What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-26 compared with 2021-11-19 · 405 added, 135 removed, 26 unchanged (95% of the section changed)

2 unchanged sentences

FORWARD-LOOKING INFORMATION:

The following information should be read along with the unaudited Condensed Consolidated Financial Statements, including the accompanying Notes appearing in this report.

Any of the following are “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended:

(1) statements in this Form 10-Q that reflect projections or expectations of our future financial or economic performance;

(2) statements that are not historical information;

(3) statements of our beliefs, intentions, plans and objectives for future operations, including those contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

(4) statements relating to our operations or activities for our fiscal year ending January 29, 2022 (“fiscal 2021”) and beyond, including, but not limited to, statements regarding expected amounts of capital expenditures and store openings, relocations, remodels and closures and statements regarding the potential impact of the COVID-19 pandemic and related responses and mitigation efforts on our business, results of operations and financial condition;

and (5) statements relating to our future contingencies.

When possible, we have attempted to identify forward-looking statements by using words such as “will,” “expects,” “anticipates,” “approximates,” “believes,” “estimates,” “hopes,” “intends,” “may,” “plans,” “could,” “would,” “should” and any variations or negative formations of such words and similar expressions.

We can give no assurance that actual results or events will not differ materially from those expressed or implied in any such forward-looking statements.

Forward-looking statements included in this report are based on information available to us as of the filing date of this report, but subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those contemplated by the forward-looking statements.

Such factors include, but are not limited to, the following:

any actual or perceived deterioration in the conditions that drive consumer confidence and spending, including, but not limited to, prevailing social, economic, political and public health conditions and uncertainties, levels of unemployment, fuel, energy and food costs, wage rates, tax rates, interest rates, home values, consumer net worth and the availability of credit;

changes in laws, regulations or governmental policies affecting our business, including tariffs;

uncertainties regarding the impact of any governmental actions regarding, or responses to, the foregoing conditions;

competitive factors and pricing pressures;

our ability to predict and respond to rapidly changing fashion trends and consumer demands;

our ability to successfully implement our new store development strategy to increase new store openings and our ability of any such new stores to grow and perform as expected;

adverse weather, public health threats (including the COVID-19 pandemic) or similar conditions that may affect our sales or operations;

inventory risks due to shifts in market demand, including the ability to liquidate excess inventory at anticipated margins;

and other factors discussed under “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended January 30, 2021 (“fiscal 2020”), as amended or supplemented, and in other reports we file with or furnish to the Securities and Exchange Commission (“SEC”) from time to time.

We do not undertake, and expressly decline, any obligation to update any such forward-looking information contained in this report, whether as a result of new information, future events, or otherwise.

“forward-looking”

(1) statements

(2) statements

(3) statements

objectives for future operations,

including those contained in

“Management’s Discussion and

Financial Condition

and Results of

(4) statements relating

operations or activities

statements regarding expected

capital expenditures and

store openings, relocations,

(5) statements relating

to our future contingencies.

When possible, we have attempted to identify forward-

looking statements

“will,” “expects,”

“anticipates,” “approximates,”

negative formations

similar expressions.

forward-looking

Forward-looking statements included in this report are based on information available to us as

unknown risks,

uncertainties and

other factors

forward-looking

deterioration in the conditions that drive consumer confidence and spending, including, but not limited to,

uncertainties,

unemployment, fuel,

interest rates,

availability of

regulations and

government policies

uncertainties

governmental action regarding, or

responses to, the

foregoing conditions;

competitive factors

rapidly changing

fashion trends

our ability to

successfully implement our

new store development

strategy to increase

new store openings

adverse weather,

public health

threats (including the COVID-19 pandemic)

or similar conditions that

may affect our

sales or operations;

supplemented,

other reports

Securities and

undertake, and

any obligation

such forward-looking information contained

in this report,

result of new

information, future

events, or otherwise.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

The Company’s accounting policies are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021.

As disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.

Future events and their effects cannot be determined with absolute certainty.

Therefore, the determination of estimates requires the exercise of judgment.

Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements.

The most significant accounting estimates inherent in the preparation of the Company’s financial statements include the allowance for customer credit losses, inventory shrinkage, the calculation of potential asset impairment, workers’ compensation, general and auto insurance liabilities, reserves relating to self-insured health insurance, and uncertain tax positions.

The Company’s critical accounting policies and estimates are discussed with the Audit Committee.

The Company’s accounting

policies are more

fully described

in “Management’s Discussion

and Analysis of

of Operations”

in the Company’s

“Management’s

Condition and Results of Operations,”

the preparation of the Company’s financial

statements in conformity

with generally

accepted accounting

in the United States (“GAAP”)

requires management

and assumptions

in the financial

their effects

with absolute

the determination of estimates requires the exercise of judgment.

Actual results inevitably will differ from

estimates, and

differences may

financial statements.

in the preparation

of the Company’s

the allowance

shrinkage, the

calculation of

impairment, workers’

compensation, general and auto insurance liabilities, reserves relating to self-insured health insurance, and

tax positions.

The Company’s

and estimates

are discussed

Audit Committee.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS:

The following table sets forth, for the periods indicated, certain items in the Company's unaudited Condensed Consolidated Statements of Income as a percentage of total retail sales:

The following

the Company's

as a percentage

Three Months Ended

Nine Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

April 30, 2022

Total retail sales

4 unchanged sentences

Interest and other income

Income (loss) before income taxes

Net income (loss)

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED):

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.

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.

Comparison of the Three and Nine Months ended October 30, 2021 with October 31, 2020

Total retail sales for the third quarter were $170.5 million compared to last year’s third quarter sales of $149.2 million, a 14% increase.

The Company’s sales increase in the third quarter of fiscal 2021 is primarily due to a 14% increase in same-store sales and sales from new stores, partially offset by permanently closed stores in 2020.

The increase in same-store sales is primarily due to stores being open in this year’s third quarter, as opposed to operating on limited hours during the third quarter of 2020.

For the nine months ended October 30, 2021, total retail sales were $587.7 million compared to last year’s comparable nine month sales of

Income before income taxes

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

$414.3 million, a 42% increase.

Sales in the first nine months of fiscal 2021 increased primarily due to a 41% increase in same-store sales and sales from new stores, partially offset by permanently closed stores in 2020.

Same-store sales for the nine months ended October 30, 2021 increased primarily due to stores being open in the first nine months of 2021 as opposed to closed from March 19, 2020 into the second quarter of 2020 .

Same-store sales include stores that have been open more than 15 months.

Stores that have been relocated or expanded are also included in the same-store sales calculation after they have been open more than 15 months.

The method of calculating same-store sales varies across the retail industry.

As a result, our same-store sales calculation may not be comparable to similarly titled measures reported by other companies.

E-commerce sales were less than 5% of total sales for the nine months ended October 30, 2021 and are included in the same-store sales calculation.

Total revenues, comprised of retail sales and other revenue (principally finance charges and late fees on customer accounts receivable and layaway fees), were $172.2 million and $593.0 million for the three and nine months ended October 30, 2021, compared to $150.8 million and $419.7 million for the three and nine months ended October 31, 2020, respectively.

The Company operated 1,324 stores at October 30, 2021 compared to 1,347 stores at the end of last year’s third quarter.

During the first nine months of fiscal 2021, the Company closed six stores.

The Company currently expects to open fewer than 10 stores and to close approximately 25 stores in fiscal 2021.

Credit revenue of $0.5 million represented 0.3% of total revenues in the third quarter of fiscal 2021, compared to 2020 credit revenue of $0.6 million or 0.4% of total revenues.

Credit revenue is comprised of interest earned on the Company’s private label credit card portfolio and related fee income.

Credit revenue decreased slightly for the most recent comparable period due to lower finance charge income and lower late fee income from sales using the Company’s proprietary credit card.

Related expenses principally include payroll, postage and other administrative expenses and totaled $0.5 million in the third quarter of fiscal 2021, compared to last year’s third quarter expense of $0.4 million.

Other revenue in total, as included in total revenues, was $1.7 million and $5.3 million for the three and nine months ended October 30, 2021, respectively, compared to $1.6 million and $5.4 million for the prior year’s comparable three and nine month periods.

The overall slight decrease in the nine months ended October 30, 2021 is primarily due to a decrease in finance charge income, partially offset by increases in layaway charges and gift card breakage income.

Cost of goods sold was $104.2 million, or 61.1% of retail sales and $343.5 million, or 58.4% of retail sales for the three and nine months ended October 30, 2021, respectively, compared to $109.4 million, or 73.3% of retail sales and $325.7 million, or 78.6% of retail sales for the comparable three and nine month periods of fiscal 2020.

The overall decrease in cost of goods sold as a percent of retail sales for the third quarter of fiscal 2021 resulted primarily from the leveraging of occupancy, buying and distribution costs due to more normalized sales and higher sales of regular priced goods .

Cost of goods sold includes merchandise costs (net of discounts and allowances), buying costs, distribution costs, occupancy costs, freight and inventory shrinkage.

Net merchandise costs and in-bound freight are capitalized as inventory costs.

Buying and distribution costs include payroll, payroll-related costs and operating expenses for the buying departments and distribution center.

Occupancy costs include rent, real estate taxes, insurance, common area maintenance, utilities and maintenance for stores and distribution facilities.

Total gross margin dollars (retail sales less cost of goods sold exclusive of depreciation) increased by 66.6% to $66.3 million for the third quarter of fiscal 2021 and increased by 175.9% to $244.2 million for the first nine months of fiscal 2021, compared to $39.8 million and $88.5 million for the prior year’s comparable three and nine months of fiscal 2020.

Gross margin as presented may not be comparable to those of other entities.

Selling, general and administrative expenses (“SG&A”) primarily include corporate and store payroll, related payroll taxes and benefits, insurance, supplies, advertising, bank and credit card processing fees.

CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Discussion and

Financial Condition

of Operations

understanding

“Financial Statements” section of this Quarterly Report on Form

10-Q, as well as our 2021 Form 10-K.

COVID-19 pandemic

business, financial condition, results

of operations, cash flows,

and liquidity.

These uncertainties include

transmissible

vaccination rates

periodic surges

COVID-19 surges,

merchandise is produced.

The Company is also subject to the continued effects of disruption in the global

transportation,

these uncertainties

others related

pandemic will

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

local orders,

reductions in

store traffic

effects of the outbreak, including increased freight and logistics costs and other

While the Company currently anticipates a continuation of the

uncertainties listed above and the potential

adverse impacts

during fiscal

these effects

future developments,

highly uncertain.

uncertainties

impact, and how

quickly and to

normal economic and

conditions can resume.

of First Quarter

Total retail sales

for the first

$204.9 million

to last year’s

first quarter

sales of $211.2

decreased primarily

same-store sales,

partially offset

noncomparable stores.

The decrease in

same-store sales was

primarily due to

cooler, wetter

weather, late

disposable income.

Same store sales include stores that have been open more than

have been relocated or expanded are also included in

the same store sales calculation after they have been

of calculating

retail industry.

result, our same

store sales calculation

may not be comparable

titled measures

first quarter

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

expenses were $62.5 million, or 36.6% of retail sales and $196.7 million, or 33.5% of retail sales for the third quarter and first nine months of fiscal 2021, respectively, compared to $51.9 million, or 34.8% of retail sales and $148.4 million, or 35.8% of retail sales for the prior year’s comparable three and nine month periods.

The overall increase in SG&A expense for the third quarter is primarily due to increased employee benefit/bonus expense and store operating expenses as store operating hours have increased substantially compared to the prior year’s phased store reopening following the extended store closure due to COVID-19, partially offset by a decrease in insurance expense.

For the first nine months of fiscal 2021, the overall increase in SG&A expense was primarily attributable to increased employee benefit/bonus expense and store operating expenses as operating hours have increased substantially compared to the prior year’s phased store reopening following the extended store closure due to COVID-19, partially offset by a $5.3 million non-cash impairment charge in 2020.

Depreciation expense was $3.2 million, or 1.9% of retail sales and $9.4 million, or 1.6% of retail sales for the third quarter and first nine months of fiscal 2021, respectively, compared to $3.6 million, or 2.4% of retail sales and $11.1 million or 2.7% of retail sales for the comparable three and nine month periods of fiscal 2020, respectively.

The decrease in depreciation expense is attributable to lower net fixed assets primarily due to $13.7 million of impairment charges in 2020.

Interest and other income was $0.5 million, or 0.3% of retail sales and $1.7 million, or 0.3% of retail sales for the three and nine months ended October 30, 2021, respectively, compared to $0.8 million, or 0.5% of retail sales and $3.6 million, or 0.9% of retail sales for the comparable three and nine month periods of fiscal 2020, respectively.

The decrease for the first nine months of fiscal 2021 compared to 2020 is primarily attributable to lower interest rates and smaller gains from the sale of investments, partially offset by an increase in short-term investments.

Income tax benefit was $5.7 million for the third quarter and $1.9 million expense for the first nine months of fiscal 2021, respectively, compared to an income tax benefit of $9.7 million and $22.7 million for the comparable three and nine month periods of fiscal 2020, respectively.

For the first nine months of fiscal 2021, the Company’s effective tax rate was 4.3% (Expense) compared to 36.7% (Benefit) for the first nine months of 2020.

The change in the 2021 year-to-date tax rate 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.

LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK:

The Company believes that its cash, cash equivalents and short-term investments, together with cash flows from operations and borrowings available under its revolving credit agreement, will be adequate to fund the Company’s regular operating requirements and expected capital expenditures for fiscal 2021 and the next 12 months.

Cash provided by operating activities during the first nine months of fiscal 2021 was $79.4 million as compared to $26.1 million used in the first nine months of fiscal 2020.

Cash provided by operating activities for the first nine months of fiscal 2021 was primarily generated by earnings adjusted for depreciation and changes in working capital.

The increase in cash provided of $105.5 million for the first nine months of fiscal 2021 as compared to the first nine months of fiscal 2020 was primarily due to a net income versus a net loss and an increase in accounts payable and accrued liabilities, partially offset by an increase in inventory and a decrease in impairment charges.

CONDITION AND RESULTS OF OPERATIONS

in the same-store sales calculation.

Total revenues, comprised of retail sales

and other revenue (principally

commerce purchases and

layaway fees),

$206.7 million

quarter ended

compared to $213.1 million

for the first quarter ended

The Company operated

1,315 stores at

2022 compared

fiscal year’s

first quarter.

of fiscal 2022, the Company opened

five stores and permanently

closed one store.

The Company currently

approximately

Credit revenue

total revenues

2022, compared

credit revenue of

$0.5 million or

total revenues.

Credit revenue is

comprised of interest

the Company’s

card portfolio

postage and other

administrative

and totaled $0.4

the first quarter

2022, compared

first quarter

Other revenue,

of total revenues,

was $1.8 million

for the first

of fiscal 2022,

comparable first

Cost of goods sold

was $132.2 million,

or 64.5% of retail

sales for the first

quarter of fiscal

2022, compared

to $123.7 million, or 58.5% of retail

sales in the first quarter of fiscal 2021.

The overall increase

first quarter

of 2022 resulted

and an increase

in freight costs

due to higher fuel

Cost of goods sold

distribution costs,

merchandise costs

in-bound freight

capitalized as

inventory costs.

distribution costs include payroll, payroll-related

operating expenses for the

buying departments

and maintenance

and distribution

Total gross margin

depreciation) decreased by 17.0% to

$72.7 million for

2022 compared

be comparable

and administrative

payroll taxes

and benefits,

expenses were 29.5% of retail

sales for the first quarter of fiscal 2022, compared

to 29.9% of retail sales in

the first quarter

of fiscal 2021.

SG&A as a percent

of retail sales

compensation, partially

offset by increased payroll costs reflecting more normalized operations.

2022, compared

$3.0 million,

or 1.4% of retail sales

for the first quarter

of fiscal 2021.

in depreciation

was attributable

fully depreciated.

first quarter

to a decrease

in short-term

Income tax expense

was $1.9 million or

1.0% of retail sales

for the first quarter

of fiscal 2022, compared

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

At October 30, 2021, the Company had working capital of $147.4 million compared to $108.6 million at January 30, 2021.

The increase in working capital is primarily attributable to higher inventory, accounts receivable and short-term investments, partially offset by higher accounts payable and accrued employee benefits and bonus.

At October 30, 2021 and January 30, 2021, the Company had an unsecured revolving credit agreement, which provides for borrowings of up to $35.0 million, less the value of revocable letters of credit relating to purchase commitments.

The revolving credit agreement is committed until 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 the credit facility, nor outstanding letters of credit that reduced borrowing availability, as of October 30, 2021 and January 30, 2021.

Expenditures for property and equipment totaled $1.8 million in the first nine months of fiscal 2021, compared to $11.2 million in last fiscal year’s first nine months.

For the full fiscal 2021 year, the Company expects to invest approximately $4.1 million for capital expenditures.

Net cash used by investing activities totaled $51.3 million in the first nine months of fiscal 2021 compared to $57.9 million provided by investing activities in the comparable period of 2020.

The increase in net cash used in 2021 is primarily due to a decrease in the sale of short-term investments and an increase in the purchase of short-term investments, partially offset by a decrease in capital expenditures.

Net cash used in financing activities totaled $21.3 million in the first nine months of fiscal 2021 compared to $24.3 million used in the comparable period of fiscal 2020.

The decrease was primarily due to less dividends paid and stock repurchases.

As of October 30, 2021, the Company had 872,513 shares remaining in open authorizations under its share repurchase program.

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

The Company does not use derivative financial instruments.

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.

CONDITION AND RESULTS OF OPERATIONS

The effective income

the first quarter

of fiscal 2022

compared to 12.9%

primarily due

Global Intangible Low-taxed Income (GILTI), partially offset by the ability to realize foreign tax credits.

LIQUIDITY, CAPITAL

The Company believes that its cash, cash equivalents and short-term

together with cash flows

from operations

and borrowings

available under

its revolving credit

will be adequate to fund the

Company’s regular

capital expenditures

for fiscal 2022

and the next 12

for depreciation

in working capital.

in cash provided

of $45.3 million

2022 as compared

2021 was primarily

lower net income

and a decrease

accrued liabilities

2021 year end

working capital

million compared

January 29, 2022.

This decrease is primarily

to lower short-term

partially offset

lower accrued

compensation.

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.

outstanding letters

Expenditures for

equipment totaled

compared to $0.6

The increase in

expenditures for property and

equipment was primarily due

costs associated with

investments in

information technology

distribution center.

full fiscal 2022

Company expects to

approximately

expenditures,

investing activities

to $34.2 million

used in the comparable

period of fiscal

2021, primarily

due to lower purchases

expenditures.

Net cash used by financing

totaled $12.7 million

in the first three months

of fiscal 2022 compared

the comparable

2021, primarily

and dividends

the quarterly

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

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.

See Note 7, Fair Value Measurements.

RECENT ACCOUNTING PRONOUNCEMENTS:

CONDITION AND RESULTS OF OPERATIONS

840,119 shares

open authorizations under its

use derivative

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,

of $11.0 million.

29, 2022, the

had $0.8 million

of $11.5 million.

Value Measurements.

PRONOUNCEMENTS:

See Note 8, Recent Accounting Pronouncements.

THE CATO CORPORATION

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

The Company is subject to market rate risk from exposure to changes in interest rates based on its financing, investing and cash management activities, but the Company does not believe such exposure is material.

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK:

financing, investing and

cash management activities,

but the Company

believe such exposure

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 2. Management’s Discussion and Analysis