CATO CORP 10-K

Item 8. Financial Statements and Supplementary Data: INDEX TO FINANCIAL STATEMENTS AND SCHEDULE Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) ..................................... 38 Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023 ................................ ........... 41 Consolidated Balance Sheets at February 1, 2025 and February 3, 2024 ............................................. 42 Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023................................ ................................................................ ......................... 43 Consolidated Statements of Stockholders’ Equity for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023 ................................................................ ............................ 44 Notes to Consolidated Financial Statements .......................................................................................... 45 Schedule II — Valuation and Qualifying Accounts for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023 ................................................................ ............................ 80 38 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of The Cato Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of The Cato Corporation and its subsidiaries (the "Company") as of February 1, 2025 and February 3, 2024, and the related consolidated statements of income (loss) and comprehensive income (loss), of stockholders' equity and of cash flows for each of the three years in the period ended February 1, 2025, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 1, 2025 and February 3, 2024, and the results of its operations and its cash flows for each of the three years in the period ended February 1, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 39 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Impairment of Long-Lived Assets - Store Location Asset Groupings As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated property and equipment, net balance was $60.3 million, of which the store locations were a portion, and consolidated operating lease right-of-use assets, net balance was $148.9 million as of February 1, 2025. The Company invests in leaseholds, right-of-use assets and equipment, primarily in connection with the opening and remodeling of stores, and in computer software and hardware. The Company periodically reviews its store locations and estimates the recoverability of its long-lived assets, which primarily relate to fixtures and equipment, leasehold improvements, right-of-use assets net of lease liabilities, and information technology equipment and software. An impairment charge is recorded for the amount by which the carrying value exceeds the estimated fair value when management determines that projected cash flows associated with those long-lived assets will not be sufficient to recover the carrying value. This determination is based on a number of factors, including the store’s historical operating results and future projected cash flows, which include contribution margin projections. The Company assesses the fair value of each lease by considering market rents and any lease terms that may adjust market rents under certain conditions such as the loss of an anchor tenant or a leased space in a shopping center not meeting certain criteria. An impairment charge for store assets of $0.8 million was recorded during the year ended February 1, 2025. The principal considerations for our determination that performing procedures relating to impairment of long-lived assets – store location asset groupings is a critical audit matter are (i) the significant judgment by management when determining the fair value measurement of the store location asset groupings, which led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s projected cash flow assumptions related to contribution margin projections. 40 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s long-lived assets – store location recoverability test and determination of the fair value of the asset groupings. These procedures also included, among others, (i) testing the completeness and accuracy of underlying data used in the projected cash flows and store location asset groupings, (ii) evaluating the reasonableness of management’s assumptions related to contribution margin projections by considering current and historical performance of the store location asset groupings and whether the assumptions were consistent with evidence obtained in other areas of the audit, (iii) evaluating the appropriateness of the projected cash flow model, and (iv) evaluating management’s assessment of the fair value of the leased assets included in the store location asset groupings. /s/ PricewaterhouseCoopers LLP Charlotte, North Carolina March 31, 2025 We have served as the Company’s auditor since 2003. 41 THE CATO CORPORATION CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) Fiscal Year Ended February 1, 2025 February 3, 2024 January 28, 2023 (Dollars in thousands, except per share data) REVENUES Retail sales $ 642,140 $ 700,318 $ 752,370 Other revenue (principally finance charges, late fees and layaway charges) 7,666 7,741 6,890 Total revenues 649,806 708,059 759,260 COSTS AND EXPENSES, NET Cost of goods sold (exclusive of depreciation shown below) 436,440 464,313 509,664 Selling, general and administrative (exclusive of depreciation shown below) 231,430 252,742 242,561 Depreciation 9,817 9,871 11,080 Interest expense 59 35 87 Interest and other income ( 11,827 ) ( 5,101 ) ( 5,902 ) Costs and expenses, net 665,919 721,860 757,490 Income (loss) before income taxes ( 16,113 ) ( 13,801 ) 1,770 Income tax expense 1,944 10,140 1,741 Net income (loss) $ ( 18,057 ) $ ( 23,941 ) $ 29 Basic earnings (loss) per share $ ( 0.97 ) $ ( 1.17 ) $ - Diluted earnings (loss) per share $ ( 0.97 ) $ ( 1.17 ) $ - Dividends per share $ 0.51 $ 0.68 $ 0.68 Comprehensive income: Net income (loss) $ ( 18,057 ) $ ( 23,941 ) $ 29 Unrealized gain (loss) on available-for-sale securities, net of deferred income taxes of $ 0 , $ 489 , and ($ 287 ) for fiscal 2024, 2023 and 2022, respectively ( 242 ) 1,633 ( 958 ) Comprehensive loss $ ( 18,299 ) $ ( 22,308 ) $ ( 929 ) See notes to consolidated financial statements. 42 THE CATO CORPORATION CONSOLIDATED BALANCE SHEETS February 1, 2025 February 3, 2024 (Dollars in thousands) ASSETS Current Assets: Cash and cash equivalents $ 20,279 $ 23,940 Short-term investments 57,423 79,012 Restricted cash 2,799 3,973 Accounts receivable, net of allowance for customer credit losses of $ 581 at February 1, 2025 and $ 705 at February 3, 2024 24,540 29,751 Merchandise inventories 110,739 98,603 Prepaid expenses and other current assets 7,406 7,783 Total Current Assets 223,186 243,062 Property and equipment – net 60,326 64,022 Other assets 19,979 25,047 Right-of-Use assets - net 148,870 154,686 Total Assets $ 452,361 $ 486,817 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 88,641 $ 87,821 Accrued expenses 41,717 37,404 Accrued bonus and benefits 326 1,675 Current lease liability 57,555 61,108 Total Current Liabilities 188,239 188,008 Other noncurrent liabilities 13,485 14,475 Lease liability 88,341 92,013 Commitments and contingencies - - Stockholders' Equity: Preferred stock, $ 100 par value per share, 100,000 shares authorized, none issued - - Class A common stock, $ 0.033 par value per share, 50,000,000 shares authorized; 18,313,929 and 18,802,742 shares issued at February 1, 2025 and February 3, 2024, respectively 619 635 Convertible Class B common stock, $ 0.033 par value per share, 15,000,000 shares authorized; 1,763,652 shares issued at February 1, 2025 and February 3, 2024 59 59 Additional paid-in capital 129,530 126,953 Retained earnings 31,935 64,279 Accumulated other comprehensive income 153 395 Total Stockholders' Equity 162,296 192,321 Total Liabilities and Stockholders’ Equity $ 452,361 $ 486,817 See notes to consolidated financial statements. 43 THE CATO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended February 1, 2025 February 3, 2024 January 28, 2023 (Dollars in thousands) Operating Activities: Net income (loss) $ ( 18,057 ) $ ( 23,941 ) $ 29 Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Depreciation 9,817 9,871 11,080 Provision for customer credit losses 654 554 280 Purchase premium and premium amortization of investments ( 1,131 ) ( 711 ) 537 (Gain) Loss on sale of assets held for investment ( 5,343 ) 8 - Share based compensation 2,283 4,170 2,606 Deferred income taxes - 8,724 386 Loss on disposal of property and equipment 192 84 199 Impairment of assets 786 1,811 884 Changes in operating assets and liabilities which provided (used) cash: Accounts receivable 1,357 ( 608 ) 29,034 Merchandise inventories ( 12,136 ) 13,453 12,851 Prepaid and other assets ( 212 ) ( 216 ) 1,543 Operating lease right-of-use assets and liabilities ( 1,410 ) ( 2,056 ) ( 2,573 ) Accrued income taxes - ( 613 ) ( 307 ) Accounts payable, accrued expenses and other liabilities 3,455 ( 10,053 ) ( 43,179 ) Net cash (used in) provided by operating activities ( 19,745 ) 477 13,370 Investing Activities: Expenditures for property and equipment ( 7,872 ) ( 12,532 ) ( 19,433 ) Purchase of short-term investments ( 39,612 ) ( 48,055 ) ( 54,734 ) Sales of short-term investments 62,782 80,371 90,190 Sales of other assets 13,667 ( 8 ) - Net cash provided by investing activities 28,965 19,776 16,023 Financing Activities: Dividends paid ( 10,516 ) ( 13,954 ) ( 14,369 ) Repurchase of common stock ( 3,877 ) ( 2,562 ) ( 15,216 ) Proceeds from employee stock purchase plan 338 384 307 Net cash used in financing activities ( 14,055 ) ( 16,132 ) ( 29,278 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 4,835 ) 4,121 115 Cash, cash equivalents, and restricted cash at beginning of period 27,913 23,792 23,677 Cash, cash equivalents, and restricted cash at end of period $ 23,078 $ 27,913 $ 23,792 Non-cash activity: Accrued property and equipment expenditures $ 329 $ 942 $ 685 Accrued treasury stock 27 - - See notes to consolidated financial statements. 44 THE CATO CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Accumulated Additional Other Total Common Paid-In Retained Comprehensive Stockholders' Stock Capital Earnings Income Equity (Dollars in thousands, except per share data) Balance — January 29, 2022 $ 728 $ 119,540 $ 134,208 $ ( 280 ) $ 254,196 Comprehensive income: Net income - - 29 - 29 Unrealized loss on available-for-sale securities, net of deferred income tax benefit of $ 287 - - - ( 958 ) ( 958 ) Dividends paid ($ 0.68 per share) - - ( 14,369 ) - ( 14,369 ) Class A common stock sold through employee stock purchase plan - 360 - - 360 Share-based compensation expense 4 2,531 17 - 2,552 Repurchase and retirement of treasury shares ( 41 ) - ( 15,176 ) - ( 15,217 ) Balance — January 28, 2023 $ 691 $ 122,431 $ 104,709 $ ( 1,238 ) $ 226,593 Comprehensive income: Net loss - - ( 23,941 ) - ( 23,941 ) Unrealized gain on available-for-sale securities, net of deferred income tax expense of $ 489 - - - 1,633 1,633 Dividends paid ($ 0.68 per share) - - ( 13,954 ) - ( 13,954 ) Class A common stock sold through employee stock purchase plan 2 445 - - 447 Share-based compensation expense 10 4,077 18 - 4,105 Repurchase and retirement of treasury shares ( 9 ) - ( 2,553 ) - ( 2,562 ) Balance — February 3, 2024 $ 694 $ 126,953 $ 64,279 $ 395 $ 192,321 Comprehensive income: Net loss - - ( 18,057 ) - ( 18,057 ) Unrealized loss on available-for-sale securities, net of deferred income tax benefit of $ 0 - - - ( 242 ) ( 242 ) Dividends paid ($ 0.51 per share) - - ( 10,516 ) - ( 10,516 ) Class A common stock sold through employee stock purchase plan 2 395 - - 397 Share-based compensation expense 12 2,182 76 - 2,270 Repurchase and retirement of treasury shares ( 30 ) - ( 3,847 ) - ( 3,877 ) Balance — February 1, 2025 $ 678 $ 129,530 $ 31,935 $ 153 $ 162,296 See notes to consolidated financial statements. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 45 1. Summary of Significant Accounting Policies: Principles of Consolidation: The Consolidated Financial Statements include the accounts of The Cato Corporation and its wholly-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated. Description of Business and Fiscal Year: The Company has two reportable segments — the operation of a fashion specialty stores segment (“Retail Segment”) and a credit card segment (“Credit Segment”). The apparel specialty stores operate under the names “Cato,” “Cato Fashions,” “Cato Plus,” “It’s Fashion,” “It’s Fashion Metro,” “Versona ” and “Cache,” including e-commerce websites. The stores are located primarily in strip shopping centers principally in the southeastern United States. The Company’s fiscal year ends on the Saturday nearest January 31 of the subsequent year. Fiscal year 2024 is a 52 -week year, 2023 is a 53 -week year and 2022 is a 52 -week year. Use of Estimates: The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s financial statements include the allowance for customer credit losses, inventory shrinkage, the calculation of potential asset impairment, workers’ compensation, general and auto insurance liabilities, reserves relating to self-insured health insurance, uncertain tax positions and valuation allowances on deferred tax assets. Cash and Cash Equivalents: Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. Short-Term Investments: Investments with original maturities beyond three months are classified as short-term investments. See Note 3 for the Company’s estimated fair value of, and other information regarding, its short-term investments. The Company’s short-term investments are all classified as available-for-sale. As they are available for current operations, they are classified on the Consolidated Balance Sheets as Current Assets. Available-for-sale securities are carried at fair value, with unrealized gains and temporary losses, net of income taxes, reported as a component of Accumulated other comprehensive income. Other than temporary declines in the fair value of investments are recorded as a reduction in the cost of the investments in the accompanying Consolidated Balance Sheets and a reduction of Interest and other income in the accompanying Consolidated Statements of Income and Comprehensive Income. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The amortization of premiums, accretion of discounts and realized gains and losses are included in Interest and other income. Restricted Cash: The Company had $ 2.8 million and $ 4.0 million in escrow at February 1, 2025 and February 3, 2024, respectively, as security and collateral for administration of the Company’s self-insured workers’ compensation and general liability coverage, which is reported as Restricted cash on the Consolidated Balance Sheets. Supplemental Cash Flow Information: Income tax payments, net of refunds received, for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023 were a payment of $ 1,874,000 , a payment of $ 4,121,000 and a refund of $ 29,206,000 , respectively. Inventories: Merchandise inventories are stated at the net realizable value as determined by the weighted-average cost method. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 46 Property and Equipment: Property and equipment are recorded at cost, including land. Maintenance and repairs are expensed to operations as incurred; renewals and betterments are capitalized. Depreciation is determined on the straight-line method over the estimated useful lives of the related assets excluding leasehold improvements. Leasehold improvements are amortized over the shorter of the estimated useful life or lease term. For leases with renewal periods at the Company’s option, the Company generally uses the original lease term plus reasonably assured renewal option periods (generally one five-year option period) to determine estimated useful lives. Typical estimated useful lives are as follows: ` Estimated Classification Useful Lives Land improvements 10 years Buildings 30 - 40 years Leasehold improvements 5 - 10 years Fixtures and equipment 3 - 10 years Information technology equipment and software 3 - 10 years Aircraft 20 years Impairment of Long-Lived Assets: The Company invests in leaseholds, right-of-use assets and equipment primarily in connection with the opening and remodeling of stores and in computer software and hardware. The Company periodically reviews its store locations and estimates the recoverability of its long-lived assets, which primarily relate to Fixtures and equipment, Leasehold improvements, Right-of- use assets net of Lease liabilities and Information technology equipment and software. An impairment charge is recorded for the amount by which the carrying value exceeds the estimated fair value when the Company determines that projected cash flows associated with those long-lived assets will not be sufficient to recover the carrying value. This determination is based on a number of factors, including the store’s historical operating results and future projected cash flows, which include contribution margin projections. The Company assesses the fair value of each lease by considering market rents and any lease terms that may adjust market rents under certain conditions, such as the loss of an anchor tenant or a leased space in a shopping center not meeting certain criteria. Further, in determining when to close a store, the Company considers real estate development in the area and perceived local market conditions, which can be difficult to predict and may be subject to change. Asset impairment charges of $ 786,000 , $ 1,811,000 and $ 884,000 were incurred in fiscal 2024, fiscal 2023 and fiscal 2022, respectively. Other Assets: Other assets are comprised of long-term assets, primarily insurance contracts related to deferred compensation assets and land held for investment purposes. ` Balance as of February 1, 2025 February 3, 2024 (Dollars in thousands) Other Assets Deferred Compensation Investments $ 9,301 $ 8,586 Land Held for Investment 8,679 9,334 Miscellaneous Investments 1,139 2,076 Asset Held for Sale - 4,183 Other Deposits 596 604 Other 264 264 Total Other Assets $ 19,979 $ 25,047 Leases: The Company leases all of its retail stores. Most lease agreements contain construction allowances and rent escalations. For purposes of recognizing incentives and minimum rental expenses on a straight-line basis over the terms of the leases, including renewal periods considered reasonably assured, THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 47 the Company begins amortization as of the initial possession date which is when the Company enters the space and begins to make improvements in preparation for intended use. 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. Gift cards do not have expiration dates. Layaway sales are recorded as deferred revenue until the customer takes possession or forfeits the merchandise. 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. In addition, a provision is made for estimated rewards cards issued to customers based on their purchases with the Company’s propriety credit card. The rewards cards issued by the Company have a 90 -day expiration. 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. In accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”), in fiscal 2024, 2023 and 2022, the Company recognized $ 1,447,934 , $ 1,116,000 and $ 256,000 , respectively, of income on unredeemed gift cards (“gift card breakage”) as a component of Other Revenue on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). Under Topic 606, the Company recognizes gift card breakage using an expected breakage percentage based on redeemed gift cards. See Note 2 for further information on miscellaneous income. 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. The Company estimated customer credit losses of $ 654,000 and $ 578,000 for the twelve months ended February 1, 2025 and February 3, 2024, respectively, on sales purchased on the Company’s proprietary credit card of $ 21.8 million and $ 23.5 million for the twelve months ended February 1, 2025 and February 3, 2024, respectively. The following table provides information about receivables and contract liabilities from contracts with customers (in thousands): ` Balance as of February 1, 2025 February 3, 2024 Proprietary Credit Card Receivables, net $ 10,848 $ 10,909 Gift Card Liability $ 7,541 $ 8,143 Cost of Goods Sold: Cost of goods sold includes merchandise costs, net of discounts and allowances, buying costs, distribution costs, occupancy costs, freight, and inventory shrinkage. Net merchandise costs and in-bound freight are capitalized as inventory costs. Buying and distribution costs include payroll, payroll-related costs and operating expenses for the Company’s buying departments and distribution center. Occupancy expenses include rent, real estate taxes, insurance, common area maintenance, utilities and maintenance for stores and distribution facilities. Buying, distribution, occupancy and internal transfer costs are treated as period costs and are not capitalized as part of inventory. The direct costs associated with shipping goods to customers are recorded as a component of Cost of goods sold. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 48 Advertising: Advertising costs are expensed in the period in which they are incurred. Advertising expense was approximately $ 4,686,000 , $ 6,277,000 and $ 6,868,000 for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023, respectively. Stock Repurchase Program: For the fiscal year ended February 1, 2025, the Company had 997,455 shares remaining in open authorizations. There is no specified expiration date for the Company’s repurchase program. Share repurchases are recorded in Retained earnings, net of par value. From year end through March 31, 2025, the Company repurchased 264,282 shares for $ 828,181 . The Board of Directors authorized an increase of 1,000,000 shares in the Company’s share repurchase program on December 23, 2024. Earnings Per Share: ASC 260 – Earnings Per Share requires dual presentation of basic EPS and diluted 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 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 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 earnings (loss) 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. The following table reflects the basic and diluted EPS calculations for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023: ` Fiscal Year Ended February 1, 2025 February 3, 2024 January 28, 2023 Numerator (Dollars in thousands) Net earnings (loss) $ ( 18,057 ) $ ( 23,941 ) $ 29 (Earnings) loss allocated to non-vested equity awards ( 548 ) 1,347 12 Net earnings (loss) available to common stockholders $ ( 18,605 ) $ ( 22,594 ) $ 41 Denominator Basic weighted average common shares outstanding 19,249,081 19,389,907 19,930,960 Diluted weighted average common shares outstanding 19,249,081 19,389,907 19,930,960 Net income (loss) per common share Basic earnings (loss) per share $ ( 0.97 ) $ ( 1.17 ) $ - Diluted earnings (loss) per share $ ( 0.97 ) $ ( 1.17 ) $ - Vendor Allowances: The Company receives certain allowances from vendors primarily related to purchase discounts and markdown and damage allowances. All allowances are reflected in Cost of goods sold as earned when the related products are sold. Cash consideration received from a vendor is presumed to be a reduction of the purchase cost of merchandise and is reflected as a reduction of inventory. The Company does not receive cooperative advertising allowances. Income Taxes: The Company files a consolidated federal income tax return. Income taxes are provided based on the asset and liability method of accounting, whereby deferred income taxes are THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 49 provided for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Unrecognized tax benefits for uncertain tax positions are established in accordance with ASC 740 – Income Taxes when, despite the fact that the tax return positions are supportable, the Company believes these positions may be challenged and the results are uncertain. The Company adjusts these liabilities in light of changing facts and circumstances. Potential accrued interest and penalties related to unrecognized tax benefits within operations are recognized as a component of Income before income taxes. The Company assesses the likelihood that deferred tax assets will be able to be realized, and based on that assessment, the Company will determine if a valuation allowance should be recorded. In addition, the Tax Cuts and Jobs Act implemented a new minimum tax on global intangible low- taxed income (“GILTI”). The Company has elected to account for GILTI tax in the period in which it is incurred, which is included as a component of its current year provision for income taxes. Deferred Tax Valuation Allowance: The Company assesses the likelihood that deferred tax assets will be realized in light of the Company’s current financial performance and projected future financial performance. Based on this assessment, the Company then determines if a valuation allowance should be recorded. If the Company concludes that it is more likely than not that the Company will not be able to realize its tax deferred assets, a valuation allowance is recorded for the proportion of the deferred tax asset it determines may not be realized. Store Opening Costs: Costs relating to the opening of new stores or the relocating or expanding of existing stores are expensed as incurred. A portion of construction, design, and site selection costs are capitalized to new, relocated and remodeled stores. Insurance: The Company is self-insured with respect to employee health care, workers’ compensation and general liability. The Company’s self-insurance liabilities are based on the total estimated cost of claims filed and estimates of claims incurred but not reported, less amounts paid against such claims, and are not discounted. Management reviews current and historical claims data in developing its estimates. The Company has stop-loss insurance coverage for individual claims in excess of $ 375,000 for employee healthcare, $ 350,000 for workers’ compensation and $ 250,000 for general liability. Fair Value of Financial Instruments: The Company’s carrying values of financial instruments, such as cash and cash equivalents, short-term investments, and restricted cash, approximate their fair values due to their short terms to maturity and/or their variable interest rates. Stock Based Compensation: The Company records compensation expense associated with restricted stock and other forms of equity compensation in accordance with ASC 718 - Compensation – Stock Compensation. Compensation cost associated with stock awards recognized in all years presented includes: 1) amortization related to the remaining unvested portion of all stock awards based on the grant date fair value and 2) adjustments for the effects of actual forfeitures versus initial estimated forfeitures. Subsequent Events: On March 13, 2025, the Company, as borrower, and certain other domestic subsidiaries, as borrowers and guarantors, entered into a Credit Agreement (the “ABL Credit Agreement”) and related loan documents, by and among the Company, certain other of the Company’s domestic subsidiaries, and Wells Fargo Bank, National Association, as the lender (the “Lender”), to establish an asset-based revolving credit facility (the “ABL Facility”) in an amount up to $ 35 million. The proceeds from the ABL Facility may be used to provide funding for ongoing working capital and general THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 50 corporate purposes. The ABL Credit Agreement replaces the credit agreement, dated as of May 19, 2022, as amended from time to time, between the Company, as borrower, certain domestic subsidiaries of the Company, as guarantors, and the Lender, as lender and agent (the “Prior Credit Agreement”). No principal or accrued interest was outstanding under the credit facility under the Prior Credit Agreement at the time of its termination on March 13, 2025. The ABL Facility may be used for revolving credit loans and letters of credit from time to time up to a maximum principal amount of $ 35 million, less an amount equal to the greater of (a) 10.0 % of the lesser of the borrowing base described below and $ 35 million and (b) $ 5 million, subject to the other limitations described below. The ABL Facility includes a $ 15 million uncommitted accordion feature that permits the borrowers, under certain conditions, to solicit the Lender to provide additional revolving loan commitments to increase the aggregate amount of the revolving loan commitments up to a maximum principal amount of $ 50 million. The ABL Facility contains a sub-facility that allows the Company to issue letters of credit in an aggregate amount not to exceed $ 5 million. Availability under the ABL Facility at closing of the ABL Credit Agreement was $ 30 million. The amount available under the ABL Facility is limited by a borrowing base consisting of certain eligible credit card receivables and inventory, reduced by specified reserves, as follows: ● 90 % of eligible credit card receivable, plus ● 90 % of net recovery percentage of eligible inventory multiplied by most recent appraised value of such inventory, calculated at the lower of (a) cost computed on a first-in first-out basis and (b) market value (net of intercompany profits and certain other adjustments), minus ● applicable reserves (as defined in the ABL Credit Agreement). The ABL Facility permits borrowings based upon (a) base rate (calculated as the greatest of (i) the federal funds rate plus 1/2% , (ii) the SOFR rate described below for an interest period of one month, plus 1 %, (iii) the rate of interest announced, from time to time, as the Lender’s “prime rate” and (iv) 0 %) and (b) SOFR rate of one, three or six-month interest periods (with SOFR defined as the secured overnight financing rate administered by the Federal Reserve Bank of New York (or its successor)). Base rate borrowings bear interest at an annual rate equal to 50 basis points above base rate. SOFR borrowings bear interest at an annual rate equal to SOFR for the interest period selected plus 10 basis points plus 150 basis points. The ABL Facility charges a fee on unutilized commitments at an annual rate of 37.5 basis points if at least half of the ABL commitments are unutilized and at an annual rate of 25 basis points if less than half of the ABL commitments are unutilized. In addition, the ABL Facility charges a monthly collateral monitoring fee and customary fees for letters of credit. The ABL Facility matures on March 13, 2028. The ABL Facility may be prepaid from time to time, in whole or in part, without a prepayment penalty or premium. In addition, customary mandatory prepayments of the loans under the ABL Facility are required upon the occurrence of certain events including, without limitation, outstanding borrowing exposures exceeding the borrowing base and certain dispositions of assets outside of the ordinary course of business. Accrued interest is payable (a) at the end of each interest period for borrowings based upon the SOFR rate (but not to exceed three months) and (b) monthly for borrowings based upon the base rate. The Company’s obligations under the ABL Facility (and certain related obligations) are guaranteed by the other borrowers and the guarantors. Each of the Company’s future domestic subsidiaries is also required to guarantee the ABL Facility on a senior secured basis (such future guarantors and the borrowers and guarantors referred to in the first sentence of this paragraph, the “Loan Parties”). In addition, the borrowers’ obligations are secured on a first-priority basis by all assets of the Loan Parties, subject to certain exceptions. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 51 Cash Dominion. Under the terms of the ABL Facility, if (i) an event of default exists or (ii) excess borrowing availability under the ABL Facility (the “Excess Availability”) falls below the greater of (a) 15.0 % of the lesser of the borrowing base and $ 35 million and (b) $ 10 million, the Loan Parties will become subject to cash dominion, which will require prepayment of loans under the ABL Facility with the cash deposited in certain deposit accounts of the Loan Parties, including a concentration account, and will restrict the Loan Parties’ ability to transfer cash from their concentration account. Such cash dominion period will end, in the case of an event of default, when the event of default no longer exists, and in the case of when Excess Availability falls below the threshold described in the first sentence of this paragraph, when Excess Availability exceeds such threshold for a period of 30 consecutive days. Affirmative and Restrictive Covenants. The ABL Credit Agreement governing the ABL Facility contains customary representations and warranties, affirmative and negative covenants (subject, in each case, to exceptions and qualifications), and events of defaults, including covenants that limit the Company’s ability to, among other things: ● incur additional indebtedness; ● create liens on its assets; ● make investments, including loans and advances to foreign subsidiaries; ● pay dividends and make other restricted payments; ● sell certain assets outside of the ordinary course of business; ● consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s assets; ● make acquisitions; and ● enter into transactions with affiliates. Restrictions relating to permitted acquisitions, permitted investments, prepayment of other indebtedness, and restricted payments are substantially less, or not applicable in the case of restricted payments, if the Company can satisfy the following payment conditions: (i) there is no default or event of default under the ABL Facility, (ii) there are no revolving credit loans outstanding, (iii) the Loan Parties have unrestricted cash of greater than $ 20 million, (iv) the Lender receives at least three business days’ prior written notice of such event, including information about the estimated date and amount of the payment and a reasonable description of such event, and (v) Lender receives a certificate certifying compliance with the foregoing clauses and demonstrating the calculations required thereby. Recently Adopted Accounting Pronouncements: In November 2023, the FASB issued ASU 2023- 07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires enhanced disclosures about significant segment expenses. This guidance was adopted by the Company during the fourth quarter of 2024 and requires retrospective application to all prior periods presented in the financial statements. Refer to Note 13 of the Company's financial statements in this Form 10-K for additional information related to segment expenses. Recently Issued Accounting Pronouncements: In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which modifies the requirements on income tax disclosures to require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. This guidance is effective for fiscal years beginning after December 15, 2024 for all public business entities, with early adoption and retrospective application permitted. The Company is currently in the process of evaluating the potential impact of adoption of this new guidance on its consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 52 Expenses,” which requires public entities to disclose, on an annual and interim basis, disaggregated information in the footnotes about specified information related to certain costs and expenses. This guidance is effective for annual periods beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of evaluating the potential impact of adoption of this new guidance on its consolidated financial statements and related disclosures. 2. Interest and Other Income: The components of Interest and other income are shown below (in thousands): Fiscal Year Ended February 1, 2025 February 3, 2024 January 28, 2023 Dividend income $ ( 75 ) $ ( 78 ) $ ( 47 ) Interest income ( 5,019 ) ( 3,919 ) ( 1,876 ) State recovery grant - - ( 1,431 ) Insurance proceeds - - ( 1,683 ) Miscellaneous income ( 1,389 ) ( 1,079 ) ( 896 ) Net loss (gain) on investment sales ( 5,344 ) ( 25 ) 31 Interest and other income $ ( 11,827 ) $ ( 5,101 ) $ ( 5,902 ) In fiscal 2022, the Company received $ 1.4 million from the state of North Carolina’s Business Recovery Program, which provided aid to eligible North Carolina businesses that suffered significant economic damage from the COVID-19 pandemic. Additionally, in fiscal 2022, the Company received $ 1.7 million in property insurance claims, including business interruption, from Hurricanes Ida and Laura in 2021 and 2020. 3. Short-Term Investments: At February 1, 2025, the Company’s investment portfolio was primarily invested in corporate and governmental debt securities held in managed accounts. These securities are classified as available-for- sale as they are highly liquid and are recorded on the Consolidated Balance Sheets at estimated fair value, with unrealized gains and temporary losses reported net of taxes in Accumulated other comprehensive income. The table below reflects gross accumulated unrealized gains (losses) in short-term investments at February 1, 2025 and February 3, 2024 (in thousands): ` February 1, 2025 February 3, 2024 Debt securities Debt securities issued by the U.S issued by the U.S Government, its various Government, its various States, municipalities Corporate States, municipalities Corporate and agencies debt and agencies debt of each securities Total of each securities Total Cost basis $ 5,878 $ 51,392 $ 57,270 $ 30,989 $ 48,320 $ 79,309 Unrealized gains - 163 163 - 38 38 Unrealized (loss) ( 10 ) - ( 10 ) ( 335 ) - ( 335 ) Estimated fair value $ 5,868 $ 51,555 $ 57,423 $ 30,654 $ 48,358 $ 79,012 Accumulated other comprehensive income on the Consolidated Balance Sheets reflects the accumulated unrealized gains and losses in short-term investments in addition to unrealized gains and losses from equity investments and restricted cash investments. The table below reflects gross accumulated unrealized gains and losses in these investments at February 1, 2025 and February 3, 2024 (in thousands): THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 53 ` February 1, 2025 February 3, 2024 Deferred Unrealized Deferred Unrealized Unrealized Tax Benefit/ Net Gain/ Unrealized Tax Benefit/ Net Gain/ Security Type Gain/(Loss) (Expense) (Loss) Gain/(Loss) (Expense) (Loss) Short-Term Investments $ 153 $ - $ 153 $ ( 297 ) $ 68 $ ( 229 ) Equity Investments - - - 811 ( 187 ) 624 Total $ 153 $ - $ 153 $ 514 $ ( 119 ) $ 395 THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 54 4. Fair Value Measurements: The following tables set forth information regarding the Company’s financial assets that are measured at fair value as of February 1, 2025 and February 3, 2024 (in thousands): ` Prices in Active Significant Markets for Other Significant Identical Observable Unobservable February 1, 2025 Assets Inputs Inputs Description Level 1 Level 2 Level 3 Assets: State/Municipal Bonds $ 1,244 $ - $ 1,244 $ - Corporate Bonds 51,326 - 51,326 - U.S. Treasury/Agencies Notes and Bonds 4,624 - 4,624 - Cash Surrender Value of Life Insurance 9,301 - - 9,301 Asset-backed Securities (ABS) 229 - 229 - Total Assets $ 66,724 $ - $ 57,423 $ 9,301 Liabilities: Deferred Compensation $ ( 8,548 ) $ - $ - $ ( 8,548 ) Total Liabilities $ ( 8,548 ) $ - $ - $ ( 8,548 ) Prices in Active Significant Markets for Other Significant Identical Observable Unobservable February 3, 2024 Assets Inputs Inputs Description Level 1 Level 2 Level 3 Assets: State/Municipal Bonds $ 12,540 $ - $ 12,540 $ - Corporate Bonds 45,400 - 45,400 - U.S. Treasury/Agencies Notes and Bonds 18,114 - 18,114 - Cash Surrender Value of Life Insurance 8,586 - - 8,586 Asset-backed Securities (ABS) 2,958 - 2,958 - Corporate Equities 1,084 1,084 - - Total Assets $ 88,682 $ 1,084 $ 79,012 $ 8,586 Liabilities: Deferred Compensation $ ( 8,654 ) $ - $ - $ ( 8,654 ) Total Liabilities $ ( 8,654 ) $ - $ - $ ( 8,654 ) The Company’s investment portfolio was primarily invested in corporate bonds and taxable governmental debt securities held in managed accounts with underlying ratings of A or better at February 1, 2025. The state, municipal and corporate bonds and asset-backed securities have contractual maturities which range from nine days to 2.8 years . The U.S. Treasury notes have contractual maturities which range from 13 days to 2.5 years . These securities are classified as available-for-sale and are recorded as Short- term investments and Other assets on the accompanying Consolidated Balance Sheets. These assets are carried at fair value with unrealized gains and losses reported net of taxes in Accumulated other comprehensive income. Additionally, at February 1, 2025 and February 3, 2024, the Company had $ 0.0 million and $ 1.1 million of corporate equities, respectively, which are recorded within Other assets in the accompanying Consolidated Balance Sheets. Level 1 category securities are measured at fair value using quoted active market prices. Level 2 THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 55 investment securities include corporate, state and municipal bonds 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 the 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 primarily 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 compensation obligation, the value of which is tracked via underlying insurance funds’ net asset values, as recorded in Other noncurrent liabilities in the Consolidated Balance Sheets. These funds are designed to mirror the return of existing mutual funds and money market funds that are observable and actively traded. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 56 The following tables summarize the change in fair value of the Company’s financial assets and liabilities measured using Level 3 inputs for the years ended February 1, 2025 and February 3, 2024 (in thousands): ` Fair Value Measurements Using Significant Unobservable Asset Inputs (Level 3) Cash Surrender Value Beginning Balance at February 3, 2024 $ 8,586 Total gains or (losses) Included in interest and other income (or changes in net assets) 715 Ending Balance at February 1, 2025 $ 9,301 Fair Value Measurements Using Significant Unobservable Liability Inputs (Level 3) Deferred Compensation Beginning Balance at February 3, 2024 $ ( 8,654 ) Redemptions 1,175 Additions ( 220 ) Total (gains) or losses Included in interest and other income (or changes in net assets) ( 849 ) Ending Balance at February 1, 2025 $ ( 8,548 ) Fair Value Measurements Using Significant Unobservable Asset Inputs (Level 3) Cash Surrender Value Beginning Balance at January 28, 2023 $ 9,274 Withdrawals ( 1,168 ) Total gains or (losses) Included in interest and other income (or changes in net assets) 480 Ending Balance at February 3, 2024 $ 8,586 Fair Value Measurements Using Significant Unobservable Liability Inputs (Level 3) Deferred Compensation Beginning Balance at January 28, 2023 $ ( 8,903 ) Redemptions 1,119 Additions ( 292 ) Total (gains) or losses Included in interest and other income (or changes in net assets) ( 578 ) Ending Balance at February 3, 2024 $ ( 8,654 ) THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 57 5. Accounts Receivable: Accounts receivable consist of the following (in thousands): February 1, 2025 February 3, 2024 Customer accounts — principally deferred payment accounts $ 11,428 $ 11,614 Income tax receivable 5,425 6,285 Miscellaneous receivables 3,365 7,171 Bank card receivables 4,903 5,386 Total 25,121 30,456 Less allowance for customer credit losses 581 705 Accounts receivable — net $ 24,540 $ 29,751 Finance charge and late charge revenue on customer deferred payment accounts totaled $ 2,696,000 , $ 2,640,000 and $ 2,243,000 for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023, respectively, and charges against the allowance for customer credit losses were approximately $ 654,000 , $ 554,000 and $ 280,000 for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023, respectively. Expenses relating to the allowance for customer credit losses are classified as a component of Selling, general and administrative expense in the accompanying Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). During fiscal 2024, the Company received $ 8.6 million from the insurance claim settlement and sale of its corporate jet, which had sustained damage in fiscal 2023. The Company recorded a net gain of $ 3.2 million which is included in Interest and other income in the accompanying Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the year ended February 1, 2025. 6. Property and Equipment: Property and equipment consist of the following (in thousands): February 1, 2025 February 3, 2024 Land and improvements $ 13,593 $ 13,755 Buildings 35,950 35,756 Leasehold improvements 72,608 74,782 Fixtures and equipment 161,950 155,357 Information technology equipment and software 33,751 39,904 Construction in progress 928 18,034 Total 318,780 337,588 Less accumulated depreciation 258,454 273,566 Property and equipment — net $ 60,326 $ 64,022 Construction in progress primarily represents costs related to new store development, distribution center improvements and investments in new technology. 7. Accrued Expenses: Accrued expenses consist of the following (in thousands): February 1, 2025 February 3, 2024 Accrued employment and related items $ 8,189 $ 4,736 Property and other taxes 13,261 13,544 Accrued self-insurance 8,593 9,500 Fixed assets 329 942 Other 11,345 8,682 Total $ 41,717 $ 37,404 THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 58 8. Financing Arrangements: At February 1, 2025, 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 contained various financial covenants and limitations, including the maintenance of specific financial ratios with which the Company was not in compliance as of February 1, 2025. There were no borrowings outstanding, or any outstanding letters of credit, under this credit facility as of the fiscal year ended February 1, 2025 or the fiscal year ended February 3, 2024. On March 13, 2025, the Company terminated the unsecured revolving line of credit when it entered into a new $ 35.0 million asset-backed revolving line of credit (the “ABL Facility”) secured primarily by inventory and third-party credit card receivables. As of March 31, 2025 there were no borrowings under the ABL Facility and availability under the ABL Facility was $ 30.0 million. For additional information regarding the ABL Facility, see Note 1 to the Consolidated Financial Statements. The Company had no outstanding revocable letters of credit relating to purchase commitments at February 1, 2025 or at February 3, 2024. On April 25, 2024, the Company amended the now terminated unsecured revolving credit agreement to modify a definition used in calculating the Company’s minimum EBITDAR coverage ratio to add back certain income tax receivables included in the calculation of the ratio. On November 1, 2024, the Company amended the now terminated unsecured revolving credit agreement to lower the minimum EBITDAR coverage ratio and the corresponding minimum cash and investments used to determine the EBITDAR coverage ratio in exchange for a secured position in any future borrowings. 9. Stockholders’ Equity: The holders of Class A Common Stock are entitled to one vote per share , whereas the holders of Class B Common Stock are entitled to ten votes per share . Each share of Class B Common Stock may be converted at any time into one share of Class A Common Stock. Subject to the rights of the holders of any shares of Preferred Stock that may be outstanding at the time, in the event of liquidation, dissolution or winding up of the Company, holders of Class A Common Stock are entitled to receive a preferential distribution of $ 1.00 per share of the net assets of the Company. Cash dividends on the Class B Common Stock cannot be paid unless cash dividends of at least an equal amount are paid on the Class A Common Stock. The Company’s certificate of incorporation provides that shares of Class B Common Stock may be transferred only to certain “Permitted Transferees” consisting generally of the lineal descendants of holders of Class B Common Stock, trusts for their benefit, corporations and partnerships controlled by them and the Company’s employee benefit plans. Any transfer of Class B Common Stock in violation of these restrictions, including a transfer to the Company, results in the automatic conversion of the transferred shares of Class B Common Stock held by the transferee into an equal number of shares of Class A Common Stock. 10. Employee Benefit Plans: The Company has a defined contribution retirement savings plan (“401(k) plan”) which covers all associates who meet minimum age and service requirements. The 401(k) plan allows participants to contribute up to 75 % of their annual compensation up to the maximum elective deferral, designated by the Internal Revenue Service. The Company is obligated to make a minimum contribution to cover plan administrative expenses. Further Company contributions are at the discretion of the Board of Directors. The Company made no contribution for the year ended February 1, 2025. The Company’s contributions THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 59 for the years ended February 3, 2024 and January 28, 2023 were approximately $ 1,099,000 and $ 1,184,000 , respectively. The Company has a trusteed, non-contributory Employee Stock Ownership Plan (“ESOP”), which covers substantially all associates who meet minimum age and service requirements. The amount of the Company’s discretionary contribution to the ESOP is determined by the Compensation Committee of the Board of Directors and can be made in Company Class A Common stock or cash. Due to a net operating loss in fiscal 2024 and fiscal 2023, the Committee did not approve a contribution to the ESOP for the years ended February 1, 2025 and February 3, 2024. The Company’s contribution was $ 32,510 for the year ended January 28, 2023. The Company is primarily self-insured for healthcare. These costs are significant primarily due to the large number of the Company’s retail locations and associates. The Company’s self-insurance liabilities are based on the total estimated costs of claims filed and estimates of claims incurred but not reported, less amounts paid against such claims. Management reviews current and historical claims data in developing its estimates. If the underlying facts and circumstances of the claims change or the historical trend is not indicative of future trends, then the Company may be required to record additional expense or a reduction to expense which could be material to the Company’s reported results of operations in the period recorded. The Company funds healthcare contributions to a third-party provider. 11. Leases: The Company determines whether an arrangement is a lease at inception. The Company has operating leases for stores, offices, warehouse space and equipment. Its leases have remaining lease terms of one year to 10 years , some of which 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): ` Fiscal Year Ended February 1, 2025 February 3, 2024 January 28, 2023 Operating lease cost (a) $ 67,174 $ 70,363 $ 71,513 Variable lease cost (b) $ 2,275 $ 2,646 $ 3,127 (a) Includes right-of-use asset amortization of ($ 0.8 ) million, ($ 1.3 ) million, and ($ 1.7 ) million for the twelve months ended February 1, 2025, February 3, 2024, and January 28, 2023 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 CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 60 Operating cash flow information: Fiscal Year Ended February 1, 2025 February 3, 2024 January 28, 2023 Cash paid for amounts included in the measurement of lease liabilities $ 60,717 $ 65,872 $ 67,194 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations, net of rent violations $ 53,419 $ 44,284 $ 57,628 THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 61 Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows: ` As of February 1, 2025 February 3, 2024 Weighted-average remaining lease term 2.3 years 2.3 years Weighted-average discount rate 4.83 % 4.58 % Maturities of lease liabilities by fiscal year for the Company’s operating leases are as follows (in thousands): Fiscal Year 2025 $ 64,565 2026 43,208 2027 28,057 2028 16,596 2029 7,931 Thereafter 1,280 Total lease payments 161,637 Less: Imputed interest 15,741 Present value of lease liabilities $ 145,896 12. Income Taxes: Unrecognized tax benefits for uncertain tax positions, primarily recorded in Other noncurrent liabilities, are established in accordance with ASC 740 when, despite the fact that the tax return positions are supportable, the Company believes these positions may be challenged and the results are uncertain. The Company adjusts these liabilities in light of changing facts and circumstances. As of February 1, 2025, the Company had gross unrecognized tax benefits totaling approximately $ 3.2 million. Including the gross unrecognized tax benefits, and interest and penalties, $ 4.3 million would affect the effective tax rate if recognized. The Company had approximately $ 1.7 million, $ 1.8 million and $ 2.0 million of interest and penalties accrued related to uncertain tax positions as of February 1, 2025, February 3, 2024 and January 28, 2023, respectively. The Company recognizes interest and penalties related to the resolution of uncertain tax positions as a component of income tax expense. The Company recognized $ 295,000 , $ 393,000 and $ 517,000 of interest and penalties in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the years ended February 1, 2025, February 3, 2024 and January 28, 2023, respectively. The Company is no longer subject to U.S. federal income tax examinations for years before 2021. In state and local tax jurisdictions, the Company has limited exposure before 2014. During the next 12 months, various state and local taxing authorities’ statutes of limitations will expire and certain state examinations may close, which could result in a potential reduction of unrecognized tax benefits for which a range cannot be determined. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands): THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 62 ` February 1, 2025 February 3, 2024 January 28, 2023 Fiscal Year Ended Balances, beginning $ 3,897 $ 4,886 $ 5,286 Additions for tax positions of the current year 65 76 431 Additions for tax positions of prior years - - 137 Reduction for tax positions of prior years for: Lapses of applicable statutes of limitations ( 728 ) ( 1,065 ) ( 968 ) Balances, ending $ 3,234 $ 3,897 $ 4,886 The provision for income taxes consists of the following (in thousands): ` February 1, 2025 February 3, 2024 January 28, 2023 Fiscal Year Ended Current income taxes: Federal $ ( 128 ) $ ( 148 ) $ ( 817 ) State 395 ( 334 ) ( 231 ) Foreign 1,677 1,898 2,403 Total 1,944 1,416 1,355 Deferred income taxes: Federal - 6,613 200 State - 2,093 186 Foreign - 18 - Total - 8,724 386 Total income tax expense $ 1,944 $ 10,140 $ 1,741 THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 63 Significant components of the Company’s deferred tax assets and liabilities as of February 1, 2025 and February 3, 2024 are as follows (in thousands): February 1, 2025 February 3, 2024 Deferred tax assets: Allowance for customer credit losses $ 124 $ 150 Inventory valuation 1,584 1,076 Non-deductible accrued liabilities 1,587 1,367 Other taxes 834 862 Federal benefit of uncertain tax positions 655 712 Equity compensation expense 2,750 2,975 Federal tax credits 928 379 Net operating losses 11,147 7,854 Charitable contribution carryover 264 265 Lease liabilities 33,077 34,810 Property and equipment 4,735 3,885 Amortization 1,774 1,401 Other 1,776 2,150 Total deferred tax assets before valuation allowance 61,235 57,886 Valuation allowance ( 23,151 ) ( 17,998 ) Total deferred tax assets after valuation allowance 38,084 39,888 Deferred tax liabilities: Right-of-Use assets 38,000 39,721 Accrued self-insurance reserves 84 167 Total deferred tax liabilities 38,084 39,888 Net deferred tax assets $ - $ - The changes in the valuation allowance are presented below: February 1, 2025 February 3, 2024 January 28, 2023 Valuation Allowance Beginning Balance $ ( 17,998 ) $ ( 5,058 ) $ ( 4,473 ) Net Valuation Allowance (Additions) / Reductions ( 5,153 ) ( 12,940 ) ( 585 ) Valuation Allowance Ending Balance $ ( 23,151 ) $ ( 17,998 ) $ ( 5,058 ) As of February 1, 2025, the Company had $ 8.0 million of net deferred tax assets attributable to state net operating loss carryforwards and $ 0.2 million of other deferred tax assets affecting state income tax. The Company assessed the likelihood that deferred tax assets related to state net operating loss carryforwards and other deferred tax assets affecting state income tax will be realized. Based on this assessment, the Company concluded that it is more likely than not the Company will not be able to realize $ 8.0 million and $ 0.2 million of the net operating losses and other deferred assets, respectively, and accordingly, has recorded a valuation allowance for the same amount. As of February 1, 2025, the Company had $ 14.9 million of net deferred tax assets attributable to U.S. federal net operating loss carryforwards, other credit carryforwards and all other deferred tax assets net of deferred tax liabilities. The Company assessed the likelihood that deferred tax assets related to net operating loss carryforwards, credit carryforwards and all other remaining deferred tax assets net of deferred tax liabilities will be realized. Based on this assessment, the Company concluded that it is more likely than not the Company will not be able to realize $ 3.2 million of net operating loss carryforwards, $ 0.9 million of credit carryforwards and $ 10.8 million of remaining deferred tax assets net of deferred tax liabilities. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 64 The net change in the valuation allowance of $ 5.2 million for the year ended February 1, 2025 is due to recording a valuation allowance of $ 3.9 million against net deferred tax assets attributable to U.S. federal net operating loss carryforwards, other credit carryforwards and all other deferred tax assets net of deferred tax liabilities, including $ 1.3 million against state net operating losses. The net change in the valuation allowance for the year ended February 3, 2024 is U.S. federal net operating loss carryforwards, other credit carryforwards, all other deferred tax assets net of deferred tax liabilities, state net operating losses and state tax credits. As of February 1, 2025, the Company’s position is that its overseas subsidiaries will not invest undistributed earnings indefinitely. Future unremitted earnings when distributed are expected to be either distributions of GILTI-previously taxed income or eligible for a 100 % dividends received deduction. The withholding tax rate on any unremitted earnings is zero and state income taxes on such earnings are considered immaterial. Therefore, the Company has not provided deferred U.S. income taxes on approximately $ 21.3 million of cumulative earnings from non-U.S. subsidiaries. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 65 The reconciliation of the Company’s effective income tax rate with the statutory rate is as follows: ` February 1, 2025 February 3, 2024 January 28, 2023 Fiscal Year Ended Federal income tax rate 21.0 % 21.0 % 21.0 % State income taxes 4.4 4.5 ( 36.4 ) Global intangible low-taxed income ( 24.6 ) ( 33.4 ) 333.0 Foreign tax credit - 0.3 ( 11.2 ) Foreign rate differential 5.5 7.8 ( 74.4 ) Offshore claim 11.0 15.2 ( 141.2 ) Limitation on officer compensation ( 2.7 ) ( 3.1 ) 27.2 Work opportunity credit 1.9 1.5 ( 63.7 ) Addback on wage related credits ( 0.4 ) ( 0.3 ) 13.4 Tax credits - Other 0.6 0.5 ( 14.4 ) Insurance - - ( 8.1 ) Charitable contribution of inventory - ( 0.6 ) - Uncertain tax positions 4.5 7.4 ( 18.7 ) Deferred rate change - - 1.1 Valuation allowance ( 31.0 ) ( 96.0 ) 70.9 Other ( 2.3 ) 1.7 ( 0.1 ) Effective income tax rate ( 12.1 ) % ( 73.5 ) % 98.4 % The largest driver for the difference between the Company’s effective income tax rate for the year ended February 1, 2025 and the U.S. federal income tax rate is the valuation allowance (discussed above) recorded against the Company’s net deferred tax assets attributable to U.S. federal net operating loss carryforwards, other credit carryforwards and all other deferred tax assets net of deferred tax liabilities. 13. Reportable Segment Information: The Company has determined that it has four operating segments, as defined under ASC 280-10 – Segment Reporting , including Cato, It’s Fashion, Verso na 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 have similar economic characteristics, products, production processes, customers and methods of distribution. The Company’s retail operating segments have similar economic characteristics and similar operating, financial and competitive risks. The products sold in each retail operating segment are similar in nature, as they all offer women’s apparel, shoes and accessories. Merchandise inventory of 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 retail operating segments is distributed to retail stores in a similar manner through the Company’s single distribution center and is subsequently sold to customers in a similar manner. 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 does not allocate certain corporate expenses to the Credit segment. The Company’s President and Chief Executive Officer is the Company’s chief operating decision maker (“CODM”). The structure described above reflects the manner in which the CODM regularly THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 66 assesses information for decision-making purposes, including the allocation of resources. The Company also provides corporate services, including finance, information technology, and corporate administration, to its segments which are fully allocated to the retail segment. Interest and other income from assets held for investment and sale are not included in assessing the segments’ performance and therefore not allocated to either segment. The CODM manages and evaluates the segments’ operating performance based on segment sales, expenses, and profit or loss from operations before income taxes as presented in the Company’s annual budget and forecasting process, as well as monthly analyses of budget-to-actual and prior year variances. Segment expenses and other items primarily include cost of goods sold, selling, general and administrative expenses, depreciation and interest and other income. Assessment and approval of all capital expenditures are determined to be in support of and based on the needs of the retail segment; however, the CODM does not evaluate performance or allocate resources based on segment asset balances; therefore, total segment assets are not presented in the tables below. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in Note 1. The Company evaluates performance based on profit or loss from operations before income taxes. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 67 The following schedule summarizes certain segment information (in thousands): ` Fiscal 2024 Retail Credit Total Total Revenues $ 647,110 $ 2,696 $ 649,806 Cost of goods sold (a) 436,440 - 436,440 Selling, general, and administrative (b) 162,367 1,630 163,997 Corporate overhead 67,492 - 67,492 Depreciation 9,817 - 9,817 Interest and other income ( 410 ) ( 1,162 ) ( 1,572 ) Income (loss) before income taxes $ ( 28,596 ) $ 2,228 $ ( 26,368 ) Corporate interest and other income ( 10,255 ) Net income (loss) before income taxes $ ( 16,113 ) Capital expenditures $ 7,872 $ - $ 7,872 Fiscal 2023 Retail Credit Total Total Revenues $ 705,419 $ 2,640 $ 708,059 Cost of goods sold (a) 464,313 - 464,313 Selling, general, and administrative (b) 176,205 1,632 177,837 Corporate overhead 74,940 - 74,940 Depreciation 9,871 - 9,871 Interest and other income ( 267 ) ( 737 ) ( 1,004 ) Income (loss) before income taxes $ ( 19,643 ) $ 1,745 $ ( 17,898 ) Corporate interest and other income ( 4,097 ) Net income (loss) before income taxes $ ( 13,801 ) Capital expenditures $ 12,532 $ - $ 12,532 Fiscal 2022 Retail Credit Total Total Revenues $ 757,017 $ 2,243 $ 759,260 Cost of goods sold (a) 509,664 - 509,664 Selling, general, and administrative (b) 173,854 1,497 175,351 Corporate overhead 67,297 - 67,297 Depreciation 11,079 1 11,080 Interest and other income ( 167 ) ( 388 ) ( 555 ) Income (loss) before income taxes $ ( 4,710 ) $ 1,133 $ ( 3,577 ) Corporate interest and other income ( 5,347 ) Net income (loss) before income taxes $ 1,770 Capital expenditures $ 19,433 $ - $ 19,433 (a) Refer to Note 1 for additional information on the components of Cost of goods sold. (b) Selling, general, and administrative expense include corporate and store payroll, related payroll taxes and benefits, insurance, supplies, advertising, bank and credit card processing fees. 14. Stock Based Compensation: As of February 1, 2025, the Company’s 2018 Incentive Compensation Plan was available for the granting of various forms of equity-based awards, including restricted stock and stock options for grant to officers, directors and key employees. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 68 The following table presents the number of options and shares of restricted stock initially authorized and available for grant under this plan as of February 1, 2025: ` 2018 Plan Options and/or restricted stock initially authorized 4,725,000 Options and/or restricted stock available for grant: February 3, 2024 3,147,393 February 1, 2025 2,797,601 In accordance with ASC 718, the fair value of 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 a five-year vesting period. As of February 1, 2025, there was $ 7,276,356 of total unrecognized compensation expense related to unvested restricted stock awards, which is expected to be recognized over a remaining weighted-average vesting period of 1.9 years. The total grant date fair value of the shares recognized as compensation expense during the twelve months ended February 1, 2025, February 3, 2024 and January 28, 2023 was $ 2,270,000 , $ 4,105,000 and $ 2,556,000 , respectively. The expenses are classified as a component of Selling, general and administrative expenses in the 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 years ended February 1, 2025, February 3, 2024 and January 28, 2023: ` Weighted Average Number of Grant Date Fair Shares Value Per Share Restricted stock awards at January 29, 2022 1,196,288 $ 13.76 Granted 319,441 13.70 Vested ( 231,638 ) 16.99 Forfeited or expired ( 224,658 ) 13.43 Restricted stock awards at January 28, 2023 1,059,433 $ 13.10 Granted 414,502 8.29 Vested ( 217,238 ) 13.97 Forfeited or expired ( 132,824 ) 11.73 Restricted stock awards at February 3, 2024 1,123,873 $ 11.32 Granted 386,900 4.80 Vested ( 232,696 ) 13.22 Forfeited or expired ( 62,896 ) 9.21 Restricted stock awards at February 1, 2025 1,215,181 $ 8.98 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 twelve month period ended February 1, 2025, the Company sold 73,593 shares to employees at an average discount of $ 0.81 per share under the Employee Stock Purchase Plan. The compensation expense recognized for the 15 % discount given under the Employee Stock Purchase Plan was approximately $ 60,000 , $ 67,000 and $ 54,000 for fiscal years 2024, 2023 and 2022, respectively. These expenses are classified as a component of Selling, general and administrative expenses. 15. Commitments and Contingencies: THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 69 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 our 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 consolidated financial statements. However, given the inherent uncertainties involved in such matters, an adverse outcome in one or more of 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. 16. Accumulated Other Comprehensive Income: The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the year ended February 1, 2025: ` Changes in Accumulated Other Comprehensive Income (a) Unrealized Gains and (Losses) on Available-for-Sale Securities Beginning Balance at February 3, 2024 $ 395 Other comprehensive income (loss) before reclassification 541 Amounts reclassified from accumulated other comprehensive income (b) ( 783 ) Net current-period other comprehensive income (loss) ( 242 ) Ending Balance at February 1, 2025 $ 153 (a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income. (b) Includes $ 1,015 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 $ 232 . Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 70 The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the year ended February 3, 2024: Changes in Accumulated Other Comprehensive Income (a) Unrealized Gains and (Losses) on Available-for-Sale Securities Beginning Balance at January 28, 2023 $ ( 1,238 ) Other comprehensive income (loss) before reclassification 1,614 Amounts reclassified from accumulated other comprehensive income (b) 19 Net current-period other comprehensive income (loss) 1,633 Ending Balance at February 3, 2024 $ 395 (a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income. (b) Includes $ 25 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 $ 6 . Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income. THE CATO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 71 The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (in thousands) for the year ended January 28, 2023: Changes in Accumulated Other Comprehensive Income (a) Unrealized Gains and (Losses) on Available-for-Sale Securities Beginning Balance at January 29, 2022 $ ( 280 ) Other comprehensive income (loss) before reclassification ( 982 ) Amounts reclassified from accumulated other comprehensive income (b) 24 Net current-period other comprehensive income (loss) ( 958 ) Ending Balance at January 28, 2023 $ ( 1,238 ) (a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income. (b) Includes $ 31 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 $ 7 . Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income. 72 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure: None.