Stein Mart 2015 Annual Report Download - page 35

STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
F-11
The following table presents the calculation of basic and diluted EPS (shares in thousands):
2015 2014 2013
Basic EPS:
Net income $ 23,711 $ 26,906 $ 25,555
Income allocated to participating securities 368 511 677
Net income available to common shareholders $ 23,343 $ 26,395 $ 24,878
Basic weighted-average shares outstanding 44,754 43,850 43,053
Basic EPS: $ 0.52 $ 0.60 $ 0.58
Diluted EPS:
Net income $ 23,711 $ 26,906 $ 25,555
Income allocated to participating securities 414 506 670
Net income available to common shareholders $ 23,297 $ 26,400 $ 24,885
Basic weighted-average shares outstanding 44,754 43,850 43,053
Incremental shares from share-based compensation plans 1,199 899 725
Diluted weighted-average shares outstanding 45,953 44,749 43,778
Diluted EPS: $ 0.51 $ 0.59 $ 0.57
Options to acquire shares and performance share awards totaling approximately 0.3 million, 0.1 million and 0.2 million shares of common
stock that were outstanding during 2015, 2014 and 2013, respectively, were not included in the computation of diluted EPS as they had
exercise prices greater than the average market price of the common shares. Inclusion of these shares would have been anti-dilutive.
Consolidated Statements of Income Classifications. Cost of merchandise sold includes merchandise costs, net of vendor discounts
and allowances; freight; inventory shrinkage; store occupancy costs (including rent, common area maintenance, real estate taxes, utilities
and maintenance); payroll, benefits and travel costs directly associated with buying inventory; and costs related to the consolidation
centers and distribution warehouses.
SG&A includes store operating expenses, such as payroll and benefit costs, advertising, store supplies, depreciation and other direct
selling costs, and costs associated with our corporate functions.
Change in Accounting Estimate
During the fourth quarter of 2013, we refined our estimation of the buying and distribution costs allocated to inventories. This change
lowered the percentage of expenses allocated to inventory purchases. The decrease in inventories resulted in a $5.0 million pretax non-
cash charge ($3.1 million after-tax or $0.07 per diluted share), comprised of a $15.0 million increase in SG&A and a $10.0 million increase
in gross profit.
Recent Accounting Pronouncements
In 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from
Contracts with Customers (Topic 606). ASU No. 2014-09 provides a single comprehensive model for entities to use in accounting for
revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific
guidance. ASU No. 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update
creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i)
identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the
transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each
performance obligation is satisfied. This guidance was deferred by ASU No. 2015-14, issued by the FASB in August 2015, and is effective
for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted for annual and interim reporting
periods beginning after December 15, 2016. We have the option to apply the provisions of ASU No. 2014-09 either retrospectively to each
prior reporting period presented or with the cumulative effect of applying this ASU recognized at the date of initial application. We are
currently evaluating the impact the adoption of this ASU will have on the our consolidated financial statements.