UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
 
20549
FORM
10-Q
☑
QUARTERLY REPORT PURSUANT
 
TO SECTION
 
13 OR 15(d)
 
OF THE SECURITIES
 
EXCHANGE
 
ACT OF
1934
For the quarterly period ended
April 29,October 28, 2023
OR
☐
TRANSITION
 
REPORT PURSUANT
 
TO SECTION
 
13 OR 15(d)
 
OF THE SECURITIES
 
EXCHANGE
 
ACT OF
1934
For the transition period from ________________to__________________
Commission file number
 
1-31340
 
THE CATO CORPORATION
(Exact name of registrant as specified in its
 
charter)
Delaware
56-0484485
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
8100 Denmark Road
,
Charlotte
,
North Carolina
28273-5975
(Address of principal executive offices)
(Zip Code)
(704)
554-8510
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
 
changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A - Common Stock, par value $.033 per share
CATO
New York Stock Exchange
Indicate
 
by check
 
mark
 
whether
 
the
 
registrant
 
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by Section
 
13
 
or
 
15(d)
 
of
 
the
 
Securities
Exchange Act of 1934
 
during the preceding 12
 
months (or for such shorter
 
period that the registrant
 
was required to file such
 
reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes
X
No
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant
 
has
 
submitted
 
electronically
 
every
 
Interactive
 
Data
 
File
 
required
 
to
 
be
 
submitted
pursuant to Rule
 
405 of Regulation
 
S-T (§232.405
of this chapter)
during the preceding
 
preceding 12 months (or
 
(or for such shorter
 
shorter period
that the
registrant
was required to
submit and post such files).
Yes
X
No
Indicate
by
 
check
mark
 
whether
the
 
registrant
is
 
a
large
 
accelerated filer,
 
filer, an
accelerated
 
filer, a
 
non-accelerated
filer,
 
a smaller
reporting
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer,”
 
“smaller
 
reporting
company,” and “emerging growth
 
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
 
☑
 
Non-accelerated filer
☐
 
Smaller reporting company
☐
 
Emerging growth company
☐
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
 
transition
 
period
 
for
complying with any new or revised financial accounting standards provided
 
pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b
 
-2 of the Exchange Act).
☐
As
of April 29,
October
28,
2023,
there
were
18,479,61518,821,512
 
shares
of
Class A
common
stock
and
1,763,652
 
shares
of
Class B
common
stock
outstanding.
12
THE CATO CORPORATION
FORM 10-Q
Quarter Ended April 29,October 28, 2023
Table
 
of Contents
Page No.
PART
 
I – FINANCIAL INFORMATION
 
(UNAUDITED)
Item 1.
Financial Statements (Unaudited):
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
23
For the Three Months and Nine Months Ended October
 
April 29,28, 2023 and April 30, October 29,
2022
Condensed Consolidated Balance Sheets
34
At April 29,October 28, 2023 and January 28,
 
January 28, 2023
Condensed Consolidated Statements of Cash Flows
45
For the ThreeNine Months Ended April 29,October 28, 2023 and
 
April 30,October 29, 2022
Condensed Consolidated Statements of Stockholders’ Equity
56 – 7
For the ThreeNine Months Ended April 29,October 28, 2023 and
 
April 30,October 29, 2022
Notes to Condensed Consolidated Financial Statements
6 - 188 – 22
For the Three Months and Nine Months Ended October
28, 2023 and October 29,
2022
Item 2.
Management’s Discussion and Analysis
 
of Financial Condition and Results
Results of Operations
19 - 2523 – 29
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
2630
Item 4.
Controls and Procedures
2630
PART
 
II – OTHER INFORMATION
Item 1.
Legal Proceedings
2731
Item 1A.
Risk Factors
2731
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
2732
Item 3.
Defaults Upon Senior Securities
2732
Item 4.
Mine Safety Disclosures
2832
Item 5.
Other Information
2832
Item 6.
Exhibits
2832
Signatures
2933
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2
3
PART
 
I FINANCIAL INFORMATION
ITEM 1.
 
FINANCIAL STATEMENTS
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
 
OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Three Months Ended
April 29, Nine Months Ended
October 28,
2023
April 30, October 29,
2022
October 28,
2023
October 29,
2022
(Dollars in thousands, except per share data)
REVENUES
 
Retail sales
$
190,311156,682
$
204,933174,921
$
528,174
$
574,860
 
Other revenue (principally finance charges, late fees and
 
layaway charges)
1,7391,574
1,7881,705
5,003
5,351
 
Total revenues
192,050158,256
206,721176,626
533,177
580,211
COSTS AND EXPENSES, NET
 
Cost of goods sold (exclusive of depreciation shown
below)
122,087105,832
132,243123,752
345,536
387,744
 
Selling, general and administrative (exclusive of
depreciation
 
shown below)
61,93461,792
60,44161,397
185,344
182,606
 
Depreciation
2,3572,504
2,7432,864
7,371
8,418
 
Interest and other income
(897)(1,523)
(403)(2,278)
(3,754)
(4,565)
 
Costs and expenses, net
185,481168,605
195,024185,735
534,497
574,203
Income (loss) before income taxes
6,569(10,349)
11,697(9,109)
(1,320)
6,008
Income tax (benefit) expense
2,141(4,272)
1,949(4,656)
(797)
2,988
Net income (loss)
$
4,428(6,077)
$
9,748(4,453)
$
(523)
$
3,020
Basic earnings (loss) per share
$
0.22(0.30)
$
0.46(0.21)
$
(0.02)
$
0.14
Diluted earnings (loss) per share
$
0.22(0.30)
$
0.46(0.21)
$
(0.02)
$
0.14
Comprehensive income:
Net income (loss)
$
4,428(6,077)
$
9,748(4,453)
$
(523)
$
3,020
Unrealized gain (loss) on available-for-sale securities, net of
 
 
of deferred income taxes of $
10760
 
and an income tax benefit of $
362
355
(1,206)217
 
for April 29,the three and
nine months ended October 28, 2023 and April 30,($
189
) and ($
532
) for
the three and nine months ended October 29, 2022,
respectively
201
(629)
723
(1,774)
Comprehensive income (loss)
$
4,783(5,876)
$
8,542(5,082)
$
200
$
1,246
See notes to condensed consolidated financial statements (unaudited).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
April 29,October 28, 2023
January 28, 2023
ASSETS
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents
 
$
39,64225,024
$
20,005
Short-term investments
 
87,75093,552
108,652
Restricted cash
3,8263,908
3,787
Accounts receivable, net of allowance for customer credit losses of
 
$
761742
 
and $
761
 
at April 29,October 28, 2023 and January 28, 2023, respectively
28,19231,115
26,497
Merchandise inventories
 
106,81398,872
112,056
Prepaid expenses and other current assets
7,2988,591
6,676
 
Total Current Assets
 
273,521261,062
277,673
Property and equipment – net
 
74,18766,302
70,382
DeferredNoncurrent deferred income taxes
9,93810,977
9,213
Other assets
 
21,47825,444
21,596
Right-of-Use assets – net
 
155,512123,583
174,276
 
Total Assets
 
$
534,636487,368
$
553,140
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
 
$
88,50886,897
$
91,956
Accrued expenses
 
42,59342,521
41,338
Accrued bonusemployee benefits and benefits
bonus
2,1541,387
1,690
Accrued income taxes
 
2,6791,988
613
Current lease liability
49,70751,431
67,360
 
Total Current Liabilities
 
185,641184,224
202,957
Other noncurrent liabilities
16,44914,683
16,183
Lease liability
105,76571,143
107,407
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;
18,479,61518,821,512
 
shares and
18,723,225
 
shares issued
 
issued at April 29,October 28, 2023 and January 28, 2023, respectively
624636
632
Convertible Class B common stock, $
0.033
 
par value per share,
 
15,000,000
 
shares authorized;
1,763,652
and
 
1,763,652
 
shares and
1,763,652
shares
issued at April 29,October 28, 2023 and January 28, 2023, respectively
59
59
Additional paid-in capital
 
123,555125,949
122,431
Retained earnings
 
103,42691,189
104,709
Accumulated other comprehensive income
(loss)
(883)(515)
(1,238)
 
Total Stockholders' Equity
 
226,781217,318
226,593
 
Total Liabilities and Stockholders’Stockholders' Equity
 
$
534,636487,368
$
553,140
See notes to condensed consolidated financial statements (unaudited).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
45
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
 
OF CASH FLOWS
(UNAUDITED)
ThreeNine Months Ended
April 29,October 28, 2023
April 30,October 29, 2022
(Dollars in thousands)
Operating Activities:
Net income (loss)
$
4,428(523)
$
9,7483,020
Adjustments to reconcile net income (loss) to net cash provided (used)
by operating activities:
Depreciation
2,3577,371
2,7438,418
Provision for customer credit losses
98397
72217
Purchase premium and premium amortization of investments
(18)(226)
388606
Share-based compensation
9583,189
6241,517
Deferred income taxes
(832)(1,981)
-
(Gain)
Loss on disposal of property and equipment
(33)13
16106
Changes in operating assets and liabilities which provided
(used) cash:
 
Accounts receivable
(1,793)(1,815)
(4,382)29,916
 
Merchandise inventories
5,24313,184
(2,669)8,189
 
Prepaid and other assets
(618)(1,716)
4741,704
 
Operating lease right-of-use assets and liabilities
(532)(1,499)
(590)(1,895)
 
Accrued income taxes
2,0661,375
1,1421,918
 
Accounts payable, accrued expenses and other liabilities
(1,429)(6,099)
(8,331)(34,418)
Net cash provided (used) by operating activities
9,89511,670
(765)19,298
Investing Activities:
Expenditures for property and equipment
 
(6,170)(10,271)
(4,440)(14,382)
Purchase of short-term investments
(5,914)(44,595)
(1,529)(53,765)
Sales of short-term investments
27,42160,999
25,56668,348
Net cash provided (used) by investing activities
15,3376,133
19,597201
Financing Activities:
Dividends paid
(3,455)(10,457)
(3,638)(10,870)
Repurchase of common stock
(2,267)(2,563)
(9,162)(11,561)
Proceeds from employee stock purchase plan
166357
91279
Net cash provided (used) byused in financing activities
(5,556)(12,663)
(12,709)(22,152)
Net increase (decrease) in cash, cash equivalents, and restricted cash
19,6765,140
6,123(2,653)
Cash, cash equivalents, and restricted cash at beginning of period
23,792
23,678
Cash, cash equivalents, and restricted cash at end of period
 
$
43,46828,932
$
29,80121,025
Non-cash activity:
Accrued other assets and property and equipment
$
6441,100
$
2,9712,311
See notes to condensed consolidated financial statements (unaudited).
 
 
 
 
56
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
 
OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income
Equity
(Dollars in thousands)
Balance — January 28, 2023
$
691
$
122,431
$
104,709
$
(1,238)
$
226,593
Comprehensive income:
 
Net income
-
-
4,428
-
4,428
 
Unrealized net gains on available-for-sale securities, net of deferred
 
deferred income tax expense of $
107
-
-
-
355
355
Dividends paid ($
0.17
 
per share)
-
-
(3,455)
-
(3,455)
Class A common stock sold through employee stock purchase
 
plan
-
195
-
-
195
Share-based compensation issuances and exercises
-
-
3
-
3
Share-based compensation expense
-
929
-
-
929
Repurchase and retirement of treasury shares
(8)
-
(2,259)
-
(2,267)
Balance — April 29, 2023
$
683
$
123,555
$
103,426
$
(883)
$
226,781
Comprehensive income:
Net income
-
-
1,127
-
1,127
Unrealized net gains on available-for-sale securities, net of
deferred income tax expense of $
50
-
-
-
167
167
Dividends paid ($
0.17
per share)
-
-
(3,507)
-
(3,507)
Class A common stock sold through employee stock purchase
plan
1
31
-
-
32
Share-based compensation issuances and exercises
-
-
-
-
-
Share-based compensation expense
12
1,212
3
-
1,227
Repurchase and retirement of treasury shares
(1)
-
(293)
-
(294)
Balance — July 29, 2023
$
695
$
124,798
$
100,756
$
(716)
$
225,533
Comprehensive income:
Net loss
-
-
(6,077)
-
(6,077)
Unrealized net gains on available-for-sale securities, net of
deferred income tax expense of $
60
-
-
-
201
201
Dividends paid ($
0.17
per share)
-
-
(3,495)
-
(3,495)
Class A common stock sold through employee stock purchase
plan
1
188
-
-
189
Share-based compensation issuances and exercises
-
-
-
-
-
Share-based compensation expense
(1)
963
5
-
967
Repurchase and retirement of treasury shares
-
-
-
-
-
Balance — October 28, 2023
$
695
$
125,949
$
91,189
$
(515)
$
217,318
See notes to condensed consolidated financial statements (unaudited).
7
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income
Equity
(Dollars in thousands)
Balance — January 29, 2022
$
728
$
119,540
$
134,208
$
(280)
$
254,196
Comprehensive income:
 
Net income
-
-
9,748
-
9,748
 
Unrealized net losses on available-for-sale securities, net of deferred
 
deferred income tax benefit of $
362
-
-
-
(1,206)
(1,206)
Dividends paid ($
0.17
 
per share)
-
-
(3,638)
-
(3,638)
Class A common stock sold through employee stock purchase
 
plan
-
111
-
-
111
Share-based compensation issuances and exercises
-
-
5
-
5
Share-based compensation expense
-
598
-
-
598
Repurchase and retirement of treasury shares
(20)
-
(9,142)
-
(9,162)
Balance — April 30, 2022
$
708
$
120,249
$
131,181
$
(1,486)
$
250,652
Comprehensive income:
Net loss
-
-
(2,274)
-
(2,274)
Unrealized net gains on available-for-sale securities, net of
deferred income tax expense of $
18
-
-
-
61
61
Dividends paid ($
0.17
per share)
-
-
(3,632)
-
(3,632)
Class A common stock sold through employee stock purchase
plan
-
62
-
-
62
Share-based compensation issuances and exercises
7
308
6
-
321
Share-based compensation expense
-
1,077
-
-
1,077
Repurchase and retirement of treasury shares
(1)
-
(433)
-
(434)
Balance — July 30, 2022
$
714
$
121,696
$
124,848
$
(1,425)
$
245,833
Comprehensive income:
Net loss
-
-
(4,453)
-
(4,453)
Unrealized net losses on available-for-sale securities, net of
deferred income tax benefit of $
189
-
-
-
(629)
(629)
Dividends paid ($
0.17
per share)
-
-
(3,600)
-
(3,600)
Class A common stock sold through employee stock purchase
plan
1
154
-
-
155
Share-based compensation issuances and exercises
-
(308)
-
-
(308)
Share-based compensation expense
(3)
(228)
5
-
(226)
Repurchase and retirement of treasury shares
(7)
-
(1,958)
-
(1,965)
Balance — October 29, 2022
$
705
$
121,314
$
114,842
$
(2,054)
$
234,807
See notes to condensed consolidated financial statements (unaudited).
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
6FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
8
NOTE 1 - GENERAL
:
The
condensed
 
consolidated
financial
 
statements
as
 
of April
 
29, October
28,
2023
 
and for
 
the thirteen-week
periods
ended
April 29,
2023 and
April
30,
2022
have been
prepared fromfor
 
the
 
thirty-nine-week
periods ended October 28, 2023 and October 29, 2022 have been prepared from the accounting records
 
of
The
 
Cato
Corporation
Corporation
and
 
its
wholly-owned
 
subsidiaries (the
(the
 
“Company”),
and
 
all
amounts
 
shown are
 
unaudited.
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
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 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
America.
On May 18,November 16, 2023, the Board of Directors maintained the quarterly
dividend at
$
0.17
 
per share.
During the third quarter of the current fiscal year,
the Company received an estimate for costs to repair its
corporate jet,
which had
sustained damage
at
the
end of
the
second
quarter.
The
Company determined
that
the
cost
of
repair
is
recoverable
and
recorded
a
receivable
for
the
estimated
repair
cost
of
$
3.2
million.
Management has determined that it is more
likely than not that the aircraft
will be sold within the next 12
months. The
Company reclassified the
aircraft as
an asset held
for sale
at its
estimated fair value
of $
4.2
million, which
is included
in Other
assets in
the accompanying Condensed
Consolidated Balance Sheets
as of October 28, 2023.
 
 
 
 
 
 
 
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
7FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
9
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).
 
Condensed Consolidated
While
 
Statements of
Income and
Comprehensive Income.
While the
Company’s certificate
of incorporation
provides the
 
right forCompany’s
 
the Board of
Directors to
declare dividends
on
Class
A
shares
without
declarationcertificate
 
of
 
commensurateincorporation
 
dividends
on
Class
B
shares,provides
 
the
 
Companyright
 
hasfor
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
has resolved to continue this
practice.
 
Accordingly, the Company’s allocation
of income for purposes
of the EPS
EPS
computation
is
the
same
 
for
Class
A
and
 
Class
B
shares
and
 
the
EPS
amounts
reported
 
herein
are applicable
applicable to both Class A and Class B
 
B shares.
Basic
 
EPS
 
is
 
computed
 
as
 
net
 
income
 
less
 
earnings
 
allocated
 
to
 
non-vested
 
equity
 
awards
 
divided
 
by
 
the
weighted average
 
number of
 
common shares
 
outstanding for
 
the period.
 
Diluted EPS
 
reflects the
 
potential
dilution
 
that
 
could
 
occur
 
from
 
common
 
shares
 
issuable
 
through
 
stock
 
options
 
and
 
the
 
Employee
 
Stock
Purchase Plan.
 
Three Months Ended
April 29, 2023
April 30, 2022
(Dollars in thousands)
Numerator
Net earnings
$
4,428
$
9,748
Earnings allocated to non-vested equity awards
(227)
(541)
Net earnings available to common stockholders
$
4,201
$
9,207
Denominator
Basic weighted average common shares outstanding
19,303,048
20,149,201
Diluted weighted average common shares outstanding
19,303,048
20,149,201
Net income per common share
Basic earnings per share
$
0.22
$
0.46
Diluted earnings per share
$
0.22
$
0.46
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Nine Months Ended
October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
(Dollars in thousands)
Numerator
Net earnings (loss)
$
(6,077)
$
(4,453)
$
(523)
$
3,020
(Earnings) loss allocated to non-vested equity awards
346
240
49
(153)
Net earnings (loss) available to common stockholders
$
(5,731)
$
(4,213)
$
(474)
$
2,867
Denominator
Basic weighted average common shares outstanding
19,421,701
19,934,592
19,373,411
20,029,703
Diluted weighted average common shares outstanding
19,421,701
19,934,592
19,373,411
20,029,703
Net income (loss) per common share
Basic earnings (loss) per share
$
(0.30)
$
(0.21)
$
(0.02)
$
0.14
Diluted earnings (loss) per share
$
(0.30)
$
(0.21)
$
(0.02)
$
0.14
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
8FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
10
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 April 29,October 28, 2023:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at July 29, 2023
$
(716)
Other comprehensive income before
reclassification
185
Amounts reclassified from accumulated
other comprehensive income (b)
16
Net current-period other comprehensive income
201
Ending Balance at October 28, 2023
$
(515)
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
(b) Includes $
20
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 $
4
.
The
following
table
sets
forth
information
regarding
the
reclassification
out
of
Accumulated
other
comprehensive income (in thousands) for the
nine months ended October 28, 2023:
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
355704
 
Amounts reclassified from accumulated
 
other comprehensive income (b)
-19
Net current-period other comprehensive income (loss)
355723
Ending Balance at April 29,October 28, 2023
$
(883)(515)
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
(b) Includes $
24
impact of Accumulated other comprehensive income ("OCI")reclassifications into Interest and other
income for net gains on available-for-sale securities. The tax impact of this reclassification was $
5
.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
11
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 April 30,October 29, 2022:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at July 30, 2022
$
(1,425)
Other comprehensive income before
reclassifications
(637)
Amounts reclassified from accumulated
other comprehensive income (b)
8
Net current-period other comprehensive income
(629)
Ending Balance at October 29, 2022
$
(2,054)
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
(b) Includes $
11
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 $
3
.
The
following
table
sets
forth
information
regarding
the
reclassification
out
of
Accumulated
other
comprehensive income (in thousands) for the
nine months ended October 29, 2022:
Changes in Accumulated Other
 
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at January 29, 2022
$
(280)
 
Other comprehensive income (loss) before
 
 
reclassificationreclassifications
(1,203)(1,788)
 
Amounts reclassified from accumulated
 
other comprehensive income (b)
(3)14
Net current-period other comprehensive income (loss)
(1,206)(1,774)
Ending Balance at April 30,October 29, 2022
$
(1,486)(2,054)
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income ("OCI").income.
(b) Includes $
$418
 
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 $
$14
.
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
9FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
12
NOTE 4 – FINANCING ARRANGEMENTS:
At
As of October 28, 2023, the Company has an unsecured revolving credit line, which provides for borrowings
of up
 
April
29,
2023,
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,
commitments,and is
committed through
May 2027.
The revolving
credit agreement
contains various
financial covenants
and limitations,
including the
maintenance of
specific financial
ratios.
On October
24, 2023,
the Company
amended the revolving
credit agreement
to link
the calculation
of the
Company’s EBITDAR
coverage ratio
to
the
amount
of
the
Company’s
cash
 
and
 
wasinvestments.
 
committedThough
 
throughthe
 
Mayeffect
 
2027.of
 
Thethe
amendment
reduced
the
minimum EBITDAR
coverage ratio
for the
quarter ended
October 28,
2023 and
is expected
to do
so going
forward, the Company
was in compliance
with the amended
credit agreement for
the quarter ended
October
28, 2023
and also
would have
been in
compliance without
giving effect
to the
amendment.
There were
no
borrowings
outstanding,
no
r
any
outstanding
letters
of
 
credit
 
agreementthat
 
containsreduced
 
variousborrowing
 
financial
covenants and limitations, including the maintenance of specific financial
ratios with which the Company
was
in
complianceavailability,
 
as
 
of
April
29,
2023.
There
were
no
borrowings
outstanding,
nor
any
outstanding
letters of
credit that
reduced borrowing availability,
as of
April 29,
October 28, 2023.
 
The weighted average
 
average interest
rate under
the credit facility
was
zero
 
at April 29, October 28,
2023
due to
no
 
outstanding borrowings.borrowings outstanding.
NOTE 5 – REPORTABLE SEGMENT INFORMATION:
The
Company
 
has
determined
 
that
it
 
has
four
four
 
operating
segments,
 
as
defined
 
under
ASC
 
280
280-10 –
Segment
Reporting
, including Cato,
 
It’s Fashion, Versona
 
and Credit.
 
As outlined in
 
ASC 280-10, the
 
Company has
two
 
reportable segments: Retail and Credit.
 
The Company has aggregated its
three
 
retail operating segments,
including
 
e-commerce,
 
based
 
on the
 
aggregation
 
criteria
 
outlined in
 
ASC
 
280-10, which
 
states that
 
two
 
or
more operating segments may be aggregated into a single reportable segment if aggregation is consistent with
the
 
objective
 
and
 
basic
 
principles
 
of
 
ASC
 
280-10,
 
which
 
require
 
the
 
segments
 
to
 
have
 
similar
 
economic
characteristics, products, production processes, clients and
 
methods of distribution.
 
The
 
Company’s
 
retail
 
operating
 
segments
 
have
 
similar
 
economic
 
characteristics
 
and
 
similar
 
operating,
financial and
 
competitive risks.
 
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
 
distributed
to
clients in a similar manner.
 
The
 
Company
operates
 
its
 
women’s
 
fashion
 
specialty
retail
 
stores
 
in
3231
 
states
 
as
 
of
 
AprilOctober
 
29,28,
 
2023,
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 separate
wholly-owned
subsidiary of
the Company.
 
 
 
 
 
 
 
 
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
10FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
13
NOTE 5 – REPORTABLE SEGMENT INFORMATION
 
(CONTINUED):
The following schedule summarizes certain segment
 
information (in thousands):
Three Months Ended
April 29,Nine Months Ended
October 28, 2023
Retail
Credit
Total
October 28, 2023
Retail
Credit
Total
Revenues
$191,434157,595
$616661
$192,050158,256
Revenues
$531,243
$1,934
$533,177
Depreciation
2,3572,504
-
2,3572,504
Depreciation
7,370
1
7,371
Interest and other income
(897)(1,523)
-
(897)(1,523)
Interest and other income
(3,754)
-
(3,754)
Income (loss) before
income taxes
6,382(10,604)
187255
6,569(10,349)
Income (loss) before
income taxes
(2,014)
694
(1,320)
Capital expenditures
6,1701,801
-
6,1701,801
Capital expenditures
10,271
-
10,271
Three Months Ended
April 30,Nine Months Ended
October 29, 2022
Retail
Credit
Total
October 29, 2022
Retail
Credit
Total
Revenues
$206,208176,057
$513569
$206,721176,626
Revenues
$578,580
$1,631
$580,211
Depreciation
2,7432,864
-
2,7432,864
Depreciation
8,417
1
8,418
Interest and other income
(403)(2,278)
-
(403)(2,278)
Interest and other income
(4,565)
-
(4,565)
Income (loss) before
income taxes
(9,280)
171
(9,109)
Income before
income taxes
11,6135,623
84385
11,6976,008
Capital expenditures
4,4403,998
-
4,4403,998
Capital expenditures
14,382
-
14,382
Retail
Credit
Total
Total assets as of April 29,October 28, 2023
$495,730450,420
$38,90636,948
$534,636487,368
Total assets as of January 28, 2023
514,609
38,531
553,140
The
Company
evaluates
segment
performance
based
on
 
income
before
income taxes.
 
The
Company
does
not
allocate certain corporate expenses or
 
income taxes to the credit segment.
The following schedule
summarizes the direct expenses
 
expenses of the
credit segment, which are
 
are reflected in
Selling,
general and administrative expenses (in
 
thousands):
Three Months Ended
April 29, 2023
April 30, 2022
Payroll
$
134
$
137
Postage
101
93
Other expenses
194
199
Total expenses
$
429
$
429
 
 
 
 
 
Three Months Ended
Nine Months Ended
October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Payroll
$
135
$
120
$
411
$
389
Postage
111
107
321
299
Other expenses
160
172
507
557
Total expenses
$
406
$
399
$
1,239
$
1,245
 
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
11FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
14
NOTE 6 – SHARE BASEDSTOCK-BASED COMPENSATION:
As of October 28, 2023,
 
April 29,the Company had
two
 
2023, 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 April 29,October 28,
 
2023:
 
2013
2018
Plan
Plan
Total
Options and/or restricted stock initially authorized
1,500,000
4,725,000
6,225,000
Options and/or restricted stock available for grant:
 
 
 
April 29,
October 28, 2023
-
3,473,4753,124,274
3,473,4753,124,274
In
 
accordance
 
with
 
ASC
 
718
 
–
Compensation–Stock Compensation
,
 
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 AprilOctober
29,28,
 
2023
 
and
 
January
 
28,
 
2023,
 
there
 
was
 
$
9,329,00010,488,000
 
and
 
$
10,543,000
,
 
respectively,
 
of
 
total
unrecognized compensation expense
 
expense related to nonvested
 
to
unvested restricted
stock awards,
 
which had a
 
a remaining
weighted-average
vesting
period
of
1.92.4
 
years
and
2.1
 
years, respectively. The
 
total respectively.
Total
compensation
expense
during
the
 
three
and
nine
months
 
ended April
 
29, October
28,
2023
 
was $
932,000
compared to
 
$
603,000967,000
and
$
3,126,000
,
respectively,
compared
to
total
compensation
benefit
of
$
535,000
and
total
compensation expense
of
$
1,471,000
 
for
the
 
three
and
nine
months
ended
 
AprilOctober
 
30,29,
 
2022.2022,
respectively.
 
These
 
expensesamounts
 
are
 
classified
 
as
 
a
component
of
Selling,
 
general and administrative expenses
 
and
administrative expenses in the Condensed
Consolidated Statements of Income.
Income (Loss) and Comprehensive Income (Loss).
The following summary
 
summary shows the changes
 
changes in the number
 
of shares of
 
unvested restricted stock
 
stock outstanding
during
 
during the
three nine months ended April
 
29,October
28, 2023:
Weighted
Weighted Average
Number of
Grant Date Fair
Shares
Value
 
Per Share
Restricted stock awards at January 28, 2023
1,059,433
$
13.10
Granted
414,502
8.29
 
Granted
-
-
Vested
-(217,238)
-13.97
Forfeited or expired
(12,414)(109,705)
13.4511.94
 
Restricted stock awards at April 29,October 28, 2023
1,047,0191,146,992
$
13.0911.31
 
 
 
 
 
 
 
 
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
12FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
15
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 three nine
months ended April 29,
October 28,
2023 and
 
April 30, 2022,October 29,
2022, the
Company sold
22,19450,540
 
and
9,46828,504
 
shares to
employees at
an average
discount of
$
1.321.23
 
and $
2.211.73
per share, respectively,
 
per share,under the Employee
Stock Purchase Plan.
The compensation expense
recognized for
respectively,the
15
% discount
given under
 
the Employee
 
Stock Purchase
 
Plan. ThePlan was
 
compensation expenseapproximately $
62,000
 
recognized for
theand $
1549,000
%
discount
given
underfor
 
the
 
Employee
Stock
Purchase
Plan
was
approximately
$
29,000
and
$
21,000
for
the
threenine
 
months
 
ended
 
AprilOctober
 
29,28,
 
2023
 
and
 
AprilOctober
 
30,29,
 
2022,
 
respectively.
 
These
 
expenses
 
are
classified
as
a
classified as a component
of
Selling,
 
general
and administrative expenses.
and
administrative
expenses
in
the
Condensed
Consolidated
Statements
of
Income.
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 April 29,October 28, 2023 and January
 
28, 2023:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
April 29,October 28, 2023
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
 
State/Municipal Bonds
$
22,18715,700
$
-
$
22,18715,700
$
-
 
Corporate Bonds
40,05747,759
-
40,05747,759
-
 
U.S. Treasury/Agencies Notes and Bonds
16,54125,625
-
16,54125,625
-
 
Cash Surrender Value of Life Insurance
9,2819,038
-
-
9,2819,038
 
Asset-backed Securities (ABS)
7,9254,468
-
7,9254,468
-
 
Corporate Equities
801788
801788
-
-
 
Commercial Paper
1,039-
-
1,039-
-
Total Assets
$
97,831103,378
$
801788
$
87,74993,552
$
9,2819,038
Liabilities:
 
Deferred Compensation
$
(8,731)(8,311)
$
-
$
-
$
(8,731)(8,311)
Total Liabilities
$
(8,731)(8,311)
$
-
$
-
$
(8,731)(8,311)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
13
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
January 28,
2023
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
 
State/Municipal Bonds
$
23,102
$
-
$
23,102
$
-
 
Corporate Bonds
47,901
-
47,901
-
 
U.S. Treasury/Agencies Notes and Bonds
27,250
-
27,250
-
 
Cash Surrender Value of Life Insurance
9,274
-
-
9,274
 
Asset-backed Securities (ABS)
9,373
-
9,373
-
 
Corporate Equities
923
923
-
-
 
Commercial Paper
1,026
-
1,026
-
Total Assets
$
118,849
$
923
$
108,652
$
9,274
Liabilities:
 
Deferred Compensation
$
(8,903)
$
-
$
-
$
(8,903)
Total Liabilities
$
(8,903)
$
-
$
-
$
(8,903)
The Company’s
 
investment portfolio
 
was primarily
 
invested in
 
corporate bonds and
 
tax-exempt and taxable
governmental debt securities held
 
debt securitiesin managed accounts with
 
held in
managed accounts
with underlying
ratings
of
A
 
or better
at
 
April 29,October 28,
2023
 
and
 
January
 
28,
 
2023.
 
The
 
state,
 
municipal
 
and
 
corporate
 
bonds
 
andhave
 
asset-backedcontractual
 
securities
have
contractual maturities
 
which
range from
four day
s to
3.1
 
years. The U.S. Treasury Notes
have contractual maturities which range from
two 79
days
 
to
3.62.3
 
years. The
 
U.S. TreasuryThese
 
Notes andsecurities
 
Certificates of
Deposit have contractual maturities
which range from
one day
to
2.8
years. These securities are
 
classified
as
available-for-sale
 
and
 
are
 
recorded
 
as
 
Short-term
investments,
Restricted
cash
and
Other
assets
on
the
investments, Restricted cash and Other assets on the accompanying Condensed Consolidated Balance Sheets.
These assets
are carried
at fair
value with
unrealized
gains
 
and
losses
 
reported
net
 
of
taxes
 
in Accumulated
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
 
and bank credit
cards that werecarry
 
originated andAAA ratings. The
 
serviced by
captive
auto finance units,
banks or
finance companies.
The bank
credit cardloan
 
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,
 
account
holders
of
cards
from
American
Express,
Citibank, JPMorgan Chase, Capital One and
Discover.
Additionally,
 
at
 
AprilOctober
 
29,28,
 
2023,
 
the
 
Company
 
had
 
$
0.8
 
million
 
of
 
corporate
 
equities
 
and
 
deferred
compensation plan assets
 
of $
9.39.0
 
million.
 
At January 28,
 
2023, the Company
 
had $
0.9
 
million of corporate
equities and deferred compensation
plan assets of $
9.3
 
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
securities
include
 
corporate
 
andbonds,
 
municipal
 
bonds
and
asset-backed
securities
 
for
 
which
 
quoted
 
prices
 
may
 
not
 
be
available
on
active
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
identical
assets
are
 
not available, these
 
prices are determinedavailable,
 
by the pricing
service using observable
market
information
such
as
quotes
from
less
active
markets
and/or
quotedthese
 
prices
 
ofare
 
securitiesdetermined
 
withby
 
similarthe
pricing
service
using
observable market information such as quotes from less active markets and/or quoted prices of securities with
similar characteristics, among other factors.
Deferred compensation plan
 
assets consist of
 
life insurance policies.
 
These life insurance
 
policies are valued
based on the cash surrender value of the insurance contract, which is determined based on
 
such factors as the
fair value of the underlying assets and discounted cash flow and are therefore classified within Level 3
 
of the
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
17
valuation
 
hierarchy.
 
The
 
Level
 
3
 
liability
 
associated
 
with
 
the
 
life
 
insurance
 
policies
 
represents
 
a
 
deferred
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
14
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 April
 
29, 2023 and January inputs for the
nine months
ended October
28, 2023
 
(dollars inand the
year ended January
28,
2023 (in thousands):
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 28, 2023
$
9,274
Redemptions
-
Additions
-
Total gains or (losses):
 
Included in interest and other income (or
changes in net assets)
7(236)
 
Included in other comprehensive income
-
Ending Balance at April 29,October 28, 2023
$
9,2819,038
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at January 28, 2023
$
(8,903)
 
Redemptions
292662
 
Additions
(82)(231)
 
Total (gains) or losseslosses:
 
Included in interest and other income (or
changes in net assets)
(38)161
 
Included in other comprehensive income
-
Ending Balance at April 29,October 28, 2023
$
(8,731)(8,311)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
18
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 29, 2022
$
11,472
Redemptions
(1,718)
Additions
-
Total gains or (losses):
 
Included in interest and other income (or
changes in net assets)
(480)
 
Included in other comprehensive income
-
Ending Balance at January 28, 2023
$
9,274
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
15
Deferred Compensation
Beginning Balance at January 29, 2022
$
(10,020)
 
Redemptions
1,142
 
Additions
(379)
 
Total (gains) or losseslosses:
 
Included in interest and other income (or
changes in net assets)
354
 
Included in other comprehensive income
-
Ending Balance at January 28, 2023
$
(8,903)
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
16FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
19
NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:
The
Company
has
reviewed
recent
accounting
pronouncements
and
 
believe
none
will
have
a
material
impact on the Company’s financial statements.
NOTE 9 – INCOME TAXES:
The Company had an effective tax rate
for the first nine months of 2023
 
first quarter of 2023 of
32.660.4
% compared to an
49.7
% for
the first nine months of 2022.
The change in the effective tax
rate of
16.7
% for the first quarternine months was
primarily
due to increases in foreign rate differential and the release of 2022. The increase in the 2023 first quarterreserves for uncertain tax positions,
 
rate was primarily dueoffset by
todecreases
 
higherin
 
Global
 
Intangible
Low-taxed
 
Income
(GILTI),
 
partiallystate
 
offsetincome taxes,
 
bynon-deductible
 
theofficer’s
compensation, and foreign tax credits, as percentages on a pre-tax
 
foreign
loss.
rate
differential
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 the Company’s control,
litigation with respect
respect to
 
various
employment
 
matters,
 
including
 
alleged
 
discrimination
and
 
wage
 
and
 
hour
 
litigation,
 
and
litigation
with
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 itsthe
Company’s
 
condensed consolidated
 
financial statements.
 
However,
 
given
the
 
inherent
uncertainties
 
involved
in
 
such
 
matters,
an
 
adverse
outcome
 
in
 
one
or
 
more
of
 
such
 
matters
could
 
could
materially and
adversely affect
the
Company’s
 
financial condition,
results of
operations and
cash flows in
flows
in
any
 
particular
 
reporting
 
period.
 
The
 
Company
 
accrues
 
for
 
these
 
matters
 
when
 
the
 
liability
 
is
deemed
deemed 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 CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
20
The Company
 
offers its
 
own proprietary
 
credit card
 
to customers.
 
All credit
 
activity is
 
performed by
 
the
Company’s wholly-owned
 
wholly-owned subsidiaries.
NoNone
ne
 
of the credit
 
credit card
receivables are
 
secured. During the
 
Thethree
and nine months ended October 28, 2023, the
 
Company
estimated customer credit losses of $
149,000
 
and
$
121,000421,000
, respectively,
compared to $
89,000
 
and $
86,000261,000
 
for the periods ended Aprilthree
 
29, 2023 and April
nine months
 
ended October
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
17
30,29, 2022,
 
respectively,respectively.
Sales purchased
 
on salesthe
 
purchased by
the Company’s
 
proprietary credit
 
card offor
the three
and nine
months
ended
October
28,
2023
were
 
$
5.85.7
 
million
and
$
5.717.4
million,
respectively,
compared
to
$
5.9
million and $
17.4
 
million for the periodsthree and nine months ended AprilOctober 29, 2023 and April 30, 2022, respectively.
The
 
following
 
table
 
provides
 
information
 
about
 
receivables
 
and
 
contract
 
liabilities
 
from
 
contracts
 
with
customers (in thousands):
Balance as of
April 29,October 28, 2023
January 28, 2023
Proprietary Credit Card Receivables, net
$
10,74911,066
$
10,553
Gift Card Liability
$
7,2966,622
$
8,523
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
21
NOTE 12 – 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
 
have remaining
lease terms
 
of
one
year
up
 
to
10 years
, some
years based on
the estimated likelihood
of which renewal. Some
include options to
 
extend the lease
term for
up to
five years
, and some of
which
include
options
to
terminate
the
lease
within one year
.
The
Company considers
these
 
options in
 
in
determining
the
 
lease
term
 
used
 
to
 
establish
its
 
right-of-use
assets
 
and
lease
 
liabilities.
The
 
Company’s
lease
lease
agreements
do
not
contain
any material residual value guarantees or
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):
`
Three Months Ended
April 29,October 28, 2023
April 30,October 29, 2022
Operating lease cost (a)
$
18,07817,498
$
17,75417,919
Variable
 
lease cost (b)
$
594544
$
768707
(a) Includes right-of-use asset amortization of ($
0.3
) million and ($
0.4
) million for the three months ended
April 29, October 28, 2023 and April 30,
October 29, 2022, respectively.
(b) Primarily relatesrelated to monthly percentage rent for stores not presented on the condensed consolidated balance sheet.sheets.
Nine Months Ended
October 28, 2023
October 29, 2022
Operating lease cost (a)
$
53,174
$
53,521
Variable
lease cost (b)
$
1,642
$
2,053
(a) Includes right-of-use asset amortization of ($
0.9
) million and ($
1.3
) million for the nine months ended October 28, 2023 and
October 29, 2022, respectively.
(b) Primarily related to monthly percentage rent for stores not presented on the condensed consolidated balance sheets.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS AND
NINE MONTHS ENDED OCTOBER 28, 2023 AND
OCTOBER 29, 2022
22
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)
18
Operating cash flow information:
Three Months Ended
April 29,October 28, 2023
April 30,October 29, 2022
Cash paid for amounts included in the measurement of lease liabilities
$
17,34516,671
$
16,83617,264
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations net of rent violations
$
1,904(1,468)
$
3,5152,107
Nine Months Ended
October 28, 2023
October 29, 2022
Cash paid for amounts included in the measurement of lease liabilities
$
50,696
$
51,138
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations
$
1,435
$
8,156
Weighted-average
 
remaining
 
lease
 
term
 
and
 
discount
 
rate
 
for
 
the
 
Company’s
 
operating
 
leases
 
are
 
as
follows:
As of
April 29,October 28, 2023
April 30,October 29, 2022
Weighted-average remaining lease term
2.21.8
 
Yearsyears
2.42.0
 
Yearsyears
Weighted-average discount rate
3.20%3.30%
2.92%2.84%
As
Maturities
of
 
April 29,
2023, the maturities
of lease
 
liabilities
by
fiscal
 
year
for
 
the
Company’s
 
operating
leases
are
as
follows
(in
are as follows (in thousands):
Fiscal Year
2023 (a)
$
52,51616,144
2024
49,82949,756
2025
32,56332,711
2026
18,65719,525
2027
8,6489,165
Thereafter
1,6031,836
Total lease payments
163,816129,137
Less: Imputed interest
8,3446,563
Present value of lease liabilities
$
155,472122,574
(a) Excluding the 3nine months ended April 29, 2023.October 28, 2023
 
 
1923
THE CATO CORPORATION
ITEM 2.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION:
The
 
following
 
information
 
should
 
be
 
read
 
along
 
with
 
the
 
unaudited
 
Condensed
 
Consolidated
 
Financial
Statements,
 
including
 
the
 
accompanying
 
Notes
 
appearing
 
in
 
this
 
report.
 
Any
 
of
 
the
 
following
 
are
“forward-looking”
 
statements
 
within
 
the
 
meaning
 
of
 
Section 27A
 
of
 
the
 
Securities
 
Act
 
of
 
1933,
 
as
amended,
 
and
 
Section 21E
 
of
 
the
 
Securities
 
Exchange
 
Act
 
of
 
1934,
 
as
 
amended:
 
(1) statements
 
in
 
this
Form 10-Q
 
that
 
reflect
 
projections
 
or
 
expectations
 
of
 
our
 
future
 
financial
 
or
 
economic
 
performance;
(2) statements
 
that
 
are
 
not
 
historical
 
information;
 
(3) statements
 
of
 
our
 
beliefs,
 
intentions,
 
plans
 
and
objectives for future operations,
 
including those contained in
 
“Management’s Discussion and
 
Analysis of
Financial Condition and
 
Results of Operations”;
 
(4) statements relating to
 
our operations or
 
activities for
our
 
fiscal
 
year
 
ending
 
February
 
3,
 
2024
 
(“fiscal
 
2023”)
 
and
 
beyond,
 
including,
 
but
 
not
 
limited
 
to,
statements regarding expected
 
amounts of
 
capital expenditures and
 
store openings, relocations,
 
remodels
and
 
closures
 
and
 
statements
 
regarding
 
the
 
potential
 
impact
 
of
 
the
 
COVID-19
 
pandemic
 
and
 
related
responses and
 
mitigation efforts,
 
as well
 
as the
 
potential impact
 
of supply
 
chain disruptions,
 
inflationary
pressures
 
and
 
other
 
economic
 
or
 
market
 
conditions
 
on
 
our
 
business,
 
results
 
of
 
operations
 
and
 
financial
condition
 
and
 
statements
 
regarding
 
new
 
store
 
development
 
strategy;
 
and
 
(5)
statements
 
relating
 
to
 
our
future contingencies. When
 
possible, we
 
have attempted to
 
identify forward-looking statements
 
by using
words
 
such
 
as
 
“will,”
 
“expects,”
 
“anticipates,”
 
“approximates,”
 
“believes,”
 
“estimates,”
 
“hopes,”
“intends,” “may,”
 
“plans,” “could,” “would,”
 
“should” and any
 
variations or negative
 
formations of such
words
 
and
 
similar
 
expressions.
 
We
 
can
 
give
 
no
 
assurance
 
that
 
actual
 
results
 
or
 
events
 
will
 
not
 
differ
materially
 
from
 
those
 
expressed
 
or
 
implied
 
in
 
any
 
such
 
forward-looking
 
statements.
 
Forward-looking
statements
 
included
 
in
 
this
 
report
 
are
 
based
 
on
 
information
 
available
 
to
 
us
 
as
 
of
 
the
 
filing
 
date
 
of
 
this
report,
 
but
 
subject
 
to
 
known
 
and
 
unknown
 
risks,
 
uncertainties and
 
other
 
factors
 
that
 
could
 
cause
 
actual
results
 
to
 
differ
 
materially
 
from
 
those
 
contemplated
 
by
 
the
 
forward-looking
 
statements.
 
Such
 
factors
include, but
 
are not
 
limited to,
 
the following:
 
any actual
 
or perceived
 
deterioration in
 
the conditions
 
that
drive
 
consumer
 
confidence
 
and
 
spending,
 
including,
 
but
 
not
 
limited
 
to,
 
prevailing
 
social,
 
economic,
political
 
and
 
public
 
health conditions
 
and
 
uncertainties, levels
 
of
 
unemployment, fuel,
 
energy
 
and
 
food
costs, wage rates, tax
 
rates, interest rates, home
 
values, consumer net worth,
 
the availability of
 
credit and
inflation;
 
changes
 
in
 
laws,
 
regulations
 
or
 
government
 
policies
 
affecting
 
our
 
business,
 
including
 
but
 
not
limited to
 
tariffs;
 
uncertainties regarding
 
the impact
 
of any
 
governmental action
 
regarding, or
 
responses
to, the
 
foregoing conditions; competitive factors
 
and pricing
 
pressures; our ability
 
to predict
 
and respond
to rapidly changing fashion trends
 
and consumer demands; our ability to
 
successfully implement our new
store development strategy to increase new
 
store openings and our ability
 
of any such new stores
 
to grow
and
 
perform
 
as
 
expected;
 
adverse
 
weather,
 
public
 
health
 
threats
 
(including
 
the
 
global
 
COVID-19
pandemic)
 
or
 
similar
 
conditions that
 
may affect
 
our
 
sales
 
or
 
operations; inventory
 
risks
 
due
 
to
 
shifts
 
in
market
 
demand,
 
including
 
the
 
ability
 
to
 
liquidate
 
excess
 
inventory
 
at
 
anticipated
 
margins;
 
adverse
developments or volatility affecting the financial services industry or broader financial markets; and
 
other
factors
discussed
under “Risk
“Risk
Factors”
in
Part
I,
Item
1A
of
our
 
annual report Annual
Report
on
Form
10-K
for
the fiscal
fiscal year ended
 
January 28, 2023
 
2023 (“(“fiscal
2022”), as amended
 
amended or
supplemented, and
in
 
other reports
we file
file with
 
or
furnish
 
to
the
 
Securities
and
 
Exchange
Commission
 
(“SEC”)
from
 
time
to
 
time.
 
We
 
do
not
undertake,
 
and
 
expressly
 
decline,
 
any
 
obligation
 
to
 
update
 
any
 
such
 
forward-looking
 
information
contained in this report, whether as a result of new information, future
 
events, or otherwise.
 
 
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
(CONTINUED)
2024
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
The
Company’s
critical
accounting
 
policies
and
estimates
are
more
 
fully
described
in
 
“Management’s
Discussion and
Analysis of
Financial Condition and Results of Operations” in the
Company’s Annual Report on Form 10-K for the fiscal
on
Form
10-K
for
the
fiscal
year
 
ended
 
January
 
28,
 
2023.
 
TheAs
 
preparationdisclosed
in
“Management’s
Discussion
and
Analysis
 
of
 
Financial
Condition and
Results of
Operations,” the
 
preparation of
the Company’s
 
financial
statements
 
in conformity
conformity
with
generally
accepted
 
accounting
principles
in
 
the
United
States
 
(“GAAP”)
requires management
to make
estimates and assumptions about future events that affect the amounts reported in the
financial statements and
inaccompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore,
the
determination
of
estimates
requires
 
the
 
financialexercise
 
statements
and
accompanying
notes.
Future
events
and
their
effects
cannot
be
determined
with absolute
certainty. Therefore,
the determination
of estimates
requires the
exercise of
 
judgment.
Actual
results
 
inevitably
 
will
 
differ
 
from
those
 
estimates,
 
and
 
such
 
differences
 
may
 
be
 
material
 
to
 
the
 
financial
statements.
The
most
significant
statements. The most significant accounting
estimates
 
inherent
in
the
preparation
of
the
 
Company’s financial
statements include the
 
allowance for customerfinancial
 
credit losses, inventorystatements
 
shrinkage, include
the
calculation
 
of
potential
asset
 
impairment,
 
workers’reserves
 
relating
to
self-insured
health
insurance,
workers’
compensation,
 
general
 
and
 
auto
 
insurance
 
liabilities,
 
reservesuncertain
 
relating
to
self-
insured health insurance, and uncertain tax
 
positions.positions,
the
allowance
for
customer
credit losses, and inventory shrinkage.
The Company’s critical accounting policies and
 
estimates are discussed with the Audit Committee.
 
 
 
 
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
(CONTINUED)
2125
RESULTS OF OPERATIONS:
The following table sets forth, for the periods indicated, certain items in
 
the Company's unaudited Condensed
Consolidated Statements of Income as a
 
percentage of total retail sales:
Three Months Ended
AprilNine Months Ended
October 28, 2023
October 29, 2022
October 28, 2023
April 30,October 29, 2022
Total retail sales
100.0
%
100.0
%
100.0
%
100.0
%
Other revenue
1.0
1.0
0.9
0.9
Total revenues
101.0
101.0
100.9
100.9
Cost of goods sold (exclusive of depreciation)
64.267.5
64.570.7
65.4
67.5
Selling, general and administrative (exclusive
of depreciation)
32.539.4
29.535.1
35.1
31.8
Depreciation
1.21.6
1.31.6
1.4
1.5
Interest and other income
(0.5)(1.0)
(0.2)(1.3)
(0.7)
(0.8)
Income (loss) before income taxes
3.5(6.6)
5.7(5.2)
(0.3)
1.0
Net income (loss)
2.3(3.9)
4.8(2.5)
(0.1)
0.5
 
 
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
(CONTINUED)
2226
RESULTS OF OPERATIONS
 
(CONTINUED):
Management’s
 
Discussion
and
 
Analysis
of
 
Financial
Condition
 
and
Results
 
of
Operations
 
(“MD&A”)
is
intended
 
to
 
provide
 
information
 
to
 
assist
 
readers
 
in
 
better
 
understanding
 
and
 
evaluating
 
our
 
financial
condition
and
results
of
operations.
 
We
recommend
reading
this
MD&A
in
conjunction
with
our Condensed
Condensed
Consolidated
Financial
 
Statements
and
 
the
Notes
 
to
those
 
statements
included
in
 
the “Financial
Statements”
“Financial Statements” section of this Quarterly Report on Form
 
Form 10-Q, as well as our 2022
Annual Report on Form 10-K.
Recent Developments
Inflationary Cost Pressure and RisingHigh Interest Rates
TheDespite
some
reduction
in
inflationary
pressures
from last
year,
wages,
operating supplies,
and
service
costs
continue
to
be
negatively
impacted
by
the
 
current
 
inflationary
 
environment
continues
to
negatively
impact
the
Company’s
operating
costs,
including
higher
wages,
operating
supplies
and
services.environment.
 
In
 
addition,
 
our
customers’ disposable income is impacted by increased
costs
for related to
 
fuel,
food,
and
housing, including rent,
and other
 
as well asconsumable products relative
 
other consumable productsto flattening wage
 
across the economy,rates, which
 
are negatively impacting
impact our
 
customers’
willingness to purchase discretionary items such as apparel,
 
disposable income,
and
our customers’
willingness to
purchase discretionary
items
such as
apparel, jewelry and shoes.
In
response,
 
to
inflationary
pressures,
the
Federal
 
Reserve
began
 
raising,
interest
rates
and
 
is
committed
 
to
continue raising
 
interest rates
until inflationary
pressures subside.
These risingraising, interest
 
rates haveuntil
inflationary pressures subside to
 
adverselyacceptable levels.
Though the Federal
Reserve has paused
raising rates,
it has
indicated it is
committed to reducing
inflation to its
targeted levels.
These high interest
rates have
adversely
affected
 
the
 
availability
 
and
 
cost
 
of
 
credit
 
for
 
both
 
businesses
 
and
 
our
 
customers.
 
InIncreasing
costs related
 
addition,to revolving
 
thecredit, auto
 
rising
interest rates are increasing the costs
related to revolving credit, auto loans and
 
mortgages which continue
to negatively
impact our
customers’
negatively impactdiscretionary
income.
Our
customers’
willingness
to
purchase
 
our customers’
 
discretionary income.
Additionally,
rising interest
ratesproducts
 
may
 
continue
to
be
negatively impact our customers’ willingnessimpacted by these inflationary pressures and high interest
 
to purchase our products.rates.
We believe
 
price increasesbelieve high
 
prices and rising
 
interest rates
 
negatively impacted the
 
the first quarter
three quarters
 
of fiscal
 
fiscal 2023 and
 
will likelyand
will
likely
continue
 
to
have
 
a
negative
 
impact
 
on
 
consumer
 
behavior
and,
 
by
 
extension,
 
our
 
results
 
of operations
and
operations and financial condition during the remainder of
fiscal 2023.
Labor Challenges and Wage Inflation
The
tight
labor
market
has
increased
competition
for
labor
among
consumer-facing
companies.
This
competition
for
labor
has
driven
significant
increases
in
wages
in
order
to
compete
for
sufficient
labor
availability and/or
to
prevent
the loss
of existing
workforce in
our stores,
distribution center
and corporate
office. We expect these pressures to
continue in fiscal 2023.
Comparison of First Quarter of 2023the Three and Nine
 
Months ended October 28, 2023 with
October 29, 2022
Total retail sales for the first quarter
 
third quarter were $190.3$156.7 million compared to
 
last year’s firstthird quarter sales
of $174.9
million, a 10% decrease.
The Company’s sales
decrease in the third quarter
of fiscal 2023 was
primarily due
to an 8% decrease in same-store sales and closed stores, partially offset
by sales from new stores. For the nine
months ended
October 28,
2023,
total
retail sales
were
$528.2
million compared
to last
year’s
comparable
nine month
sales of
 
$204.9
million.574.9 million,
 
Salesan 8%
 
decreaseddecrease. The
 
primarilydecrease in
 
duesales in
 
the first
nine months
of fiscal
2023 was due primarily to
 
a
6% decrease
in
same-store
 
sales and closed stores, partially offset
 
and
sales
from
stores
that
were
closed in the past 12 months, partially offset by sales from stores opened in the past 12
months. The decrease
in
same-store
new stores. Same-store sales
is
primarily
from
fewer
transactions
due
to
the
aforementioned
pressures
on
our
customers’
disposable
income,
partially
offset
by
higher
average
sales
per
transaction.
Same
store
sales
include stores
 
that have
been open
more than
 
15 months.
 
Stores that
have been
relocated or
 
expanded are
also included
in the same store
 
same-store sales
calculation after
they have
been open
 
more
than 15 months.
 
The method
of calculating same
storesame-store sales varies
across the retail
industry.
 
As a result, our
our same store
same-store sales calculation
may not be comparable to similarly titled measures reported by other companies. E-commerce sales were less
E-commerce
sales
were
less
than
 
5.1%5%
 
of
total
 
sales
 
for
 
the
 
firstnine
 
quartermonths
 
ofended
 
fiscalOctober
28,
 
2023
 
and
 
are
included
 
in
 
the
 
same-store
 
sales
 
calculation.
 
Total
 
revenues,
 
comprised
 
of
 
retail
 
sales
 
and
 
other
 
revenue
(principally
finance
 
charges and
late fees
on customer
accounts receivable
and layaway
fees), were
$158.3
million
 
and
 
late$533.2
 
million
for
the
three
and
nine
months
ended
October
28,
2023,
compared
to
$176.6
million
and
$580.2
million
for
the
three
and
nine
months
ended
October
29,
2022,
respectively.
The
Company operated
1,245 stores
at October
28, 2023
compared to
1,317 stores
at the end
of last
year’s third
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
27
quarter.
During the
first nine
months of
fiscal 2023,
the Company
opened nine stores
and closed
44 stores.
The Company currently expects to close
approximately 110 stores in total in
fiscal 2023.
Credit
revenue
of
$0.7
million
represented
0.4%
of
total
revenues
in
the
third
quarter
of
fiscal
2023,
compared to
2022 credit
revenue of
$0.6 million
or 0.3%
of total
revenues. Credit
revenue is
comprised of
interest earned on the Company’s private label credit card portfolio and related fee income.
Related expenses
principally
include payroll,
postage
and
other
administrative expenses
and totaled
$0.4
million in
the third
quarter of fiscal 2023, compared to
last year’s third quarter expense of
$0.4 million.
Other
revenue,
a
component
of
total
revenues,
was
$1.6
million
and
$5.0
million
for
the
three
and
nine
months ended October 28,
2023, respectively, compared to
$1.7 million and $5.4
million for the prior
year’s
comparable three and
nine month periods. The
decrease in Other revenue
for both the three
and nine months
was due to
decreases in gift
card breakage and
e-commerce shipping revenue
partially offset by
increases in
finance charges and late fees
 
onassociated with the Company’s proprietary credit card.
Cost of
goods sold
was $105.8
million, or
67.5% of
retail sales
and $345.5
million, or
65.4% of retail
sales
for the three and nine months ended October 28, 2023, respectively, compared to $123.8 million, or 70.7% of
retail sales
and $387.7
million, or
67.5% of
retail sales
for the
comparable three
and nine
month periods
of
fiscal 2022.
The overall
decrease in
cost of
goods sold
as a
percent of
retail sales
for the
third quarter
and
first
nine
months
of
fiscal
2023
resulted
primarily
from
lower
ocean
freight
costs
and
increased
sales
of
regular
priced
goods,
partially
offset
by
deleveraging
of
occupancy
and
buying
costs.
Cost
of
goods
sold
includes
merchandise
costs
(net
of
discounts
and
allowances),
buying
costs,
distribution
costs,
occupancy
costs,
freight
and
inventory
shrinkage.
Net
merchandise
costs
and
in-bound
freight
are
capitalized
as
inventory costs.
Buying and
distribution costs
include payroll,
payroll-related costs
and operating
expenses
for the buying departments and distribution center.
Occupancy costs include rent, real estate taxes, insurance,
common area maintenance, utilities
and maintenance for stores
and distribution facilities. Total
gross margin
dollars (retail sales less
cost of goods sold
exclusive of depreciation)
decreased by 0.6% to
$50.9 million for
the
third
quarter
of
fiscal
2023
and
by
2.4%
to
$182.6
million
for
the
first
nine
months
of
fiscal
2023,
compared to $51.2 million and $187.1 million for the prior year’s comparable three and nine
months of fiscal
2022, respectively.
Gross margin as presented may not be
comparable to those of other entities.
Selling, general and administrative expenses (“SG&A”) primarily include corporate and store payroll, related
payroll
taxes
and
benefits,
insurance,
supplies,
advertising,
bank
and
credit
card
processing
fees.
SG&A
expenses were $61.8 million, or 39.4% of retail sales and $185.3 million, or 35.1% of retail sales for the
third
quarter and first nine months of
fiscal 2023, respectively, compared to $61.4
million, or 35.1% of retail sales
and
$182.6
million,
or 31.8%
of retail
sales
for the
prior
year’s
comparable three
and
nine
month periods,
respectively.
The increase in
SG&A for the
third quarter and
first nine months
of fiscal 2023
was primarily
due to higher payroll and insurance
expense.
Depreciation expense was $2.5 million, or 1.6% of retail sales and $7.4 million, or 1.4% of
retail sales for the
third quarter
and first
nine months
of fiscal
2023, respectively,
compared to
$2.9 million,
or 1.6%
of retail
sales and $8.4 million or 1.5%
of retail sales for the comparable three
and nine month periods of fiscal
2022,
respectively.
Interest and other income was $1.5 million, or 1.0% of retail sales and $3.8 million, or 0.7% of retail sales for
the three and
nine months ended October
28, 2023, respectively, compared
to $2.3 million, or
1.3% of retail
sales and $4.6 million, or 0.8% of retail sales for the comparable three and nine month periods of fiscal
2022,
respectively.
The decrease for the
third quarter and first
nine months of
fiscal 2023 compared
to fiscal 2022
 
 
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
(CONTINUED)
2328
customer accountswas
 
receivable, shippingprimarily
 
charged toattributable
 
customers for
e-commerce purchases
and layaway
fees),
were
$192.1
million
for
to the
 
firstCompany’s
 
quarter
ended
April
29,
2023,
compared
to
$206.7
million
for
the
first
quarter ended April 30, 2022. The
Company operated 1,264 stores at April 29,
2023 compared to 1,315 stores
at the
end of
last fiscal
year’s first
quarter.
For the
first three
months of
fiscal 2023,
the Company
opened
four stores
and permanently
closed 20 stores.
The Company
currently anticipates closing
approximately 80
stores in fiscal 2023.
Credit revenue of $0.6 million represented 0.3% of total revenues in the first quarter of fiscal 2023,
compared
to
2022
credit
revenuereceipt
 
of
 
$0.5a
 
millionBusiness
 
orRecovery
 
0.2%Grant from
the state
 
of
 
total
revenues.
Credit
revenue
is
comprised
of
interestNorth
earned on the Company’s private label credit card portfolio and related fee income.
Related expenses include
principally payroll, postage and
other administrative expenses, and
totaled $0.4 millionCarolina in
the first quarter of
2023, compared to last year’s
first quarter expenses of $0.4 million.
Other revenue, a component of
total revenues, was $1.7 million for the first
quarter of fiscal 2023, compared
to
$1.8
million
for
the
prior
year’s
comparable
first
quarter.
The
slight
decrease
was
due
to
lower
e-
commerce shipping revenue, 2022, partially offset by higher finance
 
charges and layaway fees.
Cost of goodsamounts earned on investments due to
 
soldhigher interest rates.
Income tax
benefit was $122.1
$4.3 million
and $0.8
 
million or 64.2%for the
 
of retail sales for
the first quarter of
fiscal 2023, compared
to $132.2 million,
or 64.5% of
retail sales in
the firstthird quarter
 
of fiscal 2022.
The overall decrease
in cost of
goods sold as
a percent of
retail sales
for theand first
 
quarternine months of fiscal
2023,
 
resulted primarily
from both
lower ocean
freight
costs
and
outbound
freight
costs
to
our
stores,
partially
offset
by
deleveraging
of
occupancy
and
buying costs. Cost of goods sold
includes merchandise costs (net of discounts
and allowances), buying costs,
distribution
costs,
occupancy
costs,
freight
and
inventory
shrinkage.
Net
merchandise
costs
and
in-bound
freight are capitalized as
inventory costs.
Buying and distribution costs
include payroll, payroll-related costs
and operating
expenses for
the
buying
departments
and
distribution center.
Occupancy
costs
include rent,
real estate
taxes, insurance,
common area
maintenance, utilities
and maintenance
for stores
and distribution
facilities.
Total gross margin dollars (retail sales
less cost of goods sold exclusive
of depreciation) decreased
by 6.1% to
$68.2 million for
the first quarter
of fiscal 2023
compared to $72.7
million in the
first quarter of
fiscal 2022.
Gross margin as presented may not be comparable
to those of other entities.
Selling, general and administrative expenses (“SG&A”) primarily include corporate and store payroll, related
payroll taxes and benefits, insurance, supplies, advertising,
and bank and credit card processing fees.
SG&A
expenses were
32.5% of
retail sales for
the first
quarter of
fiscal 2023,respectively,
 
compared to
 
29.5% a
tax
benefit
of
 
retail sales
in
the first quarter of fiscal 2022. The
increase in SG&A as a
percent of retail sales was due
primarily to higher
operating costs, driven in part by higher wages as a result of the tight labor market and expenses
related to the
closure of 20 stores in
the quarter, partially offset by lower insurance
expense.
Depreciation expense was $2.4$4.7 million or 1.2% of retail sales for the first quarter of fiscal 2023, compared to
$2.7 million, or
1.3% of retail
sales for the
first quarter of
fiscal 2022. The
decrease in depreciation
expense
was attributable to older stores being
fully depreciated.
Interest
 
and
 
other
income
was
$0.9
million,
or
0.5%
of
retail
sales
for
the
first
quarter
of
fiscal
2023,
compared
to
$0.4
million,
or
0.2%
of
retail
sales
for
the
first
quarter
of
fiscal
2022.
The
increase
was
primarily attributable
to an
increase in
interest rates
earned on
short-term investments,
partially offset
by a
decrease in short-term investments.
Income tax expense
was $2.1 million or
1.1% of retail sales
for the first quarter
of fiscal 2023,
compared
to
income
 
tax
 
expense
 
of
 
$1.93.0
 
million
or
1.0%
of
retail
sales
 
for
 
the
comparable three
 
firstand nine month
 
quarter
periods of
 
fiscal 2022,
 
2022.respectively.
 
The
For the
 
first nine
 
months of
 
THE CATO CORPORATIONfiscal
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS2023, the
 
(CONTINUED)
24
Company’s effective
 
income tax rate
 
rate forwas 60.4% compared
 
to 49.7%
for the first
 
quarternine months of
 
fiscal 2023
was 32.6%
compared to
16.7% for
the first
quarter
of
2022.
 
The change in the 2023 year-to-date effective tax rate was primarily due to increases in foreign rate
increase
differential and the release of reserves for uncertain tax positions, offset by decreases in
 
theGlobal Intangible
Low-taxed
 
2023
first
quarter
tax
rate
was
primarily
due
to
higher
Global
Intangible Low-taxed Income (GILTI), partially offset by the
state
income taxes,
non-deductible officer’s
compensation, and
foreign rate differential and offshore claim.tax
credits, as percentages on a pre-tax loss.
LIQUIDITY, CAPITAL
 
RESOURCES
 
AND MARKET
 
RISK:
 
The Company
 
believes that
 
its cash,
 
cash equivalents
 
and short-term
 
investments, together
 
with cash
 
flows
from operations
 
and borrowings available
 
under its revolving
 
credit agreement,
 
will be
 
adequate to fund
 
the
Company’s regular operating requirements
 
and expected capital expenditures
 
for fiscal 2023 and the
 
next 12
months.
Cash
 
provided
 
by
 
operating
 
activities
 
forduring
 
the
 
first
 
threenine
 
months
 
of
 
fiscal
 
2023
 
was
 
primarily$11.7
 
generatedmillion
 
byas
earnings adjustedcompared to $19.3 million provided
 
forin the first nine months of fiscal
 
depreciation and
changes2022. The decrease in
working
capital. The
increase in
cash
provided
 
of
$10.7
$7.6 million
for
 
the first nine
 
months of fiscal
2023 as compared
to the first
 
three
nine months
of
 
fiscal
2023
as
compared
to
the
first
three
months
of
fiscal
2022
was
primarily due
to a
decrease net loss in
inventory and
a smaller
decrease 2023 compared to net income in
accounts payable,
accrued expenses 2022,
 
and higher accounts receivable, partially
other liabilities compared to year-end,
partially offset by lower net income.
At April 29,
2023, the Company
had working capital
of $87.9 million
compared to $74.7
million at January
28,
2023.
The
increase
is
primarily
attributable
to
an
increase
in
accounts
receivable,
lower
current
lease
liability and accounts payable partially offset byand
 
lower merchandise inventory.accrued liabilities.
At
 
AprilOctober
 
29,28,
 
2023,
 
the
 
Company
 
had
 
anworking
 
unsecuredcapital
 
of
$76.8
million
compared
to
$74.7
million
at
January 28,
2023.
The increase
in working
capital was
primarily attributable
to a
decrease in
current lease
liability and an increase in
cash, partially offset by a decrease
in inventory and short-term investments.
As of October 28, 2023, the Company has an unsecured revolving credit line, which provides for borrowings
of up
to $35.0
million, less
the balance
of any
revocable letters
of credit
related to
purchase commitments,
and is
committed through
May 2027.
The revolving
 
credit
agreement
 
whichcontains various
 
providesfinancial covenants
and limitations,
 
forincluding the
borrowingsmaintenance of
 
up tospecific financial
 
$35.0 millionratios.
 
less theOn October
 
balance of24, 2023,
 
any revocablethe Company
letters ofamended the revolving
 
credit relatedagreement
 
to purchaselink
the calculation
of the
Company’s EBITDAR
coverage ratio
commitments,to
the
amount
of
the
Company’s
cash
 
and
 
isinvestments.
 
committedThough
 
throughthe
 
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
aseffect
 
of
 
Aprilthe
 
29,amendment
 
2023.reduced
the
minimum EBITDAR
coverage ratio
for the
quarter ended
October 28,
2023 and
is expected
to do
so going
forward, the Company
was in compliance
with the amended
credit agreement for
the quarter ended
October
28, 2023
and also
would have
been in
compliance without
giving effect
to the
amendment.
 
There
were
 
no
borrowings
 
outstanding,
 
nor
 
any
 
outstanding
letters
letters
of
 
credit
that
 
reduced
borrowing
availability,
 
as of
 
April 29,of
October 28, 2023.
 
The weighted average
 
average interest
rate under
the credit facility
was zero at April 29,
October 28, 2023
due to no outstanding
borrowings.borrowings outstanding.
Expenditures
 
for
 
property
 
and
 
equipment
 
totaled
 
$6.210.3
 
million
 
in
 
the
 
first
 
threenine
 
months
 
of
 
fiscal
 
2023,
compared
to
 
$4.4
14.4 million
 
in
last
 
fiscal year’s
 
first
three nine
 
months.
The
 
increase
decrease in
 
expenditures
for
 
property
and
and equipment
 
was
 
primarily
 
due to
finishing
projects related
 
to
costs
associated
with
opening
four
new
stores
and
capital
investments
 
in the
distribution center
and
information
 
technology
and
the
distribution
center.technology.
 
For
 
the
 
full
 
fiscal
 
2023
 
year,
 
the
 
Company
 
expects
 
to
invest approximately $22.1 million in capital
 
expenditures, including distribution center automation projects.
Netinvest
 
cash
provided
by
investing
activities
totaledapproximately
 
$15.3
million
in
the
first
three
months
of
fiscal
202312.0
compared to $19.6 million provided in the comparable period of fiscal 2022. The decrease is primarily due
to
higher purchases of short-term
investments and an increase
infor capital expenditures, partially
offset by higher
sales of short-term investments.
Net cash used in
financing activities totaled $5.6
million in the first
three months of fiscal
2023 compared to
$12.7 million used
in the comparable
period of fiscal
2022, primarily due
to a decrease
in share repurchases
and dividends paid.
On May 18, 2023, the Board of
Directors maintained the quarterly dividend at
0.17 per share.
As
of
April
29,
2023,
the
Company
had
944,379
shares
remaining
in
open
authorizations
under
its
share
repurchase program.expenditures.
 
 
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
(CONTINUED)
2529
Net cash provided by investing activities totaled $6.1 million in the first nine months of fiscal 2023 compared
to
$0.2
million net
cash
provided in
the comparable
period
of
2022.
The
increase
in net
cash provided
in
2023 was primarily due to a
decrease in capital expenditures.
Net cash used in financing activities totaled $12.7 million in the first nine months of fiscal
2023 compared to
$22.2 million used in the comparable period of fiscal 2022.
The decrease in net cash used in fiscal 2023 was
primarily due to lower stock repurchases.
On November 16, 2023, the Board
of Directors maintained the quarterly dividend at
$0.17 per share.
As of
October 28,
2023, the
Company had
909,653 shares
remaining in
open authorizations
under its
share
repurchase program.
The Company does not use
 
derivative financial instruments.
The Company’s
 
investment portfolio
 
was primarily
 
invested in
 
corporate bonds and
 
tax-exempt and taxable
governmental debt securities held
 
debt securitiesin managed accounts with
 
held in
managed accounts
with underlying
ratings
of
A
 
or better
at
 
April 29,October 28,
2023
 
and
 
January
 
28,
 
2023.
 
The
 
state,
 
municipal
 
and
 
corporate
 
bonds
 
andhave
 
asset-backedcontractual
maturities
which
range from four days to 3.1 years.
The U.S. Treasury Notes have contractual
maturities which range from 79
days
to
2.3
years.
These
 
securities
 
have
contractual maturities
which range
from two
days to
3.6 years.
The U.S.
Treasury Notes
and Certificates
of
Deposit have contractual maturities
which range from
one day to 2.8
years. These securities are
 
classified
as
available-for-sale
 
and
 
are
 
recorded
 
as
 
Short-term
investments,
Restricted
cash
and
Other
assets
on
the
investments, Restricted cash and Other assets on the accompanying Condensed Consolidated Balance Sheets.
These assets
are carried
at fair
value with
unrealized
gains
 
and
losses
 
reported
net
 
of
taxes
 
in Accumulated
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
 
and bank credit
cards that werecarry
 
originated andAAA ratings. The
 
serviced by
captive
auto finance units,
banks or
finance companies.
The bank
credit cardloan
 
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,
 
account
holders
of
cards
from
American
Express,
Citibank, JPMorgan Chase, Capital One and
Discover.
Additionally,
 
at
 
AprilOctober
 
29,28,
 
2023,
 
the
 
Company
 
had
 
$0.8
 
million
 
of
 
corporate
 
equities
 
and
 
deferred
compensation plan assets
 
of $9.3$9.0 million.
 
At January 28,
 
2023, the Company
 
had $0.9 million
 
of corporate
equities and deferred compensation
plan assets of $9.3
 
million.
All of these
assets are recorded within
 
Other
assets in the Condensed Consolidated Balance
 
Sheets.
See Note 7, Fair Value
Measurements.
RECENT ACCOUNTING PRONOUNCEMENTS:
 
See Note 8, Recent Accounting Pronouncements.
 
 
 
 
THE CATO CORPORATION
QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK
2630
ITEM 3. QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK:
The
 
Company
 
is
 
subject
 
to
 
market
 
rate
 
risk
 
from
 
exposure
 
to
 
changes
 
in
 
interest
 
rates
 
relatedbased
 
toon
 
its
financing, investing and
 
cash management activities,
 
but the Company
 
does not
 
believe such exposure
 
is
material.
ITEM 4. CONTROLS AND PROCEDURES:
We carried out an evaluation, with the
 
participation of our Principal Executive Officer and
 
Principal Financial
Officer, of the effectiveness of our disclosure
 
the effectiveness
of our
disclosure controls
and procedures
as of
 
April 29,
October 28, 2023.
 
Based on
this
evaluation,
our
Principal
Executive
 
Officer
and
Principal
 
Financial
Officer
concluded
 
that,
as
of
 
April
29,October 28,
2023, our
 
disclosure controls
 
and
 
procedures,
 
as defined
 
in
 
Rule
 
13a-15(e), under
 
the
 
Securities
 
Exchange
Act of 1934 (the “Exchange
 
Act”), were effective to ensure that
 
information we are required to disclose
 
in the
reports
 
that
 
we
 
file
 
or
 
submit
 
under
 
the
 
Exchange
 
Act
 
is
 
recorded,
 
processed,
 
summarized
 
and
 
reported
within the time periods
 
specified in the SEC’s
 
rules and forms and
 
that such information is
 
accumulated and
communicated to our management, including our Principal Executive Officer and Principal Financial Officer,
as appropriate to allow timely decisions
 
regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:
No change in the Company’s internal control
 
over financial reporting (as defined in
 
Exchange Act Rule 13a-
15(f)) has occurred during the Company’s fiscal
 
quarter ended April 29,October 28, 2023
 
that has materially affected, or
or is
reasonably
likely
to
 
materially
affect,
the
Company’s
internal
control
 
over
financial
reporting.
 
 
 
THE CATO CORPORATION
PART
II OTHER
 
INFORMATION
2731
ITEM 1.
 
LEGAL PROCEEDINGS:
Not ApplicableApplicable.
ITEM 1A.
 
RISK FACTORS:
In addition to the other information
 
in this report, you should carefully
 
consider the factors discussed in
 
Part I,
“Item
 
1A.
 
Risk
 
Factors”
 
in
 
our
 
Annual
 
Report
 
on
 
Form
 
10-K
 
for
 
our
 
fiscal
 
year
 
ended
 
January
 
28,
 
2023.
These risks
 
could materially
 
affect our
 
business, financial
 
condition or
 
future results;
 
however, they
 
are not
the only risks we face.
Additional risks and uncertainties not currently known to
us or that we currently deem
to
 
be
 
immaterial
 
may
 
also
 
materially
 
adversely
 
affect
 
our
 
business,
 
financial
 
condition
 
or
 
results
 
of
operations.
THE CATO CORPORATION
PART II OTHER
INFORMATION
32
ITEM 2.
 
UNREGISTERED SALES OF EQUITY SECURITIES
 
AND USE OF PROCEEDS:
The following table summarizes the Company’s purchases of its common stock for the three months
ended April 29,October 28, 2023:
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of
Maximum Number
Shares Purchased as
(or Approximate Dollar
Total Number
Average
Part of Publicly
Value)
 
of Shares that may
Fiscal
of Shares
Price Paid
Announced Plans or
Yet be Purchased
 
Under
Period
Purchased
per Share (1)
Programs (2)
The Plans or Programs (2)
FebruaryAugust 2023
57,930-
$
9.39-
57,930-
MarchSeptember 2023
195,460-
8.81-
195,460-
AprilOctober 2023
-
-
-
Total
253,390-
$
8.95-
253,390-
944,379909,653
(1)
Prices include trading costs.
(2)
As of January
 
28, July 29,
2023, the
 
Company’s share
 
share repurchase
program had
 
197,769909,653 shares remaining
in
 
remaining in
open
 
authorizations.
 
The
Board
of
Directors
authorized
an
additional
1,000,000
shares
for
repurchase underDuring
 
the
 
program at
its
February 23,
2023 meeting.
During the
firstthird
 
quarter ended
April
 
29,ended
October
28,
 
2023,
 
the
 
Company
 
repurchaseddid
 
andnot
repurchase or
 
retired
253,390retire any
 
shares
 
under
this
 
program
for
approximately $2,266,727
or an
average market
price of
$8.95 per
share.program.
 
As of
 
April 29,October 28,
 
2023,
the
 
Company had
had
944,379909,653
 
shares
 
remaining
 
in
 
open
 
authorizations.
 
There
 
is
 
no
 
specified
expiration
date
for
the
expiration date for the Company’s repurchase program.
ITEM 3.
 
DEFAULTS
 
UPON SENIOR SECURITIES:
Not Applicable
Applicable.
 
 
 
 
THE CATO CORPORATION
PART
II OTHER
 
INFORMATION
2833
ITEM 4.
 
MINE SAFETY DISCLOSURES:
Not ApplicableApplicable.
ITEM 5.
 
OTHER INFORMATION:
Not ApplicableDuring the three months ended October 28, 2023,
 
none of the Company’s
directors or officers (as defined
in
Rule
16a-1(f)
of
the
Securities
Exchange
Act
of
1934,
as
amended)
adopted
or
terminated
a
“Rule
10b5-1 trading
arrangement” or
a “
non-Rule
10b5-1
trading arrangement”
(as such
terms are
defined in
Item 408 of Regulation S-K).
ITEM 6.
 
EXHIBITS:
Exhibit No.
Item
 
3.1
3.2
3.2
10.1**
10.2*
 
31.1*
 
31.2*
 
32.1*
 
32.2*
101.1*
The
following
materials
 
from
Registrant’s
Quarterly
 
Report on Form
 
on
Form10-Q for the
10-Q
for
the
fiscal
quarter
 
ended October
 
April
29,
28, 2023,
 
formatted
in
 
Inline
XBRL:
 
(i) Condensed
Condensed
Consolidated
Statements
 
of
Income
 
(Loss) and
Comprehensive
 
Comprehensive Income
 
(Loss) for
the
 
Three
 
Months
 
endedand
 
AprilNine
Months
Ended
October
28,
2023
and
October
 
29,
2023
and
April
30,
2022;
 
(ii)
 
Condensed
 
Consolidated
 
Balance
 
Sheets
 
at
April
 
29,October
28,
2023
and
January 28, 2023;
(iii) Condensed Consolidated Statements
of Cash Flows for
the
Nine
Months
Ended
October
28,
 
2023
 
and
 
JanuaryOctober
 
28,
2023;
(iii)
Condensed
Consolidated
Statements of Cash Flows
for the Three Months
Ended April 29, 2023
and
April
30,
 
2022;
 
(iv)
 
Condensed
Consolidated
 
Statements
 
of
Stockholders’
Stockholders’
Equity
 
for
the
 
Three Nine
Months
 
Ended April
October 28, 2023 and October 29, 2023
2022; and (v) Notes to Condensed Consolidated
April
30,
2022;
and
(v)
Notes
to
Condensed
Consolidated
Financial
Statements.
104.1
Cover
Page
 
Interactive
Data
 
File
 
(Formatted
in
 
Inline
 
XBRL
 
and
contained
in
contained in the Interactive Data Files submitted as Exhibit 101.1*)
 
THE CATO CORPORATION
PART II OTHER
INFORMATION
34
* Submitted electronically herewith.
 
** Included herein solely to correct an incorrect hyperlink
in the Exhibit Index to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 29, 2023.
 
 
 
 
 
 
THE CATO CORPORATION
PART
II OTHER
 
INFORMATION
2935
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
 
Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
 
authorized.
 
THE CATO
 
CORPORATION
May 25,November 21, 2023
/s/ John P.
 
D. Cato
Date
John P.
 
D. Cato
Chairman, President and
Chief Executive Officer
May 25,November 21, 2023
/s/ Charles D. Knight
Date
Charles D. Knight
Executive Vice President
Chief Financial Officer