UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
o
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
x
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to § 240.14a-12
Stage
Stores, Inc.
(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.
o Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1.
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Title
of each class of securities to which transaction
applies:_______________
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2.
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Aggregate
number of securities to which transaction
applies:_______________
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3.
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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):_______________
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4.
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Proposed
maximum aggregate value of
transaction:_______________
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5.
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Total
Fee Paid:_______________
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o
Fee paid previously with preliminary materials.
o
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.
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1.
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Amount
Previously Paid:_______________
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2.
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Form,
Schedule or Registration Statement
No.:_______________
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3.
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Filing
Party:_______________
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4.
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Date
Filed: ________________
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______________________________________
STAGE
STORES INC.
BEALLS
n
PALAIS ROYAL n
PEEBLES n
STAGE
______________________________________
Notice
of 2006
Annual
Meeting
and
Proxy
Statement
STAGE
STORES INC.
BEALLS
n
PALAIS ROYAL n
PEEBLES n
STAGE
10201
Main Street
Houston,
Texas 77025
May
5,
2006
Dear
Shareholder:
On
behalf
of the Board of Directors, it is my pleasure to invite you to attend the
2006
Annual Meeting of Shareholders of Stage Stores, Inc. on Thursday, June 1,
2006,
at 1:00 p.m. local time, in Houston, Texas. Information about the Annual
Meeting
is presented in the following pages.
The
Annual Meeting will begin with a discussion and vote on the matters set forth
in
the accompanying Notice of 2006 Annual Meeting of Shareholders and Proxy
Statement, followed by a discussion on any other business matters that are
properly brought before the meeting.
Your
vote
is very important. We encourage you to read the Proxy Statement and vote
your
shares as soon as possible. Whether or not you plan to attend, you can be
sure
your shares are represented at the Annual Meeting by promptly completing,
signing, dating and returning your Proxy Card in the enclosed envelope or
by
submitting your vote and proxy by telephone or by the Internet.
If
you
will need special assistance at the Annual Meeting because of a disability,
please contact Bob Aronson, Vice President, Investor Relations, at (800)
579-2302.
Thank
you
for your continued support of Stage Stores, Inc. We look forward to seeing
you
on June 1st.
Sincerely,
James
R.
Scarborough
Chairman
of the Board and Chief Executive Officer
i
TABLE
OF CONTENTS
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n
To
be voted on at the meeting
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EVERY
SHAREHOLDER’S VOTE IS IMPORTANT.
PLEASE
COMPLETE, SIGN, DATE AND RETURN
YOUR
PROXY FORM, OR SUBMIT YOUR VOTE
AND
PROXY BY TELEPHONE OR BY INTERNET,
AS
SOON AS POSSIBLE.
STAGE
STORES INC.
BEALLS
n
PALAIS ROYAL n
PEEBLES n
STAGE
NOTICE
OF 2006 ANNUAL MEETING OF SHAREHOLDERS
To
the
Shareholders:
The
2006
Annual Meeting of Shareholders of Stage Stores, Inc. (the “Company”) will be
held at the offices of the Company, 10201 Main Street, Houston, Texas 77025
on
Thursday, June 1, 2006, at 1:00 p.m. local time. The shareholders will vote
on the following matters:
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1.
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Election
of eight directors for a term of one year;
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2.
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Ratification
of the selection of Deloitte & Touche LLP as independent
registered public accounting firm for 2006;
and
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3.
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Action
upon such other matters as may properly come before the Annual
Meeting or
any adjournment thereof.
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The
Board
of Directors has fixed the close of business on April 5, 2006 as the record
date
for the determination of shareholders entitled to notice of, and to vote
at, the
Annual Meeting.
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By
Order of the Board of Directors
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Michael
E. McCreery
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Executive
Vice President,
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Chief
Financial Officer, and Secretary
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Stage
Stores, Inc.
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May
5,
2006
In
accordance with the Company’s security procedures, all persons attending the
Annual Meeting must present an Admission Card and picture identification.
If you
are a shareholder of record and plan to attend the meeting in person, please
bring the Admission Card you received in this proxy mailing with you to the
meeting. For security purposes, bags and purses will be subject to search
at the
door.
PROXY
STATEMENT
GENERAL
This
Proxy Statement is furnished in connection with the solicitation of proxies
by
Stage Stores, Inc. (the “Company”) on behalf of the Board of Directors (the
“Board”) for the 2006 Annual Meeting of Shareholders (the “Annual Meeting”)
which will be held at the principal executive offices of the Company,
10201 Main
Street, Houston, Texas 77025, on Thursday, June 1, 2006, at 1:00 p.m. local
time.
This
Proxy Statement and Proxy Card are first being sent to the shareholders
on or
about May 5, 2006. The proxy will be voted at the Annual Meeting if the
signer
of the proxy or shareholder submitting his or her vote and proxy by telephone
or
by the Internet was a shareholder of record on April 5, 2006 (the “Record
Date”).
VOTING
The
holders of common stock are entitled to one vote per share on all matters
to be
voted upon by the shareholders. On
the
Record Date, there were 26,613,717 shares of common stock, par value $0.01,
outstanding and entitled to vote at the Annual Meeting. A list of the
shareholders entitled to vote at the Annual Meeting will be available for
inspection at the Annual Meeting for purposes relating to the Annual
Meeting.
You
can
ensure that your shares are voted at the Annual Meeting by submitting your
instructions by completing, signing, dating and returning the enclosed Proxy
Card in the envelope provided or by submitting your vote and proxy by telephone
or by the Internet. Submitting your instructions by Proxy Card, by telephone,
or
by the Internet will not affect your right to attend the Annual Meeting and
vote. A shareholder who gives a proxy may revoke it at any time before it
is
exercised by voting in person at the Annual Meeting, by delivering a subsequent
proxy, or by notifying the Inspectors of Election in writing of such
revocation.
The
representation in person or by proxy of a majority of the outstanding shares
of
common stock entitled to a vote at the Annual Meeting is necessary to provide
a
quorum for the transaction of business at the Annual Meeting. Shares can
only be
voted if the shareholder is present in person or is represented by a properly
signed proxy or by a vote and proxy submitted by telephone or by the Internet.
Each shareholder’s vote is very important. Whether or not you plan to attend the
Annual Meeting in person, please sign and promptly return the enclosed Proxy
Card or submit your vote and proxy by telephone or by the Internet. All signed
and returned proxies and votes and proxies submitted by telephone or by the
Internet will be counted towards establishing a quorum for the Annual Meeting,
regardless of how the shares are voted.
A
shareholder of record on the Record Date may vote in any of the following
four
ways:
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by
toll-free number at 1-866-540-5760;
or
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by
the Internet at http://www.proxyvoting.com/SSI;
or
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by
completing and mailing the Proxy Card;
or
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by
written ballot at the Annual
Meeting.
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If
you
vote by the Internet or by telephone, your vote must be received by
11:59 p.m. Eastern Time on May 31st,
the day
before the Annual Meeting. Your shares will be voted as you indicate. If
you
return your Proxy Card, but you do not indicate your voting preferences,
the
proxies will vote your shares FOR Items 1 and 2 and in their discretion for
Item 3.
If
your
shares are held in a brokerage account in your broker’s name (this is called
street name), you should follow the voting directions provided by your broker
or
nominee. You may complete and mail a voting instruction card to your broker
or
nominee or, in most cases, submit voting instructions by mail, by telephone
or
by the Internet. Your shares should be voted by your broker or nominee as
you
have directed.
The
Company will pass out written ballots to anyone who wants to vote at the
Annual
Meeting.
For
additional information concerning the manner of proxy solicitation and voting,
please see “Additional Information” on page 25 of this Proxy
Statement.
MATTERS
TO BE ACTED UPON
ITEM
1 - ELECTION OF DIRECTORS
INFORMATION
RELATING TO DIRECTORS, NOMINEES AND
EXECUTIVE OFFICERS
In
General
At
the
Annual Meeting, eight Directors are to be elected to hold office until the
2007
Annual Meeting and until their successors have been elected and have qualified.
Information concerning the eight nominees is set forth below. All nominees
are
currently Directors of the Company. The Board has determined that the following
six directors satisfy the New York Stock Exchange’s definition of independence
as well as the Company’s more stringent director independence guidelines: Scott
J. Davido, Michael L. Glazer, John T. Mentzer, Margaret T. Monaco, William
J.
Montgoris and Sharon B. Mosse. The Company’s Corporate Governance and Nominating
Committee recommended all of them for re-election. The Board knows of no
reason
why any nominee may be unable to serve as a Director.
Your
Board of Directors recommends a vote FOR each nominee for Director set forth
below.
The
following information pertains to each nominee’s (i) age as of April 5,
2006, (ii) principal occupations for the past five years, and
(iii) directorships in other public companies:
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Name
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Age
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Positions
Currently Held
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James
R. Scarborough
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55
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Chairman,
Chief Executive Officer
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Michael
E. McCreery
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57
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Executive
Vice President, Chief Financial Officer, Director
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Scott
J. Davido
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44
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Director,
Chairman of Audit Committee
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Michael
L. Glazer
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57
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Director,
Chairman of Compensation Committee
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John
T. Mentzer
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54
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Director,
Chairman of Corporate Governance and Nominating
Committee
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Margaret
T. Monaco
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58
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Director
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William
J. Montgoris
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59
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Director,
Lead Independent Director
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Sharon
B. Mosse
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55
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Director
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Mr.
Scarborough
has been
Chairman of the Board since August 24, 2001. He joined the Company’s predecessor
as President and Chief Executive Officer in August of 2000. He served as
President of the Company until February 20, 2006. Between 1996 and 2000,
Mr.
Scarborough was President and Chief Executive Officer of Busy Body, Inc.
Busy
Body, Inc. filed a petition under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of Texas Houston
Division on May 2, 2001.
Mr.
McCreery
has been
a Director of the Company since August 24, 2001. He joined the Company’s
predecessor as Executive Vice President and Chief Financial Officer in February
of 2001. From 1998 to 2001, Mr. McCreery was Senior Vice President and
Chief Financial Officer of Levitz Furniture Company.
Mr. Davido
has been
a Director since August 24, 2001. Since February 1, 2006, he has served as
the
Executive Vice President and Chief Financial Officer of Calpine Corporation.
From April 1, 2004 until February 1, 2006, he served as Executive Vice President
and President, Northeast Region, of NRG Energy, Inc. From October of 2002
until
April 1, 2004, he served as Senior Vice President, General Counsel of NRG
Energy, Inc. From March of 1999 to May of 2002, he served as Executive Vice
President, Chief Financial Officer, Treasurer and Secretary of The Elder-Beerman
Stores Corp.
Mr. Glazer
has been
a Director since August 24, 2001. Since August 2005, he has served as Managing
Director of Team Neu, located in Pittsfield, Massachusetts. From May 1996
until
August 2005, he served as President and Chief Executive Officer of KB Toys,
Inc., which filed a petition under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware on January 14,
2004
and emerged from bankruptcy on August 29, 2005.
Mr.
Mentzer
has been
a Director since August 24, 2001. Since January of 1994, he has been a
professor of Business Policy in the Department of Marketing and Logistics
at the
University of Tennessee. Professor Mentzer is currently the Bruce Chair of
Excellence in Business and Executive Director, Integrated Value Chain Forums.
He
is also President of JTM & Associates, a consulting firm.
Ms.
Monaco
has been
a Director since June 3, 2004. She returned to the position of Principal of
Probus Advisors, a management and financial consulting firm which she founded
in
June of 1993, in October of 2003. From April of 1999 until October of 2003,
Ms. Monaco served as the Chief Operating Officer of KECALP Inc. and Merrill
Lynch Ventures LLC. She was KECALP Inc.’s Chief Administrative Officer from
April of 1998 until April of 1999. Ms. Monaco is also a Director of Barnes
and
Noble, Inc.
Mr.
Montgoris
has been
a Director since June 3, 2004. He retired from Bear Stearns in June of
1999. From June of 1996 until June of 1999, Mr. Montgoris served as Chief
Operating Officer of Bear Stearns. From June of 1993 until June of 1996,
he
served as Chief Financial Officer of Bear Stearns. Mr. Montgoris is a
Trustee of five funds within The Reserve Funds family of money market mutual
funds.
Ms.
Mosse
has been
a Director since October 4, 2004. Since January of 2005, she has served as
Chief
Marketing Officer of Red Door Spa Holdings-Elizabeth Arden. From May of 2002
until January of 2005, Ms. Mosse served as President of Strategic Marketing
Group, Inc., a marketing consulting firm which she founded in May of 2002.
From
May of 2000 until May of 2002, she served as Chief Marketing Officer for
Barnes
& Noble, Inc.
SECURITY
OWNERSHIP
Security
Ownership of Certain Beneficial Owners
The
following table shows information regarding beneficial ownership of the
Company’s common stock by any person or entity who is known by the Company to be
the beneficial owner of more than five percent (5%) of the Company’s outstanding
common stock as of April 5, 2006. As of April 5, 2006, there were 26,613,717
shares of common stock outstanding.
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Name
and Address
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Number
of Shares
Beneficially Owned
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Percent
of Class
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Paradigm
Capital Management, Inc.
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1,869,878
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7.0%
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(1)
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Nine
Elk Street
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Albany,
NY 12207
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AXA
Financial, Inc.
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1,584,760
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6.0%
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(2)
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1290
Avenue of the Americas
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New
York, NY 10104
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Wellington
Management Company, LLP
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1,418,576
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5.3%
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(3)
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75
State Street
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Boston,
MA 02109
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(1)
The
information is based on the Schedule 13G/A filed
with the Securities and Exchange Commission on February 15, 2006 by
Paradigm Capital Management reporting on beneficial ownership as of December
31,
2005. According to the filing, the reporting person has sole voting and
investment power with respect to 1,869,878 shares.
(2)
The
information is based on the Schedule 13G filed with the Securities and Exchange
Commission on February 14, 2006 by AXA Financial Inc. reporting on beneficial
ownership as of December 31, 2005. In
addition to AXA Financial, Inc., affiliates on the filing are AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA Courtage Assurance Mutuelle
and AXA. According to the filing, the reporting persons have sole voting
power
with respect to 820,286 shares and sole investment power with respect to
1,584,760 shares.
(3)
The
information is based on the Schedule 13G filed with the Securities and Exchange
Commission on February 14, 2006 by Wellington Management, LLP reporting on
beneficial ownership as of December 31, 2005. According to the filing, the
reporting person has shared voting power with respect to 1,133,425 shares
and
shared investment power with respect to 1,418,576 shares.
Security
Ownership of Directors and Executive Officers
The
following table shows the number of shares of the Company’s common stock that
are beneficially owned as of April 5, 2006 by each of the Company’s Directors
and each Named Executive Officer listed in the Summary Compensation Table,
as
well as the number of shares beneficially owned by all of the Company’s
Directors and executive officers as a group. As of April 5, 2006, there were
26,613,717 shares of common stock outstanding. Other than Mr. Scarborough,
who
owns approximately 5.7%, each Director and Named Executive Officer beneficially
owns less than one percent of the Company’s outstanding common stock. All
Directors and Executive Officers as a group (19 persons) own approximately
8.3%
of the Company’s common stock. The table also includes information about stock
options exercisable within 60 days, Deferred Stock Units and Performance
Shares
credited to the accounts of each Director and Named Executive Officer under
various compensation plans.
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Name
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Common
Stock
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Stock
Options Exercisable Within 60 Days
|
Deferred
Stock Units (1)
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Performance
Shares
(2)
|
||||
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James
R. Scarborough
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15,000
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1,499,999
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-
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39,510
|
||||
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Michael
E. McCreery
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7,500
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159,939
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-
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9,922
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||||
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Dennis
E. Abramczyk
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-
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37,500
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-
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7,329
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||||
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Cynthia
S. Murray
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15,000
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(3)
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22,500
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-
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6,928
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|||
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Ernest
R. Cruse
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-
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-
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-
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7,406
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||||
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Scott
J. Davido
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1,308
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11,251
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1,117
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-
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||||
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Michael
L. Glazer
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4,500
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33,749
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-
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-
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||||
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John
T. Mentzer
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900
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33,749
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2,031
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-
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||||
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Margaret
T. Monaco
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2,100
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15,000
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-
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-
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William
J. Montgoris
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1,972
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15,000
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-
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-
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Sharon
B. Mosse
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-
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7,500
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2,031
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-
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||||
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Walter
S. Salmon
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2,805
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33,749
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-
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-
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All
Directors and Executive Officers as a group (19 persons)
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55,585
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2,161,919
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5,179
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95,206
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Unless
otherwise indicated by footnote, individuals have sole voting and investment
power.
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(1)
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Deferred
Stock Units (“DSU”) are held under the Stage Stores, Inc. 2003
Non-Employee Director Equity Compensation Plan. Each DSU is equal
in value
to a share of Company stock, but does not have voting rights. Individuals
do not have investment power with respect to DSUs. The number of
DSUs
credited to a Director’s account will be adjusted, as appropriate, to
reflect any stock split, any dividend paid in cash and any dividend
payable in shares of Company stock. At the election of the Director
upon
termination of his or her service as a Director, the DSUs will
be
distributed to the Director either (i) in cash or (ii) in shares
of
Company stock.
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(2)
|
Performance
Shares are granted under the Stage Stores, Inc. Amended and Restated
2001
Equity Incentive Plan. These performance shares have a three-year
performance period and the payout is contingent upon the relative
performance of the value of the Company’s common stock versus a designated
comparator group over the three-year period. Depending on actual
shareholder return performance at the end of the three year performance
period, the actual aggregate number of shares that could be issued
ranges
from zero to a maximum of two times the amount reflected. Performance
shares earned for a given performance period will only be issued
to a
participant following the Compensation Committee’s review and
certification of the actual performance results for the applicable
performance period.
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(3)
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Represents
shares of non-vested stock grant with a three-year cliff vesting
on August
2, 2007.
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INFORMATION
RELATING TO THE BOARD OF DIRECTORS AND
COMMITTEES
In
General
The
Board
currently consists of nine Directors, seven of whom are Independent Directors
as
that term is defined under NYSE (Company’s common stock) and NASDAQ (Company’s
warrants) listing standards and the Company’s Corporate Governance Guidelines,
and two of whom are not Independent Directors by virtue of the fact that
they
are the Company’s Chief Executive Officer and Chief Financial Officer,
respectively.
After
five years of dedicated service to the Company as a Director, Walter Salmon,
having reached the mandatory retirement age of 75 under the Company’s Corporate
Governance Guidelines, is not standing for reelection to the Board at the
Annual
Meeting. On January 3, 2006, the Board retained the services of Spencer Stuart
to assist it in the recruitment of a new Director. Several potential candidates
have been identified and the search process is ongoing.
Corporate
Governance
Corporate
Governance Guidelines. The
Board
has adopted written Corporate Governance Guidelines (the “Governance
Guidelines”)
to
assist the Board in the exercise of its corporate governance responsibilities.
The purpose of the Governance Guidelines is to provide a structure within
which
Directors and the Company’s management can monitor the effectiveness of policy
and decision making both at the Board and management level, with a view to
enhancing shareholder value over the long term. The Governance Guidelines
are
available on the Company’s website at www.stagestoresinc.com.
They can
be accessed by clicking “Investor Relations”, then “Corporate Governance”, then
“Corporate Governance Guidelines.”
Director
Independence. As
seven
of the Company’s nine Directors are Independent Directors, the Board has
satisfied the Governance Guidelines requirement that a majority of the Directors
must be Independent Directors and that no more than two of the Company’s
executive officers may serve on the Board at the same time. For a Director
to be
considered an Independent Director, the Board must determine that the Director
does not have any direct or indirect material relationships with the Company.
The Board has established guidelines to assist it in determining Director
independence, which are more stringent than the independence requirements
of the
New York Stock Exchange’s listing standards. The Company’s independence
guidelines are set forth in Article III.C. of the Governance Guidelines at
pages
3-5.
All
members of the Audit, Compensation, and Corporate Governance and Nominating
Committees must be, and they are, Independent Directors, as defined by the
Governance Guidelines. Members of the Audit Committee must also satisfy,
and
they do satisfy, a separate Securities and Exchange Commission independence
requirement, which provides that they may not accept directly or indirectly
any
consulting, advisory, or other compensatory fee from the Company or any of
its
subsidiaries other than their Directors’ compensation.
Lead
Independent Director. The
Governance Guidelines provide that if the Chairman of the Board is not an
Independent Director, the Independent Directors must appoint a Lead Independent
Director. Since Mr. Scarborough, the Chairman of the Board, is not an
Independent Director, the Independent Directors have appointed Mr. Montgoris
as
the Lead Independent Director. The Lead Independent Director is required
to
perform the following duties:
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·
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Coordinate
the activities of the Independent
Directors;
|
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·
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Provide
the Chairman of the Board with input on agendas for the Board and
Board
committee meetings;
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·
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Coordinate
and develop the agenda for, and chair executive sessions and other
meetings of, the Independent
Directors;
|
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·
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Facilitate
communications between the Chairman of the Board and the other
members of
the Board, including communicating other members’ requests to call special
meetings of the Board;
|
|
·
|
Discuss
the results of the Chief Executive Officer’s performance evaluation with
the Chairman of the Compensation Committee;
and
|
|
·
|
Convey
to the Chief Executive Officer, together with the Chairman of the
Compensation Committee, the results of the Chief Executive Officer’s
performance evaluation.
|
Code
of Ethics for Senior Officers. The
Board, in order to promote ethical conduct in the practice of financial
management throughout the Company, has adopted a Code of Ethics for Senior
Officers (the “Code”). The Company believes that, in addition to the Chief
Executive Officer, the Chief Financial Officer and the Controller each holds
an
important and elevated role in corporate governance. The Code is designed
to
deter wrongdoing and provides principles to which the Company’s principal
executive officer, principal financial officer, principal accounting officer
or
controller, or persons performing similar functions are expected to adhere
and
advocate. These principles embody rules regarding individual and peer
responsibilities, as well as responsibilities to the shareholders, the public
and others who have a stake in the Company’s continued success and reputation
for excellence. The Code is available on the Company’s website at www.stagestoresinc.com.
It can
be accessed by clicking “Investor Relations”, then “Corporate Governance”, then
“Code of Ethics for Senior Officers.” The Company intends to disclose future
amendments to certain provisions of the Code, or waivers of such provisions
granted to Directors and executive officers, if any, on its website within
four
business days following the date of such amendment or waiver or as otherwise
may
be required by the SEC.
Code
of Ethics and Business Conduct. The
Board
has also adopted a Code of Ethics and Business Conduct (the “Code of Ethics”),
which is the basic set of policies and procedures governing the behavior
of all
Directors, executive officers, and other employees of the Company (each employee
an “Associate” and collectively the “Associates”) in conformance with Section
303A.10 of the NYSE Listed Company Manual and NASDAQ Rule 4350(n). It is
the
Company’s policy to adhere to the highest standards of business ethics in all of
its business activities. When Associates are engaged in any activity concerning
the Company, its customers, competitors, suppliers, other Associates,
shareholders or the general public, they must maintain standards of
uncompromising integrity and conduct themselves in a professional manner
with a
positive, supportive attitude about the Company. The Code of Ethics is available
on the Company’s website at www.stagestoresinc.com.
It can
be accessed by clicking “Investor Relations”, then “Corporate Governance”, then
“Code of Ethics and Business Conduct.” The Company intends to disclose future
amendments to certain provisions of the Code of Ethics, or waivers of such
provisions granted to Directors and executive officers, if any, on its website
within four business days following the date of such amendment or waiver
or as
otherwise may be required by the NYSE, NASDAQ or the SEC.
Non-Accounting
Complaints. The
Company has established procedures to enable anyone who has a concern about
a
violation of the Code of Ethics and Business Conduct or any other Company
policy
to report that concern through normal Company channels or anonymously. An
Anonymous Ethics Hotline is maintained by an independent third party and
is
available 24 hours a day, 7 days a week.
Accounting
Complaints.
The Audit Committee has established procedures for (i) the receipt,
retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters, and (ii) the
confidential, anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters. These procedures,
which
are incorporated into the Company’s Code of Ethics and Business Conduct,
(i) set forth a statement about the Company’s commitment to comply with the
laws; (ii) encourage employees to inform the Company of conduct amounting
to a violation of the applicable standards; (iii) describe prohibited conduct;
(iv) set forth compliance procedures that employees can easily use, including
making anonymous complaints, and (v) provide assurances that there will be
no
retaliation for reporting suspected violations.
Stock
Ownership by Directors
The
Board
believes that Directors should be shareholders and have a financial stake
in the
Company in an amount that a Director deems appropriate. While the Board does
not
believe it appropriate to specify the level of stock ownership for individual
Directors, it is expected that each Director will develop and maintain a
stock
position in the Company with an original investment of at least $50,000 (the
“Original Investment”). In determining whether the Director has achieved the
Original Investment, the Director can include (i) a Director’s tax basis in
any stock acquired by the Director in open market purchases, and (ii) the
amount of any Director fees which the Director has designated to be used
for the
acquisition of non-vested stock or Deferred Stock Units under the Company’s 2003
Non-Employee Director Equity Compensation Plan. Directors have three years
from
the date of their initial election to the Board to achieve the Original
Investment.
Directors
Meetings
Board
Meetings.
The
Board held four regular and three special meetings during 2005. During 2005,
no
current Director attended fewer than 75% of the aggregate of the total number
of
meetings of the Board and of meetings held by committees of the Board on
which
he or she was a member. In addition to regularly scheduled meetings, a number
of
Directors were involved in numerous informal meetings with management, offering
valuable advice and suggestions on a broad range of corporate
matters.
Executive
Sessions. As
described in the Governance Guidelines, the Independent Directors meet in
regularly scheduled executive sessions without members of the Company’s
management.
Annual
Meeting. It
is the
Board’s policy that Directors should attend the Company’s annual meeting of the
shareholders absent exceptional cause. Last year, all Directors attended
the
annual meeting of shareholders.
Standing
Committees
The
Board
has the following standing committees: Audit, Compensation, and Corporate
Governance and Nominating. Each committee operates under a written charter
which
is periodically reviewed by the respective committee and the Corporate
Governance and Nominating Committee.
Audit
Committee
In
General.
The
members of the Audit Committee are Scott Davido (Chairman), William Montgoris
and Walter Salmon, all of whom are Independent Directors. It is anticipated
that, if re-elected, John Mentzer, an Independent Director, will replace
Walter
Salmon as the third member of the Audit Committee upon Mr. Salmon’s retirement
from the Board at the Annual Meeting. The primary function of the Audit
Committee is to oversee the accounting and financial reporting processes
of the
Company and the audits of the financial statements and internal controls
of the
Company. The Audit Committee’s primary responsibilities and duties are (i) to
monitor the integrity of the Company’s financial process and systems of internal
controls regarding finance, accounting and legal compliance, (ii) to select,
retain, terminate, determine compensation and oversee the work of the Company’s
independent registered public accounting firm, (iii) to ensure the independence
and monitor the performance of the Company’s independent registered public
accounting firm and the performance of the Company’s internal auditing
department, (iv) to provide an avenue of communication between the independent
registered public accounting firm and the Company’s internal auditing
department, and (v) to provide an avenue of communication among the independent
registered public accounting firm, management, the Company’s internal auditing
department and the Board. The Audit Committee has the authority to conduct
any
investigation appropriate to fulfilling its responsibilities and duties,
and it
has direct access to the independent registered public accounting firm as
well
as anyone in the Company. The Audit Committee has the ability to engage,
at the
Company’s expense, independent counsel and other advisers as it determines
necessary to carry out its duties. The Audit Committee met thirteen times
in
2005. The Audit Committee Report begins on page 22.
Audit
Committee Charter. The
Audit
Committee’s Charter is available on the Company’s website at www.stagestoresinc.com.
It can
be accessed by clicking “Investor Relations”, then “Corporate Governance”, then
“Audit Committee Charter.”
Audit
Committee Financial Expert.
The
Board has determined that Messrs. Davido, Montgoris and Salmon are Audit
Committee Financial Experts, as that term is defined by the SEC.
Compensation
Committee
In
General.
The
members of the Compensation Committee are Michael Glazer (Chairman), John
Mentzer, Margaret Monaco, and Sharon Mosse, all of whom are Independent
Directors. The primary function of the Compensation Committee is to administer
the cash salary, bonus and other incentive compensation programs for the
executive officers of the Company. The Compensation Committee met five times
in
2005. The Compensation Committee Report begins on page 12.
Compensation
Committee Charter. The
Compensation Committee’s Charter is available on the Company’s website at
www.stagestoresinc.com.
It can
be accessed by clicking “Investor Relations”, then “Corporate Governance”, then
“Compensation Committee Charter.”
Corporate
Governance and Nominating Committee
In
General.
The
members of the Corporate Governance and Nominating Committee are John Mentzer
(Chairman), Scott Davido, Michael Glazer, Margaret Monaco, William Montgoris
and
Walter Salmon, all of whom are Independent Directors. The
Corporate Governance and
Nominating Committee’s
primary functions are (i) to maintain and review the Governance Guidelines
and propose changes to the Governance Guidelines as corporate governance
developments warrant, (ii) to consider any Director candidates recommended
by
shareholders, (iii) to identify, recruit and recommend potential candidates
for nomination as Directors to the Board and to nominate Directors for
membership on Board committees, (iv) to evaluate the overall performance
of the
Board, and (v) to report annually to the Board on the status of the Chief
Executive Officer’s succession plan. The Corporate Governance and
Nominating Committee
assists the Board in fulfilling its corporate governance and oversight
responsibilities by reviewing corporate governance issues that may be brought
before the Board, by exercising oversight over the Governance Guidelines,
by
nominating qualified individuals as Directors and reviewing their performance,
and by reviewing applicable laws and regulations related to corporate governance
matters. Annually, the Corporate Governance and
Nominating Committee
evaluates the overall performance of the Board and the Governance Guidelines.
Periodically, the Corporate Governance and
Nominating Committee
reviews the compensation paid to the Directors. The Corporate Governance
and
Nominating Committee
met three times during 2005.
Corporate
Governance and Nominating Committee Charter. The
Corporate Governance and
Nominating Committee’s
Charter is posted on the Company’s website at www.stagestoresinc.com.
It can
be accessed by clicking “Investor Relations”, then “Corporate Governance”, then
“CG&NC Charter”.
Evaluation
of the Chairman, the Board and Individual Directors. The
Corporate Governance and
Nominating Committee
is responsible for establishing the evaluation criteria and implementing
the
process for the annual evaluation of the Chairman, the Board and the individual
Directors. Each Director evaluates the Chairman, the Board and the other
Directors. With respect to the Chairman and the Board, the evaluations are
of
the Chairman and the Board’s overall performance as a whole and specifically
review areas in which the Board believes a better contribution could be made.
The results of the evaluations of the Board and the Chairman are reported
to the
entire Board by the Lead Independent Director. With respect to the evaluation
of
individual Directors, the purpose of the evaluation is to increase the corporate
governance effectiveness of the Board, not to target individual Directors.
The
results of the individual Director evaluations are communicated to the
respective Directors by the Lead Independent Director and, in the case of
the
Lead Independent Director, by outside counsel.
Evaluation
of the Guidelines, Committee Charters, Corporate Governance Policies and
Related
Party Transactions.
With
input from the other Directors, the Corporate Governance and
Nominating Committee
reports annually to the Board on its evaluation of the Governance Guidelines,
the committee charters, any other corporate governance policies, and any
related
party transactions (transactions involving the Company and any executive
officer, Director, employee or their affiliates and immediate families).
Director
Qualifications; Process for Identifying and Evaluating
Nominees. Nominees
for Director must possess the following minimum qualifications: broad
experience, wisdom, integrity, the ability to make independent analytical
inquiries, an understanding of the Company’s business environment, and a
willingness to devote adequate time to Board duties. The Corporate Governance
and
Nominating Committee
is responsible for assessing the appropriate balance of skills and
qualifications required of Directors. In identifying and evaluating nominees
for
Director, including nominees recommended by shareholders, the Corporate
Governance and
Nominating Committee
will implement such process as it deems appropriate including, in its sole
discretion, retaining a third party or third parties to identify or evaluate
or
assist in identifying or evaluating potential nominees. However, at a minimum,
each nominee for Director must (i) meet the minimum qualifications set
forth above, (ii) have at least one interview with the Corporate Governance
and
Nominating Committee
and with any other Board member who requests an interview, and
(iii) complete and sign the Company’s Director Questionnaire in a form
deemed appropriate by the Board prior to his or her nomination to the Board.
Each Director must no less than annually complete and sign a Director
Questionnaire in a form deemed appropriate by the Board. In the event any
information contained on a Director’s most recent Director Questionnaire becomes
incomplete or inaccurate, it is the responsibility of the Director to provide
complete and accurate information to the Corporate Governance and Nominating
Committee within thirty days. When
formulating its Director recommendations, the Corporate Governance and
Nominating Committee
will also consider any advice and recommendations offered by the Company’s Chief
Executive Officer and any other members of the Board.
Consideration
of Shareholder Nominees. When
formulating its Director recommendations, the Corporate Governance and
Nominating Committee
will also consider any written recommendations received from shareholders
of the
Company identifying the nominee and stating his or her qualifications. The
Corporate Governance and
Nominating Committee
evaluates all nominees for Director in the same manner regardless of the
source
of the recommendation. For the Annual Meeting of Shareholders in 2007,
recommendations for Director nominees must be submitted in writing by January
5,
2007 to the Corporate Governance and
Nominating Committee,
c/o
Michael E. McCreery, Secretary, Stage Stores, Inc., 10201 Main Street, Houston,
Texas 77025, and must include the
names
of such nominees, together with their qualifications for service as a Director
of the Company.
Succession
Planning. The
Governance Guidelines require (i) the Corporate Governance and Nominating
Committee to make an annual report to the Board on emergency as well as expected
Chief Executive Officer succession planning and (ii) the Chief Executive
Officer
to prepare, on a continuing basis, a short-term succession plan which delineates
a temporary delegation of authority to certain officers of the Company, if
all
or a portion of the executive officers of the Company should unexpectedly
become
unable to perform their duties. The short-term succession plan will be in
effect
until the Board has the opportunity to consider the situation and take action,
when necessary.
Compensation
of Directors
Directors
who are full-time employees of the Company receive no additional compensation
for serving on the Board. Directors who are not full-time employees of the
Company receive the following compensation:
Annual
Retainer.
Directors receive a $30,000 Annual Retainer, which is earned and paid pro
rata
over their term at the beginning of each month. The Annual Retainer is intended
to compensate the Director for attendance at regularly scheduled quarterly
Board
meetings, as well as periodic consultation and participation in teleconference
meetings held for periodic Board updates.
Lead
Independent Director Retainer.
In
addition to the Annual Retainer, the Lead Independent Director receives a
$70,000 Lead Independent Director Retainer, which is earned and paid pro
rata
over his or her term at the beginning of each month. The Lead Independent
Director Retainer is intended to compensate the Lead Independent Director
for
the additional duties set forth in the Governance Guidelines.
Special
Board Meeting
Fee.
Directors receive a Special Board Meeting Fee of $1,500 per meeting for their
preparation and attendance at special meetings of the Board (may be by
teleconference) called for the purpose of specific actions by the Board
(consents, resolutions, etc.) and held at times other than in conjunction
with
regular quarterly meetings of the Board. No additional meeting fee is to
be paid
for attendance at regular quarterly board meetings.
Committee
Meeting Fees.
Directors
receive (a) a Regular Committee Meeting Fee of $1,000 per meeting for their
preparation and attendance at regular quarterly meetings of the Committees
on
which they serve, and (b) a Special Committee Meeting Fee of $1,000 per meeting
for (i) their preparation and attendance at Committee meetings (may be by
teleconference) called for the purpose of specific actions by their Committees
(consents, resolutions, etc.) and held at times other than in conjunction
with
regular quarterly meetings of their Committees, and (ii) their preparation
and
attendance at “ad hoc” Board Committee assignments held at times other than in
conjunction with regular quarterly meetings of their Committees or the
Board.
Committee
Chairman Fees.
The
Chairman of the Audit Committee receives a Committee Chairman Fee of $6,000
per
year and the Chairmen of the Compensation and Corporate Governance and
Nominating Committees receive a Committee Chairman Fee of $4,000 per year.
The
Committee Chairman Fee is earned and paid pro rata over the Chairman’s term at
the beginning of each month.
Stock
Options and Restricted Stock Grants.
Upon
their initial election to the Board on August 24, 2001, Messrs. Davido,
Glazer, Mentzer and Salmon were granted options to purchase 30,000 shares
of the
Company’s common stock in three equal groupings with per share exercise prices
of $9.17, $10.00 and $10.83, respectively. Those options vest 25% of each
grouping per year over four years from the date of grant and will expire
if not
exercised ten years from the date of grant.
Upon
their election to the Board, Ms. Monaco, Mr. Montgoris and
Ms. Mosse were granted options to purchase 30,000 shares of the Company’s
common stock with an exercise price equal to the average high and low prices
of
the Company’s common stock for the five trading days prior to the date the
Director was elected to the Board (the “Base Options”). The exercise price of
Ms. Monaco’s and Mr. Montgoris’ Base Options was $25.00 and of Ms. Mosse’s Base
Options was $22.80. The Base Options will vest 25% per year over four years
from
the date of grant and will expire if not exercised within ten years from
the
date of grant.
The
options and their exercise prices reflected above have been adjusted for
the
3-for-2 stock split on August 19, 2005.
The
current Governance Guidelines provide as follows:
Initial
Grant.
Upon a
Director’s initial election to the Board, the Director will be granted, at the
Director’s election, either (a) stock options to purchase the Company’s common
stock with an exercise price equal to the average high and low prices of
the
Company’s common stock for the five trading days prior to the date the Director
is elected to the Board, or (b) restricted shares of the Company’s common stock,
in either case valued at $50,000 based on the Black Scholes Pricing Model
(the
“Initial Grant”). The Initial Grant will vest 25% per year over four years from
the date of grant and will expire if not exercised within seven years from
the
date of grant.
Reelection
Grant.
Upon a
Director’s reelection to the Board, the Director will be granted restricted
shares of the Company’s common stock valued at $100,000 based on the Black
Scholes Pricing Model (the “Reelection Grant”). The Reelection Grant will vest,
on a cliff basis, three years from the date of grant and will expire if not
exercised within seven years from the date of grant.
A
Director will forfeit any unvested Initial Grant and Reelection Grants if
the
Director ceases to be a Director at any time prior to their vesting date
other
than due to (i) the fact that the Director’s age prohibits the Director from
serving as a Director, (ii) death, or (iii) permanent disability (as determined
by the Board), at which time the unvested Initial Grant and Reelection Grants
will fully vest.
Restricted
Stock; Deferred Stock Units.
Under
the Company’s 2003 Non-Employee Director Equity Compensation Plan, a Director
may elect to receive the Annual Retainer, the Lead Independent Director
Retainer, the Committee Chairman Fee and such other compensation as the Board
may deem appropriate, as the case may be, either (a) in restricted stock,
deferred stock units, (“DSU”), cash, or a combination of restricted stock,
deferred stock units and cash at the time that such compensation is earned,
or
(b) in cash or restricted stock at a later date. Any issuance of restricted
stock in lieu of cash will be made by the Company on such terms and conditions
as the Board may establish. In any event, in order to receive restricted
stock,
a Director must, at a minimum, (a) notify the Company of his or her election
to
receive restricted stock by executing an applicable Election Form, and (b)
execute a Shareholder Agreement by which the Director agrees not to sell
any of
the restricted stock until the Director leaves the Board.
Each
DSU
is equal in value to a share of Company stock, but does not have voting rights.
Individuals do not have investment power with respect to DSUs. The number
of
DSUs credited to a Director’s account will be adjusted, as appropriate, to
reflect any stock split, any dividend paid in cash and any dividend payable
in
shares of Company stock. At the election of the Director upon termination
of his
or her service as a Director, the DSUs will be distributed to the Director
either (i) in cash, or (ii) in shares of Company stock.
Reimbursement
of Expenses.
Directors are reimbursed for actual expenses they incur while attending,
or
otherwise participating in, Board meetings, Board Committee meetings and
“ad
hoc” committee assignments.
Health
Benefits. The
Company has made arrangements with its medical provider to offer medical
and
dental coverage to the Directors and their eligible family members. The cost
to
the Directors will be the same premiums the Company’s active employees pay
through their payroll deductions.
CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
Transactions
with Management and Others
There
were no transactions between the Company and any Director or nominee for
election as a Director during 2005.
Certain
Business Relationships
Other
than those related to their employment with the Company in the case of employee
Directors James R. Scarborough and Michael E. McCreery, there were no business
relationships between the Company and any Director during 2005.
COMPENSATION
COMMITTEE REPORT
Compensation
Policies for Executive Officers
In
General.
The
Compensation Committee of the Board (the “Committee”) is comprised of the four
Directors listed below, all of whom are Independent Directors. The Committee
administers all executive officer compensation plans and approves all of
the
policies under which compensation is paid or awarded to the Company’s executive
officers, including the Named Executive Officers. The Company’s executive
officer compensation program is designed to align the interests of senior
management with those of the Company’s shareholders. It is primarily intended to
(i) provide appropriate incentives designed to aid in ensuring the
accomplishment of the Company’s performance and financial objectives, (ii) help
ensure that the Company is able to attract, motivate and retain top-quality
management personnel, and (iii) ensure that an appropriate portion of executive
officer compensation is variable and dependent upon the accomplishment of
specific performance and financial objectives as well as increases in
shareholder value.
The
Company’s basic compensation program for executive officers currently consists
of the following three elements: (i) base salary (“Base Salary”),
(ii) pay for performance (“Incentive Bonus”) and (iii) long-term performance
based incentives including stock options, restricted stock, performance shares,
and other performance based stock unit vehicles (“Equity Incentive Awards”). It
is the philosophy of the Committee to allocate a significant portion of
compensation to variable performance-based compensation in order to reward
executive officers for high achievement. As described below, each element
of the
Company’s executive compensation program has a somewhat different purpose. To
enable the Company to obtain tax deductions for the full amount of
performance-based compensation and awards under pertinent tax law, the Company’s
shareholders approved the material terms of performance goals for the five-year
period between the 2004 and 2009 annual meetings at the 2004 Annual
Meeting.
The
Committee believes that its principal responsibility is to incentivize and
reward executive officer performance that will lead to long-term enhancement
of
shareholder value. Therefore, the Committee’s judgments regarding executive
officer compensation in 2005 were primarily based upon the Committee’s
assessment of each executive officer’s leadership
performance and potential to enhance long-term shareholder value, rather
than
short term changes in the Company’s stock price.
Key
factors affecting the Committee’s judgments included the nature and scope of the
executive officer’s responsibilities and his or her effectiveness in leading the
Company’s initiatives to successfully increase customer satisfaction, enhance
Company growth, and propose, implement and ensure compliance with Company
policies. The Committee also considered the compensation practices and
performances of other major corporations that are most likely to compete
with
the Company for the services of executive officers. Based upon all factors
which
it considered relevant, the Committee considered it appropriate, and in the
best
interest of the shareholders, to set the overall level of the executive officer
Base Salary, Incentive Bonus and Equity Incentive Awards in order to enable
the
Company to continue to attract, retain and motivate the highest level of
executive officer leadership possible.
Base
Salary.
Base
Salaries for executive officers are
based
upon a combination of factors including past individual performance, competitive
salary levels,
and the individual’s potential for making significant contributions to future
Company performance.
Incentive
Bonuses.
Incentive Bonuses for executive officers and other key employees of the Company
and its subsidiaries are determined annually and paid under the Company’s Bonus
Incentive Plan. The Committee selects employees eligible to participate in
the
Bonus Incentive Plan. Each year, the Committee determines the specific annual
bonus for each executive officer of the Company. Incentive Bonuses under
the
Bonus Incentive Plan are based on (i) the Company’s Pre-Tax Income and
(ii) the Company’s comparable stores sales increases versus a designated
comparator group, or some combination of those business criteria. Normal
Incentive Bonus amounts paid can range from 0% up to 180% of Base Salary
based
upon actual results, subject to certain adjustments specified by the Committee
in writing. Incentive Bonuses are paid as soon as practicable following these
determinations, except that the Committee may require deferral of, or may
permit
a participant to elect to defer, all or part of his or her Incentive Bonus.
Equity
Incentive Awards.
Equity
Incentive Awards are long-term performance awards and are an important
performance-based component of senior executive compensation.
Equity
Incentive Awards are granted under the Company’s Amended and Restated 2001
Equity Incentive Plan (the “Plan”), which was designed to motivate executive
officers and other key employees to contribute to the long-term growth
of
shareholder value. This approach is designed to encourage the creation of
long-term shareholder value since
the
full benefit of such awards cannot be realized unless the stock price exceeds
the exercise price.
All
Equity Incentive Awards are made under the Plan.
Awards
under the Plan can include, but are not be limited to, one or more of the
following types, either alone or in any combination thereof: (i) stock
options, (ii) stock appreciation rights, (iii) restricted stock,
(iv) restricted stock units, (v) performance shares or units, or
(vi) other stock-based awards.
Perquisites.
The
Company provides its Named Executive Officers with perquisites that the Company
believes are reasonable, competitive and consistent with the Company’s overall
executive compensation plan. These perquisites include an automobile allowance
and a financial planning allowance.
Other
Compensation. The
Committee reviewed the Company’s executive retirement plans and the methods by
which benefits are earned under the plans. The Committee found the plans
to be
appropriate components of the Company’s executive officer compensation
program.
Policy
on Tax Deductibility of Compensation
Section
162(m) of the Internal Revenue Code of 1986, as amended, imposes a $1 million
limit on the amount that a public company may deduct for compensation paid
to a
company’s chief executive officer or any of the company’s four other most highly
compensated executive officers who are employed as of the end of the year.
This
limitation does not apply to compensation that meets the requirements under
Section 162(m) for “qualifying performance-based” compensation (i.e.,
compensation paid only if the individual’s performance meets pre-established
objective goals based on performance criteria approved by shareholders.)
The
Committee’s policy is to design compensation programs that further the best
interests of the Company and its shareholders and that preserve the tax
deductibility of compensation expenses. Incentive Bonuses paid to executive
officers under the Company’s Bonus Incentive Plan and stock options and
Performance Shares granted under the Company’s Amended and Restated 2001 Equity
Incentive Plan are designed to qualify as performance-based compensation.
Basis
for Chief Executive Officer Compensation
The
compensation policies described above applied to the compensation of Mr.
Scarborough in 2005. The Committee is directly responsible for making
recommendations to the Board for approval of his salary level. The overall
compensation package of Mr. Scarborough is designed to recognize the fact
that
he bears primary responsibility for effective management and operation of
the
Company’s business, the development of a successful business plan, the
implementation of changes in long-term strategy initiatives to lay the
foundation for the Company’s stable and steady growth and for increasing
shareholder value. Accordingly, a substantial portion of his compensation
is
incentive-based, providing greater compensation as the direct and indirect
financial measures of shareholder value increase.
For
2005,
Mr. Scarborough earned $990,385 in Base Salary and was awarded a $772,950
Incentive Bonus. On March 17, 2006, the Committee awarded Mr. Scarborough
55,500 stock appreciation rights and 19,500 performance shares based on his
responsibilities, prior year performance and Base Salary. The specific basis
for
the Committee’s determinations regarding Mr. Scarborough’s compensation in
2005 included the Company’s performance for the 2005 fiscal year, his leadership
role in the strategic repositioning of the Company’s assets in 2005, including,
but not limited to, his significant efforts leading up to the Company’s
acquisition of B.C. Moore & Sons, Incorporated in February of 2006, and his
commitment to shaping an agenda to enhance long-term shareholder value. Mr.
Scarborough’s Base Salary was raised to $1,000,000 effective April 3, 2005 and
will remain unchanged in fiscal 2006.
Compensation
Committee Interlocks and Insider Participation
None
of
the members of the Compensation Committee has ever been an officer or an
employee of the Company or its subsidiaries. No executive officer of the
Company
serves on any other boards of directors with any of the Company’s Directors
other than the Company’s Board.
Conclusion
In
order
to ascertain that compensation levels of executive officers are generally
reasonable and competitive, the Committee reviews compensation surveys and
certain publicly available compensation information disclosed by comparable
companies and other retailers in their proxy statements and retains the services
of outside compensation consultants. Through the programs described above,
a
significant portion of the Company’s executive officers’ compensation is linked
directly to performance. The Committee believes that existing compensation
policies and programs are competitive and effectively align executive officer
compensation with the Company’s goal of maximizing the return to
shareholders.
The
foregoing Compensation Committee Report is provided by the following Directors,
who constitute all of the members of the Compensation Committee:
|
Michael
L. Glazer (Chairman)
|
Margaret
T. Monaco
|
||
|
John
T. Mentzer
|
Sharon
B. Mosse
|
EXECUTIVE
COMPENSATION
The
following table set forth information concerning compensation for the last
three
fiscal years for services rendered by: (i) the Chief Executive Officer, and
(ii) the other four most highly compensated executive officers of the
Company at January 28, 2006 (together with Mr. Scarborough, the “Named
Executive Officers”):
SUMMARY
COMPENSATION TABLE
|
Annual
Compensation
|
Long-term
Compensation Awards
|
|||||||||||||
|
Name
and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
$ (1)
|
Other
Annual
Compensation
($)
(2)
|
Stock
Awards (3)
|
Securities
Underlying
Stock
Options
(#)
(4)
|
All
Other
Compensation
($)
(5)
|
|||||||
|
James
R. Scarborough
|
2005
|
990,385
|
772,950
|
197,332
|
-
|
47,275
|
4,025
|
|||||||
|
Chairman,
|
2004
|
930,769
|
486,638
|
163,355
|
-
|
-
|
2,622
|
|||||||
|
Chief
Executive Officer
|
2003
|
850,000
|
318,750
|
142,832
|
-
|
-
|
2,622
|
|||||||
|
|
|
|
|
|
|
|
||||||||
|
Michael
E. McCreery
|
2005
|
441,154
|
298,101
|
95,333
|
-
|
12,117
|
4,255
|
|||||||
|
Executive
Vice President and
|
2004
|
415,385
|
188,679
|
82,396
|
-
|
-
|
3,989
|
|||||||
|
Chief
Financial Officer
|
2003
|
375,000
|
121,875
|
70,205
|
-
|
-
|
3,030
|
|||||||
|
|
|
|
|
|
|
|
||||||||
|
Dennis
E. Abramczyk
|
2005
|
331,154
|
172,626
|
70,227
|
-
|
6,952
|
3,120
|
|||||||
|
Executive
Vice President,
|
2004
|
312,115
|
107,573
|
64,955
|
-
|
-
|
2,951
|
|||||||
|
Chief
Operating Officer of
|
2003
|
300,000
|
75,000
|
58,410
|
-
|
-
|
2,838
|
|||||||
|
Peebles
Division
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
||||||||
|
Cynthia
S. Murray (6)
|
2005
|
387,115
|
200,967
|
100,286
|
-
|
8,277
|
1,293
|
|||||||
|
Executive
Vice President,
|
2004
|
180,289
|
114,031
|
176,051
|
15,000
|
90,000
|
279
|
|||||||
|
Chief
Merchandising Officer of
|
|
|
|
|
|
|
|
|||||||
|
Stage
Division
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|||||||||
|
Ernest
R. Cruse
|
2005
|
339,462
|
177,779
|
127,478
|
-
|
7,284
|
2,680
|
|||||||
|
Executive
Vice President,
|
2004
|
328,077
|
112,695
|
66,362
|
-
|
-
|
1,669
|
|||||||
|
Store
Operations
|
2003
|
320,000
|
80,000
|
67,302
|
-
|
-
|
1,628
|
|||||||
______________________________
|
(1)
|
Salary
and bonus amounts include any amounts deferred under the Executive
Deferred Compensation Plan. Amounts reflect bonuses earned during
the
fiscal year covered (and paid during the subsequent fiscal year).
In the
case of Ms. Murray, the 2004 amount also includes a $50,000 bonus
paid
upon commencement of her employment with the
Company.
|
|
(2)
|
The
2005 amounts disclosed in this column include deferred compensation
matching contributions of $178,242 for Mr. Scarborough, $75,872
for Mr.
McCreery, $52,182 for Mr. Abramczyk, $62,579 for Ms. Murray and
$58,611
for Mr. Cruse.
|
The
2004
amounts disclosed in this column include (i) deferred compensation matching
contributions of $143,706 for Mr. Scarborough, $62,405 for Mr. McCreery,
$44,058
for Mr. Abramczyk, $38,215 for Ms. Murray and $46,103 for Mr. Cruse, (ii)
moving
expense of $83,743 for Ms. Murray, and (iii) gross up of taxes of $44,501
for
Ms. Murray.
The
2003
amounts disclosed in this column include deferred compensation matching
contributions of $118,889 for Mr. Scarborough, $51,554 for Mr. McCreery,
$39,366
for Mr. Abramczyk and $42,026 for Mr. Cruse.
Perquisites
provided to any named Executive Officer did not exceed the lesser of either
$50,000 or 10% of total annual salary and bonus reported for the Named Executive
Officer.
| (3) |
Represents
shares of restricted stock with a three-year cliff vesting on August
2,
2007. Dividends will not
be
paid on the restricted stock until it has been
issued.
|
|
(4)
|
Excludes
performance shares granted under the Company’s Amended and Restated 2001
Equity Incentive Plan.
|
|
(5)
|
Amounts
shown reflects premiums paid for life insurance.
|
|
(6)
|
Ms.
Murray’s employment with the Company began on August 2, 2004 at a
Base Salary of $375,000.
|
Stock
Option Granted During 2005
The
following tables provides information, for the Named Executive Officers,
on
stock options granted during fiscal 2005; on previously granted stock options
exercised during fiscal 2005; and on stock option holdings as of January
28,
2006:
STOCK
OPTIONS GRANTED IN 2005
|
Name
|
Number
of Securities Underlying Options Granted
|
%
of Total Options Granted to Employees
|
Exercise
Price per Share
|
Expiration
Date
|
Grant
Date Present Value(1)
|
|||||
|
James
R. Scarborough
|
47,275
|
11.6%
|
$25.51
|
3/30/2012
|
$387,655
|
|||||
|
Michael
E. McCreery
|
12,117
|
3.0%
|
$25.51
|
3/30/2012
|
$99,359
|
|||||
|
Dennis
E. Abramczyk
|
6,952
|
1.7%
|
$25.51
|
3/30/2012
|
$57,006
|
|||||
|
Cynthia
S. Murray
|
8,277
|
2.0%
|
$25.51
|
3/30/2012
|
$67,871
|
|||||
|
Ernest
R. Cruse
|
7,284
|
1.8%
|
$25.51
|
3/30/2012
|
$59,729
|
|
(1)
|
This
estimated hypothetical value is based on a Black Scholes option
pricing
model. The Company used the following assumptions in estimating
this
value: expected option life, 4 years; forfeiture rate, 15.85 %;
risk-free
rate of return, 3.8 %; expected volatility, 33.9 %; and expected
dividend
yield, 0.0 %.
|
AGGREGATED
STOCK OPTIONS EXERCISED IN 2005,
AND
JANUARY 28, 2006 STOCK OPTION VALUES
|
Name
of Executive
|
Shares
Acquired on Exercise (#)
|
Value
Realized ($)
(1)
|
Number
of Securities Underlying Unexercised Stock Options at 1/28/2006
(#)
Exercisable/ Unexercisable
|
Value
of Unexercised In-the-Money Stock Options at 1/28/2006 ($)
(2)
Exercisable/ Unexercisable
|
||||
|
|
||||||||
|
James
R. Scarborough
|
112,500
|
$2,337,720
|
1,499,999/
47,275
|
29,452,105/
201,864
|
||||
|
Michael
E. McCreery
|
75,002
|
$1,452,987
|
159,939/
12,117
|
3,163,563/
51,740
|
||||
|
Dennis
E. Abramczyk
|
18,750
|
$409,374
|
37,500/
6,952
|
726,188/
29,685
|
||||
|
Cynthia
S. Murray
|
-
|
-
|
22,500/
75,777
|
137,025/
446,418
|
||||
|
Ernest
R. Cruse
|
56,250
|
$1,025,955
|
-/
7,284
|
-/
31,103
|
|
(1)
|
Value
realized is based upon the fair market value of the common stock
at the
exercise date minus the exercise price and before income taxes
payable as
a result of the exercise.
|
|
(2)
|
Value
is based upon the closing price of the common stock on January
27, 2006 of
$29.78 minus the average exercise
price.
|
CONTINGENT
LONG-TERM PERFORMANCE SHARE AWARDS IN
2005
In
2005,
the Named Executive Officers were awarded an aggregate of 28,612 performance
shares based on each executive’s responsibilities, prior year performance, and
Base Salary. The following table provides information concerning the performance
shares awarded to the Named Executive Officers in 2005:
|
Name
of Executive
|
Number
of Performance Shares (1)
|
Performance
Period
(1)
|
||
|
James
R. Scarborough
|
16,515
|
2005
to 2008
|
||
|
Michael
E. McCreery
|
4,233
|
2005
to 2008
|
||
|
Dennis
E. Abramczyk
|
2,428
|
2005
to 2008
|
||
|
Cynthia
S. Murray
|
2,892
|
2005
to 2008
|
||
|
Ernest
R. Cruse
|
2,544
|
2005
to 2008
|
_______________________________
|
(1)
|
The
performance shares have a three-year performance period commencing
on
January 31, 2005 and ending on January 31,
2008. The payout of the performance shares is contingent upon the
relative
performance of the value of the Company’s common stock versus a designated
comparator group over the three-year period. Depending on actual
shareholder return performance at the end of the three year performance
period, the actual aggregate number of shares that could be issued
ranges
from zero to a maximum of two times the amount reflected. Performance
shares earned for a given performance period will only be issued
to a
participant following the Compensation Committee’s review and
certification of the actual performance results for the applicable
performance period.
|
STOCK
PRICE PERFORMANCE GRAPH
The
annual changes for the period shown in the following graph are based on the
assumption that $100 had been invested in Stage Stores stock, the S&P 500
Stock Index and the S&P 500 Retail Index on August 30, 2001 (the first day
of trading after Stage Stores emerged from bankruptcy on August 24, 2001)
and
that all quarterly dividends were reinvested at the average of the closing
prices at the beginning and end of the quarter. The total cumulative dollar
returns shown on the graph represent the value that such investments would
have
had on January 27, 2006 (the last trading date in fiscal 2005). The calculations
exclude trading commissions and taxes.
|
Date
|
Stage
Stores, Inc.
|
S&P
500 Index
|
S&P
500 Retail Index
|
|
n
|
l
|
p
|
|
|
8/30/2001
|
$100.00
(1)
|
$100.00
|
$100.00
|
|
2/1/2002
|
$286.23
|
$94.71
|
$110.37
|
|
1/31/2003
|
$192.27
|
$72.22
|
$78.95
|
|
1/30/2004
|
$343.22
|
$95.46
|
$117.11
|
|
1/28/2005
|
$410.06
|
$98.85
|
$133.46
|
|
1/27/2006
|
$473.64
|
$108.34
|
$143.92
|
|
(1)
|
Based
upon $6.29 closing price on first day of trading after bankruptcy
emergence as provided by the Pink
Sheets.
|
EMPLOYMENT
AGREEMENTS
In
General.
The
Company has Employment Agreements (the “Agreements”) with James Scarborough,
Michael McCreery, Dennis Abramczyk, Cynthia Murray and Ernest Cruse
(individually an “Executive” and collectively, the “Named Executive Officers”).
Under the terms of the respective Agreements, Mr. Scarborough is employed
as
Chairman of the Board and Chief Executive Officer; Mr. McCreery is employed
as
Executive Vice President and Chief Financial Officer; Mr. Abramczyk is employed
as Executive Vice President and Chief Operating Officer of the Peebles Division;
Ms. Murray is employed as Executive Vice President and Chief Merchandising
Officer of the Stage Division; and Mr. Cruse is employed as Executive Vice
President, Store Operations. The Agreements provide for a Base Salary, as
well
as Incentive Compensation based upon the Company’s operating results for the
applicable fiscal year and any extraordinary, unusual or non-recurring items
realized or incurred by the Company during the applicable fiscal year deemed
appropriate by the Board. The Agreements also provide for perquisites such
as an
automobile allowance and a financial planning allowance and the Executives’
participation in all other bonus and benefit plans available to executive
officers of the Company. Other than Ms. Murray, the Employment Agreements
of
these executive officers are included as exhibits to the Company’s 2001 and 2002
Annual Reports on Form 10-K. Ms. Murray’s Employment Agreement is attached
as an exhibit to the Company’s Quarterly Report on Form 10-Q as filed
August 30, 2004.
Mr.
Scarborough and Mr. McCreery.
The
Employment Agreements of Mr. Scarborough and Mr. McCreery provide that if
the Executive is terminated by the Company for Good Cause (as defined in
the
Agreement), he will be entitled to receive any Base Salary earned and unpaid,
and certain fringe benefits accrued and unpaid, through the date of termination,
and he will automatically forfeit any unvested stock options, warrants or
similar rights in the Company as of the date of termination. If he is terminated
by the Company without Good Cause or terminates employment with the Company
for
Good Reason (as defined in the Agreement), he will be entitled to
receive: (i) any Base Salary earned and unpaid, and certain
fringe benefits accrued and unpaid, through the date of termination,
(ii) an amount equal to two times (one and one-half times in the case of
Mr. McCreery) the aggregate of the Base Salary plus the Incentive
Compensation at the Target Rate (as defined in the Agreement) in effect as
of
the date of termination, (iii) the Incentive Compensation for the fiscal
year in which the termination occurs pro-rated through the date of termination,
(iv) continuation of certain fringe benefits to which he is participating
as of the date of termination for a period of 24 months (18 months in the
case of Mr. McCreery) from the date of termination, and (v) payment of
outplacement services for a period of 24 months (12 months in the case of
Mr. McCreery) from the date of termination with payments not to exceed $15,000
for any 12 month period, and he will automatically forfeit any unvested
stock options, warrants or similar rights in the Company as of the date of
termination. If the Executive terminates employment with the Company without
Good Reason, he will be entitled to receive any Base Salary earned and unpaid,
and certain fringe benefits accrued and unpaid, through the date of termination,
and he will automatically forfeit any unvested stock options, warrants or
similar rights in the Company as of the date of termination. If a Change
in
Control (as defined in the Agreement) occurs, and during the period beginning
3 months before and ending 24 months after the Change in Control, the
Company or its successor terminates this Agreement without Good Cause or
he
terminates employment with the Company or its successor with Good Reason,
he
will be entitled to receive: (i) any Base Salary earned and
unpaid, and certain fringe benefits accrued and unpaid, through the date
of the
Change in Control or termination, (ii) an amount equal to three times the
aggregate of the Base Salary plus the Incentive Compensation at the Target
Rate
(as defined in the Agreement) in effect as of the date of the Change in Control
or termination, (iii) the Incentive Compensation for the fiscal year in
which the Change in Control or termination occurs pro-rated through the date
of
the Change in Control or termination, (iv) continuation of certain fringe
benefits to which he is participating as of the date of Change in Control
or
termination for a period of 36 months from the date of the Change in
Control or termination, (v) payment of outplacement services for a period
of 24 months (12 months in the case of Mr. McCreery) from the
date of the Change in Control or termination with payments not to exceed
$15,000
for any 12 month period, and (vi) continuation of the financial
planning allowance for a period of 36 months from the date of the Change in
Control or termination, and all his stock options, warrants or similar rights
in
the Company will immediately become fully and completely vested and exercisable
as of the date of the Change in Control or termination and the Company or
its
successor shall be obligated to compensate him for any options or rights
he does
not exercise within 60 days of the date of the Change in Control or
termination at the price and in the manner described in the Agreement. If
any
payment to the Executive subjects him to any excise tax, the Company shall
pay
him a gross-up payment to compensate him for the amount of the excise
taxes.
Mr.
Abramczyk, Ms. Murray and Mr. Cruse.
The
Employment Agreements of Mr. Abramczyk, Ms. Murray, and Mr. Cruse provide
that
if the Executive is terminated by the Company for Good Cause (as defined
in the
Agreements), the Executive will be entitled to receive any Base Salary earned
and unpaid, and certain fringe benefits accrued and unpaid, through the date
of
termination, and the Executive will automatically forfeit any unvested stock
options, warrants or similar rights in the Company as of the date of
termination. If the Executive is terminated by the Company without Good Cause
or
terminates employment with the Company for Good Reason (as defined in the
Agreement), the Executive will be entitled to receive: (i) any Base Salary
earned and unpaid, and certain fringe benefits accrued and unpaid, through
the
date of termination; (ii) an amount equal to one times the aggregate of the
Base
Salary plus the Incentive Compensation at the Target Rate (as defined in
the
Agreement) in effect as of the date of termination; (iii) the Incentive
Compensation for the fiscal year in which the termination occurs pro-rated
through the date of termination; (iv) continuation of certain fringe
benefits to which the Executive is participating as of the date of termination
for a period of 12 months from the date of termination; and (v) payment of
outplacement services, not to exceed $15,000, for a period of 12 months from
the
date of termination, and the Executive will automatically forfeit any unvested
stock options, warrants or similar rights in the Company as of the date of
termination. If the Executive terminates employment with the Company without
Good Reason, the Executive will be entitled to receive any Base Salary earned
and unpaid, and certain fringe benefits accrued and unpaid, through the date
of
termination, and the Executive will automatically forfeit any unvested stock
options, warrants or similar rights in the Company as of the date of
termination. If a Change in Control (as defined in the Agreement) occurs
and
Executive is not employed with the Company or its successor thereafter, the
Executive will be entitled to receive: (i) any Base Salary earned and
unpaid, and certain fringe benefits accrued and unpaid, through the date
of the
Change in Control or termination; (ii) an amount equal to two times the
aggregate of the Base Salary plus the Incentive Compensation at the Target
Rate
(as defined in the Agreement) in effect as of the date of the Change in Control
or termination; (iii) the Incentive Compensation for the fiscal year in
which the Change in Control or termination occurs pro-rated through the date
of
the Change in Control or termination; (iv) continuation of certain fringe
benefits to which the Executive is participating as of the date of Change
in
Control or termination for a period of 24 months from the date of the
Change in Control or termination; (v) payment of outplacement services, not
to exceed $15,000, for a period of 12 months from the date of the Change
in
Control or termination; and (vi) continuation of the financial planning
allowance for a period of 12 months from the date of the Change in Control
or
termination, and all stock options, warrants or similar rights of the Executive
in the Company will immediately become fully and completely vested and
exercisable as of the date of the Change in Control or termination and the
Company or its successor shall be obligated to compensate the Executive for
any
options or rights the Executive does not exercise within 60 days of the date
of
the Change in Control or termination at the price and in the manner described
in
the Agreement. If any payment to the Executive subjects the Executive to
any
excise tax, the Company shall pay to the Executive a gross-up payment to
compensate the Executive for the amount of the excise taxes.
RETIREMENT
BENEFITS
Deferred
Compensation Plans
The
Company has two deferred compensation plans (the “Deferred Compensation Plans”)
which provide executives, certain officers and key employees of the Company
with
the opportunity to participate in unfunded, deferred compensation programs
that
are not qualified under the Internal Revenue Code of 1986, as amended (the
“Code”). Generally, the Code and the Employee Retirement Income Security Act of
1974, as amended, restrict contributions to a 401(k) plan by highly compensated
employees. The Deferred Compensation Plans are intended to allow participants
to
defer income on a pre-tax basis. Under the Deferred Compensation Plans,
participants may defer up to 50% of their base salary and up to 100% of their
bonus and earn a rate of return based on actual investments chosen by each
participant. The Company has established grantor trusts for the purposes
of
holding assets to provide benefits to the participants. For the plan involving
the executive officers and certain other officers, the Company will match
100%
of each participant’s contributions, up to 10% of the sum of their base salary
and bonus. For the plan involving other key employees, the Company currently
matches 50% of each participant’s contributions, up to 6% of the participant’s
compensation offset by what contribution the Company makes to the participant’s
401(k) account, if any. For both plans, Company contributions are vested
100%.
In addition, the Company may, with approval by the Board of Directors, at
its
sole discretion, make an additional employer contribution in any amount with
respect to any participant as is determined in its sole discretion. The
Company’s matching contribution expense for the Deferred Compensation Plans was
approximately $1.1 million, $1.0 million, and $0.7 million for 2005, 2004
and
2003, respectively.
401(k)
Savings Plans
The
Company has a contributory 401(k) savings plan (the “401(k) Plan”) covering
substantially all qualifying employees. Under the 401(k) Plan, participants
may
contribute up to 25% of their qualifying earnings, subject to certain
restrictions. The Company currently matches 50% of each participant’s
contributions, limited up to 6% of each participant’s compensation under the
Plan. The Company may make discretionary bi-weekly matching contributions
during
the year. The Company’s matching contributions expense for the 401(k) Plan were
approximately $1.1 million in 2005, $1.0 million in 2004, and $0.8 million
in
2003.
Frozen
Defined Benefit Plans
The
Company sponsors a defined benefit plan, which covered substantially all
employees who had met eligibility requirements and were enrolled prior to
June
30, 1998. This plan was frozen effective June 30, 1998. In connection with
the
acquisition of Peebles Inc., the Company acquired the Employees Retirement
Plan
of Peebles Inc., which covers certain participants who, in 1997, had reached
certain age and years of service requirements. This plan was closed to new
participants at February 1, 1998. Benefits for both plans (the “Retirement
Plans”) are administered through a trust arrangement, which provides monthly
payments or lump sum distributions. Benefits under the plans were based upon
a
percentage of the participant’s earnings during each year of credited service.
Any service after the date the plans were frozen will continue to count toward
vesting and eligibility for normal and early retirement for existing
participants.
AUDIT
COMMITTEE REPORT
The
Audit
Committee is comprised of the three Directors listed below, all of whom the
Board has determined are Independent Directors. As described in “Information
Relating to the Board of Directors and Committees-Audit Committee” and in the
Audit Committee Charter posted on the Company’s website, the
purpose of the Audit Committee is to oversee the accounting and financial
reporting processes of the Company and the audits of the financial statements
and internal controls of the Company by the Company’s independent registered
public accounting firm.
Management of the Company prepares financial statements, establishes the
system
of internal controls, and assesses the effectiveness of the Company’s internal
control over financial reporting. The Audit Committee met thirteen times
in
2005.
In
fulfilling its oversight responsibilities, the Audit Committee reviewed and
discussed the Company’s audited financial statements with management, which has
primary responsibility for the financial statements, and with the Company’s
independent registered public accounting firm, Deloitte &
Touche LLP, which is responsible for expressing an opinion on the
conformity of the Company’s audited financial statements with accounting
principles generally accepted in the United States of America.
The
Audit
Committee met regularly with Deloitte & Touche LLP and the Company’s
internal audit staff, with and without management present, to discuss the
results of their audits, management’s assessment of the Company’s internal
control over financial reporting, Deloitte & Touche’s opinions
regarding the Company’s internal control over financial reporting, and the
overall quality of the Company’s financial reporting. The Audit Committee also
reviewed Management’s Report on Internal Control Over Financial Reporting
contained the Company’s Annual Report on Form 10-K for the year ended
January 28, 2006 as filed with the SEC, as well as Deloitte &
Touche LLP’s Report of Independent Registered Public Accounting Firm included in
the same Annual Report on Form 10-K related to its audits of (i) the
Company’s consolidated financial statements, (ii) management’s assessment
of the effectiveness of internal control over financial reporting, and
(iii) the effectiveness of internal control over financial reporting.
The
Audit
Committee discussed with Deloitte & Touche LLP the matters that are required
to be discussed by Statement on Auditing Standards No. 61, as amended by
Statements 89 and 90 as well as other regulations and standards (Communications
with Audit Committees).
The
Audit Committee also discussed with internal audit and management any
significant matters as a result of the internal audit work.
The
Audit
Committee received from Deloitte & Touche LLP the written disclosures and
the letter required by Independence Standards Board Standard No. 1 (Independence
Discussions with
Audit Committees)
and
discussed with Deloitte & Touche LLP that firm’s independence. The Audit
Committee has concluded that Deloitte & Touche LLP's provision of non-audit
services to the Company and its affiliates is compatible with Deloitte &
Touche LLP's independence.
Based
on
the review and discussions referred to above, the Audit Committee recommended
to
the Board that the audited financial statements be included in the Company’s
Annual Report on Form 10-K for 2005 for filing with the SEC. The Audit
Committee also selected Deloitte & Touche LLP as the Company’s independent
registered public accounting firm for 2006.
The
foregoing report is provided by the following Directors, who constitute all
of
the members of the Audit Committee:
|
Scott
Davido (Chairman)
|
|
|
Wiliam
J. Montgoris
|
|
|
Walter
J. Salmon
|
ITEM
2
- RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE
LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2006
In
General
The
Board
has approved the Audit Committee’s selection of Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for 2006. This selection
is being presented to the shareholders for their ratification. Proxies solicited
by the Board will, unless otherwise directed, be voted to ratify the selection
by the Board of Deloitte & Touche LLP as the Company’s independent
registered public accounting firm for 2006. Deloitte & Touche LLP has been
the Company’s independent auditors since the Company’s 2000 fiscal year. The
Board has been advised by Deloitte & Touche LLP that it is an independent
registered public accounting firm with respect to the Company within the
meaning
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated under the Exchange Act.
A
representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting. He or she will have the opportunity to make a statement,
if he
or she so desires, and will be available to respond to appropriate questions
during the meeting. For additional information regarding the Company’s
relationship with Deloitte & Touche LLP, please refer to the Audit Committee
Report in this Proxy Statement.
PRINCIPAL
ACCOUNTANT FEES AND
SERVICES
The
Company retained Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu and their respective affiliates (collectively, the
“Deloitte Entities”) as its independent registered public accounting firm to
audit the consolidated financial statements for 2004 and 2005 and to provide
various advisory, auditing, and consulting services in 2004 and 2005. The
Company understands the need for the Deloitte Entities to maintain objectivity
and independence in their audit of the Company’s financial statements
and
internal controls. The Company does not use the Deloitte Entities for
internal audit work and will only use the Deloitte Entities for non-audit
work when the Audit Committee concludes that the Deloitte Entities are the
most appropriate provider of that service. The Audit Committee annually
evaluates whether the Company’s use of the Deloitte Entities for non-audit
services is compatible with the Deloitte Entities’ independence. The
aggregate fees billed by the Deloitte Entities in 2004 and 2005 for these
various services were as follows:
|
Description
of Professional Service
|
Amount
Billed
|
|
|
|
2005
|
2004
|
|
Audit
Fees
are fees for (i) the audit of the Company’s annual financial statements,
(ii) review of financial statements in the Company’s quarterly reports on
Form 10-Qs, (iii) the audit of the Company's internal control
over
financial reporting, (iv) the attestation of Management's Report
of
Internal Control Over Financial Reporting and (v) for services
that are
provided by the independent registered public accounting firm
in
connection with statutory and regulatory filings.
|
$1,248,560
|
$1,572,065
|
|
Audit-Related
Fees
in
2005 are for professional services rendered in connection with the
application of financial accounting and reporting standards
and acquisition related matters. Amount in 2004 relates
to benefit plan audits.
|
$218,120
|
$46,500
|
|
Tax
Fees
are fees for compliance, tax advice, and tax planning.
|
-
|
-
|
|
All
Other Fees
are fees for any service not included in the first three
categories.
|
-
|
-
|
PRE-APPROVAL
POLICIES
The
Audit
Committee has the direct responsibility to
select, retain, terminate, determine compensation and oversee
the work of the Company’s independent registered public accounting firm.
Pre-approval by the Audit Committee is required for any engagement of the
Company’s independent registered public accounting firm and the Audit Committee
has established the following pre-approval policies and procedures. Annually,
the Audit Committee pre-approves services to be provided by the Company’s
independent registered public accounting firm. The Audit Committee also
considers the engagement of the Company’s independent registered public
accounting firm to provide other services during the year. Requests for approval
are submitted to the Audit Committee by the Company’s management. Requests are
required to include an adequate explanation of the services in sufficient
detail
for the Audit Committee to determine whether the request is consistent with
the
SEC’s rules on auditor independence. In determining whether to approve the
engagement of the Company’s independent registered public accounting firm, the
Audit Committee considers whether such service is consistent with the
independence of the registered public accounting firm. The Audit Committee
also
considers the amount of audit related fees in comparison to all other fees
paid
to the registered public accounting firm and reviews such comparison each
year.
Ratification
of the Selection of Deloitte & Touche LLP as Independent Registered
Public Accounting Firm For 2006
Deloitte &
Touche LLP has been selected by the Audit Committee as the independent
registered public accounting firm for the Company and its subsidiaries for
the
fiscal year 2006. Consequently, the Board has approved the selection of
Deloitte & Touche LLP as the Company’s independent registered public
accounting firm for the fiscal year 2006.
Your
Board of Directors recommends a vote FOR the following
proposal:
RESOLVED
that the selection by the Audit Committee of the firm of Deloitte &
Touche LLP, as independent registered public accounting firm for the
Company for the fiscal year 2006, is hereby ratified.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
Directors and officers (“reporting persons”) to file reports with the SEC
disclosing their ownership, and changes in their ownership of the Company’s
common stock. Copies of these reports must also be furnished to the
Company.
Based
solely upon its review of the copies of reports furnished to the Company
and
written representations that no other reports are required, during 2005,
the
Company believes that all of the Company’s Directors and officers made all
required filings on a timely basis with the exception of one Form 4 reporting
a
single transaction filed one day late by Sharon Mosse and one Form 4 reporting
a
single transaction filed one day late by Cynthia Murray.
ADDITIONAL
INFORMATION
Communications
Between Shareholders and the Board
Shareholders
may send written communications to the Board and, if applicable, to specified
individual Directors, by mail, facsimile or courier to the Company’s principal
executive offices. All correspondence received by the Company will be relayed
to
the Board or, if applicable, to the individual Director. Communications should
be addressed to Michael McCreery, Secretary, Stage Stores, Inc., 10201 Main
Street, Houston, Texas 77025, or sent by facsimile to Mr. McCreery at (713)
669-2621.
Deadline
for Shareholders for Inclusion in Next Year’s Proxy
Statement
Shareholder
proposals intended to be presented at the 2007 Annual Meeting of Shareholders
and included in the Company’s proxy statement and form of proxy relating to that
meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934
must be
received in writing by the Company at the Company’s principal executive offices
by January 5, 2007. Proposals should be addressed to Michael McCreery,
Secretary, Stage Stores, Inc., 10201 Main Street, Houston, Texas
77025.
Other
Shareholder Proposals for Presentation at Next Year’s Annual
Meeting
For
any
shareholder proposal that is not submitted to the Company for inclusion in
next
year’s proxy statement, but is instead sought to be presented by the shareholder
directly at the 2007 Annual Meeting, Rule 14a-4(c) under the Securities Exchange
Act of 1934 permits management to vote proxies in its discretion if the Company:
(1) receives written notice of the proposal before the close of business on
March 21, 2007, and advises shareholders in the 2007 Proxy Statement about
the
nature of the matter and how management intends to vote on the matter, or
(2) does not receive written notice of the proposal before the close of
business on March 21,
2007.
Notices of intention to present proposals at the 2007 Annual Meeting should
be
addressed to Michael McCreery, Secretary, Stage Stores, Inc., 10201 Main
Street,
Houston, Texas 77025.
Voting
Securities
Shareholders
of record at the close of business on April 5, 2006, will be eligible to
vote at
the Annual Meeting. The voting securities of the Company consist of its $0.01
par value common stock, of which 26,613,717 shares were outstanding on April
5,
2006. Each share outstanding on the record date will be entitled to one vote.
Treasury shares are not voted. Individual votes of shareholders are kept
private, except as appropriate to meet legal requirements. Access to proxies
and
other individual shareholder voting records is limited to the Independent
Inspector of Election and certain employees of the Company and its agents
who
must acknowledge in writing their responsibility to comply with this policy
of
confidentiality.
Vote
Required for Approval
The
nominees receiving the eight highest vote totals (a plurality) of the votes
cast
at the Annual Meeting in person or by proxy will be elected as Directors.
All
other matters require for approval the favorable vote of a majority of shares
voted at the Annual Meeting in person or by proxy. Abstentions, if any, will
not
be counted as votes cast. Therefore, they will have no effect on the outcome
of
the other matters to be voted on at the Annual Meeting. A broker non-vote
occurs
when a nominee holding shares for a beneficial holder does not have
discretionary voting power and does not receive voting instructions from
the
beneficial owner. Broker non-votes will not be treated as shares present
and
entitled to vote on a voting matter and will have no effect on the outcome
of
the vote.
Manner
for Voting Proxies
The
shares represented by all valid proxies received by mail, or submitted by
telephone or the Internet will be voted in the manner specified. Where specific
choices are not indicated, the shares represented by all valid proxies received
will be voted: (1) for the nominees for director named in this
Proxy Statement, and (2) for ratification of the selection of Deloitte
& Touche LLP as independent registered public accounting firm for 2006.
Should any matter not described above be properly presented at the Annual
Meeting, the persons named in the Proxy Card will vote in accordance with
their
judgment.
Other
Matters to be Presented
The
Board
knows of no other matters which may be presented at the Annual Meeting. If
any
other matters properly come before the Annual Meeting, including any adjournment
or adjournments thereof, proxies received in response to this solicitation
will
be voted upon such matters in the discretion of the person or persons named
in
the Proxy Card.
Solicitation
of Proxies
Proxies
will be solicited on behalf of the Board by mail or in person, and all
solicitation costs will be paid by the Company. Copies of proxy material
and of the Annual Report for 2005 will be supplied to holders of record,
as well
as to brokers, dealers, banks and voting trustees, or their nominees, for
the
purpose of soliciting proxies from beneficial owners, and the Company will
reimburse such holders for their reasonable expenses. Mellon Investor Services
LLC has been retained to assist in soliciting proxies at a fee of $6,000
plus
reasonable out-of-pocket costs.
Electronic
Access to Proxy Statement and Annual Report
This
Proxy Statement and the Company’s 2005 Annual Report on Form 10-K are
available on the Company’s website at www.stagestoresinc.com
by
clicking “Investor Relations”, then “SEC Filings”, then the document to be
viewed or obtained. A copy of the Company’s 2005 Annual Report on Form 10-K
will also be furnished without charge to shareholders beneficially or of
record
at the close of business on April 5, 2006, on request to Bob Aronson, Vice
President, Investor Relations, at (800) 579-2302. This Proxy Statement and
the Company’s 2005 Annual Report on Form 10-K are also available on the
SEC’s EDGAR database at www.sec.gov.
26