J. C. Penney Company, Inc. (the Company) issued an earnings press
release on February 24, 2017, announcing its 2016 fourth quarter
and full year results of operations and financial condition. The
full text of the press release is attached as Exhibit 99.1.

The press release and accompanying schedules provide certain
information regarding (i) earnings before net interest expense,
income tax expense/(benefit) and depreciation and amortization
(EBITDA), (ii) adjusted EBITDA, (iii) adjusted net income/(loss),
(iv) adjusted earnings/(loss) per share – diluted and (v) free
cash flow, all of which may be considered non-GAAP financial
measures under the rules of the Securities and Exchange
Commission. A reconciliation of each such non-GAAP financial
measure to the most directly comparable financial measure
calculated and presented in accordance with GAAP is included with
the release.

The Company defines (i) EBITDA as net income/(loss) excluding net
interest expense (including the (gain)/loss on extinguishment of
debt), income tax expense/(benefit) and depreciation and
amortization, (ii) adjusted EBITDA as EBITDA excluding
restructuring and management transition charges, the impact of
the Companys qualified defined benefit pension plan, the
mark-to-market adjustment for the Companys supplemental
retirement plans, the net gain on the sale of non-operating
assets and the proportional share of net income from the Companys
joint venture formed to develop the excess property adjacent to
the Companys Home Office in Plano, Texas (Home Office Land Joint
Venture), (iii) adjusted net income/(loss) as net income/(loss)
excluding restructuring and management transition charges, the
impact of the Companys qualified defined benefit pension plan,
the mark-to-market adjustment for the Companys supplemental
retirement plans, the (gain)/loss on extinguishment of debt, the
net gain on the sale of non-operating assets, the proportional
share of net income from the Home Office Land Joint Venture and
the tax impact for the allocation of tax benefit to other
comprehensive income and (iv) adjusted earnings/(loss) per share
– diluted as earnings/(loss) per share – diluted excluding
restructuring and management transition charges, the impact of
the Companys qualified defined benefit pension plan, the
mark-to-market adjustment for the Companys supplemental
retirement plans, the (gain)/loss on extinguishment of debt, the
net gain on the sale of non-operating assets, the proportional
share of net income from the Home Office Land Joint Venture and
the tax impact for the allocation of tax benefit to other
comprehensive income. Unlike other operating expenses,
restructuring and management transition charges, the (gain)/loss
on extinguishment of debt, the net gain on the sale of
non-operating assets, the proportional share of net income from
the Home Office Land Joint Venture and the tax impact for the
allocation of tax benefit to other comprehensive income are not
directly related to the Companys ongoing core business
operations, which consists of selling merchandise and services to
consumers through our department stores and our website at
jcpenney.com. Pension plan expense/(income) and the
mark-to-market adjustment for the Companys supplemental
retirement plans are determined using numerous complex
assumptions about changes in pension assets and liabilities that
are subject to factors beyond the Companys control, such as
market volatility. Accordingly, the Company eliminates pension
plan expense/(income) in its entirety as the Company views all
components of net periodic benefit expense/(income) as a single,
net amount, consistent with its presentation in the Companys
consolidated financial statements. The Company believes that the
presentation of these non-GAAP financial measures, which
management uses to assess the Companys operating results, is
useful in order to better understand the Companys financial
performance and facilitate the comparison of the Companys results
to the results of its peer companies.

The Company defines free cash flow as cash flow from operating
activities less capital expenditures, plus proceeds from the sale
of operating assets. The Company believes that free cash flow is
a relevant indicator of its ability to repay maturing debt,
revise its dividend policy or fund other uses of capital that the
Company believes will enhance stockholder value. Free cash flow
is limited and does not represent remaining cash flows available
for discretionary expenditures due to the fact that the measure
does not deduct payments required for debt maturities, pay-down
of off-balance sheet pension debt and other obligations or
payments made for business acquisitions.

The Company believes it is important to view each of these
non-GAAP financial measures in addition to, rather than as a
substitute for, the GAAP measures of net income/(loss),
earnings/(loss) per share – diluted, and cash flow from operating
activities, respectively.

On February 24, 2017, the Company announced a plan to optimize
its retail operations by closing approximately 130 to 140
JCPenney department stores and two distribution facilities in
fiscal 2017. The Company expects to substantially complete the
closings by May 2017.

In connection with these actions, the Company expects to incur
estimated pre-tax charges of approximately $225 million during
the first half of fiscal 2017. A summary of the major components
of these estimated charges (in millions) is presented below:

The above charges are estimates, and the actual charges may vary
materially based on various factors, including timing of the
closures; factors relating to real estate including sale proceeds
and timing and amount of sublease income and other lease expense;
actual associate terminations and benefits; changes in
managements assumptions and other plans; and other factors.

A copy of the press release announcing these actions is attached
hereto as Exhibit 99.2.