UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
     OF 1934 [NO FEE REQUIRED]


For the fiscal year ended February 2, 2002

                                       OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
     ACT OF 1934 [NO FEE REQUIRED]

                         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                           (I.R.S. Employer
incorporation or organization)                            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

Securities registered pursuant to Section 12 (g) of the Act:
Title of each class:                  Name of each exchange on which registered:
Common Stock $.01 par value           The Nasdaq Stock Market(R)

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 the  filing
requirements for at least the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Aggregate market value of voting stock held by non-affiliates of the registrant,
Common  Stock,  based on the  $10.05  closing  sale  price on April 1,  2002 was
$255,771,224.  For purposes of this response,  executive  officers and directors
are  deemed  to be  the  affiliates  of  the  registrant  and  the  holdings  by
non-affiliates was computed as 25,449,873 shares.

Indicate the number of shares outstanding of each of the registrant's classes of
Common  Stock,  as of  the  latest  practicable  date:  41,586,976  shares  were
outstanding as of April 1, 2002.

                       DOCUMENTS INCORPORATED BY REFERENCE
                       -----------------------------------
Portions of the  registrant's  Proxy  Statement for  its 2002 Annual Meeting are
incorporated in Part III.




                                STEIN MART, INC.
                                TABLE OF CONTENTS

                                                                           FORM
                                                                           10-K
                                                                          REPORT
ITEM NO.                                                                   PAGE
- --------                                                                   ----
                                     PART I

 1.    Business                                                               3
 2.    Properties                                                             9
 3.    Legal Proceedings                                                     10
 4.    Submission of Matters to a Vote of Security Holders                   10

                                     PART II

 5.    Market for Registrant's Common Equity and Related Stockholder         10
       Matters
 6.    Selected Financial Data                                               12
 7.    Management's Discussion and Analysis of Financial Condition           13
       and Results of Operations
 7A.   Quantitative and Qualitative Disclosures about Market Risk            17
 8.    Financial Statements and Supplementary Data                           17
 9.    Changes In and Disagreements With Accountants on Accounting           17
       and Financial Disclosure

                                    PART III

10.   Directors and Executive Officers of the Registrant                     17
11.   Executive Compensation                                                 17
12.   Security Ownership of Certain Beneficial Owners and Management         17
13.   Certain Relationships and Related Transactions                         17

                                     PART IV

14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K       18
      Signatures                                                             19

             TABLE OF CONTENTS TO FINANCIAL STATEMENTS AND SCHEDULES

Independent Accountants' Report                                             F-1
Balance Sheets                                                              F-2
Statement of Income                                                         F-3
Statement of Stockholders' Equity                                           F-4
Statement of Cash Flows                                                     F-5
Notes to Financial Statements                                               F-6

SCHEDULES                                                                  NONE

INDEX TO EXHIBITS                                                           E-1

                                       2



                                     PART I

ITEM 1.   BUSINESS

At  February  2,  2002,  Stein  Mart,  Inc.  (together  with  its  wholly  owned
subsidiary, the "Company" or "Stein Mart") was a 253-store retail chain offering
fashionable, current-season, primarily branded merchandise comparable in quality
and presentation to that of traditional  department and fine specialty stores at
prices  typically 25% to 60% below those regularly  charged by such stores.  The
Company's  focused  assortment  of  merchandise  features  moderate  to designer
brand-name apparel for women, men and children,  as well as accessories,  gifts,
linens, shoes and fragrances.  Stein Mart operated a single store in Greenville,
Mississippi  from the early  1900's  until  1977,  when it began  its  expansion
program.  The Company has more than doubled the number of Stein Mart stores from
123 in 21 states at year-end  1996 to 253 in 29 states at February 2, 2002.  The
Company's  stores,  which average  approximately  37,000 gross square feet,  are
located primarily in neighborhood shopping centers in metropolitan areas.

Change in Fiscal Year End

In  November  2001,  the Company  changed its fiscal year end from the  Saturday
closest to December  31 to the  Saturday  closest to January  31. The  five-week
transition period of December 31, 2000 through February 3, 2001 (the "Transition
Period")  precedes the start of the new fiscal year.  Results for 2001, 2000 and
1999 are for the 52 weeks ended February 2, 2002,  December 30, 2000 and January
1, 2000, respectively.

Business Strategy

The Company's  business  strategy is to (i) maintain the quality of merchandise,
store appearance,  merchandise  presentation and customer service levels typical
of traditional department and fine specialty stores and (ii) offer value pricing
to its customers through its vendor relationships,  tight control over corporate
and store expenses and efficient management of inventory. The principal elements
of the Company's business strategy are as follows:

    Timely, Consistent, Upscale Merchandise.
    The  Company  purchases  upscale,   branded  merchandise  primarily  through
    preplanned  buying programs similar to those used by traditional  department
    and fine specialty  stores.  These  preplanned  buying  programs  enable the
    Company to offer  fashionable,  current-season  assortments  on a consistent
    basis.

    Appealing  Store  Appearance  and  Merchandise  Presentation.
    The Company  creates an  ambiance in its  stores  similar to that of upscale
    retailers  through  attractive  in-store  layout  and  signage.  Merchandise
    is displayed in lifestyle groupings to encourage multiple purchases.

    Emphasis on Customer Service.
    Customer  service is  fundamental  to Stein  Mart's  objective  of  building
    customer  loyalty.  Management  believes  that the Company  offers  customer
    service  superior to off-price  retailers and more comparable to traditional
    department and fine specialty stores.

    Value Pricing through Vendor Relationships.
    Stein Mart has longstanding relationships with many key vendors.  Management
    believes  that the  Company's  purchase  terms enable it to  negotiate  more
    favorable  prices  from  vendors  than are typical in the  department  store
    industry. Stein Mart passes these savings on to its customers through prices
    which are typically 25% to 60% below those regularly  charged by traditional
    department and fine specialty stores.

    Efficient Inventory Handling.
    Stein  Mart  does not rely on a large  distribution  center  or  warehousing
    facility.  Rather,  it primarily  utilizes drop  shipments  from its vendors
    directly  to  its  stores.  This  system  enables  the  Company  to  receive
    merchandise at each store on a timely basis and to save the time and expense
    of  handling   merchandise   twice,   which  is  typical  of  a  traditional
    distribution center structure.

                                       3



    Operating Efficiencies.
    Management  believes that there will be opportunities  to create  additional
    operating  efficiencies  as the Company  continues  to add stores in new and
    existing markets.

Productivity Initiatives

The goal of Stein Mart for 2002 is to improve store productivity.  By increasing
the  dollars  generated  in each  square  foot of the  stores,  the  Company can
leverage  its  expenses  more  efficiently  and move more profit  dollars to the
bottom line. Actions that will push this objective forward include:

    Reformatting  floor  layouts  in every  store  to  magnify  strongest  sales
    opportunities:  Boutique,  Ladies apparel, Ladies Accessories and Home. This
    should maximize sell through and improve inventory turn.

    Introduction  of Power  Pricing,  a series of  highlighted  items within the
    store  which  represent  extraordinary  values  (at  least 50%  savings)  on
    desirable  merchandise;  this  concept was  successfully  tested  during the
    holiday shopping season.

    Additional  support to stores in the top ten and bottom ten percent of sales
    volume. These stores will receive additional resources as needed to maximize
    performance.

Expansion Strategy

The  Company's  expansion  strategy is to add stores in new  markets,  including
those markets with the potential for multiple  stores,  and existing  markets to
capture advertising and management efficiencies. The Company plans to open 15-18
new stores in 2002.

The Company targets  metropolitan  statistical areas with populations of 125,000
or more for new store expansion.  In determining where to locate new stores, the
Company  evaluates  detailed  demographic  information,  including,  among other
factors,  data  relating  to income,  education  levels,  age,  occupation,  the
availability of prime real estate locations, existing and potential competitors,
and the number of Stein Mart  stores that a market can  support.  As a result of
processing less than 10% of its merchandise through its distribution center, the
Company is not constrained geographically or by the capacity limits of a central
facility.  This  allows  management  to  concentrate  on the  best  real  estate
opportunities in targeted markets.

The Company refurbishes  existing retail locations or occupies newly constructed
stores,  which typically are anchor stores in new or existing  shopping  centers
situated near upscale residential areas, ideally with co-tenants that cater to a
similar customer base. The Company's  historical ability to negotiate  favorable
leases and to construct  attractive  stores with a relatively low investment has
provided a significant  cost  advantage  over  traditional  department  and fine
specialty stores. The cost of opening a typical new store includes approximately
$450,000  to  $650,000  for  fixtures,  equipment,  leasehold  improvements  and
pre-opening expenses (primarily advertising, stocking and training). Pre-opening
costs are expensed when incurred.  Initial inventory  investment for a new store
is  approximately  $1.1 million (a portion of which is financed  through  vendor
credit).

Merchandising

Stein Mart's  focused  assortment of merchandise  features  moderate to designer
brand-name apparel for women, men and children,  as well as accessories,  gifts,
linens,  shoes and fragrances.  Branded merchandise is complemented by a limited
private label program that enhances the Company's  assortment of current fashion
trends and provides key upper-end classifications in complete size ranges.

Management believes that Stein Mart differentiates itself from typical off-price
retailers by offering:  (i) a higher  percentage of  current-season  merchandise
carried by  traditional  department  and fine  specialty  stores at  moderate to
better price levels,  (ii) a stronger  merchandising  "statement,"  consistently
offering more depth of color and size in

                                       4



individual  stockkeeping  units,  and  (iii)  a  merchandise  presentation  more
comparable to traditional department and fine specialty stores.

The Company  identifies and responds to the latest fashion  trends.  Within each
major merchandise  category,  the Company seeks to offer a focused assortment of
the  best-selling  department  and fine  specialty  store  items.  Stein  Mart's
merchandise  selection is driven primarily by its own merchandising  plans which
are based on  management's  assessment  of  fashion  trends,  color,  and market
conditions.  This strategy  distinguishes Stein Mart from traditional  off-price
retailers  who  achieve  cost  savings  by   responding   to  unplanned   buying
opportunities.  The Company's  merchandise is typically  priced at levels 25% to
60% below prices regularly charged by traditional  department and fine specialty
stores, therefore offering distinct value to the Stein Mart customer.

The  following   reflects  the  percentage  of  the  Company's  sales  by  major
merchandise   category   (including   sales  from  leased  shoe  and   fragrance
departments) for the periods indicated:

                                              For The 52 Weeks Ended
                                 -----------------------------------------------
                                   February 2,     December 30,     January 1,
                                      2002            2000             2000
                                 --------------   --------------   -------------

    Ladies' and Boutique apparel       40%             38%              38%

    Ladies' accessories                10              11               11

    Men's and young men's              17              18               19

    Gifts and linens                   19              19               18

    Leased departments                  7               7                7

    Children's                          5               5                6

    Other                               2               2                1
                                     ------          ------           ------
                                      100%            100%             100%
                                     ======          ======           ======

Ladies'  apparel,  the Company's  largest  contributor of revenues,  consists of
distinctive presentations of dresses,  sportswear,  petites, juniors and women's
sizes at moderate to upper-moderate prices. Stein Mart's distinctive Boutique is
a key  element of the  Company's  merchandising  strategy  to  attract  the more
fashion-conscious  customers.  The Boutique, a store-within-a-store  department,
carries  better to  designer  ladies'  apparel and offers the  presentation  and
service levels of a fine specialty  boutique.  Each Stein Mart store has its own
Boutique,  staffed  generally  by women  employed on a  part-time  basis who are
civically and socially prominent in the community.  The Boutique  highlights the
Company's  strategy of offering  upscale  merchandise,  presentation and service
levels at value prices.  Following the successful  introduction  of the Boutique
Petite area last year,  plans are  underway  to launch a Boutique  Women area as
well.  As such,  the  Company is  allocating  greater  space and more  inventory
dollars to the Ladies' and Boutique areas where the core customer shops the most
intensely.

The Company's typical store layout emphasizes ladies' accessories as the fashion
focus at the front of each store.  The key  merchandise  in this  department  is
fashion-oriented,  brand-name,  designer and private label  jewelry,  as well as
scarves, hosiery, leather goods, bath products and fragrances.

Men's and young men's areas  include  sportswear,  sportcoats,  slacks and dress
furnishings.  Corresponding to a national  pattern,  Stein Mart's men's business
struggled  somewhat  during  the  year.  To  counteract  that  trend,  merchants
concentrated on putting sharper, more focused fashion in this area.

Stein  Mart's  gifts  and  linens  departments  consist  primarily  of  a  broad
assortment of fashion-oriented  gifts (rather than basic items) for the home and
a wide range of table, bath and bed linens. The presentation in this distinctive
department  emphasizes  fashion,  lifestyle and seasonal themes and includes the
full range of  merchandise  available in typical  department  and specialty gift
stores. Both gifts and linens continued to perform well in 2001, particularly

                                       5



with the  well-documented  cocooning  trend that kept people inside their homes.
Luxury linens and  decorative  gifts were the leaders in this area. The strength
of this category has been the consistent  presentation  with a higher percentage
mix of better goods.

Stein  Mart's  children's  department  offers a range of apparel for infants and
children and features an infants' gift boutique.

The  Company's  shoe  department is a leased  department  operated in individual
stores by one of two shoe  retailers.  The  merchandise  in this  department  is
presented in a manner  consistent  with the Company's  overall  presentation  in
other  departments,  stressing  fashionable,  current-season  footwear  at value
prices.  This department  offers a variety of men's and women's casual and dress
shoes,  which  complement the range of apparel  available in other  departments.
Shoe  department  leases  provide  for the  Company to be paid the greater of an
annual  base  rent or a  percentage  of  sales.  More  than  half of the  leases
currently pay on the percentage of sales basis.

The Company  leases its  fragrance  department to a  third-party  operator.  The
operating  agreement  requires the  third-party  operator to pay the Company the
greater of an annual base amount or a percentage of sales.

Store Appearance

Stein Mart's stores are designed to reflect the upscale  ambiance and appearance
of traditional  department and fine specialty stores through  attractive layout,
displays and in-store signage.  The typical store is approximately  37,000 gross
square feet with convenient check-out and customer service areas and attractive,
individual  dressing rooms. The Company seeks to create excitement in its stores
through the continual flow of brand-name  merchandise,  sales promotions,  store
layout,  merchandise  presentation,  and the  quality,  value  and  depth of its
merchandise assortment.

The  Company  displays   merchandise  in  lifestyle  groupings  of  apparel  and
accessories. Management believes that the lifestyle grouping concept strengthens
the fashion image of its  merchandise and enables the customer to locate desired
merchandise in a manner that encourages multiple purchases.

Customer Service

Customer service is fundamental to Stein Mart's  objective of building  customer
loyalty. The Company's stores offer most of the same services typically found in
traditional  department  and fine  specialty  stores such as  alterations  and a
liberal  merchandise return policy. Each store is staffed to provide a number of
sales associates to properly attend to customer needs.

The Company's  training  programs for sales  associates  and cashiers  emphasize
attentiveness, courtesy and the effective use of selling techniques. The Company
reinforces its training programs by employing  independent  shopping services to
monitor  associates'  success in  implementing  the  principles  taught in sales
training.  Associates who are highly rated by the shopping  service receive both
formal recognition and cash awards.  Management believes this program emphasizes
the importance of customer service necessary to create customer loyalty.

Vendor Relationships and Buying

Stein  Mart buys from  over  1,900  vendors.  Many of these are  considered  key
vendors,  with whom the Company enjoys longstanding  working  relationships that
create  a  continuity   of   preplanned   buying   opportunities   for  upscale,
current-season  merchandise.  Most of the  Company's  vendors  are  based in the
United States, which generally reduces the time necessary to purchase and obtain
shipments  and allows the  Company  to react to  merchandise  trends in a timely
fashion.  The Company does not have  long-term or exclusive  contracts  with any
particular  vendor.  In fiscal 2001,  approximately 7% of Stein Mart's purchases
were  from a single  vendor  and less than 3% of total  purchases  were from any
other single vendor.

                                       6



The  Company's   buying  staff  is  headed  by  the  Executive  Vice  President,
Merchandising,  who is supported by four Vice  Presidents-General  Merchandising
Managers, ten Divisional Merchandising Managers, a Vice  President-Planning,  37
buyers  and  37  merchandise   planners.   In  addition  to  base  salary,   the
merchandising staff receives incentive  compensation for achieving certain sales
goals within their areas of responsibility.

The Company employs several purchasing  strategies to provide its customers with
a consistent selection of quality,  fashionable merchandise at value prices: (i)
Stein Mart commits to its purchases  from vendors well in advance of the selling
season,  in the same  manner as  department  stores,  unlike  typical  off-price
retailers who rely heavily on buys of close-out  merchandise  or overruns;  (ii)
the Company  purchases  some  in-season  off-price and  end-of-season  close-out
merchandise  to supplement  core  merchandise  assortments;  (iii) the Company's
information systems enable it to acquire merchandise and track sales information
on a  store-by-store  basis,  allowing  its buying  staff to respond  quickly to
customer buying trends; and (iv) an in-house merchandise  development department
works  with  buyers  and  brand-name  vendors  to  ensure  that the  merchandise
assortments offered are unique, fashionable, color-forward and of high quality.

The correct  distribution of merchandise goes hand in and hand with choosing the
right items. The newly installed planning  organization has greatly improved the
selectivity  of  merchandise  by store,  allowing  for more  targeted  seasonal,
lifestyle and volume  characteristics in each location.  This capability was put
to the test as the Company  dramatically reduced its planned inventory following
the  September 11 terrorist  attacks,  and planners led the effort to reallocate
and distribute the reduced level of  merchandise  to  appropriate  stores.  As a
result,  this  year's  inventory  is  somewhat  leaner and more  current and new
standards are in place to make the inventory work harder.

As  the  Company  continues  to  analyze  sales,   profitability  and  marketing
information,  the planners  will further  refine the  assortments.  They will be
aided by a more  sophisticated  basic  stock  replenishment  program  that  will
improve the  Company's  ability to be in-stock  every day in every  store,  at a
level that maximizes the inventory investment.

Information Systems

The Company's  information  systems  provide daily  financial and  merchandising
information  that is used by management to make timely and effective  purchasing
and pricing decisions and for inventory control.

The Company's  inventory control system enables it to achieve economies of scale
from bulk purchases  while at the same time ordering and tracking  separate drop
shipments by store. Store inventory levels are regularly  monitored and adjusted
as sales trends dictate.  The inventory control system provides information that
enhances  management's ability to make informed buying decisions and accommodate
unexpected  increases or decreases in demand for a particular  item. The Company
uses  bar  codes  and bar  code  scanners  as part  of an  integrated  inventory
management and check-out system in its stores.

The Company's  merchandise planning and allocation system enables the buyers and
planners to customize their merchandise  assortments at the individual store and
department  level,  based  on  selected  criteria,  such  as a  store's  selling
patterns,  geography and merchandise color preferences. The ability to customize
individual  store  assortments  enables the Company to more  effectively  manage
inventory, capitalize on sales trends and reduce markdowns.

A computerized  time management  system assists  management in scheduling  store
associates' hours based on individual  store's own customer traffic patterns and
necessary  tasks.  This system  helps to maximize  customer  service  levels and
enhance efficiency.

Store Operations

The store organization is supervised by three Vice Presidents-Regional Directors
of Stores who report to the Senior Vice  President-Director of Stores.  District
Directors of Stores and two Vice  President-Regional  Directors of Stores report
to the three supervising Regional Directors.  Each of these field supervisors is
responsible  for overseeing 9 to 14 stores.  Each Vice  President's and District
Director's compensation includes an incentive component based on

                                       7



overall  performance.  Each Stein Mart store is managed by a general manager who
reports  directly to a Vice  President  or a District  Director.  Store  general
managers are  responsible for individual  store  operations,  including  hiring,
motivating  and  supervising   sales   associates;   receiving  and  effectively
presenting merchandise; and implementing price change determinations made by the
Company's buying staff.  Store general managers receive  incentive  compensation
based upon operating results in several key areas,  including increases in store
sales.  In  addition  to the  store  general  manager  and two  assistant  store
managers,  each Stein Mart store  employs an average of 55 persons as department
managers, sales associates, cashiers and in other positions.

Stein Mart  stores are  generally  open 11 hours per day, 6 days a week,  and on
Sunday  afternoons.  The store hours are extended  during the Christmas  selling
season.

Marketing

The Company's  advertising  strategy  stresses the offering of upscale,  branded
merchandise at significant savings. The Company generally allocates the majority
of its advertising budget to newspaper  advertising,  employing a combination of
image,  price-and-item  and sales event  approaches.  While  newspaper and color
inserts will continue to be an integral part of the media mix,  radio and direct
mail  will  be  utilized  to a  much  greater  degree.  Stein  Mart's  per-store
advertising expense is reduced by spreading its advertising over multiple stores
in a single  market.  Management  believes the Company  also enjoys  substantial
word-of-mouth advertising benefits from its customer base.

In May,  2001,  Stein Mart launched its Preferred  Customer  program to its most
devoted shoppers.  Approximately  700,000 participants have enrolled in the past
year, and are now receiving  mailings at least once a month.  These mailings are
filled with  enticements to visit the store for special  discounts,  member-only
shopping  opportunities or an early peek at new merchandise and upcoming fashion
events.  Stein Mart will continue to examine the information  gleaned from these
customers to further refine its merchandising and marketing efforts.

Competition

Management  believes  that  the  Company  occupies  a  market  niche  closer  to
traditional department and better specialty stores than typical off-price retail
chains.  The Company faces  competition  for customers and for access to quality
merchandise from traditional  department stores, fine specialty stores and, to a
lesser degree, from off-price retail chains. Many of these competitors are units
of large national or regional chains that have  substantially  greater resources
than  the  Company.  The  retail  apparel  industry  is  highly  fragmented  and
competitive,  and the off-price retail business may become even more competitive
in the future.

The principal competitive factors in the retail apparel industry are assortment,
presentation,  quality of merchandise, price, customer service, vendor relations
and store location.  Management  believes that the Company is well-positioned to
compete on the basis of each of these factors.

Employees

At February 2, 2002, the Company's work force consisted of approximately  14,000
employees  (8,400  40-hour  equivalent  employees).   The  number  of  employees
fluctuates based on the particular selling season.

Trademarks

The Company owns the federally registered trademark Stein Mart(R), together with
a number of other marks used in conjunction  with its private label  merchandise
program.  Stein Mart primarily sells branded  merchandise.  However,  in certain
classifications of merchandise,  the Company uses several private label programs
to  provide  additional  availability  of items.  Management  believes  that its
trademarks are important but, with the exception of Stein Mart(R),  not critical
to the Company's merchandising strategy.

                                       8



ITEM 2.   PROPERTIES

At February 2, 2002, the Company operated stores in the following states:

                         State                      Number of Stores
                         -----                      ----------------
                         Alabama                           11
                         Arizona                            6
                         Arkansas                           5
                         California                        13
                         Colorado                           5
                         Florida                           33
                         Georgia                           18
                         Illinois                           5
                         Indiana                            8
                         Iowa                               1
                         Kansas                             2
                         Kentucky                           3
                         Louisiana                         10
                         Michigan                           1
                         Mississippi                        4
                         Missouri                           4
                         Nevada                             4
                         New Mexico                         2
                         New York                           1
                         North Carolina                    17
                         Ohio                              10
                         Oklahoma                           5
                         Pennsylvania                       2
                         South Carolina                    11
                         Tennessee                         13
                         Texas                             43
                         Utah                               3
                         Virginia                           8
                         Wisconsin                          5
                                                          ---
                                                          253
                                                          ===

The Company  leases all of its store  locations  and  therefore has been able to
grow without incurring indebtedness to acquire real estate.  Management believes
that the Company has earned a reputation  as an "anchor  tenant,"  which,  along
with its established  operating history,  has enabled it to negotiate  favorable
lease terms. Most of the leases provide for minimum rents, as well as percentage
rents that are based on sales in excess of predetermined levels.

The table below reflects (i) the number of the Company's  leases (as of February
2, 2002) that will expire each year if the Company  does not exercise any of its
renewal  options,  and (ii) the number of the Company's  leases that will expire
each year if the Company  exercises  all of its renewal  options  (assuming  the
lease  is not  otherwise  terminated  by  either  party  pursuant  to any  other
provision).

                                       9



                                Number of Leases         Number of Leases
                               Expiring Each Year       Expiring Each Year
                                 if no Renewals           if all Renewals
                                    Exercised                Exercised
                             ----------------------   ----------------------
                  2002                  5                        1
                  2003                 15                        1
                  2004                 16                        1
                  2005                 24                        -
                  2006                 27                        1
                  2007-2011           125                       16
                  2012-2016            41                       28
                  2017-2045             -                      205

The Company has made  consistent  capital  commitments  to maintain  and improve
existing store facilities. During 2001, approximately $5.8 million was spent for
fixtures, equipment and leasehold improvements in stores opened prior to 2001.

The Company  leases  approximately  73,000 gross square feet of office space for
its corporate  headquarters in Jacksonville,  Florida. The Company also leases a
92,000  square  foot  distribution  center in  Jacksonville  for the  purpose of
processing a limited  amount of  merchandise  purchases  (less than 10% of total
purchases).

ITEM 3.   LEGAL PROCEEDINGS

The Company is involved in various routine legal  proceedings  incidental to the
conduct of its  business.  Management  does not believe  that any of these legal
proceedings  will have a material  adverse effect on the financial  condition or
results of operations of the Company.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted to a vote of security holders during the fourth
quarter of fiscal 2001.

                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND  RELATED STOCKHOLDER MATTERS

The following table sets forth the high and low sales prices of the Common Stock
for each fiscal quarter in fiscal 2000 and 2001:
                                                   HIGH          LOW
Fiscal 2000:
April 1, 2000                                     $ 8.25        $4.00
July 1, 2000                                       10.63         6.48
September 30, 2000                                 13.38         9.75
December 30, 2000                                  15.88         8.94

Fiscal 2001:
May 5, 2001                                       $12.31        $8.69
August 4, 2001                                     12.47         7.85
November 3, 2001                                    9.08         6.12
February 2, 2002                                    9.20         7.96

                                       10



Beginning with 2001, the Company  changed to a 52-53 week ending on the Saturday
closest  to January  31;  previously,  the  Company's  fiscal  year ended on the
Saturday  closest to  December  31.  The high and low sales prices of the Common
Stock for the  Transition  Period,  December 31, 2000 to February 3, 2001,  were
$13.25 and $10.13, respectively.

Stein Mart's common stock trades on The Nasdaq Stock Market(R) under the trading
symbol SMRT.  On April 12, 2002, there were 1,109 stockholders of record.

The Company  intends to reinvest future earnings in the business and accordingly
does not anticipate paying dividends in the foreseeable future.

                                       11

ITEM 6. SELECTED FINANCIAL DATA (Dollars in Thousands Except Per Share Amounts and Operating Data) For the Fiscal Year Ended ---------------------------------------------------------------------------- Feb. 2, Dec. 30, Jan. 1, Jan. 2, Jan. 3, 2002 (1) 2000 2000 1999 1998 (3) ------------ ------------ ------------ ------------ ------------ Statement of Income Data: Net Sales $1,320,190 $1,206,624 $1,034,561 $897,821 $792,655 Cost of Merchandise Sold 1,003,567 896,560 781,038 677,334 579,747 ------------ ------------ ------------ ------------ ------------ Gross Profit 316,623 310,064 253,523 220,487 212,908 Selling, General and Administrative Expenses (2) 301,937 257,042 244,100 195,460 163,953 Other Income, Net 14,078 13,766 12,129 10,420 9,243 ------------ ------------ ------------ ------------ ------------ Income From Operations 28,764 66,788 21,552 35,447 58,198 Interest Expense 4,000 3,309 2,485 2,368 1,203 ------------ ------------ ------------ ------------ ------------ Income Before Income Taxes 24,764 63,479 19,067 33,079 56,995 Provision For Income Taxes 9,410 24,122 7,245 12,570 22,228 ------------ ------------ ------------ ------------ ------------ Net Income $ 15,354 $ 39,357 $ 11,822 $ 20,509 $ 34,767 ============ ============ ============ ============ ============ Earnings Per Share - Basic (4) $0.37 $0.92 $0.26 $0.45 $0.75 Earnings Per Share - Diluted (4) $0.37 $0.91 $0.26 $0.44 $0.73 Selected Operating Data: Stores Open at End of Period 253 226 205 182 151 Average Sales Per Store (000's) (5) $ 5,922 $ 6,068 $ 5,663 $ 5,958 $ 6,261 Average Sales Per Square Foot of Selling Area (6) $ 189 $ 192 $ 176 $ 185 $ 194 Comparable Store Net Sales (Decrease) Increase (7) (0.7%) 9.7% 2.3% 1.2% 7.2% Balance Sheet Data: Working Capital $ 179,212 $ 120,602 $ 117,284 $110,985 $110,296 Total Assets 417,672 389,989 354,094 318,012 270,604 Long-term Debt 57,750 - - - - Total Stockholders' Equity 201,895 194,028 179,912 177,979 165,803
(1) Beginning with fiscal 2001, the Company changed to a 52-53 week year ending on the Saturday closest to January 31; previously, the Company's fiscal year ended on the Saturday closest to December 31. See Note 12 to the Financial Statements for financial data for the five-week Transition Period ended February 3, 2001. (2) Selling, General and Administrative Expenses include a store closing charge of $2.9 million, a store closing credit of $3.4 million and a store closing charge of $15.9 million in fiscal 2001, 2000 and 1999, respectively. (3) The fiscal year ended January 3, 1998 is a 53-week year; all others are 52-week years. (4) Basic and Diluted Earnings Per Share are presented for all periods in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" which the Company adopted in 1997 and have been restated for the two-for-one stock split declared in 1998. (5) Average sales per store (including sales from leased shoe and fragrance departments)for each period have been calculated by dividing (a) total sales during such period by (b) the number of stores open at the end of such period, in each case exclusive of stores open for less than 12 months. All periods are calculated on a 52-week basis. (6) Includes sales and selling space of the leased shoe and fragrance departments. Selling area excludes administrative, receiving and storage areas. All periods are calculated on a 52-week basis. (7) Comparable store information for a period reflects stores open throughout that period and for the same 52-week period in the prior year. 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS This document includes a number of forward-looking statements which reflect the Company's current views with respect to future events and financial performance. Wherever used, the words "plan", "expect", "anticipate", "believe", "estimate" and similar expressions identify forward-looking statements. All such forward-looking statements contained in this document are subject to risks and uncertainties that could cause the Company's actual results of operations to differ materially from historical results or current expectations. These risks include, without limitation, ongoing competition from other retailers many of whom are larger and have greater financial and marketing resources, the availability of suitable new store sites at acceptable lease terms, ability to successfully implement strategy to exit or improve under-performing stores, changing preferences in apparel, changes in the level of consumer spending due to current events and/or general economic conditions, adequate sources of designer and brand-name merchandise at acceptable prices, and the Company's ability to attract and retain qualified employees to support planned growth. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make clear that any projected results expressed or implied therein will not be realized. The following should be read in conjunction with the "Selected Financial Data" and the notes thereto and the Financial Statements and notes thereto of the Company. Results of Operations The following table sets forth, for the periods indicated, the percentage of the Company's net sales represented by each line item presented: 52 Weeks Ended ------------------------------------ Feb. 2, Dec. 30, Jan. 1, 2002 2000 2000 ---------- ---------- ---------- Net sales 100.0% 100.0% 100.0% Cost of merchandise sold 76.0 74.3 75.5 ---------- ---------- ---------- Gross profit 24.0 25.7 24.5 Selling, general and administrative expenses 22.9 21.3 23.6 Other income, net 1.1 1.2 1.2 ---------- ---------- ---------- Income from operations 2.2 5.6 2.1 Interest expense .3 .3 .3 ---------- ---------- ---------- Income before income taxes 1.9% 5.3% 1.8% ========== ========== ========== Year Ended February 2, 2002 Compared to Year Ended December 30, 2000 In November 2001, the Company changed its year end (see Note 1 to the Financial Statements). The following discussion compares the 52 weeks ended February 2, 2002 to the 52 weeks ended December 30, 2000. In 2001 the Company opened 30 stores and closed three stores bringing to 253 the number of stores in operation at year-end. Net sales of $1.320 billion were achieved for the fiscal year 2001, an increase of $113.6 million, or 9.4 percent over net sales of $1.207 billion for the fiscal year 2000. The 30 new stores opened in 2001 contributed $74.3 million to net sales. Comparable store net sales, which decreased 0.7 percent from 2000, began to decline in early 2001, reversing strong, double digit increases from 2000. This trend continued in the fall season as shopping declined following the September 11 terrorist attacks. 13 Gross profit for 2001 was $316.6 million or 24.0 percent of net sales compared to $310.1 million or 25.7 percent of net sales for 2000. The 1.7 percent decrease in the gross profit percent resulted primarily from higher markdowns as a percent of sales and decreased leverage of occupancy expenses in 2001. Markdowns were particularly high during the fall season, primarily in the weeks following September 11, in order to reduce in-store inventories through promotion and markdowns. Selling, general and administrative expenses were $301.9 million or 22.9 percent of net sales for 2001, as compared to $257.0 million or 21.3 percent of net sales in 2001. In 2001, selling, general and administrative expenses includes a pre-tax charge of $2.9 million for four stores that will be closed in fiscal 2002. Fiscal 2000 includes a $3.4 million store closing credit related to adjustments of store closing reserves recorded in fiscal 1999. The increase of 1.6 percent of net sales is primarily due to the effect of the store closing charge and credit, increased advertising and decreased leverage of selling and administrative expenses. Pre-opening expenses for the 30 stores opened in 2001 amounted to $5.0 million and for the 22 stores opened in 2000, amounted to $3.4 million. Other income, primarily from in-store leased shoe departments, was $14.1 million in 2001, a slight increase over the $13.8 million for 2000. The increase was primarily from the additional stores operated during 2001. Interest expense for 2001 was $4.0 million, compared to $3.3 million in 2000. The increase resulted from higher average borrowings offset by lower interest rates during this year compared to last year. The increased borrowings were used to fund operating activities and to repurchase common stock. Net income for 2001 was $15.4 million or $0.37 per diluted share compared to net income of $39.4 million or $0.91 per diluted share for 2000. Five-Week Transition Period Ended February 3, 2001 See Note 12 to the Financial Statements for audited financial data for the five-week transition period of December 31, 2000 through February 3, 2001. This period precedes the start of the new fiscal year and no comparable period information is presented herein. Year Ended December 30, 2000 Compared to Year Ended January 1, 2000 In fiscal 2000 the Company opened 22 stores and closed one store bringing to 226 the number of stores in operation at year-end. Net sales of $1.207 billion were achieved for the fiscal year 2000, an increase of $172.0 million, or 16.6 percent over net sales of $1.035 billion for the fiscal year 1999. The 22 new stores opened in 2000 contributed $47.4 million to net sales. Comparable store net sales increased 9.7 percent over 1999. During 1999, the Company approved a plan to close ten under-performing stores and recorded a $20.5 million pre-tax charge for store closing and asset impairment costs. The charge included $4.6 million, included in cost of merchandise sold, for inventory write-downs resulting from additional markdowns in four stores that were closed in 1999 and markdowns associated with clearance merchandise. The charge also included $15.9 million for the estimated cost of lease terminations in the amount of $13.4 million and $2.5 million which represented primarily costs to write-down certain leasehold improvements included in property and equipment. During 2000, the Company recorded a net pre-tax credit of $3.4 million related to the 1999 store closing reserve. The credit resulted from adjustments to estimated lease obligations for changes in anticipated closing dates and for favorable lease settlements ($2.5 million), unsatisfactory lease negotiations to close two stores ($1.9 million), offset by a $1.0 million charge for the write-down of furniture, fixtures and equipment related to store closings. The 1999 store closing charge and the related 2000 credit are included in Selling, general and administrative expenses. 14 Gross profit for 2000 was $310.1 million or 25.7 percent of net sales compared to $253.5 million or 24.5 percent of net sales for 1999. The 1.2 percent increase in the gross profit percent resulted primarily from lower markdowns as a percent of sales, leveraging occupancy expenses, and the effect of the $4.6 million inventory write-down in 1999 discussed above. Selling, general and administrative expenses were $257.0 million or 21.3 percent of net sales for 2000, as compared to $244.1 million or 23.6 percent of net sales for 1999. As discussed above, these amounts include a $3.4 million store closing credit in 2000 and a $15.9 million store closing charge in 1999. Excluding the effect of store closing charges and credits, selling, general and administrative expenses increased $32.3 million, but decreased 0.5 percent of net sales from 1999. The increase in dollars is primarily due to the additional stores in operation during 2000 as compared to the number of stores in operation in 1999 and the decrease of 0.5 percent of net sales is primarily due to improved leveraging of selling and administrative expenses, offset by slightly higher advertising expenses. Pre-opening expenses for the 22 stores opened in 2000 amounted to $3.4 million and for the 28 stores opened in 1999, amounted to $4.0 million. Other income, primarily from in-store leased shoe departments, was $13.8 million in 2000, an increase of $1.7 million over the $12.1 million for 1999. The increase was primarily from the additional stores operated during 2000. Interest expense for 2000 was $3.3 million, compared to $2.5 million in 1999. The increase resulted from higher average borrowings and higher interest rates in 2000. The increased borrowings were used to fund operating activities and to repurchase common stock. Net income for 2000 was $39.4 million or $0.91 per diluted share compared to net income of $11.8 million or $0.26 per diluted share for 1999. Liquidity and Capital Resources The Company's primary capital requirements are to support inventory and capital investments for the opening of new stores, to maintain and improve existing stores, and to meet seasonal working capital needs. The Company's capital requirements and working capital needs are funded through a combination of internally generated funds, a bank line of credit and credit terms from vendors. As of February 2, 2002, the Company had $10.3 million in cash and cash equivalents. During the course of the Company's seasonal business cycle, working capital is needed to support inventory for existing stores, especially during peak selling seasons. Historically, the Company's working capital needs are lowest in the first quarter and peak in either the third or fourth quarter in anticipation of the fourth quarter selling season. Net cash provided by operating activities for 2001 amounted to $29.7 million, compared to $42.4 million for 2000. Net cash provided by operating activities in 2001 decreased from the prior year primarily due to decreased net income and less cash required for the procurement of merchandise due to the Company's focus on reducing its inventory levels, which resulted in a 6.5 percent decrease in inventories in an average store for fiscal 2001 compared to fiscal 2000. The net decrease in accounts payable and accrued liabilities in 2001 compared to 2000 related primarily to the timing of payments caused by this year ending on February 2 versus last year ending on December 30. For 2001 and 2000, cash flows used in investing activities amounted to $25.0 million and $20.9 million, respectively, primarily for the acquisition of store fixtures, equipment and leasehold improvements and for information system enhancements. 15 Cash used in financing activities was $5.5 million in 2001 and $26.1 million in 2000. During 2001, cash was used to repurchase 657,600 shares of the Company's common stock for $6.0 million and in 2000, 2,910,600 shares were repurchased for $28.4 million. To facilitate an understanding of the Company's contractual obligations, the following data is provided:
Payments Due By Period ---------------------------------------------------------------------- Within 2 - 3 4 - 5 After 5 Contractual Obligations Total 1 Year Years Years Years - ----------------------- ---------- ---------- ---------- ---------- ---------- Long-term debt $ 57,750 $ - $ 57,750 $ - $ - Operating leases 414,612 57,006 107,362 91,205 159,039 ---------- ---------- ---------- ---------- ---------- Total $472,362 $57,006 $165,112 $91,205 $159,039 ========== ========== ========== ========== ==========
The Company has a revolving credit agreement with a group of banks, which extends through June 2004. The agreement, which was amended in April 2002, provides a $135 million senior revolving credit facility, including a $10 million letter of credit sub-facility. Borrowings are secured by trade and other receivables and inventories. Due to the seasonal nature of the Company's business, the Company's bank borrowings fluctuate during the year, typically reaching their highest levels during the third or fourth quarter, as the Company builds its inventory for the Christmas selling season. At February 2, 2002, there was $57.8 million outstanding and at December 30, 2000, there was no balance outstanding under the agreement. The agreement requires the Company to maintain certain financial ratios and meet required net worth and indebtedness tests. The cost of opening a typical new store generally ranges from $450,000 to $650,000 for fixtures, equipment, leasehold improvements and pre-opening costs (primarily advertising, stocking and training). Pre-opening costs are expensed at the time of opening. Initial inventory investment for a new store is approximately $1.1 million (a portion of which is normally financed through vendor credit). The Company's total capital expenditures for 2002 (including amounts budgeted for new store expansion, improvements to existing stores and information system enhancements) are anticipated to be approximately $15 million. The Company believes that expected net cash provided by operating activities, bank borrowings and vendor credit will be sufficient to fund anticipated current and long-term capital expenditures and working capital requirements. Seasonality The Company's business is seasonal in nature with a higher percentage of the Company's merchandise sales and earnings generated in the fall and holiday selling seasons. Accordingly, selling, general and administrative expenses are typically higher as a percent of net sales during the first three quarters of each year. Critical Accounting Policies The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates and judgments, including those related to inventory valuation, the impairment of long-lived assets and store closing costs. Management bases its estimates and judgments on historical experience and other relevant factors, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. While the Company believes that the historical experience and other factors considered provide a meaningful basis for the accounting policies applied in the preparation of the financial statements, the Company cannot guarantee that its estimates and assumptions will be accurate, which could 16 require the Company to make adjustments to these estimates in future periods. See Note 1 to the Company's Financial Statements for a discussion of its significant accounting policies. New Accounting Pronouncements In August 2001, Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued. SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of." The Company will adopt SFAS No. 144 in 2002 and does not expect its provisions to have a significant impact on financial position or results of operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to interest rate risk primarily through borrowings under its revolving credit facility. At February 2, 2002, direct borrowings aggregated $57.8 million. The facility, as amended in April 2002, permits debt commitments up to $135.0 million, has a June 2004 maturity date and bears interest at spreads over LIBOR. The average outstanding borrowings during fiscal 2001, 2000 and 1999 were $82.3 million, $48.8 million and $44.2 million, respectively, at weighted-average interest rates of 4.9%, 6.7% and 5.7% respectively. Management believes that its exposure to market risk associated with its borrowings is not material. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and financial statement schedules of the Company and the Independent Auditors' Report thereon are filed pursuant to this Item 8 and are included in this report beginning on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item appears under the caption "Election of Directors" in the Company's Proxy Statement for its 2002 Annual Meeting of Stockholders and is incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this item appears under the caption "Executive Compensation" in the Company's Proxy Statement for its 2002 Annual Meeting of Stockholders and is incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item appears under the caption "Voting Securities" in the Company's Proxy Statement for its 2002 Annual Meeting of Stockholders and is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item appears under the caption "Certain Transactions; Compensation Committee Interlocks and Insider Participation" in the Company's Proxy Statement for its 2002 Annual Meeting of Stockholders and is incorporated by reference. 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 14(a)(1) Financial Statements The documents listed below are filed as part of this Form 10-K:
Page in Form 10-K --------- Independent Accountants' Report F-1 Balance Sheets at February 2, 2002 and February 3, 2001 F-2 Statement of Income for the fiscal years ended February 2, 2002, December 30, 2000 and January 1, 2000 F-3 Statement of Stockholders' Equity for the fiscal years ended February 2, 2002, December 30, 2000 and January 1, 2000 and the five-week Transition Period ended February 3, 2001 F-4 Statement of Cash Flows for the fiscal years ended February 2, 2002, December 30, 2000 and January 1, 2000 F-5 Notes to Financial Statements F-6 Statement of Income and Statement of Cash Flows for the five-week Transition Period ended February 3, 2001 (see Note 12 to Financial Statements) F-14
14(a)(2) Financial Statement Schedules All schedules are omitted because they are not applicable or the required information is presented in the financial statements or notes thereto. 14(a)(3) Exhibits See Index to Exhibits which begins on Page E-1. 14(b) Reports on Form 8-K The Company did not file a report on Form 8-K during the quarter ended February 2, 2002. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STEIN MART, INC. Date: May 1, 2002 By: /s/ John H. Williams, Jr. -------------------------------------- John H. Williams, Jr., Vice Chairman, Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on the 1st day of May, 2002. /s/ Jay Stein /s/ Linda McFarland Farthing - -------------------------------------- -------------------------------------- Jay Stein Linda McFarland Farthing Chairman of the Board Director /s/ John H. Williams, Jr. /s/ Mitchell W. Legler - -------------------------------------- -------------------------------------- John H. Williams, Jr. Mitchell W. Legler Vice Chairman, Chief Executive Officer Director and Director /s/ Michael D. Fisher /s/ Michael D. Rose - -------------------------------------- -------------------------------------- Michael D. Fisher Michael D. Rose President and Chief Operating Officer Director /s/ James G. Delfs /s/ Martin E. Stein, Jr. - -------------------------------------- -------------------------------------- James G. Delfs Martin E. Stein, Jr. Senior Vice President and Chief Director Financial Officer /s/ Clayton E. Roberson, Jr. /s/ J. Wayne Weaver - -------------------------------------- -------------------------------------- Clayton E. Roberson, Jr. J. Wayne Weaver Vice President and Controller Director /s/ Alvin R. Carpenter /s/ James H. Winston - -------------------------------------- -------------------------------------- Alvin R. Carpenter James H. Winston Director Director 19 Report of Independent Certified Public Accountants To the Board of Directors and Stockholders of Stein Mart, Inc. In our opinion, the accompanying financial statements appearing on pages F-2 through F-15 of this annual report present fairly, in all material respects, the financial position of Stein Mart, Inc. at February 2, 2002 and February 3, 2001, and the results of its operations and its cash flows for the year ended February 2, 2002, for the five-week Transition Period ended February 3, 2001, and for each of the two years in the period ended December 30, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP - ------------------------------ Jacksonville, Florida March 29, 2002, except for Note 4, as to which the date is April 17, 2002 F-1
Stein Mart, Inc. Balance Sheet (In thousands) February 2, February 3, 2002 2001 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 10,276 $ 11,066 Trade and other receivables 5,201 3,449 Inventories 296,158 282,898 Prepaid expenses and other current assets 11,324 5,623 ------------- ------------- Total current assets 322,959 303,036 Property and equipment, net 88,601 81,555 Other assets 6,112 5,493 ------------- ------------- Total assets $417,672 $390,084 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 93,675 $ 80,495 Accrued liabilities 46,001 43,200 Income taxes payable 4,071 4,799 ------------- ------------- Total current liabilities 143,747 128,494 Notes payable to banks 57,750 60,236 Other liabilities 14,280 12,863 ------------- ------------- Total liabilities 215,777 201,593 COMMITMENTS AND CONTINGENCIES Stockholders' equity: Preferred stock - $.01 par value; 1,000,000 shares authorized; no shares outstanding Common stock - $.01 par value; 100,000,000 shares authorized; 41,495,876 and 41,477,187 shares issued and outstanding, respectively. 415 415 Paid in capital - 77 Retained earnings 201,480 187,999 ------------- ------------- Total stockholders' equity 201,895 188,491 ------------- ------------- Total liabilities and stockholders' equity $417,672 $390,084 ============= =============
The accompanying notes are an integral part of these financial statements. F-2
Stein Mart, Inc. Statement of Income (In thousands except per share amounts) For The 52 Weeks Ended ------------------------------------------------- February 2, December 30, January 1, 2002 2000 2000 ------------- ------------- ------------- Net sales $1,320,190 $1,206,624 $1,034,561 Cost of merchandise sold 1,003,567 896,560 781,038 ------------- ------------- ------------- Gross profit 316,623 310,064 253,523 Selling, general and administrative expenses 301,937 257,042 244,100 Other income, net 14,078 13,766 12,129 ------------- ------------- ------------- Income from operations 28,764 66,788 21,552 Interest expense 4,000 3,309 2,485 ------------- ------------- ------------- Income before income taxes 24,764 63,479 19,067 Provision for income taxes 9,410 24,122 7,245 ------------- ------------- ------------- Net income $ 15,354 $ 39,357 $ 11,822 ============= ============= ============= Earnings per share - Basic $0.37 $0.92 $0.26 ============= ============= ============= Earnings per share - Diluted $0.37 $0.91 $0.26 ============= ============= ============= Weighted-average shares outstanding - Basic 41,176 42,909 44,948 ============= ============= ============= Weighted-average shares outstanding - Diluted 41,493 43,409 45,307 ============= ============= =============
The accompanying notes are an integral part of these financial statements. F-3
Stein Mart, Inc. Statement of Stockholders' Equity (In thousands) Total Common Paid-in Retained Stockholders' Stock Capital Earnings Equity ---------- ----------- ------------ ----------------- Balance at January 2, 1999 $454 $31,238 $146,287 $177,979 Net income 11,822 11,822 Common shares issued under stock option plan and related income tax benefits 1 381 382 Common shares issued under employee stock purchase plan 1 1,021 1,022 Reacquired shares (17) (11,276) (11,293) ---------- ----------- ------------ ----------------- Balance at January 1, 2000 439 21,364 158,109 179,912 Net income 39,357 39,357 Common shares issued under stock option plan and related income tax benefits 3 2,192 2,195 Common shares issued under employee stock purchase plan 2 955 957 Reacquired shares (29) (24,511) (3,853) (28,393) ---------- ----------- ------------ ----------------- Balance at December 30, 2000 415 - 193,613 194,028 Transition period December 31, 2000 to February 3, 2001: Net loss (5,614) (5,614) Common shares issued under stock option plan and related income tax benefits 62 62 Common shares issued under employee stock purchase plan 469 469 Reacquired shares (454) (454) ---------- ----------- ------------ ----------------- Balance at February 3, 2001 415 77 187,999 188,491 Net income 15,354 15,354 Common shares issued under stock option plan and related income tax benefits 5 3,067 3,072 Common shares issued under employee stock purchase plan 2 995 997 Reacquired shares (7) (4,139) (1,873) (6,019) ---------- ----------- ------------ ----------------- Balance at February 2, 2002 $415 $ - $201,480 $201,895 ========== =========== ============ =================
The accompanying notes are an integral part of these financial statements. F-4
Stein Mart, Inc. Statement of Cash Flows (In thousands) For The 52 Weeks Ended ------------------------------------------------- February 2, December 30, January 1, 2002 2000 2000 ------------- ------------- ------------- Cash flows from operating activities: Net income $15,354 $39,357 $11,822 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 16,822 14,373 12,950 Write-down of property and other assets 1,114 1,038 2,528 Deferred income taxes (4,999) 2,910 (4,722) Tax benefit from exercise of stock options 1,024 810 96 Changes in assets and liabilities: Trade and other receivables (1,752) (286) 108 Inventories (13,260) (32,267) (34,405) Prepaid expenses and other current assets (641) 4 304 Other assets (619) (648) (1,845) Accounts payable 13,180 4,465 14,639 Accrued liabilities 2,801 18,143 7,160 Income taxes payable (728) 3,818 2,588 Other liabilities 1,356 (9,281) 12,589 ------------- ------------- ------------- Net cash provided by operating activities 29,652 42,436 23,812 Cash flows used in investing activities: Capital expenditures (24,982) (20,914) (19,029) Cash flows from financing activities: Net borrowings under notes payable to banks (2,486) - - Proceeds from exercise of stock options 2,048 1,385 286 Proceeds from employee stock purchase plan 997 957 1,022 Purchase of common stock (6,019) (28,393) (11,293) ------------- ------------- ------------- Net cash used in financing activities (5,460) (26,051) (9,985) ------------- ------------- ------------- Net decrease in cash and cash equivalents (790) (4,529) (5,202) Cash and cash equivalents at beginning of year 11,066 17,055 22,257 ------------- ------------- ------------- Cash and cash equivalents at end of year $10,276 $12,526 $17,055 ============= ============= ============= Supplemental disclosures of cash flow information: Interest paid $ 3,980 $ 3,141 $ 2,450 Income taxes paid 14,221 16,887 9,493
The accompanying notes are an integral part of these financial statements. F-5 STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) 1. Summary of Significant Accounting Policies At February 2, 2002 the Company operated a chain of 253 off-price retail stores in 29 states. Each store offers women's, men's and children's apparel, as well as accessories, gifts, linens and shoes. Change in Fiscal Year End In November 2001, the Company changed its fiscal year end from the Saturday closest to December 31 to the Saturday closest to January 31. The five-week transition period of December 31, 2000 through February 3, 2001 (the "Transition Period") precedes the start of the new fiscal year. Audited financial information for the Transition Period is presented in Note 12. Results for 2001, 2000 and 1999 are for the 52 weeks ended February 2, 2002, December 30, 2000 and January 1, 2000, respectively. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less. Inventories Merchandise inventories are valued at the lower of average cost or market, on a first-in first-out basis, using the retail inventory method. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided on a straight-line method using estimated useful lives of 3-10 years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the term of the lease. The Company follows Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. In evaluation of the fair value and future benefits of long-lived assets, the Company performs an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets and reduces their carrying value by the excess, if any, of the results of such calculation. Management believes at this time that carrying values and useful lives continue to be appropriate, after adjusting for the impairment charge recorded in 2001, as disclosed in Note 10. Store Pre-Opening and Closing Costs New store pre-opening costs are expensed as incurred. In the event a store is closed before its lease has expired, the estimated costs of the lease termination and write-down of property and equipment is recorded upon Management's decision to close the store. Advertising Expense Advertising costs are expensed as incurred. Advertising expenses of $47,007,000, $2,256,000, $43,092,000 and $35,522,000 are reflected in Selling, general and administrative expenses in the Statement of Income for 2001, the Transition Period, 2000 and 1999, respectively. Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. F-6 STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding plus common stock equivalents related to stock options for each period. Stock options are not included in the diluted loss per share calculation for the Transition Period because they are anti-dilutive. A reconciliation of weighted-average number of common shares to weighted-average number of common shares plus common stock equivalents is as follows (000's): Transition 2001 Period 2000 1999 -------- ---------- -------- -------- Weighted-average number of common shares 41,176 41,476 42,909 44,948 Stock options 317 - 500 359 -------- ---------- -------- -------- Weighted-average number of common shares plus common stock equivalents 41,493 41,476 43,409 45,307 ======== ========== ======== ======== Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain amounts in the 1999 and 2000 financial statements have been reclassified to conform to the 2001 presentation. New Accounting Pronouncements In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued. SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The Company will adopt SFAS No. 144 in 2002 and does not expect its provisions to have a significant impact on financial position or results of operations. 2. Property and Equipment, Net Property and equipment and the related accumulated depreciation and amortization are as follows: Feb. 2, Feb. 3, 2002 2001 ----------- ----------- Furniture, fixtures and equipment $133,072 $116,987 Leasehold improvements 46,677 40,018 ----------- ----------- 179,749 157,005 Less: accumulated depreciation and amortization 91,148 75,450 ----------- ----------- $ 88,601 $ 81,555 =========== =========== F-7 STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) 3. Accrued Liabilities The major components of accrued liabilities are as follows: Feb. 2, Feb. 3, 2002 2001 ----------- ----------- Taxes, other than income taxes $16,256 $14,441 Salary, wages, bonuses and benefits 10,246 11,229 Other 19,499 17,530 ----------- ----------- $46,001 $43,200 =========== =========== 4. Notes Payable to Banks In June 2001, the Company entered into a new revolving credit agreement with a group of banks, which extends through June 2004. The agreement, which was amended in April 2002, provides a $135 million senior revolving credit facility, including a $10 million letter of credit sub-facility. Borrowings are secured by trade and other receivables and inventories. Interest is payable at rates based on spreads over the London Interbank Offering Rate (LIBOR) or the Prime Rate. A quarterly commitment fee ranging from 0.375% to 0.50% per annum is paid on the unused portion of the commitment. The weighted average interest rates on borrowings during 2001, the Transition Period, 2000 and 1999 were 4.9%, 6.4%, 6.7% and 5.7%, respectively. The agreement requires the Company to maintain certain financial ratios and indebtedness tests. At February 2, 2002, the Company was in compliance with all requirements of the amended agreement. 5. Stockholders' Equity During 2001, the Transition Period, 2000 and 1999, the Company repurchased 657,600, 40,800, 2,910,600 and 1,702,300 shares of its common stock in the open market at a total cost of $6,019,000, $454,000, $28,393,000 and $11,293,000, respectively. As of February 2, 2002, there are 2,264,200 shares which can be repurchased pursuant to the Board of Directors' current authorizations. 6. Stock Option and Purchase Plans On May 7, 2001, the shareholders approved a new stock option plan (the "Omnibus Plan") with options available under the plan for 4,500,000 shares of the Company's common stock. The Omnibus Plan replaced the Company's Employee Stock and Director Stock Option Plans. The term of the plan is indefinite, except that no incentive stock option award can be granted after the tenth anniversary of the plan. The Omnibus Plan, consistent with the prior Employee Stock and Director Stock Option Plans, provides that shares of common stock may be granted to certain key employees and outside directors through non-qualified stock options, incentive stock options, stock appreciation rights, performance awards, or any other award made under the terms of the plan. The Board of Directors, or its delegated authority, determines the exercise price and all other terms of all grants. In general, one-third of the options granted in the past have become exercisable on the third, fourth and fifth anniversary dates of grant and expire ten years after the date of grant. No stock appreciation rights or restricted stock awards have been granted under this or the prior plan. F-8 STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) Activity for these fixed-price option plans is as follows: Number Weighted- of Average Shares Exercise (000) Price ----------- ----------- Outstanding at January 2, 1999 4,626 $10.92 Granted 308 7.50 Exercised (57) 3.76 Forfeited (252) 12.51 ----------- ----------- Outstanding at January 1, 2000 4,625 10.69 Granted 614 9.11 Exercised (260) 4.89 Forfeited (396) 12.65 ----------- ----------- Outstanding at December 30, 2000 4,583 10.64 Granted - - Exercised (8) 5.28 Forfeited (33) 12.68 ----------- ----------- Outstanding at February 3, 2001 4,542 10.63 Granted 1,146 8.54 Exercised (549) 3.58 Forfeited (359) 13.90 ----------- ----------- Outstanding at February 2, 2002 4,780 $10.70 =========== =========== Exercisable stock options were 2.004 million, 1.860 million, 1.870 million and 1.317 million at February 2, 2002, February 3, 2001, December 30, 2000 and January 1, 2000, respectively. The following table summarizes information about fixed-price stock options outstanding at February 2, 2002:
Options Outstanding Options Exercisable ------------------------------------------------- ------------------------------- Weighted- Average Weighted- Weighted- Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices (000) Life (Years) Price (000) Price - ---------------- ------------- ------------- ------------- ------------- ------------- $ 2.50 - 5.75 612 5.0 $ 5.29 318 $ 5.03 $ 6.53 - 9.63 1,648 8.1 8.12 269 8.00 $10.00 - 13.81 1,965 5.4 13.24 1,181 13.39 $14.25 - 16.59 555 6.3 15.31 236 15.04 ------------- ------------- ------------- ------------- ------------- 4,780 6.4 $10.70 2,004 $11.53 ============= ============= ============= ============= =============
The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and intends to retain the intrinsic value method of accounting for stock-based compensation which it currently uses. Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost of the Company's stock option plans been determined consistent with the provisions of SFAS No. 123, the Company's net income (loss) and earnings (loss) per share would have been reduced to the following pro forma amounts: F-9
STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) Transition 2001 Period 2000 1999 ------------ ------------ ------------ ------------ Net income (loss) - as reported $15,354 $(5,614) $39,357 $11,822 Net income (loss) - pro forma 13,267 (5,793) 36,466 8,141 Basic earnings (loss) per share - as reported $0.37 $(0.14) $0.92 $0.26 Diluted earnings (loss) per share - as reported 0.37 (0.14) 0.91 0.26 Basic earnings (loss) per share - pro forma $0.32 $(0.14) $0.85 $0.18 Diluted earnings (loss) per share - pro forma 0.32 (0.14) 0.84 0.18
The effects of applying this Statement for pro forma disclosures are not likely to be representative of the effects on reported net income for future years, because options vest over several years and additional awards are made each year. No options were granted during the Transition Period. In determining the pro forma compensation cost, the weighted-average fair value of options granted during fiscal 2001, 2000 and 1999 was estimated to be $5, $5 and $4, respectively, using the Black-Scholes options pricing model. The following weighted-average assumptions were used for grants made during 2001, 2000 and 1999: dividend yield of 0.0%, expected volatility of 51.7%, 51.1% and 48.7%, respectively, risk-free interest rate of 4.8%, 5.2% and 6.5%, respectively and expected lives of 7.0 years. The Company has an Employee Stock Purchase Plan (the "Stock Purchase Plan") whereby all employees who complete six months employment with the Company and who work on a full-time basis or are regularly scheduled to work more than 20 hours per week are eligible to participate in the Stock Purchase Plan. Participants in the Stock Purchase Plan are permitted to use their payroll deductions to acquire shares at 85% of the fair market value of the Company's stock determined at either the beginning or end of each option period. In 2001, the Transition Period, 2000 and 1999, the participants acquired 127,220 shares, 53,856 shares, 198,051 shares and 172,494 shares of the Company's common stock at weighted average per-share prices of $7.84, $8.71, $4.83 and $5.92 per share, respectively. On May 7, 2001, the shareholders approved an amendment to the Stock Purchase Plan, increasing the number of shares eligible for issuance under the Plan by 1,000,000 and extending the Plan until December 31, 2005. 7. Leased Facilities and Commitments The Company leases all of its retail and support facilities. Annual store rent is generally comprised of a fixed minimum amount plus a contingent amount based on a percentage of sales exceeding a stipulated amount. Most leases also require additional payments covering real estate taxes, common area costs and insurance. Rent expense is as follows: Transition 2001 Period 2000 1999 ---------- ---------- ---------- ---------- Minimum rental $55,278 $4,335 $48,329 $44,423 Contingent rentals 889 52 689 715 ---------- ---------- ---------- ---------- $56,167 $4,387 $49,018 $45,138 ========== ========== ========== ========== F-10 STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) At February 2, 2002, for the majority of its retail and corporate facilities, the Company was committed under noncancellable leases with remaining terms of up to 20 years. Future minimum payments under noncancellable leases are: 2002 $ 57,006 2003 55,187 2004 52,175 2005 48,215 2006 42,990 Thereafter 159,039 ---------- $414,612 ========== The Company subleases shoe department and fragrance department space in all of its stores. Sales from leased departments are excluded from sales of the Company. Sublease rental income of $12,610,000, $752,000, $12,710,000 and $11,388,000 is included in other income, net for 2001, the Transition Period, 2000 and 1999, respectively. Total future minimum rental income under these noncancellable subleases is $7,830,000 at February 2, 2002. 8. Employee Benefit Plans The Company has a defined contribution retirement plan covering employees who are at least 21 years of age and have completed at least one year of service. Under the profit sharing portion of the plan, the Company makes discretionary contributions, which vest at a rate of 20 percent per year after two years of service. Under the 401(k) portion of the plan the Company contributes one percent of the employee's compensation and matches 50 percent of the employee's voluntary pre-tax contributions up to a maximum of four percent of the employee's compensation. The Company's base 401(k) contribution vests immediately while the matching portion vests in accordance with the plan's vesting schedule. Total Company contributions under the retirement plan were $1,571,000, $66,000, $1,750,000 and $1,500,000 for 2001, the Transition Period, 2000 and 1999, respectively. During 1999, the Company implemented an executive split dollar life insurance plan wherein eligible executives are provided with pre-retirement life insurance protection based upon three to five times base salary. Upon retirement, the executive is provided with life insurance protection based upon one and one-half to two and one-half times final base salary. The expense for this plan was $293,000, $248,000 and $25,000 in 2001, 2000 and 1999, respectively. There was no expense recorded during the Transition Period. Also during 1999, the Company implemented an executive deferral plan providing officers and key executives with the opportunity to participate in an unfunded, deferred compensation program. Under the program, participants may defer up to 100% of their base compensation and bonuses earned. The Company will match the executives' contributions 100% up to the first 10% of income deferred. The total of participant deferrals, which is reflected in accrued liabilities, was $814,000 at February 2, 2002 and $402,000 at February 3, 2001. The expense for this plan was $495,000, $25,000, $486,000 and $57,000 in 2001, the Transition Period, 2000 and 1999, respectively. In connection with the above two plans, whole life insurance contracts were purchased on the related participants. At February 2, 2002 and February 3, 2001 the cash surrender value of these policies was $2,773,000 and $1,949,000, respectively, and is included in Other assets. F-11 STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) 9. Income Taxes The income tax provision (benefit) is as follows: Transition 2001 Period 2000 1999 ---------- ---------- ---------- ---------- Current: Federal $13,271 $(3,387) $19,537 $11,022 State 1,138 (290) 1,675 945 ---------- ---------- ---------- ---------- Total current 14,409 (3,677) 21,212 11,967 ---------- ---------- ---------- ---------- Deferred: Federal (4,604) 217 2,680 (4,349) State (395) 19 230 (373) ---------- ---------- ---------- ---------- Total deferred (4,999) 236 2,910 (4,722) ---------- ---------- ---------- ---------- Income tax provision (benefit) $ 9,410 $(3,441) $24,122 $ 7,245 ========== ========== ========== ========== Income tax expense (benefit) differed from the amounts computed by applying the federal statutory rate of 35 percent to income before taxes as follows:
Transition 2001 Period 2000 1999 ---------- ---------- ---------- ---------- Federal tax at the statutory rate $ 8,667 $(3,169) $22,218 $ 6,673 State income taxes, net of federal benefit 743 (272) 1,904 572 ---------- ---------- ---------- ---------- $ 9,410 $(3,441) $24,122 $ 7,245 ========== ========== ========== ========== Effective tax rate 38.0% 38.0% 38.0% 38.0% ========== ========== ========== ==========
Temporary differences, which give rise to deferred tax assets and liabilities, are as follows: Feb. 2, Feb. 3, 2002 2001 ---------- ---------- Deferred tax assets: NOL carryforward $ 5,417 $ - Store closing reserve 2,158 1,894 Inventories 650 1,782 Accrued liabilities 2,012 1,325 Other 1,384 1,104 ---------- --------- 11,621 6,105 ---------- --------- Deferred tax liabilities: Depreciation 12,019 11,853 Other 2,036 1,685 ---------- --------- 14,055 13,538 ---------- --------- Net deferred tax liability $(2,434) $(7,433) ========== ========= At February 2, 2002, the Company has approximately $14 million in federal and state net operating loss ("NOL") carryforwards, which it expects to fully utilize in 2002. The NOL carryforwards, which expire in 2022, were generated in the five-week tax period ended February 2, 2002. This five-week tax period is the result of the Company's change in fiscal year (see Note 1). F-12 STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) On March 14, 2002, the Internal Revenue Service released new rules (Rev. Proc. 2002-19), which allow the Company an accelerated deduction of certain components of the Company's deferred tax asset relating to inventories. As a result, the Company's income tax payable and the corresponding deferred tax asset relating to inventories will be reduced by $3.8 million in the first quarter of fiscal 2002. Deferred tax assets and liabilities are reflected on the Company's balance sheet as follows: Feb. 2, Feb. 3, 2002 2001 ---------- ---------- Current deferred tax assets (included in Prepaid expenses and other current assets) $ 7,127 $ 2,067 Non-current deferred tax liabilities (included in Other liabilities) (9,561) (9,500) ---------- ---------- Net deferred tax liabilities $(2,434) $(7,433) ========== ========= The exercise of certain stock options which have been granted under the Company's stock option plans gives rise to compensation which is includable in the taxable income of the applicable employees and deductible by the Company for federal and state income tax purposes. Such compensation results from increases in the market value of the Company's common stock subsequent to the date of grant of the applicable exercised stock options, and in accordance with Accounting Principles Board Opinion No. 25, such compensation is not recognized as an expense for financial accounting purposes and the related tax benefits are recorded directly in Paid-in Capital. 10. Store Closing and Asset Impairment Charges and Credits During the fourth quarter of 2001, Management approved a plan to close four stores in 2002. As a result, the Company recorded a pre-tax charge of $2.9 million, including $2.2 million for the estimated cost of lease terminations and $0.7 million for the write-down of certain property and equipment. The charge is included in Selling, general and administrative expenses in the Statement of Income. The Company does not expect to incur significant additional exit costs upon the closing of these stores. During 1999, the Company approved a plan to close ten under-performing stores and recorded a $20.5 million pre-tax charge for store closing and asset impairment costs. The charge included $4.6 million, included in cost of merchandise sold, for inventory write-downs resulting from additional markdowns in four stores that were closed in 1999 and markdowns associated with clearance merchandise. The charge also included $15.9 million for the estimated cost of lease terminations in the amount of $13.4 million and $2.5 million which represented primarily costs to write-down certain leasehold improvements included in property and equipment. During 2000, the Company recorded a net pre-tax credit of $3.4 million related to the 1999 store closing reserve. The credit resulted from adjustments to estimated lease obligations for changes in anticipated closing dates and for favorable lease settlements ($2.5 million), unsatisfactory lease negotiations to close two stores ($1.9 million), offset by a $1.0 million charge for the write-down of furniture, fixtures and equipment related to store closings. The 1999 store closing charge and the related 2000 credit are included in Selling, general and administrative expenses in the Statement of Income. The store closing reserve at February 2, 2002 includes primarily the lease obligations for four stores that will close in 2002 and the remaining lease obligation for one store closed in December 1999. Payments during 2001 include lease termination and ongoing lease costs. Activity in the store closing reserve is as follows: F-13 STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) Balance at February 3, 2001 $4,984 Additions for 2002 closings 2,206 Payments on 1999 closings (1,510) ---------- Balance at February 2, 2002 $5,680 ========== The store closing reserve includes a current portion of $1.0 million and a long-term portion of $4.7 million which are included in Accrued liabilities and Other liabilities, respectively. 11. Quarterly Results of Operations (Unaudited) As discussed in Note 1, the Company changed its fiscal year in 2001. The 13 week periods of 2001 reflect this change.
13 Weeks Ended ------------------------------------------------------------- May 5, Aug. 4, Nov. 3, Feb. 2, Year Ended February 2, 2002 2001 2001 2001 2002 ------------------------------------------------------------- Net Sales $317,069 $291,473 $304,367 $407,281 Gross Profit 83,077 71,810 64,179 97,557 Net income (loss) 9,132 3,048 (5,828) 9,002 Earnings (loss) per share - Basic $0.22 $0.07 $(0.14) $0.22 Earnings (loss) per share - Diluted $0.22 $0.07 $(0.14) $0.22
13 Weeks Ended ------------------------------------------------------------- Apr. 1, Jul. 1, Sept. 30, Dec. 30, Year Ended December 30, 2000 2000 2000 2000 2000 ------------------------------------------------------------- Net sales $245,451 $291,188 $267,561 $402,424 Gross profit 57,155 82,279 63,077 107,553 Net income 999 13,830 2,082 22,446 Earnings per share - Basic $0.02 $0.32 $0.05 $0.53 Earnings per share - Diluted $0.02 $0.32 $0.05 $0.52
12. Transition Period Financial Information Statement of Income for the five-week Transition Period ended February 3, 2001: Net sales $84,013 Cost of merchandise sold 70,609 ---------- Gross profit 13,404 Selling, general and administrative expenses 23,106 Other income, net 833 ---------- Loss from operations (8,869) Interest expense 186 ---------- Loss before income tax benefit (9,055) Income tax benefit 3,441 ---------- Net loss $(5,614) ========== Loss per share - Basic and Diluted $(0.14) ========== F-14 STEIN MART, INC. NOTES TO FINANCIAL STATEMENTS February 2, 2002 (Dollars in tables in thousands except per share amounts) Statement of Cash Flows for the five-week Transition Period ended February 3, 2001: Cash flows from operating activities: Net loss $(5,614) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,299 Tax benefit from exercise of stock options 22 Deferred income taxes 236 Changes in assets and liabilities: Trade and other receivables 1,309 Inventories (5,445) Prepaid expenses and other current assets 529 Other assets 50 Accounts payable (41,083) Accrued liabilities (8,556) Income taxes payable (3,705) Other liabilities 55 ---------- Net cash used in operating activities (60,903) Cash flows used in investing activities: Capital expenditures (848) Cash flows from financing activities: Net borrowings under notes payable to banks 60,236 Proceeds from exercise of stock options 40 Proceeds from employee stock purchase plan 469 Purchase of common stock (454) ---------- Net cash provided by financing activities 60,291 ---------- Net decrease in cash and cash equivalents (1,460) Cash and cash equivalents at December 30, 2000 12,526 ---------- Cash and cash equivalents at February 3, 2001 $11,066 ========== Interest and taxes paid during the five-week Transition Period ended February 3, 2001 were $1,072,000 and $17,000, respectively. 13. Legal Proceedings The Company is involved in various routine legal proceedings incidental to the conduct of its business. Management does not believe that any of these legal proceedings will have a material adverse effect on the Company's financial condition or results of operations. F-15 INDEX TO EXHIBITS *3.1 Articles of Incorporation of the registrant 3.2 Bylaws of the registrant (amended November 6, 2000) 4.1 Provisions of the Articles of Incorporation and Bylaws of the Registrant defining rights of shareholders of Common Stock of the Registrant (incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 2000) *4.2 Form of stock certificate for Common Stock ~*10.1 Form of Director's and Officer's Indemnification Agreement 10.2 Revolving Credit Agreement dated as of June 28, 2001 between Stein Mart, Inc. and SunTrust Bank, as Administrative Agent (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001) 10.2.1 First Amendment to Revolving Credit Agreement dated as of November 9, 2001 among Stein Mart, Inc. and SunTrust Bank, as Administrative Agent (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter year ended September 29, 2001) ~*10.3 Employee Stock Plan ~*10.4 Form of Non-Qualified Stock Option Agreement ~*10.5 Form of Incentive Stock Option Agreement *10.6 Profit Sharing Plan ~*10.7 Executive Health Plan ~*10.8 Director Stock Option Plan ~^10.9 Executive Split Dollar Plan ~^10.10 Executive Deferral Plan 10.11 2001 Omnibus Plan (incorporated by reference to the Company's Form S-8 Registration Statement filed on August 7, 2001) 23 Consent of PricewaterhouseCoopers LLP (filed herein) * Previously filed as Exhibit to Form S-1 Registration Statement 33-46322 and incorporated herein by reference. ^ Previously filed as Exhibit to the Company's Form 10-K for the fiscal year ended January 1, 2000 and incorporated herein by reference. ~ Management Contracts or Compensatory Plan or Arrangements filed pursuant to S-K 601 (10) (iii)(A). E-1
               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statements on Forms S-8 (Nos.  333-27991,  333-88176,  333-39323,  333-67034 and
333-67038) of Stein Mart, Inc. of our report dated March 29, 2002,  except as to
the revolving credit  agreement  amendment as described in Note 4 which is as of
April 17,  2002,  relating to the  financial  statements,  which  appears in the
Annual Report to  Shareholders,  which is  incorporated in this Annual Report on
Form 10-K.



/s/ PricewaterhouseCoopers LLP
- ------------------------------
Jacksonville, Florida
April 17, 2002

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