What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-26 compared with 2021-11-19 · 483 added, 401 removed, 225 unchanged (80% of the section changed)

1 unchanged sentence

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND

COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS

OF INCOME AND

COMPREHENSIVE INCOME

Three Months Ended

Nine Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

April 30, 2022

(Dollars in thousands, except per share data)

7 unchanged sentences

Costs and expenses, net

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share

Income before income taxes

Income tax expense

Basic earnings per share

Diluted earnings per share

Comprehensive income:

Net income (loss)

Unrealized gain (loss) on available-for-sale securities, net of

deferred income taxes of ($ 150 ) and ($ 235 ) for the three and

nine months ended October 30, 2021 and ($ 85 ) and ($ 29 ) for

the three and nine months ended October 31, 2020, respectively

Comprehensive income (loss)

Unrealized gain (loss) on available-for-sale securities, net

of deferred income taxes of ($

) for April 30, 2022

and May 1, 2021, respectively

Comprehensive income

See notes to condensed consolidated financial statements (unaudited).

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

October 30, 2021

April 30, 2022

January 29, 2022

4 unchanged sentences

Restricted cash

Restricted short-term investments

Accounts receivable, net of allowance for customer credit losses of

$ 807 and $ 605 at October 30, 2021 and January 30, 2021, respectively

at April 30, 2022 and January 29, 2022, respectively

Merchandise inventories

8 unchanged sentences

Accrued expenses

Accrued employee benefits and bonus

Accrued bonus and benefits

Accrued income taxes

4 unchanged sentences

Stockholders' Equity:

Preferred stock, $ 100 par value per share, 100,000 shares

Preferred stock, $

par value per share,

authorized, none issued

Class A common stock, $ 0.033 par value per share, 50,000,000

Class A common stock, $

par value per share,

shares authorized;

20,261,248 shares and 20,839,795 shares

issued at October 30, 2021 and January 30, 2021, respectively

Convertible Class B common stock, $ 0.033 par value per share,

shares issued

at April 30, 2022 and January 29, 2022, respectively

Convertible Class B common stock, $

par value per share,

shares authorized;

1,763,652 shares and 1,763,652 shares

issued at October 30, 2021 and January 30, 2021, respectively

shares issued at April 30, 2022 and January 29, 2022, respectively

Additional paid-in capital

5 unchanged sentences

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

October 30, 2021

October 31, 2020

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

Three Months Ended

April 30, 2022

(Dollars in thousands)

Operating Activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided (used)

by operating activities:

Adjustments to reconcile net income to net cash provided (used) by operating activities:

Provision for customer credit losses

3 unchanged sentences

Loss on disposal of property and equipment

Impairment of store assets

Changes in operating assets and liabilities which provided

Changes in operating assets and liabilities which provided (used) cash:

Accounts receivable

9 unchanged sentences

Sales of short-term investments

Sales of other assets

Net cash provided (used) in investing activities

Net cash provided (used) by investing activities

Financing Activities:

1 unchanged sentence

Repurchase of common stock

Proceeds from line of credit

Payments on line of credit

Proceeds from employee stock purchase plan

Net cash provided (used) in financing activities

Net cash provided (used) by financing activities

Net increase (decrease) in cash, cash equivalents, and restricted cash

3 unchanged sentences

Accrued other assets and property and equipment

Accrued treasury stock

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS’ EQUITY

Comprehensive

3 unchanged sentences

Comprehensive income:

Net income (loss)

Unrealized gain (loss) on available-for-sale securities, net of

deferred income tax benefit of ($ 40 )

Dividends paid ($0.00 per share)

Class A common stock sold through employee stock purchase

plan — 19,248 shares

Class B common stock sold through stock option plans —

Class A common stock issued through restricted stock grant plans —

396,558 shares

Repurchase and retirement of treasury shares – 425,661 shares

Balance — May 1, 2021

Comprehensive income:

Net income (loss)

Unrealized gain (loss) on available-for-sale securities, net of

deferred income tax benefit of ($ 44 )

Dividends paid ($ 0.11 per share)

Class A common stock sold through employee stock purchase

plan — 1,336 shares

Class B common stock sold through stock option plans —

Class A common stock issued through restricted stock grant plans —

10,018 shares

Repurchase and retirement of treasury shares – 64,709 shares

Balance — July 31, 2021

Comprehensive income:

Net income (loss)

Unrealized gain (loss) on available-for-sale securities, net of

deferred income tax benefit of ($ 150 )

Dividends paid ($ 0.17 per share)

Unrealized net losses on available-for-sale securities, net of deferred

income tax benefit of ($

Dividends paid ($

Class A common stock sold through employee stock purchase

plan — 1,957 shares

Class B common stock sold through stock option plans —

Class A common stock issued through restricted stock grant plans

( 9,028 ) shares

Repurchase and retirement of treasury shares – 508,266 shares

Balance — October 30, 2021

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Repurchase and retirement of treasury shares –

Balance — April 30, 2022

Comprehensive

1 unchanged sentence

(Dollars in thousands)

Balance — February 1, 2020

Balance — January 30, 2021

Comprehensive income:

Net income (loss)

Unrealized gain (loss) on available-for-sale securities, net of

deferred income tax benefit of ($ 90 )

Unrealized net losses on available-for-sale securities, net of deferred

income tax benefit of ($

Dividends paid ($0.00 per share)

Class A common stock sold through employee stock purchase

plan — 26,957 shares

Class B common stock sold through stock option plans —

Class A common stock issued through restricted stock grant plans

307,354 shares

Repurchase and retirement of treasury shares – 618,056 shares

Repurchase and retirement of treasury shares –

Balance — May 1, 2021

Comprehensive income:

Net income (loss)

Unrealized gain (loss) on available-for-sale securities, net of

deferred income tax liability of $ 146

Dividends paid ($0.00 per share)

Class A common stock sold through employee stock purchase

plan — 0 shares

Class B common stock sold through stock option plans —

Class A common stock issued through restricted stock grant plans —

( 57,805 ) shares

Repurchase and retirement of treasury shares – 0 shares

Balance — August 1, 2020

Comprehensive income:

Net income (loss)

Unrealized gain (loss) on available-for-sale securities, net of

deferred income tax benefit of ($ 85 )

Dividends paid ($0.00 per share)

Class A common stock sold through employee stock purchase

plan — 21,234 shares

Class B common stock sold through stock option plans —

Class A common stock issued through restricted stock grant plans —

( 8,440 ) shares

Repurchase and retirement of treasury shares – 1,036,610 shares

Balance — October 31, 2020

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTE 1 - GENERAL :

The condensed consolidated financial statements have been prepared from the accounting records of The Cato Corporation and its wholly-owned subsidiaries (the “Company”), and all amounts shown as of and for the periods ended October 30, 2021 and October 31, 2020 are unaudited.

In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements have been included.

All such adjustments are of a normal, recurring nature unless otherwise noted.

The results of the interim period may not be indicative of the results expected for the entire year.

The interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021.

Amounts as of January 30, 2021 have been derived from the audited balance sheet, but do not include all disclosures required by accounting principles generally accepted in the United States of America.

On November 18, 2021, the Board of Directors maintained the quarterly dividend at $0.17 per share.

COVID-19 Update

The COVID-19 pandemic adversely impacted the Company's business, financial condition and operating results through fiscal 2020.

Through the first three quarters of 2021, the Company saw significant improvements in sales compared to 2020.

This improvement was primarily attributable to government stimulus, increased customer traffic, states lifting capacity limits as more people were vaccinated, consumers’ increasing comfort level with venturing out to social events and customers’ preparing to return to work.

However, the Company’s sales remain well below 2019 sales for the comparable period, and there is still significant uncertainty regarding the lingering effects of the pandemic, as well as concerns over the impact of new or potential variants of the virus that are more transmissible or severe, stagnant vaccination rates and related factors continue to impede progress toward the return to pre-pandemic activities and levels of consumer confidence.

The Company faces additional uncertainty from the continued effects of disruption in the global supply chain and available workers as it attempts to hire associates as its operating hours continue to expand.

The Company expects that these uncertainties and perhaps others related to the pandemic will continue to impact the Company throughout the upcoming holiday shopping season and remainder of fiscal 2021 and likely beyond.

The adverse financial impacts associated with the continued effects of, and uncertainties related to, the COVID-19 pandemic include, but are not limited to, (i) lower net sales in markets affected by actual or potential adverse changes in conditions relating to the pandemic, whether due to increases in case counts, state and local orders, reductions in store traffic and customer demand, labor shortages, or all of these factors, (ii) lower net sales caused by the delay of inventory production and fulfillment, (iii) and incremental costs associated with efforts to mitigate the effects of the outbreak, including increased freight and logistics costs and other expenses.

The extent to which the COVID-19 pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current estimates due to inherent uncertainties regarding the duration and further spread of the outbreak or its variants, its severity, actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

While the Company currently anticipates a continuation of the adverse impacts of COVID-19 during 2021 and likely beyond, the duration and severity of these effects will depend on the course of future developments, which are highly uncertain, including the relative speed and success of, as well as public confidence in, mitigation measures such as the current effort to vaccinate substantial portions of the U.S.

and global population, emerging information regarding variants of the virus or new viruses and their potential impact on current mitigation efforts, public attitudes toward continued compliance with containment and mitigation measures, and possible new information and understanding that could alter the course and duration of current measures to combat the spread of the virus.

Recently Adopted Accounting Policies

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

The new accounting rules reduce complexity by removing specific exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The new accounting rules also simplify accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods.

The Company adopted this accounting standards update on the first day of the first quarter of 2021 with no material impact on its Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

The condensed

consolidated financial

statements as

the thirteen-week

Corporation and

its wholly-owned

subsidiaries (the

“Company”), and

In the opinion of management, all adjustments considered necessary for a fair presentation of the financial

adjustments are

normal, recurring

nature unless

The results of the interim period may not be indicative of the results expected

for the entire year.

The interim financial

statements should be read

in conjunction with

the consolidated financial statements

January 29, 2022.

Amounts as of January 29, 2022 have been derived from the audited balance sheet, but

do not include all disclosures required by

accounting principles generally accepted in the United States of

Consolidated Balance Sheets.

Subsequent to

Company received

receivable, which

included in Accounts receivable.

The Company anticipates that the remaining balance will

be received by

the end of the second quarter of fiscal 2022.

On May 19, 2022, the Board of Directors declared the quarterly dividend

at $0.17 per share.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTE 2 - EARNINGS PER SHARE:

Accounting Standard Codification (“ASC”) 260 – Earnings Per Share requires dual presentation of basic and diluted Earnings Per Share (“EPS”) on the face of all income statements for all entities with complex capital structures.

The Company has presented one basic EPS and one diluted EPS amount for all common shares in the accompanying Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

While the Company’s certificate of incorporation provides the right for the Board of Directors to declare dividends on Class A shares without declaration of commensurate dividends on Class B shares, the Company has historically paid the same dividends to both Class A and Class B shareholders and the Board of Directors has resolved to continue this practice.

Accordingly, the Company’s allocation of income for purposes of the EPS computation is the same for Class A and Class B shares and the EPS amounts reported herein are applicable to both Class A and Class B shares.

Basic EPS is computed as net income less earnings allocated to non-vested equity awards divided by the weighted average number of common shares outstanding for the period.

Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options and the Employee Stock Purchase Plan.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

dual presentation

diluted Earnings

Per Share (“EPS”)

on the face of all income

for all entities

has presented

the accompanying Condensed

Statements of Income and Comprehensive Income.

Company’s certificate

of incorporation

provides the right

for the Board of Directors

to declare dividends

commensurate dividends

same dividends

to both Class

B shareholders

and the Board

this practice.

the Company’s

is the same for Class

A and Class B shares

and the EPS amounts

herein are applicable

computed as net

income less earnings allocated to

non-vested equity awards divided by

weighted average number

of common shares outstanding

for the period.

Diluted EPS reflects the potential

dilution that

issuable through

Employee Stock

Three Months Ended

Nine Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

April 30, 2022

(Dollars in thousands)

Net earnings (loss)

(Earnings) loss allocated to non-vested equity awards

Net earnings (loss) available to common stockholders

Earnings allocated to non-vested equity awards

Net earnings available to common stockholders

Basic weighted average common shares outstanding

Diluted weighted average common shares outstanding

Net income (loss) per common share

Basic earnings (loss) per share

Diluted earnings (loss) per share

Net income per common share

Basic earnings per share

Diluted earnings per share

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:

The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the three months ended October 30, 2021:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Beginning Balance at July 31, 2021

Other comprehensive income before

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

– ACCUMULATED

OTHER COMPREHENSIVE

reclassification

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income

Ending Balance at October 30, 2021

(a) All amounts are net-of-tax.

Amounts in parentheses indicate a debit/reduction to other comprehensive income.

(b) Includes $ 92 impact of accumulated other comprehensive income reclassifications into Interest and other

income for net gains on available-for-sale securities.

The tax impact of this reclassification was $ 21 .

The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the nine months ended October 30, 2021:

comprehensive

(in thousands)

Changes in Accumulated Other

4 unchanged sentences

Beginning Balance at January 29, 2022

Other comprehensive income before

Other comprehensive income (loss) before

reclassification

1 unchanged sentence

other comprehensive income (b)

Net current-period other comprehensive income

Ending Balance at October 30, 2021

(a) All amounts are net-of-tax.

Amounts in parentheses indicate a debit/reduction to other comprehensive income.

(b) Includes $ 177 impact of accumulated other comprehensive income reclassifications into Interest and other

income for net gains on available-for-sale securities.

The tax impact of this reclassification was $ 41 .

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME (CONTINUED):

The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the three months ended October 31, 2020:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Beginning Balance at August 1, 2020

Other comprehensive income before

reclassifications

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income

Ending Balance at October 31, 2020

Net current-period other comprehensive income (loss)

Ending Balance at April 30, 2022

(a) All amounts are net-of-tax.

Amounts in parentheses indicate a debit/reduction to other comprehensive income.

(b) Includes $ 89 impact of Accumulated other comprehensive income reclassifications into Interest and other

Amounts in parentheses indicate a debit/reduction to other comprehensive income ("OCI").

(b) Includes $

impact of Accumulated other comprehensive income reclassifications into Interest and other

income for net gains on available-for-sale securities.

The tax impact of this reclassification was $

The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the nine months ended October 31, 2020:

reclassification

comprehensive

(in thousands)

Changes in Accumulated Other

3 unchanged sentences

Available-for-Sale

Beginning Balance at February 1, 2020

Other comprehensive income before

reclassifications

Beginning Balance at January 30, 2021

Other comprehensive income (loss) before

reclassification

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income

Ending Balance at October 31, 2020

Net current-period other comprehensive income (loss)

Ending Balance at May 1, 2021

(a) All amounts are net-of-tax.

Amounts in parentheses indicate a debit/reduction to other comprehensive income.

(b) Includes $ 827 impact of Accumulated other comprehensive income reclassifications into Interest and other

Amounts in parentheses indicate a debit/reduction to other comprehensive income ("OCI").

(b) Includes $

impact of Accumulated other comprehensive income reclassifications into Interest and other

income for net gains on available-for-sale securities.

1 unchanged sentence

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

NOTE 4 – FINANCING ARRANGEMENTS:

As of October 30, 2021, the Company had an unsecured revolving credit agreement, which provides for borrowings of up to $ 35.0 million, less the balance of any revocable letters of credit related to purchase commitments.

On June 2, 2020, the Company signed an amendment extending the revolving credit agreement through May 2023.

The credit agreement contains various financial covenants and limitations, including the maintenance of specific financial ratios with which the Company was in compliance as of October 30, 2021.

There were no borrowings outstanding under this credit facility, nor any outstanding letters of credit that reduced borrowing availability, as of October 30, 2021 or January 30, 2021.

The weighted average interest rate under the credit facility was zero at October 30, 2021 due to no borrowings outstanding.

borrowings of up to $35.0 million less the balance of letters

of credit discussed below and was committed

which replaces

credit agreement,

committed availability

compliance as of April 30, 2022.

The new credit agreement also contains various financial covenants and

limitations, including the maintenance of specific financial ratios.

There were no outstanding borrowings

under the prior credit facility as of April 30, 2022 or January 29, 2022.

The weighted average interest rate

under the prior credit facility was zero at April 30, 2022 due to no outstanding

outstanding letters

NOTE 5 – REPORTABLE SEGMENT INFORMATION:

The Company has determined that it has four operating segments, as defined under ASC 280-10, including Cato, It’s Fashion, Versona and Credit.

As outlined in ASC 280-10, the Company has two reportable segments:

Retail and Credit.

The Company has aggregated its three retail operating segments, including e-commerce, based on the aggregation criteria outlined in ASC 280-10, which states that two or more operating segments may be aggregated into a single reportable segment if aggregation is consistent with the objective and basic principles of ASC 280-10, which require the segments to have similar economic characteristics, products, production processes, clients and methods of distribution.

The Company’s retail operating segments have similar economic characteristics and similar operating, financial and competitive risks.

They are similar in nature of product, as they all offer women’s apparel, shoes and accessories.

Merchandise inventory for the Company’s retail operating segments is sourced from the same countries and some of the same vendors, using similar production processes.

Merchandise for the Company’s operating segments is distributed to retail stores in a similar manner through the Company’s single distribution center and is subsequently distributed to clients in a similar manner.

The Company operates its women’s fashion specialty retail stores in 32 states as of October 30, 2021, principally in the southeastern United States .

The Company offers its own credit card to its customers and all credit authorizations, payment processing and collection efforts are performed by a wholly-owned subsidiary of the Company.

The Company has determined that it has four operating

segments, as defined under

ASC 280-10, including

Fashion, Versona

The Company has aggregated its three retail

operating segments,

the aggregation

in ASC 280-10,

segments may be aggregated

into a single reportable

segment if aggregation

is consistent with the objective

and basic principles of

ASC 280-10, which require the

segments to have

similar economic characteristics,

of distribution.

characteristics and

financial and competitive risks.

similar in nature

of product, as

offer women’s

shoes and accessories.

for the Company’s retail operating

segments is sourced

the same countries and some of the same vendors,

using similar production

Company’s operating segments

distributed to

retail stores

similar manner

principally in

the southeastern

United States.

The Company offers its own credit card to its customers

all credit authorizations,

payment processing

and collection

efforts are performed

by a separate subsidiary

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):

The following schedule summarizes certain segment information (in thousands):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

NOTE 5 – REPORTABLE

SEGMENT INFORMATION (CONTINUED):

The following

(in thousands):

Three Months Ended

Nine Months Ended

October 30, 2021

Interest and other income

April 30, 2022

Interest and other income

Income/(Loss) before

Capital expenditures

Income before taxes

Capital expenditures

Three Months Ended

Nine Months Ended

October 31, 2020

Interest and other income

Income/(Loss) before

Capital expenditures

Income before taxes

Capital expenditures

Total assets as of October 30, 2021

Total assets as of April 30, 2022

Total assets as of January 29, 2022

The Company evaluates segment performance based on income before taxes.

The Company does not allocate certain corporate expenses or income taxes to the credit segment.

The following schedule summarizes the direct expenses of the credit segment, which are reflected in Selling, general and administrative expenses (in thousands):

Company evaluates

performance based

The following

schedule summarizes

the direct expenses

of the credit segment

which are reflected

and administrative

(in thousands):

Three Months Ended

Nine Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

April 30, 2022

Other expenses

1 unchanged sentence

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

NOTE 6 – STOCK BASED COMPENSATION:

As of October 30, 2021, the Company had two long-term compensation plans pursuant to which stock-based compensation was outstanding or could be granted.

The 2018 Incentive Compensation Plan and 2013 Incentive Compensation Plan are for the granting of various forms of equity-based awards, including restricted stock and stock options for grant, to officers, directors and key employees.

Effective May 24, 2018, shares for grant were no longer available under the 2013 Incentive Compensation Plan.

The following table presents the number of options and shares of restricted stock initially authorized and available for grant under each of the plans as of October 30, 2021:

April 30, 2022,

the Company had two

long-term compensation

plans pursuant to which stock-based

compensation was

outstanding or

Compensation Plan

equity-based awards,

stock options

and key employees.

May 24, 2018,

The following table

presents the number

restricted stock initially authorized and

Options and/or restricted stock initially authorized

Options and/or restricted stock available for grant:

October 30, 2021

In accordance with ASC 718, the fair value of current restricted stock awards is estimated on the date of grant based on the market price of the Company’s stock and is amortized to compensation expense on a straight-line basis over the related vesting periods.

As of October 30, 2021 and January 30, 2021, there was $ 12,323,000 and $ 10,550,000 , respectively, of total unrecognized compensation expense related to nonvested restricted stock awards, which had a remaining weighted-average vesting period of 2.5 years and 2.1 years, respectively.

The total compensation expense during the three and nine months ended October 30, 2021 was $ 1,088,000 and $ 2,968,000 , respectively, compared to $ 1,082,000 and $ 2,941,000 , respectively, for the three and nine months ended October 31, 2020.

These expenses are classified as a component of Selling, general and administrative expenses in the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

The following summary shows the changes in the shares of unvested restricted stock outstanding during the nine months ended October 30, 2021:

Weighted Average

April 30, 2022

In accordance

with ASC 718,

value of current

restricted stock awards

is estimated on

to compensation

straight-line basis over

the related vesting

April 30, 2022

and January 29,

2022, there was

respectively,

unvested restricted stock awards, which had a remaining weighted-average

vesting period of

respectively.

classified as a component

of Selling, general and

administrative expenses in the

Condensed Consolidated

Statements of Income.

The following summary

shows the changes in the shares

of unvested restricted

stock outstanding

three months ended April

Grant Date Fair

Value Per Share

Restricted stock awards at January 29, 2022

Forfeited or expired

Restricted stock awards at October 30, 2021

Restricted stock awards at April 30, 2022

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTE 6 – STOCK BASED-COMPENSATION (CONTINUED):

The Company’s Amended and Restated Employee Stock Purchase Plan allows eligible full-time employees to purchase a limited number of shares of the Company’s Class A Common Stock during each semi-annual offering period at a 15% discount through payroll deductions.

During the nine months ended October 30, 2021 and October 31, 2020, the Company sold 22,541 and 48,191 shares to employees at an average discount of $ 1.38 and $ 1.43 per share, respectively, under the Employee Stock Purchase Plan.

The compensation expense recognized for the 15% discount given under the Employee Stock Purchase Plan was approximately $ 31,000 and $ 69,000 for the nine months ended October 30, 2021 and October 31, 2020, respectively.

These expenses are classified as a component of Selling, general and administrative expenses.

NOTE 7 – FAIR VALUE MEASUREMENTS:

The following tables set forth information regarding the Company’s financial assets and liabilities that are measured at fair value (in thousands) as of October 30, 2021 and January 30, 2021:

October 30, 2021

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

The Company’s

Employee Stock Purchase Plan

allows eligible full-time employees to

number of shares of

the Company’s Class A

Common Stock during each semi-annual offering period at a

15% discount through

payroll deductions.

During the three months ended April

30, 2022 and May 1, 2021,

at an average

respectively, under the Employee Stock Purchase

The compensation expense

recognized for the 15%

discount given under

the Employee Stock

Purchase Plan was

approximately $

respectively.

classified as

Selling, general and

administrative expenses in the

Condensed Consolidated Statements of

– FAIR VALUE MEASUREMENTS:

The following tables

set forth information regarding the Company’s financial assets and liabilities that are

(in thousands)

April 30, 2022

State/Municipal Bonds

8 unchanged sentences

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

January 30, 2021

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

State/Municipal Bonds

7 unchanged sentences

Total Liabilities

The Company’s investment portfolio was primarily invested in corporate bonds and tax-exempt and taxable governmental debt securities held in managed accounts with underlying ratings of A or better at October 30, 2021 and January 30, 2021.

The state, municipal and corporate bonds have contractual maturities which range from two days to five years .

Treasury Notes have contractual maturities which range from six months to two years .

These securities are classified as available-for-sale and are recorded as Short-term investments, Restricted cash and Restricted short-term investments on the accompanying Condensed Consolidated Balance Sheets.

These assets are carried at fair value with unrealized gains and losses reported net of taxes in Accumulated other comprehensive income.

The asset-backed securities are bonds comprised of auto loans and bank credit cards that carry AAA ratings.

The auto loan asset-backed securities are backed by static pools of auto loans that were originated and serviced by captive auto finance units, banks or finance companies.

The bank credit card asset-backed securities are backed by revolving pools of credit card receivables generated by account holders of cards from American Express, Citibank, JPMorgan Chase, Capital One and Discover.

Additionally, at October 30, 2021, the Company had $ 0.8 million of corporate equities and deferred compensation plan assets of $ 11.8 million.

At January 30, 2021, the Company had $ 0.7 million of corporate equities and deferred compensation plan assets of $ 11.3 million.

All of these assets are recorded within Other assets in the Condensed Consolidated Balance Sheets.

Level 1 category securities are measured at fair value using quoted active market prices.

Level 2 investment securities include corporate bonds, municipal bonds and asset-backed securities for which quoted prices may not be available on active exchanges for identical instruments.

Their fair value is principally based on market values determined by management with assistance of a third-party pricing service.

Since quoted prices in active markets for identical assets are not available, these prices are determined by the pricing service using observable market information such as quotes from less active markets and/or quoted prices of securities with similar characteristics, among other factors.

Deferred compensation plan assets consist of life insurance policies.

These life insurance policies are valued based on the cash surrender value of the insurance contract, which is determined based on such factors as the

The Company’s investment

portfolio was primarily

invested in corporate

bonds and tax-exempt

governmental debt securities

managed accounts with underlying ratings of A or

better at April

municipal and corporate bonds

have contractual maturities which

range from one day to 4.6 years.

Treasury Notes

have contractual

maturities which

range from 46

available-for-sale and

on the accompanying

These assets are carried at fair value with unrealized

gains and losses reported net of taxes in Accumulated

other comprehensive

are bonds comprised

of auto loans and bank

cards that carry AAA ratings.

The auto loan asset-backed

are backed by static pools of auto loans

card asset-backed securities

are backed by

revolving pools of credit card receivables generated by account

from American

Additionally,

29, 2022, the

Level 1 category

at fair value

active market

Level 2 investment

securities include corporate and

municipal bonds for

exchanges for identical instruments.

Their fair value is

principally based on market values determined by

management with

assistance of

third-party pricing

identical assets

are not available,

these prices are determined

by the pricing service

using observable

characteristics,

other factors.

Deferred compensation

plan assets consist

of life insurance

These life insurance

cash surrender

which is determined

based on such

of the underlying

and are therefore

valuation hierarchy.

liability associated with the

life insurance policies represents a

obligation, the value of which is tracked via underlying insurance

funds’ net asset values, as

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

fair value of the underlying assets and discounted cash flow and are therefore classified within Level 3 of the valuation hierarchy.

The Level 3 liability associated with the life insurance policies represents a deferred compensation obligation, the value of which is tracked via underlying insurance funds’ net asset values, as recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheet.

These funds are designed to mirror mutual funds and money market funds that are observable and actively traded.

The following tables summarize the change in fair value of the Company’s financial assets and liabilities measured using Level 3 inputs as of October 30, 2021 and January 30, 2021 (in thousands):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

noncurrent liabilities

Condensed Consolidated Balance

The following tables

summarize the change in

Company’s financial assets and

in thousands):

Measurements Using

6 unchanged sentences

Included in other comprehensive income

Ending Balance at October 30, 2021

Ending Balance at April 30, 2022

Measurements Using

6 unchanged sentences

Included in other comprehensive income

Ending Balance at October 30, 2021

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

Ending Balance at April 30, 2022

Measurements Using

2 unchanged sentences

Cash Surrender Value

Beginning Balance at February 1, 2020

Beginning Balance at January 30, 2021

Total gains or (losses)

5 unchanged sentences

Liability Inputs (Level 3)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

Deferred Compensation

Beginning Balance at February 1, 2020

Beginning Balance at January 30, 2021

Total (gains) or losses

3 unchanged sentences

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, Reference Rate Reform:

The new accounting rules provide optional expedients and exceptions for applying GAAP to contracts and other transactions affected by reference rate reform.

The amendments in this standard can be adopted any time before the fourth quarter of 2022.

The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows and disclosures.

NOTE 9 – INCOME TAXES:

The Company had an effective tax rate for the first nine months of 2021 of 4.3 % (Expense) compared to 36.7 % (Benefit) for the first nine months of 2020.

The change in the effective tax rate for the first nine months was primarily due to higher pre-tax earnings, ability to realize foreign tax credits, release of reserves for uncertain tax positions due to the expiration of the statute of limitations and a favorable adjustment to the federal net operating loss carryback, partially offset by increases in state income taxes.

Further, the Coronavirus Aid, Relief and Economic Security Act (“CARES”) allows the Company to carryback losses five years;

therefore, the Company has recorded $38.1 million of estimated refunds calculated through the third quarter of 2021 in Accounts receivable in the Condensed Consolidated Balance Sheets.

The Company had an effective tax rate for the

first quarter of 2022 of

% compared to an effective tax

% for the first quarter of 2021.

The increase in the 2022 first quarter tax

rate was primarily due

Intangible Low-taxed

Income (GILTI),

realize foreign

NOTE 10 – COMMITMENTS AND CONTINGENCIES:

The Company is, from time to time, involved in routine litigation incidental to the conduct of its business, including litigation regarding the merchandise that it sells, litigation regarding intellectual property, litigation instituted by persons injured upon premises under its control, litigation with respect to various employment matters, including alleged discrimination and wage and hour litigation, and litigation with present or former employees.

Although such litigation is routine and incidental to the conduct of the Company’s business, as with any business of its size with a significant number of employees and significant merchandise sales, such litigation could result in large monetary awards.

Based on information currently available, management does not believe that any reasonably possible losses arising from current pending litigation will have a material adverse effect on the Company’s condensed consolidated financial statements.

However, given the inherent uncertainties involved in such matters, an adverse outcome in one or more such matters could materially and adversely affect the Company’s financial condition, results of operations and cash flows in any particular reporting period.

The Company accrues for these matters when the liability is deemed probable and reasonably estimable.

The Company is, from time to time, involved in routine litigation incidental to the conduct of its business,

litigation instituted

premises under

litigation with

discrimination and

present or former employees.

Although such

litigation is

incidental to

Company’s business,

litigation could

monetary awards.

information currently

available, management

pending litigation

material adverse

condensed consolidated

financial statements.

uncertainties involved in

such matters, an

adverse outcome in

more such matters

could materially

particular reporting period.

The Company accrues for

these matters when the liability is

deemed probable

and reasonably estimable.

NOTE 11 – REVENUE RECOGNITION:

The Company recognizes sales at the point of purchase when the customer takes possession of the merchandise and pays for the purchase, generally with cash or credit.

Sales from purchases made with Cato credit, gift cards and layaway sales from stores are also recorded when the customer takes possession of the merchandise.

E-commerce sales are recorded when the risk of loss is transferred to the customer.

Gift cards are recorded as deferred revenue until they are redeemed or forfeited.

possession of

the merchandise.

recorded when the

transferred to the

are recorded as deferred revenue until they are

redeemed or forfeited.

Layaway sales

cards do not have

expiration dates.

A provision is

made for estimated merchandise returns

based on sales

transaction are

classified as

Other revenue

costs related

customers (billed

and accrued) are classified as Cost of goods sold.

own proprietary

to customers.

wholly-owned subsidiaries.

receivables are

estimated customer credit

for the periods

ended April 30,

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

are recorded as deferred revenue until the customer takes possession of, or forfeits, the merchandise.

Gift cards do not have expiration dates.

A provision is made for estimated merchandise returns based on sales volumes and the Company’s experience;

actual returns have not varied materially from historical amounts.

A provision is made for estimated write-offs associated with sales made with the Company’s proprietary credit card.

Amounts related to shipping and handling billed to customers in a sales transaction are classified as Other revenue and the costs related to shipping product to customers (billed and accrued) are classified as Cost of goods sold.

The Company offers its own proprietary credit card to customers.

All credit activity is performed by the Company’s wholly-owned subsidiaries.

None of the credit card receivables are secured.

During the three and nine months ended October 30, 2021, the Company estimated customer credit losses of $, 134000 and $, 409000 , respectively, compared to $ 125,000 and $ 311,000 for the three and nine months ended October 31, 2020, respectively.

Sales purchased on the Company’s proprietary credit card for the three and nine months ended October 30, 2021 were $ 4.4 million and $ 13.6 million, respectively, compared to $ 4.2 million and $ 11.1 million for the three and nine months ended October 31, 2020, respectively.

The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

respectively,

proprietary credit

million for the periods ended April 30, 2022 and May 1, 2021,

respectively.

customers (in thousands):

Balance as of

October 30, 2021

April 30, 2022

January 29, 2022

1 unchanged sentence

Gift Card Liability

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

NOTE 12 – LEASES:

The Company determines whether an arrangement is a lease at inception.

The Company has operating leases for stores, offices and equipment.

Its leases have remaining lease terms of up to 10 years based on the estimated likelihood of renewal.

Some include options to extend the lease term for up to five years, and some include options to terminate the lease within one year.

The Company considers these options in determining the lease term used to establish its right-of-use assets and lease liabilities.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date of the lease in determining the present value of lease payments.

Company determines

have remaining

which include

terminate the

considers these

determining the

establish its

right-of-use assets

lease agreements

do not contain any material residual value guarantees or material

restrictive covenants.

borrowing rate based

on the information

available at commencement date

in determining the

present value of lease payments.

The components of lease cost are shown below (in thousands):

Three Months Ended

October 30, 2021

October 31, 2020

Operating lease cost (a)

Variable lease cost (b)

(a) Includes right-of-use asset amortization of ($0.4) million and ($0.8) million for the three months ended October 30, 2021 and October 31, 2020, respectively.

(b) Primarily related to monthly percentage rent for stores not presented on the condensed consolidated balance sheets.

Nine Months Ended

October 30, 2021

October 31, 2020

April 30, 2022

Operating lease cost (a)

Variable lease cost (b)

(a) Includes right-of-use asset amortization of ($2.1) million and ($3.5) million for the nine months ended October 30, 2021 and October 31, 2020, respectively.

(b) Primarily related to monthly percentage rent for stores not presented on the condensed consolidated balance sheets.

lease cost (b)

(a) Includes right-of-use asset amortization of ($0.4) million and

($1.2) million for the three months ended

April 30, 2022 and May 1, 2021, respectively.

(b) Primarily related to monthly percentage rent for stores not presented on the balance sheet.

Supplemental cash flow

information and non-cash

activity related to

the Company’s

operating leases are

as follows (in thousands):

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows (in thousands):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021

Operating cash flow information:

Three Months Ended

October 30, 2021

October 31, 2020

Cash paid for amounts included in the measurement of lease liabilities

Non-cash activity:

Right-of-use assets obtained in exchange for lease obligations

Nine Months Ended

October 30, 2021

October 31, 2020

April 30, 2022

Cash paid for amounts included in the measurement of lease liabilities

1 unchanged sentence

Right-of-use assets obtained in exchange for lease obligations

During the second quarter of 2021, the Company reassessed its initial accounting term for approximately 80 stores for the likelihood of renewal.

After evaluation, the Company now believes it is no longer probable that these stores will be renewed for a second lease term.

The remeasurement resulted in a $25.8 million reduction of the Company’s Right-of-Use assets on the Condensed Consolidated Balance Sheets.

Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows:

October 30, 2021

October 31, 2020

Weighted-average

April 30, 2022

Weighted-average remaining lease term

Weighted-average discount rate

Maturities of lease liabilities by fiscal year for the Company’s operating leases are as follows (in thousands):

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

the maturities

liabilities by fiscal

the Company’s

operating leases

are as follows (in thousands):

Total lease payments

1 unchanged sentence

Present value of lease liabilities

(a) Excluding the 9 months ended October 30, 2021.

(a) Excluding the 3 months ended April 30, 2022.

THE CATO CORPORATION

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements