What changed in this filing

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Item 1. Financial Statements

2022-08-25 compared with 2022-05-26 · 325 added, 483 removed, 225 unchanged (78% of the section changed)

1 unchanged sentence

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF INCOME AND

COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND

COMPREHENSIVE INCOME (LOSS)

Three Months Ended

April 30, 2022

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

(Dollars in thousands, except per share data)

9 unchanged sentences

Income tax expense

Basic earnings per share

Diluted earnings per share

Comprehensive income:

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

of deferred income taxes of ($

) for April 30, 2022

and May 1, 2021, respectively

Net income (loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share

Comprehensive income:

Net income (loss)

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

deferred income taxes of ($ 18 ) and ($ 343 ) for the three and

six months ended July 30, 2022 and ($ 44 ) and ($ 85 ) for

the three and six months ended July 31, 2021, respectively

Comprehensive income (loss)

See notes to condensed consolidated financial statements (unaudited).

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

April 30, 2022

July 30, 2022

January 29, 2022

5 unchanged sentences

Accounts receivable, net of allowance for customer credit losses of

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

$ 817 and $ 803 at July 30, 2022 and January 29, 2022, respectively

Merchandise inventories

8 unchanged sentences

Accrued expenses

Accrued bonus and benefits

Accrued employee benefits and bonus

Accrued income taxes

4 unchanged sentences

Stockholders' Equity:

Preferred stock, $

par value per share,

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

authorized, none issued

Class A common stock, $

par value per share,

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

shares authorized;

shares issued

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

Convertible Class B common stock, $

par value per share,

19,416,912 shares and 19,824,093 shares

issued at July 30, 2022 and January 29, 2022, respectively

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

15,000,000 shares authorized;

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

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

issued at July 30, 2022 and January 29, 2022, respectively

Additional paid-in capital

5 unchanged sentences

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

Three Months Ended

April 30, 2022

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

July 30, 2022

July 31, 2021

(Dollars in thousands)

Operating Activities:

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

Adjustments to reconcile net income to net cash provided

by operating activities:

Provision for customer credit losses

1 unchanged sentence

Share-based compensation

Deferred income taxes

Loss on disposal of property and equipment

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

Changes in operating assets and liabilities which provided

Accounts receivable

4 unchanged sentences

Accounts payable, accrued expenses and other liabilities

Net cash provided (used) by operating activities

Net cash provided by operating activities

Investing Activities:

2 unchanged sentences

Sales of short-term investments

Net cash provided (used) by investing activities

Net cash provided by (used in) investing activities

Financing Activities:

2 unchanged sentences

Proceeds from employee stock purchase plan

Net cash provided (used) by financing activities

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

Net cash used in financing activities

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

2 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:

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

Class A common stock issued through restricted stock grant plans

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

deferred income tax benefit of ($ 362 )

Dividends paid ($ 0.17 per share)

Class A common stock sold through employee stock purchase plan

Share-based compensation issuances and exercises

Share-based compensation expense

Repurchase and retirement of treasury shares

Balance — April 30, 2022

Comprehensive income:

Net income (loss)

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

deferred income tax benefit of ($ 18 )

Dividends paid ($ 0.17 per share)

Class A common stock sold through employee stock purchase plan

Share-based compensation issuances and exercises

Share-based compensation expense

Repurchase and retirement of treasury shares

Balance — July 30, 2022

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Comprehensive

3 unchanged sentences

Comprehensive income:

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

income tax benefit of ($

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

deferred income tax benefit of ($ 40 )

Dividends paid ($ - per share)

Class A common stock sold through employee stock purchase

Class A common stock issued through restricted stock grant plans

Class A common stock sold through employee stock purchase plan

Share-based compensation issuances and exercises

Share-based compensation expense

Repurchase and retirement of treasury shares

Balance — May 1, 2021

Comprehensive income:

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

Share-based compensation issuances and exercises

Share-based compensation expense

Repurchase and retirement of treasury shares

Balance — July 31, 2021

See notes to condensed consolidated financial statements (unaudited).

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 July 30, 2022 and July 31, 2021 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 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 America.

The Company received $ 33 million of its income tax receivable by the end of the second quarter of the current fiscal year.

The Company anticipates that the remaining balance, which is included in Accounts receivable on the accompanying Condensed Consolidated Balance Sheets, will be received by the end of the fourth quarter of fiscal 2022.

On August 25, 2022, the Board of Directors declared the quarterly dividend at $ 0.17 per share.

THE CATO CORPORATION

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

THE CATO CORPORATION

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

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.

Three Months Ended

April 30, 2022

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

(Dollars in thousands)

Earnings allocated to non-vested equity awards

Net earnings available to common stockholders

Net earnings (loss)

(Earnings) loss allocated to non-vested equity awards

Net earnings (loss) available to common stockholders

Basic weighted average common shares outstanding

Diluted weighted average common shares outstanding

Net income per common share

Basic earnings per share

Diluted earnings per share

Net income (loss) per common share

Basic earnings (loss) per share

Diluted earnings (loss) per share

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

– ACCUMULATED

OTHER COMPREHENSIVE

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

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 July 30, 2022:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Beginning Balance at April 30, 2022

Other comprehensive income before

reclassification

comprehensive

(in thousands)

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income

Ending Balance at July 30, 2022

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

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

(b) Includes a $ 4 loss 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 a benefit of $ 1 .

The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the six months ended July 30, 2022:

Changes in Accumulated Other

4 unchanged sentences

Beginning Balance at January 29, 2022

Other comprehensive income (loss) before

Other comprehensive income before

reclassification

1 unchanged sentence

other comprehensive income (b)

Net current-period other comprehensive income (loss)

Ending Balance at April 30, 2022

Net current-period other comprehensive income

Ending Balance at July 30, 2022

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

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

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

(b) Includes $ 7 loss 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 $

reclassification

comprehensive

(in thousands)

The tax impact of this reclassification was a benefit of $ 1 .

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

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 July 31, 2021:

Changes in Accumulated Other

3 unchanged sentences

Available-for-Sale

Beginning Balance at May 1, 2021

Other comprehensive income before

reclassifications

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income

Ending Balance at July 31, 2021

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

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

(b) Includes $ 34 gain 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 expense of $ 8 .

The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the six months ended July 31, 2021:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Beginning Balance at January 30, 2021

Other comprehensive income (loss) before

reclassification

Other comprehensive income before

reclassifications

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income (loss)

Ending Balance at May 1, 2021

Net current-period other comprehensive income

Ending Balance at July 31, 2021

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

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

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

(b) Includes $ 85 gain 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 tax impact of this reclassification was expense of $ 20 .

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

NOTE 4 – FINANCING ARRANGEMENTS:

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

As of July 30, 2022, the Company had an unsecured revolving credit agreement, which provided for borrowings of up to $ 35.0 million, less the balance of any revocable letters of credit related to purchase commitments, and was committed through May 2027.

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 July 30, 2022.

There were no borrowings outstanding, no r any outstanding letters of credit that reduced borrowing availability, as of July 30, 2022 or January 29, 2022.

The weighted average interest rate under the credit facility was zero at July 30, 2022 due to no borrowings outstanding.

NOTE 5 – REPORTABLE SEGMENT INFORMATION:

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 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 July 30, 2022, 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 CATO CORPORATION

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):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):

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

Three Months Ended

April 30, 2022

Six Months Ended

July 30, 2022

Interest and other income

Income before taxes

Interest and other income

Income/(Loss) before

Capital expenditures

Three Months Ended

Six Months Ended

July 31, 2021

Interest and other income

Income before taxes

Interest and other income

Income/(Loss) before

Capital expenditures

Total assets as of April 30, 2022

Capital expenditures

Total assets as of July 30, 2022

Total assets as of January 29, 2022

Company evaluates

performance based

The following

schedule summarizes

the direct expenses

of the credit segment

which are reflected

and administrative

(in thousands):

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):

Three Months Ended

April 30, 2022

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Other expenses

1 unchanged sentence

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

NOTE 6 – STOCK-BASED COMPENSATION:

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

As of July 30, 2022, 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 July 30, 2022:

Options and/or restricted stock initially authorized

Options and/or restricted stock available for grant:

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

July 30, 2022

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 July 30, 2022 and January 29, 2022, there was $ 13,016,000 and $ 11,096,000 , respectively, of total unrecognized compensation expense related to unvested restricted stock awards, which had a remaining weighted-average vesting period of 2.6 years and 2.3 years, respectively.

The total compensation expense during the three and six months ended July 30, 2022 was $ 1,403,000 and $ 2,006,000 , respectively, compared to $ 1,597,000 and $ 1,880,000 , respectively, for the three and six months ended July 31, 2021.

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 six months ended July 30, 2022:

Weighted Average

Grant Date Fair

Value Per Share

Restricted stock awards at January 29, 2022

Forfeited or expired

Restricted stock awards at April 30, 2022

Restricted stock awards at July 30, 2022

THE CATO CORPORATION

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

NOTE 6 – STOCK BASED-COMPENSATION (CONTINUED):

The Company’s 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 six months ended July 30, 2022 and July 31, 2021, the Company sold 12,196 and 20,584 shares to employees at an average discount of $ 2.12 and $ 1.26 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 $ 26,000 and $ 26,000 for the six months ended July 30, 2022 and July 31, 2021, 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 July 30, 2022 and January 29, 2022:

July 30, 2022

State/Municipal Bonds

8 unchanged sentences

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

January 29, 2022

State/Municipal Bonds

7 unchanged sentences

Total Liabilities

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 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 July 30, 2022 and January 29, 2022.

The state, municipal and corporate bonds have contractual maturities which range from one day to 4.5 years.

Treasury Notes have contractual maturities which range from one day to 2.1 years.

These securities are classified as available-for-sale and are recorded as Short-term investments, Restricted cash and Other assets 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 July 30, 2022, the Company had $ 0.7 million of corporate equities and deferred compensation plan assets of $ 11.0 million.

At January 29, 2022, the Company had $ 0.8 million of corporate equities and deferred compensation plan assets of $ 11.5 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 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

THE CATO CORPORATION

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):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

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 July 30, 2022 and January 29, 2022 (in thousands):

Measurements Using

6 unchanged sentences

Included in other comprehensive income

Ending Balance at April 30, 2022

Ending Balance at July 30, 2022

Measurements Using

6 unchanged sentences

Included in other comprehensive income

Ending Balance at April 30, 2022

Ending Balance at July 30, 2022

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

Measurements Using

10 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

5 unchanged sentences

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:

NOTE 9 – INCOME TAXES:

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

The Company had an effective tax rate for the first six months of 2022 of 50.6 % compared to an effective tax rate of 18.0 % for the first six months of 2021.

The change in the effective tax rate for the first six months was primarily due to an increase in Global Intangible Low-taxed Income (GILTI), state income taxes and non-deductible officer’s compensation, offset by the foreign rate differential and foreign tax credits, as a percentage on lower pre-tax earnings.

NOTE 10 – COMMITMENTS AND CONTINGENCIES:

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.

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.

NOTE 11 – REVENUE RECOGNITION:

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 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.

Layaway sales 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 six months ended July 30, 2022, the Company estimated customer credit losses of $ 87,000 and

THE CATO CORPORATION

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):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

$ 173,000 respectively, compared to $ 144,000 and $ 275,000 for the three and six months ended July 31, 2021, respectively.

Sales purchased on the Company’s proprietary credit card for the three and six months ended July 30, 2022 were $ 5.8 million and $ 11.5 million, respectively, compared to $ 4.8 million and $ 9.2 million for the three and six months ended July 31, 2021, respectively.

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

Balance as of

April 30, 2022

July 30, 2022

January 29, 2022

2 unchanged sentences

NOTE 12 – LEASES:

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 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 of which 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.

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

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

Three Months Ended

April 30, 2022

July 30, 2022

July 31, 2021

Operating lease cost (a)

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.

Variable lease cost (b)

(a) Includes right-of-use asset amortization of ($ 0.5 ) million and ($ 0.5 ) million for the three months ended July 30, 2022 and July 31, 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):

Six Months Ended

July 30, 2022

July 31, 2021

Operating lease cost (a)

Variable lease cost (b)

(a) Includes right-of-use asset amortization of ($ 0.9 ) million and ($ 1.6 ) million for the six months ended July 30, 2022 and July 31, 2021, respectively.

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

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2022 AND JULY 31, 2021

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

Operating cash flow information:

Three Months Ended

April 30, 2022

July 30, 2022

July 31, 2021

Cash paid for amounts included in the measurement of lease liabilities

1 unchanged sentence

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

Weighted-average

April 30, 2022

Six Months Ended

July 30, 2022

July 31, 2021

Cash paid for amounts included in the measurement of lease liabilities

Non-cash activity:

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

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

July 30, 2022

July 31, 2021

Weighted-average remaining lease term

Weighted-average discount rate

the maturities

liabilities by fiscal

the Company’s

operating leases

are as follows (in thousands):

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

Total lease payments

1 unchanged sentence

Present value of lease liabilities

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

(a) Excluding the six months ended July 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