Stein Mart 2008 Annual Report Download - page 30

STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
F-6
1. Summary of Significant Accounting Policies and Other Information
As of January 31, 2009 the Company operated a chain of 276 off-price retail stores in 31 states and the District of Columbia that features
current-season, moderate to better fashion apparel for men and women, as well as accessories, gifts, linens and shoes, all offered at prices
competitive with off-price retail chains.
As used herein, the terms “we”, “our”, “us”, “Stein Mart” and the “Company” refer to Stein Mart, Inc. and its wholly-owned subsidiaries, Stein
Mart Buying Corp. and Stein Mart Holding Corp.
Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-
company accounts have been eliminated in consolidation.
Fiscal Year End. The Company’s fiscal year ends on the Saturday closest to January 31. Fiscal years 2008, 2007 and 2006 ended on
January 31, 2009, February 2, 2008 and February 3, 2007, respectively. Fiscal years 2008 and 2007 included 52 weeks and fiscal year
2006 included 53 weeks. References to years in the Consolidated Financial Statements relate to fiscal years rather than calendar years.
Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash Equivalents. Cash equivalents include money market funds and are stated at cost, which approximates fair value.
Inventories. Merchandise inventories are valued at the lower of average cost or market, on a first-in first-out basis, using the retail
inventory method (RIM). RIM is an averaging method that is widely used in the retail industry. The use of RIM results in inventories being
valued at the lower of cost or market as markdowns are taken as a reduction of the retail values of inventories.
Vendor Allowances. The Company receives allowances from some of its vendors primarily related to markdown reimbursement,
damaged/defective merchandise and vendor compliance issues. Vendor allowances are recorded when earned in accordance with
Emerging Issues Task Force (“EITF”) No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from
a Vendor. Allowances received from vendors related to profitability of inventory recently sold are reflected as reductions to cost of
merchandise sold in the later of the period that the merchandise markdown is incurred or the allowance is negotiated. Allowances received
from vendors related to damaged/defective inventory are reflected as reductions to the cost of merchandise as it is received. Allowances
received due to compliance issues (primarily violations of shipping and merchandise preparation requirements) are reflected as a reduction
of the cost of the merchandise when negotiated.
Property and Equipment. Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is
computed using the straight-line method over estimated useful lives of 3-10 years for fixtures, equipment and software and 5-15 years for
leasehold improvements. Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the
term of the lease.
Impairment of Long-Lived Assets. The Company follows Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which requires impairment losses to be recorded on long-lived assets used in operations
whenever events or changes in circumstances indicate that the net carrying amounts may not be recoverable. For long-lived assets held
for use, an impairment loss is recognized if the sum of the future undiscounted cash flows from the use of the assets is less than the
carrying value of the assets. The amount of the impairment is the excess of the carrying value of the asset over its fair value. Fair value is
based on estimated market values of similar assets. Impairment reviews are performed for individual stores. Factors used in the review
include management’s plans for future operations, recent operating results and projected cash flows. See Note 2 for further discussion.
Store Closing Costs. The Company follows SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, to record
store closing costs. SFAS No. 146 requires the recognition of costs associated with exit or disposal activities when they are incurred.
Lease termination costs are recorded net of estimated sublease income that could reasonably be obtained for the properties.