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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,
(Address of principal executive offices)
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(
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(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
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
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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
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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 May 4, 2024, there were
1
THE CATO CORPORATION
FORM 10-Q
Quarter Ended May 4, 2024
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 May 4, 2024 and April 29, 2023
Condensed Consolidated Balance Sheets
3
At May 4, 2024 and February 3, 2024
Condensed Consolidated Statements of Cash Flows
4
For the Three Months Ended May 4, 2024 and April 29, 2023
Condensed Consolidated Statements of Stockholders’ Equity
5
For the Three Months Ended May 4, 2024 and April 29, 2023
Notes to Condensed Consolidated Financial Statements
6 - 19
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
20 - 26
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
27
Item 4.
Controls and Procedures
27
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
28
Item 1A.
Risk Factors
28
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
28
Item 3.
Defaults Upon Senior Securities
28
Item 4.
Mine Safety Disclosures
29
Item 5.
Other Information
29
Item 6.
Exhibits
29
Signatures
30
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
May 4, 2024
April 29, 2023
(Dollars in thousands, except per share data)
REVENUES
$
$
COSTS AND EXPENSES, NET
(5,821 )
(897 )
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
(748 )
Comprehensive income
$
$
See notes to condensed consolidated financial statements (unaudited).
3
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
May 4, 2024
February 3, 2024
(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
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 (loss)
(353 )
$
$
See notes to condensed consolidated financial statements (unaudited).
4
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
May 4, 2024
April 29, 2023
(Dollars in thousands)
Operating Activities:
Net income
$
$
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
Provision for customer credit losses
Purchase premium and premium amortization of investments
(136 )
(18 )
Gain on sale of assets held for investment
(4,093 )
Share-based compensation
(38 )
Deferred income taxes
(832 )
Loss (Gain) on disposal of property and equipment
(33 )
Changes in operating assets and liabilities which provided (used) cash:
(1,836 )
(1,793 )
(2,714 )
(618 )
(435 )
(532 )
(1,429 )
Net cash provided by operating activities
Investing Activities:
Expenditures for property and equipment
(3,261 )
(6,170 )
Purchase of short-term investments
(8,572 )
(5,914 )
Sales of short-term investments
Sales of other assets
Net cash provided by investing activities
Financing Activities:
Dividends paid
(3,523 )
(3,455 )
Repurchase of common stock
(2,237 )
(2,267 )
Proceeds from employee stock purchase plan
Net cash used by financing activities
(5,599 )
(5,556 )
Net increase 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 expenditures
$
$
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 (Loss)
Equity
(Dollars in thousands)
Balance — February 3, 2024
$
$
$
$
$
Comprehensive income:
(748 )
(748 )
Dividends paid ($
(3,523 )
(3,523 )
Class A common stock sold through employee stock purchase plan
Share-based compensation issuances and exercises
Share-based compensation expense
(84 )
(84 )
Repurchase and retirement of treasury shares
(14 )
(2,223 )
(2,237 )
Balance — May 4, 2024
$
$
$
$
(353 )
$
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income (Loss)
Equity
(Dollars in thousands)
Balance — January 28, 2023
$
$
$
$
(1,238 )
$
Comprehensive income:
Dividends paid ($
(3,455 )
(3,455 )
Class A common stock sold through employee stock purchase plan
Share-based compensation issuances and exercises
Share-based compensation expense
Repurchase and retirement of treasury shares
(8 )
(2,259 )
(2,267 )
Balance — April 29, 2023
$
$
$
$
(883 )
$
See notes to condensed consolidated financial statements (unaudited).
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6
NOTE 1 - GENERAL
:
The condensed consolidated financial statements as of May 4, 2024 and for the thirteen-week periods
ended May 4, 2024 and April 29, 2023 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
February 3, 2024. Amounts as of February 3, 2024 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 February 16, 2024, the Company closed on the sale of land held for investment. The sale resulted in a
net gain of $
Consolidated Statements of Income and Comprehensive Income for the period ended May 4, 2024.
On May 23, 2024, the Board of Directors maintained the quarterly dividend at $
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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
May 4, 2024
April 29, 2023
(Dollars in thousands)
Numerator
Net earnings
$
$
Earnings allocated to non-vested equity awards
(557 )
(227 )
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)
8
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:
The following table sets forth information regarding the reclassification out of Accumulated other
comprehensive income (loss) (in thousands) for the three months ended May 4, 2024:
Changes in Accumulated Other
Comprehensive Income (Loss) (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at February 3, 2024
$
(1,434 )
Net current-period other comprehensive income (loss)
(748 )
Ending Balance at May 4, 2024
$
(353 )
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive
income.
(b) Includes $
income for net realized 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 (loss) (in thousands) for the three months ended April 29, 2023:
Changes in Accumulated Other
Comprehensive Income (Loss) (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at January 28, 2023
$
(1,238 )
Net current-period other comprehensive income (loss)
Ending Balance at April 29, 2023
$
(883 )
(a) All amounts are net-of-tax.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9
NOTE 4 – FINANCING ARRANGEMENTS:
At May 4, 2024, the Company had an unsecured revolving credit agreement, which provides for
borrowings of up to $
commitments, and is committed through May 2027. The credit agreement contains various financial
covenants and limitations, including the maintenance of specific financial ratios. On April 25, 2024, the
Company amended the revolving credit agreement to modify a definition used in calculating the
Company’s minimum EBITDAR coverage ratio to add back certain income tax receivables included in
the calculation of the ratio. For the quarter ended May 4, 2024, after giving effect to the amendment, the
Company was in compliance with the credit agreement. There were
r any
outstanding letters of credit that reduced borrowing availability, as of May 4, 2024. The weighted
average interest rate under the credit facility was
NOTE 5 – REPORTABLE SEGMENT INFORMATION:
The Company has determined that it has
Segment
Reporting
, including Cato, It’s Fashion, Versona and Credit. As outlined in ASC 280-10, the Company has
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 distributed to
customers in a similar manner.
The Company operates its women’s fashion specialty retail stores in
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 separate wholly-owned
subsidiaries of the Company.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
10
NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):
The following schedule summarizes certain segment information (in thousands):
Three Months Ended
May 4, 2024
Retail
Credit
Total
Revenues
$176,430
$669
$177,099
Depreciation
Interest and other income
(5,821 )
(5,821 )
Income before taxes
Capital expenditures
Three Months Ended
April 29, 2023
Retail
Credit
Total
Revenues
$191,434
$616
$192,050
Depreciation
Interest and other income
(897 )
(897 )
Income before taxes
Capital expenditures
Retail
Credit
Total
Total assets as of May 4, 2024
$438,371
$38,778
$477,149
Total assets as of February 3, 2024
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
May 4, 2024
April 29, 2023
Payroll
$
$
Postage
Other expenses
Total expenses
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
11
NOTE 6 – SHARE BASED COMPENSATION:
As of May 4, 2024, the Company had the 2018 Incentive Compensation Plan for the granting of various
forms of equity-based awards, including restricted stock and stock options for grant to officers, directors and
key employees.
The following table presents the number of options and shares of restricted stock initially authorized and
available for grant under this plan as of May 4, 2024:
2018
Plan
Options and/or restricted stock initially authorized
Options and/or restricted stock available for grant
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 May 4,
2024 and February 3, 2024, there was $
, respectively, of total unrecognized
compensation expense related to unvested restricted stock awards, which had a remaining weighted-
average vesting period of
three months ended May 4, 2024 was $
ended April 29, 2023. This compensation activity is 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 number of shares of unvested restricted stock outstanding
during the three months ended May 4, 2024:
Weighted
Average
Number of
Grant Date Fair
Shares
Value Per Share
Restricted stock awards at February 3, 2024
$
Granted
Vested
(232,696 )
Forfeited or expired
(2,812 )
Restricted stock awards at May 4, 2024
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12
NOTE 6 – SHARE 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
% discount through payroll deductions. During the three months ended May 4, 2024 and April 29, 2023,
the Company sold
share, respectively, under the Employee Stock Purchase Plan. The compensation expense recognized for the
% discount given under the Employee Stock Purchase Plan was approximately $
three months ended May 4, 2024 and April 29, 2023. 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 May 4, 2024 and February 3, 2024:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
May 4, 2024
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
$
$
Total Assets
$
$
$
$
Liabilities:
$
(8,662 )
$
$
$
(8,662 )
Total Liabilities
$
(8,662 )
$
$
$
(8,662 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
February 3,
2024
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
$
$
Total Assets
$
$
$
$
Liabilities:
$
(8,654 )
$
$
$
(8,654 )
Total Liabilities
$
(8,654 )
$
$
$
(8,654 )
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 May 4, 2024
and February 3, 2024. The state, municipal and corporate bonds and asset-backed securities have contractual
maturities which range from
contractual maturities which range from
sale and are recorded as Short-term investments 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 May 4, 2024, the Company had $
plan assets of $
deferred compensation plan assets of $
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 the assistance of a third-party pricing service. Since quoted prices in active markets for
identical assets are not available, these prices are determined by the pricing service using observable market
information such as quotes from less active markets and/or quoted prices of securities with similar
characteristics, among other factors.
Deferred compensation plan assets consist 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)
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 May 4, 2024 and February 3, 2024 (dollars in thousands):
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
15
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at February 3, 2024
$
Redemptions
Additions
Total gains or (losses)
Ending Balance at May 4, 2024
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at February 3, 2024
$
(8,654 )
(63 )
(198 )
Ending Balance at May 4, 2024
$
(8,662 )
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 28, 2023
$
Redemptions
(1,168 )
Additions
Ending Balance at February 3, 2024
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at January 28, 2023
$
(8,903 )
(292 )
(578 )
Ending Balance at February 3, 2024
$
(8,654 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
16
NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures”, which modifies disclosure requirements for all public entities that are required to report
segment information. The update will change the reporting of segments by adding significant segment
expenses, other segment items, title and position of the chief operating decision maker (“COD”) and how
the COD uses the reported measures to make decisions. The update also requires all annual disclosure
about a reportable segment’s profit or loss and assets in interim periods. This guidance is effective for
fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after
December 15, 2024. Early adoption is permitted, and the guidance is applicable retrospectively to all
prior periods presented in the financial statements. The Company is currently in the process of evaluating
the potential impact of adoption of this new guidance on its consolidated financial statements and related
disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to
Income Tax Disclosures”, which modifies the requirements on income tax disclosures to require
disaggregated information about a reporting entity’s effective tax rate reconciliation as well as
information on income taxes paid. This guidance is effective for fiscal years beginning after December
15, 2024 for all public business entities, with early adoption and retrospective application permitted. The
Company is currently in the process of evaluating the potential impact of adoption of this new guidance
on its consolidated financial statements and related disclosures.
NOTE 9 – INCOME TAXES:
The Company had an effective tax rate for the first quarter of 2024 of
% compared to an effective tax
rate of
% for the first quarter of 2023. Income tax expense for the quarter decreased to $
in 2024 from $
against net deferred tax assets attributable to U.S. federal net operating loss carryforwards and the impact
of the foreign rate differential and lower state income taxes.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
17
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 of such matters could
materially and adversely affect the Company’s financial condition, results of operations and cash flows in
any particular reporting period. The Company accrues for these matters when the liability is deemed
probable and reasonably estimable.
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. Gift cards do
not have expiration dates. Layaway transactions are recorded as deferred revenue until the customer takes
possession or forfeits the merchandise. A provision is made for estimated merchandise returns based on
sales volumes and the Company’s experience; actual returns have not varied materially from historical
amounts. A provision is made for estimated write-offs associated with sales made with the Company’s
proprietary credit card. 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.
ne of the credit card receivables are secured. The Company
estimated customer credit losses of $
29, 2023, 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
May 4, 2024
February 3, 2024
Proprietary Credit Card Receivables, net
$
$
Gift Card Liability
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
18
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 remaining lease terms of up to
, some of which include options to extend the lease term for
, and some of which
include options to terminate the lease
. The Company considers these options in
determining the lease term used to establish its right-of-use assets and lease liabilities. The Company’s
lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated
incremental borrowing rate based on the information available at commencement date of the lease in
determining the present value of lease payments.
The components of lease cost are shown below (in thousands):
`
Three Months Ended
May 4, 2024
April 29, 2023
Operating lease cost (a)
$
$
Variable lease cost (b)
$
$
(a) Includes right-of-use asset amortization of ($
) million and ($
) million for the three months ended
May 4, 2024 and April 29, 2023, respectively.
(b) Primarily relates to monthly percentage rent for stores not presented on the balance sheet.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
19
NOTE 12 – LEASES (CONTINUED):
Supplemental cash flow information and non-cash activity related to the Company’s operating leases are
as follows (in thousands):
Operating cash flow information:
Three Months Ended
May 4, 2024
April 29, 2023
Cash paid for amounts included in the measurement of lease liabilities
$
$
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations, net of rent violations
$
$
Weighted-average remaining lease term and discount rate for the Company’s operating leases are as
follows:
As of
May 4, 2024
April 29, 2023
Weighted-average remaining lease term
Weighted-average discount rate
As of May 4, 2024, the maturities of lease liabilities by fiscal year for the Company’s operating leases are
as follows (in thousands):
Fiscal Year
2024 (a)
$
2025
2026
2027
2028
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
$
(a) Excluding the 3 months ended May 4, 2024.
20
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 1, 2025 (“fiscal 2024”) 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 supply chain disruptions, extreme weather
conditions, inflationary pressures and other economic or market conditions on our business, results of
operations and financial condition and statements of plans or intentions regarding new store development
or store closures; 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, or continuation of negative trends 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; underperformance or other factors that may lead to, or affect the volume of, store
closures; adverse weather, public health threats (including the global COVID-19 pandemic), acts of war
or aggression or similar conditions that may affect our merchandise supply chain, 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 Factors” in Part I, Item 1A of our
annual report on Form 10-K for the fiscal year ended February 3, 2024 (“fiscal 2023”), 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)
21
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 year ended February 3, 2024. 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 calculation of potential asset impairment, income tax valuation allowances, reserves
relating to self-insured health insurance, workers’ compensation, general and auto insurance liabilities,
uncertain tax 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)
22
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
May 4, 2024
April 29, 2023
Total retail sales
100.0
%
100.0
%
Other revenue
1.0
0.9
Total revenues
101.0
100.9
Cost of goods sold (exclusive of depreciation)
64.2
64.2
Selling, general and administrative (exclusive of depreciation)
32.4
32.5
Depreciation
1.2
1.2
Interest and other income
(3.3)
(0.5)
Income before income taxes
6.6
3.5
Net income
6.3
2.3
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
23
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 2023
Annual Report
on Form 10-K.
Recent Developments
Inflationary Cost Pressure and High Interest Rates
The pressure on our customers’ disposable income continued in the first quarter of fiscal 2024, due to
prolonged and persistently high inflation rates, especially related to housing and fuel, as well as high interest
rates. These high interest rates have adversely affected the availability and cost of credit for our customers,
including revolving credit and auto loans, and continue to negatively impact our customers’ disposable
income. Our customers’ willingness to purchase our products may continue to be negatively impacted by
these inflationary pressures and high interest rates.
We believe continued inflation and high interest rates negatively impacted the first quarter of 2024 and will
likely continue to have a negative impact on consumer behavior and, by extension, our results of operations
and financial condition during the remainder of fiscal 2024.
Merchandise Supply Chain
A significant amount of our merchandise is manufactured overseas, principally Southeast Asia, and traverses
through the Panama Canal or the Suez Canal. The regional drought conditions experienced in the region
surrounding the Panama Canal reduced the number of transits by approximately 37% and has also reduced
the permissible draft of vessels transiting the Panama Canal, which reduced the volume and number of
containers carried by container ships and increased our costs in the first quarter. During the second quarter,
the Panama Canal authority plans to increase the daily transits by 33% and increase the permissible draft of
vessels depending on weather conditions. The hostilities affecting the region surrounding the Suez Canal are
causing container ships to travel longer distances around the Cape of Good Hope, which is increasing lead
times for merchandise and our costs to ship these goods as well as decreasing the pool of containers available.
Both of these situations have negatively impacted 2024. Though conditions in the Panama Canal could
incrementally improve if weather conditions allow the easing of existing restrictions, we believe the totality
of these conditions will likely continue to have a negative impact on our results of operations and financial
condition for the foreseeable future.
Comparison of First Quarter of 2024 with 2023
Total retail sales for the first quarter were $175.3 million compared to last year’s first quarter sales of $190.3
million. Sales decreased primarily due to a decrease in same-store sales 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 sales is primarily from fewer transactions due to the aforementioned pressures on our
customers’ disposable income, as well as lower 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 sales calculation after they have been open more than 15 months. The method of calculating
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
24
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 2024 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, shipping charged to customers for e-commerce purchases and layaway fees), were
$177.1 million for the first quarter ended May 4, 2024, compared to $192.1 million for the first quarter ended
April 29, 2023. The Company operated 1,171 stores at May 4, 2024 compared to 1,264 stores at the end of
last fiscal year’s first quarter. For the first three months of fiscal 2024, the Company permanently closed
seven stores. The Company currently anticipates closing approximately 75 stores in fiscal 2024.
Credit revenue of $0.7 million represented 0.4% of total revenues in the first quarter of fiscal 2024, compared
to 2023 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 include
principally payroll, postage and other administrative expenses, and totaled $0.4 million in the first quarter of
2024, compared to last year’s first quarter expenses of $0.4 million.
Other revenue, a component of total revenues, was $1.8 million for the first quarter of fiscal 2024, compared
to $1.7 million for the prior year’s comparable first quarter. The slight increase was due to higher gift card
breakage income and late charges, partially offset by lower e-commerce shipping revenue and layaway fees.
Cost of goods sold was $112.5 million, or 64.2% of retail sales for the first quarter of fiscal 2024, compared
to $122.1 million, or 64.2% of retail sales in the first quarter of fiscal 2023. 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 8.0% to $62.8 million for the first
quarter of fiscal 2024 compared to $68.2 million in the first quarter of fiscal 2023. 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 32.4% of retail sales for the first quarter of fiscal 2024, compared to 32.5% of retail sales in
the first quarter of fiscal 2023. SG&A expense is lower in the first quarter of fiscal 2024 compared to the first
quarter of fiscal 2023 primarily due to lower equity compensation, advertising and store expenses, including
payroll, partially offset by an increase in insurance expense.
Depreciation expense was $2.0 million, or 1.2% of retail sales for the first quarter of fiscal 2024, compared to
$2.4 million, or 1.2% of retail sales for the first quarter of fiscal 2023. The decrease in depreciation expense
was attributable to older stores being fully depreciated.
Interest and other income was $5.8 million, or 3.3% of retail sales for the first quarter of fiscal 2024,
compared to $0.9 million, or 0.5% of retail sales for the first quarter of fiscal 2023. The increase was
primarily due to a $3.2 million net gain on sale of land held for investment.
Income tax expense was 0.6 million or 0.4% of retail sales for the first quarter of fiscal 2024, compared to
income tax expense of 2.1 million, or 1.1% of retail sales for the first quarter of fiscal 2023. The effective
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
25
income tax rate for the first quarter of fiscal 2024 was 5.6% compared to 32.6% for the first quarter of
2023. The decrease in tax expense is primarily due to the valuation allowance against net deferred tax
assets attributable to U.S. federal net operating loss carryforwards and the impact of the foreign rate
differential and lower state income taxes.
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 the next 12 months.
Cash provided by operating activities for the first three months of fiscal 2024 was primarily generated by
earnings adjusted for depreciation and changes in working capital. The decrease in cash provided of $4.2
million for the first three months of fiscal 2024 as compared to the first three months of fiscal 2023 was
primarily attributable to the relative change in inventory from year-end to the first quarter for both years and a
decrease to first quarter 2024 net income for non-operating gain on sale of assets held for investment.
At May 4, 2024, the Company had working capital of $65.8 million compared to $55.1 million at February 3,
2024. The increase is primarily attributable to an increase in cash and cash equivalents, inventory, accounts
receivable and lower current lease liability, partially offset by lower short-term investments.
At May 4, 2024, the Company had an unsecured revolving credit agreement, 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 credit agreement contains various financial
covenants and limitations, including the maintenance of specific financial ratios. On April 25, 2024, the
Company amended the revolving credit agreement to modify a definition used in calculating the
Company’s minimum EBITDAR coverage ratio to add back certain income tax receivables included in
the calculation of the ratio. For the quarter ended May 4, 2024, after giving effect to the amendment, the
Company was in compliance with the credit agreement. There were no borrowings outstanding, nor any
outstanding letters of credit that reduced borrowing availability, as of May 4, 2024. The weighted
average interest rate under the credit facility was zero at May 4, 2024 due to no outstanding borrowings.
Expenditures for property and equipment totaled $3.3 million in the first three months of fiscal 2024,
compared to $6.2 million in last year’s first three months. The decrease in expenditures for property and
equipment was primarily due to lower capital investments in information technology and the distribution
center, as well as no new store openings in the first quarter of fiscal 2024. For the full fiscal 2024 year, the
Company expects to invest approximately $9.0 million in capital expenditures, including distribution center
automation projects.
Net cash provided by investing activities totaled $14.6 million in the first three months of fiscal 2024
compared to $15.3 million provided in the comparable period of fiscal 2023. The decrease is primarily due to
an increase in purchases of short-term investments and a decrease in sales of short-term investments, partially
offset by the sale of other assets and a decrease in capital expenditures.
Net cash used in financing activities totaled $5.6 million in the first three months of fiscal 2024 and fiscal
2023.
On May 23, 2024, the Board of Directors maintained the quarterly dividend at 0.17 per share.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
26
As of May 4, 2024, the Company had 478,238 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 May 4, 2024
and February 3, 2024. The state, municipal and corporate bonds and asset-backed securities have contractual
maturities which range from seven days to 3.0 years. The U.S. Treasury/Agencies Notes and Bonds have
contractual maturities which range from 2 months to 1.8 years. These securities are classified as available-for-
sale and are recorded as Short-term investments 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 May 4, 2024, the Company had $0.1 million of corporate equities and deferred compensation
plan assets of $8.7 million. At February 3, 2024, the Company had $1.1 million of corporate equities and
deferred compensation plan assets of $8.6 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
27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The Company is subject to market rate risk from exposure to changes in interest rates related to 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 May 4, 2024. Based on this
evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of May 4, 2024,
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 May 4, 2024 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
28
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 February 3, 2024.
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 May 4, 2024:
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 2024
-
$
-
-
March 2024
134,209
5.41
134,209
April 2024
297,206
5.05
297,206
Total
431,415
$
5.16
431,415
478,238
(1)
Prices include trading costs.
(2)
As of February 3, 2024, the Company’s share repurchase program had 909,653 shares remaining
in open authorizations. During the first quarter ended May 4, 2024, the Company repurchased
and retired 431,415 shares under this program for approximately $2,227,608 or an average market
price of $5.16 per share. As of May 4, 2024, the Company had 478,238 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
29
ITEM 4. MINE SAFETY DISCLOSURES:
No matters requiring disclosure.
ITEM 5. OTHER INFORMATION:
During the three months ended May 4, 2024, none of the Company’s directors or officers (as defined in
Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended)
trading arrangement” or a “
of Regulation S-K).
ITEM 6. EXHIBITS:
Exhibit No.
Item
10.1*
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
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
30
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 30, 2024
/s/ John P. D. Cato
Date
John P. D. Cato
Chairman, President and
Chief Executive Officer
May 30, 2024
/s/ Charles D. Knight
Date
Charles D. Knight
Executive Vice President
Chief Financial Officer
1
Execution Version
FOURTH AMENDMENT TO CREDIT
AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT
dated
(the "Borrower''), the Banks (as defined below) party hereto and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as agent on behalf of the Banks under the Credit Agreement (as
hereinafter defined) (in such capacity, the "Agent"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Credit Agreement.
W I T N E S S E T H
WHEREAS
, the Borrower, certain Domestic Subsidiaries of the Borrower as may be from
time to time party thereto, certain banks and financial institutions from time to time party thereto (the
"Banks")
and the Agent are parties to that certain Credit Agreement dated as of May 19, 2022 (as
amended by that certain First Amendment to Credit Agreement, dated as of June 6, 2022, that certain
Second Amendment
to Credit Agreement, dated as of August 9, 2023, that certain Third
Amendment to Credit Agreement, dated as of October 24, 2023, and as further amended,
modified, extended, restated, replaced, or
supplemented from time to time, the "Credit Agreement");
WHEREAS
, the Borrower has requested that the Required Banks and Agent amend
certain
provisions of the Credit Agreement; and
WHEREAS
, the Required Banks and the Agent are willing to make such amendments to
the
Credit Agreement, in accordance with and subject to the terms and conditions set forth herein.
NOW, THEREFORE
, in consideration of the agreements hereinafter set forth, and for
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
the parties
hereto agree as follows:
ARTICLE I
AMENDMENTS TO CREDIT AGREEMENT
1.1
Amendment to Definition of Minimum EBITDAR Coverage Ratio
. The
definition of Minimum EBITDAR Coverage Ratio set forth in Section 1.01 of the Credit
Agreement is hereby
amended and restated in its entirety to read as follows:
"Minimum EBITDAR Coverage Ratio" means, as of the end of any Fiscal Quarter,
the ratio of (i) EBITDAR for the four-Fiscal Quarter period then ended, minus (a) Taxe s
paid in
Cash for such four-Fiscal Quarter period, plus (b) following the date the financial
statements are delivered pursuant to Section 5.01 for the Fiscal Quarter ended July 29,2023
and without duplication of any amounts set forth in clause (b)(ii) of the definition of
EBITDAR, the amount
of income tax returns anticipated by the Borrower in good faith to be
received from the Internal Revenue Service after August 1, 2023 in connection with taxes
paid during the 2021 Fiscal Year
(the "Income Tax Receivables"); provided, that (A) the
amount added back pursuant to this
clause (b) shall not exceed the lesser of (x) $5,325,000
and (y) the actual amount of Income Tax
Receivables received from the Internal Revenue
Service and (B) the addback set forth in this clause (b) shall no longer be available from and
after the earlier of (I) receipt by the Borrower
of any Income Tax Receivable
s
from the
2
Internal Revenue Service and (II) any reporting period following the end of the second Fiscal
Quarter of 2024, to (ii) the Fixed Charges for such four Fiscal Quarte
r
period.
2
ARTICLE II
CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective as of the day and year set forth above (the
''Fourth Amendment Effective Date") when the Agent shall have received a copy of this
Amendment duly executed by each of the Borrower, the Required Banks and the Agent.
ARTICLE III
MISCELLANEOUS
3.1
Amended Terms.
references to the Credit Agreement in each of the Loan Documents shall hereafter mean the
Credit Agreement as amended by this Amendment. Except as specifically amended hereby or
otherwise agreed, the Credit Agreement is hereby, ratified and confirmed and shall remain in
full force and effect according to
its terms.
3.2
Reaffirmation of Obligations.
Agreement as amended by this Amendment and acknowledges and reaffirms (a) that it is
bound by all terms of the Credit Agreement as so amended applicable to it and (b) that it is
responsible for the observance and full performance of its Obligations.
3.3
Loan Document.
terms of the Credit Agreement.
3.4
Further Assurances.
upon the request of the Agent, as is necessary to carry out the intent of this Amendment.
3.5
Entirety.
agreement among the parties hereto relating to the subject matter hereof and thereof and
supersede all previous documents, agreements and understandings, oral or written, relating to the
subject matter hereof and thereof.
3.6
Counterparts; Telecopy.
(and by different parties hereto in different counterparts), each of which when so executed
and delivered will constitute an original, but all of which when taken together will constitute a
single contract. Delivery of an executed counterpart to this Amendment by telecopy or other
electronic means shall be effective as an original and shall constitute a representation that an
original will be delivered.
3.7
No Actions, Claims. Etc.
acknowledges and confirms that it has no knowledge of any actions, causes of action, claims,
demands,
damages and liabilities of whatever kind or nature, in law or in equity, against the
Agent, the Banks, or
the Agent's or the Banks' respective officers, employees, representatives,
agents, counsel or directors
arising from any action by such Persons, or failure of such Persons
to act under the Credit Agreement
on or prior to the date hereof.
3.8
NORTH CAROLINA LAW . THIS AMENDMENT SHALL BE
3
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NORTH CAROLINA.
4
3.9
Successors and Assigns.
the benefit of the parties hereto and their respective successors and assigns.
3.10
Expenses.
Agreement, each party hereto agrees that it shall be responsible for its own expenses in
connection with this Amendment;
provided
however the Borrower shall pay fees and
disbursements of outside counsel for the Agent in connection with the preparation of this
Amendment in the amount of $3,000.
3.11
Consent to Jurisdiction: Service of Process; Waiver of .Jury Trial.
jurisdiction, service of process and waiver of jury trial provis1ons set forth in Section 9.16 of the
Credit Agreement
are hereby incorporated by reference,
mutatis mutandis.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly executed
on
the date first above written.
BORROWER:
6
THE
7
'
CATO
8
CORPORATION
By:
Executive Vice President and Chief Financial Officer
'
9
AGENT AND BANKS:
10
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Agent, Issuing Bank and as a Bank
By:
Name: Brad D. Bostick: Title: Senior Vice President
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 30, 2024
/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 30, 2024
/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 May 4, 2024 (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 30, 2024
/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 May 4, 2024 (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 30, 2024
/s/ Charles D. Knight
Charles D. Knight
Executive Vice President
Chief Financial Officer