##### 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 endedNovember 3, 2007
 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
  þ o o
  o þ




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##### 



THE CATO CORPORATION
 FORM 10-Q
 Quarter Ended November 3, 2007
 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 November 3, 2007 and October 28, 2006
    
    
    2Condensed Consolidated Balance Sheets
At November 3, 2007, October 28, 2006 and February 3, 2007
    
    
    3Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended November 3, 2007 and October 28, 2006
    
    
    4Notes to Condensed Consolidated Financial Statements
For the Three Months and Nine Months Ended November 3, 2007 and October 28, 2006
    
    
    5  12Item 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  27Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 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 3,
    
    
    October 28,
    
    
    November 3,
    
    
    October 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)(Dollars in thousands, except per share data)REVENUESRetail sales
    
    $
    181,870
    
    
    $
    187,727
    
    
    $
    624,977
    
    
    $
    632,101Other income (principally finance charges, late fees and
layaway charges)
    
    
    2,968
    
    
    
    3,155
    
    
    
    9,024
    
    
    
    9,686Total revenues
    
    
    184,838
    
    
    
    190,882
    
    
    
    634,001
    
    
    
    641,787COSTS AND EXPENSES, NETCost of goods sold
    
    
    126,080
    
    
    
    127,229
    
    
    
    417,015
    
    
    
    413,087Selling, general and administrative
    
    
    51,303
    
    
    
    51,482
    
    
    
    154,903
    
    
    
    157,831Depreciation
    
    
    5,684
    
    
    
    5,169
    
    
    
    16,698
    
    
    
    15,561Interest and other income
    
    
    (2,176
    )
    
    
    (2,131
    )
    
    
    (6,385
    )
    
    
    (5,624
    )180,891
    
    
    
    181,749
    
    
    
    582,231
    
    
    
    580,855Income before income taxes
    
    
    3,947
    
    
    
    9,133
    
    
    
    51,770
    
    
    
    60,932Income tax expense
    
    
    1,011
    
    
    
    3,272
    
    
    
    17,654
    
    
    
    22,179Net Income
    
    $
    2,936
    
    
    $
    5,861
    
    
    $
    34,116
    
    
    $
    38,753Basic earnings per share
    
    $
    0.09
    
    
    $
    0.19
    
    
    $
    1.08
    
    
    $
    1.24Basic weighted average shares
    
    
    31,891,308
    
    
    
    31,298,253
    
    
    
    31,713,755
    
    
    
    31,270,347Diluted earnings per share
    
    $
    0.09
    
    
    $
    0.18
    
    
    $
    1.07
    
    
    $
    1.22Diluted weighted average shares
    
    
    31,988,081
    
    
    
    31,846,241
    
    
    
    32,020,584
    
    
    
    31,795,150Dividends per share
    
    $
    .165
    
    
    $
    0.15
    
    
    $
    0.48
    
    
    $
    0.43Comprehensive income:Net income
    
    $
    2,936
    
    
    $
    5,861
    
    
    $
    34,116
    
    
    $
    38,753Unrealized gains on available-for-sale securities, net
of deferred income tax expense
    
    
    215
    
    
    
    78
    
    
    
    193
    
    
    
    112Net comprehensive income
    
    $
    3,151
    
    
    $
    5,939
    
    
    $
    34,309
    
    
    $
    38,865
  2




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##### Table of Contents



THE CATO CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 November 3,
    
    
    October 28,
    
    
    February 3,2007
    
    
    2006
    
    
    2007(Unaudited)
    
    
    (Unaudited)(Dollars in thousands)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    20,187
    
    
    $
    21,428
    
    
    $
    24,833Short-term investments
    
    
    126,797
    
    
    
    86,229
    
    
    
    98,709Accounts receivable, net of allowance for doubtful accounts of $3,194,
$3,585 and $3,554 at November 3, 2007, October 28, 2006 and
February 3, 2007, respectively
    
    
    44,470
    
    
    
    45,229
    
    
    
    45,958Merchandise inventories
    
    
    114,066
    
    
    
    110,078
    
    
    
    115,918Deferred income taxes
    
    
    7,415
    
    
    
    8,462
    
    
    
    7,508Prepaid expenses
    
    
    7,208
    
    
    
    2,438
    
    
    
    6,587Total Current Assets
    
    
    320,143
    
    
    
    273,864
    
    
    
    299,513Property and equipment  net
    
    
    125,377
    
    
    
    130,255
    
    
    
    128,461Other assets
    
    
    4,617
    
    
    
    11,150
    
    
    
    4,348Total Assets
    
    $
    450,137
    
    
    $
    415,269
    
    
    $
    432,322LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    88,169
    
    
    $
    63,542
    
    
    $
    77,046Accrued expenses
    
    
    34,646
    
    
    
    34,334
    
    
    
    29,526Accrued bonus and benefits
    
    
    1,881
    
    
    
    11,511
    
    
    
    10,756Accrued income taxes
    
    
    2,259
    
    
    
    5,803
    
    
    
    5,721Total Current Liabilities
    
    
    126,955
    
    
    
    115,190
    
    
    
    123,049Deferred income taxes
    
    
    8,817
    
    
    
    9,261
    
    
    
    8,817Other noncurrent liabilities (primarily deferred rent)
    
    
    23,266
    
    
    
    23,187
    
    
    
    23,663Commitments 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 36,100,759 shares, 35,922,824 shares
and 35,955,815 shares at November 3, 2007, October 28, 2006 and
February 3, 2007, respectively
    
    
    1,203
    
    
    
    1,197
    
    
    
    1,199Convertible Class B common stock, $.033 par value per share,
15,000,000 shares authorized; issued 1,743,525 shares,
690,525 shares and 690,525 shares at November 3, 2007,
October 28, 2006 and February 3, 2007, respectively
    
    
    58
    
    
    
    23
    
    
    
    23Additional paid-in capital
    
    
    57,639
    
    
    
    41,318
    
    
    
    42,475Retained earnings
    
    
    346,901
    
    
    
    319,716
    
    
    
    327,684Accumulated other comprehensive income
    
    
    418
    
    
    
    190
    
    
    
    225406,219
    
    
    
    362,444
    
    
    
    371,606Less Class A common stock in treasury, at cost
(6,128,015 Class A shares at November 3, 2007, and
5,093,609 Class A shares at October 28, 2006 and
February 3, 2007, respectively)
    
    
    (115,120
    )
    
    
    (94,813
    )
    
    
    (94,813
    )Total Stockholders Equity
    
    
    291,099
    
    
    
    267,631
    
    
    
    276,793Total Liabilities and Stockholders Equity
    
    $
    450,137
    
    
    $
    415,269
    
    
    $
    432,322
  3




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THE CATO CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedNovember 3,
    
    
    October 28,2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)(Dollars in thousands)OPERATING ACTIVITIESNet income
    
    $
    34,116
    
    
    $
    38,753Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    16,698
    
    
    
    15,561Provision for doubtful accounts
    
    
    1,812
    
    
    
    2,111Share-based compensation
    
    
    1,282
    
    
    
    983Excess tax benefits from share-based compensation
    
    
    (5,460
    )
    
    
    (312
    )Deferred income taxes
    
    
    3⁄4
    
    
    
    64Loss on disposal of property and equipment
    
    
    500
    
    
    
    1,323Changes in operating assets and liabilities which provided
(used) cash:Accounts receivable
    
    
    (324
    )
    
    
    2,304Merchandise inventories
    
    
    1,852
    
    
    
    (6,708
    )Prepaid and other assets
    
    
    (890
    )
    
    
    (416
    )Accrued income taxes
    
    
    2,360
    
    
    
    (1,125
    )Accounts payable, accrued expenses and other liabilities
    
    
    5,651
    
    
    
    (20,327
    )Net cash provided by operating activities
    
    
    57,597
    
    
    
    34,461INVESTING ACTIVITIESExpenditures for property and equipment
    
    
    (14,288
    )
    
    
    (23,169
    )Purchases of short-term investments
    
    
    (154,470
    )
    
    
    (114,143
    )Sales of short-term investments
    
    
    126,669
    
    
    
    114,110Net cash used in investing activities
    
    
    (42,089
    )
    
    
    (23,202
    )FINANCING ACTIVITIESChange in cash overdrafts included in accounts payable
    
    
    (500
    )
    
    
    600Dividends paid
    
    
    (15,279
    )
    
    
    (13,508
    )Purchases of treasury stock
    
    
    (18,314
    )
    
    
    3⁄4Proceeds from employee stock purchase plan
    
    
    461
    
    
    
    395Excess tax benefits from share-based compensation
    
    
    5,460
    
    
    
    312Proceeds from stock options exercised
    
    
    8,018
    
    
    
    636Net cash used in financing activities
    
    
    (20,154
    )
    
    
    (11,565
    )Net decrease in cash and cash equivalents
    
    
    (4,646
    )
    
    
    (306
    )Cash and cash equivalents at beginning of period
    
    
    24,833
    
    
    
    21,734Cash and cash equivalents at end of period
    
    $
    20,187
    
    
    $
    21,428
  4




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THE CATO CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 3, 2007 AND OCTOBER 28, 2006
 NOTE 1  GENERAL:
        NOTE 2  EARNINGS PER SHARE:
  5




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 3, 2007 AND OCTOBER 28, 2006
 NOTE 2  EARNINGS PER SHARE (CONTINUED):
   Three Months Ended
    
    Nine Months EndedNovember 3,
    
    October 28,
    
    November 3,
    
    October 28,2007
    
    2006
    
    2007
    
    2006Weighted-average shares outstanding
    
    
    31,891,308
    
    
    
    31,298,253
    
    
    
    31,713,755
    
    
    
    31,270,347Dilutive effect of :Stock options
    
    
    40,486
    
    
    
    523,476
    
    
    
    254,722
    
    
    
    511,307Restricted stock
    
    
    55,100
    
    
    
    24,512
    
    
    
    50,524
    
    
    
    13,496Employee stock purchase plan
    
    
    1,187
    
    
    
    3⁄4
    
    
    
    1,583
    
    
    
    3⁄4Weighted-average shares and common
stock equivalents outstanding
    
    
    31,988,081
    
    
    
    31,846,241
    
    
    
    32,020,584
    
    
    
    31,795,150
 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 3, 2007 AND OCTOBER 28, 2006
 NOTE 4  FINANCING ARRANGEMENTS (CONTINUED):
  NOTE 5  REPORTABLE SEGMENT INFORMATION:
   Three 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
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedOctober 28, 2006
    
    Retail
    
    Credit
    
    Total
    
    October 28, 2006
    
    Retail
    
    Credit
    
    TotalRevenues
    
    $
    188,171
    
    
    $
    2,711
    
    
    $
    190,882
    
    
    Revenues
    
    $
    633,718
    
    
    $
    8,069
    
    
    $
    641,787Depreciation
    
    
    5,142
    
    
    
    27
    
    
    
    5,169
    
    
    Depreciation
    
    
    15,494
    
    
    
    67
    
    
    
    15,561Interest and other
income
    
    
    (2,131
    )
    
    
    
    
    
    
    (2,131
    )
    
    Interest and other income
    
    
    (5,624
    )
    
    
    
    
    
    
    (5,624
    )Income before taxes
    
    
    7,948
    
    
    
    1,185
    
    
    
    9,133
    
    
    Income before taxes
    
    
    57,753
    
    
    
    3,179
    
    
    
    60,932Total assets
    
    
    345,075
    
    
    
    70,194
    
    
    
    415,269
    
    
    Total assets
    
    
    345,075
    
    
    
    70,194
    
    
    
    415,269Capital expenditures
    
    
    5,797
    
    
    
    2
    
    
    
    5,799
    
    
    Capital expenditures
    
    
    23,146
    
    
    
    23
    
    
    
    23,169
   7




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 3, 2007 AND OCTOBER 28, 2006
 NOTE
5  REPORTABLE SEGMENT INFORMATION (CONTINUED):
 Three Months Ended
    
    
    Nine Months EndedNovember 3,
    
    
    October 28,
    
    
    November 3,
    
    
    October 28,2007
    
    
    2006
    
    
    2007
    
    
    2006Bad debt expense
    
    $
    678
    
    
    $
    722
    
    
    $
    1,812
    
    
    $
    2,303Payroll
    
    
    251
    
    
    
    246
    
    
    
    738
    
    
    
    760Postage
    
    
    235
    
    
    
    239
    
    
    
    748
    
    
    
    780Other expenses
    
    
    287
    
    
    
    292
    
    
    
    1,005
    
    
    
    980Total expenses
    
    $
    1,451
    
    
    $
    1,499
    
    
    $
    4,303
    
    
    $
    4,823
 NOTE 6  STOCK BASED COMPENSATION:
 Share-Based Payment, Accounting for Stock Issued to
Employees,
  8




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 3, 2007 AND OCTOBER 28, 2006
 NOTE 6  STOCK BASED COMPENSATION (CONTINUED):
  1987
    
    1999
    
    2004Plan
    
    Plan
    
    Plan
    
    TotalOptions and/or restricted stock initially authorized
    
    
    5,850,000
    
    
    
    1,000,000
    
    
    
    1,350,000
    
    
    
    8,200,000Options and/or restricted stock available for grant:February 3, 2007
    
    
    9,277
    
    
    
    
    
    
    
    1,091,618
    
    
    
    1,100,895November 3, 2007
    
    
    9,277
    
    
    
    
    
    
    
    1,003,909
    
    
    
    1,013,186
   WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Term
    
    Value (a)Options outstanding at February 3, 2007
    
    
    1,236,675
    
    
    $
    8.01
    
    
    1.86 years
    
    $
    18,363,084Granted
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    2,400
    
    
    
    14.86Exercised
    
    
    1,083,200
    
    
    
    7.40Outstanding at November 3, 2007
    
    
    151,075
    
    
    $
    12.30
    
    
    4.78 years
    
    $
    1,218,037Vested and exercisable at November 3, 2007
    
    
    102,025
    
    
    $
    11.08
    
    
    3.85 years
    
    $
    946,662
 
 (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 NOVEMBER 3, 2007 AND OCTOBER 28, 2006
 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 NOVEMBER 3, 2007 AND OCTOBER 28, 2006
 NOTE
6  STOCK BASED COMPENSATION (CONTINUED):
  Weighted AverageNumber of
    
    
    Grant Date FairShares
    
    
    Value Per ShareRestricted stock awards at February 3, 2007
    
    
    214,882
    
    
    $
    22.92Granted
    
    
    100,226
    
    
    
    21.87Vested
    
    
    Forfeited
    
    
    11,017
    
    
    
    22.67Restricted stock awards at November 3, 2007
    
    
    304,091
    
    
    $
    22.59
 NOTE
7  INCOME TAXES:
     11




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THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 3, 2007 AND OCTOBER 28, 2006
 NOTE
8  RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED):
     12




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##### Table of Contents



THE CATO CORPORATION
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD LOOKING INFORMATION:
   13




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THE CATO CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 CRITICAL ACCOUNTING POLICIES:
   14




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THE CATO CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 RESULTS OF OPERATIONS:
  Three Months Ended
    
    Nine Months EndedNovember 3,
    
    October 28,
    
    November 3,
    
    October 28,2007
    
    2006
    
    2007
    
    2006Total retail sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Total revenues
    
    
    101.6
    
    
    
    101.7
    
    
    
    101.4
    
    
    
    101.5Cost of goods sold
    
    
    69.3
    
    
    
    67.8
    
    
    
    66.7
    
    
    
    65.3Selling, general and administrative
    
    
    28.2
    
    
    
    27.4
    
    
    
    24.8
    
    
    
    25.0Depreciation
    
    
    3.1
    
    
    
    2.7
    
    
    
    2.6
    
    
    
    2.5Interest and other income
    
    
    (1.2
    )
    
    
    (1.1
    )
    
    
    (1.0
    )
    
    
    (0.9
    )Income before income taxes
    
    
    2.2
    
    
    
    4.9
    
    
    
    8.3
    
    
    
    9.6Net income
    
    
    1.6
    
    
    
    3.1
    
    
    
    5.5
    
    
    
    6.1
 Comparison of Third Quarter and First Nine Months of 2007 with 2006.
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##### Table of Contents



THE CATO CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 RESULTS
OF OPERATIONS  (CONTINUED):
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##### Table of Contents



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:
  17




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##### Table of Contents



THE CATO CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK (CONTINUED):
         18




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##### Table of Contents



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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##### Table of Contents



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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##### Table of Contents



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 NumberShares Purchased as
    
    
    (or Approximate DollarTotal Number
    
    
    
    
    
    
    Part of Publicly
    
    
    Value) 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 2007
    
    
    306,500
    
    
    $
    19.39
    
    
    
    306,500September 2007
    
    
    
    
    
    
    
    
    
    
    October 2007
    
    
    522,015
    
    
    
    18.96
    
    
    
    522,015Total
    
    
    828,515
    
    
    $
    19.12
    
    
    
    828,515
    
    
    2.728 million shares
 
 (1)
    
    On August 30, 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 3,
2007, the Company had 2.728 million shares remaining in open authorizations. There is no
specified expiration date for the Companys repurchase program. During the month of November 2007,
the Company repurchased 761,900 additional shares at a cost of $14,120,000.(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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##### Table of Contents



ITEM 6. EXHIBITS
 Exhibit No.
    
    Item3.1
    
    Registrants Restated Certificate of Incorporation of the
Registrant 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 as amended and restated, incorporated by
reference to Exhibit 99.2 to Form 8-K of the Registrant Filed
December 10, 2007.31.1
    
    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.
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##### Table of Contents



PART II OTHER INFORMATION
 
 THE CATO CORPORATION
 
 THE CATO CORPORATIONDecember 12, 2007
    
    /s/ John P. D. CatoDate
    
    John P. D. CatoChairman, President andChief Executive OfficerDecember 12, 2007
    
    /s/ Thomas W. StoltzThomas W. StoltzExecutive Vice PresidentChief Financial OfficerDecember 12, 2007
    
    /s/ John R. HoweDate
    
    John R. HoweSenior Vice PresidentController
 23