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 1, 2000 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 8, 2000, the latest practicable date, there were 43,096,585 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 1, 2000, January 1, 2000
and April 3, 1999 3
Statement of Income for the three months ended
April 1, 2000 and April 3, 1999 4
Statement of Cash Flows for the three months ended
April 1, 2000 and April 3, 1999 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>
April 1, January 1, April 3,
2000 2000 1999
------------ ------------ ------------
Unaudited Unaudited
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,081 $ 17,055 $ 18,263
Trade and other receivables 3,648 4,472 3,744
Inventories 269,449 245,186 238,166
Prepaid taxes - - 862
Prepaid expenses and other current assets 3,039 4,089 3,595
------------ ------------ ------------
Total current assets 292,217 270,802 264,630
Property and equipment, net 76,520 76,503 76,110
Other assets 4,725 4,895 3,901
------------ ------------ ------------
Total assets $373,462 $352,200 $344,641
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 97,916 $120,640 $ 88,806
Accrued liabilities 31,542 30,086 25,181
Income taxes payable 992 4,686 -
------------ ------------ ------------
Total current liabilities 130,450 155,412 113,987
Store closing reserve 11,834 12,589 -
Notes payable to banks 50,121 - 43,651
Deferred income taxes 4,287 4,287 9,008
------------ ------------ ------------
Total liabilities 196,692 172,288 166,646
Stockholders' equity:
Preferred stock - $.01 par value; 1,000,000 shares
authorized; no shares outstanding
Common stock - $.01 par value; 100,000,000 shares
authorized; 43,102,585 shares issued and outstanding
at April 1, 2000; and 43,904,450 shares issued and
outstanding at January 1, 2000; 45,348,623 shares
issued and outstanding at April 3, 1999 431 439 453
Paid-in capital 17,231 21,364 31,012
Retained earnings 159,108 158,109 146,530
------------ ------------ ------------
Total stockholders' equity 176,770 179,912 177,995
------------ ------------ ------------
Total liabilities and stockholders' equity $373,462 $352,200 $344,641
============ ============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
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<TABLE>
Stein Mart, Inc.
Statement of Income
(Unaudited)
(In thousands except per share amounts)
<CAPTION>
For The
Three Months Ended
----------------------------
April 1, April 3,
2000 1999
------------ ------------
<S> <C> <C>
Net sales $245,451 $212,087
Cost of merchandise sold 188,296 163,444
------------ ------------
Gross profit 57,155 48,643
Selling, general and administrative expenses 57,874 50,511
Other income, net 2,955 2,692
------------ ------------
Income from operations 2,236 824
Interest expense 625 432
------------ ------------
Income before income taxes 1,611 392
Provision for income taxes 612 149
------------ -------------
Net income $ 999 $ 243
============ =============
Earnings per share - Basic $ 0.02 $ 0.01
============ =============
Earnings per share - Diluted $ 0.02 $ 0.01
============ =============
Weighted-average shares outstanding - Basic 43,494 45,372
============ =============
Weighted-average shares outstanding - Diluted 43,664 45,761
============ =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
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<TABLE>
Stein Mart, Inc.
Statement of Cash Flows
(Unaudited)
(In thousands)
<CAPTION>
For The
Three Months Ended
-----------------------------
April 1, April 3,
2000 1999
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 999 $ 243
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 3,452 2,998
(Increase) decrease in:
Trade and other receivables 824 836
Inventories (24,263) (27,385)
Prepaid taxes - (862)
Prepaid expenses and other current assets 1,050 797
Other assets 170 79
Increase (decrease) in:
Accounts payable (22,724) (13,668)
Accrued liabilities 1,456 (1,272)
Income taxes payable (3,694) (2,098)
Store closing reserve (755) -
------------- -------------
Net cash used in operating activities (43,485) (40,332)
Cash flows used in investing activities:
Net acquisition of property and equipment (3,469) (7,086)
Cash flows from financing activities:
Net borrowings under notes payable to banks 50,121 43,651
Proceeds from exercise of stock options and related
income tax benefits 48 145
Proceeds from employee stock purchase plan 528 522
Purchase of common stock (4,717) (894)
------------- -------------
Net cash provided by financing activities 45,980 43,424
------------- -------------
Net decrease in cash and cash equivalents (974) (3,994)
Cash and cash equivalents at beginning of year 17,055 22,257
------------- -------------
Cash and cash equivalents at end of period $ 16,081 $ 18,263
============= =============
Supplemental disclosures of cash flow information:
Interest paid $ 343 $ 862
Income taxes paid 4,296 2,815
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 1, 2000.
2. 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 (000's):
Apr. 1, Apr. 3,
2000 1999
------------ ------------
Weighted-average number
of common shares 43,494 45,372
Stock options 170 389
------------ ------------
Weighted-average number of common
shares plus common stock equivalents 43,664 45,761
============ ============
3. Store Closing Reserve
The store closing reserve includes primarily the estimated cost of lease
terminations of ten under-performing stores recorded in 1999. Four stores were
closed on December 31, 1999 and six more will be closed during 2000. Activity in
the store closing reserve for the quarter ended April 1, 2000 included only
severance payments and ongoing lease payments on two stores that were closed on
December 31, 1999 and is as follows:
Balance, beginning of year $12,589
Payments (243)
------------
12,346
Less current portion (included in Accrued Liabilities) (512)
------------
Balance, April 1, 2000 $11,834
============
4. Common Stock Repurchase
During the three months ended April 1, 2000, the Company repurchased 925,500
shares for $4.7 million and during the three months ended April 3, 1999,
repurchased 131,000 shares for $0.9 million.
6
<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, ability to
successfully implement strategies to exit or improve under-performing stores,
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
In 1999, the Company recorded a charge to close ten under-performing stores.
Four stores were closed on December 31, 1999 and six more will be closed during
2000. The Company continues to follow its plan to close these stores and
believes the charge recorded in 1999 is sufficient to carry out this plan.
The information in the following table is presented as a percentage of net sales
for the periods indicated:
Quarter Ended
---------------------------
Apr. 1, Apr. 3,
2000 1999
------------ ------------
Net sales 100.0% 100.0%
Cost of merchandise sold 76.7 77.1
------------ ------------
Gross profit 23.3 22.9
Selling, general and administrative expenses 23.6 23.8
Other income, net 1.2 1.3
------------ ------------
Income from operations 0.9 0.4
Interest expense 0.2 0.2
------------ ------------
Income before income taxes 0.7 0.2
Provision for income taxes 0.3 0.1
------------ ------------
Net income 0.4% 0.1%
============ ============
7
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the three months ended April 1, 2000 compared with the three months ended
April 3, 1999:
Two stores were opened during the first quarter this year, bringing to 207 the
number of stores in operation at the end of the first quarter of 2000 compared
to 191 stores in operation at the end of the first quarter of 1999.
Net sales for the quarter ended April 1, 2000 were $245.5 million, a 15.7
percent increase over net sales of $212.1 million for the first quarter of 1999.
Comparable store net sales increased 7.7 percent over the first quarter of 1999.
Gross profit for the quarter ended April 1, 2000 was $57.2 million or 23.3
percent of net sales compared to $48.6 million or 22.9 percent of net sales for
the first quarter of 1999. The 0.4 percent increase in the gross profit
percentage resulted primarily from improved occupancy leverage.
Selling, general and administrative expenses were $57.9 million or 23.6 percent
of net sales for the quarter ended April 1, 2000 and $50.5 million or 23.8
percent of net sales for the same 1999 quarter. The $7.4 million increase in
selling, general and administrative expenses is primarily due to the additional
stores in operation during the first quarter of 2000 as compared to the number
of stores in operation during the first quarter of 1999. The decrease of 0.2
percent of net sales is primarily due to improved leverage of both selling and
corporate office expenses.
Other income, primarily from in-store leased shoe departments, increased to $3.0
million for the first quarter of 2000, an increase of $0.3 million over the $2.7
for the first quarter of 1999. The increase resulted from the additional stores
operated during the quarter this year.
Interest expense was $625,000 for the first quarter of 2000 and $432,000 for the
first quarter of 1999. The increase resulted from higher average borrowings and
higher interest rates during the first quarter this year compared to last year.
The increased borrowings were primarily used to fund operating activities and to
repurchase common stock.
Net income for the first quarter of 2000 was $1.0 million or $0.02 diluted
earnings per share compared to net income of $0.2 million or $0.01 diluted
earnings per share for the first quarter of 1999.
8
<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 $43.5 million and $40.3 million for
the first quarters of 2000 and 1999, respectively. During the first quarters of
2000 and 1999 cash was used to increase inventories by $24.3 million and $27.4
million, respectively, primarily related to new stores openings. Cash was also
used to reduce liabilities, primarily accounts payable, by $25.7 million and
$17.0 million, respectively. Based on historical cash flow results, operating
activities are expected to produce positive cash flow for the year ending
December 30, 2000.
During the first three months of 2000 and 1999, cash flows used in investing
activities amounted to $3.5 million and $7.1 million, respectively, primarily
for acquisition of fixtures, equipment, and leasehold improvements for new
stores and information system enhancements. Total capital expenditures for 2000
are anticipated to be $15-18 million.
Cash flow from financing activities was $46.0 million for the first three months
of 2000 and $43.4 million for the first three months of 1999 which reflected in
both periods net borrowing under the Company's revolving credit agreement to
meet seasonal working capital requirements. In each of the first quarters of
2000 and 1999, $0.5 million of cash was provided by proceeds from the employee
stock purchase plan. During the first quarter of 2000, cash was used to
repurchase 925,500 shares of the Company's common stock for $4.7 million and in
last year's first quarter, 131,000 shares were repurchased for $0.9 million.
The Company believes that cash flow generated from 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.
9
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Year 2000 Issue
Beginning in 1997, the Company conducted a comprehensive review of its
information technology systems and other equipment and services to determine
those which would be impacted by the Year 2000 Issue (i.e., the inability of
some technology and equipment to accurately read and process certain dates
including all dates in the Year 2000 and thereafter). As a result of this
review, the Company developed and successfully completed a program to resolve
its Year 2000 issues.
The Company performs system upgrades and purchases new systems, applications,
software and hardware in the ordinary course of business and, since 1996, has
only purchased software and systems that are Year 2000 compliant or require
little modification to remedy Year 2000 issues. As a result, the Company has
been able to minimize the financial impact of its Year 2000 costs and such costs
have not been material to the Company's financial position, results of
operations or cash flows.
The Company has not experienced any Year 2000 difficulties to date. However,
there can be no assurance that all of the Company's Year 2000 issues or those of
key third parties upon whom the Company relies for goods and services have
surfaced. If the Company or its key vendors fail to address future Year 2000
issues in a timely manner, and there are no alternatives available to the
Company, then the Company could experience a material adverse impact on its
results of operations or financial position.
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 1, 2000.
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 15, 2000 /s/ John H. Williams, Jr.
----------------------------------
John H. Williams, Jr.
President, Chief Operating Officer
and Director
/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 1, 2000 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> JAN-2-2000
<PERIOD-END> APR-1-2000
<CASH> 16081
<SECURITIES> 0
<RECEIVABLES> 3648
<ALLOWANCES> 0
<INVENTORY> 269449
<CURRENT-ASSETS> 292217
<PP&E> 140959
<DEPRECIATION> 64439
<TOTAL-ASSETS> 373462
<CURRENT-LIABILITIES> 130450
<BONDS> 0
0
0
<COMMON> 431
<OTHER-SE> 176339
<TOTAL-LIABILITY-AND-EQUITY> 373462
<SALES> 245451
<TOTAL-REVENUES> 248406
<CGS> 188296
<TOTAL-COSTS> 246170
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 625
<INCOME-PRETAX> 1611
<INCOME-TAX> 612
<INCOME-CONTINUING> 999
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 999
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
