THE CATO CORPORATION
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street NW
Washington, D.C. 29549


Form 8-K


CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

     
Date of Report (Date of earliest event reported):   March 16, 2004
   

THE CATO CORPORATION


(Exact Name of Registrant as Specified in its Charter)
         
Delaware   1-31340   56-0484485

 
 
(State or Other Jurisdiction   (Commission   (I.R.S. Employer
of Incorporation)   File Number)   Identification Number)
     
8100 Denmark Road, Charlotte, North Carolina   28273-5975

 
(Address of Principal Executive Offices)   (Zip Code)

(704) 554-8510


(Registrant’s telephone number, including area code)

Not Applicable


(Former Name or Former Address, if changed since last report)

 


 

THE CATO CORPORATION

Item 7. Financial Statements and Exhibits.

       (c) Exhibits

       Exhibit 99.1 – Press Released issued March 16, 2004

Item 9. Regulation FD Disclosure; and

Item 12. Results of Operations and Financial Condition.

On March 16, 2004, The Cato Corporation issued a press release regarding its financial results for the fourth quarter and fiscal year ending January 31, 2004. A copy of this press release is attached hereto as Exhibit 99.1 and incorporated by reference herein. The information being furnished in this report (including Exhibit 99.1) is not deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any filing under the Securities Act of 1933.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

     
    THE CATO CORPORATION
     
March 18, 2004   /s/ John P. Derham Cato

 
Date   John P. Derham Cato
    Chairman, President and
    Chief Executive Officer
     
March 18, 2004   /s/ Michael O. Moore

 
Date   Michael O. Moore
    Executive Vice President
    Chief Financial Officer and Secretary

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Exhibit Index

         
Exhibit   Exhibit No.

 
Press Release issued March 16, 2004
    99.1  

4

EX-99.1
 

Exhibit 99.1

(CATO LOGO)

The CATO Corporation
     
    NEWS RELEASE
     
FOR IMMEDIATE RELEASE    
    CEO Approval ____________
For Further Information Contact:    
     Michael O. Moore    
     Executive Vice President    
     Chief Financial Officer    
     704-551-7201    

CATO REPORTS 2003 RESULTS WITH EPS DOWN 25%
4Q EPS of $.26 in Line with Previous Guidance

Provides 2004 Outlook


Charlotte, N.C. (March 16, 2004) – The Cato Corporation (NYSE: CTR) today reported net income for the year ended January 31, 2004 of $31.4 million or $1.33 per diluted share compared to net income of $45.8 million or $1.77 per diluted share for the year ended February 1, 2003, a net income decrease of 31% and an earnings per diluted share decrease of 25%. Sales for 2003 were $731.8 million as compared to 2002 sales of $732.7 million. For the year, total sales were flat and comparable store sales decreased 7%.

For the fourth quarter ended January 31, 2004, net income was $5.4 million or $.26 per diluted share compared to net income of $9.8 million or $.38 per diluted share for the fourth quarter ended February 1, 2003, a net income decrease of 45% and an earnings per diluted share decrease of 32%. Earnings for the quarter were in line with the Company’s previously published estimate. Sales for the fourth quarter were $193.1 million, as compared to sales of $191.0 million for the fourth quarter last year. Total sales for the fourth quarter increased 1% and comparable store sales decreased 5%.

“Although earnings declined in 2003 due to negative comparable store sales, the Company delivered net income of $31.4 million,” said John Cato, Chairman, President and Chief Executive Officer. “ We repurchased a large block of controlling shares at a favorable price. We opened 87 new stores, continued investing in systems for greater efficiency throughout our business, and implemented several initiatives that we believe will reduce our cost structure going forward.”

8100 Denmark Road
P.O. Box 34216
Charlotte, NC 28234
(704) 554-8510

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2003 HIGHLIGHTS

In 2003, gross margin decreased 180 basis points to 30.5% of sales; selling, general and administrative expenses increased 70 basis points to 23.8% of sales; and net income decreased to 4.3% of sales. The Company’s earnings include an after-tax charge of $1.8 million ($2.8 million pre-tax) or $.08 per diluted share related to previously announced retirement agreements with the Company’s founders. The Company ended the year with cash and short-term investments of $71.4 million, a decrease of $35.5 million from last year. The cash decrease was primarily a result of $68.3 million used for the repurchase of Company stock.

During 2003, the Company:

    Returned $14.5 million in dividends to shareholders. The Company’s annualized dividend of $.64 per share increased 7% in 2003, representing a yield of approximately 3% at the current share price;
 
    Repurchased 5.1 million shares of Class B Common stock from its founders at a 10% discount to the pre-announcement market price, a 20% reduction in outstanding shares;
 
    Repurchased 165,000 Class A Common shares at an average per share cost of $16.61. The Company currently has 1,162,050 authorized shares remaining in its repurchase program;
 
    Opened 87 stores, relocated 28 stores and closed seven stores;
 
    Continued its geographic expansion and opened stores in two new states;
 
    Increased capacity of the existing distribution center to serve 2,000 stores;
 
    Continued to leverage the product development and direct sourcing functions; and
 
    Implemented a number of new expense reduction initiatives.

2004 OUTLOOK

The Company’s goal of increasing net income and dividends by 10% annually over the long term remains unchanged. In 2004, the Company anticipates a continued challenging economic environment in many of its markets. The Company estimates 2004 earnings per diluted share to be in the range of $1.44 to $1.64, an increase of 8% to 23%, and 2004 net income to be in the range of $30.4 to $34.5 million, a 3% decrease to a 10% increase.

8100 Denmark Road
P.O. Box 34216
Charlotte, NC 28234
(704) 554-8510

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    The Company is projecting first quarter earnings per diluted share to be in the range of $.80 to $.86, an increase of 18% to 26%, and net income in the range of $16.8 million, or a 4% decrease, to $18.1 million, or a 4% increase, over comparable results for the first quarter of 2003.
 
    Comparable store sales are estimated to range from a decline of 2% to an increase of 2% over the comparable first quarter and yearly results.
 
    The Company expects to open 90 new stores during the year. The Company’s estimate reflects the impact of closing 10 stores by year-end. At this time, no stores have been identified for closure.
 
    Capital expenditures are projected to be $33 million, including $16 million for store development and $7 million for technology.
 
    Depreciation is expected to be $21.7 million for the year.
 
    The effective tax rate is expected to be 36% to 37%.

The Cato Corporation is a leading specialty retailer of value-priced women’s fashion apparel operating two divisions: “Cato” and “It’s Fashion!”. The Company primarily offers exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices, every day. As of February 28, 2004, the Company operated 1,102 stores in 28 states, compared to 1,025 stores in 26 states as of March 1, 2003. Additional information on The Cato Corporation is available at www.catocorp.com.

     Statements in this press release not historical in nature including, without limitation, statements regarding the Company’s expected savings from cost reduction initiatives and all statements in the paragraph and bullet points that appear under the heading “2004 Outlook,” including statements regarding the Company’s expected financial results and other operating statistics for the first quarter or the full year of fiscal 2004, are considered “forward-looking” within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations that are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those contemplated by the forward-looking statements. Such factors include, but are not limited to, the following: general economic conditions; competitive factors and pricing pressures; the Company’s ability to predict fashion trends; consumer apparel buying patterns; adverse weather conditions and inventory risks due to shifts in market demand, and other factors that may be discussed from time to time in the Company’s reports on Form 10-K, 10-Q or 8-K filed with, or furnished to, the SEC. The Company does not undertake to publicly update or revise the forward-looking statements even if experience or future changes make it clear that the projected results expressed or implied therein will not be realized. The Company is not responsible for any changes made to this press release by wire or Internet services.

# # #

8100 Denmark Road
P.O. Box 34216
Charlotte, NC 28234
(704) 554-8510

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THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE PERIODS ENDED JANUARY 31, 2004 AND FEBRUARY 1, 2003

(Dollars in thousands, except per share data)
                                                                     
        Quarter Ended   Twelve Months Ended
       
 
        January 31,   %   February 1,   %   January 31,   %   February 1,   %
        2004   Sales   2003   Sales   2004   Sales   2003   Sales
       
 
 
 
 
 
 
 
REVENUES
                                                               
 
Retail sales
  $ 193,077       100.0 %   $ 191,008       100.0 %   $ 731,770       100.0 %   $ 732,742       100.0 %
 
Other income (principally finance, late fees and layaway charges)
    3,858       2.0 %     3,889       2.0 %     15,497       2.1 %     15,589       2.1 %
 
 
 
 
 
   
Total revenues
    196,935       102.0 %     194,897       102.0 %     747,267       102.1 %     748,331       102.1 %
 
 
 
 
 
GROSS MARGIN (Memo)
    52,847       27.4 %     55,165       28.9 %     223,369       30.5 %     236,397       32.3 %
COSTS AND EXPENSES, NET
                                                               
 
Cost of goods sold
    140,230       72.6 %     135,843       71.1 %     508,401       69.5 %     496,345       67.7 %
 
Selling, general and administrative
    43,383       22.5 %     38,937       20.4 %     174,202       23.8 %     168,914       23.1 %
 
Depreciation
    4,969       2.6 %     4,409       2.3 %     18,695       2.6 %     14,913       2.0 %
 
Interest and other income, net
    (92 )     -0.1 %     272       0.1 %     (3,308 )     -0.5 %     (3,680 )     -0.5 %
 
 
 
 
 
   
Cost and expenses, net
    188,490       97.6 %     179,461       93.9 %     697,990       95.4 %     676,492       92.3 %
 
 
 
 
 
Income Before Income Taxes
    8,445       4.4 %     15,436       8.1 %     49,277       6.7 %     71,839       9.8 %
Income Tax Expense
    3,066       1.6 %     5,588       2.9 %     17,888       2.4 %     26,006       3.5 %
 
 
 
 
 
Net Income
  $ 5,379       2.8 %   $ 9,848       5.2 %   $ 31,389       4.3 %   $ 45,833       6.3 %
 
 
 
 
 
Basic Earnings Per Share
  $ 0.26             $ 0.39             $ 1.35             $ 1.80          
 
   
             
             
             
         
Basic Weighted Average Shares
    20,545,519               25,550,677               23,240,581               25,465,543          
 
   
             
             
             
         
Diluted Earnings Per Share
  $ 0.26             $ 0.38             $ 1.33             $ 1.77          
 
   
             
             
             
         
Diluted Weighted Average Shares
    20,890,840               25,961,237               23,651,419               25,947,457          
 
   
             
             
             
         

THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

                     
        January 31,   February 1,
        2004   2003
        (Unaudited)    
       
 
ASSETS
               
Current Assets
               
 
Cash and cash equivalents
  $ 23,857     $ 32,065  
 
Short-term investments
    47,545       74,871  
 
Accounts receivable — net
    52,714       54,116  
 
Merchandise inventories
    97,292       93,457  
 
Other current assets
    5,992       6,382  
 
   
     
 
Total Current Assets
    227,400       260,891  
Property and Equipment — net
    114,367       113,307  
Other Assets
    9,806       9,212  
 
   
     
 
   
TOTAL
  $ 351,573     $ 383,410  
 
   
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current Liabilities
  $ 114,492     $ 98,282  
Noncurrent Liabilities
    21,470       14,964  
Long Term Debt
    21,500       0  
Stockholders’ Equity
    194,111       270,164  
 
   
     
 
   
TOTAL
  $ 351,573     $ 383,410  
 
   
     
 

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