Year Ended February 2, 2008 Compared to Year Ended February 3, 2007 for Stein

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Stein Mart (SMRT)

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SMRT » Topics » Year Ended February 2, 2008 Compared to Year Ended February 3, 2007

These excerpts taken from the SMRT 10-K filed Apr 16, 2009.

Year Ended February 2, 2008 Compared to Year Ended February 3, 2007

The $43.7 million or 2.9 percent total net sales decrease for the year ended February 2, 2008 compared to the prior year reflects a $79.4 million decrease in comparable store group and a $12.1 million decrease in the closed store group, offset by a $47.8 million increase in the non-comparable group due to the inclusion of sales for the 12 stores opened in 2006 and the 14 stores opened in 2007. The closed store group includes the two stores closed in 2007 and the six stores closed in 2006. Included in the aforementioned changes is a $22.1 million sales decrease due to fiscal year 2006 sales including an extra week.

Gross profit for the year ended February 2, 2008 was $361.4 million or 24.8 percent of net sales, a 2.9 percentage point decrease from gross profit of $416.3 million or 27.7 percent of net sales for the year ended February 3, 2007. The $54.9 million decrease in gross profit reflects a $59.3 million decrease in the comparable store group and a $2.4 million decrease in the closed store group, offset by a $6.8 million increase in the non-comparable group due to the inclusion of operating results for the 12 stores opened in 2006 and the 14 stores opened in 2007. Gross profit as a percent of sales decreased in 2007 from 2006 due to a 2.8 percentage point increase in markdowns, a 0.7 percentage point increase in occupancy and buying costs, offset by a 0.7 percentage point improvement in markup. Markdowns were significantly higher in 2007 due to the substantial decline in sales from 2006 requiring us to offer dramatic discounts to clear seasonal goods.

SG&A expenses were $388.6 million or 26.7 percent of net sales for the year ended February 2, 2008, as compared to $376.6 million or 25.1 percent of net sales for 2006. The SG&A rate was higher in 2007 due to a lack of leverage on decreased sales and expenses increased $12.0 million primarily due to a $10.3 million increase in store operating expenses for the non-comparable store group, a $5.2 million increase in advertising expense, a $2.8 million increase in asset impairment and store closing charges, a $2.5 million increase in depreciation expense and a $1.9 million increase in corporate overhead expenses. Store operating expenses were reduced by $8.1 million in the comparable store group due primarily to cost saving initiatives and $2.6 million in the closed store group. The non-comparable store group had higher operating expenses in 2007 due to the inclusion of operating results for the 12 stores opened in 2006 and the 14 stores opened in 2007. Advertising expense was higher in 2007 due to increased spending, including additional television advertising. Corporate overhead expenses were higher in 2007 primarily due to $1.8 million of separation costs for the August 2007 resignation of the former President/Chief Executive Officer.

Pre-opening expenses for the 14 stores opened in 2007 and the 12 stores opened in 2006 amounted to $2.7 million and $3.3 million, respectively.

The $3.2 million net increase in other income reflects increased revenues from our credit card program that was introduced in October 2006, offset by a $1.8 million decrease from a 2006 settlement of Visa Check/MasterMoney anti-trust litigation.

The Company incurred net interest expense of $0.8 million during 2007 compared to earning $1.0 million of net interest income during 2006. We were borrowing under the revolving credit agreement during the second half of 2006 and most of 2007 and had $27.1 million in borrowings at February 2, 2008.

The effective income tax rate decreased from 36.9 percent in 2006 to 31.2 percent in 2007 primarily due to the current year impact of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) and an increase in the effect of business tax credits.

Year Ended February 2, 2008 Compared to Year Ended February 3, 2007

FACE="Times New Roman" SIZE="2">The $43.7 million or 2.9 percent total net sales decrease for the year ended February 2, 2008 compared to the prior year reflects a $79.4 million decrease in comparable store group and a $12.1 million decrease in
the closed store group, offset by a $47.8 million increase in the non-comparable group due to the inclusion of sales for the 12 stores opened in 2006 and the 14 stores opened in 2007. The closed store group includes the two stores closed in 2007 and
the six stores closed in 2006. Included in the aforementioned changes is a $22.1 million sales decrease due to fiscal year 2006 sales including an extra week.

SIZE="2">Gross profit for the year ended February 2, 2008 was $361.4 million or 24.8 percent of net sales, a 2.9 percentage point decrease from gross profit of $416.3 million or 27.7 percent of net sales for the year ended February 3,
2007. The $54.9 million decrease in gross profit reflects a $59.3 million decrease in the comparable store group and a $2.4 million decrease in the closed store group, offset by a $6.8 million increase in the non-comparable group due to the
inclusion of operating results for the 12 stores opened in 2006 and the 14 stores opened in 2007. Gross profit as a percent of sales decreased in 2007 from 2006 due to a 2.8 percentage point increase in markdowns, a 0.7 percentage point increase in
occupancy and buying costs, offset by a 0.7 percentage point improvement in markup. Markdowns were significantly higher in 2007 due to the substantial decline in sales from 2006 requiring us to offer dramatic discounts to clear seasonal goods.

SG&A expenses were $388.6 million or 26.7 percent of net sales for the year ended February 2, 2008, as compared to $376.6 million or 25.1 percent
of net sales for 2006. The SG&A rate was higher in 2007 due to a lack of leverage on decreased sales and expenses increased $12.0 million primarily due to a $10.3 million increase in store operating expenses for the non-comparable store group, a
$5.2 million increase in advertising expense, a $2.8 million increase in asset impairment and store closing charges, a $2.5 million increase in depreciation expense and a $1.9 million increase in corporate overhead expenses. Store operating expenses
were reduced by $8.1 million in the comparable store group due primarily to cost saving initiatives and $2.6 million in the closed store group. The non-comparable store group had higher operating expenses in 2007 due to the inclusion of operating
results for the 12 stores opened in 2006 and the 14 stores opened in 2007. Advertising expense was higher in 2007 due to increased spending, including additional television advertising. Corporate overhead expenses were higher in 2007 primarily due
to $1.8 million of separation costs for the August 2007 resignation of the former President/Chief Executive Officer.

Pre-opening expenses for the 14
stores opened in 2007 and the 12 stores opened in 2006 amounted to $2.7 million and $3.3 million, respectively.

The $3.2 million net increase in other
income reflects increased revenues from our credit card program that was introduced in October 2006, offset by a $1.8 million decrease from a 2006 settlement of Visa Check/MasterMoney anti-trust litigation.

STYLE="margin-top:12px;margin-bottom:0px">The Company incurred net interest expense of $0.8 million during 2007 compared to earning $1.0 million of net interest income during 2006. We were borrowing under the
revolving credit agreement during the second half of 2006 and most of 2007 and had $27.1 million in borrowings at February 2, 2008.

The effective
income tax rate decreased from 36.9 percent in 2006 to 31.2 percent in 2007 primarily due to the current year impact of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes
(“FIN 48”) and an increase in the effect of business tax credits.

This excerpt taken from the SMRT 10-Q filed Dec 10, 2008.

For the 39 weeks ended November 1, 2008 compared to the 39 weeks ended November 1, 2007

Net sales for the first 39 weeks of 2008 were $962.6 million, down 7.5% from $1,040.2 million for the first 39 weeks of 2007. The $77.6 million decrease reflects a $105.3 million decrease in the comparable store group and an $8.1 million decrease in the closing/closed store group, offset by a $35.8 million increase in the non-comparable store group due to the inclusion of sales for the 14 stores opened in 2007 and the six stores opened in 2008. Comparable stores sales for the first 39 weeks of 2008 decreased 10.5% compared to the first 39 weeks of 2007.

Gross profit for first 39 weeks of 2008 was $239.3 million or 24.9 percent of net sales compared to $277.3 million or 26.7 percent of net sales for the first 39 weeks of 2007. The $38.0 million decrease in gross profit reflects a $39.7 million decrease in the comparable store group and a $3.2 million decrease in the closing/closed store group, partially offset by a $4.9 million increase in the non-comparable store group due to the inclusion of operating results for the 14 stores opened in 2007 and the six stores opened in 2008. Gross profit as a percent of sales decreased during the first 39 weeks of 2008 primarily from a 1.6 percentage point increase in occupancy costs due to a lack of leverage on lower sales and relatively flat merchandise margin due to increased markdowns mostly offset by an increase in markup.

SG&A expenses were $277.6 million or 28.8 percent of net sales for first 39 weeks of 2008 as compared to $282.3 million or 27.1 percent of net sales for the first 39 weeks of 2007. The $4.8 million decrease in SG&A expenses primarily reflects significant reductions in advertising expenses and share-based compensation, somewhat offset by increased store closing expenses, professional fees and benefits costs. Advertising expenses decreased $10.3 million this year due primarily to reduced broadcast media. Share-based compensation expense decreased $3.7 million ($2.4 million in cost of merchandise sold and $1.3 million in SG&A expenses) primarily due to compensation expense for performance shares issued in 2006 being fully amortized through the first quarter of 2008. Store closing costs increased $3.8 million due to more planned store closings in 2008. SG&A expenses for 2008 also include $4.9 million for professional fees related to ongoing expense reduction initiatives and higher benefits costs, while last year included $1.8 million of separation costs for the resignation of the former President/Chief Executive Officer. SG&A expenses as a percentage of net sales was higher this year due to a lack of leverage on lower sales.

Interest expense, net increased $0.7 million during the first 39 weeks of 2008 compared to the first 39 weeks of 2007 due to higher borrowings at lower interest rates this year compared to last year.

This excerpt taken from the SMRT 10-Q filed Sep 10, 2008.

For the 26 weeks ended August 2, 2008 compared to the 26 weeks ended August 4, 2007

The $43.1 million or 6.1% total net sales decrease for the 26 weeks ended August 2, 2008 compared to the 26 weeks ended August 4, 2007 reflects a $65.0 million decrease in the comparable store group and a $4.3 million decrease in the closing/closed store group, offset by a $26.2 million increase in the non-comparable store group due to the inclusion of sales for the 14 stores opened in 2007 and the five stores opened in 2008. Comparable stores sales for the 26 weeks ended August 2, 2008 decreased 9.5% compared to the 26 weeks ended August 4, 2007.

Gross profit for the 26 weeks ended August 2, 2008 was $171.9 million or 25.9 percent of net sales compared to $191.1 million or 27.0 percent of net sales for the 26 weeks ended August 4, 2007. The $19.2 million decrease in gross profit reflects a $21.8 million decrease in the comparable store group and a $1.7 million decrease in the closing/closed store group, partially offset by a $4.3 million increase in the non-comparable store group due to the inclusion of operating results for the 14 stores opened in 2007 and the five stores opened in 2008. Gross profit as a percent of sales decreased during the first half of 2008 primarily from a 1.4 percentage point increase in occupancy costs due to lack of leverage on lower sales. Merchandise margin increased 0.3 percentage point due to a 0.5 percentage point increase in markup offset by a 0.2 percentage point increase in markdowns.

SG&A expenses decreased $1.1 million to $184.1 million for the 26 weeks ended August 2, 2008 from $185.1 million for the same 2007 period, but increased as a percent of net sales to 27.7 percent of sales from 26.2 percent of sales. Store operating expenses and depreciation increased $1.2 million during the first half of 2008 due to a $6.4 million increase in expenses for the non-comparable store group, substantially offset by a $5.3 million decrease in expenses for the comparable store group. The non-comparable store group had higher expenses this period due to the inclusion of operating results for the 14 stores opened in 2007 and the five stores opened in 2008, while the comparable store group expenses decreased due to cost saving initiatives. Store closing costs increased $1.2 million due to more planned store closings in 2008. Advertising expense was $5.1 million lower this period due to reduced spending on television, radio, newspaper and magazine advertising. We also incurred certain non-recurring legal expenses and professional fees related to our ongoing expense reduction initiatives in 2008, which totaled $2.8 million. Share-based compensation expense decreased $2.2 million ($1.4 million in cost of merchandise sold and $0.8 million in SG&A expenses) primarily due to compensation expense for 2006 performance shares issued being fully recognized through the first quarter of 2008.

Other income, net was $11.3 million or 1.7 percent of net sales for the 26 weeks ended August 2, 2008 compared to $10.6 million or 1.5 percent of net sales for the same 2007 period. The increase is due to an increased number of credit cards issued through our co-brand credit card program.

The effective income tax rate was 31.3 percent for the first half of 2008 compared to 38.3 percent for the first half of 2007. The rates reflect the statutory federal and state rates, but due to the small taxable loss in 2008, certain book/tax differences and the recording of unrecognized tax benefits in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, have a more significant effect on the rate. For the year, we expect the effective tax rate to be approximately 40 percent.

This excerpt taken from the SMRT 10-Q filed Jun 11, 2008.

For the 13 weeks ended May 3, 2008 compared to the 13 weeks ended May 5, 2007

The $24.0 million or 6.4% total net sales decrease for the 13 weeks ended May 3, 2008 compared to the 13 weeks ended May 5, 2007 reflects a $34.7 million decrease in comparable store sales and a $2.1 million decrease in net sales due to the closing of two stores in 2007 and one in 2008, offset by an increase in net sales of $12.8 million due to the inclusion of sales for the 14 stores opened in 2007 and the opening of five stores in 2008. Comparable stores sales for the 13 weeks ended May 3, 2008 decreased 9.3% compared to the 13 weeks ended May 5, 2007.

Gross profit for the 13 weeks ended May 3, 2008 was $97.7 million or 27.8 percent of net sales compared to $104.9 million or 27.9 percent of net sales for the 13 weeks ended May 5, 2007. The $7.2 million decrease in gross profit reflects an $8.6 million decrease in the comparable store group and a $0.7 million decrease due to the closing of two stores in 2007 and one in 2008, partially offset by a $2.1 million increase due to the inclusion of operating results for the 14 stores opened in 2007 and the opening of five stores in 2008. Gross profit as a percent of sales was essentially flat to last year due to a 1.2 percentage point increase in occupancy and buying costs offset by a 0.7 percentage point decrease in markdowns and a 0.4 percentage point increase in markup.

SG&A expenses decreased $5.9 million to $91.5 million or 26.0 percent of net sales for the 13 weeks ended May 3, 2008 from $97.4 million or 25.9 percent of net sales for the same 2007 quarter. Even though the total number of stores increased by 14 since the first quarter of 2007, store operating expenses and depreciation increased only $0.4 million, while advertising expense decreased $4.6 million and corporate expense decreased $1.6 million. The modest increase in store operating expenses and depreciation included a $3.7 million increase in expenses for the non-comparable store group, offset by a $2.9 million decrease in the comparable store group and a $0.5 million decrease from the closing of two stores in 2007 and one store in 2008. The non-comparable store group had higher expenses this quarter due to the inclusion of operating results for the 14 stores opened in 2007 and the five stores opened in 2008, while the comparable store group expenses decreased due to cost saving initiatives. Advertising expense was lower this quarter due to reduced spending on television, radio, newspaper and magazine advertising. Corporate overhead expense was lower primarily due to cost saving initiatives and decreased share-based compensation expense.

Share-based compensation expense from stock options, restricted stock and performance awards was $1.3 million for the first quarter of 2008 and $2.3 million for the first quarter of 2007. The decrease of $1.0 million is included in cost of merchandise sold at $0.6 million and in SG&A expenses at $0.4 million.

Other income, net was $5.9 million or 1.7 percent of net sales for the 13 weeks ended May 3, 2008 compared to $5.4 million or 1.4 percent of net sales for the same 2007 quarter. The increase is due to an increased number of credit cards issued through our co-brand credit card program.

The effective income tax rate increased from 37.6 percent for the first quarter of 2007 to 40.5 percent for the first quarter of 2008 primarily due to the effect on statutory rates of permanent book/tax items and the recording of unrecognized tax benefits in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes.

These excerpts taken from the SMRT 10-K filed Apr 17, 2008.

Year Ended February 2, 2008 Compared to Year Ended February 3, 2007

The $43.7 million or 2.9 percent total net sales decrease for the year ended February 2, 2008 compared to the prior year reflects a $79.4 million decrease in comparable store sales and a $12.1 million decrease in net sales due to the closing of six stores in 2006 and two stores in 2007, offset by an increase in net sales of $21.8 million due to the inclusion of sales for the 12 stores opened in 2006 and $26.0 million for the opening of 14 new stores in 2007. Included in the aforementioned changes is a $22.1 million sales decrease due to last year’s sales including an extra week.

Gross profit for the year ended February 2, 2008 was $361.4 million or 24.8 percent of net sales, a 2.9 percentage point decrease from gross profit of $416.3 million or 27.7 percent of net sales for the year ended February 3, 2007. The $54.9 million decrease in gross profit reflects a $59.3 million decrease in the comparable store group and a $2.4 million decrease due to the closing of six stores in 2006 and two stores in 2007, offset by a $1.8 million increase due to the inclusion of operating results for the 12 stores opened in 2006 and $5.0 million for the opening of 14 new stores in 2007. Gross profit as a percent of sales decreased in 2007 from 2006 due to a 2.8 percentage point increase in markdowns, a 0.4 percentage point increase in occupancy costs and a 0.3 percentage point increase in buying costs, offset by a 0.7 percentage point improvement in markup. Markdowns were significantly higher this year due to the substantial decline in sales requiring us to offer dramatic discounts to clear seasonal goods.

SG&A expenses were $388.6 million or 26.7 percent of net sales for the year ended February 2, 2008, as compared to $376.6 million or 25.1 percent of net sales for 2006. The SG&A rate was higher in 2007 due to a lack of leverage on decreased sales and expenses increased $12.0 million primarily due to a $10.3 million increase in store operating expenses for the non-comparable store group, a $5.2 million increase in advertising expense, a $2.8 million increase in store closing and asset impairment expenses, a $2.5 million increase in depreciation expense and a $1.9 million increase in corporate overhead expenses. Store operating expenses were reduced by $8.1 million in the comparable store group due primarily to cost saving initiatives and $2.6 million for the six stores that closed in 2006 and two stores that closed in 2007. The non-comparable store group had higher operating expenses this period due to the inclusion of operating results for the 12 stores opened in 2006 and the 14 stores opened in 2007. Advertising expense was higher for the year due to increased spending, including additional television advertising. Corporate overhead expenses were higher this year primarily due to $1.8 million of separation costs for the August 2007 resignation of the former President/Chief Executive Officer.

Pre-opening expenses for the 14 stores opened in 2007 and the 12 stores opened in 2006 amounted to $2.7 million and $3.3 million, respectively.

The Company incurred net interest expense of $0.8 million during 2007 compared to earning $1.0 million of net interest income during 2006. We were borrowing under the revolving line of credit agreement during the second half of 2006 and most of 2007 and had $27.1 million in borrowings at February 2, 2008.

Year Ended February 2, 2008 Compared to Year Ended February 3, 2007

STYLE="margin-top:6px;margin-bottom:0px">The $43.7 million or 2.9 percent total net sales decrease for the year ended February 2, 2008 compared to the prior year reflects a $79.4 million decrease in
comparable store sales and a $12.1 million decrease in net sales due to the closing of six stores in 2006 and two stores in 2007, offset by an increase in net sales of $21.8 million due to the inclusion of sales for the 12 stores opened in 2006 and
$26.0 million for the opening of 14 new stores in 2007. Included in the aforementioned changes is a $22.1 million sales decrease due to last year’s sales including an extra week.

FACE="Times New Roman" SIZE="2">Gross profit for the year ended February 2, 2008 was $361.4 million or 24.8 percent of net sales, a 2.9 percentage point decrease from gross profit of $416.3 million or 27.7 percent of net sales for the year
ended February 3, 2007. The $54.9 million decrease in gross profit reflects a $59.3 million decrease in the comparable store group and a $2.4 million decrease due to the closing of six stores in 2006 and two stores in 2007, offset by a $1.8
million increase due to the inclusion of operating results for the 12 stores opened in 2006 and $5.0 million for the opening of 14 new stores in 2007. Gross profit as a percent of sales decreased in 2007 from 2006 due to a 2.8 percentage point
increase in markdowns, a 0.4 percentage point increase in occupancy costs and a 0.3 percentage point increase in buying costs, offset by a 0.7 percentage point improvement in markup. Markdowns were significantly higher this year due to the
substantial decline in sales requiring us to offer dramatic discounts to clear seasonal goods.

SG&A expenses were $388.6 million or 26.7 percent of
net sales for the year ended February 2, 2008, as compared to $376.6 million or 25.1 percent of net sales for 2006. The SG&A rate was higher in 2007 due to a lack of leverage on decreased sales and expenses increased $12.0 million primarily
due to a $10.3 million increase in store operating expenses for the non-comparable store group, a $5.2 million increase in advertising expense, a $2.8 million increase in store closing and asset impairment expenses, a $2.5 million increase in
depreciation expense and a $1.9 million increase in corporate overhead expenses. Store operating expenses were reduced by $8.1 million in the comparable store group due primarily to cost saving initiatives and $2.6 million for the six stores that
closed in 2006 and two stores that closed in 2007. The non-comparable store group had higher operating expenses this period due to the inclusion of operating results for the 12 stores opened in 2006 and the 14 stores opened in 2007. Advertising
expense was higher for the year due to increased spending, including additional television advertising. Corporate overhead expenses were higher this year primarily due to $1.8 million of separation costs for the August 2007 resignation of the former
President/Chief Executive Officer.

Pre-opening expenses for the 14 stores opened in 2007 and the 12 stores opened in 2006 amounted to $2.7 million and
$3.3 million, respectively.

The $3.2 million net increase in other income reflects increased revenues from our credit card program that was introduced in
October 2006, offset by a $1.8 million decrease from a 2006 settlement of Visa Check/Master Money anti-trust litigation.

The Company incurred net interest
expense of $0.8 million during 2007 compared to earning $1.0 million of net interest income during 2006. We were borrowing under the revolving line of credit agreement during the second half of 2006 and most of 2007 and had $27.1 million in
borrowings at February 2, 2008.

The effective income tax rate decreased from 36.9 percent in 2006 to 31.2 percent in 2007 primarily due to the
current year impact of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) and an increase in the effect of business tax credits.

STYLE="margin-top:18px;margin-bottom:0px">Year Ended February 3, 2007 Compared to Year Ended January 28, 2006

SIZE="2">The $19.7 million or 1.3 percent total sales increase for the year ended February 3, 2007 from the prior year reflects a $19.7 million sales increase due to 2006 including an extra week and the opening of 12 new stores which
contributed $28.6 million to net sales, offset by the closing of six stores and a 1.2 percentage point decrease in net sales from comparable stores.

Gross
profit for the year ended February 3, 2007 was $416.3 million or 27.7 percent of net sales, a 0.4 percentage point decrease from gross profit of $416.2 million or 28.1 percent of net sales for the year ended January 28, 2006. Gross profit
was negatively impacted by a 0.4 percentage point increase in occupancy costs due to increased rent, real estate taxes and utilities expenses, a 0.5 percentage point increase in markdowns and a 0.2 percentage point increase in share-based
compensation expense, somewhat offset by a 0.7 percentage point increase in markup. Gross profit for the year ended January 28, 2006 included a $1.9 million insurance recovery related to hurricane losses.

STYLE="margin-top:12px;margin-bottom:0px">SG&A expenses were $376.6 million or 25.1 percent of net sales for the year ended February 3, 2007, as compared to $353.1 million or 23.8 percent of net sales
for 2005. The SG&A rate was higher due to a lack of leverage on relatively flat sales, and reflected increases in payroll, depreciation, advertising, insurance expenses and share-based compensation. Included in SG&A expenses for fiscal 2006
and 2005 are store closing and asset impairment charges of $2.4 million and $3.4 million, respectively.

Pre-opening expenses for the 12 stores opened in 2006 and for the seven stores opened in 2005 amounted to $3.3 million
and $1.6 million, respectively.

The $2.7 million increase in other income is the result of a $1.8 million settlement received from the Visa Check/Master
Money anti-trust litigation and the revenue from our new credit card program.

The Company earned net interest income of $1.0 million on its cash and
short-term investments during 2006 compared to $2.0 million during 2005. The decrease in net interest income is due to decreased short-term investments, primarily as a result of paying dividends of $76.3 million during 2006, capital expenditures of
$48.8 million in 2006 and borrowing under the revolving line of credit agreement during the second half of 2006.

Liquidity and Capital Resources

The Company's primary source of liquidity is the sale of its merchandise inventories. Capital requirements and working capital needs are funded through a
combination of internally generated funds, a revolving credit facility and credit terms from vendors. Working capital is needed to support store inventories and capital investments for new store openings and to maintain existing stores.
Historically, the Company's working capital needs are lowest in the first quarter and highest in either the third or fourth quarter in anticipation of the fourth quarter peak selling season. As of February 2, 2008, the Company had $15.1 million
in cash and cash equivalents.

Net cash provided by operating activities was $17.8 million in 2007, $30.3 million in 2006 and $76.4 million in 2005.
Operating cash flows for 2007 decreased $12.5 million from 2006 due to a $37.1 million decrease in cash provided by net income (loss) plus non-cash charges, a $24.8 million increase in cash used for income taxes receivable/payable and a $4.2 million
increase in cash used for other working capital accounts excluding inventory. Inventories decreased $28.4 million in 2007 and increased $25.2 million in 2006. The decrease in inventories is due to lower sales this year resulting in less inventory
being purchased and lower inventory levels.

Operating cash flows for 2006 decreased $46.0 million from 2005 due to a $11.9 million decrease in cash
provided by net income plus non-cash charges and a $36.5 million increase in cash used to acquire inventories, offset by a $2.4 million increase in cash provided by other working capital accounts. We were building inventory levels during the second
half of 2006 to support a revamped home area, the expanded intimate, special size and casual categories, nine new fall stores, and a better transition in our resort stores. A sales shortfall during the 2006 holiday selling season resulted in higher
inventory levels.

Net cash (used in) provided by investing activities was $(15.1) million in 2007, $45.3 million in 2006 and $(67.3) million in 2005. The
net liquidation of short-term investments provided $10.8 million and $94.1 million of cash in 2007 and 2006, respectively, compared to net purchases of short-term investments using $32.5 million cash in 2005. Capital expenditures were higher in 2006
and 2005 due primarily to remodeling costs for existing stores and the roll-out of new point-of-sale equipment and software.

Net cash used in financing
activities was $5.2 million in 2007, $78.3 million in 2006 and $9.2 million in 2005. Dividends paid were highest in 2006 due to a special dividend of $1.50 per share totaling $65.4 million.

STYLE="margin-top:12px;margin-bottom:0px">The Company expects to invest approximately $17-20 million in capital expenditures in 2008. The cost of opening a typical new store generally ranges from $650,000
to $850,000 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
$950,000.

The Company has a $100 million senior revolving secured credit agreement (the “Agreement”) with a group of lenders which extends
through January 2011. Under the terms of the Agreement, the Company has the option to increase the facility by an additional $50 million. Borrowings are based on and collateralized primarily by eligible inventory. The Company had $27.1 million in
borrowings and $10.0 million of outstanding standby letters of credit at February 2, 2008. Approximately $63 million was available under the Agreement and no event of default existed under the terms of the Agreement at February 2, 2008.

The Company believes that expected net cash provided by operating activities and unused borrowing capacity under the revolving credit agreement will be
sufficient to fund anticipated current and long-term capital expenditures and working capital requirements. Should current operating conditions deteriorate, management can borrow on the revolving credit agreement or adjust operating plans, including
new store rollout.

EXCERPTS ON THIS PAGE:

10-K (2 sections)	Apr 16, 2009

10-Q	Dec 10, 2008

10-Q	Sep 10, 2008

10-Q	Jun 11, 2008

10-K (2 sections)	Apr 17, 2008

Stein Mart (SMRT)

SMRT » Topics » Year Ended February 2, 2008 Compared to Year Ended February 3, 2007

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