Stein Mart 2011 Annual Report Download - page 37

Table of Contents
STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
Options and market-based performance shares to acquire approximately 1.1 million, 1.2 million and 1.2 million shares of common stock that
were outstanding during 2011, 2010 and 2009, respectively, were not included in the computation of diluted net income per share. Options
excluded were those that had exercise prices greater than the average market price of the common shares such that inclusion would have been
anti-dilutive. Market-based performance shares were not included based on level of performance.
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 expenses include 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.
Recent Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) amended ASC Topic 220, Comprehensive Income. The amended guidance
requires most entities to present changes in net income and other comprehensive income in either a single statement of comprehensive income
or two separate, but consecutive, statements. The objective of these amendments is to improve the comparability, consistency, and transparency
of financial reporting and to increase the prominence of items reported in other comprehensive income. This guidance is effective for fiscal
years beginning after December 15, 2011, however early adoption is permitted. The guidance will not have a material impact on our
consolidated financial statements or disclosures when adopted in the first quarter of 2012.
Reclassifications
Certain reclassifications have been made to the prior period Consolidated Balance Sheets, Consolidated Statements of Income and Statements
of Cash Flows to conform to the 2011 presentation.
2. Correction of an Error
During the first quarter of 2011, we identified an error in our liability for credit card rewards earned under the Stein Mart MasterCard program.
The error was the result of inaccuracies in data used to calculate breakage income for expired rewards during fiscal years 2008 through 2010
which overstated the rewards liability and understated income for those periods. In accordance with ASC Topic 250, Accounting Changes and
Error Corrections
, we evaluated the materiality of the error from a qualitative and quantitative perspective and concluded that the error was
not material to any prior period. Further, we evaluated the materiality of the error on the results of operations for the first quarter of 2011, as
well as results of operations for the full year, and concluded that although the error was quantitatively significant to the first quarter financial
statements, it was not material to the full year or the trend of financial results. Accordingly, we corrected the error in the first quarter of 2011
by reducing accrued expenses and other current liabilities and increasing Other income by $2.0 million.
3. Property and Equipment, Net
Property and equipment, net consists of the following:
Assets under capital leases are primarily point-of-sale and related store equipment. Depreciation and amortization expense for property and
equipment totaled $17.8 million, $16.9 million and $18.9 million for 2011, 2010 and 2009, respectively.
During 2011, 2010 and 2009, we recorded net pre-tax asset impairment charges of $1.2 million, $1.2 million and $8.4 million, respectively, to
reduce the carrying value of fixtures, equipment and leasehold improvements held for use and certain other assets in under-performing
F
-
10
January 28,
2012
January 29,
2011
Fixtures, equipment and software
$
216,314
$
199,118
Leasehold improvements
64,217
60,361
280,531
259,479
Accumulated depreciation and amortization
(186,103
)
(179,515
)
94,428
79,964
Assets under capital leases, net of accumulated amortization of $416
9,713
—
$
104,141
$
79,964