Stein Mart 2011 Annual Report Download - page 23

Table of Contents
We are exposed to interest rate risk primarily through borrowings under our revolving credit facility which are at variable rates. The facility
permits debt commitments up to $100 million, which can be increased to $150 million, has a February 2017 maturity date and bears interest at
spreads over the prime rate and LIBOR. We had no borrowings under our revolving credit facility during 2011, other than fees charged by the
lender and outstanding letters of credit.
The consolidated financial statements and the Report of Independent Registered Certified Public Accounting Firm thereon are filed pursuant to
this Item 8 and are included in this report beginning on page F-1.
None.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we
have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report.
Based on the evaluation discussed above, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures were not effective as of the date of that evaluation to provide reasonable assurance that the objectives of disclosure controls and
procedures are met. As noted below, material weaknesses in our internal control over financial reporting existed as of January 28, 2012.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting was designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of January 28, 2012. In making this assessment,
management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on that assessment, management concluded that our internal control over financial reporting was not effective as
of January 28, 2012 due to the identification of two material weaknesses which related to our controls over communication of system incidents
and credit card receivables.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of the company’s annual or interim financial statements will not be presented or detected on a timely
basis.
The two material weaknesses identified were as follows:
We did not maintain effective controls related to communication of system incidents. Specifically, we determined that IT operations personnel
followed protocols for issue resolution; however, because of the uniqueness and potential impacts of certain incidents, further escalation to the
finance organization should have occurred. IT personnel did not notify the finance organization that historical records had been removed to free
up system capacity and that certain transactions had been reprocessed. This prevented accounting personnel from identifying an error in the
Perpetual System unit balances and analyzing the potential impact related to permanent markdowns on a timely basis. The above information
technology control deficiency resulted in an adjustment in the third quarter to the cost of merchandise sold and inventory accounts by not
recording all permanent markdowns actually taken.
21
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
ITEM 9A.
1)
Information technology