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
June 28, 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 August 4, 1997, the latest practicable date, there were 23,182,155 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 June 28, 1997, December 28,
1996 and June 29, 1996 3
Statement of Income for the three months and six
months ended June 28, 1997 and June 29, 1996 4
Statement of Cash Flows for the six months ended
June 28, 1997 and June 29, 1996 5
Notes to Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II - OTHER INFORMATION 12
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 13
2
<PAGE>
<TABLE>
Stein Mart, Inc.
Balance Sheet
(In Thousands)
<CAPTION>
June 28, December 28, June 29,
1997 1996 1996
----------- ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 8,089 $ 23,551 $ 6,326
Trade and Other Receivables 2,097 2,291 1,213
Inventories 162,309 139,180 140,479
Prepaid Expenses and Other Current Assets 2,777 1,874 2,750
------------ ------------ ------------
Total Current Assets 175,272 166,896 150,768
Property and Equipment, Net 57,044 50,151 44,288
Other Assets 1,353 1,217 1,350
------------ ------------ ------------
Total Assets $233,669 $218,264 $196,406
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 39,500 $ 59,176 $ 39,323
Accrued Liabilities 17,569 17,187 14,064
Income Taxes Payable 3,237 3,945 3,448
------------ ------------ ------------
Total Current Liabilities 60,306 80,308 56,835
Notes Payable to Bank 20,447 1 28,527
Deferred Income Taxes 5,812 5,812 4,397
------------ ------------ ------------
Total Liabilities 86,565 86,121 89,759
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; 23,117,627 shares issued and
outstanding at June 28, 1997; 22,811,444 shares
issued and outstanding at December 28, 1996
and 22,172,171 shares issued and outstanding
at June 29, 1996 232 228 222
Paid-in Capital 44,783 40,904 34,220
Retained Earnings 102,089 91,011 72,205
------------ ------------ ------------
Total Stockholders' Equity 147,104 132,143 106,647
------------ ------------ ------------
Total Liabilities and Stockholders' Equity $233,669 $218,264 $196,406
============ ============ ============
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 For The
Three Months Ended Six Months Ended
------------------------ ------------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $183,604 $149,400 $334,991 $257,917
Cost of Merchandise Sold 130,810 106,597 246,643 190,234
-------- -------- -------- --------
Gross Profit 52,794 42,803 88,348 67,683
Selling, General and Administrative Expenses 38,961 31,756 74,014 58,919
Other Income, Net 2,310 1,978 4,225 3,619
-------- -------- -------- --------
Income From Operations 16,143 13,025 18,559 12,383
Interest Expense 269 383 398 665
-------- -------- -------- --------
Income Before Income Taxes 15,874 12,642 18,161 11,718
Provision for Income Taxes 6,191 4,930 7,083 4,570
-------- -------- -------- --------
Net Income $ 9,683 $ 7,712 $ 11,078 $ 7,148
======== ======== ======== ========
Weighted Average Shares Outstanding 24,063 23,504 23,969 23,430
Net Income Per Share $ 0.40 $ 0.33 $ 0.46 $ 0.31
======== ======== ======== ========
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
Six Months Ended
----------------------------
June 28, June 29,
1997 1996
--------- ---------
<S> <C> <C>
Cash Flow from Operating Activities:
Net Income $ 11,078 $ 7,148
Adjustments to Reconcile Net Income to Net Cash Used In
Operating Activities:
Depreciation and Amortization 4,165 3,129
(Increase) Decrease In:
Trade and Other Receivables 194 98
Inventories (23,129) (27,518)
Prepaid Expenses and Other Current Assets (903) (795)
Other Assets (136) 108
Increase (Decrease) In:
Accounts Payable (19,676) (8,293)
Accrued Liabilities 382 (558)
Income Taxes Payable (708) (1,997)
--------- ---------
Net Cash Used in Operating Activities (28,733) (28,678)
Cash Flows Used in Investing Activities:
Net Acquisition of Property and Equipment (11,058) (6,726)
Cash Flows from Financing Activities:
Net Borrowings Under Notes Payable to Bank 20,446 28,526
Proceeds from Exercise of Stock Options and Related
Income Tax Benefits 6,683 689
Purchase of Common Stock (2,800) (2,626)
--------- ---------
Net Cash Provided By Financing Activities 24,329 26,589
--------- ---------
Net Decrease in Cash and Cash Equivalents (15,462) (8,815)
Cash and Cash Equivalents at Beginning of Year 23,551 15,141
--------- ---------
Cash and Cash Equivalents at End of Period $ 8,089 $ 6,326
========= =========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 554 $ 516
Income Taxes Paid 5,759 6,254
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 and
six 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 six months ended June 28, 1997, the Company repurchased 106,000
shares for $2,800,000 and during the six months ended June 29, 1996, the Company
repurchased 270,000 shares for $2,626,000.
Employee Stock Purchase Plan
- ----------------------------
In May 1997, the stockholders approved the Employee Stock Purchase Plan (the
"Stock Purchase Plan"). Under the Stock Purchase Plan, all employees who
complete 6 months 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 1997
through 2000, with no more than 100,000 shares being made available in each
calendar year.
Employee Stock Plan
- -------------------
In May 1997, the stockholders approved 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 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.
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 is not anticipated to have a
material effect on net income per share.
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 June 28, 1997 compared with the three months ended
June 29, 1996:
Three stores were opened during the second quarter this year, bringing to 136
the number of stores in operation this year compared to 109 stores in operation
at the end of the second quarter of 1996.
Net sales for the quarter ended June 28, 1997 were $183.6 million, a 22.9
percent increase over the $149.4 million for the second quarter of 1996.
Comparable store net sales increased 3.8 percent from the second quarter of
1996.
Gross profit for the quarter ended June 28, 1997 increased to $52.8 million, a
23.3 percent increase over the $42.8 million for the second quarter of 1996.
Gross profit as a percent of net sales increased 0.1 percent to 28.8 percent for
the second quarter this year from 28.7 percent for the second quarter last year.
This increase resulted primarily from an improvement in markup offset by slight
increases in markdowns and occupancy costs.
For the quarter ended June 28, 1997 selling, general and administrative expenses
were $39.0 million, or 21.2 percent of net sales, compared to $31.8 million, or
21.3 percent of net sales for the same 1996 quarter. The $7.2 million increase
in selling, general and administrative expenses is primarily due to the
additional stores in operation during the second quarter of 1997 as compared to
the number of stores in operation during the second quarter of 1996.
8
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
- ---------------------
Other income, primarily from in-store leased shoe departments, increased to $2.3
million for the second quarter of 1997 compared to $2.0 million for the second
quarter of 1996. The increase resulted from the additional stores operated
during the quarter this year.
Interest expense was $269,000 for the second quarter of 1997 and $383,000 for
the second quarter of 1996. The $114,000 decrease in interest expense resulted
from decreased borrowings for working capital offset by slightly higher interest
rates than were in effect last year.
The effective tax rate of 39.0 percent remained constant for the second quarter
of both years.
Net income for the second quarter of 1997 was $9.7 million or $0.40 per share
compared to net income of $7.7 million or $0.33 per share for the second quarter
of 1996.
For the six months ended June 28, 1997 compared with the six months ended June
29, 1996:
Thirteen stores were opened during the first six months of 1997 and ten stores
were opened during the first six months of 1996.
Net sales for the first six months of 1997 were $335.0 million, a 29.9 percent
increase over sales of $257.9 million for the first six months of 1996.
Comparable store net sales for the first six months of 1997 increased by 9.2
percent from the first six months of 1996.
Gross profit for the first six months of 1997 was $88.3 million or 26.4 percent
of net sales compared to $67.7 million or 26.2 percent of net sales for the same
six month period of 1996. The 0.2 percent increase in the gross profit percent
resulted primarily from an improvement in markup partially offset by a slight
increase in markdowns.
Selling, general and administrative expenses were $74.0 million or 22.1 percent
of net sales for the first six months of 1997 and $58.9 million or 22.8 percent
for the first six months of 1996. The $15.1 million increase in selling, general
and administrative expenses is primarily due to the additional stores in
operation during the first six months of 1997 as compared to the number of
stores in operation during the first six months of 1996. 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 $4.2
million for the first half of 1997 compared to $3.6 million for the first half
of 1996. The increase resulted primarily from the additional stores operated
during the first six months this year.
9
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
- ---------------------
Interest expense was $398,000 for the first half of 1997 and $665,000 for the
first half of 1996. The $267,000 decrease in interest expense resulted from
decreased borrowings for working capital for the first half of 1997 compared to
the first half of 1996 offset by slightly higher interest rates than were in
effect last year.
The effective tax rate of 39.0 percent remained constant for the first half of
both years.
Net income for the first six months of 1997 was $11.1 million or $0.46 per share
compared to net income of $7.1 million or $0.31 per share for the first six
months of 1996.
The information in the following table is presented as a percentage of net sales
for the periods indicated:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
--------------------------- -----------------------
6/28/97 6/29/96 6/28/97 6/29/96
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Merchandise Sold 71.2 71.3 73.6 73.8
---------- ---------- -------- ----------
Gross Profit 28.8 28.7 26.4 26.2
Selling, General and
Administrative Expenses 21.2 21.3 22.1 22.8
Other Income, Net 1.2 1.3 1.2 1.4
---------- ---------- -------- ----------
Income from Operations 8.8 8.7 5.5 4.8
Interest Expense 0.2 0.2 0.1 0.3
---------- ---------- -------- ----------
Income before Income Taxes 8.6 8.5 5.4 4.5
Provision for Income Taxes 3.3 3.3 2.1 1.7
---------- ---------- -------- ----------
Net Income 5.3% 5.2% 3.3% 2.8%
========== ========== ======== ==========
</TABLE>
10
<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 $28.7 million during both the first
six months of 1997 and 1996. During the first half of both years cash was used
to acquire inventory for the additional stores in operation and to reduce the
net amount of current liabilities. Based on historical cash flow results,
operating activities are expected to produce positive cash flow for the year
ending January 3, 1998.
During the first six months of 1997 and 1996, cash flow used in investing
activities was $11.1 million and $6.7 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 $24.3 million for the first six months
of 1997 and $26.6 million for the first six months 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 half includes $6.7
million of proceeds from the exercise of stock options and related income tax
benefits compared to $0.7 million in last year's first half. During the first
half of 1997, cash was used to repurchase 106,000 shares of the Company's common
stock for $2.8 million and in last year's first half 270,000 shares were
repurchased for $2.6 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.
11
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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
The company held its 1997 annual meeting of stockholders on May 12,
1997. At the meeting all of the Company's directors were elected to
serve for one-year terms. Thevote for each nominee for director was
as follows:
Votes
Name of Director Votes For Withheld
---------------- --------- --------
Jay Stein 20,275,473 98,186
John H. Williams, Jr. 20,275,673 97,986
Mason Allen 20,276,023 97,636
Pete Carpenter 20,254,550 119,109
Albert Ernest, Jr. 20,292,866 80,793
Mitchell W. Legler 20,194,199 179,460
Michael D. Rose 20,221,350 152,309
James H. Winston 20,292,573 81,086
At the meeting, the stockholders also voted to approve
amending the Stein Mart Employee Stock Plan (the "Plan") to
increase the number of shares of Company Common Stock covered
by the Plan by 1,500,000 shares, from 3,000,000 to 4,500,000
shares. The vote on the amendment was as follows: 13,856,062
shares "for", 5,224,287 shares "against", and 10,767 shares
"abstain", with 1,282,543 shares constituting broker
non-votes.
The stockholders also voted to adopt the Stein Mart, Inc. Employee
Stock Purchase Plan. The vote was as follows: 19,054,827 shares
"for", 128,031 shares "against", and 13,500 shares "abstain", with
1,177,301 shares constituting broker non-votes.
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
June 28, 1997.
12
<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: August 8, 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
13
<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 six months
ended June 28, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-3-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 8089
<SECURITIES> 0
<RECEIVABLES> 2097
<ALLOWANCES> 0
<INVENTORY> 162309
<CURRENT-ASSETS> 175272
<PP&E> 90443
<DEPRECIATION> 33399
<TOTAL-ASSETS> 233669
<CURRENT-LIABILITIES> 60306
<BONDS> 0
0
0
<COMMON> 232
<OTHER-SE> 146872
<TOTAL-LIABILITY-AND-EQUITY> 233669
<SALES> 334991
<TOTAL-REVENUES> 339216
<CGS> 246643
<TOTAL-COSTS> 320657
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 398
<INCOME-PRETAX> 18161
<INCOME-TAX> 7083
<INCOME-CONTINUING> 11078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11078
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
