What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-22 compared with 2022-08-25 · 157 added, 125 removed, 425 unchanged (40% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

(Dollars in thousands, except per share data)

7 unchanged sentences

Costs and expenses, net

Income before income taxes

Income tax expense

Income (loss) before income taxes

Income tax (benefit) expense

Net income (loss)

5 unchanged sentences

deferred income taxes of ($ 189 ) and ($ 532 ) 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

nine months ended October 29, 2022 and ($ 150 ) and ($ 235 ) for

the three and nine months ended October 30, 2021, respectively

Comprehensive income (loss)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

July 30, 2022

October 29, 2022

January 29, 2022

5 unchanged sentences

Accounts receivable, net of allowance for customer credit losses of

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

$ 827 and $ 803 at October 29, 2022 and January 29, 2022, respectively

Merchandise inventories

20 unchanged sentences

19,128,675 shares and 19,824,093 shares

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

issued at October 29, 2022 and January 29, 2022, respectively

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

1 unchanged sentence

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

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

issued at October 29, 2022 and January 29, 2022, respectively

Additional paid-in capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

(Dollars in thousands)

24 unchanged sentences

Net cash used in financing activities

Net increase in cash, cash equivalents, and restricted cash

Net increase (decrease) 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).

6 unchanged sentences

Comprehensive income:

Net income (loss)

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

9 unchanged sentences

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

deferred income tax benefit of ($ 18 )

deferred income tax expense of $ 18

Dividends paid ($ 0.17 per share)

4 unchanged sentences

Balance — July 30, 2022

Comprehensive income:

Net income (loss)

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

deferred income tax benefit of ($ 189 )

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 — October 29, 2022

See notes to condensed consolidated financial statements (unaudited).

6 unchanged sentences

Comprehensive income:

Net income (loss)

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

7 unchanged sentences

Comprehensive income:

Net income (loss)

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

6 unchanged sentences

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)

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 — October 30, 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.

3 unchanged sentences

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

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

During the third quarter of the current fiscal year, the Company received $ 1.4 million from the state of North Carolina’s Business Recovery Program, which provides aid to eligible North Carolina businesses that suffered significant economic damage from the COVID-19 pandemic.

The full amount received is recorded in Interest and other income in the accompanying Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

On November 17, 2022, the Board of Directors maintained the quarterly dividend at $ 0.17 per share.

Recently Adopted Accounting Policies

In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance .

This update provides for increased transparency of government assistance, including the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance and the effect of the assistance on an entity’s financial statements.

This standard is effective for annual periods beginning after December 15, 2021.

The Company adopted this standard on a prospective basis on January 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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

NOTE 2 - EARNINGS PER SHARE:

6 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

(Dollars in thousands)

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 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:

The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the three months ended October 29, 2022:

Changes in Accumulated Other

3 unchanged sentences

Available-for-Sale

Beginning Balance at April 30, 2022

Beginning Balance at July 30, 2022

Other comprehensive income before

3 unchanged sentences

Net current-period other comprehensive income

Ending Balance at July 30, 2022

Ending Balance at October 29, 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:

(b) Includes an $ 11 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 an expense of $ 3 .

The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the nine months ended October 29, 2022:

Changes in Accumulated Other

9 unchanged sentences

Net current-period other comprehensive income

Ending Balance at July 30, 2022

Ending Balance at October 29, 2022

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

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

(b) Includes an $ 18 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 a benefit of $ 1 .

The tax impact of this reclassification was an expense of $ 4 .

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 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:

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

3 unchanged sentences

Available-for-Sale

Beginning Balance at May 1, 2021

Beginning Balance at July 31, 2021

Other comprehensive income before

3 unchanged sentences

Net current-period other comprehensive income

Ending Balance at July 31, 2021

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 $ 34 gain impact of Accumulated other comprehensive income reclassifications into Interest and other

(b) Includes a $ 92 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:

The tax impact of this reclassification was an expense of $ 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:

Changes in Accumulated Other

9 unchanged sentences

Net current-period other comprehensive income

Ending Balance at July 31, 2021

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 $ 85 gain impact of Accumulated other comprehensive income reclassifications into Interest and other

(b) Includes a $ 177 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 $ 20 .

The tax impact of this reclassification was an expense of $ 41 .

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

NOTE 4 – FINANCING ARRANGEMENTS:

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.

As of October 29, 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 October 29, 2022.

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

The weighted average interest rate under the credit facility was zero at October 29, 2022 due to no borrowings outstanding.

NOTE 5 – REPORTABLE SEGMENT INFORMATION:

7 unchanged sentences

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 operates its women’s fashion specialty retail stores in 32 states as of October 29, 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.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):

1 unchanged sentence

Three Months Ended

Six Months Ended

July 30, 2022

Nine Months Ended

October 29, 2022

Interest and other income

5 unchanged sentences

Three Months Ended

Six Months Ended

July 31, 2021

Nine Months Ended

October 30, 2021

Interest and other income

4 unchanged sentences

Capital expenditures

Total assets as of July 30, 2022

Total assets as of October 29, 2022

Total assets as of January 29, 2022

3 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Other expenses

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

NOTE 6 – STOCK-BASED COMPENSATION:

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.

As of October 29, 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:

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 29, 2022:

Options and/or restricted stock initially authorized

Options and/or restricted stock available for grant:

July 30, 2022

October 29, 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:

As of October 29, 2022 and January 29, 2022, there was $ 11,786,000 and $ 11,096,000 , respectively, of total unrecognized compensation expense related to nonvested restricted stock awards, which had a remaining weighted-average vesting period of 2.4 years and 2.3 years, respectively.

Total compensation benefit during the three months ended October 29, 2022 was $ 535,000 and total compensation expense during the nine months ended October 29, 2022 was $ 1,471,000 , compared to an expense of $ 1,088,000 and $ 2,968,000 , respectively, for the three and nine months ended October 30, 2021.

The total compensation benefit during the three months ended October 29, 2022 is the result of forfeitures driven by the retirement of several senior members of management.

These amounts 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 29, 2022:

Weighted Average

3 unchanged sentences

Forfeited or expired

Restricted stock awards at July 30, 2022

Restricted stock awards at October 29, 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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 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.

During the nine months ended October 29, 2022 and October 30, 2021, the Company sold 28,504 and 22,541 shares to employees at an average discount of $ 1.73 and $ 1.38 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 $ 49,000 and $ 31,000 for the nine months ended October 29, 2022 and October 30, 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

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 29, 2022 and January 29, 2022:

October 29, 2022

State/Municipal Bonds

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

January 29, 2022

8 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 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.

The state, municipal and corporate bonds have contractual maturities which range from four days to 4.1 years.

Treasury Notes have contractual maturities which range from two days to 1.9 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.

2 unchanged sentences

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.

Additionally, at October 29, 2022, the Company had $ 0.9 million of corporate equities and deferred compensation plan assets of $ 8.8 million.

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

5 unchanged sentences

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

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 CATO CORPORATION

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.

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

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

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

Measurements Using

6 unchanged sentences

Included in other comprehensive income

Ending Balance at July 30, 2022

Ending Balance at October 29, 2022

Measurements Using

6 unchanged sentences

Included in other comprehensive income

Ending Balance at July 30, 2022

Ending Balance at October 29, 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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

Measurements Using

18 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:

NOTE 9 – INCOME TAXES:

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.

The Company had an effective tax rate for the first nine months of 2022 of 49.7 % compared to 4.3 % for the first nine months of 2021.

The change in the effective tax rate for the first nine 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, foreign tax credits and release of reserves for uncertain tax positions, as a percentage on lower pre-tax earnings.

NOTE 10 – COMMITMENTS AND CONTINGENCIES:

18 unchanged sentences

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

During the three

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

$ 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.

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

and nine months ended October 29, 2022, the Company estimated customer credit losses of $, 89000 and $, 261000 , respectively, compared to $ 134,000 and $ 409,000 for the three and nine months ended October 30, 2021, respectively.

Sales purchased on the Company’s proprietary credit card for the three and nine months ended October 29, 2022 were $ 5.9 million and $ 17.4 million, respectively, compared to $ 4.4 million and $ 13.6 million for the three and nine months ended October 30, 2021, respectively.

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

Balance as of

July 30, 2022

October 29, 2022

January 29, 2022

5 unchanged sentences

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 .

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.

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

Three Months Ended

July 30, 2022

July 31, 2021

October 29, 2022

October 30, 2021

Operating lease cost (a)

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.

Six Months Ended

July 30, 2022

July 31, 2021

(a) Includes right-of-use asset amortization of ($ 0.4 ) million and ($ 0.4 ) million for the three months ended October 29, 2022 and October 30, 2021, respectively.

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

Nine Months Ended

October 29, 2022

October 30, 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.

(a) Includes right-of-use asset amortization of ($ 1.3 ) million and ($ 2.1 ) million for the nine months ended October 29, 2022 and October 30, 2021, respectively.

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

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

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

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

1 unchanged sentence

Three Months Ended

July 30, 2022

July 31, 2021

October 29, 2022

October 30, 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

Six Months Ended

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

Cash paid for amounts included in the measurement of lease liabilities

2 unchanged sentences

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

July 30, 2022

July 31, 2021

October 29, 2022

October 30, 2021

Weighted-average remaining lease term

4 unchanged sentences

Present value of lease liabilities

(a) Excluding the six months ended July 30, 2022.

(a) Excluding the nine months ended October 29, 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