Stein Mart 2012 Annual Report Download

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Annual Report 2012

Table of contents

  • Page 1
    Annual Report 2012

  • Page 2
    ...about our future growth opportunities with e-commerce and our ability to manage our inventories even better through an improved company-operated supply chain. As we begin 2013, our merchandising strategy has not changed. Our goal is to build on the sales increases we experienced in 2012 by deepening...

  • Page 3
    ...STEIN MART, INC. (Exact name of registrant as specified in its charter) Florida (State or other jurisdiction of incorporation or organization) 64-0466198 (I.R.S. Employer Identification Number) 1200 Riverplace Blvd., Jacksonville, Florida (Address of principal executive offices) 32207 (Zip Code...

  • Page 4
    ...adjustments that were deemed immaterial to the annual or interim periods in which they relate. On November 6, 2012, the Board of Directors of the Company, based on the recommendation of the Audit Committee and in consultation with management, concluded that our previously issued financial statements...

  • Page 5
    ...of the Company's management and on information currently available to such management. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to publicly update or revise its forward-looking statements in light of new information or future events...

  • Page 6
    PART I ITEM 1. BUSINESS OVERVIEW Headquartered in Jacksonville, Florida, Stein Mart is a national retailer offering the fashion merchandise, service and presentation of a better department or specialty store. Our focused assortment of merchandise features current-season, moderate to better fashion ...

  • Page 7
    ... better department or specialty stores, such as a liberal merchandise return policy, merchandise locator service, a Preferred Customer program, co-branded credit card and private label credit card programs, and electronic gift cards. Each store is staffed with a number of sales associates to provide...

  • Page 8
    ... based on their cumulative purchases made on the credit card. We have an Internet site, www.steinmart.com, to promote Stein Mart's fashion point of view, as well as provide information for customers regarding store locations, brands, products and selected sales promotion activity. Visitors to the...

  • Page 9
    ... our vendors have opened outlet stores which offer merchandise at prices that are competitive with ours. Many of our competitors have significant Internet sales. While we maintain an Internet site and have plans to start selling merchandise on the Internet in 2013, we currently only sell gift cards...

  • Page 10
    ... year. Comparable store sales and quarterly operating results have fluctuated in the past and are expected to continue to fluctuate in the future. Our stock price is influenced by these financial fluctuations, as well as other factors, including economic conditions, timing of promotional events...

  • Page 11
    ... our normal course of business, we collect, process and retain sensitive and confidential customer and employee information. In addition, we accept and transmit credit card applications through our retail locations pursuant to our credit card agreement with GE Capital Retail Bank ("GE"). Despite the...

  • Page 12
    ... store count activity during the last three fiscal years: 2012 2011 2010 Stores at beginning of year Stores opened during the year Stores closed during the year Stores at end of year 262 6 (5) 263 264 3 (5) 262 267 2 (5) 264 As of February 2, 2013, our stores operated in the following 29 states...

  • Page 13
    ... foot corporate headquarters in Jacksonville, Florida and a distribution/warehouse facility in Georgia. As of February 2, 2013, the current terms of our 263 stores (assuming we exercise all lease renewal options) were as follows: Years Lease Term Expire Number of Leases Expiring 2013 2014-2017...

  • Page 14
    ... 30, 2012 - February 2, 2013 Total (1) 601 79,755 80,356 $7.52 7.21 $7.21 601 79,755 80,356 970,688 890,933 890,933 890,933 Our Open Market Repurchase Program is conducted pursuant to authorizations made from time to time by our Board of Directors. Equity Compensation Plan Information The...

  • Page 15
    ... of any dividends. $260 $240 $220 $200 $180 $160 DOLLARS $140 $120 $100 $80 $60 $40 $20 $0 2/2/2008 1/31/2009 Stein Mart, Inc. 1/30/2010 NASDAQ Composite 1/29/2011 1/28/2012 S&P 500 Apparel Retail 2/2/2013 2/2/2008 1/31/2009 1/30/2010 1/29/2011 1/28/2012 2/2/2013 Stein Mart, Inc. NASDAQ...

  • Page 16
    ...,986 169,794 (1) 2012 is a 53-week year; all others are 52-week years. (2) Sales per store is calculated by dividing (a) total sales including shoe department sales for stores open at the end of the year, excluding stores open for less than 12-months by (b) the number of stores open at the end of...

  • Page 17
    ...customers' spending. We expect the following factors to influence our business in 2013: x The gross profit rate is expected to be slightly lower than in 2012 as we continue to manage our selling prices and couponing and from lower margins on e-commerce sales in the second half of the year. x Selling...

  • Page 18
    ...benefit costs. Store expenses increased primarily due to higher compensation costs, partially offset by a decrease in credit card interchange fees. Credit card program income decreased primarily due to a performance-based incentive from GE Capital Retail Bank ("GE") related to the final program year...

  • Page 19
    ... value of insurance contracts underlying our executive split-dollar insurance plans for 2011 compared to 2010 and higher information systems expenses. Store expense reductions include $3.5 million for the elimination of operating costs from closed stores and a $1.0 million savings in credit card...

  • Page 20
    ...improvements, with the largest portion for our new merchandise information system. The remaining capital amounts are for opening and remodeling stores, including upgrades to fitting rooms, lighting, flooring and fixtures. We also replaced our point-of-sale system hardware during 2011, primarily with...

  • Page 21
    ... 83,073 Represent open purchase orders with vendors for merchandise not yet received and recorded on our Consolidated Balance Sheet. The above table does not include long-term debt as we did not have any direct borrowings under our senior revolving credit facility at February 2, 2013. Other long...

  • Page 22
    ...inventory. We perform physical inventory counts at all stores annually. Included in the carrying value of merchandise inventories is a reserve for shrinkage. Shrinkage is estimated based on historical physical inventory results as a percentage of sales for the year. The difference between actual and...

  • Page 23
    ... ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. 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 evaluated the effectiveness of the design...

  • Page 24
    ...of merchandise sold and Selling, general & administrative expenses. Specifically, we did not design effective controls for financial management to adequately validate the assertions made by real estate operations management regarding the future value of leasehold improvements made by the Company and...

  • Page 25
    ... rent credits are correctly recorded; 2) The finance department will meet with real estate management annually to review the lease accounting policy and validate the underlying assertions made by the real estate department upon which the policy is predicated; and 3) We will be purchasing a software...

  • Page 26
    ... PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated herein by reference to the disclosure found in the Proxy Statement for our June 18, 2013 Annual Meeting of Stockholders. We have adopted a code of conduct applicable to all...

  • Page 27
    ...are required to make the statements in this report not misleading. Additional information about the Company may be found elsewhere in this report and the Company's other public files, which are available without charge through the SEC's website at http://www.sec.gov. Unless otherwise indicated below...

  • Page 28
    ...1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STEIN MART, INC. Date: May 3, 2013 By: /s/ Jay Stein Jay Stein Chairman of the Board and Interim Chief Executive Officer Pursuant to the requirements of the Securities Exchange...

  • Page 29
    Report of Independent Registered Certified Public Accounting Firm To the Board of Directors and Shareholders of Stein Mart, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows,...

  • Page 30
    ... 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. /s/ PricewaterhouseCoopers LLP Jacksonville, Florida May 3, 2013 F-2

  • Page 31
    Stein Mart, Inc. Consolidated Balance Sheets (In thousands, except for share and per share data) February 2, 2013 January 28, 2012 (Restated) (1) ASSETS Current assets: Cash and cash equivalents Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net...

  • Page 32
    Stein Mart, Inc. Consolidated Statements of Income (In thousands, except for per share amounts) Year Ended February 2, 2013 Year Ended January 28, 2012 (Restated) (1) Year Ended January 29, 2011 (Restated) (1) Net sales Cost of merchandise sold Gross profit Selling, general and administrative ...

  • Page 33
    Stein Mart, Inc. Consolidated Statements of Comprehensive Income (In thousands) Year Ended February 2, 2013 Year Ended January 28, 2012 (Restated) (1) Year Ended January 29, 2011 (Restated) (1) Net income Other comprehensive income (loss), net of tax: Change in post-retirement benefit obligations ...

  • Page 34
    Stein Mart, Inc. Consolidated Statements of Shareholders' Equity (In thousands) Additional Paid-in Capital Accumulated Other Total Comprehensive Shareholders' Income (Loss) Equity Common Stock Shares Amount Retained Earnings Balance at January 30, 2010 As previously reported Adjustments (1) As ...

  • Page 35
    Stein Mart, Inc. Consolidated Statements of Cash Flows (In thousands) Year Ended February 2, 2013 Year Ended January 28, 2012 (Restated) (1) Year Ended January 29, 2011 (Restated) (1) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by ...

  • Page 36
    STEIN MART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, except per share amounts) 1. Summary of Significant Accounting Policies and Other Information As of February 2, 2013 we operated a chain of 263 retail stores in 29 states that offers the fashion merchandise,...

  • Page 37
    .... Shoe department inventory is owned by a single supplier under a supply agreement. Our percentage of net revenue per the supply agreement is included in Net sales in the Consolidated Statements of Income. We offer electronic gift cards and electronic merchandise return cards to our customers. These...

  • Page 38
    ...co-branded credit card customers are eligible to participate in the credit card rewards program, which provides for an incentive to cardholders in the form of reward certificates upon the cumulative purchase of an established amount. Stein Mart cardholders also receive special promotional offers and...

  • Page 39
    ... 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...

  • Page 40
    ... the retail inventory method of accounting used by us, promotional markdowns do not impact the value of unsold inventory and thus do not impact cost of sales until the merchandise is sold. Conversely, permanent markdowns reduce the value of unsold inventory and impact cost of sales at the time the...

  • Page 41
    STEIN MART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, except per share amounts) The net effect of the adjustments on the Consolidated Statements of Income was to increase Net income by $0.1 million and $7.9 million for the years ended January 28, 2012 and ...

  • Page 42
    STEIN MART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, except per share amounts) The following table presents the effect of the aforementioned adjustments on our Consolidated Balance Sheet as of January 28, 2012 and indicates the category of the adjustments by ...

  • Page 43
    ... descriptions of the errors for which we made corrections: Year Ended January 28, 2012 As Previously Reported Reclassifications Adjustments Description of Adjustments As Restated Net sales Cost of merchandise sold Gross profit Selling, general and administrative expenses Other income, net Operating...

  • Page 44
    STEIN MART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, except per share amounts) The following tables present the effect of the aforementioned adjustments on our Consolidated Statements of Comprehensive Income for the fiscal years ended January 28, 2012 and ...

  • Page 45
    STEIN MART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, except per share amounts) The following tables present the effect of the aforementioned adjustments on our Consolidated Statements of Cash Flows for the fiscal years ended January 28, 2012 and January 29, ...

  • Page 46
    STEIN MART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, except per share amounts) Year Ended January 29, 2011 As Previously Reported Adjustments Description of Adjustments As Restated Cash flows from operating activities: Net income Adjustments to reconcile net ...

  • Page 47
    ... 2, 2013 January 28, 2012 (Restated) Compensation and employee benefits Unredeemed gift and merchandise return cards Property taxes Accrued vacation Other $ $ 12,487 9,163 11,357 6,553 26,549 66,109 $ $ 10,006 11,277 11,845 6,443 28,492 68,063 See Note 2 for further information regarding...

  • Page 48
    ... lease term for two or more 5-year periods. Annual store rent is generally comprised of a fixed minimum amount plus a contingent amount based on a percentage of sales in excess of specified levels. Most store leases also require additional payments covering real estate taxes, common area costs and...

  • Page 49
    ... reserves Share-based compensation Store closing reserves Accrued vacation Other accrued liabilities Unredeemed credit card awards NOL and credit carry forwards Other Gross deferred tax assets Gross deferred tax liabilities: Inventory Property and equipment Prepaid items Other assets Gross deferred...

  • Page 50
    STEIN MART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, except per share amounts) The components of income tax expense (benefit) are as follows: 2012 2011 (Restated) 2010 (Restated) Current: Federal State Deferred: Federal State Income tax expense (benefit) $ ...

  • Page 51
    ...tax years 2010 through 2012. The Company's state tax returns are open to audit under similar statute of limitations for the tax years 2008 through 2012. See Note 2 for further information regarding the correcting adjustments made to previously reported Financial Statements. 8. Employee Benefit Plans...

  • Page 52
    ...the Board of Directors' current authorization. Employee Stock Purchase Plan We have an Employee Stock Purchase Plan (the "Stock Purchase Plan") whereby all employees who complete six months of employment and who work on a full-time basis or are regularly scheduled to work more than 20 hours per week...

  • Page 53
    ... 1.3 years $ 2,272 987 The aggregate intrinsic value in the table above represents the excess of our closing stock price on February 1, 2013 ($8.84 per share) over the exercise price, multiplied by the applicable number of in-the-money options. This amount changes based on the fair market value of...

  • Page 54
    ... model using historical employee exercise data. In December 2012, as a result of paying a special cash dividend, all outstanding stock options were modified to decrease the exercise price and increase the number of options in order to maintain the original grant fair value. No incremental stock...

  • Page 55
    ... segment. The following table summarizes retail sales by major merchandise category: 2012 2011 (Restated) 2010 (Restated) Ladies' apparel and accessories Men's apparel and accessories Home Other Owned department sales Leased department commissions Net sales $ $ 746,616 $ 266,777 150,347 48...

  • Page 56
    ... Company. We leased three locations in 2012, 2011 and 2010 from a company for which one of our directors is Chairman and Chief Executive Officer. We paid approximately $0.8 million in base rent in 2012, 2011 and 2010. The amounts paid for leased space and other lease-related services are competitive...

  • Page 57
    ... by reference to the Company's Form S-1 Registration Statement No. 33-46322 Amended and Restated Stein Mart, Inc. Employee Stock Purchase Plan, incorporated by reference to the Company's Form S-8 Registration Statement filed on June 26, 2009 Form of Director's and Officer's Indemnification Agreement...

  • Page 58
    ... of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (filed herein) Interactive data files from Stein Mart, Inc.'s Annual Report on Form 10-K for the year ended January 28, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii...

  • Page 59
    ... Information Officer Steven Horowitz Real Estate Greg Lohman Human Resources Richard A. Schart Supply Chain Vice Presidents, General Merchandising Managers, Stein Mart Buying Corp. Jane Dever, Home Derrick Luppino, Center Core & Intimate Darrell D. Murphy, Men's Vice Presidents, Regional Directors...

  • Page 60
    1200 Riverplace Boulevard Jacksonville, FL 32207 www.steinmart.com