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
April 4, 1998 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 11, 1998, the latest practicable date, there were 46,266,488 (post split)
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 April 4, 1998, January 3,
1998 and March 29, 1997 3
Statement of Income for the three months ended
April 4, 1998 and March 29, 1997 4
Statement of Cash Flows for the three months ended
April 4, 1998 and March 29, 1997 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
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<TABLE>
STEIN MART, INC.
BALANCE SHEET
(In Thousands)
<CAPTION>
April 4, January 3, March 29,
1998 1998 1997
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,849 $ 27,979 $ 13,675
Trade and other receivables 2,537 2,518 1,920
Inventories 207,799 175,620 163,025
Prepaid expenses and other current assets 3,669 2,170 2,984
------------ ------------ ------------
Total current assets 221,854 208,287 181,604
Property and equipment, net 62,464 61,087 54,919
Other assets 2,962 1,230 1,427
------------ ------------ ------------
Total assets $287,280 $270,604 $237,950
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 64,505 $ 65,013 $ 64,653
Accrued liabilities 19,146 21,527 17,598
Income taxes payable 401 11,451 -
------------ ------------ ------------
Total current liabilities 84,052 97,991 82,251
Notes payable to bank 29,292 - 14,234
Deferred income taxes 6,810 6,810 5,812
------------ ------------ ------------
Total liabilities 120,154 104,801 102,297
Stockholders' equity:
Preferred stock - $.01 par value; 1,000,000 shares
authorized; there are no shares outstanding
Common stock - $.01 par value; 100,000,000 shares
authorized; 46,161,756 shares issued and
outstanding at April 4, 1998; 46,010,708 shares
issued and outstanding at January 3, 1998 and
45,958,952 shares issued and outstanding at March 29, 1997 462 460 460
Paid-in capital 40,177 39,565 42,787
Retained earnings 126,487 125,778 92,406
------------ ------------ ------------
Total stockholders' equity 167,126 165,803 135,653
------------ ------------ ------------
Total liabilities and stockholders' equity $287,280 $270,604 $237,950
============ ============ ============
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
-----------------------------
April 4, March 29,
1998 1997
------------ ------------
<S> <C> <C>
Net sales $169,482 $151,387
Cost of merchandise sold 129,584 115,833
------------ ------------
Gross profit 39,898 35,554
Selling, general and administrative expenses 40,648 35,053
Other income, net 2,202 1,915
------------ ------------
Income from operations 1,452 2,416
Interest expense 308 129
------------ ------------
Income before income taxes 1,144 2,287
Provision for income taxes 435 892
------------ ------------
Net income
$ 709 $ 1,395
============ ============
Earnings per share:
Basic $ 0.02 $ 0.03
============ ============
Diluted $ 0.02 $ 0.03
============ ============
Weighted average shares outstanding:
Basic 45,969 45,715
============ ============
Diluted 47,021 46,935
============ ============
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
-----------------------------
April 4, March 29,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 709 $ 1,395
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,440 2,025
(Increase) decrease in:
Trade and other receivables (19) 371
Inventories (32,179) (23,845)
Prepaid expenses and other current assets (1,499) (1,110)
Other assets (1,732) (210)
Increase (decrease) in:
Accounts payable (508) 5,477
Accrued liabilities (2,381) 411
Income taxes payable (11,050) (3,945)
------------ ------------
Net cash used in operating activities (46,219) (19,431)
Cash flows used in investing activities:
Net acquisition of property and equipment (3,817) (6,793)
Cash flows from financing activities:
Net borrowings under notes payable to bank 29,292 14,233
Proceeds from exercise of stock options and
related income tax benefits 1,873 2,410
Proceeds from employee stock purchase plan 512 -
Purchase of common stock (1,771) (295)
------------ ------------
Net cash provided by financing activities 29,906 16,348
------------ ------------
Net decrease in cash and cash equivalents (20,130) (9,876)
Cash and cash equivalents at beginning of year 27,979 23,551
------------ ------------
Cash and cash equivalents at end of period $ 7,849 $ 13,675
============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 480 $ 425
Income taxes paid 10,648 5,367
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<PAGE>
STEIN MART, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. 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 January 3, 1998.
2. STOCK SPLIT
On April 24, 1998, the Board of Directors authorized a two-for-one stock split,
to be distributed in the form of a stock dividend on May 22, 1998 for
shareholders of record as of May 8, 1998. In this report, all references to
number of shares and per share amounts have been restated. In addition,
stockholders' equity has been restated to give retroactive recognition to the
stock split in prior periods by reclassifying from paid-in capital to common
stock the $.01 par value of the additional shares arising from the split.
3. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" in the fourth quarter of 1997. Accordingly, in addition to
the restatement for the stock split, the Company has also restated all periods
presented in these financial statements to reflect "basic" and "diluted"
earnings per share. Basic earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding for the period.
Diluted earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding plus common stock equivalents
related to stock options for each period.
A reconciliation of weighted average number of common shares to weighted average
number of common shares plus common stock equivalents is as follows:
Apr. 4, Mar. 29,
1998 1997
---------- ----------
Weighted average number
of common shares 45,969 45,715
Stock options 1,052 1,220
---------- ----------
Weighted average number of common
shares plus common stock equivalents 47,021 46,935
========== ==========
6
<PAGE>
STEIN MART, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. COMMON STOCK REPURCHASE
During the three months ended April 4, 1998, the Company repurchased 136,000
shares for $1.8 million and during the three months ended March 29, 1997,
repurchased 30,000 shares for $295,000.
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.
Wherever used, the words "plan", "expect", "anticipate", "believe", "estimate"
and similar expressions identify forward looking statements.
Any such forward-looking statements contained herein are subject to risks and
uncertainties that could cause the Company's actual results of operations to
differ materially from historical results or current expectations. These risks
include, without limitation, ongoing 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.
The Company does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make clear that any projected
results expressed or implied therein will not be realized.
RESULTS OF OPERATIONS
The information in the following table is presented as a percentage of net sales
for the periods indicated:
Quarter Ended
-------------------------
Apr. 4, Mar. 29,
1998 1997
---------- ----------
Net sales 100.0% 100.0%
Cost of merchandise sold 76.5 76.5
---------- ----------
Gross profit 23.5 23.5
Selling, general and administrative expenses 24.0 23.2
Other income, net 1.3 1.3
---------- ----------
Income from operations 0.8 1.6
Interest expense 0.2 0.1
---------- ----------
Income before income taxes 0.6 1.5
Income tax provision 0.2 0.6
---------- ----------
Net income 0.4% 0.9%
========== ==========
8
<PAGE>
STEIN MART, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three months ended April 4, 1998 compared with the three months ended
March 29, 1997:
Four stores were opened during the first quarter of this year, bringing to 155
the number of stores in operation this year compared to 133 stores in operation
at the end of the first quarter of 1997.
Net sales for the quarter ended April 4, 1998 were $169.5 million, a 12.0
percent increase over the $151.4 million for the first quarter of 1997.
Comparable store net sales decreased 0.8 percent from the first quarter of 1997.
Gross profit for the quarter ended April 4, 1998 increased to $39.9 million, a
12.2 percent increase over the $35.6 million for the first quarter of 1997.
Gross profit as a percent of net sales was 23.5 percent in both the first
quarter this year and the first quarter last year. The gross profit percentage
in the first quarter of 1998 reflects decreased markdowns, offset by increased
occupancy costs as a percent of net sales resulting from slightly lower sales
per store.
For the quarter ended April 4, 1998 selling, general and administrative expenses
were $40.6 million, or 24.0 percent of net sales, compared to $35.1 million, or
23.2 percent of net sales for the same 1997 quarter. The $5.6 million increase
in selling, general and administrative expenses is primarily due to the
additional stores in operation during the first quarter of 1998 as compared to
the number of stores in operation during the first quarter of 1997. The increase
of 0.8 percent of net sales is primarily due to increased selling expenses as a
percent of net sales resulting from lower per store sales productivity.
Other income, primarily from in-store leased shoe departments, increased to $2.2
million for the first quarter of 1998 compared to $1.9 million for the first
quarter of 1997. The increase resulted primarily from the additional stores
operated during the quarter this year.
Interest expense was $308,000 for the first quarter of 1998 and $129,000 for the
first quarter of 1997. The $179,000 increase in interest expense resulted from
higher average borrowings during the first quarter this year compared to last
year. The increased borrowings resulted primarily from the timing of payments
for merchandise and for increased income taxes.
Net income for the first quarter of 1998 was $0.7 million compared to net income
of $1.4 million for the first quarter of 1997. Earnings per share were $0.02
(basic and diluted) for the first quarter this year compared to $0.03 (basic and
diluted) for the first quarter last year.
In this report, all references to number of shares and per share amounts have
been restated for the two-for-one stock split described in Note 2 to Financial
Statements.
9
<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 $46.2 million and $19.4 million for
the first quarters of 1998 and 1997, respectively. Net income for the first
quarter of 1998 was $0.7 million, a decrease of $0.7 million in net income from
the first quarter of 1997. 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. Cash was also used in the first
quarter of 1998 to reduce liabilities, primarily income taxes payable, by $13.9
million. Based on historical cash flow results, operating activities are
expected to produce positive cash flow for the year ending January 2, 1999.
During the first three months of 1998 and 1997, cash flow used in investing
activities was $3.8 million and $6.8 million, respectively, primarily for
acquisition of fixtures, equipment, and leasehold improvements for new stores
and information system enhancements. Total capital expenditures for 1998 are
projected to be approximately $22.0 million.
Cash flow from financing activities was $29.8 million for the first quarter of
1998 and $16.3 million for the first quarter of 1997 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 $1.9
million of proceeds from the exercise of stock options and related income tax
benefits compared to $2.4 million in last year's first quarter. This year's
first quarter also includes $0.5 million of proceeds from the employee stock
purchase plan. During the first quarter of 1998, cash was used to repurchase
136,000 shares of the Company's common stock for $1.8 million and in last year's
first quarter 30,000 shares were repurchased for $295,000.
The Company believes that expected cash flow provided by operating activities,
bank borrowings 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
April 4, 1998.
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 18, 1998 /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 April 4, 1998 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-2-1999
<PERIOD-START> JAN-5-1998
<PERIOD-END> APR-4-1998
<CASH> 7849
<SECURITIES> 0
<RECEIVABLES> 3637
<ALLOWANCES> 1100
<INVENTORY> 207799
<CURRENT-ASSETS> 221854
<PP&E> 102809
<DEPRECIATION> 40345
<TOTAL-ASSETS> 287280
<CURRENT-LIABILITIES> 84052
<BONDS> 0
0
0
<COMMON> 462
<OTHER-SE> 166664
<TOTAL-LIABILITY-AND-EQUITY> 287280
<SALES> 169482
<TOTAL-REVENUES> 171684
<CGS> 129584
<TOTAL-COSTS> 170232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 308
<INCOME-PRETAX> 1144
<INCOME-TAX> 435
<INCOME-CONTINUING> 709
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 709
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
