UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ________________to__________________
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(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
,
,
(Address of principal executive offices)
(Zip Code)
(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
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.
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 during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).
X
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
☐
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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.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b -2 of the Exchange Act).
As of April 30, 2022, there were
1
THE CATO CORPORATION
FORM 10-Q
Quarter Ended April 30, 2022
Table of Contents
Page No.
PART I – FINANCIAL INFORMATION (UNAUDITED)
Item 1.
Financial Statements (Unaudited):
Condensed Consolidated Statements of Income and Comprehensive Income
2
For the Three Months Ended April 30, 2022 and May 1, 2021
Condensed Consolidated Balance Sheets
3
At April 30, 2022 and January 29, 2022
Condensed Consolidated Statements of Cash Flows
4
For the Three Months Ended April 30, 2022 and May 1, 2021
Condensed Consolidated Statements of Stockholders’ Equity
5
For the Three Months Ended April 30, 2022 and May 1, 2021
Notes to Condensed Consolidated Financial Statements
6 - 18
For the Three Months Ended April 30, 2022 and May 1, 2021
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
19 - 25
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
26
Item 4.
Controls and Procedures
26
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
27
Item 1A.
Risk Factors
27
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
27
Item 3.
Defaults Upon Senior Securities
27
Item 4.
Mine Safety Disclosures
28
Item 5.
Other Information
28
Item 6.
Exhibits
28
Signatures
29
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
April 30, 2022
May 1, 2021
(Dollars in thousands, except per share data)
REVENUES
$
$
COSTS AND EXPENSES, NET
(403 )
(663 )
Income before income taxes
Income tax expense
Net income
$
$
Basic earnings per share
$
$
Diluted earnings per share
$
$
Comprehensive income:
Net income
$
$
Unrealized gain (loss) on available-for-sale securities, net
) and ($
) for April 30, 2022
(1,206 )
(134 )
Comprehensive income
$
$
See notes to condensed consolidated financial statements (unaudited).
3
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
April 30, 2022
January 29, 2022
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents
$
$
Short-term investments
Restricted cash
Accounts receivable, net of allowance for customer credit losses of
Merchandise inventories
Prepaid expenses and other current assets
Property and equipment – net
Noncurrent deferred income taxes
Other assets
Right-of-Use assets – net
$
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
$
Accrued expenses
Accrued bonus and benefits
Accrued income taxes
Current lease liability
Other noncurrent liabilities
Lease liability
Stockholders' Equity:
Preferred stock, $
Class A common stock, $
Convertible Class B common stock, $
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
(1,486 )
(280 )
$
$
See notes to condensed consolidated financial statements (unaudited).
4
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
April 30, 2022
May 1, 2021
(Dollars in thousands)
Operating Activities:
Net income
$
$
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation
Provision for customer credit losses
Purchase premium and premium amortization of investments
(1,121 )
Share-based compensation
Deferred income taxes
(1 )
Loss on disposal of property and equipment
Changes in operating assets and liabilities which provided (used) cash:
(4,382 )
(2,510 )
(2,669 )
(726 )
(493 )
(590 )
(1,242 )
(8,331 )
Net cash provided (used) by operating activities
(765 )
Investing Activities:
Expenditures for property and equipment
(4,440 )
(554 )
Purchase of short-term investments
(1,529 )
(62,075 )
Sales of short-term investments
Net cash provided (used) by investing activities
(34,232 )
Financing Activities:
Dividends paid
(3,638 )
Repurchase of common stock
(9,162 )
(5,629 )
Proceeds from employee stock purchase plan
Net cash provided (used) by financing activities
(12,709 )
(5,501 )
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
$
$
Non-cash activity:
Accrued other assets and property and equipment
$
$
See notes to condensed consolidated financial statements (unaudited).
5
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
$
$
$
(280 )
$
Comprehensive income:
-
-
-
)
-
-
-
(1,206 )
(1,206 )
Dividends paid ($
-
-
(3,638)
-
(3,638)
Class A common stock sold through employee stock purchase
-
-
-
Class A common stock issued through restricted stock grant plans —
-
5
-
Repurchase and retirement of treasury shares –
(20)
-
(9,142 )
-
(9,162 )
Balance — April 30, 2022
$
708
$
$
$
(1,486 )
$
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income
Equity
(Dollars in thousands)
Balance — January 30, 2021
$
762
$
$
$
$
Comprehensive income:
-
-
-
)
-
-
-
(134 )
(134 )
Dividends paid ($0.00 per share)
-
-
-
Class A common stock sold through employee stock purchase
1
-
-
Class A common stock issued through restricted stock grant plans —
13
-
Repurchase and retirement of treasury shares –
(14)
-
(5,615 )
-
(5,629 )
Balance — May 1, 2021
$
762
$
$
$
$
See notes to condensed consolidated financial statements (unaudited).
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
6
NOTE 1 - GENERAL
:
The condensed consolidated financial statements as of April 30, 2022 and for the thirteen-week periods
ended April 30, 2022 and May 1, 2021 have been prepared from the accounting records of The Cato
Corporation and its wholly-owned subsidiaries (the “Company”), and all amounts shown are unaudited.
In the opinion of management, all adjustments considered necessary for a fair presentation of the financial
statements have been included. All such adjustments are of a normal, recurring nature unless otherwise
noted. The results of the interim period may not be indicative of the results expected for the entire year.
The interim financial statements should be read in conjunction with the consolidated financial statements
and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended
January 29, 2022. Amounts as of January 29, 2022 have been derived from the audited balance sheet, but
do not include all disclosures required by accounting principles generally accepted in the United States of
America.
As planned, in May 2022, the Company made a $14.4 million contribution to its Employee Stock
Ownership Plan, which is included in Accrued bonus and benefits on the accompanying Condensed
Consolidated Balance Sheets.
Subsequent to April 30, 2022, the Company received $18 million of its income tax receivable, which is
included in Accounts receivable. The Company anticipates that the remaining balance will be received by
the end of the second quarter of fiscal 2022.
On May 19, 2022, the Board of Directors declared the quarterly dividend at $0.17 per share.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
7
NOTE 2 - EARNINGS PER SHARE:
Accounting Standard Codification (“ASC”) 260 –
Earnings Per Share
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 and Comprehensive Income. While the
Company’s certificate of incorporation provides the right for the Board of Directors to declare dividends on
Class A shares without declaration of commensurate dividends on Class B shares, the Company has
historically paid the same dividends to both Class A and Class B shareholders and the Board of Directors has
resolved to continue this practice. Accordingly, the Company’s allocation of income for purposes of the EPS
computation is the same for Class A and Class B shares and the EPS amounts reported herein are applicable
to both Class A and Class B shares.
Basic EPS is computed as net income less earnings allocated to non-vested equity awards divided by the
weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through stock options and the Employee Stock
Purchase Plan.
Three Months Ended
April 30, 2022
May 1, 2021
(Dollars in thousands)
Numerator
Net earnings
$
$
Earnings allocated to non-vested equity awards
(541 )
(942 )
Net earnings available to common stockholders
$
$
Denominator
Basic weighted average common shares outstanding
Diluted weighted average common shares outstanding
Net income per common share
Basic earnings per share
$
$
Diluted earnings per share
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
8
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 30, 2022:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at January 29, 2022
$
(280 )
(1,203 )
(3 )
Net current-period other comprehensive income (loss)
(1,206 )
Ending Balance at April 30, 2022
$
(1,486 )
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to other comprehensive income ("OCI").
(b) Includes $
income for net gains on available-for-sale securities. The tax impact of this reclassification was $
.
The following table sets forth information regarding the reclassification out of Accumulated other
comprehensive income (in thousands) for the three months ended May 1, 2021:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at January 30, 2021
$
(173 )
Net current-period other comprehensive income (loss)
(134 )
Ending Balance at May 1, 2021
$
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to other comprehensive income ("OCI").
(b) Includes $
income for net gains on available-for-sale securities. The tax impact of this reclassification was $
.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
9
NOTE 4 – FINANCING ARRANGEMENTS:
At April 30, 2022, the Company had an unsecured revolving credit agreement, which provided for
borrowings of up to $35.0 million less the balance of letters of credit discussed below and was committed
through May 2022. In May 2022, the Company signed a new unsecured revolving credit agreement,
which replaces the prior credit agreement, provides up to $35.0 million in committed availability and is
committed through May 2027. The prior credit agreement contained various financial covenants and
limitations, including the maintenance of specific financial ratios with which the Company was in
compliance as of April 30, 2022. The new credit agreement also contains various financial covenants and
limitations, including the maintenance of specific financial ratios. There were no outstanding borrowings
under the prior credit facility as of April 30, 2022 or January 29, 2022. The weighted average interest rate
under the prior credit facility was zero at April 30, 2022 due to no outstanding borrowings.
At April 30, 2022 and January 29, 2022, the Company had no outstanding letters of credit relating to
purchase commitments.
NOTE 5 – REPORTABLE SEGMENT INFORMATION:
The Company has determined that it has four operating segments, as defined under ASC 280-10, including
Cato, It’s Fashion, Versona and Credit. As outlined in ASC 280-10, the Company has two reportable
segments: Retail and Credit. The Company has aggregated its three retail operating segments, including e-
commerce, based on the aggregation criteria outlined in ASC 280-10, which states that two or more operating
segments may be aggregated into a single reportable segment if aggregation is consistent with the objective
and basic principles of ASC 280-10, which require the segments to have similar economic characteristics,
products, production processes, clients and methods of distribution.
The Company’s retail operating segments have similar economic characteristics and similar operating,
financial and competitive risks. They are similar in nature of product, as they all offer women’s apparel,
shoes and accessories. Merchandise inventory for the Company’s retail operating segments is sourced from
the same countries and some of the same vendors, using similar production processes. Merchandise for the
Company’s operating segments is distributed to retail stores in a similar manner through the Company’s
single distribution center and is subsequently distributed to clients in a similar manner.
The Company operates its women’s fashion specialty retail stores in 32 states as of April 30, 2022,
principally in the southeastern United States. The Company offers its own credit card to its customers and
all credit authorizations, payment processing and collection efforts are performed by a separate subsidiary of
the Company.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
10
NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):
The following schedule summarizes certain segment information (in thousands):
Three Months Ended
April 30, 2022
Retail
Credit
Total
Revenues
$206,208
$513
$206,721
Depreciation
Interest and other income
(403 )
(403 )
Income before taxes
Capital expenditures
Three Months Ended
May 1, 2021
Retail
Credit
Total
Revenues
$212,547
$538
$213,085
Depreciation
Interest and other income
(663 )
(663 )
Income before taxes
Capital expenditures
Retail
Credit
Total
Total assets as of April 30, 2022
$574,601
$37,429
$612,030
Total assets as of January 29, 2022
The Company evaluates segment performance based on income before taxes. The Company does not
allocate certain corporate expenses or income taxes to the credit segment.
The following schedule summarizes the direct expenses of the credit segment which are reflected in Selling,
general and administrative expenses (in thousands):
Three Months Ended
April 30, 2022
May 1, 2021
Payroll
$
$
Postage
Other expenses
Total expenses
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
11
NOTE 6 – STOCK BASED COMPENSATION:
As of April 30, 2022, the Company had two long-term compensation plans pursuant to which stock-based
compensation was outstanding or could be granted. The 2018 Incentive Compensation Plan and 2013
Incentive Compensation Plan are for the granting of various forms of equity-based awards, including
restricted stock and stock options for grant, to officers, directors and key employees. Effective May 24, 2018,
shares for grant were no longer available under the 2013 Incentive Compensation Plan.
The following table presents the number of options and shares of restricted stock initially authorized and
available for grant under each of the plans as of April 30, 2022:
2013
2018
Plan
Plan
Total
Options and/or restricted stock initially authorized
Options and/or restricted stock available for grant:
-
In accordance with ASC 718, the fair value of current restricted stock awards is estimated on the date of
grant based on the market price of the Company’s stock and is amortized to compensation expense on a
straight-line basis over the related vesting periods. As of April 30, 2022 and January 29, 2022, there was
$
, respectively, of total unrecognized compensation expense related to
unvested restricted stock awards, which had a remaining weighted-average vesting period of
was $
classified as a component of Selling, general and administrative expenses in the Condensed Consolidated
Statements of Income.
The following summary shows the changes in the shares of unvested restricted stock outstanding during the
three months ended April 30, 2022:
Weighted
Average
Number of
Grant Date Fair
Shares
Value Per Share
Restricted stock awards at January 29, 2022
$
Granted
Vested
Forfeited or expired
Restricted stock awards at April 30, 2022
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
12
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 months ended April 30, 2022 and May 1, 2021,
the Company sold
respectively, under the Employee Stock Purchase Plan. The compensation expense recognized for the 15%
discount given under the Employee Stock Purchase Plan was approximately $
three months ended April 30, 2022 and May 1, 2021, respectively. These expenses are classified as a
component of Selling, general 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 30, 2022 and January 29, 2022:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
April 30, 2022
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
-
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Assets
$
$
$
$
Liabilities:
(9,272 )
-
-
(9,272 )
Total Liabilities
$
(9,272 )
$
-
$
-
$
(9,272 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
13
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
January 29,
2022
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
-
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Assets
$
$
$
$
Liabilities:
(10,020)
-
-
(10,020 )
Total Liabilities
$
(10,020)
$
-
$
-
$
(10,020 )
The Company’s investment portfolio was primarily invested in corporate bonds and tax-exempt and taxable
governmental debt securities held in managed accounts with underlying ratings of A or better at April 30,
2022 and January 29, 2022. The state, municipal and corporate bonds have contractual maturities which
range from one day to 4.6 years. The U.S. Treasury Notes have contractual maturities which range from 46
days to 2.4 years. These securities are classified as available-for-sale and are recorded as Short-term
investments, Restricted cash and Other assets on the accompanying Condensed Consolidated Balance Sheets.
These assets are carried at fair value with unrealized gains and losses reported net of taxes in Accumulated
other comprehensive income. The asset-backed securities are bonds comprised of auto loans and bank credit
cards that carry AAA ratings. The auto loan asset-backed securities are backed by static pools of auto loans
that were originated and serviced by captive auto finance units, banks or finance companies. The bank credit
card asset-backed securities are backed by revolving pools of credit card receivables generated by account
holders of cards from American Express, Citibank, JPMorgan Chase, Capital One, and Discover.
Additionally, at April 30, 2022, the Company had $
compensation plan assets of $
equities and deferred compensation plan assets of $
assets in the Condensed Consolidated Balance Sheets.
Level 1 category securities are measured at fair value using quoted active market prices. Level 2 investment
securities include corporate and municipal bonds for which quoted prices may not be available on active
exchanges for identical instruments. Their fair value is principally based on market values determined by
management with assistance of a third-party pricing service. Since quoted prices in active markets for
identical assets are not available, these prices are determined by the pricing service using observable market
information such as quotes from less active markets and/or quoted prices of securities with similar
characteristics, among other factors.
Deferred compensation plan assets consist of life insurance policies. These life insurance policies are valued
based on the cash surrender value of the insurance contract, which is determined based on such factors as the
fair value of the underlying assets and discounted cash flow and are therefore classified within Level 3 of the
valuation hierarchy. The Level 3 liability associated with the life insurance policies represents a deferred
compensation obligation, the value of which is tracked via underlying insurance funds’ net asset values, as
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
14
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 30, 2022 and January 29, 2022 (dollars in thousands):
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 29, 2022
$
Redemptions
-
Additions
-
Total gains or (losses)
(439 )
-
Ending Balance at April 30, 2022
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at January 29, 2022
$
(10,020 )
(149 )
-
Ending Balance at April 30, 2022
$
(9,272 )
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 30, 2021
$
Redemptions
-
Additions
-
-
Ending Balance at January 29, 2022
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
15
Deferred Compensation
Beginning Balance at January 30, 2021
$
(10,316 )
(304 )
(410 )
-
Ending Balance at January 29, 2022
$
(10,020 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
16
NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:
None.
NOTE 9 – INCOME TAXES:
The Company had an effective tax rate for the first quarter of 2022 of
% compared to an effective tax
rate of
% for the first quarter of 2021. The increase in the 2022 first quarter tax rate was primarily due
to higher
tax credits.
NOTE 10 – COMMITMENTS AND CONTINGENCIES:
The Company is, from time to time, involved in routine litigation incidental to the conduct of its business,
including litigation regarding the merchandise that it sells, litigation regarding intellectual property,
litigation instituted by persons injured upon premises under its control, litigation with respect to various
employment matters, including alleged discrimination and wage and hour litigation, and litigation with
present or former employees.
Although such litigation is routine and incidental to the conduct of the Company’s business, as with any
business of its size with a significant number of employees and significant merchandise sales, such
litigation could result in large monetary awards. Based on information currently available, management
does not believe that any reasonably possible losses arising from current pending litigation will have a
material adverse effect on its condensed consolidated financial statements. However, given the inherent
uncertainties involved in such matters, an adverse outcome in one or more such matters could materially
and adversely affect the Company’s financial condition, results of operations and cash flows in any
particular reporting period. The Company accrues for these matters when the liability is deemed probable
and reasonably estimable.
NOTE 11 – REVENUE RECOGNITION:
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 or forfeits the merchandise. Gift
cards do not have expiration dates. A provision is made for estimated merchandise returns based on sales
volumes and the Company’s experience; actual returns have not varied materially from historical
amounts. A provision is made for estimated write-offs associated with sales made with the Company’s
proprietary credit card. Amounts related to shipping and handling billed to customers in a sales
transaction are classified as Other revenue and the costs related to shipping product to customers (billed
and accrued) are classified as Cost of goods sold.
The Company offers its own proprietary credit card to customers. All credit activity is performed by the
Company’s wholly-owned subsidiaries. None of the credit card receivables are secured. The Company
estimated customer credit losses of $
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
17
1, 2021, respectively, on sales purchased by the Company’s proprietary credit card of $
$
The following table provides information about receivables and contract liabilities from contracts with
customers (in thousands):
Balance as of
April 30, 2022
January 29, 2022
Proprietary Credit Card Receivables, net
$
$
Gift Card Liability
$
$
NOTE 12 – LEASES:
The Company determines whether an arrangement is a lease at inception. The Company has operating
leases for stores, offices and equipment. Its leases have remaining lease terms of one year to 10 years,
some of which include options to extend the lease term for up to five years, and some of which include
options to terminate the lease within one year. The Company considers these options in determining the
lease term used to establish its right-of-use assets and lease liabilities. The Company’s lease agreements
do not contain any material residual value guarantees or material restrictive covenants.
As most of the Company’s leases do not provide an implicit rate, it 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 30, 2022
May 1, 2021
Operating lease cost (a)
$
$
Variable lease cost (b)
$
$
(a) Includes right-of-use asset amortization of ($0.4) million and ($1.2) million for the three months ended
April 30, 2022 and May 1, 2021, respectively.
(b) Primarily related to monthly percentage rent for stores not presented on the balance sheet.
Supplemental cash flow information and non-cash activity related to the Company’s operating leases are
as follows (in thousands):
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 2022 AND MAY 1, 2021
18
Operating cash flow information:
Three Months Ended
April 30, 2022
May 1, 2021
Cash paid for amounts included in the measurement of lease liabilities
$
$
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations
$
$
Weighted-average remaining lease term and discount rate for the Company’s operating leases are as
follows:
As of
April 30, 2022
May 1, 2021
Weighted-average remaining lease term
2.4 years
2.7 years
Weighted-average discount rate
As of April 30, 2022,
the maturities of lease liabilities by fiscal year for the Company’s operating leases
are as follows (in thousands):
Fiscal Year
2022 (a)
$
2023
2024
2025
2026
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
$
(a) Excluding the 3 months ended April 30, 2022.
19
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 January 28, 2023 (“fiscal 2022”) 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 on our business, results of operations and financial condition; 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 and 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 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; and other factors discussed under “Risk Factors” in Part I, Item 1A of our annual
report on Form 10-K for the fiscal year ended January 29, 2022 (“fiscal 2021”), as amended or
supplemented, and in other reports we 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)
20
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
The Company’s accounting policies 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
year ended January 29, 2022. As disclosed in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” the preparation of the Company’s financial statements in 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
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
accounting estimates inherent in the preparation of the Company’s financial statements include the allowance
for customer credit losses, inventory shrinkage, the calculation of potential asset impairment, workers’
compensation, general and auto insurance liabilities, reserves relating to self-insured health insurance, and
uncertain tax positions.
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)
21
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
April 30, 2022
May 1, 2021
Total retail sales
100.0
%
100.0
%
Other revenue
0.9
0.9
Total revenues
100.9
100.9
Cost of goods sold (exclusive of depreciation)
64.5
58.5
Selling, general and administrative (exclusive of depreciation)
29.5
29.9
Depreciation
1.3
1.4
Interest and other income
(0.2)
(0.3)
Income before income taxes
5.7
11.3
Net income
4.8
9.8
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
22
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 Consolidated Financial Statements and the Notes to those statements included in the
“Financial Statements” section of this Quarterly Report on Form 10-Q, as well as our 2021 Form 10-K.
COVID-19 Update
There is still significant uncertainty regarding the lingering effects of the COVID-19 pandemic on our
business, financial condition, results of operations, cash flows, and liquidity. These uncertainties include
the impact of new or potential variants of the virus that are more transmissible or severe, stagnant
vaccination rates and related factors that may continue to fuel periodic surges of the virus or otherwise
impede progress toward the return to pre-pandemic activities and levels of consumer confidence and
commercial activity. The Company also faces uncertainty from the impacts of COVID-19 and the
governmental responses to COVID-19 surges, including lockdowns, in the foreign countries where our
merchandise is produced. The Company is also subject to the continued effects of disruption in the global
supply chain, inflation and its impact on our cost of products, transportation, wage rates and other
operating costs, as well as, the impact on our customers’ disposable incomes, and the availability of
workers. The Company expects that these uncertainties and perhaps others related to the pandemic will
continue to impact the Company in fiscal 2022. The adverse financial impacts associated with these
continued effects of, and uncertainties related to, the COVID-19 pandemic include, but are not limited to,
(i) lower net sales in markets affected by actual or potential adverse changes in conditions relating to the
pandemic, whether due to increases in case counts, state and local orders, reductions in store traffic and
customer demand, labor shortages, or all of these factors, (ii) lower net sales caused by the delay of
inventory production and fulfillment, (iii) and incremental costs associated with efforts to mitigate the
effects of the outbreak, including increased freight and logistics costs and other expenses.
While the Company currently anticipates a continuation of the uncertainties listed above and the potential
adverse impacts of COVID-19 during fiscal 2022, the duration and severity of these effects will depend
on the course of future developments, which are highly uncertain. The extent to which the COVID-19
pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash
flows, and liquidity may differ from management’s current estimates due to inherent uncertainties
regarding the duration and further spread of the outbreak or its variants, its severity, actions taken to
contain the virus or treat its impact, and how quickly and to what extent normal economic and operating
conditions can resume.
Comparison of First Quarter of 2022 with 2021
Total retail sales for the first quarter were $204.9 million compared to last year’s first quarter sales of $211.2
million. Sales decreased primarily due to a decrease in same-store sales, partially offset by sales from
noncomparable stores. The decrease in same-store sales was primarily due to cooler, wetter weather, late
merchandise shipments due to supply chain disruptions and inflationary pressure on our customers’
disposable income. 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 sales calculation after they have been
open more than 15 months. The method of calculating same store sales varies across the retail industry. As a
result, our same store sales calculation may not be comparable to similarly titled measures reported by other
companies. E-commerce sales were less than 5.0% of sales for the first quarter of fiscal 2022 and are included
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
23
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, shipping charged to customers for e-
commerce purchases and layaway fees), were $206.7 million for the first quarter ended April 30, 2022,
compared to $213.1 million for the first quarter ended May 1, 2021. The Company operated 1,315 stores at
April 30, 2022 compared to 1,325 stores at the end of last fiscal year’s first quarter. For the first three months
of fiscal 2022, the Company opened five stores and permanently closed one store. The Company currently
expects to close approximately 25 stores in fiscal 2022.
Credit revenue of $0.5 million represented 0.2% of total revenues in the first quarter of fiscal 2022, compared
to 2021 credit revenue of $0.5 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 include
principally payroll, postage and other administrative expenses, and totaled $0.4 million in the first quarter of
2022, compared to last year’s first quarter expenses of $0.3 million.
Other revenue, a component of total revenues, was $1.8 million for the first quarter of fiscal 2022, compared
to $1.9 million for the prior year’s comparable first quarter. The slight decrease was due to lower e-
commerce shipping revenue and finance charges, slightly offset by higher layaway fees.
Cost of goods sold was $132.2 million, or 64.5% of retail sales for the first quarter of fiscal 2022, compared
to $123.7 million, or 58.5% of retail sales in the first quarter of fiscal 2021. The overall increase in cost of
goods sold as a percent of retail sales for first quarter of 2022 resulted primarily from higher markdown sales
and an increase in freight costs due to higher fuel prices. 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 17.0% to $72.7 million for the first
quarter of fiscal 2022 compared to $87.6 million in the first quarter of fiscal 2021. 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 29.5% of retail sales for the first quarter of fiscal 2022, compared to 29.9% of retail sales in
the first quarter of fiscal 2021. SG&A as a percent of retail sales decreased primarily due to lower incentive
compensation, partially offset by increased payroll costs reflecting more normalized operations.
Depreciation expense was $2.7 million, or 1.3% of retail sales for the first quarter of fiscal 2022, compared to
$3.0 million, or 1.4% of retail sales for the first quarter of fiscal 2021. The decrease in depreciation expense
was attributable to older stores being fully depreciated.
Interest and other income was $0.4 million, or 0.2% of retail sales for the first quarter of fiscal 2022,
compared to $0.7 million, or 0.3% of retail sales for the first quarter of fiscal 2021. The decrease was
primarily attributable to a decrease in short-term investments.
Income tax expense was $1.9 million or 1.0% of retail sales for the first quarter of fiscal 2022, compared
to an income tax expense of $3.1 million, or 1.5% of retail sales for the first quarter of fiscal 2021.
Income tax expense for the first quarter of fiscal 2022 decreased primarily as a result of lower pre-tax
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
24
earnings. The effective income tax rate for the first quarter of fiscal 2022 was 16.7% compared to 12.9%
for the first quarter of 2021. The increase in the 2022 first quarter tax rate was primarily due to higher
Global Intangible Low-taxed Income (GILTI), partially offset by the ability to realize foreign tax credits.
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 2022 and the next 12
months.
Cash used by operating activities for the first three months of fiscal 2022 was primarily generated by earnings
adjusted for depreciation and changes in working capital. The decrease in cash provided of $45.3 million for
the first three months of fiscal 2022 as compared to the first three months of fiscal 2021 was primarily due to
lower net income and a decrease in accounts payable and accrued liabilities from fiscal 2021 year end versus
an increase from 2020 year end, partially offset by a decrease in prepaid and other assets.
At April 30, 2022, the Company had working capital of $107.8 million compared to $111.5 million at
January 29, 2022. This decrease is primarily attributable to lower short-term investments, partially offset by
lower accrued incentive compensation.
At April 30, 2022, the Company had an unsecured revolving credit agreement, which provided for
borrowings of up to $35.0 million less the balance of letters of credit discussed below and was committed
through May 2022. In May 2022, the Company signed a new unsecured revolving credit agreement,
which replaces the prior credit agreement, provides up to $35.0 million in committed availability and is
committed through May 2027. The prior credit agreement contained various financial covenants and
limitations, including the maintenance of specific financial ratios with which the Company was in
compliance as of April 30, 2022. The new credit agreement also contains various financial covenants and
limitations, including the maintenance of specific financial ratios. There were no outstanding borrowings
under the prior credit facility as of April 30, 2022 or January 29, 2022.
At April 30, 2022 and January 29, 2022, the Company had no outstanding letters of credit relating to
purchase commitments.
Expenditures for property and equipment totaled $4.4 million in the first three months of fiscal 2022,
compared to $0.6 million in last year’s first three months. The increase in expenditures for property and
equipment was primarily due to costs associated with opening five new stores and capital investments in
information technology and the distribution center. For the full fiscal 2022 year, the Company expects to
invest approximately $22.6 million in capital expenditures, including distribution center automation projects.
Net cash provided by investing activities totaled $19.6 million in the first three months of fiscal 2022
compared to $34.2 million used in the comparable period of fiscal 2021, primarily due to lower purchases of
short-term investments, partially offset by an increase in capital expenditures.
Net cash used by financing activities totaled $12.7 million in the first three months of fiscal 2022 compared
to $5.5 million used in the comparable period of fiscal 2021, primarily due to an increase in share repurchases
and dividends paid.
On May 19, 2022, the Board of Directors declared the quarterly dividend at $0.17 per share.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
25
As of April 30, 2022, the Company had 840,119 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 in managed accounts with underlying ratings of A or better at April 30,
2022 and January 29, 2022. The state, municipal and corporate bonds have contractual maturities which
range from one day to 4.6 years. The U.S. Treasury Notes have contractual maturities which range from 46
days to 2.4 years. These securities are classified as available-for-sale and are recorded as Short-term
investments, Restricted cash and Other assets on the accompanying Condensed Consolidated Balance Sheets.
These assets are carried at fair value with unrealized gains and losses reported net of taxes in Accumulated
other comprehensive income. The asset-backed securities are bonds comprised of auto loans and bank credit
cards that carry AAA ratings. The auto loan asset-backed securities are backed by static pools of auto loans
that were originated and serviced by captive auto finance units, banks or finance companies. The bank credit
card asset-backed securities are backed by revolving pools of credit card receivables generated by account
holders of cards from American Express, Citibank, JPMorgan Chase, Capital One, and Discover.
Additionally, at April 30, 2022, the Company had $0.8 million of corporate equities and deferred
compensation plan assets of $11.0 million. At January 29, 2022, the Company had $0.8 million of corporate
equities and deferred compensation plan assets of $11.5 million. All of these assets are recorded within Other
assets in the Condensed Consolidated Balance Sheets. 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
26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The Company is subject to market rate risk from exposure to changes in interest rates based on 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 controls and procedures as of April 30, 2022. Based on this
evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of April 30,
2022, 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 30, 2022 that has materially affected, or
is reasonably likely to materially affect, the Company’s internal control over financial reporting.
THE CATO CORPORATION
PART II OTHER INFORMATION
27
ITEM 1. LEGAL PROCEEDINGS:
Not Applicable
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 29, 2022.
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.
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 30, 2022:
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
of Shares
Price Paid
Announced Plans or
Yet be Purchased Under
Period
Purchased
per Share (1)
Programs (2)
The Plans or Programs (2)
February 2022
70,967
$
16.61
70,967
March 2022
327,897
15.01
327,897
April 2022
211,064
14.50
211,064
Total
609,928
$
15.02
609,928
840,119
(1)
Prices include trading costs.
(2)
As of January 29, 2022, the Company’s share repurchase program had 450,047 shares remaining
in open authorizations. The Board of Directors authorized an additional 1,000,000 shares for
repurchase under the program at its February 24, 2022 meeting. During the first quarter ended
April 30, 2022, the Company repurchased and retired 609,928 shares under this program for
approximately $9,161,613 or an average market price of $15.02 per share. As of April 30, 2022,
the Company had 840,119 shares remaining in open authorizations. There is no specified
expiration date for the Company’s repurchase program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
Not Applicable
THE CATO CORPORATION
PART II OTHER INFORMATION
28
ITEM 4. MINE SAFETY DISCLOSURES:
Not Applicable
ITEM 5. OTHER INFORMATION:
Not Applicable
ITEM 6. EXHIBITS:
Exhibit No.
Item
10.1
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
101.1*
The following materials from Registrant’s Quarterly Report on Form
10-Q for the fiscal quarter ended April 30, 2022, formatted in Inline
XBRL: (i) Condensed Consolidated Statements of Income and
Comprehensive Income for the Three Months ended April 30, 2022
and May 1, 2021; (ii) Condensed Consolidated Balance Sheets at April
30, 2022 and January 29, 2022; (iii) Condensed Consolidated
Statements of Cash Flows for the Three Months Ended April 30, 2022
and May 1, 2021; (iv) Condensed Consolidated Statements of
Stockholders’ Equity for the Three Months Ended April 30, 2022 and
May 1, 2021; and (v) Notes to Condensed Consolidated Financial
Statements.
104.1
Cover Page Interactive Data File (Formatted in Inline XBRL and
contained in the Interactive Data Files submitted as Exhibit 101.1*)
THE CATO CORPORATION
PART II OTHER INFORMATION
29
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.
May 26, 2022
/s/ John P. D. Cato
Date
John P. D. Cato
Chairman, President and
Chief Executive Officer
May 26, 2022
/s/ Charles D. Knight
Date
Charles D. Knight
Executive Vice President
Chief Financial Officer
1
EXHIBIT 31.1
PRINCIPAL EXECUTIVE OFFICER CERTIFICATION PURSUANT TO
SECURITIES EXCHANGE ACT OF 1934 RULE 13a-14(a)/15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this report on Form 10-Q of The Cato Corporation (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: May 26, 2022
/s/ John P. D. Cato
John P. D. Cato
Chairman, President and
Chief Executive Officer
1
EXHIBIT 31.2
PRINCIPAL FINANCIAL OFFICER CERTIFICATION PURSUANT TO
SECURITIES EXCHANGE ACT OF 1934 RULE 13a-14(a)/15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Charles D. Knight, certify that:
1.
I have reviewed this report on Form 10-Q of The Cato Corporation (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: May 26, 2022
/s/ Charles D. Knight
Charles D. Knight
Executive Vice President
Chief Financial Officer
1
EXHIBIT 32.1
CERTIFICATION OF PERIODIC REPORT
I, John P. D. Cato, Chairman, President and Chief Executive Officer of The Cato Corporation (the
“Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350,
that on the date of this Certification:
1.
the Form 10-Q of the Company for the quarter ended April 30, 2022 (the “Report”) fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: May 26, 2022
/s/ John P. D. Cato
John P. D. Cato
Chairman, President and
Chief Executive Officer
1
EXHIBIT 32.2
CERTIFICATION OF PERIODIC REPORT
I, Charles D. Knight, Executive Vice President, Chief Financial Officer of The Cato Corporation (the
“Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350,
that on the date of this Certification:
1.
the Form 10-Q of the Company for the quarter ended April 30, 2022 (the “Report”) fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and
Dated: May 26, 2022
/s/ Charles D. Knight
Charles D. Knight
Executive Vice President
Chief Financial Officer