##### 



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 1934
 For the quarterly period ended October 29, 2005
 OR
 o
    
    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
  Delaware
    
    56-0484485(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
  
 
  
 
  þ o
  þ o
  o þ




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##### 



THE CATO CORPORATION
 FORM 10-Q
 October 29, 2005
 Table of Contents
 PageNo.PART I  FINANCIAL INFORMATION (UNAUDITED)Item 1. Financial Statements:Condensed Consolidated Statements of Income
    
    
    2For the Three Months and Nine Months Ended
October 29, 2005 and October 30, 2004 (restated)Condensed Consolidated Balance Sheets
    
    
    3At October 29, 2005, October 30, 2004 (restated) and January 29, 2005Condensed Consolidated Statements of Cash Flows
    
    
    4For the Nine Months Ended October 29, 2005 and October 30, 2004 (restated)Notes to Condensed Consolidated Financial Statements
    
    
    510For the Three Months and Nine Months Ended
October 29, 2005 and October 30, 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
    
    
    Nine Months EndedOctober 29,
    
    
    October 30,
    
    
    October 29,
    
    
    October 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)(Restated)
    
    
    
    
    
    
    (Restated)(Dollars in thousands, except per share data)REVENUESRetail sales
    
    $
    177,762
    
    
    $
    163,611
    
    
    $
    601,142
    
    
    $
    565,873Other income (principally finance charges, late fees and
layaway charges)
    
    
    3,592
    
    
    
    3,903
    
    
    
    11,103
    
    
    
    11,727Total revenues
    
    
    181,354
    
    
    
    167,514
    
    
    
    612,245
    
    
    
    577,600COSTS AND EXPENSES, NETCost of goods sold
    
    
    119,869
    
    
    
    115,640
    
    
    
    396,729
    
    
    
    384,224Selling, general and administrative
    
    
    51,231
    
    
    
    44,402
    
    
    
    151,328
    
    
    
    137,518Depreciation
    
    
    5,094
    
    
    
    5,140
    
    
    
    15,158
    
    
    
    15,210Interest expense
    
    
    10
    
    
    
    183
    
    
    
    172
    
    
    
    512Interest and other income
    
    
    (1,235
    )
    
    
    (676
    )
    
    
    (3,247
    )
    
    
    (1,838
    )174,969
    
    
    
    164,689
    
    
    
    560,140
    
    
    
    535,626Income before income taxes
    
    
    6,385
    
    
    
    2,825
    
    
    
    52,105
    
    
    
    41,974Income tax expense
    
    
    2,318
    
    
    
    1,025
    
    
    
    18,914
    
    
    
    15,236Net Income
    
    $
    4,067
    
    
    $
    1,800
    
    
    $
    33,191
    
    
    $
    26,738Basic earnings per share
    
    $
    0.13
    
    
    $
    0.06
    
    
    $
    1.07
    
    
    $
    0.87Basic weighted average shares
    
    
    31,126,752
    
    
    
    30,913,685
    
    
    
    31,139,741
    
    
    
    30,832,394Diluted earnings per share
    
    $
    0.13
    
    
    $
    0.06
    
    
    $
    1.04
    
    
    $
    0.85Diluted weighted average shares
    
    
    31,771,535
    
    
    
    31,451,004
    
    
    
    31,798,500
    
    
    
    31,376,973Dividends per share
    
    $
    0.13
    
    
    $
    0.117
    
    
    $
    0.377
    
    
    $
    0.34Comprehensive income:Net income
    
    $
    4,067
    
    
    $
    1,800
    
    
    $
    33,191
    
    
    $
    26,738Unrealized gains (losses) on available-for-sale securities, net
of deferred income tax liability or benefit
    
    
    (20
    )
    
    
    (29
    )
    
    
    10
    
    
    
    44Net comprehensive income
    
    $
    4,047
    
    
    $
    1,771
    
    
    $
    33,201
    
    
    $
    26,782
  2




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##### 



THE CATO CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 October 29,
    
    
    October 30,
    
    
    January 29,2005
    
    
    2004
    
    

2005(Unaudited)
    
    
    (Unaudited)(Restated)(Dollars in thousands)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    18,288
    
    
    $
    27,560
    
    
    $
    18,640Short-term investments
    
    
    75,107
    
    
    
    63,323
    
    
    
    88,588Accounts receivable, net of allowance for doubtful accounts of $4,187,
$6,223 and $6,122 at October 29, 2005, October 30, 2004 and
January 29, 2005, respectively
    
    
    47,638
    
    
    
    49,404
    
    
    
    50,889Merchandise inventories
    
    
    103,435
    
    
    
    101,807
    
    
    
    100,538Deferred income taxes
    
    
    5,775
    
    
    
    4,971
    
    
    
    5,781Prepaid expenses
    
    
    2,919
    
    
    
    2,416
    
    
    
    1,986Total Current Assets
    
    
    253,162
    
    
    
    249,481
    
    
    
    266,422Property and equipment  net
    
    
    122,034
    
    
    
    116,307
    
    
    
    117,590Other assets
    
    
    10,941
    
    
    
    10,110
    
    
    
    10,122Total Assets
    
    $
    386,137
    
    
    $
    375,898
    
    
    $
    394,134LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    71,286
    
    
    $
    72,710
    
    
    $
    82,828Accrued expenses
    
    
    45,395
    
    
    
    35,347
    
    
    
    39,338Accrued income taxes
    
    
    3,457
    
    
    
    5,910
    
    
    
    4,465Current portion of long-term debt
    
    
    3⁄4
    
    
    
    6,000
    
    
    
    6,000Total Current Liabilities
    
    
    120,138
    
    
    
    119,967
    
    
    
    132,631Deferred income taxes
    
    
    10,172
    
    
    
    10,203
    
    
    
    10,172Long-term debt
    
    
    3⁄4
    
    
    
    17,000
    
    
    
    16,000Other noncurrent liabilities (primarily deferred rent)
    
    
    24,306
    
    
    
    24,036
    
    
    
    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 30,663,977 shares, 26,170,545 shares
and 26,249,178 shares at October 29, 2005, October 30, 2004 and
January 29, 2005, respectively
    
    
    1,022
    
    
    
    872
    
    
    
    875Convertible Class B common stock, $.033 par value per share,
15,000,000 shares authorized; issued 5,597,834 shares,
at October 29, 2005, October 30, 2004 and January 29, 2005,
respectively
    
    
    187
    
    
    
    187
    
    
    
    187Additional paid-in capital
    
    
    37,841
    
    
    
    101,509
    
    
    
    103,366Retained earnings
    
    
    286,882
    
    
    
    261,015
    
    
    
    265,499Accumulated other comprehensive income
    
    
    81
    
    
    
    102
    
    
    
    71Unearned compensation  restricted stock awards
    
    
    (398
    )
    
    
    (1,081
    )
    
    
    (911
    )325,615
    
    
    
    362,604
    
    
    
    369,087Less Class A and Class B common stock in treasury, at cost (148,531
Class A and 4,907,309 Class B shares at October 29, 2005, and
5,906,179 Class A and 5,137,484 Class B at October 30, 2004 and
January 29, 2005)
    
    
    (94,094
    )
    
    
    (157,912
    )
    
    
    (157,912
    )Total Stockholders Equity
    
    
    231,521
    
    
    
    204,692
    
    
    
    211,175Total Liabilities and Stockholders Equity
    
    $
    386,137
    
    
    $
    375,898
    
    
    $
    394,134
  3




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##### 



THE CATO CORPORATION
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedOctober 29,
    
    
    October 30,2005
    
    
    2004(Unaudited)
    
    
    (Unaudited)(Restated)(Dollars in thousands)OPERATING ACTIVITIESNet income
    
    $
    33,191
    
    
    $
    26,738Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    15,158
    
    
    
    15,210Provision for doubtful accounts
    
    
    3,519
    
    
    
    3,877Deferred income taxes
    
    
    6
    
    
    
    25Compensation expense related to restricted stock awards
    
    
    512
    
    
    
    512Loss on disposal of property and equipment
    
    
    1,516
    
    
    
    1,598Changes in operating assets and liabilities which provided
(used) cash:Accounts receivable
    
    
    (268
    )
    
    
    (567
    )Merchandise inventories
    
    
    (2,897
    )
    
    
    (4,515
    )Prepaid and other assets
    
    
    (1,752
    )
    
    
    2,988Accrued income taxes
    
    
    (1,008
    )
    
    
    1,404Accounts payable, accrued expenses and other liabilities
    
    
    (7,903
    )
    
    
    4,863Net cash provided by operating activities
    
    
    40,074
    
    
    
    52,133INVESTING ACTIVITIESExpenditures for property and equipment
    
    
    (21,050
    )
    
    
    (18,619
    )Purchases of short-term investments
    
    
    (56,689
    )
    
    
    (52,469
    )Sales of short-term investments
    
    
    70,180
    
    
    
    36,735Net cash used in investing activities
    
    
    (7,559
    )
    
    
    (34,353
    )FINANCING ACTIVITIESCash overdrafts included in accounts payable
    
    
    2,500
    
    
    
    (900
    )Dividends paid
    
    
    (11,808
    )
    
    
    (10,516
    )Purchase of treasury stock
    
    
    (2,812
    )
    
    
    3⁄4Payments to settle long term debt
    
    
    (22,000
    )
    
    
    (4,500
    )Proceeds from employee stock purchase plan
    
    
    416
    
    
    
    479Proceeds from stock options exercised
    
    
    837
    
    
    
    1,360Net cash used in financing activities
    
    
    (32,867
    )
    
    
    (14,077
    )Net increase (decrease) in cash and cash equivalents
    
    
    (352
    )
    
    
    3,703Cash and cash equivalents at beginning of period
    
    
    18,640
    
    
    
    23,857Cash and cash equivalents at end of period
    
    $
    18,288
    
    
    $
    27,560
  4




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2005
AND OCTOBER 30, 2004 (RESTATED)
 NOTE 1  GENERAL:
     5




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2005
AND OCTOBER 30, 2004 (RESTATED)
 NOTE 1  GENERAL (CONTINUED):
  As PreviouslyReported
    
    
    
    
    
    
    As RestatedOctober 30,
    
    
    
    
    
    
    October 30,2004
    
    
    Adjustments
    
    
    2004Deferred income taxes
    
    $
    259
    
    
    $
    4,712
    
    
    $
    4,971Total Current Assets
    
    
    244,769
    
    
    
    4,712
    
    
    
    249,481Total Assets
    
    
    371,186
    
    
    
    4,712
    
    
    
    375,898Accrued expenses
    
    
    35,520
    
    
    
    (173
    )
    
    
    35,347Accrued income tax
    
    
    5,757
    
    
    
    153
    
    
    
    5,910Total Current Liabilities
    
    
    119,987
    
    
    
    (20
    )
    
    
    119,967Other noncurrent liabilities
    
    
    11,158
    
    
    
    12,878
    
    
    
    24,036Total Liabilities
    
    
    158,348
    
    
    
    12,858
    
    
    
    171,206Retained earnings
    
    
    269,161
    
    
    
    (8,146
    )
    
    
    261,015Total Stockholders Equity
    
    
    212,838
    
    
    
    (8,146
    )
    
    
    204,692Total Liabilities and
Stockholders Equity
    
    $
    371,186
    
    
    $
    4,712
    
    
    $
    375,898
 Three Months Ended
    
    
    Nine Months EndedAs Previously
    
    
    
    
    
    
    
    
    
    
    As PreviouslyReported
    
    
    
    
    
    
    As Restated
    
    
    Reported
    
    
    
    
    
    
    As RestatedOctober 30,
    
    
    
    
    
    
    October 30,
    
    
    October 30,
    
    
    
    
    
    
    October 30,2004
    
    
    Adjustments
    
    
    2004
    
    
    2004
    
    
    Adjustments
    
    
    2004Revenues
    
    $
    167,514
    
    
    $
    0
    
    
    $
    167,514
    
    
    $
    577,600
    
    
    $
    0
    
    
    $
    577,600Cost of Goods Sold
    
    
    115,481
    
    
    
    159
    
    
    
    115,640
    
    
    
    383,876
    
    
    
    348
    
    
    
    384,224Selling, general and
administrative
    
    
    44,481
    
    
    
    (79
    )
    
    
    44,402
    
    
    
    137,692
    
    
    
    (174
    )
    
    
    137,518Income before taxes
    
    
    2,904
    
    
    
    (79
    )
    
    
    2,825
    
    
    
    42,148
    
    
    
    (174
    )
    
    
    41,974Income tax provision
    
    
    1,054
    
    
    
    (29
    )
    
    
    1,025
    
    
    
    15,300
    
    
    
    (64
    )
    
    
    15,236Net income (loss)
    
    $
    1,850
    
    
    $
    (50
    )
    
    $
    1,800
    
    
    $
    26,848
    
    
    $
    (110
    )
    
    $
    26,738Basic earnings per share
    
    $
    0.06
    
    
    $
    
    
    
    $
    0.06
    
    
    $
    0.87
    
    
    $
    
    
    
    $
    0.87Diluted earnings per share
    
    $
    0.06
    
    
    $
    
    
    
    $
    0.06
    
    
    $
    0.85
    
    
    $
    
    
    
    $
    0.85
 6




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2005
AND OCTOBER 30, 2004 (RESTATED)
 NOTE 1  GENERAL (CONTINUED):
        7




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2005
AND OCTOBER 30, 2004 (RESTATED)
 NOTE 2  EARNINGS PER SHARE:
  Three Months Ended
    
    
    Nine Months EndedOctober 29,
    
    
    October 30,
    
    
    October 29,
    
    
    October 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Weighted-average shares outstanding
    
    
    31,126,752
    
    
    
    30,913,685
    
    
    
    31,139,741
    
    
    
    30,832,394Dilutive effect of stock options
    
    
    644,783
    
    
    
    537,319
    
    
    
    658,759
    
    
    
    544,579Weighted-average shares and common
stock equivalents (stock options)
outstanding
    
    
    31,771,535
    
    
    
    31,451,004
    
    
    
    31,798,500
    
    
    
    31,376,973
 NOTE 3  SUPPLEMENTAL CASH FLOW INFORMATION:
  NOTE 4  FINANCING ARRANGEMENTS:
    8




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##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2005
AND OCTOBER 30, 2004 (RESTATED)
 NOTE 5  REPORTABLE SEGMENT INFORMATION:
   Three Months EndedOctober 29, 2005
    
    Retail
    
    
    Credit
    
    
    TotalRevenues
    
    $
    178,226
    
    
    $
    3,128
    
    
    $
    181,354Depreciation
    
    
    5,069
    
    
    
    25
    
    
    
    5,094Interest and other income
    
    
    (1,235
    )
    
    
    
    
    
    
    (1,235
    )Income before taxes
    
    
    5,093
    
    
    
    1,292
    
    
    
    6,385Total assets
    
    
    320,659
    
    
    
    65,478
    
    
    
    386,137Capital expenditures
    
    
    9,366
    
    
    
    
    
    
    
    9,366
 Nine Months EndedOctober 29, 2005
    
    Retail
    
    
    Credit
    
    
    TotalRevenues
    
    $
    602,522
    
    
    $
    9,723
    
    
    $
    612,245Depreciation
    
    
    15,076
    
    
    
    82
    
    
    
    15,158Interest and other income
    
    
    (3,247
    )
    
    
    
    
    
    
    (3,247
    )Income before taxes
    
    
    48,486
    
    
    
    3,619
    
    
    
    52,105Total assets
    
    
    320,659
    
    
    
    65,478
    
    
    
    386,137Capital expenditures
    
    
    21,048
    
    
    
    2
    
    
    
    21,050
 Three Months EndedOctober 30, 2004
    
    Retail
    
    
    Credit
    
    
    Total(Restated)
    
    
    
    
    
    
    (Restated)Revenues
    
    $
    163,953
    
    
    $
    3,561
    
    
    $
    167,514Depreciation
    
    
    5,120
    
    
    
    20
    
    
    
    5,140Interest and other income
    
    
    (676
    )
    
    
    
    
    
    
    (676
    )Income before taxes
    
    
    1,321
    
    
    
    1,504
    
    
    
    2,825Total assets
    
    
    311,077
    
    
    
    64,821
    
    
    
    375,898Capital expenditures
    
    
    6,804
    
    
    
    50
    
    
    
    6,854
 Nine Months EndedOctober 30, 2004
    
    Retail
    
    
    Credit
    
    
    Total(Restated)
    
    
    
    
    
    
    (Restated)Revenues
    
    $
    567,004
    
    
    $
    10,596
    
    
    $
    577,600Depreciation
    
    
    15,151
    
    
    
    59
    
    
    
    15,210Interest and other income
    
    
    (1,838
    )
    
    
    
    
    
    
    (1,838
    )Income before taxes
    
    
    38,050
    
    
    
    3,924
    
    
    
    41,974Total assets
    
    
    311,077
    
    
    
    64,821
    
    
    
    375,898Capital expenditures
    
    
    18,484
    
    
    
    135
    
    
    
    18,619
   Three Months Ended
    
    
    Nine Months EndedOctober 29,
    
    
    October 30,
    
    
    October 29,
    
    
    October 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Bad debt expense
    
    $
    1,074
    
    
    $
    1,208
    
    
    $
    3,517
    
    
    $
    3,877Payroll
    
    
    251
    
    
    
    287
    
    
    
    801
    
    
    
    859Postage
    
    
    223
    
    
    
    250
    
    
    
    820
    
    
    
    826Other expenses
    
    
    263
    
    
    
    292
    
    
    
    884
    
    
    
    1,051Total expenses
    
    $
    1,811
    
    
    $
    2,037
    
    
    $
    6,022
    
    
    $
    6,613
 9




---



##### 



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 29, 2005
AND OCTOBER 30, 2004 (RESTATED)
 NOTE 6  STOCK OPTIONS:
  Three Months Ended
    
    
    Nine Months EndedOctober 29,
    
    
    October 30,
    
    
    October 29,
    
    
    October 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Net Income as Reported
    
    $
    4,067
    
    
    $
    1,800
    
    
    $
    33,191
    
    
    $
    26,738Add: Stock-Based employee compensation expense
included in reported net income, net of related tax
effects
    
    
    109
    
    
    
    109
    
    
    
    326
    
    
    
    326Deduct: Total stock-based employee compensation
expense determined under fair value based method for
all awards, net of related tax effects
    
    
    (125
    )
    
    
    (109
    )
    
    
    (387
    )
    
    
    (356
    )Pro forma Net Income
    
    $
    4,051
    
    
    $
    1,800
    
    
    $
    33,130
    
    
    $
    26,708Earnings per share:Basic  as reported
    
    $
    .13
    
    
    $
    .06
    
    
    $
    1.07
    
    
    $
    .87Basic  pro forma
    
    $
    .13
    
    
    $
    .06
    
    
    $
    1.06
    
    
    $
    .87Diluted  as reported
    
    $
    .13
    
    
    $
    .06
    
    
    $
    1.04
    
    
    $
    .85Diluted  pro forma
    
    $
    .13
    
    
    $
    .06
    
    
    $
    1.04
    
    
    $
    .85
 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
    
    
    Nine Months EndedOctober 29,
    
    
    October 30,
    
    
    October 29,
    
    
    October 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Total retail sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Total revenues
    
    
    102.0
    
    
    
    102.4
    
    
    
    101.9
    
    
    
    102.1Cost of goods sold
    
    
    67.4
    
    
    
    70.7
    
    
    
    66.0
    
    
    
    67.9Selling, general and administrative
    
    
    28.8
    
    
    
    27.2
    
    
    
    25.2
    
    
    
    24.3Depreciation
    
    
    2.9
    
    
    
    3.1
    
    
    
    2.5
    
    
    
    2.7Interest expense
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Interest and other income
    
    
    (0.7
    )
    
    
    (0.4
    )
    
    
    (0.5
    )
    
    
    (0.3
    )Income before income taxes
    
    
    3.6
    
    
    
    1.7
    
    
    
    8.7
    
    
    
    7.4Net income
    
    
    2.3
    
    
    
    1.1
    
    
    
    5.5
    
    
    
    4.7
 Comparison of Third Quarter and First Nine 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  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
  ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  (c) Total Number of
    
    
    (d) Maximum Number (orShares Purchased as
    
    
    Approximate Dollar Value)(a) Total Number
    
    
    
    
    
    
    Part of Publicly
    
    
    of Shares that May Yet Beof Shares
    
    
    (b) Average Price
    
    
    Announced Plans or
    
    
    Purchased Under the PlansPeriod
    
    Purchased
    
    
    Paid Per Share
    
    
    Programs
    
    
    or ProgramsAugust 2005
    
    
    7,100
    
    
    $
    18.79
    
    
    
    7,100
    
    
    1,735,744September 2005
    
    
    109,200
    
    
    
    18.90
    
    
    
    109,200
    
    
    1,626,544October 2005
    
    
    32,000
    
    
    
    19.05
    
    
    
    32,000
    
    
    1,594,544Total
    
    
    148,300
    
    
    $
    18.93
    
    
    
    148,300
  ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
  ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  ITEM 5.     OTHER INFORMATION
  ITEM 6.     EXHIBITS
  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 CORPORATIONDecember 6, 2005
    
    /s/ John P. Derham CatoDate
    
    John P. Derham CatoChairman, President andChief Executive OfficerDecember 6, 2005
    
    /s/ Michael O. MooreDate
    
    Michael O. MooreExecutive Vice PresidentChief Financial Officer and SecretaryDecember 6, 2005
    
    /s/ Robert M. SandlerDate
    
    Robert M. SandlerSenior Vice PresidentController
 18