SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number
September 28, 1996 0-20052
STEIN MART, INC.
(Exact name of registrant as specified in its charter)
Florida 64-0466198
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1200 Riverplace Blvd., Jacksonville, Florida 32207
(Address of principal executive offices) (Zip Code)
(904) 346-1500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
At November 4, 1996, the latest practicable date, there were 22,871,469 shares
outstanding of Common Stock, $.01 par value.
<PAGE>
Stein Mart, Inc.
Index to Form 10-Q
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets at September 28, 1996, December 30,
1995 and September 30, 1995 3
Statement of Income for the three months and nine months
ended September 28, 1996 and September 30, 1995 4
Statement of Cash Flows for the nine months ended
September 28, 1996 and September 30, 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
PART II - OTHER INFORMATION 11
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 12
2
<PAGE>
<TABLE>
Stein Mart, Inc.
Balance Sheet
(In Thousands)
<CAPTION>
September 28, December 30, September 30,
1996 1995 1995
------------- ------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 7,847 $ 15,141 $ 6,029
Trade and Other Receivables 1,367 1,311 952
Inventories 153,797 112,961 126,995
Prepaid Taxes 5,301 473
Other Prepaid Expenses and Current Assets 2,604 1,955 2,268
------------- ------------ -------------
Total Current Assets 170,916 131,368 136,717
Property and Equipment, Net 46,642 40,691 38,725
Other Assets 1,279 1,458 2,724
------------- ------------ -------------
Total Assets $218,837 $173,517 $178,166
============= ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 54,308 $ 47,616 $ 45,021
Accrued Liabilities 13,839 14,622 11,557
Income Taxes Payable 5,445
------------- ------------ -------------
Total Current Liabilities 68,147 67,683 56,578
Notes Payable to Bank 28,702 1 28,657
Deferred Income Taxes 4,397 4,397 3,324
------------- ------------ -------------
Total Liabilities 101,246 72,081 88,559
Stockholders' Equity:
Preferred stock - $.01 par value; 1,000,000 shares
authorized; there are no shares outstanding
Common stock - $.01 par value; 50,000,000 shares
authorized; 22,903,375 shares issued and
outstanding at September 28, 1996; 22,365,584
shares issued and outstanding at December 30,
1995 and 22,407,841 shares issued and
outstanding at September 30, 1995 229 224 224
Paid-in Capital 42,746 36,155 36,551
Retained Earnings 74,616 65,057 52,832
------------- ------------ -------------
Total Stockholders' Equity 117,591 101,436 89,607
------------- ------------ -------------
Total Liabilities and Stockholders' Equity $218,837 $173,517 $178,166
============= ============ =============
The accompanying notes are an integral part of these financial statements.
3
</TABLE>
<PAGE>
<TABLE>
Stein Mart, Inc.
Statement of Income
(Unaudited)
(In Thousands Except Per Share Amounts)
<CAPTION>
For The For The
Three Months Ended Nine Months Ended
----------------------------- ------------------------------
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $131,264 $108,221 $389,181 $312,460
Cost of Merchandise Sold 100,081 82,726 290,315 234,749
------------- ------------- ------------- -------------
Gross Profit 31,183 25,495 98,866 77,711
Selling, General and Administrative Expenses 28,445 24,122 87,364 72,160
Other Income, Net 1,656 1,633 5,275 4,380
------------- ------------- ------------- -------------
Income From Operations 4,394 3,006 16,777 9,931
Interest Expense 441 440 1,106 860
------------- ------------- ------------- -------------
Income Before Income Taxes 3,953 2,566 15,671 9,071
Provision for Income Taxes 1,542 1,001 6,112 3,538
------------- ------------- ------------- -------------
Net Income $ 2,411 $ 1,565 $ 9,559 $ 5,533
============= ============= ============= =============
Weighted Average Shares Outstanding 23,750 23,508 23,537 23,493
Net Income Per Share $ 0.10 $ 0.07 $ 0.41 $ 0.24
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
4
</TABLE>
<PAGE>
<TABLE>
Stein Mart, Inc.
Statement of Cash Flows
(Unaudited)
(In Thousands)
For The
Nine Months Ended
--------------------------------
September 28, September 30,
1996 1995
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 9,559 $ 5,533
Adjustments to Reconcile Net Income to Net Cash Used In
Operating Activities:
Depreciation and Amortization 4,818 3,728
(Increase) Decrease In:
Trade and Other Receivables (56) 48
Inventories (40,836) (32,051)
Prepaid Taxes (5,301) (151)
Other Prepaid Expenses and Current Assets (649) (723)
Other Assets 179 137
Increase (Decrease) In:
Accounts Payable 6,692 (1,999)
Accrued Liabilities (783) (1,222)
Income Taxes Payable (5,445) (5,638)
------------- -------------
Net Cash Used in Operating Activities (31,822) (32,338)
Cash Flows Used in Investing Activities:
Net Acquisition of Property and Equipment (10,769) (10,380)
Cash Flows from Financing Activities:
Net Borrowings Under Notes Payable to Bank 28,701 28,656
Proceeds from Exercise of Stock Options and Related
Income Tax Benefits 9,222 127
Purchase of Common Stock (2,626) (1,330)
------------- -------------
Net Cash Provided By Financing Activities 35,297 27,453
------------- -------------
Net Decrease in Cash and Cash Equivalents (7,294) (15,265)
Cash and Cash Equivalents at Beginning of Year 15,141 21,294
------------- -------------
Cash and Cash Equivalents at End of Period $ 7,847 $ 6,029
============= =============
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 905 $ 403
Income Taxes Paid 12,081 9,596
The accompanying notes are an integral part of these financial statements.
5
</TABLE>
<PAGE>
STEIN MART, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month and nine month periods are not necessarily indicative of the results
that may be expected for the entire year. For further information, refer to the
financial statements and footnotes thereto included in the Stein Mart, Inc.
annual report on Form 10-K for the year ended December 30, 1995.
NOTES PAYABLE TO BANK
In June 1996, the Company amended its revolving credit agreement to
increase the total amount available to $40 million, to extend the expiration
date to June 29, 1999 and to extend the expiration date of the letter of credit
facility to June 30, 1997. Interest is payable, at the Company's option, at
1.50% below the prime rate or at .5% over the London Inter-Bank Offering Rate
(LIBOR). An additional $10 million seasonal line of credit is available each
year from March 15 through June 30 and from September 15 through December 31.
COMMON STOCK REPURCHASE
In February 1996, the Board of Directors authorized the repurchase of an
additional 500,000 shares of the Company's common stock in the open market,
bringing the total repurchases authorized to 1,000,000 shares. During the nine
months ended September 28, 1996, the Company repurchased 270,000 shares for
$2,626,000 and during the nine months ended September 30, 1995, repurchased
117,500 shares for $1,330,000.
EARNINGS PER SHARE
Net income per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding plus the common stock
equivalents related to stock options for each period.
6
<PAGE>
STEIN MART, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the three months ended September 28, 1996 compared with the three months
ended September 30, 1995:
Three stores were opened during the third quarter this year, bringing to 112 the
number of stores in operation this year compared to 92 stores in operation at
the end of the third quarter of 1995.
Net sales for the quarter ended September 28, 1996 were $131.3 million, a 21.3
percent increase over the $108.2 million for the third quarter of 1995.
Comparable store net sales increased 4.4 percent from the third quarter of 1995.
Gross profit for the quarter ended September 28, 1996 increased to $31.2
million, a 22.3 percent increase over the $25.5 million for the third quarter of
1995. Gross profit as a percent of net sales increased 0.2 percent to 23.8
percent for the third quarter this year from 23.6 percent for the third quarter
last year. This increase resulted primarily from an improvement in markup,
partially offset by slightly higher markdowns.
For the quarter ended September 28, 1996 selling, general and administrative
expenses were $28.4 million, or 21.7 percent of net sales, compared to $24.1
million, or 22.3 percent of net sales for the same 1995 quarter. The $4.3
million increase in selling, general and administrative expenses is primarily
due to the additional stores in operation during the third quarter of 1996 as
compared to the number of stores in operation during the third quarter of 1995.
The decrease of 0.6 percent of sales resulted from leveraging of selling,
general and administrative expenses.
Other income, primarily from in-store leased shoe departments, was unchanged for
the third quarter of 1996 compared to the third quarter of 1995. Interest
expense for the third quarter of 1996 was also unchanged from the third quarter
of 1995 as a result of increased borrowings for working capital for the
additional stores, offset by lower interest rates than were in effect last year.
The effective tax rate of 39.0 percent remained constant for the third quarter
of both years.
Net income for the third quarter of 1996 was $2.4 million or $0.10 per share
compared to net income of $1.6 million or $0.07 per share for the third quarter
of 1995.
7
<PAGE>
STEIN MART, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (continued)
For the nine months ended September 28, 1996 compared with the nine months ended
September 30, 1995:
Thirteen stores were opened during the first nine months of 1996 and twelve
stores were opened during the first nine months of 1995.
Net sales for the first nine months of 1996 were $389.2 million, a 24.6 percent
increase over sales of $312.5 million for the first nine months of 1995.
Comparable store net sales for the first nine months of 1996 increased by 6.0
percent from the first nine months of 1995.
Gross profit for the first nine months of 1996 was $98.9 million or 25.4 percent
of net sales compared to $77.7 million or 24.9 percent of net sales for the same
nine month period of 1995. The increase in the gross profit percent resulted
primarily from a slight improvement in markup and leveraging of occupancy costs.
Selling, general and administrative expenses were $87.4 million or 22.4 percent
of net sales for the first nine months of 1996 and $72.2 million or 23.1 percent
for the first nine months of 1995. The $15.2 million increase in selling,
general and administrative expenses is primarily due to the additional stores in
operation during the first nine months of 1996 as compared to the number of
stores in operation during the first nine months of 1995. The decrease of 0.7
percent of sales resulted from leveraging of selling, general and administrative
expenses.
Other income, primarily from in-store leased shoe departments, increased to $5.3
million for the first nine months of 1996 compared to $4.4 million for the first
nine months of 1995. The increase resulted from the additional stores operated
during the first nine months this year and from the fragrance department which
became a leased operation at the beginning of the second quarter of 1995.
Interest expense was $1,106,000 for the first nine months of 1996 and $860,000
for the first nine months of 1995. The increase in interest expense resulted
from increased borrowings for working capital for the additional stores,
partially offset by lower interest rates than were in effect last year.
The effective tax rate of 39.0 percent remained constant for the first nine
months of both years.
Net income for the first nine months of 1996 was $9.6 million or $0.41 per share
compared to net income of $5.5 million or $0.24 per share for the first nine
months of 1995.
8
<PAGE>
<TABLE>
STEIN MART, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (continued)
The information in the following table is presented as a percentage of net sales
for the periods indicated:
<CAPTION>
Quarter Ended Nine Months Ended
--------------------------- ---------------------------
9/28/96 9/30/95 9/28/96 9/30/95
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Merchandise Sold 76.2 76.4 74.6 75.1
----------- ----------- ----------- -----------
Gross Profit 23.8 23.6 25.4 24.9
Selling, General and
Administrative Expenses 21.7 22.3 22.4 23.1
Other Income, Net 1.2 1.5 1.3 1.4
----------- ----------- ----------- -----------
Income from Operations 3.3 2.8 4.3 3.2
Interest Expense 0.3 0.4 0.3 0.3
----------- ----------- ----------- -----------
Income before Income Taxes 3.0 2.4 4.0 2.9
Provision for Income Taxes 1.2 1.0 1.5 1.1
----------- ----------- ----------- -----------
Net Income 1.8% 1.4% 2.5% 1.8%
=========== =========== =========== ===========
9
</TABLE>
<PAGE>
STEIN MART, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $31.8 million and $32.3 million during
the first nine months of 1996 and 1995, respectively. During the first nine
months of both years cash was used primarily to acquire inventory for the
additional stores in operation. Based on historical cash flow results, operating
activities are expected to produce positive cash flow for the year ending
December 28, 1996.
During the first nine months of 1996 and 1995, cash flow used in investing
activities was $10.8 million and $10.4 million respectively, for acquisition of
fixtures, equipment, and leasehold improvements for new stores, information
system enhancements and improvements to existing stores. Total capital
expenditures for 1996 are projected to be approximately $15.0 million.
Cash flow from financing activities was $35.3 million for the first nine months
of 1996 and $27.5 million for the first nine months of 1995 which reflected in
both periods net borrowing under the Company's revolving credit agreement to
meet seasonal working capital requirements. Also during the first nine months of
1996, cash was used to repurchase 270,000 shares of the Company's common stock
for $2.6 million and in last year's first nine months 117,500 shares were
repurchased for $1.3 million.
The Company believes that cash flow generated from operating activities,
combined with the revolving credit agreement and vendor credit, will be
sufficient to fund current and long-term capital expenditures and working
capital requirements.
SEASONALITY AND INFLATION
The Company's business is seasonal in nature with the fourth quarter, which
includes the Christmas selling season, historically accounting for the largest
percentage of the Company's net sales and operating income. Accordingly,
selling, general and administrative expenses are typically higher as a
percentage of net sales during the first three quarters of each year.
Inflation affects the costs incurred by the Company in the purchase of
merchandise, the leasing of its stores, and in certain components of its
selling, general and administrative expenses. The Company has been successful in
offsetting the effects of inflation through the control of expenses during the
past three years. However, there can be no assurance that inflation will not
have a material effect in the future.
10
<PAGE>
STEIN MART, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 28, 1996.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Stein Mart, Inc.
Date: November 8, 1996 /s/ John H. Williams, Jr.
---------------- -----------------------------------
John H. Williams, Jr.
President, Chief Operating Officer
/s/ James G. Delfs
-----------------------------------
James G. Delfs
Senior Vice President,
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the condensed
consolidated balance sheet and condensed consolidated statement of income found
on the Company's Form 10-Q for the nine months ended September 28, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 7847
<SECURITIES> 0
<RECEIVABLES> 1367
<ALLOWANCES> 0
<INVENTORY> 153797
<CURRENT-ASSETS> 170916
<PP&E> 74185
<DEPRECIATION> 27543
<TOTAL-ASSETS> 218837
<CURRENT-LIABILITIES> 68147
<BONDS> 0
0
0
<COMMON> 229
<OTHER-SE> 117362
<TOTAL-LIABILITY-AND-EQUITY> 218837
<SALES> 389181
<TOTAL-REVENUES> 394456
<CGS> 290315
<TOTAL-COSTS> 377679
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1106
<INCOME-PRETAX> 15671
<INCOME-TAX> 6112
<INCOME-CONTINUING> 9559
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9559
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
</TABLE>
