UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 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)
Registrant's telephone number, including area code: (904) 346-1500
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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
At May 28, 2004, the latest practicable date, the Registrant had issued and
outstanding an aggregate of 42,167,754 shares of its common stock.
STEIN MART, INC.
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets at May 1, 2004, January 31, 2004 3
and May 3, 2003
Statements of Operations for the 13 Weeks Ended May 1, 2004 4
and May 3, 2003
Statements of Cash Flows for the 13 Weeks Ended May 1, 2004 5
and May 3, 2003
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
Stein Mart, Inc.
Balance Sheets
(In thousands)
May 1, January 31, May 3,
2004 2004 2003
-------------- -------------- --------------
ASSETS (Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 43,904 $ 11,965 $ 17,052
Trade and other receivables 4,230 4,227 3,700
Inventories 288,176 283,379 329,838
Prepaid expenses and other current assets 6,658 6,227 5,783
-------------- -------------- --------------
Total current assets 342,968 305,798 356,373
Property and equipment, net 76,242 76,934 86,133
Other assets 9,602 10,297 7,755
-------------- -------------- --------------
Total assets $428,812 $393,029 $450,261
============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 97,402 $ 59,046 $ 96,802
Accrued liabilities 63,680 60,715 52,945
Income taxes payable 7,587 - 907
Notes payable to banks - - 56,300
-------------- -------------- --------------
Total current liabilities 168,669 119,761 206,954
Notes payable to banks - 24,962 -
Other liabilities 19,655 20,628 18,699
-------------- -------------- --------------
Total liabilities 188,324 165,351 225,653
COMMITMENTS AND CONTINGENCIES
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; 42,059,262; 41,993,529 and 41,568,678
shares issued and outstanding, respectively 421 420 416
Paid-in capital 4,461 3,196 509
Unearned compensation (280) (309) -
Retained earnings 235,886 224,371 223,683
-------------- -------------- --------------
Total stockholders' equity 240,488 227,678 224,608
-------------- -------------- --------------
Total liabilities and stockholders' equity $428,812 $393,029 $450,261
============== ============== ==============
The accompanying notes are an integral part of these financial statements.
3
Stein Mart, Inc.
Statements of Operations
(Unaudited)
(In thousands except per share amounts)
For The 13 Weeks Ended
---------------------------------
May 1, May 3,
2004 2003
-------------- --------------
Net sales $363,608 $328,201
Cost of merchandise sold 264,563 244,981
-------------- --------------
Gross profit 99,045 83,220
Selling, general and administrative expenses 83,844 83,743
Other income, net 3,634 3,624
-------------- --------------
Income from operations 18,835 3,101
Interest expense 39 405
-------------- --------------
Income from continuing operations before income taxes 18,796 2,696
Provision for income taxes 7,142 1,025
-------------- --------------
Income from continuing operations 11,654 1,671
Loss from discontinued operations, net of tax benefit (139) (158)
-------------- --------------
Net income $ 11,515 $ 1,513
============== ==============
Basic income per share:
Continuing operations $ 0.27 $ 0.04
Discontinued operations - -
-------------- --------------
Total $ 0.27 $ 0.04
============== ==============
Diluted income per share:
Continuing operations $ 0.27 $ 0.04
Discontinued operations - -
-------------- --------------
Total $ 0.27 $ 0.04
============== ==============
Weighted-average shares outstanding - Basic 42,000 41,587
============== ==============
Weighted-average shares outstanding -Diluted 42,461 41,587
============== ==============
The accompanying notes are an integral part of these financial statements.
4
Stein Mart, Inc.
Statements of Cash Flows
(Unaudited)
(In thousands)
For The 13 Weeks Ended
---------------------------------
May 1, May 3,
2004 2003
-------------- --------------
Cash flows from operating activities:
Net income $11,515 $ 1,513
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 4,396 4,824
Impairment of property and other assets - 765
Store closing charges 180 -
Deferred income taxes (159) (46)
Restricted stock compensation 10 -
Tax benefit from exercise of stock options 199 -
Changes in assets and liabilities:
Trade and other receivables (3) 1,219
Inventories (4,797) (32,608)
Prepaid expenses and other current assets (35) (891)
Other assets 695 (354)
Accounts payable 38,356 26,330
Accrued liabilities 3,039 (462)
Income taxes payable 7,587 (4,446)
Other liabilities (1,464) 1,886
-------------- --------------
Net cash provided by (used in) operating activities 59,519 (2,270)
Cash flows used in investing activities:
Capital expenditures (3,704) (5,275)
Cash flows from financing activities:
Net (payments) borrowings under notes payable to banks (24,962) 14,950
Proceeds from exercise of stock options 1,086 -
Purchase of common stock - (212)
-------------- --------------
Net cash (used in) provided by financing activities (23,876) 14,738
-------------- --------------
Net increase in cash and cash equivalents 31,939 7,193
Cash and cash equivalents at beginning of year 11,965 9,859
-------------- --------------
Cash and cash equivalents at end of period $43,904 $17,052
============== ==============
Supplemental disclosures of cash flow information:
Interest paid $ 65 $ 407
Income taxes paid 281 5,412
The accompanying notes are an integral part of these financial statements.
5
STEIN MART, INC.
NOTES TO FINANCIAL STATEMENTS
May 1, 2004
(Unaudited)
(Dollars in tables in thousands except per share amounts)
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 13-week 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 31, 2004.
Certain reclassifications have been made to the 2003 financial statements to
conform to the 2004 presentation.
2. Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, as amended by SFAS No. 148, "Accounting
for Stock-Based Compensation". Accordingly, no compensation cost has been
recognized for the Company's stock option plans. Restricted stock awards issued
by the Company are accounted for in accordance with APB 25. The employee
compensation cost is included in net income, as reported, throughout the vesting
period. Had compensation cost of the Company's stock-based plans been determined
consistent with the provisions of SFAS No. 123, the Company's net income and
earnings per share would have been changed to the following pro forma amounts:
13 Weeks Ended
-----------------------------
May 1, May 3,
2004 2003
------------ ------------
Net income - as reported $11,515 $1,513
Add: Restricted stock-based employee
compensation expense included in reported
net income, net of related tax effects 6 -
Deduct: Total stock-based employee
compensation expense determined under the
fair value based method for all awards, net of
related tax effects 276 377
------------ ------------
Net income - pro forma $11,245 $1,136
============ ============
Basic earnings per share - as reported $0.27 $0.04
Diluted earnings per share - as reported $0.27 $0.04
Basic earnings per share - pro forma $0.27 $0.03
Diluted earnings per share - pro forma $0.26 $0.03
3. Discontinued Operations
Two of the stores closed during 2003 and one store closed during the first
quarter of 2004 (see Note 4) are reported as discontinued operations. SFAS No.
144 requires closed stores to be classified as discontinued operations when the
operations and cash flows of the stores have been eliminated from ongoing
operations. To determine if cash flows have been eliminated from ongoing
operations, management evaluated a number of factors, including:
6
STEIN MART, INC.
NOTES TO FINANCIAL STATEMENTS
proximity to a remaining store, physical location within a metropolitan or
non-metropolitan area and transferability of sales between open and closed
locations. Based on these criteria, management determined that these three
closed stores should be accounted for as discontinued operations. The prior
years' operating activities for these stores have also been reclassified to
"Loss from discontinued operations" in the accompanying Statements of
Operations.
Discontinued operations generated sales of $0.9 million and $2.4 million during
the first quarter of 2004 and 2003, respectively. Loss from discontinued
operations includes the following components:
13 Weeks Ended
---------------------------------
2004 2003
-------------- --------------
Loss from operations $(224) $(255)
Income tax benefit 85 97
-------------- --------------
Loss from discontinued operations, net of tax benefit $(139) $(158)
============== ==============
See Note 4 for a description of store closing costs and asset impairment charges
included in loss from discontinued operations for the first quarter of 2004 and
2003.
4. Store Closing Charges and Impairment of Long-Lived Assets
In January 2004, the Company announced plans to close six stores and relocate
three other stores in 2004 within the same metropolitan areas. The plan has
since been revised to close seven stores and relocate two stores. Four of these
stores were closed during the first quarter of 2004 incurring minimal lease
termination and severance costs. The Company will incur approximately $1.0
million in lease termination and severance charges during the remainder of 2004
to complete these store closings and relocations.
The Company closed 16 under-performing stores during 2003, three of which were
closed during the first quarter of 2003. During the first quarter of 2003, the
Company incurred a pre-tax asset impairment charge of $0.8 million to reduce the
carrying value of property and equipment of these stores to their respective
estimated fair value. All store closing and asset impairment charges are
included in selling, general and administrative expenses in the Statement of
Operations for the first quarter of 2004 and 2003, except for $154,000 in 2004
and $42,000 in 2003 which are included in loss from discontinued operations.
The following tables show the activity in the store closing reserve for the
first quarter of 2004 and 2003:
Jan. 31, May 1,
2004 Charges Payments 2004
-------------- -------------- -------------- --------------
Continuing operations:
Lease termination costs $8,780 $ - $ 819 $7,961
Severance 131 343 347 127
Other 105 - - 105
-------------- -------------- -------------- --------------
9,016 343 1,166 8,193
-------------- -------------- -------------- --------------
Discontinued operations:
Lease termination costs 159 77 190 46
Severance 19 77 96 -
-------------- -------------- -------------- --------------
178 154 286 46
-------------- -------------- -------------- --------------
Total store closing reserve $9,194 $497 $1,452 $8,239
============== ============== ============== ==============
Feb. 1, May 3,
Continuing operations: 2003 Charges Payments 2003
-------------- -------------- -------------- --------------
Lease termination costs $4,982 $ - $ 418 $4,564
============== ============== ============== ==============
7
STEIN MART, INC.
NOTES TO FINANCIAL STATEMENTS
The store closing reserve at May 1, 2004, January 31, 2004 and May 3, 2003
includes a current portion (in accrued liabilities) of $3.3 million, $2.8
million and $1.2 million, respectively, and a long-term portion (in other
liabilities) of $4.9 million, $6.4 million and $3.4 million, respectively.
The table below sets forth the components of loss from operations for all stores
closed during 2004 and 2003. The 2004 table presents the losses from the 4
stores that closed during the first quarter of 2004. The 2003 table presents the
sum of the losses from the four stores closed during the first quarter of 2004
and the 16 stores closed during fiscal year 2003.
Operating Results Of Closed Stores Included In:
------------------------------------------------
Continuing Discontinued Total Closed
Quarter ended May 1, 2004: Operations Operations Stores
-------------- -------------- --------------
Sales $1,747 $ 942 $ 2,689
Cost of sales 1,674 748 2,422
-------------- -------------- --------------
Gross profit 73 194 267
Selling, general and administrative expenses 958 418 1,376
Other income, net 9 - 9
-------------- -------------- --------------
Loss from operations $ (876) $(224) $(1,100)
============== ============== ==============
# of stores closed in 2004 3 1 4
============== ============== ==============
Continuing Discontinued Total Closed
Quarter ended May 3, 2003: Operations Operations Stores
-------------- -------------- --------------
Sales $12,426 $2,356 $14,782
Cost of sales 11,755 1,880 13,635
-------------- -------------- --------------
Gross profit 671 476 1,147
Selling, general and administrative expenses 4,676 760 5,436
Other income, net 168 29 197
-------------- -------------- --------------
Loss from operations $(3,837) $ (255) $(4,092)
============== ============== ==============
# of stores closed in 2004 and 2003 17 3 20
============== ============== ==============
5. Notes Payable to Banks
The Company has a three-year $150 million senior revolving credit agreement (the
"Agreement") with a group of lenders, with an initial term ending July 2006.
Under the terms of the Agreement, the Company has the option to increase the
facility by an additional $25 million and to extend the terms for an additional
year. The Company had outstanding commercial and stand-by letters of credit of
$0.1 million and $5.3 million, respectively, at May 1, 2004. There were no other
borrowings under the Agreement at May 1, 2004.
Notes payable to banks was classified as current at May 3, 2003 because the
Company was not in compliance with certain financial covenants under the
previous credit agreement. The new Agreement was completed in July 2003.
6. Stockholders' Equity and Earnings Per Share
During the first quarter of 2003, the Company repurchased 50,000 shares of its
common stock at a cost of $212,000.
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 and restricted stock for each period.
8
STEIN MART, INC.
NOTES TO FINANCIAL STATEMENTS
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):
13 Weeks Ended
---------------------------------
May 1, May 3,
2004 2003
-------------- --------------
Weighted-average number of common shares 42,000 41,587
Stock options 461 -
-------------- --------------
Weighted-average number of common shares
plus common stock equivalents 42,461 41,587
============== ==============
9
Stein Mart, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This document 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 in this document 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 store closings, changing preferences in
apparel, changes in the level of consumer spending due to current events and/or
general economic conditions, 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.
Overview
Stein Mart's 258 stores offer the fashion merchandise, service and presentation
of a better department or specialty store, at prices competitive with off-price
retail chains. Currently with locations from California to New York, Stein
Mart's focused assortment of merchandise features moderate to designer
brand-name apparel for women, men and children, as well as accessories, gifts,
linens and shoes. Management believes that Stein Mart differentiates itself from
typical off-price retailers by offering: (i) current-season merchandise carried
by better department and specialty stores at value prices, (ii) a stronger
merchandising "statement," with more depth of color and size, and (iii)
merchandise presentation more comparable to other upscale retailers.
The Company faces competition for customers and for access to quality
merchandise from better department stores, fine specialty stores and, to a
lesser degree, from off-price retail chains. Many of these competitors are units
of large national or regional chains that have substantially greater resources
than the Company. The retail apparel industry is highly fragmented and
competitive, and the off-price retail business may become even more competitive
in the future.
During the current quarter, the Company experienced strong customer response to
the full-priced spring fashion assortment, as well as greater clearance
efficiency, as markdowns were taken on seasonal inventory. First quarter 2004
earnings improvement was attributable to:
o An 11.8% increase in comparable store sales, which led to better
occupancy and expense leverage,
o Reduced average store inventories by 8.6% while maintaining the
freshness of fashion merchandise,
o Improvement in the gross margin rate due to higher initial mark-up
and better occupancy leverage, partially offset by an increase
in markdowns, and
o The closure of 16 under-performing stores during 2003 and four stores
in the first quarter of 2004. These stores had operating losses of
$4.1 million in the first quarter of 2003 and losses of $1.1 million
during the first quarter of 2004.
Outlook
The Company will continue its policy of taking markdowns earlier and more
assertively to maintain inventory that is current and appealing. The second
quarter of 2004 will be influenced by seasonal clearance activity, particularly
in June and July. As it did following the Christmas selling season, the Company
will begin in July to emphasize its "dot clearance" promotions within local
newspapers, and scale back its branding campaign TV ads as well as its color
newspaper inserts/mailers that were used heavily last year to deliver full-price
coupons.
10
Stein Mart, Inc.
Stores
The number of stores open as of May 1, 2004 and May 3, 2003 were 258 and 270,
respectively.
13 Weeks Ended
---------------------------------
May 1, May 3,
2004 2003
-------------- --------------
Stores at beginning of period 261 265
Stores opened during the period 1 7
Stores closed during the period (4) (2)
-------------- --------------
Stores at the end of period 258 270
============== ==============
For the remainder of the year, the Company expects to open 7-9 new stores,
including two relocations, and close three more stores.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of the
Company's net sales represented by each line item presented (numbers may not add
due to rounding):
13 Weeks Ended
---------------------------------
May 1, May 3,
2004 2003
-------------- --------------
Net sales 100.0% 100.0%
Cost of merchandise sold 72.8 74.6
-------------- --------------
Gross profit 27.2 25.4
Selling, general and administrative expenses 23.1 25.5
Other income, net 1.0 1.1
-------------- --------------
Income from operations 5.2 0.9
Interest expense - 0.1
-------------- --------------
Income from continuing operations before income taxes 5.2 0.8
Provision for income taxes 2.0 0.3
-------------- --------------
Income from continuing operations 3.2 0.5
Loss from discontinued operations, net of tax benefit - -
-------------- --------------
Net income 3.2% 0.5%
============== ==============
Store Closings
The Company closed four stores during the first quarter of 2004 and plans to
close three stores and relocate two other stores during the remainder of 2004.
Sixteen under-performing stores were closed during 2003, two of which were
closed during the first quarter of 2003. The 2004 store closings will be at
natural lease term expirations, so there will be no significant lease
termination costs in 2004.
Two of the 16 stores closed during 2003 and one of the four stores closed during
the first quarter of 2004 are classified as discontinued operations in
accordance with SFAS No. 144, as cash flows of these stores have been eliminated
from ongoing operations. Sales and operating losses for the four stores closed
in 2004 and the 16 stores closed during fiscal year 2003 are shown below for the
13 weeks ended May 1, 2004 and May 3, 2003. Included in the 2003 column are
operating results of the 16 stores closed in 2003, in addition to four stores
closed in 2004.
11
Stein Mart, Inc.
13 Weeks Ended
---------------------------------
May 1, May 3,
2004 2003
-------------- --------------
Sales from closed stores:
Included in continuing operations $ 1,747 $12,426
Included in discontinued operations 942 2,356
-------------- --------------
$ 2,689 $14,782
============== ==============
Operating losses from closed stores:
Included in continuing operations $ (876) $(3,837)
Included in discontinued operations (224) (255)
-------------- --------------
$(1,100) $(4,092)
============== ==============
Operating losses from closed stores include the following store closing and asset impairment expenses:
May 1, May 3,
Continuing operations: 2004 2003
-------------- --------------
Asset impairment charges $ - $723
Severance 343 -
Other 59 -
-------------- --------------
402 723
-------------- --------------
Discontinued operations:
Lease termination costs 77 -
Asset impairment charges - 42
Severance 77 -
-------------- --------------
154 42
-------------- --------------
Total $556 $765
============== ==============
Continuing Operations
For the 13 weeks ended May 1, 2004 compared to the 13 weeks ended May 3, 2003
The 10.8% total sales increase for the 13 weeks ended May 1, 2004 from the same
2003 period reflects an 11.8% increase in sales from comparable stores, the
opening of one new store and the closing of four stores. The comparable store
sales improvement was driven by increases in both full-price and clearance
merchandise sales.
Gross profit for the 13 weeks ended May 1, 2004 was $99.0 million or 27.2
percent of net sales a 1.8 percentage point increase over gross profit of $83.2
million or 25.4 percent of net sales for the first quarter of 2003. Mark-up
improved 2.0 percentage points and occupancy decreased 0.8 percentage points as
a result of higher per store sales productivity in the first quarter this year
compared to last year. These improvements were offset by a 0.7 percentage point
increase in markdowns and a 0.3 percentage point increase in shrinkage expense.
Selling, general and administrative expenses ("SG&A") were $83.8 million or 23.1
percent of net sales for the 13 weeks ended May 1, 2004, as compared to $83.7
million or 25.5 percent of net sales for the same 2003 quarter. The 2.4
percentage point decrease in SG&A expenses as a percent of sales is primarily
due to the leveraging of expenses as a result of the 11.8 percent increase in
comparable store sales. Included in SG&A expenses for the first quarter of 2004
and 2003 are store closing and asset impairment charges of $0.4 million and $0.7
million, respectively.
Interest expense was $39,000 for the first quarter of 2004 and $405,000 for the
first quarter of 2003. The decrease resulted from lower average borrowings, as
well as slightly lower interest rates during the first quarter this year
compared to last year. There were no borrowings at May 1, 2004.
12
Stein Mart, Inc.
Liquidity and Capital Resources
The Company's primary source of liquidity is the sale of its merchandise
inventories. Capital requirements and working capital needs are funded through a
combination of internally generated funds, a revolving credit facility and
credit terms from vendors. As of May 1, 2004, the Company had $43.9 million in
cash and cash equivalents. Working capital is needed to support store
inventories and capital investments for new store openings and to maintain
existing stores. Historically, the Company's working capital needs are lowest in
the first quarter and highest in either the third or fourth quarter in
anticipation of the fourth quarter peak selling season.
Net cash provided by operating activities was $59.5 million for the first
quarter of 2004 compared to net cash used in operating activities of $2.3
million for the first quarter of 2003. The increase in 2004 is primarily
attributable to an increase in net income including non-cash items, a decrease
in income taxes paid and increases in inventories and accounts payable from the
end of the year. On an average store basis, inventories were reduced 8.6% from
the prior year due to increased sales resulting from the Company's continued
focus on marketing, sales promotion and clearance strategies. The increase in
accounts payable is related to the increase in inventory, but was greater than
the change in inventory due to improved inventory turn.
Capital expenditures were lower for the first quarter of 2004 compared to the
first quarter of 2003 primarily due to fewer store openings. The Company plans
to open 9-11 new stores in 2004, including two relocations. Total capital
expenditures for 2004 are anticipated to be approximately $15 million.
Cash used in financing activities was $23.9 million during first quarter of 2004
compared to $14.7 million of cash provided by financing activities during the
first quarter of 2003. Cash provided by operating activities of $59.5 million
enabled the Company to eliminate borrowings under the revolving credit agreement
at the end of the current quarter.
The Company has a $150 million senior revolving credit agreement with a group of
lenders, with an initial term ending July 2006. Borrowings are based on and
secured by eligible inventory. Due to the seasonal nature of the Company's
business, the Company's bank borrowings fluctuate during the year, typically
reaching their highest levels during the third or fourth quarter, as the Company
builds its inventory for the Christmas selling season. At May 1, 2004 there were
no outstanding borrowings under the credit facility and the Company was in full
compliance with the terms of the Agreement.
The Company believes that expected net cash provided by operating activities and
bank borrowings will be sufficient to fund anticipated current and long-term
capital expenditures and working capital requirements. Should current operating
conditions deteriorate, management can adjust operating plans, including new
store rollout. In addition, there is unused borrowing capacity under the
revolving credit agreement.
Seasonality
The Company's business is seasonal in nature with a higher percentage of the
Company's merchandise sales and earnings generated in the fall and holiday
selling seasons. Accordingly, selling, general and administrative expenses are
typically higher as a percent of net sales during the first three quarters of
each year.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to interest rate risk primarily through borrowings under
its revolving credit facility. At May 1, 2004, the Company had no outstanding
borrowings. The facility permits debt commitments up to $150.0 million and bears
interest at spreads over the prime rate and LIBOR. Management believes that its
exposure to market risk associated with its borrowings is not material.
13
Stein Mart, Inc.
Item 4. Controls and Procedures
The Company's management, including the Chief Executive Officer and Chief
Financial Officer, have evaluated the effectiveness of the Company's disclosure
controls and procedures, as defined in Exchange Act Rules 13a-14 and 15d-14 of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). Based
upon this evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded that the Company's disclosure controls and procedures are
effective in alerting them to material information relating to the Company
required to be included in the Company's Exchange Act filings in a timely
manner. There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect these internal
controls subsequent to the date of evaluation.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350
32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350
(b) Reports on Form 8-K:
A press release dated May 6, 2004 was filed in a Form 8-K on May 11, 2004
to report April and first quarter 2004 sales.
A press release dated May 20, 2004 was filed in a Form 8-K on May 25, 2004
to report first quarter 2004 financial results.
14
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: June 9, 2004 By: /s/ Michael D. Fisher
-------------------------------------
Michael D. Fisher
President and Chief Executive Officer
/s/ James G. Delfs
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James G. Delfs
Senior Vice President and Chief
Financial Officer
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