Stein Mart, Inc.
Mar 18, 2010
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Stein Mart, Inc. Reports 4Q and Fiscal Year 2009 Financial Results

JACKSONVILLE, Fla., March 18, 2010 /PRNewswire via COMTEX News Network/ -- Fiscal Year 2009 highlights:

Stein Mart, Inc. (Nasdaq: SMRT) today announced financial results for its fourth quarter and fiscal year ended January 30, 2010.

Overview of Results for Fourth Quarter

For the fourth quarter of 2009, we earned $2.7 million or $0.06 per diluted share compared to a net loss of $(56.2) million or $(1.35) per diluted share for the fourth quarter of 2008. Included in net income for the fourth quarter of 2009 are $8.7 million (pre-tax) of store closing and impairment charges, or $0.13 per share, using the full-year effective tax rate. The fourth quarter 2008 results include charges totaling $0.78 per share consisting of $21.1 million (pre-tax) for store closing and impairment charges and a valuation allowance for deferred tax assets of $19.0 million. Our fourth quarter earnings per share without the impact of these charges would have been $0.19 in 2009 compared to a net loss of $(0.57) in 2008.

Our fourth quarter effective tax rate ("ETR") of 54.2 percent was higher than our full-year rate of 31.6 percent primarily due to the impact of a change in our annual ETR. During the fourth quarter, our annual ETR increased from the estimated annual ETR used through the third quarter due to the impact of changes in book/tax differences on our deferred tax valuation allowance. This rate increase resulted in an unfavorable tax adjustment of $0.9 million ($0.02 per diluted share) in the fourth quarter. Our full year rate was lower than the federal statutory rate due to the effect of certain book/tax differences including the results of a third quarter tax accounting method change.

Overview of Results for Fiscal Year

For the year ended January 30, 2010, we earned $23.6 million or $0.54 per diluted share compared to a net loss of $(71.3) million or $(1.72) per diluted share in 2008. Included in net income for 2009 are $11.1 million (pre-tax) of store closing and impairment charges, or $0.17 per diluted share. Full year 2008 results include charges totaling $0.85 per share, consisting of $25.4 million (pre-tax) for store closing and impairment charges and a fourth quarter valuation allowance for deferred tax assets of $19.0 million. Excluding these charges, earnings per diluted share is $0.71 in 2009 compared to a net loss per diluted share of $(0.87) in 2008.

A reconciliation of net income (loss) per diluted share (GAAP basis) to adjusted net income (loss) per diluted share (non-GAAP basis) is provided in the financial schedules accompanying this release.

Comments on the Fourth Quarter and Fiscal Year Results

"We are proud to have reversed two years of losses and earned a significant profit in one of the most demanding years in our Company's history," said David H. Stovall, Jr., president and chief executive officer of Stein Mart, Inc. "Rigorous focus on inventory levels and freshness, dedication to expense reduction and emphasis on cash generation all contributed to our profitability this year. Our 13,000 associates were instrumental in the gains we made in 2009 and I want to thank them for their devotion and efforts."

Sales for the fourth quarter of 2009 decreased 6.1 percent to $341.8 million from $363.9 million in 2008. Comparable store sales decreased 3.8 percent from the fourth quarter of 2008 to the fourth quarter of 2009. For the 52 weeks ended January 30, 2010, sales decreased 8.1 percent to $1,219.1 million from $1,326.5 million for the same 52 weeks ended last year. Comparable store sales declined 5.6 percent from 2008 to 2009.

Gross profit for the fourth quarter of 2009 increased to $88.5 million or 25.9 percent of net sales compared to $54.9 million or 15.1 percent of net sales in the same period last year. For 2009 gross profit increased to $330.4 million or 27.1 percent of sales compared to $294.2 million or 22.2 percent of net sales in 2008.

SG&A expenses for the fourth quarter of 2009 were $86.7 million compared to $117.2 million for the same period last year. Included in SG&A expenses for the fourth quarter of 2009 were $8.7 million of store closing and impairment charges compared with $21.1 million in 2008. SG&A expenses for the fourth quarter excluding those charges were $78.0 million or 22.8 percent of sales compared to $96.1 million or 26.4 percent in 2008. For 2009, SG&A expenses were $314.1 million as compared to $394.8 million in 2008. Included in SG&A expenses for 2009 were $11.1 million of store closing and impairment charges compared with $25.4 million in 2008. SG&A expenses for 2009 excluding those charges were $303.0 million or 24.9 percent of sales compared to $369.4 million or 27.8 percent in 2008.

The transformation of our supply chain methodology from direct-to-store shipments to centralized distribution increased our 2009 gross profit by $1.6 million and decreased store payroll in SG&A by $8.4 million for a total improvement in our 2009 results of $10.0 million (pre-tax). We expect similar savings from supply chain between now and early 2011.

Balance Sheet Highlights

We ended 2009 with $81.0 million of cash and no borrowings. This compares to net debt of $11.1 million at the end of 2008 comprised of $88.9 million of cash and borrowings of $100 million. In the fourth quarter of 2009 we exercised our option to extend our credit facility for one year. It now expires at the end of January 2012.

Inventories at the end of 2009 were $218.1 million compared with $207.1 million at the end of 2008. At the end of 2009 our inventories included approximately $30 million of merchandise in our distribution centers that was received earlier than at the end of 2008 as part of our new supply chain network. These planned earlier receipts also increased accounts payable. Without the merchandise in our distribution centers, our average inventory per store at the end of 2009 decreased 6.0 percent to $705,000 from $750,000 at the end of 2008.

Store Network

We opened two new stores and closed 11 in 2009, for a net decrease of nine locations. At year-end, we operated 267 stores compared to 276 stores at the end of 2008.

2010 Plans

"We are planning conservatively for 2010. Our first priority is improving sales, while continuing to focus on expense and operating controls," Stovall continued. "With the added leadership of Brian Morrow as chief merchant, the full deployment of our new supply chain process and a significant information systems enhancement, we believe we are correctly positioned to further improve our business and give customers even more reason to visit our stores."

We expect the following factors to influence our business in 2010:

Conference Call

A conference call for investment analysts to discuss these results will be held at 10 a.m. ET today, Thursday, March 18, 2010. The call may be heard on the investor relations portion of the Company's website at http://ir.steinmart.com. A replay of the conference call will be available on the website through March 26, 2010.

About Stein Mart

Stein Mart stores offer the fashion merchandise, service and presentation of a better department or specialty store, at prices competitive with off-price retail chains. Currently with locations from California to Massachusetts, Stein Mart's focused assortment of merchandise features current season, moderate to better fashion apparel for women and men, as well as accessories, gifts, linens and shoes.

SAFE HARBOR STATEMENT>>>>>>>Except for historical information contained herein, the statements in this release may be forward-looking, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company does not assume any obligation to update or revise any forward-looking statements even if experience or future changes make it clear that projected results expressed or implied will not be realized. Forward-looking statements involve known and unknown risks and uncertainties that may cause Stein Mart's actual results in future periods to differ materially from forecasted or expected results. Those risks include, without limitation:

and the other risks and uncertainties described in the Company's filings with the Securities and Exchange Commission.

SMRT-F

Additional information about Stein Mart, Inc. can be found at www.steinmart.com





                                  Stein Mart, Inc.
                             Consolidated Balance Sheets
                                     Unaudited
                        (In thousands, except for share data)

                                                       January 30, January 31,
                                                            2010        2009

    ASSETS
    Current assets:
    Cash and cash equivalents                              $80,975  $88,903
    Trade and other receivables                             10,178    9,011
    Inventories                                            218,125  207,139
    Income taxes receivable                                      -   24,439
    Prepaid expenses and other current assets               11,112   12,089
                                                            ------   ------
        Total current assets                               320,390  341,581
    Property and equipment, net                             68,415   86,321
    Other assets                                            15,408   21,988
                                                            ------   ------
        Total assets                                      $404,213 $449,890
                                                           -------  -------
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable                                       $80,318  $55,683
    Accrued liabilities                                     84,330   79,794
    Income taxes payable                                     2,961        -
                                                             -----      ---
        Total current liabilities                          167,609  135,477
    Notes payable to banks                                       -  100,000
    Other liabilities                                       20,915   28,063
                                                            ------   ------
        Total liabilities                                  188,524  263,540
    Stockholders' 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; 42,872,457 and 42,655,544 shares issued
      and outstanding, respectively                            429      427
    Additional paid-in capital                              15,977    9,986
    Retained earnings                                      198,705  175,152
    Accumulated other comprehensive income                     578      785
                                                            ------   ------
        Total stockholders' equity                         215,689  186,350
                                                            ------   ------
        Total liabilities and stockholders' equity        $404,213 $449,890
                                                           -------  -------






                              Stein Mart, Inc.
                    Consolidated Statements of Operations
                               Unaudited
                  (In thousands, except for share amounts)

                              13 Weeks    13 Weeks
                                Ended       Ended    Year Ended   Year Ended
                             January 30, January 31, January 30,  January 31,
                                2010        2009        2010         2009
                             ----------  ---------- ----------- ------------

    Net sales                    $341,829  $363,903  $1,219,109  $1,326,469
    Cost of merchandise sold      253,352   308,998     888,752   1,032,232
                                  -------   -------     -------   ---------
    Gross profit                   88,477    54,905     330,357     294,237
    Selling, general and
     administrative expenses       86,709   117,180     314,115     394,767
    Other income, net               4,211     4,144      18,405      20,401
                                    -----     -----      ------      ------
    Income (loss) from
     operations                     5,979   (58,131)     34,647     (80,129)
    Interest income (expense),
     net                               10      (662)       (238)     (1,753)
                                      ---      ----        ----      ------
    Income (loss) before income
     taxes                          5,989   (58,793)     34,409     (81,882)
    Income tax (provision)
     benefit                       (3,245)    2,615     (10,856)     10,581
                                   ------     -----     -------      ------
    Net income (loss)              $2,744  $(56,178)    $23,553    $(71,301)
                                   ------  --------     -------    --------

    Net income (loss) per share:
    Basic                           $0.06    $(1.35)      $0.55      $(1.72)
                                    -----    ------       -----      ------
    Diluted                         $0.06    $(1.35)      $0.54      $(1.72)
                                    -----    ------       -----      ------

    Weighted-average shares
     outstanding:
    Basic                          41,950    41,495      41,822      41,366
                                   ------    ------      ------      ------
    Diluted                        43,690    41,495      43,082      41,366
                                   ------    ------      ------      ------


                              Stein Mart, Inc.
                 Consolidated Statements of Cash Flows
                               Unaudited
                            (In thousands)

                                                      Year Ended   Year Ended
                                                      January 30,  January 31,
                                                         2010         2009
                                                     ------------ -----------

    Cash flows from operating activities:
       Net income (loss)                                  $23,553  $(71,301)
       Adjustments to reconcile net income (loss) to
        net cash provided by operating activities:
          Depreciation and amortization                    19,223    25,752
          Impairment of property and other assets           8,429    20,726
          Change in valuation allowance for deferred tax
           assets                                          (2,272)   18,958
          Deferred income taxes                             2,558   (10,341)
          Store closing charges                             2,658     4,697
          Share-based compensation                          4,610     4,077
          Tax benefit (deficiency) from equity issuances      221      (183)
          Excess tax benefits from share-based
           compensation                                      (166)       (3)
          Changes in assets and liabilities:
             Trade and other receivables                   (1,167)    3,361
             Inventories                                  (10,986)   55,357
             Income taxes receivable                       24,439   (10,336)
             Prepaid expenses and other current assets        977     1,491
             Other assets                                   2,461     1,595
             Accounts payable                              24,635   (21,441)
             Accrued liabilities                            5,033      (481)
             Income taxes payable                           2,961         -
             Other liabilities                             (8,838)   (2,572)
                                                           ------    ------
       Net cash provided by operating activities           98,329    19,356
                                                           ------    ------
    Cash flows from investing activities:
       Capital expenditures                                (7,585)  (19,281)
                                                           ------   -------
       Net cash used in investing activities               (7,585)  (19,281)
                                                           ------   -------
    Cash flows from financing activities:
       Borrowings under notes payable to banks             57,300   626,652
       Repayments of notes payable to banks              (157,300) (553,785)
       Excess tax benefits from share-based
        compensation                                          166         3
       Proceeds from exercise of stock options                761        31
       Proceeds from employee stock purchase plan             524       800
       Repurchase of common stock                            (123)      (18)
                                                             ----       ---
       Net cash (used in) provided by financing
        activities                                        (98,672)   73,683
                                                          -------    ------
    Net (decrease) increase in cash and cash
     equivalents                                           (7,928)   73,758
    Cash and cash equivalents at beginning of year         88,903    15,145
                                                           ------    ------
    Cash and cash equivalents at end of year              $80,975   $88,903
                                                          -------   -------
    Supplemental disclosures of cash flow
     information:
       Income taxes paid                                  $13,236    $2,100
       Interest paid                                          271     1,906

SEC Regulation G - The Company reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP). However, to supplement these consolidated financial results, management believes that certain non-GAAP operating results, which exclude store closing and impairment charges and the initial valuation allowance for deferred tax assets, may provide a more meaningful measure on which to compare the Company's results of operations between periods. The Company believes these non-GAAP results provide useful information to both management and investors by excluding certain charges that impact the comparability of the results. A reconciliation of 2009 and 2008 fourth quarter and total year net income (loss) per diluted share on a GAAP basis to adjusted net income (loss) per diluted share (non-GAAP basis) are presented in the table below.




                               Stein Mart, Inc.
     Reconciliation of Net Income (Loss) per Diluted Share (GAAP Basis) to
         Adjusted Net Income (Loss) per Diluted Share (Non-GAAP Basis)
                                   Unaudited

                                         13 Weeks Ended     Year Ended
                                        ----------------- -----------------
                                        January  January  January  January
                                        30, 2010 31, 2009 30, 2010 31, 2009
                                        -------- -------- -------- --------
    Net income (loss) per diluted share
     (GAAP Basis)                          $0.06  $(1.35)    $0.54   $(1.72)
                                           -----  ------     -----   ------
    Adjustments:
      Store closing and impairment charges,
       net of tax                           0.13    0.32      0.17     0.39
      Initial valuation allowance for
       deferred tax assets                          0.46               0.46
                                           -----  ------     -----   ------
    Adjustments total                       0.13    0.78      0.17     0.85
                                           -----  ------     -----   ------
    Adjusted net income (loss) per diluted
     share (Non-GAAP Basis)                $0.19  $(0.57)    $0.71   $(0.87)
                                           -----  ------     -----   ------


SOURCE Stein Mart, Inc.

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