Stein Mart 2009 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 30, 2010 we operated a chain of 267 retail stores in 30 states and the District of Columbia that offers the fashion
merchandise, service and presentation of a better department or specialty store 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. Our fiscal year ends on the Saturday closest to January 31. Fiscal years 2009, 2008 and 2007 ended on January 30,
2010, January 31, 2009 and February 2, 2008, respectively. Fiscal years 2009, 2008 and 2007 included 52 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 and Cash Equivalents. The carrying value of cash and cash equivalents, which includes money market funds, approximates fair
value due to their short-term nature. In February 2008, we adopted the guidance of ASC Topic 820, Fair Value Measurements and
Disclosures, for financial assets and liabilities. This guidance defines fair value, establishes a framework for measuring fair value in GAAP,
and expands disclosures about fair value measurements. The fair value measurement disclosures are grouped into three levels based on
valuation factors. The only instruments that fall under the scope of this pronouncement are cash equivalents of $70.2 million at January 30,
2010 and $69.5 million at January 31, 2009, which are Level 1 securities with readily available market prices.
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. We receive allowances from some of our vendors primarily related to markdown reimbursement, damaged/defective
merchandise and vendor compliance issues. Vendor allowances are recorded when earned in accordance with ASC Topic 605-50,
Revenue Recognition, Customer Payments and Incentives. 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 to 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. We follow the guidance in ASC Topic 360, Property, Plant and Equipment, 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.