation of ratios (Computation of Ratios of Available Income to Combined Fixed Charges and
Preferred Stock Dividend Requirements and Computation of Ratios of Available Income to Fixed
Charges for the 52 weeks ended July 28, 2001, and for each of the years ended January 27, 2001,
January 29, 2000, January 30, 1999, January 31, 1998, and January 25, 1997, respectively, were filed
as Exhibits 12 (a) and 12(b), respectively, to the Registrant's Quarterly Report on Form 10-Q for the
13 weeks ended July 28, 2001, and the Registrant's Annual Reports on Form 10-K for each of the
years ended January 27, 2001, January 29, 2000, January 30, 1999, January 31, 1998, and
January 25, 1997, respectively (SEC File No. 1-777), which Reports are incorporated herein by
reference).
23(a) Consent of KPMG LLP.
(b) Consent of C. R. Lotter. (See Exhibit 5)
(c) Consent of Miller & Chevalier.
24 Powers of Attorney.
25 Statement of Eligibility on Form T-1 of The Bank of New York, as trustee under the Indenture
pursuant to which the notes registered hereunder are to be issued.
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