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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE CATO CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[LOGO] 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 22, 1997 at 11:00 A.M., Eastern Time.
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,
WAYLAND H. CATO, JR.
Chairman of the Board
Chief Executive Officer
8100 DENMARK ROAD
P. O. BOX 34216
CHARLOTTE, NC 28234
(704) 554-8510
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THE CATO CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997
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 22, 1997 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
January 31, 1998; 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 28,
1997 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
ALAN E. WILEY
Dated: April 25, 1997 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.
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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 22,
1997, 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 25, 1997.
Only stockholders of record at the close of business on March 28, 1997
are entitled to notice of and to vote at the meeting. As of March 28, 1997, the
Company had outstanding and entitled to vote 23,195,153 shares of Class A Common
Stock ("Class A Stock") held by approximately 1,313 holders of record and
5,264,317 shares of Class B Common Stock ("Class B Stock") held by 15 holders of
record. The Transfer Agent estimates that there are approximately 4,700
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 $800.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 28, 1997, 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
------------------ ----------------- VOTING
NUMBER PERCENT NUMBER PERCENT POWER
--------- ------- --------- ------- --------
Wayland H. Cato, Jr.(3)(4) 3,474,685 14.8% 2,913,503 55.3% 42.9%
Edgar T. Cato(5) 1,734,936 7.4% 1,702,200 32.3% 24.7%
John P. Derham Cato(6) 263,380 1.1% 82,215 1.6% 1.4%
Linda McFarland Jenkins(7) 236,301 1.0% -- -- *
Clarice Cato Goodyear(8) 297,906 1.3% 190,515 3.6% 2.9%
Thomas E. Cato(9) 164,477 * 95,925 1.8% 1.5%
Alan E. Wiley(10) 35,841 * -- -- *
Howard A. Severson(11) 32,828 * -- -- *
George S. Currin 11,287 * -- -- *
James H. Shaw 10,500 * -- -- *
Robert W. Bradshaw, Jr 500 * -- -- *
Grant L. Hamrick 3,000 * -- -- *
Paul Fulton 4,000 * -- -- *
A.F. (Pete) Sloan 1,200 * -- -- *
All directors and executive officers
as a group (18 persons)(12) 6,352,521 26.3% 4,984,358 94.7% 73.1%
The Crabbe Huson Group, Inc.(13) 2,467,900 10.6% -- -- 3.3%
FMR Corp.(14) 1,274,200 5.5% -- -- 1.7%
First Chicago
NBD Corporation(15) 1,738,100 7.5% -- -- 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 28, 1997 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 28, 1997.
3) The business address of this stockholder is 8100 Denmark Road,
Charlotte, North Carolina 28273-5975.
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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 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 amount shown for Class A Stock also includes
216,666 shares subject to stock options and 20,600 shares held by a
limited liability company of which Mr. Cato is a member.
5) The amount shown for Class A Stock includes 141,666 shares subject to
stock options. The address of this stockholder is 3985 Douglas Road,
Coconut Grove, Florida 33133.
6) Includes 3,000 shares of Class A Stock owned by Mr. John Cato's wife.
Also includes 8,700 shares of Class A 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 116,500 shares subject to stock
options.
7) Includes 230,000 Shares of Class A Stock 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 97,500 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 66,000 shares subject to stock
options.
10) Includes 35,500 shares of Class A Stock subject to stock options.
11) Includes 30,750 shares of Class A Stock subject to stock options.
12) The amounts shown for Class A Stock and Class B Stock include 1,008,582
and 3,750 shares, respectively, subject to stock options.
13) Based on Schedule 13G received by the Company from this stockholder on
or about February 11, 1997. The address of this stockholder is The
Crabbe Huson Group, Inc., 121 S. W. Morrison, Suite 1400, Portland,
Oregon 97204.
14) Based on Schedule 13G received by the Company from this stockholder on
or about February 14, 1997. 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 25, 1997. The address of this stockholder is First
Chicago NBD Corporation, One First National Plaza, Chicago, Illinois
60670.
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ELECTION OF DIRECTORS
The Board of Directors, consisting of 14 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, Ms. Clarice Cato Goodyear and
Messrs. John P. Derham Cato, Alan E. Wiley, Paul Fulton and James H. Shaw, have
been nominated by the Board of Directors to succeed themselves and to serve
until the 2000 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 nine 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.
John P. Derham Cato, 46, 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 Vice Chairman, Chief Operating Officer. Mr. John Cato is a son of Mr.
Wayland H. Cato, Jr.
Alan E. Wiley, 50, has been employed as an officer of the Company since
1992 and a director of the Company since 1994. He currently serves as Senior
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, 50, 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 and Assistant Secretary. Ms.
Goodyear is a daughter of Mr. Wayland H. Cato, Jr.
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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, Lowe's Companies, Inc., Bassett Furniture Industries, Inc., and
Winston Hotels, Inc.
James H. Shaw, 68, 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.
CONTINUING DIRECTORS
Information with respect to the nine continuing members of the Board of
Directors, including biographical data for the last five years, is set forth
below.
Wayland H. Cato, Jr., 74, 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, 72, 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.
Linda McFarland Jenkins, 49, 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 Merchandising Officer of The Cato Division. 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.
Howard A. Severson, 49, 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.
Thomas E. Cato, 42, 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.
Robert W. Bradshaw, Jr., 63, 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.
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Grant L. Hamrick, 58, has been a director of the Company since 1994.
Mr. Hamrick was Senior Vice President and Chief Financial Officer for American
City Business Journals, Inc., from 1989 until his retirement in 1996. 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.
George S. Currin, 60, 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.
A. F. (Pete) Sloan, 67, 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., Richfood, Inc., and Lance,
Inc.
The nine continuing members of the Board of Directors are divided into
two classes with current terms expiring in 1998 and 1999, 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, and A. F. (Pete) Sloan expire in 1998. The terms of
Messrs. Wayland H. Cato, Jr., Edgar T. Cato, Howard A. Severson, Robert W.
Bradshaw, Jr. and Grant L. Hamrick expire in 1999.
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 $1,000 per day
for attending special meetings or for additional services.
MEETINGS AND COMMITTEES
During the fiscal year ended February 1, 1997, the Company's Board of
Directors held 5 meetings.
The Company's Audit Committee reviews the Company's internal controls
and confers with the Company's independent auditors concerning the scope and
results of their audits and any recommendations they may have and considers such
other matters relating to auditing and accounting as the Committee may deem
appropriate. During the fiscal year ended February 1, 1997, the Audit Committee
held one meeting. Ms. Clarice Cato Goodyear and Messrs. Wayland H. Cato, Jr.,
Hamrick, Bradshaw, Currin, Fulton, Shaw and Sloan are members of the Audit
Committee.
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The Company's Compensation Committee reviews and approves the
compensation of the executive officers of the Company. The Compensation
Committee held one meeting during the fiscal year ended February 1, 1997. Ms.
Clarice Cato Goodyear and Messrs. Wayland H. Cato, Jr., Bradshaw, Currin,
Fulton, Hamrick, Shaw and Sloan are members of the Compensation Committee.
SUMMARY COMPENSATION TABLE
The table below sets forth the compensation for the persons who were at
February 1, 1997 the Company's Chief Executive Officer and four other most
highly compensated executive officers.
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------ AWARDS
OTHER ANNUAL SECURITIES UNDERLYING
FISCAL SALARY BONUS COMPENSATION NUMBER OF OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) ($) (2) # (3)
- - ----------------------------------- -------- -------- ------- ----------------------------------------
Wayland H. Cato, Jr. 1996 $449,504 $ -- -- --
Chairman of the Board and 1995 449,530 -- -- --
Chief Executive Officer 1994 437,032 -- -- --
John P. Derham Cato 1996 $304,920 $40,000 -- --
Vice Chairman and 1995 219,530 -- -- 47,500
Chief Operating Officer 1994 214,532 -- -- 25,000
Linda McFarland Jenkins 1996 $398,753 $ -- -- --
President and 1995 398,780 -- -- 125,000
Chief Merchandising Officer 1994 385,298 -- -- 50,000
The Cato Division
Alan E. Wiley 1996 $205,993 $30,000 -- --
Senior Executive Vice President 1995 197,660 -- -- 88,750
Secretary 1994 193,260 -- -- 20,000
Chief Financial and
Administrative Officer
Howard A. Severson 1996 $167,065 $10,000 -- --
Executive Vice President 1995 165,212 -- -- 42,500
Chief Real Estate and 1994 156,993 -- -- --
Store Development Officer
- - --------------
(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 $50,000
or 10% of the annual salary and bonus for each named executive officer.
(3) Options to purchase Class A Stock were granted to the named executive
officers at the fair market value of the Class A Stock on the date of
grant. The options vest in equal amounts over five years from the date
of grant and expire ten years from the date of grant
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SEVERANCE AGREEMENTS
The Company has a severance agreement with Ms. McFarland Jenkins which
currently provides for the continuation of her annual salary for 18 months upon
the termination of her employment without cause. The Company has a severance
agreement with Mr. Wiley which currently provides for the continuation of his
salary for 12 months upon the termination of his employment without cause.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table summarizes options exercised by the named executive
officers during the fiscal year ended February 1, 1997 and presents the value of
unexercised options held by the named executives at the end of the fiscal year.
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL OPTIONS AT
SHARES YEAR-END (#) FISCAL YEAR-END ($)(2)
ACQUIRED VALUE ----------------------------- ----------------------
ON EXERCISE REALIZED EXERCISABLE (E)/ EXERCISABLE (E)/
NAME (#) ($)(1) UNEXERCISABLE (U) UNEXERCISABLE (U)
- - -------------------------- ----------- -------- ----------------------------- ----------------------
Wayland H. Cato, Jr. -- $ -- 1,050,000 (E)(3) $ -- (E)
-- (U) -- (U)
John P. Derham Cato -- -- 92,000 (E) -- (E)
53,000 (U) -- (U)
Linda McFarland Jenkins 30,000 246,150 190,000 (E) 77,400 (E)
115,000 (U) -- (U)
Alan E. Wiley -- -- 17,750 (E) -- (E)
71,000 (U) -- (U)
Howard A. Severson 4,000 7,980 18,500 (E) -- (E)
37,750 (U) -- (U)
- - --------------
(1) Market value of underlying securities at the exercise date minus the
exercise price.
(2) Value is based on difference between exercise price and market price of
the underlying securities as of January 31, 1997.
(3) Includes an option for 833,334 shares which expired March 9, 1997.
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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 1996.
The Compensation Committee is composed of eight members--six 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 six 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.
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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
James H. Shaw
A. F. (Pete) Sloan
* Compensation Committee only
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ms. Goodyear and Messrs. Wayland H. Cato, Jr., Currin, Fulton, Shaw,
Bradshaw, Hamrick and Sloan served as members of the Compensation Committee
during fiscal 1996. Mr. Cato served as Chief Executive Officer and Chairman of
the Company during fiscal 1996. Ms. Goodyear served as Executive Vice President
of the Company during fiscal 1996. 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 an 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 1996, the Company paid to the entities in which Mr. Currin has
an interest, the amount of $454,028 for rent and related charges.
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.
11
15
STOCK PERFORMANCE GRAPH
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 DAY THE CATO D.J. EQTY D.J. SPC
OF THE FISCAL YEAR CORPORATION MKT INDEX APPL MKT
- - ------------------ ----------- --------- --------
01/31/92 100.00 100.00 100.00
01/29/93 154.58 111.04 94.78
01/28/94 157.16 124.25 88.57
01/27/95 77.99 125.05 80.03
02/02/96 72.23 174.12 93.23
01/31/97 40.88 221.28 109.49
The graph assumes an initial investment of $100 on January 31, 1992,
the last trading day prior to the commencement of the Company's 1992 fiscal year
and reinvestment of all dividends.
12
16
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche LLP as
independent auditors to examine the Company's financial statements for the
fiscal year ending January 31, 1998. This selection is being presented to the
stockholders for their ratification at the annual meeting. Deloitte & Touche
examined the Company's financial statements for the fiscal year ending February
1, 1997 and February 3, 1996. 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 affirmative vote of a majority of the votes present or
represented at the annual meeting and entitled to vote by the holders of Class A
Stock and Class B Stock, voting as a single class, is required to approve the
proposal. The directors recommend that stockholders vote FOR the proposal to
ratify the selection of Deloitte & Touche LLP as the Company's independent
auditors.
Ernst & Young LLP examined the Company's financial statements for the
fiscal years ended January 29, 1994 and January 28, 1995 and was notified on
August 24, 1995 of the Company's decision to end their engagement. The reports
of Ernst & Young LLP on the Company's financial statements for the fiscal years
ended January 29, 1994 and January 28, 1995 contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. There were no disagreements with Ernst &
Young LLP on matters of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, if not resolved to the
satisfaction of Ernst &Young LLP, would have caused Ernst & Young LLP to make
reference to such matters in its reports.
The decision to change independent auditors was recommended by the
Audit Committee and ratified by the Board of Directors.
STOCKHOLDER PROPOSALS
Stockholder proposals relating to the Company's annual meeting of
stockholders to be held in 1998 must be received by the Company no later than
January 27, 1998. 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.
13
17
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
ALAN E. WILEY
April 25, 1997 Secretary
14
18
APPENDIX A
(PROXY CARD FRONT)
CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY THE CATO CORPORATION
The undersigned hereby appoints Wayland H. Cato, Jr., Alan E. Wiley and Clarice
Cato Goodyear, and each of them, with full power of substitution, attorneys and
proxies to appear and vote, as indicated below, all of the shares of Class A
Common Stock of The Cato Corporation that the undersigned would be entitled to
vote at the annual meeting of stockholders of The Cato Corporation to be held on
May 22, 1997, and at any and all adjournments thereof. The Board of Directors
recommends a vote FOR the following items:
1. ELECTION OF DIRECTORS [ ] FOR all nominees except as indicated to the
contrary
[ ] WITHHOLD AUTHORITY to vote for all nominees
Nominees: Ms. Clarice Cato Goodyear and Messrs. John P. Derham
Cato, Alan E. Wiley, Paul Fulton and James H. Shaw
(INSTRUCTION: To withhold authority to vote for any individual nominee strike
a line through that nominee's name in the list provided above.)
2. RATIFICATION OF THE ACTION OF THE BOARD OF DIRECTORS IN SELECTING
DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JANUARY 31, 1998; AND
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
19
(PROXY CARD BACK)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED,
"FOR" ALL PROPOSALS AND "FOR" ELECTION OF ALL NOMINEES FOR DIRECTOR.
DATED:_________________________________
_______________________________________
_______________________________________
Signature
Please sign exactly as your name appears
hereon. If the holder named hereon is a
corporation, partnership or other
association, please sign its name and add
your own name and title. When signing as
attorney, executor, administrator, trustee
or guardian, please also give your full
title. If shares are held jointly, EACH
holder should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY SO AS TO INSURE 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.
20
APPENDIX B
(PROXY CARD FRONT)
CLASS B COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY THE CATO CORPORATION
The undersigned hereby appoints Wayland H. Cato, Jr., Alan E. Wiley and Clarice
Cato Goodyear, and each of them, with full power of substitution, attorneys and
proxies to appear and vote, as indicated below, all of the shares of Class B
Common Stock of The Cato Corporation that the undersigned would be entitled to
vote at the annual meeting of stockholders of The Cato Corporation to be held on
May 22, 1997, and at any and all adjournments thereof. The Board of Directors
recommends a vote FOR the following items:
1. ELECTION OF DIRECTORS [ ] FOR all nominees except as indicated to the
contrary
[ ] WITHHOLD AUTHORITY to vote for all nominees
Nominees: Ms. Clarice Cato Goodyear and Messrs. John P. Derham
Cato, Alan E. Wiley, Paul Fulton and James H. Shaw
(INSTRUCTION: To withhold authority to vote for any individual nominee strike
a line through that nominee's name in the list provided above.)
2. RATIFICATION OF THE ACTION OF THE BOARD OF DIRECTORS IN SELECTING
DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JANUARY 31, 1998; AND
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
21
(PROXY CARD BACK)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED,
"FOR" ALL PROPOSALS AND "FOR" ELECTION OF ALL NOMINEES FOR DIRECTOR.
DATED:_________________________________
_______________________________________
_______________________________________
Signature
Please sign exactly as your name appears
hereon. If the holder named hereon is a
corporation, partnership or other
association, please sign its name and add
your own name and title. When signing as
attorney, executor, administrator, trustee
or guardian, please also give your full
title. If shares are held jointly, EACH
holder should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY SO AS TO INSURE 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.
