##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended November 1, 2008ORo
    
    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.)
  
 
  
   
   x o
  þ  ̈  ̈  ̈
   o x




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##### 



THE CATO CORPORATION
 FORM 10-Q
 Quarter Ended November 1, 2008
 Table of Contents
 PageNo.PART I  FINANCIAL INFORMATION (UNAUDITED)Item 1. Financial Statements:Condensed Consolidated Statements of Income and Comprehensive Income
    
    
    2For the Three Months and Nine Months Ended November 1, 2008
and November 3, 2007Condensed Consolidated Balance Sheets
    
    
    3At November 1, 2008, November 3, 2007, and February 2, 2008Condensed Consolidated Statements of Cash Flows
    
    
    4For the Nine Months Ended November 1, 2008 and November 3, 2007Notes to Condensed Consolidated Financial Statements
    
    
    5 - 12For the Three Months and Nine Months Ended
November 1, 2008 and November 3, 2007Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    13 - 19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    21Item 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 EndedNovember 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)(Dollars in thousands, except per share data)REVENUESRetail sales
    
    $
    179,838
    
    
    $
    181,870
    
    
    $
    636,585
    
    
    $
    624,977Other income (principally finance charges, late fees and
layaway charges)
    
    
    2,947
    
    
    
    2,968
    
    
    
    8,895
    
    
    
    9,024Total revenues
    
    
    182,785
    
    
    
    184,838
    
    
    
    645,480
    
    
    
    634,001COSTS AND EXPENSES, NETCost of goods sold (exclusive of depreciation shown below)
    
    
    127,172
    
    
    
    126,080
    
    
    
    416,811
    
    
    
    417,015Selling, general and administrative (exclusive of depreciation
shown below)
    
    
    50,908
    
    
    
    51,303
    
    
    
    170,804
    
    
    
    154,903Depreciation
    
    
    5,614
    
    
    
    5,684
    
    
    
    16,881
    
    
    
    16,698Interest and other income
    
    
    (2,183
    )
    
    
    (2,176
    )
    
    
    (5,792
    )
    
    
    (6,385
    )181,511
    
    
    
    180,891
    
    
    
    598,704
    
    
    
    582,231Income before income taxes
    
    
    1,274
    
    
    
    3,947
    
    
    
    46,776
    
    
    
    51,770Income tax expense
    
    
    451
    
    
    
    1,011
    
    
    
    17,009
    
    
    
    17,654Net Income
    
    $
    823
    
    
    $
    2,936
    
    
    $
    29,767
    
    
    $
    34,116Basic earnings per share
    
    $
    0.03
    
    
    $
    0.09
    
    
    $
    1.02
    
    
    $
    1.08Basic weighted average shares
    
    
    29,108,130
    
    
    
    31,891,308
    
    
    
    29,105,686
    
    
    
    31,713,755Diluted earnings per share
    
    $
    0.03
    
    
    $
    0.09
    
    
    $
    1.02
    
    
    $
    1.07Diluted weighted average shares
    
    
    29,223,218
    
    
    
    31,988,081
    
    
    
    29,188,880
    
    
    
    32,020,584Dividends per share
    
    $
    .165
    
    
    $
    .165
    
    
    $
    .495
    
    
    $
    0.48Comprehensive income:Net income
    
    $
    823
    
    
    $
    2,936
    
    
    $
    29,767
    
    
    $
    34,116Unrealized gains (losses) on available-for-sale securities, net
of deferred income tax expense
    
    
    (208
    )
    
    
    215
    
    
    
    (528
    )
    
    
    193Net comprehensive income
    
    $
    615
    
    
    $
    3,151
    
    
    $
    29,239
    
    
    $
    34,309
  2




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##### Table of Contents



THE CATO CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 November 1,
    
    
    November 3,
    
    
    February 2,2008
    
    
    2007
    
    
    2008(Unaudited)
    
    
    (Unaudited)(Dollars in thousands)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    35,959
    
    
    $
    20,187
    
    
    $
    21,583Short-term investments
    
    
    99,869
    
    
    
    126,797
    
    
    
    92,995Accounts receivable, net of allowance for doubtful accounts of
$3,633, $3,194 and $3,263 at November 1, 2008, November 3, 2007 and
February 2, 2008, respectively
    
    
    43,267
    
    
    
    44,470
    
    
    
    45,282Merchandise inventories
    
    
    110,282
    
    
    
    114,066
    
    
    
    118,679Deferred income taxes
    
    
    7,024
    
    
    
    7,415
    
    
    
    6,756Prepaid expenses
    
    
    7,660
    
    
    
    7,208
    
    
    
    7,755Total Current Assets
    
    
    304,061
    
    
    
    320,143
    
    
    
    293,050Property and equipment  net
    
    
    120,859
    
    
    
    125,377
    
    
    
    123,190Other assets
    
    
    4,317
    
    
    
    4,617
    
    
    
    4,552Total Assets
    
    $
    429,237
    
    
    $
    450,137
    
    
    $
    420,792LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    89,595
    
    
    $
    88,169
    
    
    $
    110,848Accrued expenses
    
    
    35,343
    
    
    
    34,646
    
    
    
    27,617Accrued bonus and benefits
    
    
    5,265
    
    
    
    1,881
    
    
    
    2,543Accrued income taxes
    
    
    14,320
    
    
    
    2,259
    
    
    
    7,928Total Current Liabilities
    
    
    144,523
    
    
    
    126,955
    
    
    
    148,936Deferred income taxes
    
    
    1,707
    
    
    
    8,817
    
    
    
    1,707Other noncurrent liabilities (primarily deferred rent)
    
    
    21,064
    
    
    
    23,266
    
    
    
    22,779Commitments 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 36,304,025 shares, 36,100,759 shares,
and 36,109,263 shares at November 1, 2008, November 3, 2007 and
February 2, 2008, respectively
    
    
    1,210
    
    
    
    1,203
    
    
    
    1,204Convertible Class B common stock, $.033 par value per share,
15,000,000 shares authorized; issued 1,743,525 shares, 1,743,525,
shares and 1,743,525 shares at November 1, 2008, November 3,
2007 and February 2, 2008, respectively
    
    
    58
    
    
    
    58
    
    
    
    58Additional paid-in capital
    
    
    61,025
    
    
    
    57,639
    
    
    
    58,685Retained earnings
    
    
    355,276
    
    
    
    346,901
    
    
    
    340,088Accumulated other comprehensive income
    
    
    182
    
    
    
    418
    
    
    
    709417,751
    
    
    
    406,219
    
    
    
    400,744Less Class A common stock in treasury, at cost (8,660,233 shares,
6,128,015 shares and 8,461,615 shares at November 1, 2008,
November 3, 2007 and February 2, 2008, respectively)
    
    
    (155,808
    )
    
    
    (115,120
    )
    
    
    (153,374
    )Total Stockholders Equity
    
    
    261,943
    
    
    
    291,099
    
    
    
    247,370Total Liabilities and Stockholders Equity
    
    $
    429,237
    
    
    $
    450,137
    
    
    $
    420,792
  3




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THE CATO CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedNovember 1,
    
    
    November 3,2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)(Dollars in thousands)OPERATING ACTIVITIESNet income
    
    $
    29,767
    
    
    $
    34,116Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    16,881
    
    
    
    16,698Provision for doubtful accounts
    
    
    2,689
    
    
    
    1,812Share-based compensation
    
    
    1,654
    
    
    
    1,282Excess tax benefits from share-based compensation
    
    
    (65
    )
    
    
    (5,460
    )Loss on disposal of property and equipment
    
    
    2,819
    
    
    
    500Changes in operating assets and liabilities which provided
(used) cash:Accounts receivable
    
    
    (674
    )
    
    
    (324
    )Merchandise inventories
    
    
    8,397
    
    
    
    1,852Prepaid and other assets
    
    
    330
    
    
    
    (890
    )Accrued income taxes
    
    
    6,457
    
    
    
    2,360Accounts payable, accrued expenses and other liabilities
    
    
    (12,518
    )
    
    
    5,651Net cash provided by operating activities
    
    
    55,737
    
    
    
    57,597INVESTING ACTIVITIESExpenditures for property and equipment
    
    
    (17,370
    )
    
    
    (14,288
    )Purchases of short-term investments
    
    
    (121,616
    )
    
    
    (154,470
    )Sales of short-term investments
    
    
    113,945
    
    
    
    126,669Net cash used in investing activities
    
    
    (25,041
    )
    
    
    (42,089
    )FINANCING ACTIVITIESChange in cash overdrafts included in accounts payable
    
    
    
    
    
    
    (500
    )Dividends paid
    
    
    (14,579
    )
    
    
    (15,279
    )Purchases of treasury stock
    
    
    (2,434
    )
    
    
    (18,314
    )Proceeds from employee stock purchase plan
    
    
    411
    
    
    
    461Excess tax benefits from share-based compensation
    
    
    65
    
    
    
    5,460Proceeds from stock options exercised
    
    
    217
    
    
    
    8,018Net cash used in financing activities
    
    
    (16,320
    )
    
    
    (20,154
    )Net increase (decrease) in cash and cash equivalents
    
    
    14,376
    
    
    
    (4,646
    )Cash and cash equivalents at beginning of period
    
    
    21,583
    
    
    
    24,833Cash and cash equivalents at end of period
    
    $
    35,959
    
    
    $
    20,187
  4




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 1, 2008 AND NOVEMBER 3, 2007
 
 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 NOVEMBER 1, 2008 AND NOVEMBER 3, 2007
 
 NOTE 2  EARNINGS PER SHARE:
 Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedNovember 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted-average shares outstanding
    
    
    29,108,130
    
    
    
    31,891,308
    
    
    
    29,105,686
    
    
    
    31,713,755Dilutive effect of :Stock options
    
    
    15,922
    
    
    
    40,486
    
    
    
    14,313
    
    
    
    254,722Restricted stock
    
    
    99,166
    
    
    
    55,100
    
    
    
    68,881
    
    
    
    50,524Employee stock purchase plan
    
    
    
    
    
    
    1,187
    
    
    
    
    
    
    
    1,583Weighted-average shares and common
stock equivalents outstanding
    
    
    29,223,218
    
    
    
    31,988,081
    
    
    
    29,188,880
    
    
    
    32,020,584
 NOTE 3  SUPPLEMENTAL CASH FLOW INFORMATION:
  NOTE 4  FINANCING ARRANGEMENTS:
  6




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 1, 2008 AND NOVEMBER 3, 2007
 
 NOTE 4  FINANCING ARRANGEMENTS (CONTINUED):
  NOTE 5  REPORTABLE SEGMENT INFORMATION:
   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
    
    
    
    
    
    
    
    17,370Three Months Ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedNovember
3, 2007
    
    Retail
    
    Credit
    
    Total
    

November
3, 2007
    
    Retail
    
    Credit
    
    TotalRevenues
    
    $
    182,215
    
    
    $
    2,623
    
    
    $
    184,838
    
    
    Revenues
    
    $
    626,220
    
    
    $
    7,781
    
    
    $
    634,001Depreciation
    
    
    5,656
    
    
    
    28
    
    
    
    5,684
    
    
    Depreciation
    
    
    16,620
    
    
    
    78
    
    
    
    16,698Interest and other
income
    
    
    (2,176
    )
    
    
    
    
    
    
    (2,176
    )
    
    Interest and other
income
    
    
    (6,385
    )
    
    
    
    
    
    
    (6,385
    )Income before taxes
    
    
    2,803
    
    
    
    1,144
    
    
    
    3,947
    
    
    Income before taxes
    
    
    48,370
    
    
    
    3,400
    
    
    
    51,770Total assets
    
    
    380,967
    
    
    
    69,170
    
    
    
    450,137
    
    
    Total assets
    
    
    380,967
    
    
    
    69,170
    
    
    
    450,137Capital expenditures
    
    
    4,720
    
    
    
    
    
    
    
    4,720
    
    
    Capital expenditures
    
    
    14,169
    
    
    
    119
    
    
    
    14,288
  7




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 1, 2008 AND NOVEMBER 3, 2007
 
 NOTE 5  REPORTABLE SEGMENT INFORMATION (CONTINUED):
  Three Months Ended
    
    
    Nine Months EndedNovember 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,2008
    
    
    2007
    
    
    2008
    
    
    2007Bad debt expense
    
    $
    1,227
    
    
    $
    678
    
    
    $
    2,689
    
    
    $
    1,812Payroll
    
    
    249
    
    
    
    251
    
    
    
    756
    
    
    
    738Postage
    
    
    237
    
    
    
    235
    
    
    
    750
    
    
    
    748Other expenses
    
    
    301
    
    
    
    287
    
    
    
    909
    
    
    
    1,005Total expenses
    
    $
    2,014
    
    
    $
    1,451
    
    
    $
    5,104
    
    
    $
    4,303
 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:February 2, 2008
    
    
    12,277
    
    
    
    
    
    
    
    1,006,033
    
    
    
    1,018,310November 1, 2008
    
    
    18,627
    
    
    
    
    
    
    
    865,528
    
    
    
    884,155
  8




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 1, 2008 AND NOVEMBER 3, 2007
 
 NOTE 6  STOCK BASED COMPENSATION (CONTINUED):
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    Value (a)Options outstanding at February 2, 2008
    
    
    139,075
    
    
    $
    12.41
    
    
    
    4.64
    
    
    $
    494,087Granted
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (7,250
    )
    
    $
    17.78Exercised
    
    
    (23,125
    )
    
    $
    9.40Outstanding at November 1, 2008
    
    
    108,700
    
    
    $
    12.69
    
    
    
    4.35
    
    
    $
    393,748Vested and exercisable at November 1, 2008
    
    
    88,825
    
    
    $
    12.22
    
    
    
    4.03
    
    
    $
    363,503
 
 (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.   Share-Based Payment
  9




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 1, 2008 AND NOVEMBER 3, 2007
 
 NOTE 6  STOCK BASED COMPENSATION (CONTINUED):
    Weighted AverageNumber of
    
    
    Grant Date FairShares
    
    
    Value Per ShareRestricted stock awards at February 2, 2008
    
    
    301,967
    
    
    $
    22.56Granted
    
    
    156,795
    
    
    
    16.32Vested
    
    
    Forfeited
    
    
    (16,290
    )
    
    
    19.58Restricted stock awards at November 1, 2008
    
    
    442,472
    
    
    
    20.46
 10




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 1, 2008 AND NOVEMBER 3, 2007
 
 NOTE 7  INCOME TAXES:
  NOTE 8  FAIR VALUE MEASUREMENTS:
 Fair Value Measurements Effective date of
FASB Statement No. 157
  Fair Value Measurements at Reporting Date UsingQuoted MarketPrices in Active
    
    
    SignificantMarket for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableNovember 1,
    
    
    Assets/Liabilities
    
    
    Inputs
    
    
    InputsDescription
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Short term investments
    
    $
    99,869
    
    
    $
    92,519
    
    
    $
    7,350
    
    
    
    Other Assets
    
    
    2,516
    
    
    
    329
    
    
    
    2,187
    
    
    
    
   11




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 1, 2008 AND NOVEMBER 3, 2007
 
 NOTE 8  FAIR VALUE MEASUREMENTS (CONTINUED):
   NOTE 9  RECENT ACCOUNTING PRONOUNCEMENTS:
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Accounting for Income Tax
Benefits of Dividends on Share-Based Payment
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
 12




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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 EndedNovember 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,2008
    
    
    2007
    
    
    2008
    
    
    2007Total retail sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Total revenues
    
    
    101.6
    
    
    
    101.6
    
    
    
    101.4
    
    
    
    101.4Cost of goods sold
    
    
    70.7
    
    
    
    69.3
    
    
    
    65.5
    
    
    
    66.7Selling, general and administrative
    
    
    28.3
    
    
    
    28.2
    
    
    
    26.8
    
    
    
    24.8Depreciation
    
    
    3.1
    
    
    
    3.1
    
    
    
    2.7
    
    
    
    2.6Interest and other income
    
    
    (1.2
    )
    
    
    (1.2
    )
    
    
    (0.9
    )
    
    
    (1.0
    )Income before income taxes
    
    
    0.7
    
    
    
    2.2
    
    
    
    7.3
    
    
    
    8.3Net income
    
    
    0.5
    
    
    
    1.6
    
    
    
    4.7
    
    
    
    5.5
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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 2008 with 2007.
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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):
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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):
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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
   Total Number of
    
    
    Maximum Number (orShares Purchased as
    
    
    Approximate Dollar Value)Total Number
    
    
    
    
    
    
    Part of Publicly
    
    
    of Shares that mayOf Shares
    
    
    Average Price
    
    
    Announced Plans or
    
    
    Yet be Purchased UnderPeriod
    
    Purchased
    
    
    Paid per Share (2)
    
    
    Programs (1)
    
    
    The Plans or Programs (1)August 2008
    
    
    
    
    
    $
    
    
    
    
    September 2008
    
    
    
    
    
    
    
    
    
    
    October 2008
    
    
    198,618
    
    
    
    12.25
    
    
    
    198,618Total
    
    
    198,618
    
    
    $
    12.25
    
    
    
    198,618
    
    
    196,042 shares
 (1)
    
    On August 31, 2007, the Companys board of directors authorized an increase in the
share repurchase program of two million shares. At the third quarter ending November 1,
2008, the Company had 196,042 million shares remaining in open authorizations. There is no
specified expiration date for the Companys repurchase program. During the month of
November 2008, the Company repurchased 100 additional shares at a cost of $1,203.(2)
    
    Prices include trading costs.
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
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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, 2004.10.1
    
    Registrants Amended and Restated 2004 Incentive Compensation Plan,
incorporated by reference to Definitive Proxy Statement on Schedule
14A of the Registrant Filed April 11, 2008.10.2
    
    Letter Agreement between the Registrant and Mr. John Howe, Executive
Vice President and Chief Financial Officer, incorporated by reference
to Exhibit 99.1 to Form 8-K of the Registrant Filed September 3,
2008.31.1
    
    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 10, 2008
    
    /s/ John P. D. CatoDate
    
    John P. D. Cato
Chairman, President and
Chief Executive OfficerDecember 10, 2008
    
    /s/ John R. HoweDate
    
    John R. Howe
Executive Vice President
Chief Financial Officer
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