What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-25 compared with 2022-11-22 · 415 added, 360 removed, 222 unchanged (78% of the section changed)

1 unchanged sentence

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND

COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS

OF INCOME AND

COMPREHENSIVE INCOME

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

(Dollars in thousands, except per share data)

7 unchanged sentences

Costs and expenses, net

Income (loss) before income taxes

Income tax (benefit) expense

Net income (loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share

Income before income taxes

Income tax expense

Basic earnings per share

Diluted earnings per share

Comprehensive income:

Net income (loss)

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

deferred income taxes of ($ 189 ) and ($ 532 ) for the three and

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

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

Comprehensive income (loss)

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

of deferred income taxes of $

and an income tax benefit of $

for April 29, 2023 and April 30, 2022, respectively

Comprehensive income

See notes to condensed consolidated financial statements (unaudited).

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

October 29, 2022

April 29, 2023

January 28, 2023

5 unchanged sentences

Accounts receivable, net of allowance for customer credit losses of

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

at April 29, 2023 and January 28, 2023, respectively

Merchandise inventories

2 unchanged sentences

Property and equipment – net

Noncurrent deferred income taxes

Deferred income taxes

Right-of-Use assets – net

3 unchanged sentences

Accrued expenses

Accrued employee benefits and bonus

Accrued bonus and benefits

Accrued income taxes

4 unchanged sentences

Stockholders' Equity:

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

Preferred stock, $

par value per share,

authorized, none issued

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

Class A common stock, $

par value per share,

shares authorized;

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

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

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

shares issued

at April 29, 2023 and January 28, 2023, respectively

Convertible Class B common stock, $

par value per share,

shares authorized;

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

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

shares issued at April 29, 2023 and January 28, 2023, respectively

Additional paid-in capital

5 unchanged sentences

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

October 29, 2022

October 30, 2021

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

Three Months Ended

April 29, 2023

April 30, 2022

(Dollars in thousands)

Operating Activities:

Adjustments to reconcile net income to net cash provided

by operating activities:

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

Provision for customer credit losses

1 unchanged sentence

Share-based compensation

Loss on disposal of property and equipment

Changes in operating assets and liabilities which provided

Deferred income taxes

(Gain) Loss on disposal of property and equipment

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

Accounts receivable

4 unchanged sentences

Accounts payable, accrued expenses and other liabilities

Net cash provided by operating activities

Net cash provided (used) by operating activities

Investing Activities:

2 unchanged sentences

Sales of short-term investments

Net cash provided by (used in) investing activities

Net cash provided (used) by investing activities

Financing Activities:

2 unchanged sentences

Proceeds from employee stock purchase plan

Net cash used in financing activities

Net cash provided (used) by financing activities

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

5 unchanged sentences

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS’ EQUITY

Comprehensive

3 unchanged sentences

Comprehensive income:

Net income (loss)

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

deferred income tax benefit of ($ 362 )

Dividends paid ($ 0.17 per share)

Class A common stock sold through employee stock purchase plan

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

income tax expense of $

Dividends paid ($

Class A common stock sold through employee stock purchase

Share-based compensation issuances and exercises

2 unchanged sentences

Balance — April 29, 2023

Comprehensive income:

Net income (loss)

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

deferred income tax expense 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

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).

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Comprehensive

3 unchanged sentences

Comprehensive income:

Net income (loss)

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

deferred income tax benefit of ($ 40 )

Dividends paid ($ - 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 — May 1, 2021

Comprehensive income:

Net income (loss)

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

deferred income tax benefit of ($ 44 )

Dividends paid ($ 0.11 per share)

Class A common stock sold through employee stock purchase plan

Share-based compensation issuances and exercises

Share-based compensation expense

Repurchase and retirement of treasury shares

Balance — July 31, 2021

Comprehensive income:

Net income (loss)

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

deferred income tax benefit of ($ 150 )

Dividends paid ($ 0.17 per share)

Class A common stock sold through employee stock purchase plan

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

Share-based compensation issuances and exercises

1 unchanged sentence

Repurchase and retirement of treasury shares

Balance — October 30, 2021

Balance — April 30, 2022

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 October 29, 2022 and October 30, 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 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 NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL

The condensed

consolidated financial

statements as

the thirteen-week

prepared from

accounting records

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 28, 2023.

Amounts as of January 28, 2023 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

On May 18, 2023, the Board of Directors maintained the quarterly dividend at

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

The Company has presented one basic EPS and one diluted EPS amount for all common shares in

the accompanying

Condensed Consolidated

Statements of

Comprehensive Income.

Company’s certificate

of incorporation

declare dividends

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

weighted average

common shares

outstanding for

Purchase Plan.

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

(Dollars in thousands)

Net earnings (loss)

(Earnings) loss allocated to non-vested equity awards

Net earnings (loss) available to common stockholders

Earnings allocated to non-vested equity awards

Net earnings available to common stockholders

Basic weighted average common shares outstanding

Diluted weighted average common shares outstanding

Net income (loss) per common share

Basic earnings (loss) per share

Diluted earnings (loss) per share

Net income per common share

Basic earnings per share

Diluted earnings per share

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:

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

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Beginning Balance at July 30, 2022

Other comprehensive income before

reclassification

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income

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 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:

comprehensive income (in thousands) for the

three months ended April 29, 2023:

Changes in Accumulated Other

4 unchanged sentences

Beginning Balance at January 28, 2023

Other comprehensive income before

Other comprehensive income (loss) before

reclassification

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income

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 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 an expense of $ 4 .

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 October 30, 2021:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Beginning Balance at July 31, 2021

Other comprehensive income before

reclassifications

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income

Ending Balance at October 30, 2021

other comprehensive income

Net current-period other comprehensive income (loss)

Ending Balance at April 29, 2023

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

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

(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 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:

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

reclassification

comprehensive income (in thousands) for the

three months ended April 30, 2022:

Changes in Accumulated Other

4 unchanged sentences

Beginning Balance at January 29, 2022

Other comprehensive income before

reclassifications

Other comprehensive income (loss) before

reclassification

Amounts reclassified from accumulated

other comprehensive income (b)

Net current-period other comprehensive income

Ending Balance at October 30, 2021

Net current-period other comprehensive income (loss)

Ending Balance at April 30, 2022

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

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

(b) Includes a $ 177 gain impact of Accumulated other comprehensive income reclassifications into Interest and other

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

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 $ 41 .

The tax impact of this reclassification was

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – FINANCING ARRANGEMENTS:

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.

borrowings of

revocable letters

covenants and limitations, including the maintenance of specific financial

ratios with which the Company

reduced borrowing availability,

average interest

rate under the credit facility was

at April 29, 2023 due to

outstanding borrowings.

NOTE 5 – REPORTABLE SEGMENT INFORMATION:

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

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

, including Cato,

It’s Fashion, Versona

As outlined in

ASC 280-10, the

reportable segments:

Retail and Credit.

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

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

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

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

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

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

The Company has aggregated its

retail operating segments,

280-10, which

more operating segments may be aggregated into a single reportable segment if aggregation is consistent with

characteristics, products, production processes, clients and

methods of distribution.

characteristics

financial and

competitive risks.

retail operating

production processes.

Merchandise for the Company’s retail operating segments is distributed to retail stores

clients in a 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 of

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – REPORTABLE SEGMENT INFORMATION

The following schedule summarizes certain segment

information (in thousands):

Three Months Ended

Nine Months Ended

October 29, 2022

Interest and other income

April 29, 2023

Interest and other income

Income (Loss) before

Capital expenditures

Income before taxes

Capital expenditures

Three Months Ended

Nine Months Ended

October 30, 2021

Interest and other income

April 30, 2022

Interest and other income

Income (Loss) before

Capital expenditures

Income before taxes

Capital expenditures

Total assets as of October 29, 2022

Total assets as of April 29, 2023

Total assets as of January 28, 2023

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):

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

general and administrative expenses (in

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

Other expenses

1 unchanged sentence

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

NOTE 6 – STOCK-BASED COMPENSATION:

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 October 29, 2022:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – SHARE BASED COMPENSATION:

two long-term

compensation plans

which stock-based

restricted stock and stock options for grant

to officers, directors and key

Effective May 24, 2018,

shares for grant were no longer available

under the 2013 Incentive Compensation Plan.

available for grant under each of

the plans as of April 29,

Options and/or restricted stock initially authorized

Options and/or restricted stock available for grant:

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 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

April 29, 2023

Compensation–Stock Compensation

compensation expense

straight-line basis

related vesting

respectively,

unrecognized compensation

expense related

unvested restricted

stock awards,

weighted-average vesting period of

years, respectively.

total compensation expense

administrative expenses in the Condensed Consolidated Statements of Income.

The following

summary shows the

changes in the

unvested restricted

stock outstanding

three months ended April

Grant Date Fair

Value Per Share

Restricted stock awards at January 28, 2023

Forfeited or expired

Restricted stock awards at October 29, 2022

Restricted stock awards at April 29, 2023

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 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 October 29, 2022 and January 29, 2022:

October 29, 2022

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

semi-annual offering

% discount through payroll deductions.

During the three months ended April 29, 2023 and

April 30, 2022,

the Company sold

shares to employees at an average discount of $

respectively, under

Stock Purchase

compensation expense

recognized for

approximately

respectively.

administrative

– FAIR VALUE MEASUREMENTS:

The following

information regarding

Company’s financial

liabilities that

measured at fair value (in thousands)

as of April 29, 2023 and January

April 29, 2023

State/Municipal Bonds

8 unchanged sentences

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

January 29, 2022

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

State/Municipal Bonds

7 unchanged sentences

Total Liabilities

The Company’s investment portfolio was primarily invested in corporate bonds and tax-exempt and taxable governmental debt securities held in managed accounts with underlying ratings of A or better at October 29, 2022 and January 29, 2022.

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.

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

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

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

Additionally, at October 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.

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

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

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

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

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

Deferred compensation plan assets consist of life insurance policies.

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

The Company’s

investment portfolio

was primarily

corporate bonds and

tax-exempt and taxable

debt securities

managed accounts

with underlying

contractual maturities

Certificates of

Deposit have contractual maturities

which range from

These securities are

classified as

available-for-sale

accompanying Condensed Consolidated Balance Sheets.

These assets are carried at fair value with unrealized

comprehensive

asset-backed securities are

of auto loans

originated and

auto finance units,

finance companies.

asset-backed securities

Citibank, JPMorgan Chase, Capital One, and

Additionally,

compensation plan assets

At January 28,

2023, the Company

million of corporate

equities and deferred compensation

plan assets of $

assets are recorded within

assets in the Condensed Consolidated Balance

Level 1 category securities are measured

at fair value using quoted active

market prices.

Level 2 investment

identical assets are

not available, these

prices are determined

by the pricing

service using observable

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

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

compensation obligation,

via underlying

insurance funds’

designed to mirror mutual funds and money

market funds that are observable and

actively traded.

measured using Level 3 inputs as of April

29, 2023 and January 28, 2023

(dollars in thousands):

Measurements Using

6 unchanged sentences

Included in other comprehensive income

Ending Balance at October 29, 2022

Ending Balance at April 29, 2023

Measurements Using

6 unchanged sentences

Included in other comprehensive income

Ending Balance at October 29, 2022

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Ending Balance at April 29, 2023

Measurements Using

10 unchanged sentences

Liability Inputs (Level 3)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Deferred Compensation

5 unchanged sentences

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:

pronouncements

impact on the Company’s financial statements.

NOTE 9 – INCOME TAXES:

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.

The Company had an effective tax rate for the

first quarter of 2023 of

% compared to an effective tax

% for the first quarter of 2022.

The increase in the 2023 first quarter tax

rate was primarily due

and offshore claim, 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, including litigation regarding the merchandise that it sells, litigation regarding intellectual property, litigation instituted by persons injured upon premises under its control, litigation with respect to various employment matters, including alleged discrimination and wage and hour litigation, and litigation with present or former employees.

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

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

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

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

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

litigation instituted

premises under

litigation with

discrimination and

present or former employees.

Although such

litigation is

incidental to

Company’s business,

litigation could

monetary awards.

information currently

available, management

pending litigation

material adverse

condensed consolidated

financial statements.

uncertainties

materially and adversely affect the Company’s

financial condition, results of operations and cash flows in

probable and reasonably estimable.

NOTE 11 – REVENUE RECOGNITION:

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

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

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

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

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

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 losses of

for the periods ended April

29, 2023 and April

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

respectively,

the Company’s

proprietary credit

million for the periods ended April 29, 2023 and April 30, 2022, respectively.

customers (in thousands):

Balance as of

October 29, 2022

April 29, 2023

January 28, 2023

2 unchanged sentences

NOTE 12 – LEASES:

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

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

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

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

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

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

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

Company determines

warehouse space

and equipment.

have remaining

, some of which include options to

extend the lease term for

up to five years

, and some of

within one year

Company considers

establish its

right-of-use assets

lease agreements do not contain any material residual value guarantees or material

restrictive covenants.

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 NINE MONTHS ENDED OCTOBER 29, 2022 AND OCTOBER 30, 2021

Three Months Ended

October 29, 2022

October 30, 2021

Operating lease cost (a)

Variable lease cost (b)

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

April 29, 2023

April 30, 2022

Operating lease cost (a)

Variable lease cost (b)

(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.

lease cost (b)

(a) Includes right-of-use asset amortization of ($

) million and ($

) million for the three months ended

April 29, 2023 and April 30, 2022, respectively.

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

Supplemental cash flow

information and non-cash

activity related to

the Company’s

operating leases are

as follows (in thousands):

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 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):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Operating cash flow information:

Three Months Ended

October 29, 2022

October 30, 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

Nine Months Ended

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

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:

October 29, 2022

October 30, 2021

Right-of-use assets obtained in exchange for lease obligations, net of rent violations

Weighted-average

April 29, 2023

April 30, 2022

Weighted-average remaining lease term

Weighted-average discount rate

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

2023, the maturities

liabilities by fiscal

the Company’s

operating leases

are as follows (in thousands):

Total lease payments

1 unchanged sentence

Present value of lease liabilities

(a) Excluding the nine months ended October 29, 2022

(a) Excluding the 3 months ended April 29, 2023.

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