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
March 29, 1997 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 May 5, 1997, the latest practicable date, there were 23,070,071 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 March 29, 1997, December 28,
1996 and March 30, 1996 3
Statement of Income for the three months ended
March 29, 1997 and March 30, 1996 4
Statement of Cash Flows for the three months ended
March 29, 1997 and March 30, 1996 5
Notes to Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
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>
March 29, December 28, March 30,
1997 1996 1996
----------- ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 13,675 $ 23,551 $ 8,057
Trade and Other Receivables 1,920 2,291 1,558
Inventories 163,025 139,180 138,247
Prepaid Expenses and Other Current Assets 2,984 1,874 2,706
----------- ------------ -----------
Total Current Assets 181,604 166,896 150,568
Property and Equipment, Net 54,919 50,151 42,424
Other Assets 1,427 1,217 1,411
----------- ------------ -----------
Total Assets $237,950 $218,264 $194,403
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 64,653 $ 59,176 $ 53,431
Accrued Liabilities 17,598 17,187 12,538
Income Taxes Payable 3,945
----------- ------------ -----------
Total Current Liabilities 82,251 80,308 65,969
Notes Payable to Bank 14,234 1 25,099
Deferred Income Taxes 5,812 5,812 4,397
----------- ------------ -----------
Total Liabilities 102,297 86,121 95,465
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; 22,979,476 shares issued and outstanding
at March 29, 1997; 22,811,444 shares issued and
outstanding at December 28, 1996 and 22,157,716 shares
issued and outstanding at March 30, 1996 230 228 222
Paid-in Capital 43,017 40,904 34,223
Retained Earnings 92,406 91,011 64,493
----------- ------------ -----------
Total Stockholders' Equity 135,653 132,143 98,938
----------- ------------ -----------
Total Liabilities and Stockholders' Equity $237,950 $218,264 $194,403
=========== ============ ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
<TABLE>
Stein Mart, Inc.
Statement of Income
(Unaudited)
(In Thousands Except Per Share Amounts)
<CAPTION>
For The
Three Months Ended
--------------------------------
March 29, March 30,
1997 1996
---------- ---------
<S> <C> <C>
Net Sales $151,387 $108,517
Cost of Merchandise Sold 115,833 83,637
---------- ---------
Gross Profit 35,554 24,880
Selling, General and Administrative Expenses 35,053 27,163
Other Income, Net 1,915 1,641
---------- ---------
Income (Loss) From Operations 2,416 (642)
Interest Expense 129 282
---------- ---------
Income (Loss) Before Income Taxes 2,287 (924)
Income Tax (Provision) Benefit (892) 360
---------- ---------
Net Income (Loss) $ 1,395 $ (564)
========== =========
Weighted Average Shares Outstanding 23,875 23,357
========== =========
Net Income (Loss) Per Share $ 0.06 $ (0.02)
========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE>
<TABLE>
Stein Mart, Inc.
Statement of Cash Flows
(Unaudited)
(In Thousands)
<CAPTION>
For The
Three Months Ended
-------------------------------
March 29, March 30,
1997 1996
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 1,395 $ (564)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Used in Operating Activities:
Depreciation and Amortization 2,025 1,520
(Increase) Decrease In:
Trade and Other Receivables 371 (247)
Inventories (23,845) (25,286)
Prepaid Expenses and Other Current Assets (1,110) (751)
Other Assets (210) 47
Increase (Decrease) In:
Accounts Payable 5,477 5,815
Accrued Liabilities 411 (2,084)
Income Taxes Payable (3,945) (5,445)
---------- ----------
Net Cash Used in Operating Activities (19,431) (26,995)
Cash Flows Used in Investing Activities:
Net Acquisition of Property and Equipment (6,793) (3,253)
Cash Flows from Financing Activities:
Net Borrowings Under Notes Payable to Bank 14,233 25,098
Proceeds from Exercise of Stock Options and
Related Income Tax Benefits 2,410 399
Purchase of Common Stock (295) (2,333)
---------- ----------
Net Cash Provided By Financing Activities 16,348 23,164
---------- ----------
Net Decrease in Cash and Cash Equivalents (9,876) (7,084)
Cash and Cash Equivalents at Beginning of Year 23,551 15,141
---------- ----------
Cash and Cash Equivalents at End of Period $ 13,675 $ 8,057
========== ==========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 425 $ 237
Income Taxes Paid 5,367 5,750
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<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 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 28, 1996.
Common Stock Repurchase
- -----------------------
During the three months ended March 29, 1997, the Company repurchased 15,000
shares for $295,000 and during the three months ended March 30, 1996,
repurchased 255,000 shares for $2,333,000.
Employee Stock Purchase Plan
- ----------------------------
In February 1997, the Board of Directors adopted, subject to stockholder
approval, the Employee Stock Purchase Plan (the "Stock Purchase Plan"). Under
the Stock Purchase Plan, all employees who complete 90 days employment with the
Company and who work on a full-time basis or are regularly scheduled to work
more than 20 hours per week are eligible to participate in the Stock Purchase
Plan. Participants in the Stock Purchase Plan are permitted to use their payroll
deductions to acquire shares at 85% of the fair market value of the Company's
stock determined at either the beginning or end of each option period. Shares
eligible under the Plan are limited to 400,000 shares in the aggregate and the
Plan will be effective for the years of 1997 through 2000, with no more than
100,000 shares being made available in each calendar year.
Employee Stock Plan
- -------------------
In March 1997, the Board of Directors adopted, subject to stockholder approval,
an amendment to the Company's Employee Stock Plan (the "Plan"), increasing the
number of shares authorized for issuance under the Plan from 3,000,000 shares to
a total of 4,500,000 shares.
6
<PAGE>
Stein Mart, Inc.
Notes to Financial Statements
(Unaudited)
Earnings Per Share
- ------------------
Net income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding plus the common
stock equivalents related to stock options for each period.
In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings
per Share" ("FAS 128"), was issued. FAS 128 is effective for periods ending
after December 15, 1997. FAS 128 replaces the presentation of primary earnings
per share with a presentation of basic earnings per share, which excludes
dilution and is computed by dividing income by the weighted average number of
common shares outstanding for the period. FAS 128 had no effect on net income
per share for the three months ended March 29, 1997.
7
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This report includes a number of forward-looking statements which reflect the
Company's current views with respect to future events and financial performance.
In these reports the words "may", "expect", "anticipate", "believe", "estimate"
and similar expressions identify forward looking statements.
Any such forward-looking statements contained herein are subject to certain
risks and uncertainties that could cause the Company's actual results of
operations to differ materially from historical results or current expectations.
These factors include, without limitation, intense competition from other
retailers many of whom are larger and have greater financial and marketing
resources, the availability of suitable new store sites at acceptable lease
terms, changes in the level of consumer spending or preferences in apparel,
adequate sources of designer and brand-name merchandise at acceptable prices,
and the Company's ability to attract and retain qualified employees to support
planned growth.
Results of Operations
- ---------------------
For the three months ended March 29, 1997 compared with the three months ended
March 30, 1996:
Ten stores were opened during the first quarter of this year, bringing to 133
the number of stores in operation this year compared to 102 stores in operation
at the end of the first quarter of 1996.
Net sales for the quarter ended March 29, 1997 were $151.4 million, a 39.5
percent increase over the $108.5 million for the first quarter of 1996.
Comparable store net sales increased 16.2 percent from the first quarter of
1996.
Gross profit for the quarter ended March 29, 1997 increased to $35.6 million, a
42.9 percent increase over the $24.9 million for the first quarter of 1996.
Gross profit as a percent of net sales increased 0.6 percent to 23.5 percent for
the first quarter this year from 22.9 percent for the first quarter last year.
This increase resulted primarily from leveraging of occupancy costs.
For the quarter ended March 29, 1997 selling, general and administrative
expenses were $35.1 million, or 23.2 percent of net sales, compared to $27.2
million, or 25.0 percent of net sales for the same 1996 quarter. The $7.9
million increase in selling, general and administrative expenses is primarily
due to the additional stores in operation during the first quarter of 1997 as
compared to the number of stores in operation during the first quarter of 1996.
The decrease of 1.8 percent of sales resulted from leveraging of selling,
general and administrative expenses.
Other income, primarily from in-store leased shoe departments, increased to $1.9
million for the first quarter of 1997 compared to $1.6 million for the first
quarter of 1996. The increase resulted primarily from the additional stores
operated during the quarter this year.
8
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
- ---------------------
Interest expense was $129,000 for the first quarter of 1997 and $282,000 for the
first quarter of 1996. The $153,000 decrease in interest expense resulted from
decreased borrowings for working capital for the additional stores for the first
quarter of 1997 compared to the first quarter of 1996 and lower interest rates
than were in effect last year.
The effective tax rate of 39.0 percent remained constant for the first quarter
of both years.
Net income for the first quarter of 1997 was $1.4 million or $0.06 per share
compared to a net loss of $564,000 or $0.02 loss per share for the first quarter
of 1996.
The information in the following table is presented as a percentage of net sales
for the periods indicated:
<TABLE>
<CAPTION>
Quarter Ended
------------------------------
3/29/97 3/30/96
------- --------
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of Merchandise Sold 76.5 77.1
------- --------
Gross Profit 23.5 22.9
Selling, General and Administrative Expenses 23.2 25.0
Other Income, Net 1.3 1.5
------- --------
Income (Loss) from Operations 1.6 (0.6)
Interest Expense 0.1 0.3
------- --------
Income (Loss) before Income Taxes 1.5 (0.9)
Income Tax (Provision) Benefit (0.6) 0.4
------- --------
Net Income (Loss) 0.9% (0.5)%
======= ========
</TABLE>
Liquidity and Capital Resources
- -------------------------------
Net cash used in operating activities was $19.4 million and $27.0 million for
the first quarters of 1997 and 1996, respectively. During the first quarter of
both years inventory levels were increased to provide inventory for the
additional stores in operation and for the Easter selling season. Based on
historical cash flow results, operating activities are expected to produce
positive cash flow for the year ending January 3, 1998.
9
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
- -------------------------------
During the first three months of 1997 and 1996, cash flow used in investing
activities was $6.8 million and $3.3 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 1997 are projected to be approximately $22.0 million.
Cash flow from financing activities was $16.3 million for the first quarter of
1997 and $23.2 million for the first quarter of 1996 which reflected in both
periods net borrowing under the Company's revolving credit agreement to meet
seasonal working capital requirements. This year's first quarter includes $2.4
million of proceeds from the exercise of stock options and related income tax
benefits compared to $.4 million in last year's first quarter. During the first
quarter of 1997, cash was used to repurchase 15,000 shares of the Company's
common stock for $295,000 and in last year's first quarter 255,000 shares were
repurchased for $2.3 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
March 29, 1997.
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: May 12, 1997 /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>
This 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 three months
ended March 29, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-3-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 13675
<SECURITIES> 0
<RECEIVABLES> 2522
<ALLOWANCES> 602
<INVENTORY> 163025
<CURRENT-ASSETS> 181604
<PP&E> 86201
<DEPRECIATION> 31282
<TOTAL-ASSETS> 237950
<CURRENT-LIABILITIES> 82251
<BONDS> 0
0
0
<COMMON> 230
<OTHER-SE> 135423
<TOTAL-LIABILITY-AND-EQUITY> 237950
<SALES> 151387
<TOTAL-REVENUES> 153302
<CGS> 115833
<TOTAL-COSTS> 150886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> 2287
<INCOME-TAX> 892
<INCOME-CONTINUING> 1395
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1395
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
