UNITED STATES
SECURITIESAND EXCHANGECOMMISSION
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 October 30, 2021 | ||
OR | ||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from ________________to__________________ | ||
Commission file number 1-31340 |
THE CATO CORPORATION | |
(Exact name of registrant as specified in its charter) | |
Delaware | 56-0484485 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
8100 Denmark Road, Charlotte, North Carolina28273-5975 | |
(Address of principal executive offices) (Zip Code) | |
(704)554-8510 | |
(Registrant's telephone number, including area code) | |
Not Applicable | |
(Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A - Common Stock, par value $.033 per share | CATO | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act:
Yes | X | No |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes | X | No |
Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, anon-acceleratedfiler, a smaller reporting
Large acceleratedfiler
If anemerging growthcompany, indicateby checkmark ifthe registranthas electednot touse theextended transitionperiod for
Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).
As of May 1,October 30, 2021, there were
THE CATO CORPORATION
FORM 10-Q
Quarter Ended May 1,October 30, 2021
Tableof Contents
Page No. | |||||
PART I – FINANCIAL INFORMATION (UNAUDITED) | |||||
Item 1. | Financial Statements (Unaudited): | ||||
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) | 3 | ||||
For the Three Months and Nine Months Ended October 30, 2021 and October 31, 2020 | |||||
Condensed Consolidated Balance Sheets | 4 | ||||
At October 30, 2021 and January 30, 2021 | |||||
Condensed Consolidated Statements of Cash Flows | 5 | ||||
For the Nine Months Ended October 30, 2021 and October 31, 2020 | |||||
Condensed Consolidated Statements of Stockholders’ Equity | 6 – 7 | ||||
For the Nine Months Ended October 30, 2021 and October 31, 2020 | |||||
Notes to Condensed Consolidated Financial Statements | 8 – 24 | ||||
For the Three Months and Nine Months Ended October 30, 2021 and October 31, 2020 | |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 – 32 | |||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 33 | |||
Item 4. | Controls and Procedures | 33 | |||
PART II – OTHER INFORMATION | |||||
Item 1. | Legal Proceedings | 34 | |||
Item 1A. | Risk Factors | 34 | |||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 34 | |||
Item 3. | Defaults Upon Senior Securities | 34 | |||
Item 4. | Mine Safety Disclosures | 35 | |||
Item 5. | Other Information | 35 | |||
Item 6. | Exhibits | 35 | |||
Signatures | 36 |
2
PARTI FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTSOF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
|
|
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|
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|
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|
|
|
|
| Three Months Ended |
| Nine Months Ended | |||||||
| October 30, 2021 |
| October 31, 2020 |
| October 30, 2021 |
| October 31, 2020 | ||||
|
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| (Dollars in thousands, except per share data) | |||||||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
Retail sales | $ | 170,513 |
| $ | 149,205 |
| $ | 587,709 |
| $ | 414,283 |
Other revenue (principally finance charges, late fees and |
|
|
|
|
|
|
|
|
|
|
|
layaway charges) |
| 1,700 |
|
| 1,586 |
|
| 5,335 |
|
| 5,410 |
Total revenues |
| 172,213 |
|
| 150,791 |
|
| 593,044 |
|
| 419,693 |
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES, NET |
|
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|
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|
|
|
|
|
|
Cost of goods sold (exclusive of depreciation shown below) |
| 104,225 |
|
| 109,404 |
|
| 343,487 |
|
| 325,738 |
Selling, general and administrative (exclusive of depreciation |
|
|
|
|
|
|
|
|
|
|
|
shown below) |
| 62,466 |
|
| 51,885 |
|
| 196,687 |
|
| 148,353 |
Depreciation |
| 3,173 |
|
| 3,619 |
|
| 9,352 |
|
| 11,113 |
Interest and other income |
| (541) |
|
| (791) |
|
| (1,719) |
|
| (3,603) |
Costs and expenses, net |
| 169,323 |
|
| 164,117 |
|
| 547,807 |
|
| 481,601 |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
| 2,890 |
|
| (13,326) |
|
| 45,237 |
|
| (61,908) |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
| (5,713) |
|
| (9,704) |
|
| 1,929 |
|
| (22,698) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) | $ | 8,603 |
| $ | (3,622) |
| $ | 43,308 |
| $ | (39,210) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share | $ | 0.39 |
| $ | (0.15) |
| $ | 1.93 |
| $ | (1.64) |
|
|
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|
|
|
|
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|
|
|
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Diluted earnings (loss) per share | $ | 0.39 |
| $ | (0.15) |
| $ | 1.93 |
| $ | (1.64) |
|
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|
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Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) | $ | 8,603 |
| $ | (3,622) |
| $ | 43,308 |
| $ | (39,210) |
Unrealized gain (loss) on available-for-sale securities, net of |
|
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|
|
|
|
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|
|
|
deferred income taxes of ($150) and ($235) for the three and |
|
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|
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nine months ended October 30, 2021 and ($85) and ($29) for |
|
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|
the three and nine months ended October 31, 2020, respectively |
| (496) |
|
| (282) |
|
| (775) |
|
| (96) |
Comprehensive income (loss) | $ | 8,107 |
| $ | (3,904) |
| $ | 42,533 |
| $ | (39,306) |
|
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|
|
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|
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|
See notes to condensed consolidated financial statements (unaudited).
3
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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|
| October 30, 2021 |
| January 30, 2021 | ||
|
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|
ASSETS | (Dollars in thousands) | ||||
Current Assets: |
|
|
|
|
|
Cash and cash equivalents | $ | 23,990 |
| $ | 17,510 |
Short-term investments |
| 176,120 |
|
| 126,416 |
Restricted cash |
| 3,918 |
|
| 3,512 |
Restricted short-term investments |
| 1 |
|
| 406 |
Accounts receivable, net of allowance for customer credit losses of |
|
|
|
|
|
$807 and $605 at October 30, 2021 and January 30, 2021, respectively |
| 56,017 |
|
| 52,743 |
Merchandise inventories |
| 90,229 |
|
| 84,123 |
Prepaid expenses and other current assets |
| 11,478 |
|
| 5,840 |
Total Current Assets |
| 361,753 |
|
| 290,550 |
Property and equipment – net |
| 65,115 |
|
| 72,550 |
Noncurrent deferred income taxes |
| 5,920 |
|
| 5,685 |
Other assets |
| 23,528 |
|
| 22,850 |
Right-of-Use assets – net |
| 130,842 |
|
| 199,817 |
Total Assets | $ | 587,158 |
| $ | 591,452 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
Accounts payable | $ | 92,922 |
| $ | 73,769 |
Accrued expenses |
| 44,267 |
|
| 40,790 |
Accrued employee benefits and bonus |
| 20,985 |
|
| 1,916 |
Accrued income taxes |
| 5,929 |
|
| 2,038 |
Current lease liability |
| 50,234 |
|
| 63,421 |
Total Current Liabilities |
| 214,337 |
|
| 181,934 |
Other noncurrent liabilities |
| 17,408 |
|
| 19,705 |
Lease liability |
| 84,635 |
|
| 143,315 |
|
|
|
|
|
|
Stockholders' Equity: |
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|
|
|
|
Preferred stock, $100 par value per share, 100,000 shares |
|
|
|
|
|
authorized, none issued |
| 0 |
|
| 0 |
Class A common stock, $0.033 par value per share, 50,000,000 |
|
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|
|
|
shares authorized; 20,261,248 shares and 20,839,795 shares |
|
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|
|
|
issued at October 30, 2021 and January 30, 2021, respectively |
| 683 |
|
| 703 |
Convertible Class B common stock, $0.033 par value per share, |
|
|
|
|
|
15,000,000 shares authorized; 1,763,652 shares and 1,763,652 shares |
|
|
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|
|
issued at October 30, 2021 and January 30, 2021, respectively |
| 59 |
|
| 59 |
Additional paid-in capital |
| 118,427 |
|
| 115,278 |
Retained earnings |
| 151,229 |
|
| 129,303 |
Accumulated other comprehensive income |
| 380 |
|
| 1,155 |
Total Stockholders' Equity |
| 270,778 |
|
| 246,498 |
Total Liabilities and Stockholders' Equity | $ | 587,158 |
| $ | 591,452 |
See notes to condensed consolidated financial statements (unaudited).
4
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS
(UNAUDITED)
|
| Nine Months Ended |
| |||
| October 30, 2021 |
| October 31, 2020 |
| ||
|
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| (Dollars in thousands) |
| |||
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Operating Activities: |
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|
Net income (loss) | $ | 43,308 |
| $ | (39,210) |
|
Adjustments to reconcile net income (loss) to net cash provided (used) |
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|
by operating activities: |
|
|
|
|
|
|
Depreciation |
| 9,352 |
|
| 11,113 |
|
Provision for customer credit losses |
| 368 |
|
| 202 |
|
Purchase premium and premium amortization of investments |
| (952) |
|
| (613) |
|
Share-based compensation |
| 2,999 |
|
| 3,010 |
|
Deferred income taxes |
| 0 |
|
| 1,201 |
|
Loss on disposal of property and equipment |
| 392 |
|
| 438 |
|
Impairment of store assets |
| 0 |
|
| 7,525 |
|
Changes in operating assets and liabilities which provided |
|
|
|
|
|
|
(used) cash: |
|
|
|
|
|
|
Accounts receivable |
| (3,641) |
|
| (21,814) |
|
Merchandise inventories |
| (6,106) |
|
| 31,084 |
|
Prepaid and other assets |
| (6,190) |
|
| (2,223) |
|
Operating lease right-of-use assets and liabilities |
| (2,892) |
|
| (1,422) |
|
Accrued income taxes |
| 3,891 |
|
| (315) |
|
Accounts payable, accrued expenses and other liabilities |
| 38,881 |
|
| (15,041) |
|
Net cash provided (used) by operating activities |
| 79,410 |
|
| (26,065) |
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
Expenditures for property and equipment |
| (1,790) |
|
| (11,228) |
|
Purchase of short-term investments |
| (131,837) |
|
| (54,910) |
|
Sales of short-term investments |
| 82,355 |
|
| 123,860 |
|
Sales of other assets |
| 0 |
|
| 200 |
|
Net cash provided (used) in investing activities |
| (51,272) |
|
| 57,922 |
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
Dividends paid |
| (6,276) |
|
| (7,912) |
|
Repurchase of common stock |
| (15,152) |
|
| (16,823) |
|
Proceeds from line of credit |
| 0 |
|
| 34,000 |
|
Payments on line of credit |
| 0 |
|
| (34,000) |
|
Proceeds from employee stock purchase plan |
| 176 |
|
| 391 |
|
Net cash provided (used) in financing activities |
| (21,252) |
|
| (24,344) |
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, cash equivalents, and restricted cash |
| 6,886 |
|
| 7,513 |
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash at beginning of period |
| 21,022 |
|
| 14,401 |
|
Cash, cash equivalents, and restricted cash at end of period | $ | 27,908 |
| $ | 21,914 |
|
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|
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|
Non-cash activity: |
|
|
|
|
|
|
Accrued other assets and property and equipment | $ | 862 |
| $ | 2,604 |
|
Accrued treasury stock |
| 0 |
|
| 556 |
|
See notes to condensed consolidated financial statements (unaudited).
5
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTSOF STOCKHOLDERS’ EQUITY
(UNAUDITED)
|
|
| Convertible |
|
|
|
| Accumulated |
|
| ||
| Class A | Class B | Additional |
|
| Other | Total | |||||
| Common | Common | Paid-in | Retained | Comprehensive | Stockholders' | ||||||
| Stock | Stock | Capital | Earnings | Income | Equity | ||||||
|
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| (Dollars in thousands) | |||||||||||
|
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Balance — January 30, 2021 | $ | 703 | $ | 59 | $ | 115,278 | $ | 129,303 | $ | 1,155 | $ | 246,498 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| 0 |
| 0 |
| 0 |
| 20,713 |
| 0 |
| 20,713 |
Unrealized gain (loss) on available-for-sale securities, net of |
|
|
|
|
|
|
|
|
|
|
|
|
deferred income tax benefit of ($40) |
| 0 |
| 0 |
| 0 |
| 0 |
| (134) |
| (134) |
Dividends paid ($0.00 per share) |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Class A common stock sold through employee stock purchase |
|
|
|
|
|
|
|
|
|
|
|
|
plan — 19,248 shares |
| 1 |
| 0 |
| 150 |
| 0 |
| 0 |
| 151 |
Class B common stock sold through stock option plans — |
|
|
|
|
|
|
|
|
|
|
|
|
0 shares |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Class A common stock issued through restricted stock grant plans — |
|
|
|
|
|
|
|
|
|
|
|
|
396,558 shares |
| 13 |
| 0 |
| 271 |
| 0 |
| 0 |
| 284 |
Repurchase and retirement of treasury shares – 425,661 shares |
| (14) |
| 0 |
| 0 |
| (5,615) |
| 0 |
| (5,629) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — May 1, 2021 | $ | 703 | $ | 59 | $ | 115,699 | $ | 144,401 | $ | 1,021 | $ | 261,883 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| 0 |
| 0 |
| 0 |
| 13,992 |
| 0 |
| 13,992 |
Unrealized gain (loss) on available-for-sale securities, net of |
|
|
|
|
|
|
|
|
|
|
|
|
deferred income tax benefit of ($44) |
| 0 |
| 0 |
| 0 |
| 0 |
| (145) |
| (145) |
Dividends paid ($0.11 per share) |
| 0 |
| 0 |
| 0 |
| (2,488) |
| 0 |
| (2,488) |
Class A common stock sold through employee stock purchase |
|
|
|
|
|
|
|
|
|
|
|
|
plan — 1,336 shares |
| 0 |
| 0 |
| 23 |
| 0 |
| 0 |
| 23 |
Class B common stock sold through stock option plans — |
|
|
|
|
|
|
|
|
|
|
|
|
0 shares |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Class A common stock issued through restricted stock grant plans — |
|
|
|
|
|
|
|
|
|
|
|
|
10,018 shares |
| 0 |
| 0 |
| 1,590 |
| 5 |
| 0 |
| 1,595 |
Repurchase and retirement of treasury shares – 64,709 shares |
| (2) |
| 0 |
| 0 |
| (1,046) |
| 0 |
| (1,048) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — July 31, 2021 | $ | 701 | $ | 59 | $ | 117,312 | $ | 154,864 | $ | 876 | $ | 273,812 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| 0 |
| 0 |
| 0 |
| 8,603 |
| 0 |
| 8,603 |
Unrealized gain (loss) on available-for-sale securities, net of |
|
|
|
|
|
|
|
|
|
|
|
|
deferred income tax benefit of ($150) |
| 0 |
| 0 |
| 0 |
| 0 |
| (496) |
| (496) |
Dividends paid ($0.17 per share) |
| 0 |
| 0 |
| 0 |
| (3,788) |
| 0 |
| (3,788) |
Class A common stock sold through employee stock purchase |
|
|
|
|
|
|
|
|
|
|
|
|
plan — 1,957 shares |
| 0 |
| 0 |
| 34 |
| 0 |
| 0 |
| 34 |
Class B common stock sold through stock option plans — |
|
|
|
|
|
|
|
|
|
|
|
|
0 shares |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Class A common stock issued through restricted stock grant plans — |
|
|
|
|
|
|
|
|
|
|
|
|
(9,028) shares |
| 0 |
| 0 |
| 1,081 |
| 8 |
| 0 |
| 1,089 |
Repurchase and retirement of treasury shares – 508,266 shares |
| (18) |
| 0 |
| 0 |
| (8,458) |
| 0 |
| (8,476) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — October 30, 2021 | $ | 683 | $ | 59 | $ | 118,427 | $ | 151,229 | $ | 380 | $ | 270,778 |
See notes to condensed consolidated financial statements (unaudited).
6
THE CATO CORPORATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
|
| Convertible |
|
|
|
| Accumulated |
|
| |||
| Class A | Class B | Additional |
|
| Other | Total | |||||
| Common | Common | Paid-in | Retained | Comprehensive | Stockholders' | ||||||
| Stock | Stock | Capital | Earnings | Income | Equity | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Dollars in thousands) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — February 1, 2020 | $ | 761 | $ | 59 | $ | 110,813 | $ | 203,458 | $ | 1,423 | $ | 316,514 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| 0 |
| 0 |
| 0 |
| (28,417) |
| 0 |
| (28,417) |
Unrealized gain (loss) on available-for-sale securities, net of |
|
|
|
|
|
|
|
|
|
|
|
|
deferred income tax benefit of ($90) |
| 0 |
| 0 |
| 0 |
| 0 |
| (298) |
| (298) |
Dividends paid ($0.33 per share) |
| 0 |
| 0 |
| 0 |
| (7,990) |
| 0 |
| (7,990) |
Class A common stock sold through employee stock purchase |
|
|
|
|
|
|
|
|
|
|
|
|
plan — 26,957 shares |
| 1 |
| 0 |
| 293 |
| 0 |
| 0 |
| 294 |
Class B common stock sold through stock option plans — |
|
|
|
|
|
|
|
|
|
|
|
|
0 shares |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Class A common stock issued through restricted stock grant plans — |
|
|
|
|
|
|
|
|
|
|
|
|
307,354 shares |
| 10 |
| 0 |
| 587 |
| 8 |
| 0 |
| 605 |
Repurchase and retirement of treasury shares – 618,056 shares |
| (22) |
| 0 |
| 0 |
| (9,034) |
| 0 |
| (9,056) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — May 2, 2020 | $ | 750 | $ | 59 | $ | 111,693 | $ | 158,025 | $ | 1,125 | $ | 271,652 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| 0 |
| 0 |
| 0 |
| (7,170) |
| 0 |
| (7,170) |
Unrealized gain (loss) on available-for-sale securities, net of |
|
|
|
|
|
|
|
|
|
|
|
|
deferred income tax liability of $146 |
| 0 |
| 0 |
| 0 |
| 0 |
| 484 |
| 484 |
Dividends paid ($0.00 per share) |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Class A common stock sold through employee stock purchase |
|
|
|
|
|
|
|
|
|
|
|
|
plan — 0 shares |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Class B common stock sold through stock option plans — |
|
|
|
|
|
|
|
|
|
|
|
|
0 shares |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Class A common stock issued through restricted stock grant plans — |
|
|
|
|
|
|
|
|
|
|
|
|
(57,805) shares |
| (2) |
| 0 |
| 1,256 |
| (1) |
| 0 |
| 1,253 |
Repurchase and retirement of treasury shares – 0 shares |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — August 1, 2020 | $ | 748 | $ | 59 | $ | 112,949 | $ | 150,854 | $ | 1,609 | $ | 266,219 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| 0 |
| 0 |
| 0 |
| (3,622) |
| 0 |
| (3,622) |
Unrealized gain (loss) on available-for-sale securities, net of |
|
|
|
|
|
|
|
|
|
|
|
|
deferred income tax benefit of ($85) |
| 0 |
| 0 |
| 0 |
| 0 |
| (282) |
| (282) |
Dividends paid ($0.00 per share) |
| 0 |
| 0 |
| 0 |
| 78 |
| 0 |
| 78 |
Class A common stock sold through employee stock purchase |
|
|
|
|
|
|
|
|
|
|
|
|
plan — 21,234 shares |
| 1 |
| 0 |
| 166 |
| 0 |
| 0 |
| 167 |
Class B common stock sold through stock option plans — |
|
|
|
|
|
|
|
|
|
|
|
|
0 shares |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Class A common stock issued through restricted stock grant plans — |
|
|
|
|
|
|
|
|
|
|
|
|
(8,440) shares |
| 0 |
| 0 |
| 1,081 |
| 1 |
| 0 |
| 1,082 |
Repurchase and retirement of treasury shares – 1,036,610 shares |
| (32) |
| 0 |
| 0 |
| (7,473) |
| 0 |
| (7,505) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — October 31, 2020 | $ | 717 | $ | 59 | $ | 114,196 | $ | 139,838 | $ | 1,327 | $ | 256,137 |
See notes to condensed consolidated financial statements (unaudited).
7
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 1 -GENERAL
The condensedconsolidated financialstatements asof May1, 2021and forthe thirteen-week periods
The interim financial statements shouldbe read in conjunction withthe consolidated financial statements
On May 20,November 18, 2021, the Board of Directors declaredmaintained the quarterly dividend at $0.11$0.17 per share.
COVID-19Update
The COVID-19 pandemic adverselyimpacted the Company's business,financial condition and operating
The extentto whichthe COVID-19COVID-19 pandemicultimately impactsthe Company’sbusiness, financial
8
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
While the Company currently anticipates a continuation of the adverse impactsof COVID-19 during 2021
RecentlyAdoptedAccountingPolicies
In December 2019,the FASBissued ASU 2019-12,
9
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 2 -EARNINGSPER SHARE:
AccountingStandardCodification(“ASC”)260 –
Basic EPS iscomputedas net income lessearningsallocatedto non-vested equity awards divided bythe
|
|
|
| Three Months Ended |
|
| Nine Months Ended | ||||||
|
|
|
| October 30, 2021 |
|
| October 31, 2020 |
|
| October 30, 2021 |
|
| October 31, 2020 |
|
| (Dollars in thousands) | |||||||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
| |
| Net earnings (loss) |
| $ | 8,603 |
| $ | (3,622) |
| $ | 43,308 |
| $ | (39,210) |
| (Earnings) loss allocated to non-vested equity awards |
|
| (464) |
|
| 155 |
|
| (2,239) |
|
| 1,706 |
| Net earnings (loss) available to common stockholders |
| $ | 8,139 |
| $ | (3,467) |
| $ | 41,069 |
| $ | (37,504) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
| |
| Basic weighted average common shares outstanding |
|
| 21,030,099 |
|
| 22,674,507 |
|
| 21,295,693 |
|
| 22,847,776 |
| Diluted weighted average common shares outstanding |
|
| 21,030,099 |
|
| 22,674,507 |
|
| 21,295,693 |
|
| 22,847,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
| |
| Basic earnings (loss) per share |
| $ | 0.39 |
| $ | (0.15) |
| $ | 1.93 |
| $ | (1.64) |
| Diluted earnings (loss) per share |
| $ | 0.39 |
| $ | (0.15) |
| $ | 1.93 |
| $ | (1.64) |
10
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 3 –ACCUMULATEDOTHER COMPREHENSIVEINCOME:
The following table setsforth informationregardingthe reclassificationout of Accumulatedother
|
| Changes in Accumulated Other |
| ||||
|
| Comprehensive Income (a) |
| ||||
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
| and (Losses) on |
|
|
|
|
|
|
| Available-for-Sale |
|
|
|
|
|
|
| Securities |
|
|
|
| Beginning Balance at July 31, 2021 |
| $ | 876 |
|
|
|
| Other comprehensive income before |
|
|
|
|
|
|
| reclassification |
|
| (567) |
|
|
|
|
|
|
|
|
|
|
|
| Amounts reclassified from accumulated |
|
|
|
|
|
|
| other comprehensive income (b) |
|
| 71 |
|
|
|
|
|
|
|
|
|
|
|
| Net current-period other comprehensive income |
|
| (496) |
|
|
|
|
|
|
|
|
|
|
|
| Ending Balance at October 30, 2021 |
| $ | 380 |
|
|
|
|
|
|
|
|
|
|
|
| (a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to other comprehensive income. | ||||||
| (b) Includes $92 impact of accumulated other comprehensive income reclassifications into Interest and other |
The following table setsforth informationregardingthe reclassificationout of Accumulatedother
|
| Changes in Accumulated Other |
| ||||
|
| Comprehensive Income (a) |
| ||||
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
| and (Losses) on |
|
|
|
|
|
|
| Available-for-Sale |
|
|
|
|
|
|
| Securities |
|
|
|
| Beginning Balance at January 30, 2021 |
| $ | 1,155 |
|
|
|
| Other comprehensive income before |
|
|
|
|
|
|
| reclassification |
|
| (911) |
|
|
|
|
|
|
|
|
|
|
|
| Amounts reclassified from accumulated |
|
|
|
|
|
|
| other comprehensive income (b) |
|
| 136 |
|
|
|
|
|
|
|
|
|
|
|
| Net current-period other comprehensive income |
|
| (775) |
|
|
|
|
|
|
|
|
|
|
|
| Ending Balance at October 30, 2021 |
| $ | 380 |
|
|
|
|
|
|
|
|
|
|
|
| (a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to other comprehensive income. | ||||||
| (b) Includes $177 impact of accumulated other comprehensive income reclassifications into Interest and other |
11
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME (CONTINUED):
The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income (loss)(in thousands) for the three months ended October 31, 2020:
|
| Changes in Accumulated Other |
| ||||
|
| Comprehensive Income (a) |
| ||||
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
| and (Losses) on |
|
|
|
|
|
|
| Available-for-Sale |
|
|
|
|
|
|
| Securities |
|
|
|
| Beginning Balance at August 1, 2020 |
| $ | 1,609 |
|
|
|
| Other comprehensive income before |
|
|
|
|
|
|
| reclassifications |
|
| (350) |
|
|
|
|
|
|
|
|
|
|
|
| Amounts reclassified from accumulated |
|
|
|
|
|
|
| other comprehensive income (b) |
|
| 68 |
|
|
|
|
|
|
|
|
|
|
|
| Net current-period other comprehensive income |
|
| (282) |
|
|
|
|
|
|
|
|
|
|
|
| Ending Balance at October 31, 2020 |
| $ | 1,327 |
|
|
|
|
|
|
|
|
|
|
|
| (a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to other comprehensive income. | ||||||
| (b) Includes $89 impact of Accumulated other comprehensive income reclassifications into Interest and other |
The following table sets forth information regarding the reclassification out of Accumulated other comprehensive income ("OCI").(in thousands) for the nine months ended October 31, 2020:
|
| Changes in Accumulated Other |
| ||||
|
| Comprehensive Income (a) |
| ||||
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
| and (Losses) on |
|
|
|
|
|
|
| Available-for-Sale |
|
|
|
|
|
|
| Securities |
|
|
|
| Beginning Balance at February 1, 2020 |
| $ | 1,423 |
|
|
|
| Other comprehensive income before |
|
|
|
|
|
|
| reclassifications |
|
| (732) |
|
|
|
|
|
|
|
|
|
|
|
| Amounts reclassified from accumulated |
|
|
|
|
|
|
| other comprehensive income (b) |
|
| 636 |
|
|
|
|
|
|
|
|
|
|
|
| Net current-period other comprehensive income |
|
| (96) |
|
|
|
|
|
|
|
|
|
|
|
| Ending Balance at October 31, 2020 |
| $ | 1,327 |
|
|
|
|
|
|
|
|
|
|
|
| (a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to other comprehensive income. | ||||||
| (b) Includes $827 impact of Accumulated other comprehensive income reclassifications into Interest and other |
12
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 4 – FINANCING ARRANGEMENTS:
As of May1,October 30, 2021, the Company hadan unsecured revolving credit agreement,allowingthe Company which provides for borrowings of up to
NOTE 5 – REPORTABLE SEGMENT INFORMATION:
The Company has determinedthat it has four operating segments,as defined under ASC 280-10,including
The Company’sretail operatingsegmentshave similareconomiccharacteristicsand similaroperating,
The Companyoperates itswomen’s fashionspecialty retailstores in32 statesas ofMay 1, October 30, 2021,
13
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 5 – REPORTABLESEGMENT INFORMATION (CONTINUED):
The followingschedulesummarizescertainsegment information(in (in thousands):
Three Months Ended |
|
|
|
| Nine Months Ended |
|
|
|
October 30, 2021 | Retail | Credit | Total |
| October 30, 2021 | Retail | Credit | Total |
|
|
|
|
|
|
|
|
|
Revenues | $171,708 | $505 | $172,213 |
| Revenues | $591,497 | $1,547 | $593,044 |
Depreciation | 3,172 | 1 | 3,173 |
| Depreciation | 9,351 | 1 | 9,352 |
Interest and other income | (541) | 0 | (541) |
| Interest and other income | (1,719) | 0 | (1,719) |
Income/(Loss) before income taxes | 2,863 | 27 | 2,890 |
| Income/(Loss) before income taxes | 44,769 | 468 | 45,237 |
Capital expenditures | 665 | 0 | 665 |
| Capital expenditures | 1,790 | 0 | 1,790 |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
| Nine Months Ended |
|
|
|
October 31, 2020 | Retail | Credit | Total |
| October 31, 2020 | Retail | Credit | Total |
|
|
|
|
|
|
|
|
|
Revenues | $150,203 | $588 | $150,791 |
| Revenues | $417,616 | $2,077 | $419,693 |
Depreciation | 3,618 | 1 | 3,619 |
| Depreciation | 11,112 | 1 | 11,113 |
Interest and other income | (791) | 0 | (791) |
| Interest and other income | (3,603) | 0 | (3,603) |
Income/(Loss) before income taxes | (13,559) | 233 | (13,326) |
| Income/(Loss) before income taxes | (62,851) | 943 | (61,908) |
Capital expenditures | 1,428 | 0 | 1,428 |
| Capital expenditures | 11,228 | 0 | 11,228 |
|
|
|
|
|
|
|
|
|
| Retail | Credit | Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of October 30, 2021 | $544,131 | $43,027 | $587,158 |
|
|
|
|
|
Total assets as of January 30, 2021 | 549,349 | 42,103 | 591,452 |
|
|
|
|
|
The Company evaluatessegmentperformancebased onincomebefore taxes.The Company doesnot
The followingschedulesummarizesthe directexpensesof the credit segment,which are reflectedin Selling,
| Three Months Ended |
| Nine Months Ended | ||||||||
|
| October 30, 2021 |
|
| October 31, 2020 |
|
| October 30, 2021 |
|
| October 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Payroll | $ | 80 |
| $ | 135 |
| $ | 362 |
| $ | 417 |
Postage |
| 59 |
|
| 85 |
|
| 252 |
|
| 278 |
Other expenses |
| 338 |
|
| 134 |
|
| 464 |
|
| 438 |
Total expenses | $ | 477 |
| $ | 354 |
| $ | 1,078 |
| $ | 1,133 |
14
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 6 – STOCK BASEDSTOCK-BASED COMPENSATION:
As of May1,October 30, 2021,the Company had twolong-termcompensationplans pursuant to whichstock-based
The following table presents thenumberof options and sharesof restricted stock initially authorized and
|
| 2013 |
| 2018 |
|
|
|
| Plan |
| Plan |
| Total |
Options and/or restricted stock initially authorized |
| 1,500,000 |
| 4,725,000 |
| 6,225,000 |
Options and/or restricted stock available for grant: |
|
|
|
|
|
|
October 30, 2021 |
| 0 |
| 3,563,925 |
| 3,563,925 |
In accordance with ASC718, the fair valueof current restricted stockawards is estimated onthe date of
The followingsummaryshows the changesin the shares of unvestedrestrictedstock outstandingduringthe
|
|
|
| Weighted Average |
| Number of |
|
| Grant Date Fair |
| Shares |
|
| Value Per Share |
Restricted stock awards at January 30, 2021 | 1,023,956 |
| $ | 15.33 |
Granted | 407,910 |
|
| 13.49 |
Vested | (176,575) |
|
| 22.22 |
Forfeited or expired | (42,457) |
|
| 13.98 |
Restricted stock awards at October 30, 2021 | 1,212,834 |
| $ | 13.76 |
15
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 6 – STOCK BASED-COMPENSATION (CONTINUED):
The Company’s Amended and Restated Employee Stock Purchase Planallowseligiblefull-timeemployeesto purchase a limited
NOTE 7 –FAIR VALUE MEASUREMENTS:
The following tablesset forth information regardingthe Company’s financial assets and liabilities that are
|
|
|
|
| Quoted |
|
|
|
|
|
| |
|
|
|
|
| Prices in |
|
|
|
|
|
| |
|
|
|
|
| Active |
| Significant |
|
|
| ||
|
|
|
|
| Markets for |
| Other |
| Significant | |||
|
|
|
|
| Identical |
| Observable |
| Unobservable | |||
|
| October 30, 2021 |
| Assets |
| Inputs |
| Inputs | ||||
Description |
|
| Level 1 |
| Level 2 |
| Level 3 | |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
State/Municipal Bonds |
| $ | 31,104 |
| $ | 0 |
| $ | 31,104 |
| $ | 0 |
Corporate Bonds |
|
| 99,364 |
|
| 0 |
|
| 99,364 |
|
| 0 |
U.S. Treasury/Agencies Notes and Bonds |
|
| 22,388 |
|
| 0 |
|
| 22,388 |
|
| 0 |
Cash Surrender Value of Life Insurance |
|
| 11,759 |
|
| 0 |
|
| 0 |
|
| 11,759 |
Asset-backed Securities (ABS) |
|
| 21,920 |
|
| 0 |
|
| 21,920 |
|
| 0 |
Corporate Equities |
|
| 828 |
|
| 828 |
|
| 0 |
|
| 0 |
Commercial Paper |
|
| 1,344 |
|
| 0 |
|
| 1,344 |
|
| 0 |
Total Assets |
| $ | 188,707 |
| $ | 828 |
| $ | 176,120 |
| $ | 11,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation |
|
| (10,497) |
|
| 0 |
|
| 0 |
|
| (10,497) |
Total Liabilities |
| $ | (10,497) |
| $ | 0 |
| $ | 0 |
| $ | (10,497) |
|
|
|
|
|
|
|
|
|
|
|
|
|
16
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
|
|
|
|
| Quoted |
|
|
|
|
|
| |
|
|
|
|
| Prices in |
|
|
|
|
|
| |
|
|
|
|
| Active |
| Significant |
|
|
| ||
|
|
|
|
| Markets for |
| Other |
| Significant | |||
|
|
|
|
| Identical |
| Observable |
| Unobservable | |||
|
|
| January 30, 2021 |
| Assets |
| Inputs |
| Inputs | |||
Description |
|
|
| Level 1 |
| Level 2 |
| Level 3 | ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
State/Municipal Bonds |
| $ | 23,254 |
| $ | 0 |
| $ | 23,254 |
| $ | 0 |
Corporate Bonds |
|
| 67,566 |
|
| 0 |
|
| 67,566 |
|
| 0 |
U.S. Treasury/Agencies Notes and Bonds |
|
| 17,869 |
|
| 0 |
|
| 17,869 |
|
| 0 |
Cash Surrender Value of Life Insurance |
|
| 11,263 |
|
| 0 |
|
| 0 |
|
| 11,263 |
Asset-backed Securities (ABS) |
|
| 16,064 |
|
| 0 |
|
| 16,064 |
|
| 0 |
Corporate Equities |
|
| 703 |
|
| 703 |
|
| 0 |
|
| 0 |
Commercial Paper |
|
| 2,069 |
|
| 0 |
|
| 2,069 |
|
| 0 |
Total Assets |
| $ | 138,788 |
| $ | 703 |
| $ | 126,822 |
| $ | 11,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation |
|
| (10,316) |
|
| 0 |
|
| 0 |
|
| (10,316) |
Total Liabilities |
| $ | (10,316) |
| $ | 0 |
| $ | 0 |
| $ | (10,316) |
The Company’s investmentportfoliowas primarilyinvestedin corporatebonds and tax-exemptand taxable
Additionally,at May 1,October 30, 2021, theCompanyhad $
Level 1 categorysecuritiesare measuredat fair valueusing quotedactive marketprices.Level 2 investment
Deferredcompensationplan assetsconsistof life insurancepolicies.These lifeinsurancepoliciesare valued
17
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
fair valueof the underlyingassets anddiscountedcash flowand are thereforeclassifiedwithin Level3 of the
The following tables summarize the change infair value of theCompany’s financialassets and liabilities
| Fair Value | |
| Measurements Using | |
| Significant Unobservable | |
| Asset Inputs (Level 3) | |
| Cash Surrender Value | |
Beginning Balance at January 30, 2021 | $ | 11,263 |
Additions |
| 0 |
Total gains or (losses) |
|
|
Included in interest and other income (or changes in net assets) |
| 496 |
Included in other comprehensive income |
| 0 |
Ending Balance at October 30, 2021 | $ | 11,759 |
|
|
|
| Fair Value | |
| Measurements Using | |
| Significant Unobservable | |
| Liability Inputs (Level 3) | |
| Deferred Compensation | |
Beginning Balance at January 30, 2021 | $ | (10,316) |
Redemptions |
| 714 |
Additions |
| (245) |
Total (gains) or losses |
|
|
Included in interest and other income (or changes in net assets) |
| (650) |
Included in other comprehensive income |
| - |
Ending Balance at October 30, 2021 | $ | (10,497) |
18
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
| Fair Value | ||
| Measurements Using | ||
| Significant Unobservable |
| |
| Asset Inputs (Level 3) |
| |
| Cash Surrender Value |
| |
Beginning Balance at February 1, 2020 | $ | 10,517 |
|
Additions |
| 0 |
|
Total gains or (losses) |
|
|
|
Included in interest and other income (or changes in net assets) |
| 746 |
|
Included in other comprehensive income |
| 0 |
|
Ending Balance at January 30, 2021 | $ | 11,263 |
|
|
|
|
|
| Fair Value |
| |
| Measurements Using |
| |
| Significant Unobservable |
| |
| Liability Inputs (Level 3) |
| |
| Deferred Compensation |
| |
Beginning Balance at February 1, 2020 | $ | (10,391) |
|
Redemptions |
| 1,714 |
|
Additions |
| (652) |
|
Total (gains) or losses |
|
|
|
Included in interest and other income (or changes in net assets) |
| (987) |
|
Included in other comprehensive income |
| - |
|
Ending Balance at January 30, 2021 | $ | (10,316) |
|
19
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:
In March 2020,,the FASBissued ASU 2020-04,
NOTE 9 – INCOME TAXES:
The Company hadan effective taxrate for thefirst quarternine months of2021 of
NOTE 10 – COMMITMENTS AND CONTINGENCIES:
The Company is, from time to time, involved in routine litigation incidental to the conduct of its business,
Although such litigationis routine andincidental to the conductof the Company’sbusiness, as withany
NOTE 11 – REVENUE RECOGNITION:
The Companyrecognizes salesat thepoint ofpurchase whenthe customertakes possessionof the
20
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
are recordedas deferredrevenue untilthe customertakes possession of, or forfeits,the merchandise.Gift
The Company offersits own proprietary creditcard to customers.All credit activity isperformed by the
The following table provides information about receivables and May 2, 2020, respectively.
| Balance as of | ||||
|
| October 30, 2021 |
|
| January 30, 2021 |
|
|
|
|
|
|
Proprietary Credit Card Receivables, net | $ | 8,710 |
| $ | 9,606 |
Gift Card Liability | $ | 6,024 |
| $ | 8,155 |
21
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
NOTE 12 – LEASES:
The Companydetermines whetheran arrangementis alease atinception. TheCompany hasoperating
As mostof theCompany’s leasesdo notprovide animplicit rate,it the Company usesits estimatedincremental
The components of lease cost are shown below (in thousands):
| Three Months Ended | ||||
|
| October 30, 2021 |
|
| October 31, 2020 |
|
|
|
|
|
|
Operating lease cost (a) | $ | 17,509 |
| $ | 17,665 |
Variable lease cost (b) | $ | 660 |
| $ | 480 |
|
|
|
|
|
|
(a) Includes right-of-use asset amortization of ($0.4) million and ($0.8) million for the three months ended October 30, 2021 and October 31, 2020, respectively. | |||||
(b) Primarily related to monthly percentage rent for stores not presented on the condensed consolidated balance sheets. |
| Nine Months Ended | ||||
|
| October 30, 2021 |
|
| October 31, 2020 |
|
|
|
|
|
|
Operating lease cost (a) | $ | 51,569 |
| $ | 52,522 |
Variable lease cost (b) | $ | 2,153 |
| $ | 999 |
|
|
|
|
|
|
(a) Includes right-of-use asset amortization of ($2.1) million and ($3.5) million for the nine months ended October 30, 2021 and October 31, 2020, respectively. | |||||
(b) Primarily related to monthly percentage rent for stores not presented on the condensed consolidated balance sheets. |
22
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
Supplemental cash flow informationand non-cash activity relatedto the Company’soperating leases are
Operating cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
| October 30, 2021 |
| October 31, 2020 | ||
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities | $ | 16,485 |
| $ | 16,109 |
Non-cash activity: |
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations | $ | 1,705 |
| $ | (1,825) |
|
|
|
|
|
|
| Nine Months Ended | ||||
| October 30, 2021 |
| October 31, 2020 | ||
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities | $ | 48,158 |
| $ | 47,554 |
Non-cash activity: |
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations | $ | (23,718) |
| $ | 29,659 |
During the second quarter of 2021,
Weighted-average remaining lease term
| As of | ||
| October 30, 2021 |
| October 31, 2020 |
|
|
|
|
Weighted-average remaining lease term | 2.0 years |
| 2.7 years |
Weighted-average discount rate | 3.42% |
| 4.14% |
Maturities of lease liabilities by fiscal year for the Company’s operating leasesare
23
THE CATO CORPORATION |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020 |
Fiscal Year |
|
|
|
|
|
2021 (a) | $ | 16,110 |
2022 |
| 49,333 |
2023 |
| 36,478 |
2024 |
| 22,788 |
2025 |
| 12,456 |
Thereafter |
| 5,543 |
Total lease payments |
| 142,708 |
Less: Imputed interest |
| 7,839 |
Present value of lease liabilities | $ | 134,869 |
|
|
|
(a) Excluding the 9 months ended October 30, 2021. |
24
THE CATO CORPORATION |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL |
CONDITION AND RESULTS OF OPERATIONS |
FORWARD-LOOKING INFORMATION:
The followinginformation shouldbe readalong withthe unauditedCondensed ConsolidatedFinancial
25
THE CATO CORPORATION |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL |
CONDITION AND RESULTS OF OPERATIONS (CONTINUED) |
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
The Company’s accountingpoliciesare more fullydescribedin “Management’sDiscussionand Analysisof
The Company’scriticalaccountingpoliciesand estimatesare discussedwith theAudit Committee.
26
THE CATO CORPORATION |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL |
CONDITION AND RESULTS OF OPERATIONS (CONTINUED) |
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 |
|
| Nine Months Ended |
| ||||
| October 30, 2021 |
| October 31, 2020 |
|
| October 30, 2021 |
| October 31, 2020 |
|
Total retail sales | 100.0 | % | 100.0 | % |
| 100.0 | % | 100.0 | % |
Other revenue | 1.0 |
| 1.1 |
|
| 0.9 |
| 1.3 |
|
Total revenues | 101.0 |
| 101.1 |
|
| 100.9 |
| 101.3 |
|
Cost of goods sold (exclusive of depreciation) | 61.1 |
| 73.3 |
|
| 58.4 |
| 78.6 |
|
Selling, general and administrative (exclusive of depreciation) | 36.6 |
| 34.8 |
|
| 33.5 |
| 35.8 |
|
Depreciation | 1.9 |
| 2.4 |
|
| 1.6 |
| 2.7 |
|
Interest and other income | (0.3) |
| (0.5) |
|
| (0.3) |
| (0.9) |
|
Income (loss) before income taxes | 1.7 |
| (8.9) |
|
| 7.7 |
| (14.9) |
|
Net income (loss) | 5.0 |
| (2.4) |
|
| 7.4 |
| (9.5) |
|
27
THE CATO CORPORATION |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL |
CONDITION AND RESULTS OF OPERATIONS (CONTINUED) |
RESULTS OF OPERATIONS(CONTINUED)
COVID-19Update
The COVID-19 pandemic adverselyimpacted the Company's business,financial condition and operating
The extentto whichthe COVID-19COVID-19 pandemicultimately impactsthe Company’sbusiness, financial
While the Company currently anticipates a continuation of the adverse impactsof COVID-19 during 2021
Comparisonof First Quarterofthe Three and Nine Months ended October 30, 2021with October 31, 2020
Total retail sales for the firstthird quarterwere $211.2$170.5 millioncomparedto last year’s firstthird quartersales of $98.8
28
THE CATO CORPORATION |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL |
CONDITION AND RESULTS OF OPERATIONS (CONTINUED) |
$414.3 million, a 42% increase. Sales in the first nine months of fiscal 2021 increased primarily due to a 41% increase in same-store sales and sales from new stores, partially offset by permanently closed stores in 2020. Same-store sales for the nine months ended October 30, 2021 increased primarily due to stores being open in the first nine months of 2021 as opposed to closed fromMarch 19, 2020through into the end ofthe firstsecond quarter of2020. Same store 2020. Same-store sales
Credit revenueof $0.5millionrepresented0.3% oftotal revenuesin the firstthird quarterof fiscal2021, compared
Other revenuea componentof in total, as included in total revenues,was $1.9$1.7 million and $5.3 million for the firstquarterof fiscalthree and nine months ended October 30, 2021, respectively, compared
Cost of goodssold was $123.7$104.2 million,or 58.5% of retailsales for thefirst quarterof fiscal 2021,compared
Selling,generaland administrativeexpenses(“SG&A”)primarilyincludecorporateand storepayroll,related
29
THE CATO CORPORATION |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL |
CONDITION AND RESULTS OF OPERATIONS (CONTINUED) |
expenseswere 29.9%$62.5 million, or 36.6% of retail sales and $196.7 million, or 33.5% of retail sales for the third quarter and first nine months of fiscal 2021, respectively, compared to $51.9 million, or 34.8% of retail sales and $148.4 million, or 35.8% of retail sales for the prior year’s comparable three and nine month periods. The overall increase in SG&A expense for the third quarter is primarily due to increased employee benefit/bonus expense and store operating expenses as store operating hours have increased substantially compared to the prior year’s phased store reopening following the extended store closure due to COVID-19, partially offset by a decrease in insurance expense. For the first nine months of fiscal 2021, the overall increase in SG&A expense was primarily attributable to increased employee benefit/bonus expense and store operating expenses as operating hours have increased substantially compared to the prior year’s phased store reopening following the extended store closure due to COVID-19, partially offset by a $5.3 million non-cash impairment charge in 2020.
Depreciation expense was $3.2 million, or 1.9% of retail sales and $9.4 million, or 1.6% of retail sales for the third quarter and first nine months of fiscal 2021, respectively, compared to $3.6 million, or 2.4% of retail sales and $11.1 million or 2.7% of retail sales for the comparable three and nine month periods of fiscal 2020, respectively. The decrease in depreciation expense is attributable to lower net fixed assets primarily due to $13.7 million of impairment charges in 2020.
Interest and other income was $0.5 million, or 0.3% of retail sales and $1.7 million, or 0.3% of retail sales for the three and nine months ended October 30, 2021, respectively, compared to $0.8 million, or 0.5% of retail sales and $3.6 million, or 0.9% of retail sales for the comparable three and nine month periods of fiscal 2020, respectively. The decrease for the first quarternine months of fiscal 2021 comparedto 53.1%2020 is primarily attributable to lower interest rates and smaller gains from the sale of retail sales in
Income tax benefit was $3.0$5.7 millionor 1.4%of retailsales forthe firstquarterof fiscal2021, comparedto
LIQUIDITY, CAPITALRESOURCESAND MARKETRISK:
The Company believesthat its cash, cash equivalentsand short-terminvestments,togetherwith cash flows
Cash provided by operating activities during the first nine months of fiscal 2021 was $79.4 million as compared to $26.1 million used in the first nine months of fiscal 2020. Cash provided by operating activities for the firstthree nine months of fiscal 2021 wasprimarilygeneratedby
30
THE CATO CORPORATION |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL |
CONDITION AND RESULTS OF OPERATIONS (CONTINUED) |
At May 1,October 30, 2021,the Companyhad workingcapitalof $130.5$147.4 millioncomparedto $108.6millionat January
At May 1,October 30, 2021 and January 30,2021, the Company had an unsecuredrevolving credit agreement, which
Expenditures for property and January30, 2021,the Companyhad no outstandinglettersof creditrelatingto purchase
Net cashused byinvestingactivitiestotaled$34.2 $51.3 millionin the firstthree nine monthsof fiscal2021 comparedto
Net cash used in financing activities totaled $21.3 million in the first nine months of fiscal 2021 compared to $24.3 million used in the comparable period of fiscal 2020,2020. The decrease was primarilydue to adecreasein the sale of
As of May1,October 30, 2021, theCompanyhad 1,445,488872,513 shares remaining in openauthorizationsunder its share
On November 18, 2021, the Board of Directors maintained the quarterly dividend at $0.17 per share.
The Companydoes notuse derivative financial instruments.
The Company’s investmentportfoliowas primarilyinvestedin corporatebonds and tax-exemptand taxable
31
THE CATO CORPORATION |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL |
CONDITION AND RESULTS OF OPERATIONS (CONTINUED) |
Additionally,at May 1,October 30, 2021,the Companyhad $0.8millionof corporateequitiesand deferredcompensation
See Note7, FairValue Measurements.
RECENT ACCOUNTING PRONOUNCEMENTS:
See Note 8, Recent Accounting Pronouncements.
32
THE CATO CORPORATION |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 3. QUANTITATIVEAND QUALITATIVEDISCLOSURES ABOUT MARKET RISK:
The Companyis subjectto marketrate riskfrom exposureto changesin interestrates basedon its
ITEM 4. CONTROLS AND PROCEDURES:
We carried outan evaluation,with theparticipationof our PrincipalExecutiveOfficerand PrincipalFinancial
CHANGESIN INTERNALCONTROLOVER FINANCIALREPORTING:
No changein the Company’sinternalcontrolover financialreporting(as (as definedin ExchangeAct Rule13a-
33
THE CATO CORPORATION
PARTII OTHERINFORMATION
ITEM 1.LEGAL PROCEEDINGS:
Not Applicable
ITEM 1A.RISK FACTORS:
In additionto the otherinformationin thisreport,you shouldcarefullyconsiderthe factorsdiscussedin PartI,
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIESAND USE OF PROCEEDS:
The following table summarizes the Company’s purchases of its common stock for the three months
ISSUERPURCHASESOF EQUITY SECURITIES
|
|
|
|
|
|
| Total Number of |
| Maximum Number |
|
|
|
|
|
|
| Shares Purchased as |
| (or Approximate Dollar |
|
| Total Number |
|
| Average |
| Part of Publicly |
| Value) of Shares that may |
Fiscal |
| of Shares |
|
| Price Paid |
| Announced Plans or |
| Yet be Purchased Under |
Period |
| Purchased |
|
| per Share (1) |
| Programs (2) |
| The Plans or Programs (2) |
August 2021 |
| 184,319 |
| $ | 16.66 |
| 184,319 |
|
|
September 2021 |
| 209,497 |
|
| 16.59 |
| 209,497 |
|
|
October 2021 |
| 114,450 |
|
| 16.87 |
| 114,450 |
|
|
Total |
| 508,266 |
| $ | 16.68 |
| 508,266 |
| 872,513 |
(1)
(2)
ITEM 3.DEFAULTSUPON SENIOR SECURITIES:
Not Applicable
34
THE CATO CORPORATION
PARTII OTHERINFORMATION
ITEM 4.MINE SAFETY DISCLOSURES:
Not Applicable
ITEM 5.OTHER INFORMATION:
Not Applicable
ITEM 6.EXHIBITS:
Exhibit No. | Item | |
3.1 | ||
3.2 | ||
31.1* | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. | |
31.2* | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. | |
32.1* | ||
32.2* | ||
101.1* | The following materials from Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 30, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three Months and Nine Months Ended October 30, 2021 and October 31, 2020; (ii) Condensed Consolidated Balance Sheets at October 30, 2021 and January 30, 2021; (iii) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 30, 2021 and October 31, 2020; (iv) Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended October 30, 2021 and October 31, 2020; 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*) | |
and Restated Certificate of
Incorporation,
35
THE CATO CORPORATION
PARTII OTHERINFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registranthas duly caused this
THE CATOCORPORATION
November 19, 2021 | /s/ John P. D. Cato | |
Date | John P. D. Cato Chairman, President and Chief Executive Officer | |
November 19, 2021 | /s/ John R. Howe | |
Date | John R. Howe Executive Vice President Chief Financial Officer |
36