The CATO Corporation
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders to be held at the Home Office of the Company, 8100
Denmark Road, Charlotte, NC 28273 on Thursday, May 23, 1996 at
11:00 A.M., Eastern Time.
The meeting this year will be streamlined in the interest of
saving time and money. We will briefly review our results and
plans for coping with this difficult retail apparel environment.
The Notice of the Annual Meeting of Stockholders and Proxy
Statement are attached. The matters to be acted upon by our
stockholders are set forth in the Notice of Annual Meeting of
Stockholders and discussed in the Proxy Statement.
We would appreciate your signing, dating and returning to
the Company the enclosed proxy card in the envelope provided at
your earliest convenience.
We look forward to seeing you at our Annual Meeting.
Sincerely yours,
/s/ Wayland H. Cato, Jr.
-----------------------
WAYLAND H. CATO, JR.
Chairman of the Board
Chief Executive Officer
8100 Denmark Road
P. O. Box 34216
Charlotte, NC 28234
(704) 554-8510
The Cato Corporation
__________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 1996
__________________________________________________
TO THE STOCKHOLDERS OF
THE CATO CORPORATION
Notice is hereby given that the annual meeting of
stockholders of The Cato Corporation (the "Company") will be held
on Thursday, May 23, 1996 at 11:00 A.M., Eastern Time, at the
Home Office of the Company, 8100 Denmark Road, Charlotte, NC
28273, for the following purposes:
1. To elect five Directors to serve until their successors
are elected and qualified;
2. To consider and vote upon a proposal to ratify the
action of the Board of Directors in selecting Deloitte &
Touche LLP as the Company's independent auditors for
the fiscal year ending February 1, 1997; and
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
March 29, 1996 as the record date for determination of
stockholders entitled to notice of and to vote at the meeting or
any adjournments thereof.
By Order of the Board of Directors
/s/ Alan E. Wiley
--------------------
ALAN E. WILEY
Dated: April 26, 1996 Secretary
_________________________________________________________________
STOCKHOLDERS ARE URGED TO SIGN AND MAIL THE ENCLOSED PROXY IN THE
ENCLOSED ENVELOPE TO ENSURE A QUORUM AT THE MEETING. THIS IS
IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL
EXPENSE.
The Cato Corporation
8100 Denmark Road
Charlotte, North Carolina 28273-5975
____________________
PROXY STATEMENT
____________________
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of The Cato
Corporation (the "Company") for use at the annual meeting of
stockholders of the Company to be held on May 23, 1996, and at
any adjournment or adjournments thereof. This proxy statement
and the accompanying proxy card are first being mailed to
stockholders on or about April 26, 1996.
Only stockholders of record at the close of business on
March 29, 1996 are entitled to notice of and to vote at the
meeting. As of March 29, 1996, the Company had outstanding and
entitled to vote 23,215,897 shares of Class A Common Stock
("Class A Stock") held by approximately 1,286 holders of record
and 5,264,317 shares of Class B Common Stock ("Class B Stock")
held by 16 holders of record. The Transfer Agent estimates that
there are approximately 4,500 shareholders in total. Holders of
Class A Stock are entitled to one vote per share and holders of
Class B Stock are entitled to ten votes per share. Holders of
Class A Stock vote with holders of Class B Stock as a single
class.
All proxies which are properly executed and received prior
to the meeting will be voted at the meeting. If a stockholder
specifies how the proxy is to be voted on any of the business to
come before the meeting, the proxy will be voted in accordance
with such specification. If no specification is made, the proxy
will be voted for the election of Directors and for the
ratification of the selection of auditors. A proxy may be
revoked, to the extent it has not been exercised, at any time
prior to its exercise by written notice to the Secretary of the
Company, by executing and delivering a proxy with a later date or
by voting in person at the meeting.
If you plan to attend and vote at the meeting and your
shares are held in the name of a broker or other nominee, please
bring with you a proxy or letter from the broker or nominee to
confirm your ownership of shares.
In accordance with applicable Delaware law and the Company's
Bylaws, the holders of a majority of the combined voting power of
Class A Stock and Class B Stock present in person or represented
by proxy at the meeting will constitute a quorum. Abstentions
are counted for purposes of determining the presence or absence
of a quorum. With regard to the election of directors, votes may
either be cast in favor of or withheld, and (assuming the
presence of a quorum) directors will be elected by a plurality of
the votes cast. Votes that are withheld will be excluded
entirely from the vote and will have no effect on the outcome of
the election. Approval of the ratification of the selection of
independent auditors requires the affirmative vote of a majority
of the combined voting power of the Class A Stock and Class B
Stock present in person or represented at the meeting and
entitled to vote. On any proposal other than the election of
directors, an abstention will have the same effect as a negative
vote but, because shares held by brokers will not be considered
entitled to vote on matters which the brokers withhold authority,
a broker non-vote will have no effect on the vote on any such
proposal.
The Company will bear the expense of preparing, printing and
mailing the proxy statement to stockholders. The Company will
reimburse brokers, dealers, banks and other custodians, nominees
and fiduciaries for their reasonable expenses in forwarding proxy
solicitation materials to beneficial owners of the Company's
Class A Stock and Class B Stock and securing their voting
instructions. Corporate Investor Communications, Inc. has
assisted the Company in conducting the search for beneficial
owners at a cost of approximately $500.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 29, 1996,
certain information regarding the ownership of the outstanding
shares of Class A Stock and Class B Stock by (i) each director
and nominee, (ii) each person who is known by the Company to own
more than 5% of such stock, (iii) executive officers listed in
the Summary Compensation Table, and (iv) all directors and
executive officers as a group. Unless otherwise indicated in the
footnotes below, each stockholder named has sole voting and
investment power with respect to such stockholder's shares.
Shares Beneficially Owned (1)(2)
--------------------------------- Percent
Class A Stock Class B Stock of Total
Name Number Percent Number Percent Power
- --------------------------- ------ ------- ------ ------- ---------
Wayland H. Cato, Jr. (3)(4) 3,477,382 14.8% 3,732,284 61.2% 48.3%
Edgar T. Cato (5) 1,734,934 7.4 1,785,534 33.4 25.5
Linda McFarland Jenkins (6) 181,259 * - - *
John P.Derham Cato (7) 237,064 1.0 85,965 1.6 1.4
Clarice Cato Goodyear (8) 281,758 1.2 190,515 3.6 2.9
Thomas E. Cato (9) 153,505 * 95,925 1.8 1.5
Alan E. Wiley(10) 18,085 * - - *
Howard A. Severson(11) 20,370 * - - *
Diane V. Missel(12) 10,000 * - - *
George S. Currin 11,287 * - - *
James H. Shaw 10,500 * - - *
Robert L. Kirby 450 * - - *
Robert W.Bradshaw, Jr. 500 * - - *
Grant L. Hamrick 3,000 * - - *
Paul Fulton 2,000 * - - *
A. F. (Pete) Sloan 1,200 * - - *
All directors and executive
officers as a
group (19 persons) (13) 6,223,156 25.8 5,890,223 95.2 75.8
FMR Corp. (14) 2,576,600 11.1 - - 3.4
First Chicago
NBD Corporation(15) 1,710,800 7.4 - - 2.3
_________________
* Less than 1%
(1) Includes the vested interest of executive officers in the
Company's Employee Stock Ownership Plan. The aggregate
vested amount credited to their accounts as of March 29, 1996 was
50,264 shares of Class A Stock.
(2) Share amounts shown as subject to stock options in the
footnotes below cover shares under options that are
presently exercisable or will become exercisable within 60 days
after March 29, 1996.
(3) The business address of this stockholder is 8100 Denmark
Road, Charlotte, North Carolina 28273-5975.
(4) The amounts shown for Class A Stock and Class B Stock
include 672,400 shares and 346,500 shares, respectively,
held in an irrevocable trust for Mr. Cato's children. The
amounts shown for Class A Stock also include 41,250 shares held
in a separate trusts for Mr. Cato's children and grandchildren.
An officer of the Company serves as trustee for these trusts and
has sole voting and investment power with respect to these
shares. Mr. Cato disclaims beneficial ownership of the shares
held in these trusts. The amounts shown for Class A Stock and
Class B Stock also include 216,666 and 833,334 shares
respectively, subject to stock options.
(5) The amounts shown for Class A Stock and Class B Stock
include 141,666 and 83,334 shares, respectively, subject to
stock options. The address of this stockholder is 3985 Douglas
Road, Coconut Grove, Florida 33133.
(6) Includes 175,000 Shares of Class A Stock subject to stock
options.
(7) Includes 3,000 shares of Class A Stock owned by Mr. John
Cato's wife. Also includes 6,600 shares of Class A Stock and
3,750 shares of Class B Stock subject to stock options held by
Mr. John Cato's wife. Mr. John Cato disclaims beneficial
ownership of shares held directly or indirectly by his wife.
The amount shown for Class A Stock includes 92,000 shares subject
to stock options.
(8) The amounts shown for Class A Stock and Class B Stock
include 32,520 shares of Class A Stock and 22,500 shares of
Class B Stock held by Ms. Goodyear's husband. Ms. Goodyear
disclaims beneficial ownership of these shares. The amount
shown for Class A Stock includes 82,500 shares subject to
stock options.
(9) The amounts shown for Class A Stock include 4,770 shares of
stock held by Mr. Thomas Cato's children for which he acts as
custodian. The amounts shown for Class A Stock include 55,500
shares subject to stock options.
(10) Includes 17,750 shares of Class A Stock subject to stock
options.
(11) Includes 14,500 shares of Class A Stock subject to stock
options.
(12) Includes 10,000 shares of Class A Stock subject to stock
options.
(13) The amounts shown for Class A Stock and Class B Stock
include 886,082 and 920,418 shares, respectively, subject to
stock options.
(14) Based on Schedule 13G received by the Company from this
stockholder on or about June 9, 1995. The address of this
stockholder is FMR Corp., 82 Devonshire Street, Boston,
Massachusetts 02109.
(15) Based on Schedule 13G received by the Company from this
stockholder on or about February 9, 1996. The address of
this stockholder is First Chicago NBD Corporation, One First
National Plaza, Chicago, Illinois 60670.
ELECTION OF DIRECTORS
The Board of Directors, consisting of 15 members, is divided
into three classes with terms expiring alternately over a three
year period. As a result of the expiration of the terms of five
incumbent directors, a total of five nominees are standing for
election at the annual meeting. The five directors whose terms
expire at this year's annual meeting, Messrs. Wayland H. Cato,
Jr. Edgar T. Cato, Howard A. Severson, Robert W. Bradshaw, Jr.
and Grant L. Hamrick, have been nominated by the Board of
Directors to succeed themselves and to serve until the 1999
annual meeting and until their successors are elected and
qualified.
It is the intention of the persons named in the proxy to
vote for such persons for election to the Board of Directors for
the ensuing periods as described except to the extent authority
to so vote is withheld with respect to one or more nominees.
Should any nominee be unable to serve (which is not anticipated),
the proxy will be voted for the election of a substitute nominee
selected by the Board of Directors. The five nominees shall be
elected by a plurality of the votes of Class A Stock and Class B
Stock voting as a single class. The other ten members of the
Board of Directors will continue to serve in such capacity until
their terms expire and their successors are elected and
qualified.
Nominees
Information with respect to each nominee, including
biographical data for the last five years, is set forth below.
Wayland H. Cato, Jr., 73, is Chairman of the Board and has
been a director of the Company since 1946. Since 1960, he has
served as the Company's Chief Executive Officer.
Edgar T. Cato, 71, is the Vice Chairman of the Board of
Directors and has been a director of the Company since 1946. Mr.
Edgar T. Cato is the brother of Mr. Wayland H. Cato, Jr.
Howard A. Severson, 48, has been employed by the Company
since 1985 and has served as a director of the Company since
1995. He currently serves as Executive Vice President, Assistant
Secretary and Chief Real Estate and Store Development Officer.
From August 1989 through January 1993, Mr. Severson served as
Senior Vice President - Chief Real Estate Officer.
Robert W. Bradshaw, Jr., 62, has been a director of the
Company since 1994. Since 1961, he has been engaged in the
private practice of law with Robinson, Bradshaw & Hinson, P.A.
and is a shareholder, officer and director of the firm.
Grant L. Hamrick, 57, has been a director of the Company
since 1994. From 1961 to 1985, Mr. Hamrick was employed by the
public accounting firm Price Waterhouse and served as Managing
Partner of the Charlotte, North Carolina Office. Since 1989, Mr.
Hamrick has served as Senior Vice President and Chief Financial
Officer for American City Business Journals, Inc.
Continuing Directors
Information with respect to the ten continuing members of
the Board of Directors, including biographical data for the last
five years, is set forth below.
Linda McFarland Jenkins, 48, has been employed as an officer
of the Company since 1990 and a director of the Company since
1991. She currently serves as President and Chief Operating
Officer. Prior to joining the Company, she was Senior Vice
President - General Merchandise Manager of J. B. Ivey & Company,
a Charlotte, North Carolina based regional department store
chain, where she was employed for 11 years.
John P. Derham Cato, 45, has been employed as an officer of
the Company since 1981 and has been a director of the Company
since 1986. He currently serves as Executive Vice President,
President and General Manager - It's Fashion! Division. Mr. John
Cato is a son of Mr. Wayland H. Cato, Jr.
Alan E. Wiley, 49, has been employed as an officer of the
Company since 1992 and a director of the Company since 1994. He
currently serves as Executive Vice President, Secretary, Chief
Financial and Administrative Officer. From 1981 through 1990 he
held senior administrative and financial positions with British
American Tobacco, U.S. in various companies of their specialty
retail division. From 1990 until joining the Company, he was
President and majority stockholder of Gibbs-Louis, Inc., an
Orlando, Florida based women's specialty store chain. In May
1992, Gibbs-Louis, Inc. filed a petition pursuant to the U.S.
Bankruptcy Code and was liquidated in June 1992.
Clarice Cato Goodyear, 49, has been employed by the Company
since 1975 and has served as a director and officer of the
Company since 1979. She currently serves as Executive Vice
President & Assistant Secretary. Ms. Goodyear is a daughter of
Mr. Wayland H. Cato, Jr.
Thomas E. Cato, 41, has been employed by the Company since
1977, has served as an officer since 1986 and has been a director
of the Company since 1993. He currently serves as Vice
President, Divisional Merchandise Manager, Accessories and Shoes.
Mr. Thomas Cato is a son of Mr. Wayland H. Cato, Jr.
George S. Currin, 59, has been a director of the Company
since 1973. He currently serves as Chairman and Managing
Director of Fourth Stockton Company and Chairman of Currin-
Patterson Properties LLC, both privately held real estate
investment companies.
Paul Fulton, 62, has been a director of the Company since
1994. From July 1988 to December 1993, Mr. Fulton served as
President of Sara Lee Corporation. Since January 1994, Mr.
Fulton has served as Dean of the Kenan-Flagler Business School of
the University of North Carolina at Chapel Hill. Mr. Fulton is
currently a director of Sonoco Products, NationsBank Corporation,
Bassett Furniture Industries, Inc., and Winston Hotels, Inc.
Robert L. Kirby, 65, has been a director of the Company
since 1992. Mr. Kirby served as Executive Vice President of
NationsBank of North Carolina from 1983 to 1988 and as President
and Director of NationsBank of Florida from 1988 until his
retirement in 1990.
James H. Shaw, 67, has been a director of the Company since
1989. Mr. Shaw was Chairman of Consolidated Ivey's, a regional
department store chain, from 1988 until his retirement in 1989,
Chairman and Chief Executive Officer of J. B. Ivey & Company from
1986 to 1988 and Chairman and Chief Executive Officer of Ivey's
Carolinas from 1983 to 1986.
A. F. (Pete) Sloan, 66, has been a director of the Company
since 1994. Mr. Sloan was Chairman of the Board of Lance, Inc.
where he was employed from 1955 until his retirement in 1990.
Mr. Sloan is currently a director of Bassett Furniture
Industries, Inc., PCA International, Inc., and Richfood, Inc.
The ten continuing members of the Board of Directors are
divided into two classes with current terms expiring in 1997 and
1998, respectively. On the expiration of each director's term,
his successor in office will be elected for a three year term.
The terms of Ms. Linda McFarland Jenkins and Messrs. Thomas E.
Cato, George S. Currin, Robert L. Kirby and A. F. (Pete) Sloan
expire in 1998. The terms of Ms. Clarice Cato Goodyear and
Messrs. John P. Derham Cato, Wiley, Fulton and Shaw expire in
1997.
Directors' Compensation
Directors, who are not employees of the Company, receive a
fee for their services of $18,000 per year payable at the rate of
$1,500 per month and are reimbursed for reasonable expenses
incurred in attending director meetings. Non-employee directors
also receive $125 per hour or a maximum of $1,000 per day for
attending special meetings or for additional services.
MEETINGS AND COMMITTEES
During the fiscal year ended February 3, 1996, the Company's
Board of Directors held 11 meetings.
The Company's Audit Committee reviews the Company's internal
controls and confers with the Company's independent auditors
concerning the scope and results of their audits and any
recommendations they may have and considers such other matters
relating to auditing and accounting as the Committee may deem
appropriate. During the fiscal year ended February 3, 1996, the
Audit Committee held four meetings. Ms. Clarice Cato Goodyear
and Messrs. Wayland H. Cato, Jr., Hamrick, Bradshaw, Currin,
Fulton, Kirby, Shaw and Sloan are members of the Audit Committee.
The Company's Compensation Committee reviews and approves
the compensation of the executive officers of the Company. The
Compensation Committee held two meetings during the fiscal year
ended February 3, 1996. Ms. Clarice Cato Goodyear and Messrs.
Wayland H. Cato, Jr., Bradshaw, Currin, Fulton, Hamrick, Kirby,
Shaw and Sloan are members of the Compensation Committee.
SUMMARY COMPENSATION TABLE
The table below sets forth the compensation for the persons
who were at February 3, 1996 the Company's Chief Executive
Officer and four other most highly compensated executive
officers.
Long Term
Compensation
Annual Compensation Awards
------------------- -------------------------
Other Annual Securities Underlying
Fiscal Salary Bonus Compensation Number of Options
Name and Principal Position Year ($)(1) ($) ($)(2) #(3)
- --------------------------- ------ ------ ----- ------------ ---------------
Wayland H. Cato, Jr. 1995 $449,530 $ -- -- --
Chief Executive Officer 1994 437,032 -- -- --
1993 399,532 320,000 -- --
Linda McFarland Jenkins 1995 $398,780 $ -- -- 125,000
President and Chief 1994 385,298 -- -- 50,000
Operating Officer 1993 334,423 210,000 -- 75,000
John P. Derham Cato 1995 $219,530 $ -- -- 47,500
Executive Vice President, 1994 214,532 -- -- 25,000
President and General Manager - 1993 194,532 135,000 -- 22,500
It's Fashion! Division
Alan E. Wiley 1995 $197,660 $ -- -- 88,750
Executive Vice President 1994 193,260 -- -- 20,000
Secretary 1993 170,353 62,000 95,267(4) 22,500
Chief Financial and
Administrative Officer
Diane V. Missel (5) 1995 $231,320 $ -- $10,112(4) 50,000
Executive Vice President - 1994 -- -- -- --
General Merchandise Manager 1993 -- -- -- --
______________
(1) Does not include amounts deducted pursuant to Internal
Revenue Code Section 125.
(2) Excludes perquisites and other personal benefits, securities
or property which, in the aggregate, did not exceed the
lesser of $50,000 or 10% of the annual salary and bonus for each
named executive officer.
(3) Options to purchase Class A Stock were granted to the named
executive officers at the fair market value of the Class A
Stock on the date of grant. The options vest in equal amounts
over five years from the date of grant and expire ten years
from the date of grant. All option grants reflect a three-for-
two stock split effective June 28, 1993.
(4) Relocation related expenses.
(5) Ms. Missel joined the Company in April 1995.
Severance Agreement
The Company has a severance agreement with Ms. McFarland
Jenkins which currently provides for the continuation of her
annual salary for one year upon the termination of her employment
without cause. The Company has severance agreements with Ms.
Missel and Mr. Wiley which currently provide for the continuation
of their salaries for six months upon the termination of their
employment without cause.
Option Grants in Last Fiscal Year
The following table sets forth certain options granted by
the Company to the named executive officers during the fiscal
year ended February 3, 1996:
Individual Grants
- ---------------------------------------------------
Number of % of Total Potential Realizable Value
Securities Options Exercise at Assumed Annual Rates
Underlying Granted to Price Per of Stock Price Appreciation
Options Employees in Share Expiration for Option Term
Name Granted(#) Fiscal Year ($/Sh) Date 5%($) 10% ($)
- ----- ---------- ------------ ----- ---- ----- --------
Linda McFarland Jenkins(1)(2) 125,000 14.2% $7.69 04-27-2005 $604,626 $1,532,233
John P. Derham Cato(1)(3) 47,500 5.4 7.69 04-27-2005 229,758 582,248
Alan E. Wiley(1)(4) 88,750 10.0 7.69 04-27-2005 429,285 1,087,885
Diane V. Missel(3) 50,000 5.7 7.69 04-27-2005 241,851 612,893
_____________
(1) Number of securities underlying options granted resulted
from surrender by the executive officer of the same number of
securities from previous option grants.
(2) Includes 105,000 shares granted under the Company's Non-
Qualified Stock Option Plan to purchase Class A Stock and
20,000 shares granted under the Company's Incentive Stock Option
Plan to purchase Class A Stock on the date of grant.
(3) Options granted under the Company's Non-Qualified Stock
Option Plan to purchase Class A Stock at the fair market
value of the Class A Stock on the date of grant.
(4) Includes 68,750 shares granted under the Company's Non-
Qualified Stock Option Plan to purchase Class A Stock and
20,000 shares granted under the Company's Incentive Stock Option
Plan to purchase Class A Stock on the date of grant.
Aggregated Fiscal Year-End Option Values
The following table summarizes the value of unexercised
options held by the named executives at February 3, 1996.
Value of
Number of Unexercised
Securities Underlying In-the-Money
Unexercised Options at Fiscal Options at
Year-End (#) Fiscal Year-End ($)(1)
---------------- ----------------------
Exercisable (E)/ Exercisable (E)/
Name Unexercisable (U) Unexercisable (U)
- ------- ----------------- ----------------------
Wayland H. Cato, Jr. 1,050,000(E) $ -- (E)
-- (U) -- (U)
Linda McFarland Jenkins 165,000(E) 484,800(E)
170,000(U) 33,750(U)
John P. Derham Cato 67,500(E) -- (E)
77,500(U) -- (U)
Alan E. Wiley -- (E) -- (E)
88,750(U) -- (U)
Diane V. Missel -- (E) -- (E)
50,000(U) -- (U)
__________
(1) Value is based on difference between exercise price and
market price of the underlying securities as of February 2,
1996.
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The following report submitted by the Compensation Committee
and Stock Option Committee of the Board of Directors addresses
the Company's executive compensation policies for fiscal 1995.
The Compensation Committee is composed of nine members--
seven outside directors, the Chief Executive Officer and an
Executive Vice President. The Compensation Committee provides
guidance for the Company's executive compensation programs to
insure a direct relationship between executive compensation and
corporate performance.
The Stock Option Committee is composed of the seven outside
members of the Board of Directors. The Stock Option Committee
makes final decisions regarding stock option awards made under
the Company's plans.
The Company's executive compensation program has been
designed (i) to provide compensation equivalent to compensation
offered by peer group companies thereby allowing the Company to
attract and retain the most qualified executives, (ii) to
motivate executive officers by rewarding them for attaining pre-
established Company financial goals and individual performance
goals and (iii) to align the interest of executive officers with
the long-term interest of stockholders.
In designing the compensation packages for executive
officers, the Compensation Committee and Stock Option Committee
compare the Company's executive officer compensation packages
with peer group executive officer compensation packages, some of
which are included in the Dow Jones Specialty Apparel Market
Index plotted in the performance graph. Peer group companies
which are similar in size and operate in the specialty apparel
retail market are given particular consideration. The
Compensation Committee and Stock Option Committee also consider
the views of the Company's outside retail consultants concerning
appropriate compensation levels for executive officers.
The executive compensation program is focused on attainment
of profitability and enhancement of stockholder equity.
Currently, the Company's executive compensation program consists
of three principal types of compensation: annual base salary,
incentive bonuses and long-term stock option awards. Executive
officers are rewarded when the Company achieves financial goals
related to total revenues, net income, return on equity and
expense management and when the executive officer achieves
individual performance goals related to the executive officer's
specific area of responsibility.
Annual Base Salary - Each year the Compensation
Committee determines the base salary for each executive officer
based on whether the executive officer achieves his or her
individual performance goals.
Incentive Bonus - Incentive bonuses, paid to executive
officers in April following the fiscal year end, are based on the
achievement of the Company's financial goals and the achievement
of the executive officer's individual performance goals. A bonus
accrual is made based on the achievement of corporate financial
goals. If corporate financial goals are not achieved, the
accrual may be reduced or eliminated. However, the Compensation
Committee may choose to give a performance bonus to an executive
officer based on individual performance goals.
Long-Term Stock Option Awards - Stock options are awarded by
the Stock Option Committee under the Company's Incentive Stock
Option Plan and Non-Qualified Stock Option Plan to executive
officers to provide incentive for the executive officer to focus
on the Company's future financial performance and as a means to
encourage an executive officer to remain with the Company. The
Stock Option exercise price is 100% of the fair market value of
the Class A shares on the date of grant and vests in 20%
increments over five years. Stock option grants are made when
executive officers join the Company and thereafter at the
discretion of the Stock Option Committee.
The Compensation Committee and Stock Option Committee
recognize that, to some degree, the determination of an executive
officer's compensation package involves subjective
considerations.
Chief Executive Officer
The Compensation Committee (other than Mr. Wayland H. Cato,
Jr.) and the Stock Option Committee determine the compensation
package for the Chief Executive Officer by comparing his
compensation package to the Chief Executive Officer compensation
packages of the peer group. The Compensation Committee and Stock
Option Committee also take into consideration years of service,
specialty retail apparel experience, leadership, dedication and
vision.
This report has been provided by the Compensation Committee and
Stock Option Committee:
Wayland H. Cato, Jr.*
Clarice Cato Goodyear*
Robert W. Bradshaw, Jr.
George S. Currin
Paul Fulton
Grant L. Hamrick
Robert L. Kirby
James H. Shaw
A. F. (Pete) Sloan
* Compensation Committee only
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ms. Goodyear and Messrs. Wayland H. Cato, Jr., Currin,
Fulton, Shaw, Kirby, Bradshaw, Hamrick and Sloan served as
members of the Compensation Committee during fiscal 1995. Mr.
Cato served as Chief Executive Officer and Chairman of the
Company during fiscal 1995. Ms. Goodyear served as Executive
Vice President of the Company during fiscal 1995. Ms. Goodyear
and Mr. Wayland H. Cato, Jr. are the only officers of the Company
who serve on the Compensation Committee.
The Company has eight lease agreements with entities in
which Mr. Currin has a partnership interest. Four lease
agreements were signed in 1995 and four were signed in 1994. The
lease term of each agreement is for approximately 10 years with
renewal terms at the option of the Company.
During 1995, the Company paid to the entities in which Mr.
Currin has an interest, the amount of $285,000 for rent and
related charges. The Company received $240,000 for construction
reimbursement from the same entities. The Company estimates that
the aggregate payments for base rent to the entities will be
$38,000 per month when all leases are active.
The Company believes that the terms and conditions of the
Lease Agreements are comparable to those which could have been
obtained from unaffiliated leasing companies.
The firm of Robinson, Bradshaw & Hinson, P.A., of which
Robert W. Bradshaw, Jr., a director of the Company, is an
officer, a director and a shareholder, was retained to perform
legal services for the Company during the last fiscal year. It
is anticipated that the firm will continue to provide legal
services to the Company during the current fiscal year.
Stock Performance Graph
In lieu of a performance graph as required by Item
402(I) of Regulation S-K, submitted below is the data
interpretted in a chart form. A paper copy of the
performance graph will be sent to the SEC.
The following graph compares the yearly change in the
Company's cumulative total shareholder return on the Company's
Common Stock (which includes Class A Stock and Class B Stock) for
each of the Company's last five fiscal years with (i) the Dow
Jones Equity Market Index and (ii) the Dow Jones Specialty
Apparel Market Index.
THE CATO CORPORATION
STOCK PERFORMANCE TABLE
(BASE 100- IN DOLLARS)
LAST TRADING THE CATO D. J. EQTY D.J. SPC
DAY
OF THE FISCAL CORPORATION MKT INDEX APPL MKT
YEAR
02/01/91 100.00 100.00 100.00
01/31/92 2,537.44 124.70 153.03
01/29/93 3,922.56 138.61 145.10
01/28/94 3,990.08 155.11 135.60
01/27/95 1,977.44 156.10 122.52
02/02/96 1,835.04 217.59 142.73
The graph assumes an initial investment of $100 on February
1, 1991, the last trading day prior to the commencement of the
Company's 1991 fiscal year and reinvestment of all dividends.
Option Repricing
On April 27, 1995, the Board of Directors approved a replacement
of stock option grants held by officers and directors of the
Company. The officers and directors were given the opportunity
to surrender stock option grants and receive a new stock option
grant to purchase the same number of shares underlying the
options surrendered. The new stock option grants were granted
under the terms and conditions of the Incentive Stock Option Plan
or the Non-Qualified Stock Option Plan. The new stock option
grant vesting provisions were the same as any stock option grant,
20% increments with the first 20% vesting on April 27, 1996. The
term of each new stock option grant was ten (10) years.
The price of each new stock option grant was $7.69. The prices
of the surrendered stock option grants ranged from $17.63 to
$8.96.
The Board of Directors believes that equity ownership provides a
major incentive to directors and officers in building stockholder
value, aligns the interests of the director and officer with
stockholders providing incentive for the director or officer to
focus on the Company's future financial performance and serves to
retain directors and officers. The Board of Directors determined
that the decrease in price of the Company's Common Stock could
limit the motivational and retention value of the options held by
directors and officers and provided little incentive value. As a
result, the Board of Directors approved a replacement of the
stock option grants as described above and as provided in the
tabular format below.
This report has been provided by the Compensation Committee and
Stock Option Committee:
Wayland H. Cato, Jr.*
Clarice Cato Goodyear*
Robert W. Bradshaw, Jr.
George S. Currin
Paul Fulton
Grant L. Hamrick
Robert L. Kirby
James H. Shaw
A. F. (Pete) Sloan
* Compensation Committee only
Ten-Year Option/Repricings
Length of
original
Market Price option
of stock at Exercise term
time of price at remaining
Number of repricing time of at date
options or repricing or New of repricing
repriced or amendment amendment exercise or
Name Date amended (#) ($) ($) price ($) amendment
- -----------------------------------------------------------------------------------------------------------------------------
Linda McFarland Jenkins 4/27/95 75,000(1) $7.69 $17.63 $7.69 39 Months
4/27/95 30,000(1) 7.69 10.13 7.69 52 Months
4/27/95 20,000(2) 7.69 10.13 7.69 52 Months
John P. Derham Cato 4/27/95 22,500(1) 7.69 17.63 7.69 39 Months
4/27/95 25,000(1) 7.69 10.13 7.69 52 Months
Alan E. Wiley 4/27/95 46,250(1) 7.69 8.96 7.69 26 Months
4/27/95 22,500(1) 7.69 17.63 7.69 39 Months
4/27/95 20,000(2) 7.69 10.13 7.69 52 Months
_____________
(1) Shares granted pursuant to the Non-Qualified Stock Option
Plan.
(2) Shares granted pursuant to the Incentive Stock Option Plan.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP examined the Company's financial
statements for the fiscal year ended January 28, 1995 and was
notified on August 24, 1995 of the Company's decision to end
their engagement. Deloitte & Touche LLP examined the Company's
financial statements for the fiscal year ended February 3, 1996.
The Board of Directors has selected Deloitte & Touche LLP as
independent auditors to examine the Company's financial
statements for the fiscal year ending February 1, 1997. A
representative of Deloitte & Touche LLP is expected to attend the
meeting, respond to appropriate questions from stockholders
present at the meeting and, if such representative desires, to
make a statement. The directors recommend that stockholders vote
FOR the proposal to ratify the selection of Deloitte & Touche LLP
as the Company's independent auditors.
No financial statement for either of the past two years contained
a qualified or modified opinion. No Financial statement for
either of the past two years contained an adverse opinion or
disclaimer. The decision to change independent auditors was
recommended by the Audit Committee and ratified by the Board of
Directors. There have been no disagreements during the two most
recent fiscal years with the former independent auditors. The
former independent auditors have made no statements indicating
that they could not rely on internal controls or management's
representations. Also, no information has come to their
attention that materially limits the fairness or reliability of
previously issued audit reports or underlying financial
statements.
STOCKHOLDER PROPOSALS
Stockholder proposals relating to the Company's annual
meeting of stockholders to be held in 1997 must be received by
the Company no later than December 27, 1996. Stockholders should
send their proposals to the attention of the Company's Secretary
at the Company's principal executive offices, 8100 Denmark Road,
Charlotte, North Carolina 28273-5975.
OTHER MATTERS
The Board of Directors of the Company knows of no matters
which will be presented for consideration at the meeting other
than those set forth in this proxy statement. However, if any
other matters are properly presented for action, it is the
intention of the persons named in the proxy to vote on them in
accordance with their best judgment.
For the Board of Directors
THE CATO CORPORATION
/s/ Alan E. Wiley
------------------------
ALAN E. WILEY
April 26, 1996 Secretary
