##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended      July 30, 2005ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition
period from
____________ to ____________
 1-31340
 THE CATO CORPORATION
 
  Delaware
    
    56-0484485(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
  
 
  
   
 
  þ o
  þ o




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##### 



THE CATO CORPORATION
 FORM 10-Q
 July 30, 2005
 Table of Contents
 PageNo.PART I  FINANCIAL INFORMATION (UNAUDITED)Item 1. Financial Statements:Condensed Consolidated Statements of Income
    
    
    2For the Three Months and Six Months Ended
July 30, 2005 and July 31, 2004 (restated)Condensed Consolidated Balance Sheets
    
    
    3At July 30, 2005, July 31, 2004 (restated) and January 29, 2005Condensed Consolidated Statements of Cash Flows
    
    
    4For the Six Months Ended July 30, 2005 and July 31, 2004 (restated)Notes to Condensed Consolidated Financial Statements
    
    
    510For the Three Months and Six Months Ended
July 30, 2005 and July 31, 2004 (restated)Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    1115Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    16PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3. Defaults upon Senior Securities
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    17Signatures
    
    
    18-22




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##### 



PART I FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 THE CATO CORPORATION
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended
    
    
    Six Months EndedJuly 30,
    
    
    July 31,
    
    
    July 30,
    
    
    July 31,2005
    
    
    2004
    
    
    2005
    
    
    2004(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)(Restated)
    
    
    
    
    
    
    (Restated)(Dollars in thousands, except per share data)REVENUESRetail sales
    
    $
    208,316
    
    
    $
    197,068
    
    
    $
    423,380
    
    
    $
    402,261Other income (principally finance charges, late fees and
layaway charges)
    
    
    3,648
    
    
    
    3,816
    
    
    
    7,511
    
    
    
    7,824Total revenues
    
    
    211,964
    
    
    
    200,884
    
    
    
    430,891
    
    
    
    410,085COSTS AND EXPENSES, NETCost of goods sold
    
    
    140,426
    
    
    
    136,185
    
    
    
    276,860
    
    
    
    268,583Selling, general and administrative
    
    
    50,765
    
    
    
    47,320
    
    
    
    100,097
    
    
    
    93,116Depreciation
    
    
    5,025
    
    
    
    5,091
    
    
    
    10,064
    
    
    
    10,070Interest expense
    
    
    10
    
    
    
    167
    
    
    
    162
    
    
    
    329Interest and other income
    
    
    (1,071
    )
    
    
    (656
    )
    
    
    (2,012
    )
    
    
    (1,162
    )195,155
    
    
    
    188,107
    
    
    
    385,171
    
    
    
    370,936Income before income taxes
    
    
    16,809
    
    
    
    12,777
    
    
    
    45,720
    
    
    
    39,149Income tax expense
    
    
    6,102
    
    
    
    4,638
    
    
    
    16,596
    
    
    
    14,211Net Income
    
    $
    10,707
    
    
    $
    8,139
    
    
    $
    29,124
    
    
    $
    24,938Basic earnings per share
    
    $
    0.34
    
    
    $
    0.26
    
    
    $
    0.94
    
    
    $
    0.81Basic weighted average shares
    
    
    31,188,146
    
    
    
    30,772,526
    
    
    
    31,146,236
    
    
    
    30,791,747Diluted earnings per share
    
    $
    0.34
    
    
    $
    0.26
    
    
    $
    0.92
    
    
    $
    0.80Diluted weighted average shares
    
    
    31,828,039
    
    
    
    31,320,047
    
    
    
    31,811,183
    
    
    
    31,336,248Dividends per share
    
    $
    .13
    
    
    $
    .117
    
    
    $
    .247
    
    
    $
    .223Comprehensive income:Net income
    
    $
    10,707
    
    
    $
    8,139
    
    
    $
    29,124
    
    
    $
    24,938Unrealized gains (losses) on available-for-sale securities, net
of deferred income tax liability or benefit
    
    
    70
    
    
    
    (112
    )
    
    
    30
    
    
    
    73Net comprehensive income
    
    $
    10,777
    
    
    $
    8,027
    
    
    $
    29,154
    
    
    $
    25,011
  2




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##### 



THE CATO CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 July 30,
    
    
    July 31,
    
    
    January 29,2005
    
    
    2004
    
    
    2005(Unaudited)
    
    
    (Unaudited)(Restated)(Dollars in thousands)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    23,884
    
    
    $
    29,439
    
    
    $
    18,640Short-term investments
    
    
    86,140
    
    
    
    76,494
    
    
    
    88,588Accounts receivable, net of allowance for doubtful accounts of $5,955,
$6,214 and $6,122 at July 30, 2005, July 31, 2004 and January 29,
2005, respectively
    
    
    48,229
    
    
    
    50,260
    
    
    
    50,889Merchandise inventories
    
    
    84,904
    
    
    
    86,355
    
    
    
    100,538Deferred income taxes
    
    
    5,764
    
    
    
    4,955
    
    
    
    5,781Prepaid expenses
    
    
    2,180
    
    
    
    5,804
    
    
    
    1,986Total Current Assets
    
    
    251,101
    
    
    
    253,307
    
    
    
    266,422Property and equipment  net
    
    
    118,599
    
    
    
    114,783
    
    
    
    117,590Other assets
    
    
    10,818
    
    
    
    10,194
    
    
    
    10,122Total Assets
    
    $
    380,518
    
    
    $
    378,284
    
    
    $
    394,134LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    64,272
    
    
    $
    68,527
    
    
    $
    82,828Accrued expenses
    
    
    38,112
    
    
    
    33,738
    
    
    
    39,338Accrued income taxes
    
    
    10,252
    
    
    
    10,875
    
    
    
    4,465Current portion of long-term debt
    
    
    3⁄4
    
    
    
    6,000
    
    
    
    6,000Total Current Liabilities
    
    
    112,636
    
    
    
    119,140
    
    
    
    132,631Deferred income taxes
    
    
    10,172
    
    
    
    10,203
    
    
    
    10,172Long-term debt
    
    
    3⁄4
    
    
    
    18,500
    
    
    
    16,000Other noncurrent liabilities (primarily deferred rent)
    
    
    23,732
    
    
    
    24,428
    
    
    
    24,156Commitments and contingencies:Stockholders Equity:Preferred stock, $100 par value per share, 100,000 shares authorized,
none issued
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4Class A common stock, $.033 par value per share, 50,000,000
shares authorized; issued 30,650,431 shares, 26,147,346 shares
and 26,249,178 shares at July 30, 2005, July 31, 2004 and
January 29, 2005, respectively
    
    
    1,021
    
    
    
    871
    
    
    
    875Convertible Class B common stock, $.033 par value per share,
15,000,000 shares authorized; issued 5,597,834 shares,
at July 30, 2005, July 31, 2004 and January 29, 2005,
respectively
    
    
    187
    
    
    
    187
    
    
    
    187Additional paid-in capital
    
    
    37,635
    
    
    
    101,134
    
    
    
    103,366Retained earnings
    
    
    286,890
    
    
    
    262,854
    
    
    
    265,499Accumulated other comprehensive income
    
    
    101
    
    
    
    131
    
    
    
    71Unearned compensation  restricted stock awards
    
    
    (569
    )
    
    
    (1,252
    )
    
    
    (911
    )325,265
    
    
    
    363,925
    
    
    
    369,087Less Class A and Class B common stock in treasury, at cost (231
Class A and 4,907,309 Class B shares at July 30, 2005, and
5,906,179 Class A and 5,137,484 Class B at July 31, 2004 and
January 29, 2005)
    
    
    (91,287
    )
    
    
    (157,912
    )
    
    
    (157,912
    )Total Stockholders Equity
    
    
    233,978
    
    
    
    206,013
    
    
    
    211,175Total Liabilities and Stockholders Equity
    
    $
    380,518
    
    
    $
    378,284
    
    
    $
    394,134
  3




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##### 



THE CATO CORPORATION
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJuly 30,
    
    
    July 31,2005
    
    
    2004(Unaudited)
    
    
    (Unaudited)(Restated)(Dollars in thousands)OPERATING ACTIVITIESNet income
    
    $
    29,124
    
    
    $
    24,938Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    10,064
    
    
    
    10,070Provision for doubtful accounts
    
    
    2,443
    
    
    
    2,669Deferred income taxes
    
    
    17
    
    
    
    42Compensation expense related to restricted stock awards
    
    
    341
    
    
    
    341Loss on disposal of property and equipment
    
    
    690
    
    
    
    1,363Changes in operating assets and liabilities which provided
(used) cash:Accounts receivable
    
    
    217
    
    
    
    (215
    )Merchandise inventories
    
    
    15,634
    
    
    
    10,937Prepaid and other assets
    
    
    (890
    )
    
    
    (484
    )Accrued income taxes
    
    
    5,787
    
    
    
    6,369Accounts payable, accrued expenses and other liabilities
    
    
    (24,485
    )
    
    
    (4,292
    )Net cash provided by operating activities
    
    
    38,942
    
    
    
    51,738INVESTING ACTIVITIESExpenditures for property and equipment
    
    
    (11,684
    )
    
    
    (11,765
    )Purchases of short-term investments
    
    
    (44,877
    )
    
    
    (42,651
    )Sales of short-term investments
    
    
    47,355
    
    
    
    13,775Net cash used in investing activities
    
    
    (9,206
    )
    
    
    (40,641
    )FINANCING ACTIVITIESCash overdrafts included in accounts payable
    
    
    4,200
    
    
    
    2,900Dividends paid
    
    
    (7,734
    )
    
    
    (6,877
    )Purchase of treasury stock
    
    
    (5
    )
    
    
    3⁄4Payments to settle long term debt
    
    
    (22,000
    )
    
    
    (3,000
    )Proceeds from employee stock purchase plan
    
    
    230
    
    
    
    226Proceeds from stock options exercised
    
    
    817
    
    
    
    1,236Net cash used in financing activities
    
    
    (24,492
    )
    
    
    (5,515
    )Net increase in cash and cash equivalents
    
    
    5,244
    
    
    
    5,582Cash and cash equivalents at beginning of period
    
    
    18,640
    
    
    
    23,857Cash and cash equivalents at end of period
    
    $
    23,884
    
    
    $
    29,439
  4




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2005
AND JULY 31, 2004 (UNAUDITED)
 
 NOTE 1  GENERAL:
    Accounting for Leases, Issues Relating to Accounting for Leases, Accounting for Operating Leases with Scheduled Rent
Increases.
 5




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2005
AND JULY 31, 2004 (UNAUDITED)
 
 NOTE 1  GENERAL (CONTINUED):
  As PreviouslyReported
    
    
    
    
    
    
    As RestatedJuly 31,
    
    
    
    
    
    
    July 31,2004
    
    
    Adjustments
    
    
    2004Deferred
income taxes
    
    $
    243
    
    
    $
    4,712
    
    
    $
    4,955Total Current Assets
    
    
    248,595
    
    
    
    4,712
    
    
    
    253,307Total Assets
    
    
    373,572
    
    
    
    4,712
    
    
    
    378,284Accrued expenses
    
    
    33,832
    
    
    
    (94
    )
    
    
    33,738Accrued income tax
    
    
    10,693
    
    
    
    182
    
    
    
    10,875Total Current Liabilities
    
    
    119,052
    
    
    
    88
    
    
    
    119,140Other noncurrent liabilities
    
    
    11,709
    
    
    
    12,719
    
    
    
    24,428Total Liabilities
    
    
    159,464
    
    
    
    12,807
    
    
    
    172,271Retained earnings
    
    
    270,949
    
    
    
    (8,095
    )
    
    
    262,854Total Stockholders Equity
    
    
    214,108
    
    
    
    (8,095
    )
    
    
    206,013Total Liabilities and
Stockholders Equity
    
    $
    373,572
    
    
    $
    4,712
    
    
    $
    378,284
 Three Months Ended
    
    
    Six Months EndedAs Previously
    
    
    
    
    
    
    
    
    
    
    As PreviouslyReported
    
    
    
    
    
    
    As Restated
    
    
    Reported
    
    
    
    
    
    
    As RestatedJuly 31,
    
    
    
    
    
    
    July 31,
    
    
    July 31,
    
    
    
    
    
    
    July 31,2004
    
    
    Adjustments
    
    
    2004
    
    
    2004
    
    
    Adjustments
    
    
    2004Revenues
    
    $
    200,884
    
    
    $
    0
    
    
    $
    200,884
    
    
    $
    410,085
    
    
    $
    0
    
    
    $
    410,085Cost of Goods Sold
    
    
    136,051
    
    
    
    134
    
    
    
    136,185
    
    
    
    268,395
    
    
    
    188
    
    
    
    268,583Selling, general and
administrative
    
    
    47,387
    
    
    
    (67
    )
    
    
    47,320
    
    
    
    93,210
    
    
    
    (94
    )
    
    
    93,116Income before taxes
    
    
    12,844
    
    
    
    (67
    )
    
    
    12,777
    
    
    
    39,243
    
    
    
    (94
    )
    
    
    39,149Income tax provision
    
    
    4,662
    
    
    
    (24
    )
    
    
    4,638
    
    
    
    14,245
    
    
    
    (34
    )
    
    
    14,211Net income (loss)
    
    $
    8,182
    
    
    $
    (43
    )
    
    $
    8,139
    
    
    $
    24,998
    
    
    $
    (60
    )
    
    $
    24,938Basic earnings per share
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    0.26
    
    
    $
    0.81
    
    
    $
    
    
    
    $
    0.81Diluted earnings per share
    
    $
    0.26
    
    
    $
    
    
    
    $
    0.26
    
    
    $
    0.80
    
    
    $
    
    
    
    $
    0.80
 6




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2005
AND JULY 31, 2004 (UNAUDITED)
 
 NOTE 1  GENERAL (CONTINUED):
        7




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2005
AND JULY 31, 2004 (UNAUDITED)
 
 NOTE 2  EARNINGS PER SHARE:
  Three Months Ended
    
    
    Six Months EndedJuly 30,
    
    
    July 31,
    
    
    July 30,
    
    
    July 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Weighted-average shares outstanding
    
    
    31,188,146
    
    
    
    30,772,526
    
    
    
    31,146,236
    
    
    
    30,791,747Dilutive effect of stock options
    
    
    639,893
    
    
    
    547,521
    
    
    
    664,947
    
    
    
    544,501Weighted-average shares and common
stock equivalents (stock options)
outstanding
    
    
    31,828,039
    
    
    
    31,320,047
    
    
    
    31,811,183
    
    
    
    31,336,248
 NOTE 3  SUPPLEMENTAL CASH FLOW INFORMATION:
  NOTE 4  FINANCING ARRANGEMENTS:
     8




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2005
AND JULY 31, 2004 (UNAUDITED)
 
 NOTE 5  REPORTABLE SEGMENT INFORMATION:
   Three Months Ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJuly 30, 2005
    
    Retail
    
    
    Credit
    
    
    Total
    
    
    July 30, 2005
    
    
    Retail
    
    
    Credit
    
    
    TotalRevenues
    
    $
    208,706
    
    
    $
    3,258
    
    
    $
    211,964
    
    
    Revenues
    
    $
    424,296
    
    
    $
    6,595
    
    
    $
    430,891Depreciation
    
    
    4,996
    
    
    
    29
    
    
    
    5,025
    
    
    Depreciation
    
    
    10,006
    
    
    
    58
    
    
    
    10,064Interest and other income
    
    
    (1,071
    )
    
    
    
    
    
    
    (1,071
    )
    
    Interest and other income
    
    
    (2,012
    )
    
    
    
    
    
    
    (2,012
    )Income before taxes
    
    
    15,567
    
    
    
    1,242
    
    
    
    16,809
    
    
    Income before taxes
    
    
    43,393
    
    
    
    2,327
    
    
    
    45,720Total assets
    
    
    315,492
    
    
    
    65,026
    
    
    
    380,518
    
    
    Total assets
    
    
    315,492
    
    
    
    65,026
    
    
    
    380,518Capital expenditures
    
    
    4,951
    
    
    
    2
    
    
    
    4,953
    
    
    Capital expenditures
    
    
    11,682
    
    
    
    2
    
    
    
    11,684Three Months Ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJuly 31, 2004
    
    Retail
    
    
    Credit
    
    
    Total
    
    

July 31, 2004
    
    
    Retail
    
    
    Credit
    
    
    Total(Restated)
    
    
    
    
    
    (Restated)
    
    


    
    
    (Restated)
    
    
    
    
    
    (Restated)Revenues
    
    $
    197,359
    
    
    $
    3,525
    
    
    $
    200,884
    
    
    Revenues
    
    $
    403,050
    
    
    $
    7,035
    
    
    $
    410,085Depreciation
    
    
    5,072
    
    
    
    19
    
    
    
    5,091
    
    
    Depreciation
    
    
    10,031
    
    
    
    39
    
    
    
    10,070Interest and other income
    
    
    (656
    )
    
    
    
    
    
    
    (656
    )
    
    Interest and other income
    
    
    (1,162
    )
    
    
    
    
    
    
    (1,162
    )Income before taxes
    
    
    11,466
    
    
    
    1,311
    
    
    
    12,777
    
    
    Income before taxes
    
    
    36,729
    
    
    
    2,420
    
    
    
    39,149Total assets
    
    
    315,697
    
    
    
    62,587
    
    
    
    378,284
    
    
    Total assets
    
    
    315,697
    
    
    
    62,587
    
    
    
    378,284Capital expenditures
    
    
    4,699
    
    
    
    83
    
    
    
    4,782
    
    
    Capital expenditures
    
    
    11,680
    
    
    
    85
    
    
    
    11,765
   Three Months Ended
    
    
    Six Months EndedJuly 30,
    
    
    July 31,
    
    
    July 30,
    
    
    July 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Bad debt expense
    
    $
    1,179
    
    
    $
    1,247
    
    
    $
    2,443
    
    
    $
    2,669Payroll
    
    
    254
    
    
    
    294
    
    
    
    550
    
    
    
    572Postage
    
    
    292
    
    
    
    260
    
    
    
    597
    
    
    
    576Other expenses
    
    
    262
    
    
    
    394
    
    
    
    620
    
    
    
    759Total expenses
    
    $
    1,987
    
    
    $
    2,195
    
    
    $
    4,210
    
    
    $
    4,576
 9




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 30, 2005
AND JULY 31, 2004 (UNAUDITED)
 
 NOTE 6  STOCK OPTIONS:
 
 Three Months Ended
    
    
    Six Months EndedJuly 30,
    
    
    July 31,
    
    
    July 30,
    
    
    July 31,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Net Income as Reported
    
    $
    10,707
    
    
    $
    8,139
    
    
    $
    29,124
    
    
    $
    24,938Add: Stock-Based employee compensation expense
included in reported net income, net of related tax
effects
    
    
    109
    
    
    
    109
    
    
    
    217
    
    
    
    217Deduct: Total stock-based employee compensation
expense determined under fair value based method for
all awards, net of related tax effects
    
    
    (130
    )
    
    
    (118
    )
    
    
    (258
    )
    
    
    (248
    )Pro forma Net Income
    
    $
    10,686
    
    
    $
    8,130
    
    
    $
    29,083
    
    
    $
    24,907Earnings per share:Basic  as reported
    
    $
    .34
    
    
    $
    .26
    
    
    $
    .94
    
    
    $
    .81Basic  pro forma
    
    $
    .34
    
    
    $
    .26
    
    
    $
    .93
    
    
    $
    .81Diluted  as reported
    
    $
    .34
    
    
    $
    .26
    
    
    $
    .92
    
    
    $
    .80Diluted  pro forma
    
    $
    .34
    
    
    $
    .26
    
    
    $
    .91
    
    
    $
    .79
 NOTE 7  RECENT ACCOUNTING PRONOUNCEMENTS:
  10




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##### 



THE CATO CORPORATION  ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS
 
 RESULTS OF OPERATIONS:
  Three Months Ended
    
    
    Six Months EndedJuly 30,
    
    
    July 31,
    
    
    July 30,
    
    
    July 31,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Total retail sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Total revenues
    
    
    101.7
    
    
    
    101.9
    
    
    
    101.8
    
    
    
    101.9Cost of goods sold
    
    
    67.4
    
    
    
    69.1
    
    
    
    65.4
    
    
    
    66.8Selling, general and administrative
    
    
    24.4
    
    
    
    24.0
    
    
    
    23.6
    
    
    
    23.1Depreciation
    
    
    2.4
    
    
    
    2.5
    
    
    
    2.4
    
    
    
    2.5Interest expense
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Interest and other income
    
    
    (0.5
    )
    
    
    (0.3
    )
    
    
    (0.4
    )
    
    
    (0.3
    )Income before income taxes
    
    
    8.0
    
    
    
    6.5
    
    
    
    10.8
    
    
    
    9.7Net income
    
    
    5.1
    
    
    
    4.1
    
    
    
    6.9
    
    
    
    6.2
 Comparison of Second Quarter and First Six Months of 2005 with 2004.
   11




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##### 



THE CATO CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
 RESULTS OF OPERATIONS  (CONTINUED):
     12




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##### 



THE CATO CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
 RESULTS OF OPERATIONS  (CONTINUED):
     LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK:
   13




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##### 



THE CATO CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
 LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK (CONTINUED):
         14




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##### 



THE CATO CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
 LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK (CONTINUED):
   15




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##### 



THE CATO CORPORATION  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
  FORWARD LOOKING STATEMENTS:
  ITEM 4. CONTROLS AND PROCEDURES:
  CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTS:
  16




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##### 



PART II OTHER INFORMATION
 THE CATO CORPORATION
 ITEM 1. LEGAL PROCEEDINGS
 None
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 In connection with the stock split effected June 27, 2005, the Company repurchased 231 shares
of Class A Common Stock by paying cash for fractional shares.
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 None
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 Following are the results of the matters voted upon at the Companys Annual Meeting which was
held on May 26, 2005.
 Election of Directors:For
    
    Withheld
    
    Voting Power For
    
    Voting Power WithheldMr. Robert W. Bradshaw, Jr.
    
    
    11,596,527
    
    
    
    8,450,838
    
    
    
    15,739,677
    
    
    
    8,450,838Mr. Grant L. Hamrick
    
    
    19,468,553
    
    
    
    578,812
    
    
    
    23,611,703
    
    
    
    578,812Mr. Michael O. Moore
    
    
    18,824,521
    
    
    
    1,222,844
    
    
    
    22,967,671
    
    
    
    1,222,844Ratification of
Independent Auditor:For
    
    Withheld
    
    Voting Power For
    
    Voting Power Withheld19,741,951
    
    
    
    305,414
    
    
    
    23,885,101
    
    
    
    305,414
 ITEM 5. OTHER INFORMATION
 None
 ITEM 6. EXHIBITS
 (A)
 Exhibit No.
    
    Item3.1
    
    Registrants Restated Certificate of Incorporation of the
Registrant dated March 6, 1987, incorporated by reference to Form
S-8 of the Registrant filed February 7, 2000.3.2
    
    Registrants By Laws, incorporated by reference to Form S-8 of
the Registrant Filed February 7, 2000.31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.32.1
    
    Section 1350 Certification of Chief Executive Officer.32.2
    
    Section 1350 Certification of Chief Financial Officer.
 17




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##### 



PART II OTHER INFORMATION
 THE CATO CORPORATION
 
 THE CATO CORPORATIONSeptember 7, 2005
    
    /s/ John P. Derham CatoDate
    
    John P. Derham Cato
Chairman, President and
Chief Executive OfficerSeptember 7, 2005
    
    /s/ Michael O. MooreDate
    
    Michael O. Moore
Executive Vice President
Chief Financial Officer and SecretarySeptember 7, 2005
    
    /s/ Robert M. SandlerDate
    
    Robert M. Sandler
Senior Vice President
Controller
 18