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 30, 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 November 4, 2000, the latest practicable date, there were 42,431,011
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 30, 2000, January 1, 2000
and October 2, 1999 3
Statement of Income for the three months and nine
months ended September 30, 2000 and October 2, 1999 4
Statement of Cash Flows for the nine months ended
September 30, 2000 and October 2, 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>
September 30, January 1, October 2,
2000 2000 1999
------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,650 $ 17,055 $ 12,781
Trade and other receivables 2,478 4,472 4,586
Inventories 308,549 245,186 266,512
Prepaid taxes 1,821 - 3,178
Prepaid expenses and other current assets 3,742 4,089 3,087
------------- ------------- ------------
Total current assets 330,240 270,802 290,144
Property and equipment, net 79,256 76,503 79,050
Other assets 6,341 4,895 4,099
------------- ------------- ------------
Total assets $415,837 $352,200 $373,293
============= ============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $110,835 $120,640 $ 99,100
Accrued liabilities 42,691 30,086 27,879
Income taxes payable - 4,686 -
------------- ------------- ------------
Total current liabilities 153,526 155,412 126,979
Store closing reserve 10,515 12,589 -
Notes payable to banks 60,115 - 58,013
Deferred income taxes 4,287 4,287 9,008
------------- ------------- ------------
Total liabilities 228,443 172,288 194,000
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; 42,631,111 shares issued and outstanding
at September 30, 2000; 43,904,450 shares issued and
outstanding at January 1, 2000 and 44,595,440 shares
issued and outstanding at October 2, 1999 426 439 446
Paid-in capital 11,948 21,364 25,674
Retained earnings 175,020 158,109 153,173
------------- ------------- -------------
Total stockholders' equity 187,394 179,912 179,293
------------- ------------- -------------
Total liabilities and stockholders' equity $415,837 $352,200 $373,293
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<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 30, October 2, September 30, October 2,
2000 1999 2000 1999
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales $267,561 $227,625 $804,200 $684,632
Cost of merchandise sold 204,484 179,259 601,689 519,665
------------- ---------- ------------- ----------
Gross profit 63,077 48,366 202,511 164,967
Selling, general and administrative expenses 61,819 54,963 182,625 160,789
Other income, net 2,927 2,789 9,623 8,507
------------- ---------- ------------- ----------
Income (loss) from operations 4,185 (3,808) 29,509 12,685
Interest expense 827 629 2,233 1,579
------------- ---------- ------------- ----------
Income (loss) before income taxes 3,358 (4,437) 27,276 11,106
Income tax provision (benefit) 1,276 (1,686) 10,365 4,220
------------- ---------- ------------- ----------
Net income (loss) $ 2,082 $ (2,751) $ 16,911 $ 6,886
============= ========== ============= ==========
Earnings (loss) per share - Basic $0.05 $(0.06) $0.39 $0.15
============= ========== ============= ==========
Earnings (loss) per share - Diluted $0.05 $(0.06) $0.39 $0.15
============= ========== ============= ==========
Weighted-average shares outstanding - Basic 42,991 44,871 43,164 45,194
============= ========== ============= ==========
Weighted-average shares outstanding - Diluted 43,665 45,213 43,596 45,595
============= ========== ============= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
Stein Mart, Inc.
Statement of Cash Flows
(Unaudited)
(In thousands)
<CAPTION>
For The
Nine Months Ended
--------------------------------------
September 30, October 2,
2000 1999
------------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $16,911 $ 6,886
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 10,570 9,160
Tax benefit from exercise of stock options 197 88
(Increase) decrease in:
Trade and other receivables 1,994 (6)
Inventories (63,363) (55,731)
Prepaid taxes (1,821) (3,178)
Prepaid expenses and other current assets 347 1,305
Other assets (1,446) (119)
Increase (decrease) in:
Accounts payable (9,805) (3,374)
Accrued liabilities 12,605 1,426
Income taxes payable (4,686) (2,098)
Store closing reserve (2,074) -
------------- ----------
Net cash used in operating activities (40,571) (45,641)
Cash flows used in investing activities:
Net acquisition of property and equipment (13,323) (16,188)
Cash flows from financing activities:
Net borrowings under notes payable to banks 60,115 58,013
Proceeds from exercise of stock options 520 244
Proceeds from employee stock purchase plan 957 1,022
Purchase of common stock (11,103) (6,926)
------------- ----------
Net cash provided by financing activities 50,489 52,353
------------- ----------
Net decrease in cash and cash equivalents (3,405) (9,476)
Cash and cash equivalents at beginning of year 17,055 22,257
------------- ----------
Cash and cash equivalents at end of period $13,650 $12,781
============= ==========
Supplemental disclosures of cash flow information:
Interest paid $ 2,160 $ 1,781
Income taxes paid 16,853 6,389
</TABLE>
The accompanying notes are an integral part of these financial statements.
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 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 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):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------------------ ------------------------
Sept. 30, Oct. 2, Sept. 30, Oct. 2,
2000 1999 2000 1999
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Weighted-average number of common shares 42,991 44,871 43,164 45,194
Stock options 674 342 432 401
---------- -------- ---------- --------
Weighted-average number of common shares
plus common stock equivalents 43,665 45,213 43,596 45,595
========== ======== ========== ========
</TABLE>
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 nine months ended September 30, 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 (434)
----------
12,155
Less current portion (included in Accrued liabilities) (1,640)
----------
Balance, September 30, 2000 10,515
==========
4. Common Stock Repurchase
During the nine months ended September 30, 2000, the Company repurchased
1,570,500 shares for $11.1 million and during the nine months ended October 2,
1999, the Company repurchased 1,002,800 shares for $6.9 million. During the
period from October 1, 2000 through November 4, 2000, the Company repurchased an
additional 247,100 shares of its common stock in the open market at a cost of
$2.9 million.
6
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
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:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
--------------------------- ----------------------------
9/30/00 10/2/99 9/30/00 10/2/99
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of merchandise sold 76.4 78.8 74.8 75.9
----------- ---------- ---------- ----------
Gross profit 23.6 21.2 25.2 24.1
Selling, general and
administrative expenses 23.1 24.1 22.7 23.5
Other income, net 1.1 1.2 1.2 1.3
----------- ---------- ---------- ----------
Income (loss) from operations 1.6 (1.7) 3.7 1.9
Interest expense 0.3 0.2 0.3 0.3
----------- ---------- ---------- ----------
Income (loss) before income taxes 1.3 (1.9) 3.4 1.6
Income tax provision (benefit) 0.5 (0.7) 1.3 0.6
----------- ---------- ---------- ----------
Net income (loss) 0.8% (1.2%) 2.1 % 1.0%
=========== ========== ========== ==========
</TABLE>
7
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
For the three months ended September 30, 2000 compared with the three months
ended October 2, 1999:
Five stores were opened during the third quarter this year, bringing to 216 the
number of stores in operation this year compared to 203 stores in operation at
the end of the third quarter of 1999.
Net sales for the quarter ended September 30, 2000 were $267.6 million, a 17.5
percent increase over net sales of $227.6 million for the third quarter of 1999.
Comparable store net sales increased 11.1 percent over the third quarter of
1999.
Gross profit for the quarter ended September 30, 2000 was $63.1 million or 23.6
percent of net sales compared to $48.4 million or 21.2 percent of net sales for
the third quarter of 1999. The 2.4 percent increase in the gross profit
percentage resulted from lower markdowns as a percent of sales and from
leveraging occupancy expenses.
Selling, general and administrative expenses were $61.8 million or 23.1 percent
of net sales for the quarter ended September 30, 2000 and $55.0 million or 24.1
percent of net sales for the same 1999 quarter. The $6.8 million increase in
selling, general and administrative expenses is primarily due to the additional
stores in operation during the third quarter of 2000 as compared to the number
of stores in operation during the third quarter of 1999. The decrease of 1.0
percent of net sales is due to improved leverage of selling and administrative
expenses and decreased pre-opening expenses from fewer stores being opened this
year.
Other income, primarily from in-store leased shoe departments, increased to $2.9
million for the third quarter of 2000 compared to $2.8 million for the third
quarter of 1999. The increase resulted from the additional stores operated
during the quarter this year.
Interest expense was $827,000 for the third quarter of 2000 and $629,000 for the
third quarter of 1999. The increase resulted from higher interest rates during
the third quarter this year compared to last year. Average borrowings for the
third quarter of 2000 were comparable to the third quarter of 1999.
Net income for the third quarter of 2000 was $2.1 million or $0.05 diluted
earnings per share compared to a net loss of $(2.8) million or $(0.06) diluted
loss per share for the third quarter of 1999.
8
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
For the nine months ended September 30, 2000 compared with the nine months ended
October 2, 1999:
Eleven stores were opened during the first nine months of 2000 and twenty-two
stores were opened and one store was closed during the first nine months of
1999.
Net sales for the first nine months of 2000 were $804.2 million, a 17.5 percent
increase over sales of $684.6 million for the first nine months of 1999.
Comparable store net sales for the first nine months of 2000 increased by 10.6
percent over the first nine months of 1999.
Gross profit for the first nine months of 2000 was $202.5 million or 25.2
percent of net sales compared to $165.0 million or 24.1 percent of net sales for
the same nine month period of 1999. The 1.1 percent increase in the gross profit
percent resulted from lower markdowns as a percent of sales and from leveraging
occupancy expenses.
Selling, general and administrative expenses were $182.6 million or 22.7 percent
of net sales for the first nine months of 2000 and $160.8 million or 23.5
percent for the first nine months of 1999. The $21.8 million increase in
selling, general and administrative expenses is primarily due to the additional
stores in operation during the first nine months of 2000 as compared to the
number of stores in operation during the first nine months of 1999. The decrease
of 0.8 percent of net sales is due to improved leverage of selling and
administrative expenses and decreased pre-opening expenses related to fewer new
stores being opened in the first nine months this year.
Other income, primarily from in-store leased shoe departments, increased to $9.6
million for the first nine months of 2000 compared to $8.5 million for the first
nine months of 1999. The increase resulted primarily from the additional stores
operated during the first nine months this year.
Interest expense was $2.2 million and $1.6 million for the first nine months of
2000 and 1999, respectively. The increase resulted from higher average
borrowings and higher interest rates during the first nine months of 2000
compared to last year. The increased borrowings were primarily used to fund
operating activities and repurchase common stock.
Net income for the first nine months of 2000 was $16.9 million or $0.39 diluted
earnings per share compared to net income of $6.9 million or $0.15 diluted
earnings per share for the first nine months of 1999.
9
<PAGE>
Stein Mart, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Liquidity and Capital Resources
Net cash used in operating activities was $40.6 million and $45.7 million for
the first nine months of 2000 and 1999, respectively. Cash was used in the first
nine months of 2000 and 1999 to increase inventories by $63.4 million and $55.7
million, respectively, primarily related to new store openings, and to pay
accounts payable of $9.8 million and $3.4 million, respectively. These decreases
were offset by a $10.0 million increase in net income before depreciation and
amortization and a $12.6 million increase in accrued liabilities. 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 nine months of 2000 and 1999, cash flow used in investing
activities was $13.3 million and $16.2 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 $20 million.
Cash flow from financing activities was $50.5 million for the first nine months
of 2000 and $52.4 million for the first nine months of 1999 which reflected in
both periods net borrowing under the Company's revolving credit agreement to
meet seasonal working capital requirements. During the first nine months of
2000, cash was used to repurchase 1,570,500 shares of the Company's common stock
for $11.1 million and in last year's first nine months 1,002,800 shares were
repurchased for $6.9 million. During both 2000 and 1999, the first nine months
includes $1.0 million of proceeds from the employee stock purchase plan.
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.
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 30, 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: November 14, 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
