Form 10-Q
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 5, 2018

or

 

[    ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number 0-20052

STEIN MART, INC.

(Exact name of registrant as specified in its charter)

 

Florida

    64-0466198

(State or other jurisdiction of

incorporation or organization)

   

(I.R.S. Employer

Identification Number)

1200 Riverplace Blvd., Jacksonville, Florida

    32207

(Address of principal executive offices)

    (Zip Code)

Registrant’s telephone number, including area code: (904) 346-1500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [    ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [     ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [    ]

  

Accelerated filer [    ]

Non-accelerated filer [    ]

  

Smaller reporting company [X]

(Do not check if a smaller reporting company)

  

Emerging growth company [    ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [    ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares outstanding of the Registrant’s common stock as of June 6, 2018, was 47,871,360.


Table of Contents

Stein Mart, Inc.

Table of Contents

 

          PAGE  

PART I

   FINANCIAL INFORMATION   

Item 1.

   Condensed Consolidated Financial Statements (Unaudited):   
   Condensed Consolidated Balance Sheets at May 5, 2018, February 3, 2018 and April 29, 2017      3  
   Condensed Consolidated Statements of Income for the 13 Weeks Ended May 5, 2018 and April 29, 2017      4  
   Condensed Consolidated Statements of Comprehensive Income for the 13 Weeks Ended May 5, 2018 and April 29, 2017      5  
   Condensed Consolidated Statements of Cash Flows for the 13 Weeks Ended May 5, 2018 and April 29, 2017      6  
   Notes to Condensed Consolidated Financial Statements (Unaudited)      7  

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      15  

Item 4.

   Controls and Procedures      20  

PART II

   OTHER INFORMATION   

Item 1.

   Legal Proceedings      21  

Item 1A.

   Risk Factors      21  

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      21  

Item 3.

   Defaults upon Senior Securities      21  

Item 4.

   Mine Safety Disclosures      21  

Item 5.

   Other Information      21  

Item 6.

   Exhibits      22  

SIGNATURES

     23  

 

2


Table of Contents

Stein Mart, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except for share and per share data)

 

       May 5, 2018     As Adjusted
February 3, 2018
    As Adjusted
April 29, 2017
 
  

 

 

 

ASSETS

      

Current assets:

      

Cash and cash equivalents

     $ 16,165     $ 10,400     $ 15,554  

Inventories

     296,964       270,237       322,030  

Prepaid expenses and other current assets

     35,597       26,620       26,007  
  

 

 

 

Total current assets

     348,726       307,257       363,591  

Property and equipment, net of accumulated depreciation and amortization of $235,748, $231,997 and $221,626, respectively

     144,109       151,128       164,012  

Other assets

     24,838       24,973       28,692  
  

 

 

 

Total assets

     $ 517,673     $ 483,358     $ 556,295  
  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

      

Current liabilities:

      

Accounts payable

     $ 93,632     $ 119,388     $ 162,208  

Current portion of long-term debt

     159,415       13,738       8,333  

Accrued expenses and other current liabilities

     78,418       78,453       73,175  
  

 

 

 

Total current liabilities

     331,465       211,579       243,716  

Long-term debt, net of current portion

     49,266       142,387       149,119  

Deferred rent

     41,535       40,860       42,509  

Other liabilities

     38,785       40,214       49,128  
  

 

 

 

Total liabilities

     461,051       435,040       484,472  
  

 

 

 

COMMITMENTS AND CONTINGENCIES

      

Shareholders’ equity:

      

Preferred stock - $.01 par value, 1,000,000 shares authorized; no shares issued or outstanding

     -       -       -  

Common stock - $.01 par value; 100,000,000 shares authorized; 47,910,450, 47,978,275 and 47,181,498 shares issued and outstanding, respectively

     479       480       472  

Additional paid-in capital

     56,961       56,002       51,557  

Retained (deficit) earnings

     (576     (7,918     20,090  

Accumulated other comprehensive loss

     (242     (246     (296
  

 

 

 

Total shareholders’ equity

     $ 56,622     $ 48,318     $ 71,823  
  

 

 

 

Total liabilities and shareholders’ equity

     $ 517,673     $ 483,358     $ 556,295  
  

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Table of Contents

Stein Mart, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 

    

  13 Weeks Ended

 

  May 5, 2018

    

As Adjusted

 

13 Weeks Ended

 

April 29, 2017

 
  

 

 

 

Net sales

     $ 326,685      $ 337,335  

Other revenue

     4,302        3,714  
  

 

 

 

Total revenue

     330,987        341,049  

Cost of merchandise sold

     230,621        241,779  

Selling, general and administrative expenses

     90,509        89,208  
  

 

 

 

Operating income

     9,857        10,062  

Interest expense, net

     2,463        1,139  
  

 

 

 

Income before income taxes

     7,394        8,923  

Income tax expense

     60        5,223  
  

 

 

 

Net income

     $ 7,334      $ 3,700  
  

 

 

 

Net earnings per common share:

     

Basic

     $ 0.16      $ 0.08  
  

 

 

 

Diluted

     $ 0.16      $ 0.08  
  

 

 

 

Weighted-average shares outstanding:

     

Basic

     46,610        46,165  
  

 

 

 

Diluted

     46,659        46,171  
  

 

 

 

Dividends declared per common share

     $ -          $ 0.075  
  

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Stein Mart, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

 

       13 Weeks Ended
  May 5, 2018
     13 Weeks Ended
April 29, 2017
 
  

 

 

 

Net income

     $ 7,334      $ 3,700  

Other comprehensive income, net of tax:

     

Amounts reclassified from accumulated other comprehensive income

     4        8  
  

 

 

 

Comprehensive income

     $ 7,338      $ 3,708  
  

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Table of Contents

Stein Mart, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

       13 Weeks Ended
  May 5, 2018
    As Adjusted
13 Weeks Ended
April 29, 2017
 
  

 

 

 

Cash flows from operating activities:

    

Net income

     $ 7,334     $ 3,700  

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

    

Depreciation and amortization

     8,070       8,085  

Share-based compensation

     995       1,523  

Store closing charges

     116       286  

Impairment of property and other assets

     299       31  

Loss on disposal of property and equipment

     99       232  

Deferred income taxes

     -       4,858  

Changes in assets and liabilities:

    

Inventories

     (26,727     (30,920

Prepaid expenses and other current assets

     (8,977     4,242  

Other assets

     (2,311     1,196  

Accounts payable

     (25,735     47,924  

Accrued expenses and other current liabilities

     217       296  

Other liabilities

     (586     (1,355
  

 

 

 

Net cash (used in) provided by operating activities

     (47,206     40,098  
  

 

 

 

Cash flows from investing activities:

    

Net acquisition of property and equipment

     (1,664     (7,182

Proceeds from cancelled corporate owned life insurance policies

     2,514       83  
  

 

 

 

Net cash provided by (used in) investing activities

     850       (7,099
  

 

 

 

Cash flows from financing activities:

    

Proceeds from borrowings

     428,877       108,911  

Repayments of debt

     (375,587     (133,261

Debt issuance costs

     (802     -  

Cash dividends paid

     (147     (3,494

Capital lease payments

     (183     -  

Repurchase of common stock

     (37     (205
  

 

 

 

Net cash provided by (used in) financing activities

     52,121       (28,049
  

 

 

 

Net increase in cash and cash equivalents

     5,765       4,950  

Cash and cash equivalents at beginning of year

     10,400       10,604  
  

 

 

 

Cash and cash equivalents at end of period

     $ 16,165     $ 15,554  
  

 

 

 

Supplemental disclosures of cash flow information:

    

Income taxes received

     $ (228   $ (8,220

Interest paid

     2,096       1,087  

Accruals and accounts payable for capital expenditures

     379       1,464  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (Unaudited) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual audited financial statements. In our opinion, all adjustments (consisting primarily of normal and recurring adjustments) considered necessary for a fair presentation have been included. Due to the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. These Condensed Consolidated Financial Statements (Unaudited) should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended February 3, 2018, filed with the Securities and Exchange Commission (“SEC”) on May 4, 2018.

As used herein, the terms “we,” “our,” “us” and “Stein Mart” refer to Stein Mart, Inc. and its wholly-owned subsidiaries.

Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU No. 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted this ASU on February 4, 2018, for all revenue contracts with our customers using the full retrospective approach and increased retained earnings as of January 28, 2017, by less than $0.1 million as we now recognize Ecommerce sales when orders are delivered to the carrier and no longer reserve for orders in transit. We changed the balance sheet presentation of our sales return liability. Prior to the adoption of ASU No. 2014-09 our sales return liability was recorded as a net liability. We now recognize a gross return liability for the sales amounts expected to be refunded to customers and a corresponding asset for the recoverable cost of the merchandise expected to be returned by customers. Other changes relate primarily to the presentation of revenue. Revenue associated with our credit card program and breakage revenue has been retrospectively reclassed to present the revenue in other revenues, rather than as an offset to selling, general and administrative expenses on the Condensed Consolidated Statements of Income (Unaudited) for all periods presented.

Revenue from sales of our merchandise is recognized at the time of sale net of any returns, discounts and percentage-off coupons. Our Ecommerce operation records revenue as orders are fulfilled and provided to a carrier for delivery. Shipping and handling fees charged to customers are also included in total net sales with corresponding costs recorded as cost of goods sold as they are considered a fulfillment cost. Future merchandise returns are estimated based on historical experience. Sales tax collected from customers is not recognized as revenue and is included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets (Unaudited) until paid. Our shoe department and luxury handbag department inventory are each owned by separate single suppliers under supply agreements. Our commission from the sales in these areas is included in net sales in the Condensed Consolidated Statements of Income (Unaudited).

We offer gift and merchandise return cards to our customers. Some cards are electronic and none have expiration dates. At the time gift cards are sold the issuance is recorded as a liability to customers and no revenue is recognized. At the time merchandise return cards are issued for returned merchandise, the sale is reversed and a liability to customers is recorded. These card liabilities are reduced and sales revenue recognized when they are redeemed for merchandise. Card liabilities are included in accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets (Unaudited).

Our gift and merchandise return cards may not ultimately be redeemed either in full or partially. We account for this “breakage” of unused amounts as revenue in proportion to the pattern of rights exercised by the customer. With the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), breakage revenue is recorded within other revenue in the Condensed Consolidated Statements of Income (Unaudited). During the 13 weeks ended May 5, 2018 and April 29, 2017, we recognized $0.6 million and $0.3 million, respectively, of breakage revenue on unused gift and merchandise return cards.

Credit Card

We offer co-branded and private label credit cards under the Stein Mart brand. These cards are issued by Synchrony Bank (“Synchrony”). Synchrony extends credit directly to card holders, provides all servicing for the credit card accounts and bears all risk of credit and fraud losses.

We receive royalty revenue from Synchrony based on card usage in our stores and at other retailers for the Stein Mart Mastercard. We also receive revenues from them for new accounts and gainsharing based on the profitability of the overall program. With the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), this credit card revenue is recorded within other revenue in the Condensed Consolidated Statements of Income (Unaudited). Prior to the adoption of ASU No. 2014-09, these amounts were recorded as an offset to selling, general and administrative expenses. These revenues are recorded as they are earned based on the occurrence of the various program activities and represent the majority of other revenue.

Once a card is activated, the card holders are eligible to participate in the credit card rewards program, which provides for an incentive to card holders in the form of reward points for which certificates are issued in $10 increments, which is equivalent to 1,000 points. Points are valued at the stand alone selling price of the certificates issued. We defer a portion of our revenue for loyalty points earned by customers using the co-branded and private label cards and recognize the revenue as the certificates earned are used to purchase merchandise by our customers. Stein Mart card holders also receive special promotional offers and advance notice of in-store sales events.

 

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Table of Contents

Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

Adjustments to Previously Reported Financial Statements

The following tables set forth the adjustments made to our financial statements for the adoption of ASU No. 2014-09 (in thousands):

Condensed Consolidated Balance Sheets

 

    February 3, 2018  
    As Reported         Adjustment          As Adjusted     
 

 

 

 

Prepaid expenses and other current assets

    $ 24,194     $ 2,426      $ 26,620     

Accrued expenses and other current liabilities

    76,058       2,395        78,453     

Retained deficit

    (7,949     31        (7,918)    
    April 29, 2017  
    As Reported         Adjustment          As Adjusted    
 

 

 

 

Prepaid expenses and other current assets

    $ 24,161     $ 1,846      $ 26,007    

Accrued expenses and other current liabilities

    71,360       1,815        73,175    

Retained earnings

    20,059       31        20,090    

Condensed Consolidated Statements of Income

 

    13 Weeks Ended - April 29, 2017  
    As Reported          Adjustment          As Adjusted    
 

 

 

 

Other revenue

    $ -      $ 3,714      $ 3,714    

Selling, general and administrative expenses

    85,494        3,714        89,208    

Condensed Consolidated Statements of Cash Flows

 

    13 Weeks Ended - April 29, 2017  
    As Reported         Adjustment         As Adjusted    
 

 

 

 

Prepaid expenses and other current assets

    $ 6,088     $ (1,846   $ 4,242    

Accrued expenses and other current liabilities

    (1,550     1,846       296    

 

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Table of Contents

Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

Revenue

The following table sets forth our revenue by type of contract (in thousands):

 

   

    13 Weeks Ended    

May 5, 2018

         13 Weeks Ended  
April 29, 2017
 

Store sales (1)

  $ 306,911      $ 322,171    

Ecommerce sales (1)

    12,814        8,598    

Licensee commissions (2)

    6,960        6,566    

Net sales

  $ 326,685      $ 337,335    

Credit card revenue (3)

    2,268        2,668    

Breakage revenue (4)

    1,995        995    

Other

    39        51    

Other revenue

    4,302        3,714    

Total revenue

  $ 330,987      $ 341,049    

 

  (1)

Store and Ecommerce sales are net of any returns, discounts and percentage-off coupons.

  (2)

Licensee commissions are leased department commissions received net of any returns.

  (3)

Credit card revenue earned from Synchrony programs.

  (4)

Breakage revenue earned on unused gift and merchandise return cards and unused certificates and loyalty reward points.

The following table sets forth the gross up of the sales return reserve (in thousands):

 

        May 5, 2018             February 3, 2018         April 29, 2017      

Reserve for sales returns

    $ (6,133   $ (4,094   $ (3,141)   

Cost of inventory returns

    3,378       2,426       1,846    

 

The following table sets forth the contract liabilities and their relationship to revenue (in thousands):

 

 

        May 5, 2018             February 3, 2018         April 29, 2017  

Deferred revenue contracts

    (12,115     (12,512     (13,703)   

Gift card liability

    (9,675     (12,180     (9,577)   

Credit card reward liability

    (4,449     (4,689     (3,175)   

Liability for deferred revenue

    $ (26,239   $ (29,381   $ (26,455)   

Contract liabilities include consideration received for gift card and loyalty related performance obligations which have not been satisfied as of the dates presented above.

The following table sets forth a rollforward of the amounts included in contract liabilities for the periods presented (in thousands):

 

        13 Weeks Ended    
May 5, 2018
        13 Weeks Ended    
April 29, 2017
 

Beginning balance

  $ 29,381     $ 29,412  

Current period gift cards sold and loyalty reward points earned

    7,101       6,334  

Net sales from redemptions (1)

    (7,851     (7,900

Breakage and amortization (2)

    (2,392     (1,391

Ending balance

  $ 26,239     $ 26,455  

 

  (1)

$4.5 million and $4.6 million in net sales from redemptions were included in the beginning balance of contract liabilities for the 13 weeks ended May 5, 2018 and April 29, 2017, respectively.

  (2)

$2.3 million and $1.3 million in breakage and amortization were included in the beginning balance of contract liabilities for the 13 weeks ended May 5, 2018 and April 29, 2017, respectively.

 

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

Accrued Expenses and Other Current Liabilities

The following table sets forth the major components of accrued expenses and other current liabilities (in thousands):

 

        May 5, 2018      February 3, 2018          April 29, 2017  

Property taxes

  $ 14,280      $ 17,451      $ 12,876  

Unredeemed gift and merchandise return cards

    9,640        12,150        9,559  

Compensation and employee benefits

    8,068        7,732        7,116  

Accrued vacation

    7,632        7,632        7,715  

Other

    38,798        33,488        35,909  

Accrued expenses and other current liabilities

  $ 78,418      $ 78,453      $ 73,175  

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-04, Liabilities-Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products. The amendments in the ASU are designed to provide guidance and eliminate diversity in practice of accounting for derecognition of prepaid stored-value product liabilities. Typically, a prepaid stored-value product liability is to be derecognized when it is probable that a significant reversal of the recognized breakage amount will not subsequently occur. This is when the likelihood of the product holder exercising its remaining rights becomes remote. This estimate shall be updated at the end of each period. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted this ASU on February 4, 2018, and the adoption did not have a material effect on our financial condition, results of operations or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and also disclose key information about leasing arrangements. The main provisions of the new standard include: clarifications to the definitions of a lease, components of leases and criteria for determining lease classification; requiring virtually all leased assets, including operating leases and related liabilities, to be reflected on the lessee’s balance sheet; and expanding and adding to the required disclosures for lessees. This ASU is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual period. We are in the process of evaluating our lease portfolio and identifying what additional data will be needed to comply with the new standard. We have identified a software application suited to track and account for leases under the new standard. We plan to adopt ASU 2016-02 in fiscal 2019 and are currently evaluating the overall effect the adoption of this ASU will have on our financial condition, results of operations and cash flows. We currently believe the adoption of this ASU will have a significant effect on our Consolidated Balance Sheets due to the addition of our applicable leased assets and related liabilities. We do not believe the adoption of this ASU will have a significant effect on our results of operations as the depreciation and interest under the new standard will approximate our rent expense as it is currently being recorded.

2. Shareholders’ Equity

Dividends

During the 13 weeks ended May 5, 2018, there were no cash dividends declared. We paid $0.1 million in accrued dividends on restricted shares that vested during the period. During the 13 weeks ended April 29, 2017, we paid a quarterly cash dividend of $0.075 per common share on April 14, 2017.

 

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

Stock Repurchase Plan

During the 13 weeks ended May 5, 2018, we repurchased 45,103 shares of our common stock at a total cost of less than $0.1 million. During the 13 weeks ended April 29, 2017, we repurchased 56,753 shares of our common stock at a total cost of approximately $0.2 million. Stock repurchases were for tax withholding amounts due on employee stock awards and during 2018 and 2017, included no shares purchased on the open market under our previously authorized stock repurchase plan. As of May 5, 2018, there are 370,195 shares that can be repurchased pursuant to the Board of Directors’ current authorization.

3. Earnings per Share

Our restricted stock awards granted in 2013 contain non-forfeitable rights to dividends and, as such, are considered participating securities. Participating securities are to be included in the calculation of earnings per share under the two-class method. In applying the two-class method, income is allocated to both common shares and participating securities based on their respective weighted-average shares outstanding for the period.

The following table sets forth the calculation of basic and diluted earnings per common share (in thousands, except per share data):

 

        13 Weeks Ended    
May 5, 2018
         13 Weeks Ended    
April 29, 2017
 

Basic:

    

Net income

  $ 7,334      $ 3,700  

Income allocated to participating securities

    1        2  

Net income available to common shareholders

  $ 7,333      $ 3,698  

Basic weighted-average shares outstanding

    46,610        46,165  

Basic earnings per common share

  $ 0.16      $ 0.08  

Diluted:

    

Net income

  $ 7,334      $ 3,700  

Income allocated to diluted participating securities

    1        2  

Net income available to common shareholders

  $ 7,333      $ 3,698  

Basic weighted-average shares outstanding

    46,610        46,165  

Incremental shares from share-based compensation plans

    49        6  

Diluted weighted-average shares outstanding

    46,659        46,171  

Diluted earnings per common share

  $ 0.16      $ 0.08  

Diluted weighted-average shares outstanding exclude approximately 3.7 million and 3.9 million shares during the 13 weeks ended May 5, 2018 and April 29, 2017, respectively, which are anti-dilutive for the periods presented. These shares are comprised of a mix of stock options, performance awards and restricted stock. Stock 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. Restricted stock and performance shares excluded were shares that were anti-dilutive as calculated using the treasury stock method.

 

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

4. Debt

The following table sets forth our debt (in thousands):

 

         May 5, 2018          February 3, 2018          April 29, 2017      
  

 

 

 

Revolving credit facility

     $ 146,128        $ 142,387        $  149,150  

Term loan

     50,000        -        -  

Promissory note

     13,287        13,738        -  

Equipment term loan

     -        -        8,333  
  

 

 

 

Total debt

     209,415        156,125        157,483  

Current portion

     (159,415)        (13,738)        (8,333)  

Debt issuance costs

     (734)        -        (31)  
  

 

 

 

Long-term debt

     $ 49,266        $ 142,387        $  149,119  
  

 

 

 

Revolving Credit Facility and Equipment Term Loan

On February 3, 2015, we entered into a $250.0 million senior secured revolving credit facility pursuant to a second amended and restated credit agreement (the “Credit Agreement”) with Wells Fargo Bank (“Wells Fargo”) that will mature in February 2020 (the “Revolving Credit Facility”) and a secured $25.0 million master loan agreement with Wells Fargo Equipment Finance, Inc. (the “Equipment Term Loan”) with an original maturity in February 2018. Borrowings under the Revolving Credit Facility were initially used for a special dividend but are subsequently being used for working capital, capital expenditures and other general corporate purposes. During 2015, debt issuance costs associated with the Revolving Credit Facility and the Equipment Term Loan were capitalized in the amount of $0.4 million and have been fully amortized. We repaid the Equipment Term Loan in full on January 22, 2018.

On February 19, 2018, we entered into Amendment No. 1 (the “Credit Agreement Amendment”) to the Credit Agreement with Wells Fargo. The Credit Agreement Amendment provides for, among other things, an Accommodation Period (as defined in the Credit Agreement Amendment) during which we were not required to meet the Fixed Charge Coverage Ratio (as defined in the Credit Agreement). This change permitted us to borrow the full amount of the then applicable borrowing base until we delivered our financial statements for the Measurement Period (as defined in the Credit Agreement) ended February 28, 2018. Pursuant to the Credit Agreement Amendment, a Cash Dominion Event (as defined in the Credit Agreement Amendment) has occurred as of the effective date of the Credit Agreement Amendment and at all times thereafter.

As a result of the Cash Dominion Event, all of our cash receipts are swept daily to repay outstanding borrowings under the Credit Agreement. We manage our cash on a daily basis and borrow against the Credit Agreement based on our daily cash disbursement needs. As long as we remain within the terms of the Credit Agreement, the bank is obligated to allow us to draw up to our borrowing availability. The Credit Agreement matures in February 2020; however, as a result of the Cash Dominion Event the amount outstanding under the Credit Agreement has been classified as a short-term obligation.

On March 14, 2018, we entered into Amendment No. 2 (the “Second Credit Agreement Amendment”) to the Credit Agreement with Wells Fargo. The Second Credit Agreement Amendment provides for, among other things, the following: (1) the $25.0 million Tranche A-1 Revolving Loans (as defined in the Second Credit Agreement Amendment) shall have been repaid in full with the proceeds of the Term Loan (as defined below); (2) the entry into the Intercreditor Agreement (as defined below); and (3) certain other modifications and updates to coordinate the Revolving Credit Facility with the Term Loan.

The total amount available for borrowings under the Credit Agreement is the lesser of $225.0 million or 100 percent of eligible credit card receivables and the net recovery percentage of inventories less reserves. On May 5, 2018, in addition to outstanding borrowings under the Credit Agreement, we had $7.9 million of outstanding letters of credit and our unused availability under the Credit Agreement was $40.0 million.

The Credit Agreement contains customary representations and warranties, affirmative and negative covenants (including the requirement of a 1.0 to 1.0 consolidated Fixed Charge Coverage Ratio upon the occurrence and during the continuance of any Covenant Compliance Event, as defined in the Credit Agreement), and events of default for facilities of this type and is cross-collateralized and cross-defaulted. Collateral for the Revolving Credit Facility and the Equipment Term Loan consists of substantially all of our personal property. Wells Fargo

 

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

has a first lien on all collateral other than equipment. Wells Fargo Equipment Finance had a first lien on equipment through January 22, 2018, when we repaid the Equipment Term Loan in full.

Borrowings under the Credit Agreement are either Base Rate Loans or London Interbank Offered Rate (“LIBOR”) loans. LIBOR Loans bear interest equal to the adjusted LIBOR plus the applicable margin (125 to 175 basis points) depending on the quarterly average excess availability. Base Rate Loans bear interest equal to the highest of (a) the Federal Funds Rate plus 0.50 percent, (b) the adjusted LIBOR plus 1.00 percent, or (c) the Wells Fargo “prime rate,” plus the Applicable Margin (25 to 75 basis points).

The weighted average interest rate for the amount outstanding under the Credit Agreement was 3.47 percent as of May 5, 2018.

Promissory Note

On February 2, 2018, we executed a promissory note under which we borrowed approximately $13.7 million (the “Promissory Note”) from SunTrust Bank (the “Trustee”) in its capacity as the trustee under a trust agreement (the “Trust Agreement”) dated September 1, 1999. The trust established by the Trust Agreement (the “Trust”) holds certain whole life insurance policies related to our executive deferred compensation plans. The Trustee obtained loans from the insurance policies held in the Trust in an amount not less than the amount of the Promissory Note. The Promissory Note is a short-term obligation and the proceeds were used to pay down borrowings under the existing Credit Agreement which provided additional availability under that agreement.

The Promissory Note has a fixed interest rate of 3.58 percent per annum and an original maturity date of April 1, 2018. On March 7, 2018, we executed an amendment to the Promissory Note under which the Trustee extended the maturity date of the note from April 1, 2018, to July 1, 2018 (the “Maturity Date”). The amendment did not alter the short-term nature of the Promissory Note. The Promissory Note may be prepaid in whole or in part at any time. All unpaid principal and accrued interest on the Promissory Note will become due and payable on the Maturity Date. The Trustee may offset payments due under the Promissory Note against amounts we are otherwise entitled to withdraw from the Trust under the terms of the Trust Agreement.

Term Loan

On March 14, 2018, we entered into a Term Loan Credit Agreement with Gordon Brothers Finance Company, as administrative agent (in such capacity, the “Term Loan Agent”), and Gordon Brothers Finance Company, LLC, as lender (the “Term Loan Agreement”). The Term Loan Agreement provided for a term loan in the amount of $50.0 million (the “Term Loan”) and paid in full the existing $25.0 million Tranche A-1 Revolving Loan (as defined in the Credit Agreement) under the Credit Agreement. Debt issuance costs associated with the Term Loan were capitalized in the amount of $0.8 million and will be amortized over the term of the loan. The net proceeds of $49.2 million from the Term Loan were used to permanently pay off the Tranche A-1 Revolving Loan (as defined in the Credit Agreement) and to pay down the Credit Agreement. After utilizing proceeds from the Term Loan Agreement for repayment of amounts outstanding under the existing Tranche A-1 Revolving Loans, the Term Loan resulted in an increase in our Excess Availability of approximately $25.0 million under the Credit Agreement.

The Term Loan will mature on the earlier of (1) the termination date specified in our Credit Agreement, as such date may be extended with the consent of the Term Loan Agent or in accordance with the Intercreditor Agreement (defined below), and (2) March 14, 2020.

The Term Loan Agreement contains customary representations and warranties, affirmative and negative covenants including the retention of the existing minimum 1.0 to 1.0 consolidated fixed charge coverage ratio under the Credit Agreement, which limits borrowing availability if not met during periods where Revolving Excess Availability (as defined in the Term Loan Agreement) is less than the greater of $20.0 million or 10.0 percent of Combined Loan Cap (as defined in the Term Loan Agreement) for four consecutive business days, and events of default for a facility of this type. The Term Loan is secured by a second lien security interest (subordinate only to the liens securing the Credit Agreement) on all assets securing the Credit Agreement (which consist of substantially all of our personal property), except furniture, fixtures and equipment and intellectual property, upon which the Term Loan lenders will have a first lien security interest. If at any time prior to the first anniversary date of the Term Loan, the Revolving Excess Availability is less than $20.0 million, if requested by the Term Loan Agent, the Term Loan will also be secured by a first lien on leasehold interests in real property with an aggregate value of not less than $10.0 million, and the Credit Agreement will be secured by a second lien on such leasehold interests.

The Term Loan is subject to certain mandatory prepayments if an Event of Default (as defined in the Term Loan Agreement) exists. If no such Event of Default exists, proceeds of the Term Loan priority collateral are to be applied to amounts outstanding under the Credit Agreement.

 

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Stein Mart, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

(Unaudited)

 

The Term Loan Agent and Wells Fargo have entered into an Intercreditor Agreement dated as of March 14, 2018 (the “Intercreditor Agreement”), acknowledged by us under the Term Loan and the Credit Agreement.

The non-default interest rate applicable to the Term Loan under the Term Loan Agreement is a fluctuating rate of interest equal to three-month LIBOR (with a floor of 1.5 percent) plus 8.5 percent per annum.

The weighted average interest rate for the amount outstanding under the Term Loan was 10.81 percent as of May 5, 2018.

The following table sets forth the aggregate maturities of our long-term debt at May 5, 2018 for the following fiscal years (in thousands):

 

2019

     $          -  

2020

     50,000  

2021

     -  

2022

     -  

2023

     -  

Thereafter

     -  
  

 

 

 

Total

             $50,000  
  

 

 

 

5. Commitments and Contingencies

We are involved in various routine legal proceedings incidental to the conduct of our business. During both the 13 weeks ended May 5, 2018 and April 29, 2017, we did not accrue for any actual or anticipated loss contingencies. While some of these matters could be material to our results of operations or cash flows for any particular period if an unfavorable outcome results, we do not believe that the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our overall financial condition.

6. Income Taxes

Our income tax expense for the 13 weeks ended May 5, 2018, reflects our net operating loss carryforward position along with the valuation allowance established against deferred tax assets during the fourth quarter of 2017. The first quarter of 2018 expense represents certain state income tax expense. We expect the effective tax rate to be close to zero percent for all of 2018.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used herein, the terms “we,” “our,” “us” and “Stein Mart” refer to Stein Mart, Inc. and its wholly-owned subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to certain risks, uncertainties or assumptions and may be affected by certain factors including, but not limited to, the matters discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, filed with the Securities and Exchange Commission (“SEC”) on May 4, 2018. Wherever used, the words “plan,” “expect,” “anticipate,” “believe,” “estimate” and similar expressions identify forward-looking statements. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on beliefs and assumptions of our management and on information currently available to such management. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise our forward-looking statements in light of new information or future events. Undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Forward-looking statements are not guarantees of performance.

The following discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended February 3, 2018, filed with the SEC on May 4, 2018.

Overview

We are a national specialty off-price retailer offering designer and name-brand fashion apparel, home décor, accessories and shoes at everyday discount prices. Stein Mart provides real value that customers love every day both in stores and online. We currently operate 289 stores across 30 states.

Financial Overview for the 13 Weeks Ended May 5, 2018

 

Net sales were $326.7 million for the 13 weeks ended May 5, 2018, compared to $337.3 million for the 13 weeks ended April 29, 2017.

 

Comparable store sales for the 13 weeks ended May 5, 2018, decreased 0.7 percent compared to the 13 weeks ended April 29, 2017.

 

Net income for the 13 weeks ended May 5, 2018, was $7.3 million, or $0.16 per diluted share, compared to net income of $3.7 million, or $0.08 per diluted share, during the 13 weeks ended April 29, 2017.

 

We had $209.4 million, $156.1 million and $157.5 million of borrowings on our credit facilities as of May 5, 2018, February 3, 2018, and April 29, 2017, respectively.

Stores

The following table sets forth the stores activity for the 13 weeks ended May 5, 2018 and April 29, 2017:

 

             13 Weeks Ended
        May 5, 2018
    13 Weeks Ended
April 29, 2017
 
  

 

 

 

Stores at beginning of period

     293       290    

Stores opened during the period

     -       5    

Stores closed during the period

     (4     (3)   
  

 

 

 

Stores at the end of period

     289       292    
  

 

 

 

Inventories

Inventory levels were $297.0 million as of May 5, 2018, compared to $270.2 million as of February 3, 2018 and $322.0 million as of April 29, 2017. Average inventories per store as of May 5, 2018, decreased 9.7 percent from April 29, 2017. We have intentionally operated with lower inventory levels during 2018, mainly by purchasing merchandise closer to the time of sales during the selling season.

 

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Results of Operations

The following table sets forth each line item of our Condensed Consolidated Statements of Income (Unaudited) expressed as a percentage of net sales (1):

 

             13 Weeks Ended
        May 5, 2018
    13 Weeks Ended
April 29, 2017
 
  

 

 

 

Net sales

     100.0     100.0%    

Other revenue

     1.3     1.1%    

Total revenue

     101.3     101.1%    
  

 

 

 

Cost of merchandise sold

     70.6     71.7%    

Selling, general and administrative expenses

     27.7     26.4%    
  

 

 

 

Operating income

     3.0     3.0%    

Interest expense, net

     0.8     0.3%    
  

 

 

 

Income before income taxes

     2.3     2.7%    

Income tax expense

     0.0     1.6%    
  

 

 

 

Net income

     2.2     1.1%    
  

 

 

 

 

  (1)

Table may not foot, due to rounding.

Important Information Regarding Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, we believe that certain non-GAAP financial measures provide users of our financial information with additional useful information in evaluating operating performance. Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, financial results prepared in accordance with GAAP. Items excluded from or included in non-GAAP financial measures may be significant and should be considered in assessing our financial condition and performance. The methods we used to calculate these non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, the non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.

We believe that providing calculations of changes in comparable sales including and excluding sales from leased departments assists in evaluating our ability to generate sales growth, whether through owned businesses or departments leased to third parties. The following table sets forth these calculations.

 

    

        13 Weeks Ended

        May 5, 2018

   

13 Weeks Ended

April 29, 2017

 
  

 

 

 

Decrease in comparable sales on an owned basis (1)

     (1.8 )%      (7.6)%    

Effect of growth in comparable sales of departments licensed to third parties (2)

     1.1     0.5%    
  

 

 

 

Decrease in comparable sales on an owned plus licensed basis

     (0.7 )%      (7.1)%    

 

  (1)

Represents the period-to-period percentage change in net sales from stores open throughout the period presented and the same period in the prior year and all online sales of steinmart.com, excluding commissions from departments leased to third parties.

  (2)

Represents the effect of including the full sales amounts for departments leased to third parties throughout the period presented and the same period in the prior year on the calculation of comparable sales. We lease our shoe and vintage handbag departments to third parties and receive a commission from these third parties based on a percentage of their sales. In our financial statements prepared in conformity with GAAP, we include commissions (rather than sales of the departments licensed to third parties) in our net sales. We do not include the commission amounts from leased department sales in our comparable sales calculation.

 

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13 Weeks Ended May 5, 2018, Compared to the 13 Weeks Ended April 29, 2017 (tables presented in thousands):

Net Sales

 

     13 Weeks Ended
May 5, 2018
     13 Weeks Ended
April 29, 2017
     Decrease  
  

 

 

 

Net sales

     $   326,685      $ 337,335      $     (10,650)  

Sales percent change:

        

Total net sales

           (3.2)%  

Comparable store sales on an owned plus licensed basis

           (0.7)%  

The 3.2 percent decrease in net sales includes the effect of closing four stores in the 13 weeks ended May 5, 2018, and three stores in the 13 weeks ended April 29, 2017. The 0.7 percent decrease in comparable stores sales on an owned plus licensed basis for the 13 weeks ended May 5, 2018, was primarily driven by decreases in the number of transactions driven by lower clearance selling and lower units per transaction, primarily due to the lower clearance selling, partially offset by increased average unit retail driven by improved regular-priced selling. Comparable store sales reflect stores open throughout the period and prior fiscal year and include Ecommerce. Ecommerce sales were up 84.9 percent and contributed approximately a 1.2 percent increase to comparable store sales for the 13 weeks ended May 5, 2018.

Other Revenue

 

     13 Weeks Ended
May 5, 2018
     13 Weeks Ended
April 29, 2017
     Increase  
  

 

 

 

Other revenue

     $   4,302      $ 3,714      $     588  

Percentage of net sales

     1.3%        1.1%        0.2%  

The increase in other revenue for the 13 weeks ended May 5, 2018, is the result of higher penetration from our growing credit card program.

Gross Profit

Gross profit is determined as follows:

 

     13 Weeks Ended
May 5, 2018
     13 Weeks Ended
April 29, 2017
     (Decrease)/
Increase
 
  

 

 

 

Net sales

     $     326,685      $ 337,335      $     (10,650)  

Cost of merchandise sold

     230,621        241,779        (11,158)  
  

 

 

 

Gross profit

     $ 96,064      $ 95,556      $ 508  

Percentage of net sales

     29.4%        28.3%        1.1%  

The gross profit rate increase for the 13 weeks ended May 5, 2018, was primarily due to a higher merchandise margin rate, partially offset by occupancy costs which were flat for the quarter but higher as a percentage of net sales. The higher merchandise margin rate was driven by lower markdowns that more than offset Ecommerce fulfillment and shipping costs which were higher due to an increase in online orders.

Selling, General and Administrative Expenses (“SG&A”)

 

     13 Weeks Ended
May 5, 2018
     13 Weeks Ended
April 29, 2017
     Increase  
  

 

 

 

Selling, general and administrative expenses

     $     90,509      $ 89,208      $     1,301  

Percentage of net sales

     27.7%        26.4%        1.3%  

The SG&A increase for the 13 weeks ended May 5, 2018, was primarily the result of planned higher advertising of $2.8 million and Ecommerce expenses of $1.7 million that were mostly offset by cost savings. Advertising expenses were higher due to the rollout of our new TV-focused campaign this spring. Ecommerce expenses were higher to support the additional sales volume.

 

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Interest Expense, Net

 

     13 Weeks Ended
May 5, 2018
     13 Weeks Ended
April 29, 2017
     Increase  
  

 

 

 

Interest expense, net

     $     2,463      $ 1,139      $     1,324  

Precentage of net sales

     0.8%        0.3%        0.5%  

The increase in interest expense for the 13 weeks ended May 5, 2018, is due to higher borrowing levels and higher interest rates, primarily on our new Term Loan.

Income Taxes

 

     13 Weeks Ended
May 5, 2018
     13 Weeks Ended
April 29, 2017
     Decrease  
  

 

 

 

Income tax expense

       $     60      $ 5,223      $ (5,163)  

Effective tax rate

     0.8%        58.5%            (57.7)%  

Our effective tax rate represents the applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal returns, adjusted for the effect of permanent differences. The decrease in the effective tax rate for the 13 weeks ended May 5, 2018, was primarily driven by our net operating loss carryforward position and our valuation allowance against all net deferred tax assets established during the fourth quarter of 2017. For the 13 weeks ended April 29, 2017, excluding the effect of adopting ASU 2016-09, which added an additional $1.1 million in tax expense for the quarter as amounts previously recorded in equity related to the tax effects associated with the exercise of stock options and vesting of restricted stock are now rerecorded within income tax expense, our effective tax rate would have been 46.7 percent. We expect that our effective tax rate will remain near zero percent for the rest of fiscal 2018.

Liquidity and Capital Resources

Capital requirements and working capital needs are funded through a combination of internally generated funds, available cash, credit terms from vendors, our $225.0 million senior secured revolving credit facility pursuant to a second amended and restated credit agreement with Wells Fargo Bank (“Credit Agreement”) and our $50.0 million Term Loan (as defined in Note 4 “Debt” to the Notes to Condensed Consolidated Financial Statements (Unaudited)).

On February 19, 2018, we entered into Amendment No. 1 (the “Credit Agreement Amendment”) to the Credit Agreement. The Credit Agreement Amendment provided for, among other things, an Accommodation Period (as defined in the Credit Agreement Amendment) during which we were not required to meet the Fixed Charge Coverage Ratio (as defined in the Credit Agreement). This change permitted us to borrow the full amount of the then applicable borrowing base until we delivered our financial statements for the Measurement Period (as defined in the Credit Agreement) ended February 28, 2018. Pursuant to the Credit Agreement Amendment, a Cash Dominion Event (as defined in the Credit Agreement Amendment) occurred as of the effective date of the Credit Agreement Amendment and at all times thereafter. The Credit Agreement Amendment also changed the frequency of our delivery of Borrowing Base Certificates (as defined in the Credit Agreement) from monthly to weekly.

As a result of the Cash Dominion Event, all of our cash receipts are swept daily to repay borrowings under the Credit Agreement. We manage our cash on a daily basis and borrow against the Credit Agreement based on our daily cash disbursement needs. As long as we remain within the terms of the Credit Agreement, the bank is obligated to allow us to draw up to our borrowing availability. The Credit Agreement matures in February 2020; however, as a result of the Cash Dominion Event, the amount outstanding under the Credit Agreement is classified as a short-term obligation on the Condensed Consolidated Balance Sheets (Unaudited).

On March 14, 2018, we entered into the Term Loan Agreement, which provided for a term loan in the amount of $50.0 million. At the same time, we entered into Amendment No. 2 (the “Second Credit Agreement Amendment”) to the Credit Agreement with Wells Fargo. The Second Credit Agreement Amendment provided for, among other things, the following: (1) the permanent repayment in full of $25.0 million of Tranche A-1 Revolving Loans (as defined in the Second Credit Agreement Amendment) with the proceeds of the Term Loan (as defined below), thereby reducing the maximum amount of the revolving credit facility under the Credit Agreement to $225.0 million; (2) the entry into the Intercreditor Agreement between Wells Fargo Bank and Gordon Brothers Finance Company, LLC (as defined in Note 4 “Debt” in the Notes to Condensed Consolidated Financial Statements (Unaudited); and (3) certain other modifications and updates to coordinate the Credit Agreement with the Term Loan. The net proceeds of $49.2 million from the Term Loan were used to permanently pay off the $25.0

 

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million Tranche A-1 Revolving Loan Commitment (as defined in Note 4 “Debt” in the Notes to Condensed Consolidated Financial Statements (Unaudited)) and to pay down the outstanding Tranche A-1 Revolving Loans (as defined in the Credit Agreement). After utilizing proceeds from the Term Loan Agreement for repayment of amounts outstanding under the Credit Agreement, the Term Loan increased our total borrowing availability under the combination of the Credit Agreement and Term Loan to $275 million and increased our Excess Availability by approximately $25.0 million. See Note 4 “Debt” of the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion.

On February 2, 2018, we executed a short-term promissory note under which we borrowed approximately $13.7 million (the “Promissory Note”) from SunTrust Bank in its capacity as trustee under a trust agreement dated September 1, 1999. The proceeds from the Promissory Note were used to pay down borrowings under the Credit Agreement to provide additional availability under the Credit Agreement to assist us during our February low working capital period following the holiday selling season. In March 2018, we extended the due date of the Promissory Note to July 1, 2018. See Note 4 “Debt” of the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion.

Cash flows from operations are driven by sales as well as the credit terms available to us from our vendors and their factors. Our sales generate cash almost immediately and are affected by customer traffic into our stores and the desirability of our merchandise to those customers. Customer traffic is in turn affected by our marketing and advertising, general economic and business conditions, and weather. Changes in these factors could have a material effect on our ability to generate sales and thus cash inflows to operate our business.

Our cash outflows can be materially affected by changes in credit terms and availability from our vendors and their factors. During the first quarter of 2018, our vendors and factors constricted our credit terms and limits significantly. This was a reaction to our 2017 third quarter results as well as concern about the general retail environment at the time, which included multiple bankruptcies and restructurings. This constriction caused us to make payments to our vendors and factors more quickly than in prior periods thus increasing our debt levels during that period. The added availability from the Term Loan Agreement was a key part of our ability to fund the accelerated payments. During this time we successfully managed our vendor and factor relationships to maintain the flow of our merchandise during the key early spring selling period. Throughout all periods we made our payments to vendors and their factors on a timely basis in accordance with our negotiated terms.

When we announced our fourth quarter results and outlook for spring 2018 in March our terms with the vendors and their factors began to be less constricted. At that same time, we also announced our Term Loan Agreement. We have non-disclosure agreements with the major factors, credit insurers and several of our largest vendors which allow us to communicate our operating results and cash flows to them on a regular basis. Additionally, we made presentations to larger groups of our vendors just after our fourth quarter results were announced, in March 2018. These steps have contributed to the positive movement in the credit arrangements we have with our vendors and their factors.

Our working capital fluctuates with seasonal variations which affects our borrowings and availability. Our availability is highest just after our strong seasonal spring and holiday selling seasons and is lowest just before those seasons as we build inventory levels. Working capital is also used to support capital investments for maintenance of our existing stores, system improvements and new store openings. We have reduced our capital investments to enhance our cash flows. These reduced levels of investment can be sustained for the foreseeable future as prior to this our store base and systems have been well maintained. Positive operating results and cash flows will help us preserve satisfactory credit terms and allow us to operate within the borrowing availability under our Credit Agreement and Term Loan Agreement. Based on our current expectations regarding our operating results we consider our resources adequate to satisfy our cash needs for at least the next 12 months.

During the first quarter of 2017, we announced that we hired PJ Solomon to help us evaluate strategic and capital alternatives. We hired Alvarez & Marsal as advisors in 2017 to assist in evaluating our forecasting and strategic communications with our vendors and their factors. Alvarez & Marsal also advised us on cost savings and cash flow initiatives and assisted with evaluating capital alternatives which resulted in the Term Loan Agreement. It is possible that additional strategic alternatives arise from these efforts.

As of May 5, 2018, we had cash and cash equivalents of $16.2 million and $146.1 million in borrowings under our Credit Agreement, $50.0 million in borrowings under the Term Loan and $13.3 million in borrowings under the Promissory Note, for a total of $209.4 million in outstanding borrowings. As of February 3, 2018, we had cash and cash equivalents of $10.4, and borrowings under our credit facilities of $142.4 million and $13.7 million in borrowings under the Promissory Note, for a total of $156.1 million in outstanding borrowings. As of April 29, 2017, we had cash and cash equivalents of $15.6 million and borrowings under our credit facilities were $157.5 million. The total amount available for borrowings and letters of credit under our Credit Agreement is the lesser of $225.0 million or 100 percent of eligible credit card receivables and the net recovery percentage value of inventories less reserves. On May 5, 2018, in addition to outstanding

 

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borrowings under the Credit Agreement, Term Loan and Promissory Note, we had $7.9 million of outstanding letters of credit. Our Excess Availability (as defined in the Credit Agreement) was $40.0 million on May 5, 2018.

Cash Flows

 

       13 Weeks Ended
  May 5, 2018
    13 Weeks Ended
April 29, 2017
    Change  
  

 

 

 

Cash (used in) provided by :

      

Operating activities

     $ (47,206   $ 40,098     $ (87,304

Investing activities

     850       (7,099     7,949  

Financing activities

         52,121       (28,049             80,170  
  

 

 

 

Net increase in cash and cash equivalents

     $ 5,765     $ 4,950     $ 815  
  

 

 

 

Net cash used in operating activities was $47.2 million for the 13 weeks ended May 5, 2018 compared to net cash provided by operating activities of $40.1 million for the 13 weeks ended April 29, 2017. The decrease in cash provided by operating activities was mainly due to borrowings to fund the acceleration of vendor payments during the 13 weeks ended May 5, 2018 which significantly reduced our accounts payable balance compared to the 13 weeks ended April 29, 2017. Also contributing to the decrease was an increase in prepaid rent due to the timing of the end of the first quarter this year.

Net cash provided by investing activities was primarily from proceeds from canceled corporate-owned life insurance policies, partially offset by capital expenditures and was $0.1 million for the 13 weeks ended May 5, 2018, compared to net cash used of $7.1 million for the 13 weeks ended April 29, 2017, primarily for capital expenditures. The decrease in capital expenditures was primarily due to lower investment in technologies, fewer remodels to existing stores and fewer tenant improvements for fiscal 2018.

Net cash provided by financing activities was $52.1 million during the 13 weeks ended May 5, 2018 compared to cash used in financing activities of $28.0 million during the 13 weeks ended April 29, 2017. During the 13 weeks ended May 5, 2018, we had net proceeds of debt of $53.3 million, primarily due to our accelerated payments to vendors. We paid debt issuance costs of $0.8 million, cash dividends of $0.1 and capital lease payments of $0.2 million. In addition, we repurchased 45,103 shares of common stock for less than $0.1 million. During the 13 weeks ended April 29, 2017, we had net repayments of debt of $24.4 million. We also paid cash dividends of $3.5 million. We did not pay any debt issuance costs or capital lease payments. In addition, we repurchased 56,753 shares of common stock for $0.2 million. See Note 2 “Shareholders’ Equity” of the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion.

Critical Accounting Policies and Estimates

We discuss our critical accounting policies and estimates in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended February 3, 2018, and filed with the SEC on May 4, 2018. We have made no significant changes in our critical accounting policies and estimates since February 3, 2018.

Recent Accounting Pronouncements

Recently issued accounting pronouncements are discussed in Note 1 “Basis of Presentation” of the Notes to Condensed Consolidated Financial Statements (Unaudited).

Seasonality and Inflation

Our business is seasonal. Sales and profitability are historically higher in the first and fourth quarters of the fiscal year, which include the spring and holiday seasons. Therefore, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

Although we expect that our income will be influenced by general economic conditions, we do not believe that inflation has had a material effect on our results of operations. However, there can be no assurance that our business will not be affected by inflation in the future.

ITEM 4. 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 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 (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of May 5, 2018 to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,

 

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and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See the discussion of legal proceedings in Note 4 “Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements (Unaudited) included in Item 1 of Part I of this Quarterly Report, which is incorporated by reference into this Item 1 of Part II.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those described in our Annual Report on Form 10-K for the year ended February 3, 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth information regarding repurchases of our common stock during the quarter ended May 5, 2018:

 

Period   

Total
number

of shares
purchased

     Average
price
paid per
share
     Total number of
shares purchased
as part of publicly
announced plans
or programs (1)
     Maximum number
of shares that may
yet be purchased
under the plans or
programs (1)
 

February 4, 2018 - March 3, 2018

     41,582      $ 0.65        41,582        373,716  

March 4, 2018 - April 7, 2018

     1,519        1.40        1,519        372,197  

April 8, 2018 - May 5, 2018

     2,002        1.96        2,002        370,195  

Total

     45,103      $ 0.73        45,103        370,195  

 

 

  (1)

All stock repurchases were for tax withholding amounts due on employee stock awards. No shares were purchased on the open market pursuant to our open market repurchase program. Our open market repurchase program is conducted pursuant to authorizations made from time to time by our Board of Directors, including the most recent authorization of an additional 500,000 shares by the Board of Directors announced on November 30, 2015.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

 

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Table of Contents

ITEM 6. EXHIBITS

 

10.1  

Amendment No. 1 to Second Amended and Restated Credit Agreement, dated February 19, 2018, by and among Wells Fargo Bank, National Association, the parties to the Credit Agreement as lenders party thereto, Stein Mart, Inc., Stein Mart Buying Corp. and the obligors party thereto as guarantors, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 21, 2018

10.2  

Amendment No. 2 to Second Amended and Restated Credit Agreement & Exhibit A to Amendment No. 2 to Second Amended and Restated Credit Agreement, dated as of March 14, 2018, by and among Wells Fargo Bank, National Association, the parties to the Credit Agreement as lenders party thereto, Stein Mart, Inc., Stein Mart Buying Corp. and the obligors party thereto as guarantors, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 14, 2018

10.3  

Amendment No. 1 dated March 7, 2018 to Promissory Note, dated February 2, 2018, by and among Stein Mart, Inc. as borrower and SunTrust Bank, as Trustee, incorporated by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K filed on May 4, 2018

10.4  

Term Loan Agreement, dated as of March 14, 2018, by and among Stein Mart, Inc. as Lead Borrower, the additional borrowers named therein, the guarantors named therein, Gordon Brothers Finance Company, the other lender parties thereto, and Gordon Brothers Finance Company, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 14, 2018

10.5  

Intercreditor Agreement, dated as of March 14, 2018, by and between Wells Fargo Bank, National Association, and Gordon Brothers Finance Company, and acknowledged by Stein Mart. Inc., the other borrowers signatory thereto, and the other guarantors signatory thereto, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed March 14, 2018

10.6*  

Gary L. Pierce Amended and Restated Employment Agreement with Stein Mart, Inc., effective May 1, 2018, by and between the Company and Gary L. Pierce, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed April 6, 2018

10.7+  

First Amendment to Term Loan Credit Agreement, dated as of May 10, 2018 (this “Amendment”), is entered into by and among Stein Mart, Inc., a Florida corporation, the Guarantors party hereto, the Lenders party hereto, and Gordon Brothers Finance Company, a Delaware corporation, in its capacity as administrative agent for the Lenders

31.1+  

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a)

31.2+  

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a)

32.1+  

Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

32.2+  

Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

101   

Interactive data files from Stein Mart, Inc.’s Quarterly Report on Form 10-Q for the quarter ended May 5, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets (Unaudited), (ii) the Condensed Consolidated Statements of Income (Unaudited), (iii) the Condensed Consolidated Statements of Comprehensive Income (Unaudited), (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited), and (v) the Notes to Condensed Consolidated Financial Statements (Unaudited)

 

*

   Management contract or compensatory plan or arrangement.

+

   Filed herewith.

 

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

STEIN MART, INC.

 

Date: June 7, 2018     By:      

/s/ D. Hunt Hawkins

      D. Hunt Hawkins
     

Chief Executive Officer

 

     

/s/ Gregory W. Kleffner

      Gregory W. Kleffner
      Executive Vice President and Chief Financial Officer

 

23

EX-10.7

EXHIBIT 10.7

FIRST AMENDMENT TO TERM LOAN CREDIT AGREEMENT

This FIRST AMENDMENT TO TERM LOAN CREDIT AGREEMENT, dated as of May 10, 2018 (this “Amendment”), is entered into by and among Stein Mart, Inc., a Florida corporation (“Stein Mart” or the “Lead Borrower”), Stein Mart Buying Corp., a Florida corporation (“Buying Corp.”, and together with Stein Mart, the “Borrowers”), the Guarantors party hereto, the Lenders party hereto, and Gordon Brothers Finance Company, a Delaware corporation, in its capacity as administrative agent for the Lenders (in such capacity, together with its successors and assigns, “Administrative Agent”).

W I T N E S S E T H

WHEREAS, Administrative Agent, Lenders, Borrowers and Guarantors have entered into that certain Term Loan Credit Agreement, dated as of March 14, 2018 (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”);

WHEREAS, Lead Borrower has requested that Administrative Agent and Lenders modify certain provisions of the Credit Agreement and the Administrative Agent and Required Lenders are willing to agree to such modifications on the terms and subject to the conditions set forth herein;

NOW THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.    Definitions. All capitalized terms used herein but not defined herein shall have the meanings assigned thereto in the Credit Agreement.

2.    Amendment to Credit Agreement. Section 6.17(b) to the Credit Agreement is hereby amended by amending and restating such section in its entirety as follows:

(b)    Not later than ninety (90) days after the Closing Date (or such later date as the Administrative Agent may agree in its sole discretion), the Borrowers shall provide the Administrative Agent with an appraisal report, in form and substance and from an appraiser satisfactory to the Administrative Agent, which shall provide the liquidation value of the Borrowers’ real property leaseholds.

3.    Representations and Warranties. Borrowers each represent and warrant to the Administrative Agent and each Lender as of the date hereof that after giving effect to this Amendment, no Default or Event of Default exists or has occurred and is continuing as of the date of this Amendment.

4.    Effect of Amendment. Except as expressly set forth herein, no other consents, amendments, changes or modifications to the Loan Documents are intended or implied hereby, and in all other respects the Loan Documents are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof.


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.

 

    BORROWERS:
   

STEIN MART, INC.

      By:  

/s/ Gregory W. Kleffner

      Name:  

Gregory W. Kleffner

      Title:  

CFO

   

STEIN MART BUYING CORP.

      By:  

/s/ Gregory W. Kleffner

      Name:  

Gregory W. Kleffner

      Title:  

Director

   

GUARANTORS:

   

STEIN MART HOLDING CORP.

      By:  

/s/ Gregory W. Kleffner

      Name:  

Gregory W. Kleffner

      Title:  

Director

[GBFC/Stein Mart – Signature Page to First Amendment]


    AGENT AND LENDERS:
    GORDON BROTHERS FINANCE COMPANY, as the
Administrative Agent
      By:  

/s/ David Vega

      Name:  

David Vega

      Title:  

Managing Director

    GORDON BROTHERS FINANCE COMPANY, LLC,
as a Lender
      By:  

/s/ David Vega

      Name:  

David Vega

      Title:  

Managing Director

[GBFC/Stein Mart – Signature Page to First Amendment]

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a)

I, D. Hunt Hawkins, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Stein Mart, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4.

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

  a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

  c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d.

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

  b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date: June 7, 2018

 

/s/ D. Hunt Hawkins

 

D. Hunt Hawkins

 

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a)

I, Gregory W. Kleffner, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Stein Mart, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4.

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

  a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

  c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d.

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

  b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date: June 7, 2018

 

/s/ Gregory W. Kleffner

 

Gregory W. Kleffner

 

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended May 5, 2018 of Stein Mart, Inc. (the “Form 10-Q”), I, D. Hunt Hawkins, Chief Executive Officer of Stein Mart, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Stein Mart, Inc.

 

Date: June 7, 2018

 

/s/ D. Hunt Hawkins

 

D. Hunt Hawkins

 

Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended May 5, 2018 of Stein Mart, Inc. (the “Form 10-Q”), I, Gregory W. Kleffner, Executive Vice President and Chief Financial Officer of Stein Mart, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Stein Mart, Inc.

 

Date: June 7, 2018

 

/s/ Gregory W. Kleffner

 

Gregory W. Kleffner

 

Executive Vice President and Chief Financial Officer