Stein Mart 2014 Annual Report Download - page 36

STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
F-12
The following table presents the calculation of basic and diluted EPS (shares in thousands):
201420132012
Basic EPS:
Net income $ 26,906 $ 25,555 $ 25,027
Income allocated to participating securities 511 677 781
Net income available to common shareholders $ 26,395 $ 24,878 $ 24,246
Basic weighted-average shares outstanding 43,850 43,053 42,639
Basic EPS: $ 0.60 $ 0.58 $ 0.57
Diluted EPS:
Net income $ 26,906 $ 25,555 $ 25,027
Income allocated to participating securities 506 670 783
Net income available to common shareholders $ 26,400 $ 24,885 $ 24,244
Basic weighted-average shares outstanding 43,850 43,053 42,639
Incremental shares from share-based compensation plans 899 725 189
Diluted weighted-average shares outstanding 44,749 43,778 42,828
Diluted EPS: $ 0.59 $ 0.57 $ 0.57
Options to acquire shares and performance share awards totaling approximately 0.1 million, 0.2 million and 1.2 million shares of common
stock that were outstanding during 2014, 2013 and 2012, respectively, were not included in the computation of diluted EPS as they had
exercise prices greater than the average market price of the common shares. Inclusion of these shares would have been anti-dilutive.
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 includes 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.
Change in Accounting Estimate
During the fourth quarter of 2013, we refined our estimation of the buying and distribution costs allocated to inventories. This change
lowered the percentage of expenses allocated to inventory purchases. The decrease in inventories resulted in a $5.0 million pretax non-
cash charge ($3.1 million after-tax or $0.07 per diluted share), comprised of a $15.0 million increase in SG&A and a $10.0 million increase
in gross profit.
Recent Accounting Pronouncements
In 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11, Presentation of
an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. Under
ASU No. 2013-11, an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial
statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. If a
net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date, the unrecognized tax
benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU No. 2013-
11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. We adopted this guidance in
the first quarter of 2014. The application of this guidance did not have an impact on our consolidated financial statements or disclosures.
In 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,
which raises the threshold for disposals to qualify as discontinued operations. ASU No. 2014-08 defines a discontinued operation as (1) a
component of an entity or group of components that has been disposed of or classified as held for sale and represents a strategic shift that
has or will have a major effect on an entitys operations and financial results; or (2) an acquired business that is classified as held for sale
on the acquisition date. Under ASU No. 2014-08, additional disclosures are required regarding discontinued operations, as well as
material disposals that do not meet the definition of discontinued operations. The application of this guidance is prospective from the date
of adoption and applies only to disposals (or new classifications to held for sale) that have not been reported as discontinued operations in