##### Table of Contents



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 31, 2009
 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.)
 8100 Denmark Road, Charlotte, North Carolina 28273-5975
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year,
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



THE CATO CORPORATION
 FORM 10-Q
 Quarter Ended October 31, 2009
 Table of Contents
 PageNo.PART I  FINANCIAL INFORMATION (UNAUDITED)Item 1. Financial Statements:Condensed Consolidated Statements of Income and Comprehensive Income
For the Three Months and Nine Months Ended October 31, 2009
and November 1, 2008
    
    2Condensed
Consolidated Balance Sheets
At October 31, 2009, November 1, 2008, and January 31, 2009
    
    3Condensed
Consolidated Statements of Cash Flows 
For the Nine Months Ended October 31, 2009 and November 1, 2008
    
    4Notes to Condensed
Consolidated Financial Statements 
For the Three Months and Nine Months Ended
October 31, 2009 and November 1, 2008
    
    5  14Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    15  20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    21Item 4. Controls and Procedures
    
    21PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    22Item 1A. Risk Factors
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    22Item 3. Defaults Upon Senior Securities
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    22Item 5. Other Information
    
    22Item 6. Exhibits
    
    22Signatures
    
    23  27EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 THE CATO CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
 COMPREHENSIVE INCOME
 Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)(Dollars in thousands, except per share data)REVENUESRetail sales
    
    $
    190,966
    
    
    $
    179,838
    
    
    $
    654,389
    
    
    $
    636,585Other income (principally finance charges, late fees and
layaway charges)
    
    
    2,854
    
    
    
    2,947
    
    
    
    8,724
    
    
    
    8,895Total revenues
    
    
    193,820
    
    
    
    182,785
    
    
    
    663,113
    
    
    
    645,480COSTS AND EXPENSES, NETCost of goods sold (exclusive of depreciation shown below)
    
    
    124,545
    
    
    
    127,172
    
    
    
    409,917
    
    
    
    416,811Selling, general and administrative (exclusive of depreciation
shown below)
    
    
    60,519
    
    
    
    50,908
    
    
    
    181,643
    
    
    
    170,804Depreciation
    
    
    5,441
    
    
    
    5,614
    
    
    
    16,467
    
    
    
    16,881Interest and other income
    
    
    (957
    )
    
    
    (2,183
    )
    
    
    (2,878
    )
    
    
    (5,792
    )189,548
    
    
    
    181,511
    
    
    
    605,149
    
    
    
    598,704Income before income taxes
    
    
    4,272
    
    
    
    1,274
    
    
    
    57,964
    
    
    
    46,776Income tax expense
    
    
    1,289
    
    
    
    451
    
    
    
    19,509
    
    
    
    17,009Net income
    
    $
    2,983
    
    
    $
    823
    
    
    $
    38,455
    
    
    $
    29,767Basic earnings per share
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    1.31
    
    
    $
    1.01Diluted earnings per share
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    1.31
    
    
    $
    1.01Dividends per share
    
    $
    .165
    
    
    $
    .165
    
    
    $
    .495
    
    
    $
    .495Comprehensive income:Net income
    
    $
    2,983
    
    
    $
    823
    
    
    $
    38,455
    
    
    $
    29,767Unrealized (losses) on available-for-sale securities, net
of deferred income tax expense
    
    
    (68
    )
    
    
    (208
    )
    
    
    (38
    )
    
    
    (528
    )Net comprehensive income
    
    $
    2,915
    
    
    $
    615
    
    
    $
    38,417
    
    
    $
    29,239
  2




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##### Table of Contents



THE CATO CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 October 31,
    
    
    November 1,
    
    
    January 31,2009
    
    
    2008
    
    
    2009(Unaudited)
    
    
    (Unaudited)(Dollars in thousands)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    32,636
    
    
    $
    35,959
    
    
    $
    42,262Short-term investments
    
    
    147,528
    
    
    
    90,878
    
    
    
    93,452Restricted cash
    
    
    2,647
    
    
    
    8,991
    
    
    
    9,089Accounts receivable, net of allowance for doubtful accounts of
$3,308, $3,633 and $3,723 at October 31, 2009, November 1, 2008 and
January 31, 2009, respectively
    
    
    40,472
    
    
    
    43,267
    
    
    
    44,136Merchandise inventories
    
    
    101,139
    
    
    
    110,282
    
    
    
    112,290Deferred income taxes
    
    
    6,446
    
    
    
    7,024
    
    
    
    6,403Prepaid expenses
    
    
    4,758
    
    
    
    7,660
    
    
    
    7,737Total Current Assets
    
    
    335,626
    
    
    
    304,061
    
    
    
    315,369Property and equipment  net
    
    
    108,572
    
    
    
    120,859
    
    
    
    116,262Other assets
    
    
    7,341
    
    
    
    4,317
    
    
    
    3,722Total Assets
    
    $
    451,539
    
    
    $
    429,237
    
    
    $
    435,353LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    77,180
    
    
    $
    89,595
    
    
    $
    102,971Accrued expenses
    
    
    35,683
    
    
    
    35,343
    
    
    
    29,946Accrued bonus and benefits
    
    
    16,486
    
    
    
    5,265
    
    
    
    6,307Accrued income taxes
    
    
    13,150
    
    
    
    14,320
    
    
    
    11,506Total Current Liabilities
    
    
    142,499
    
    
    
    144,523
    
    
    
    150,730Deferred income taxes
    
    
    2,528
    
    
    
    1,707
    
    
    
    2,528Other noncurrent liabilities (primarily deferred rent)
    
    
    18,161
    
    
    
    21,064
    
    
    
    20,282Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    Stockholders Equity:Preferred
stock, $100 par value per share, 100,000 shares authorized, none issued
    
    
    
    
    
    
    
    
    
    
    Class A
common stock, $.033 par value per share, 50,000,000 shares
authorized; issued 27,841,180 shares, 36,304,025 shares, and
36,303,922 shares at October 31, 2009, November 1, 2008 and January 31, 2009, respectively
    
    
    928
    
    
    
    1,210
    
    
    
    1,210Convertible
Class B common stock, $.033 par value per share, 15,000,000 shares authorized; issued 1,743,525 shares at October
31, 2009, November 1, 2008 and January 31, 2009, respectively
    
    
    58
    
    
    
    58
    
    
    
    58Additional paid-in capital
    
    
    64,343
    
    
    
    61,025
    
    
    
    61,608Retained earnings
    
    
    222,647
    
    
    
    355,276
    
    
    
    354,333Accumulated other comprehensive income
    
    
    375
    
    
    
    182
    
    
    
    413288,351
    
    
    
    417,751
    
    
    
    417,622Less
Class A common stock in treasury, at cost (-0- shares, 8,660,233 shares and 8,660,333 shares at October 31, 2009, November 1, 2008 and January 31, 2009, respectively)
    
    
    
    
    
    
    (155,808
    )
    
    
    (155,809
    )Total Stockholders Equity
    
    
    288,351
    
    
    
    261,943
    
    
    
    261,813Total Liabilities and Stockholders Equity
    
    $
    451,539
    
    
    $
    429,237
    
    
    $
    435,353
  3




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THE CATO CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedOctober 31,
    
    
    November 1,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)(Dollars in thousands)OPERATING ACTIVITIESNet income
    
    $
    38,455
    
    
    $
    29,767Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    16,467
    
    
    
    16,881Provision for doubtful accounts
    
    
    2,621
    
    
    
    2,689Share-based compensation
    
    
    1,775
    
    
    
    1,654Excess tax benefits from share-based compensation
    
    
    (148
    )
    
    
    (65
    )Loss on disposal of property and equipment
    
    
    599
    
    
    
    2,819Changes in
operating assets and liabilities which provided (used) cash:Accounts receivable
    
    
    1,043
    
    
    
    (674
    )Merchandise inventories
    
    
    11,151
    
    
    
    8,397Prepaid and other assets
    
    
    (640
    )
    
    
    330Accrued income taxes
    
    
    1,792
    
    
    
    6,457Accounts payable, accrued expenses and other liabilities
    
    
    (11,996
    )
    
    
    (12,518
    )Net cash provided by operating activities
    
    
    61,119
    
    
    
    55,737INVESTING ACTIVITIESExpenditures for property and equipment
    
    
    (9,376
    )
    
    
    (17,370
    )Purchases of short-term investments
    
    
    (112,721
    )
    
    
    (121,616
    )Sales of short-term investments
    
    
    58,563
    
    
    
    113,945Change in restricted cash
    
    
    6,442
    
    
    
    Net cash used in investing activities
    
    
    (57,092
    )
    
    
    (25,041
    )FINANCING ACTIVITIESDividends paid
    
    
    (14,600
    )
    
    
    (14,579
    )Purchases of treasury stock
    
    
    (49
    )
    
    
    (2,434
    )Proceeds from employee stock purchase plan
    
    
    389
    
    
    
    411Excess tax benefits from share-based compensation
    
    
    148
    
    
    
    65Proceeds from stock options exercised
    
    
    459
    
    
    
    217Net cash used in financing activities
    
    
    (13,653
    )
    
    
    (16,320
    )Net increase (decrease) in cash and cash equivalents
    
    
    (9,626
    )
    
    
    14,376Cash and cash equivalents at beginning of period
    
    
    42,262
    
    
    
    21,583Cash and cash equivalents at end of period
    
    $
    32,636
    
    
    $
    35,959
  4




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THE CATO CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE
THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2009 AND NOVEMBER 1, 2008
 
 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 31, 2009
AND NOVEMBER 1, 2008
 
 NOTE 2  EARNINGS PER SHARE:
   6




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THE
CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2009 AND NOVEMBER 1, 2008
 
 NOTE 2  EARNINGS PER SHARE (CONTINUED):
 Three      Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands, except per share data)Basic earnings per share:Net earnings
    
    $
    2,983
    
    
    $
    823
    
    
    $
    38,455
    
    
    $
    29,767Earnings allocated to non-vested equity awards
    
    
    (36
    )
    
    
    0
    
    
    
    (553
    )
    
    
    (369
    )Net earnings available to common stockholders
    
    $
    2,947
    
    
    $
    823
    
    
    $
    37,902
    
    
    $
    29,398Basic weighted-average common shares
outstanding
    
    
    29,062,994
    
    
    
    29,108,180
    
    
    
    29,019,302
    
    
    
    29,105,326Basic earnings per share
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    1.31
    
    
    $
    1.01Diluted earnings per share:Net earnings
    
    $
    2,983
    
    
    $
    823
    
    
    $
    38,455
    
    
    $
    29,767Earnings allocated to non-vested equity awards
    
    
    (36
    )
    
    
    0
    
    
    
    (553
    )
    
    
    (369
    )Net earnings available to common stockholders
    
    $
    2,947
    
    
    $
    823
    
    
    $
    37,902
    
    
    $
    29,398Basic weighted-average common shares
outstanding
    
    
    29,062,994
    
    
    
    29,108,180
    
    
    
    29,019,302
    
    
    
    29,105,326Dilutive effect of stock options
    
    
    20,622
    
    
    
    16,783
    
    
    
    17,891
    
    
    
    15,000Diluted weighted avg. shares outstanding
    
    
    29,083,616
    
    
    
    29,124,963
    
    
    
    29,037,193
    
    
    
    29,120,326Diluted earnings per share
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    1.31
    
    
    $
    1.01
 NOTE 3  SUPPLEMENTAL CASH FLOW INFORMATION:
  NOTE 4  FINANCING ARRANGEMENTS:
   7




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2009 AND NOVEMBER 1, 2008
 
 NOTE 5  REPORTABLE SEGMENT INFORMATION:
   Three Months Ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedOctober 31, 2009
    
    Retail
    
    
    Credit
    
    
    Total
    
    
    October 31, 2009
    
    Retail
    
    
    Credit
    
    
    TotalRevenues
    
    $
    191,494
    
    
    $
    2,326
    
    
    $
    193,820
    
    
    Revenues
    
    $
    656,035
    
    
    $
    7,078
    
    
    $
    663,113Depreciation
    
    
    5,435
    
    
    
    6
    
    
    
    5,441
    
    
    Depreciation
    
    
    16,444
    
    
    
    23
    
    
    
    16,467Interest and
other income
    
    
    (957
    )
    
    
    
    
    
    
    (957
    )
    
    Interest and other income
    
    
    (2,878
    )
    
    
    
    
    
    
    (2,878
    )Income before taxes
    
    
    3,524
    
    
    
    748
    
    
    
    4,272
    
    
    Income before taxes
    
    
    55,812
    
    
    
    2,152
    
    
    
    57,964Total assets
    
    
    379,719
    
    
    
    71,820
    
    
    
    451,539
    
    
    Total assets
    
    
    379,719
    
    
    
    71,820
    
    
    
    451,539Capital expenditures
    
    
    3,215
    
    
    
    3
    
    
    
    3,218
    
    
    Capital expenditures
    
    
    9,373
    
    
    
    3
    
    
    
    9,376
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedNovember 1, 2008
    
    Retail
    
    
    Credit
    
    
    Total
    
    
    November 1, 2008
    
    Retail
    
    
    Credit
    
    
    TotalRevenues
    
    $
    180,213
    
    
    $
    2,572
    
    
    $
    182,785
    
    
    Revenues
    
    $
    637,923
    
    
    $
    7,557
    
    
    $
    645,480Depreciation
    
    
    5,604
    
    
    
    10
    
    
    
    5,614
    
    
    Depreciation
    
    
    16,850
    
    
    
    31
    
    
    
    16,881Interest and
other income
    
    
    (2,183
    )
    
    
    
    
    
    
    (2,183
    )
    
    Interest and other income
    
    
    (5,792
    )
    
    
    
    
    
    
    (5,792
    )Income before taxes
    
    
    726
    
    
    
    548
    
    
    
    1,274
    
    
    Income before taxes
    
    
    44,354
    
    
    
    2,422
    
    
    
    46,776Total assets
    
    
    356,555
    
    
    
    72,682
    
    
    
    429,237
    
    
    Total assets
    
    
    356,555
    
    
    
    72,682
    
    
    
    429,237Capital expenditures
    
    
    6,830
    
    
    
    
    
    
    
    6,830
    
    
    Capital expenditures
    
    
    17,370
    
    
    
    
    
    
    
    17,370
   Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,2009
    
    
    2008
    
    
    2009
    
    
    2008Bad debt expense
    
    $
    869
    
    
    $
    1,227
    
    
    $
    2,621
    
    
    $
    2,689Payroll
    
    
    237
    
    
    
    249
    
    
    
    733
    
    
    
    756Postage
    
    
    217
    
    
    
    237
    
    
    
    686
    
    
    
    750Other expenses
    
    
    249
    
    
    
    301
    
    
    
    863
    
    
    
    909Total expenses
    
    $
    1,572
    
    
    $
    2,014
    
    
    $
    4,903
    
    
    $
    5,104
 8




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##### Table of Contents



THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2009 AND NOVEMBER 1, 2008
 
 NOTE 6  STOCK BASED COMPENSATION:
   1987
    
    
    1999
    
    
    2004Plan
    
    
    Plan
    
    
    Plan
    
    
    TotalOptions and/or restricted stock initially authorized
    
    
    5,850,000
    
    
    
    1,500,000
    
    
    
    1,350,000
    
    
    
    8,700,000Options and/or restricted stock available for grant:January 31, 2009
    
    
    18,627
    
    
    
    
    
    
    
    868,078
    
    
    
    886,705October 31, 2009
    
    
    18,627
    
    
    
    
    
    
    
    736,662
    
    
    
    755,289
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    Value (a)Options outstanding at January 31, 2009
    
    
    107,950
    
    
    $
    12.72
    
    
    4.07 years
    
    $
    124,257Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    Exercised
    
    
    43,000Outstanding at October 31, 2009
    
    
    64,950
    
    
    $
    14.08
    
    
    4.27 years
    
    $
    369,695Vested and exercisable at October 31, 2009
    
    
    63,750
    
    
    $
    13.99
    
    
    4.26 years
    
    $
    368,465
 
 (a)
    
    The intrinsic value of a stock option is the amount by which the market value of the
underlying stock exceeds the exercise price of the option. 9




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THE CATO CORPORATION  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2009 AND NOVEMBER 1, 2008
 
 NOTE 6  STOCK BASED COMPENSATION (CONTINUED):
       10




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THE CATO CORPORATION  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2009 AND NOVEMBER 1, 2008
 
 NOTE 6  STOCK BASED COMPENSATION (CONTINUED):
  Weighted AverageNumber of
    
    
    Grant Date FairShares
    
    
    Value Per ShareRestricted stock awards at January 31, 2009
    
    
    439,921
    
    
    $
    20.46Granted
    
    
    158,225
    
    
    
    18.91Vested
    
    
    (59,801
    )
    
    
    22.34Forfeited
    
    
    (39,437
    )
    
    
    20.38Restricted stock awards at October 31, 2009
    
    
    498,908
    
    
    
    19.75
 NOTE 7  INCOME TAXES:
  NOTE 8  FAIR VALUE MEASUREMENTS:
  Fair Value Measurements at Reporting Date UsingDescription
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Short-term investments
    
    $
    147,528
    
    
    $
    147,528
    
    
    $
    
    
    
    $
    Other assets
    
    
    5,834
    
    
    
    404
    
    
    
    1,980
    
    
    
    3,450
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THE CATO CORPORATION  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2009 AND NOVEMBER 1, 2008
 
 NOTE 8  FAIR VALUE MEASUREMENTS (CONTINUED):
  Fair Value Measurements at Reporting Date UsingDescription
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Short-term investments
    
    $
    93,452
    
    
    $
    90,002
    
    
    $
    3,450
    
    
    $
    Other assets
    
    
    2,258
    
    
    
    303
    
    
    
    1,955
    
    
    
    
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THE CATO CORPORATION  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2009 AND
NOVEMBER 1, 2008
 
 NOTE 8  FAIR VALUE MEASUREMENTS (CONTINUED):
  (in thousands)
    
    Fair ValueBalance at January 31, 2009
    
    $
    Transfer into Level 3
    
    
    3,450Balance at October 31, 2009
    
    $
    3,450
 NOTE 9  RECENT ACCOUNTING PRONOUNCEMENTS:
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THE CATO CORPORATION  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2009 AND
NOVEMBER 1, 2008
 
 NOTE 9  RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED):
  14




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THE CATO CORPORATION
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
 FORWARD LOOKING INFORMATION:
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THE CATO CORPORATION
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 
 CRITICAL ACCOUNTING POLICIES:
   RESULTS OF OPERATIONS:
  Three Months Ended
    
    Nine Months EndedOctober 31,
    
    November 1,
    
    October 31,
    
    November 1,2009
    
    2008
    
    2009
    
    2008Total retail sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Other income
    
    
    1.5
    
    
    
    1.6
    
    
    
    1.3
    
    
    
    1.4Total revenues
    
    
    101.5
    
    
    
    101.6
    
    
    
    101.3
    
    
    
    101.4Cost of goods sold
    
    
    65.2
    
    
    
    70.7
    
    
    
    62.6
    
    
    
    65.5Selling, general and administrative
    
    
    31.7
    
    
    
    28.3
    
    
    
    27.7
    
    
    
    26.8Depreciation
    
    
    2.9
    
    
    
    3.1
    
    
    
    2.5
    
    
    
    2.7Interest and other income
    
    
    (0.5)
    
    
    
    (1.2)
    
    
    
    (0.4
    )
    
    
    (0.9
    )Income before income taxes
    
    
    2.2
    
    
    
    0.7
    
    
    
    8.9
    
    
    
    7.3Net income
    
    
    1.5
    
    
    
    0.5
    
    
    
    5.9
    
    
    
    4.7
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THE CATO CORPORATION
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 
 RESULTS OF OPERATIONS  (CONTINUED):
 Comparison of Third Quarter and First Nine Months of 2009 with 2008.
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THE CATO CORPORATION


MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)





RESULTS OF OPERATIONS  (CONTINUED):










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THE CATO CORPORATION
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 
 RESULTS OF OPERATIONS  (CONTINUED):
  LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK:
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THE CATO CORPORATION  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 
 LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK (CONTINUED):
          20




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THE CATO CORPORATION  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
  
 ITEM 4. CONTROLS AND PROCEDURES:
  CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:
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PART II OTHER INFORMATION
 THE CATO CORPORATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 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 dated March 6,
1987, incorporated by reference to Exhibit 4.1 to Form S-8 of the
Registrant filed February 7, 2000 (SEC File No. 333-96283).3.2
    
    
    Registrants By Laws incorporated by reference to Exhibit 99.2 to Form
8-K of the Registrant Filed December 10, 2007.4.1
    
    
    Rights Agreement dated December 18, 2003, incorporated by reference
to Exhibit 4.1 to Form 8-A12G of the Registrant filed December 22,
2003 and as amended in Form 8-A12B/A filed January 6, 2004.31.1
    
    
    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
    
    
    Section 1350 Certification of Principal Executive Officer.32.2
    
    
    Section 1350 Certification of Principal Financial Officer.
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PART II OTHER INFORMATION
 THE CATO CORPORATION
  THE CATO CORPORATIONDecember 9, 2009
    
    
    
    /s/ John P. D. CatoDate
    
    
    
    John P. D. CatoChairman, President andChief Executive OfficerDecember 9, 2009
    
    
    
    /s/ John R. HoweDate
    
    
    
    John R. HoweExecutive Vice PresidentChief Financial Officer
 23