Stein Mart, Inc.

Table of Contents

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PART I		FINANCIAL INFORMATION

Item 1.		~~Condensed~~ Consolidated Financial Statements (Unaudited):

		~~Condensed~~ Consolidated Balance Sheets at November 2, 2019, February 2, 2019 and November 3, 2018 ~~February 3, 2018 and October 28, 2017~~			3

		~~Condensed~~ Consolidated Statements of Operations for the 13 and 39 ~~weeks~~Weeks Ended November 2, 2019 and November 3, 2018 ~~and October 28, 2017~~			4

		~~Condensed~~ Consolidated Statements of Comprehensive Loss for the 13 and 39 ~~weeks~~Weeks Ended November 2, 2019 and November 3, 2018 ~~and October 28, 2017~~			5

	Consolidated Statements of Shareholders’ Equity for the 13 and 39 Weeks Ended November 2, 2019 and November 3, 2018		6

	~~Condensed~~ Consolidated Statements of Cash Flows for the 39 ~~weeks~~Weeks Ended November 2, 2019 and November 3, 2018 ~~and October 28, 2017~~			6	8

		Notes to ~~Condensed~~ Consolidated Financial Statements ~~(Unaudited)~~			7	9

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			15	19

Item 4.		Controls and Procedures			21	27

PART II		OTHER INFORMATION

Item 1.		Legal Proceedings			21	28

Item 1A.		Risk Factors			21	28

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			22	28

Item 3.		Defaults upon Senior Securities			22	28

Item 4.		Mine Safety Disclosures			22
			29
~~Item 5.~~		~~Other Information~~			22

Item 6.		Exhibits			22
			30

SIGNATURES				23	31

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Stein Mart, Inc.

~~Condensed~~ Consolidated Balance Sheets

(Unaudited)

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


	November 3, 2018			As Adjusted February 3, 2018			As Adjusted October 28, 2017		November 2, 2019			February 2, 2019			November 3, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	13,884		$	10,400		$	13,230	$	12,953		$	9,049		$	13,884
Inventories		305,010			270,237			311,255		307,124			255,884			305,010
Prepaid expenses and other current assets		35,638			26,620			33,265		23,368			28,326			35,638

Total current assets		354,532			307,257			357,750		343,445			293,259			354,532
Property and equipment, net of accumulated depreciation and amortization of $250,418, $231,997 and $236,623, respectively		133,094			151,128			159,006
Property and equipment, net of accumulated depreciation and amortization of $270,205, $251,793 and $249,705, respectively										108,781			119,740			129,683
Operating lease assets										361,168			-			-
Other assets		24,594			24,973			30,192		25,949			24,108			24,594

Total assets	$	512,220		$	483,358		$	546,948	$	839,343		$	437,107		$	508,809

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	122,019		$	119,388		$	179,666	$	126,541		$	89,646		$	122,019
Current portion of long-term debt		-			13,738			3,333
Current portion of operating lease liabilities										80,936			-			-
Accrued expenses and other current liabilities		82,043			78,453			80,458		80,223			77,650			82,043

Total current liabilities		204,062			211,579			263,457		287,700			167,296			204,062
Long-term debt, net of current portion		190,657			142,387			147,472
Long-term debt										170,292			153,253			190,657
Deferred rent		40,558			40,860			41,592		-			39,708			40,558
Noncurrent operating lease liabilities										316,890			-			-
Other liabilities		35,982			40,214			47,219		32,554			33,897			35,982

Total liabilities		471,259			435,040			499,740		807,436			394,154			471,259

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES (Note 9)
Shareholders’ equity:
Preferred stock - $0.01 par value, 1,000,000 shares authorized; no shares issued or outstanding		-			-			-		-			-			-
Common stock - $0.01 par value; 100,000,000 shares authorized; 47,898,068, 47,978,275 and 47,867,630 shares issued and outstanding, respectively		479			480			479
Common stock - $0.01 par value; 100,000,000 shares authorized; 48,194,610, 47,874,286 and 47,898,068 shares issued and outstanding, respectively										482			479			479
Additionalpaid-in capital		59,009			56,002			54,528		61,504			60,172			59,009
Retained deficit		(18,295	)		(7,918	)		(7,521)		(30,283	)		(17,951	)		(21,706	)
Accumulated other comprehensive loss		(232	)		(246	)		(278)

Accumulated other comprehensive income (loss)										204			253			(232	)
Total shareholders’ equity	$	40,961		$	48,318		$	47,208		31,907			42,953			37,550

Total liabilities and shareholders’ equity	$	512,220		$	483,358		$	546,948	$	839,343		$	437,107		$	508,809

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

Stein Mart, Inc.

~~Condensed~~ Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)


	13 Weeks Ended November 3, 2018			As Adjusted 13 Weeks Ended October 28, 2017			39 Weeks Ended November 3, 2018			As Adjusted 39 Weeks Ended October 28, 2017
												13 Weeks Ended November 2, 2019			13 Weeks Ended November 3, 2018			39 Weeks Ended November 2, 2019			39 Weeks Ended November 3, 2018
Net sales	$	279,127		$	285,395		$	916,751		$	933,766	$	276,132		$	279,047		$	882,658		$	916,511
Other revenue		3,734			3,516			11,525			10,728		4,291			3,814			13,479			11,765

Total revenue		282,861			288,911			928,276			944,494		280,423			282,861			896,137			928,276
Cost of merchandise sold		209,286			217,126			671,427			705,273		206,721			209,286			651,122			671,426
Selling, general and administrative expenses		86,948			95,674			258,584			274,581		83,285			86,626			247,891			258,071

Operating loss		(13,373	)		(23,889	)		(1,735	)		(35,360)		(9,583	)		(13,051	)		(2,876	)		(1,221	)
Interest expense, net		3,078			1,156			8,406			3,437		2,306			3,078			7,024			8,406

Loss income before income taxes		(16,451	)		(25,045	)		(10,141	)		(38,797)
Income tax expense (benefit)		171			(10,429	)		291			(14,888)

Loss before income taxes													(11,889	)		(16,129	)		(9,900	)		(9,627	)
Income tax expense													203			171			308			291
Net loss	$	(16,622	)	$	(14,616	)	$	(10,432	)	$	(23,909)	$	(12,092	)	$	(16,300	)	$	(10,208	)	$	(9,918	)

Net loss per common share:
Basic	$	(0.36)		$	(0.31)		$	(0.22)		$	(0.52)

Diluted	$	(0.36)		$	(0.31)		$	(0.22)		$	(0.52)

Basic and Diluted												$	(0.25	)	$	(0.35	)	$	(0.22	)	$	(0.21	)
Weighted-average shares outstanding:
Basic		46,743			46,447			46,674			46,292

Diluted		46,743			46,447			46,674			46,292

Dividends declared per common share	$	-		$	-		$	-		$	0.075

Basic and Diluted													47,545			46,743			47,354			46,674

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

Stein Mart, Inc.

~~Condensed~~ Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)


	13 Weeks Ended November 3, 2018		13 Weeks Ended October 28, 2017		39 Weeks Ended November 3, 2018		39 Weeks Ended October 28, 2017
									13 Weeks Ended November 2, 2019			13 Weeks Ended November 3, 2018			39 Weeks Ended November 2, 2019			39 Weeks Ended November 3, 2018
Net loss	$	(16,622)	$	(14,616)	$	(10,432)	$	(23,909)	$	(12,092	)	$	(16,300	)	$	(10,208	)	$	(9,918	)
Other comprehensive income, net of tax:
Other comprehensive (loss) income, net of tax:
Amounts reclassified from accumulated other comprehensive loss		5		9		14		26		(17	)		5			(49	)		14

Comprehensive loss	$	(16,617)	$	(14,607)	$	(10,418)	$	(23,883)	$	(12,109	)	$	(16,295	)	$	(10,257	)	$	(9,904	)

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

Stein Mart, Inc.

~~Condensed~~ Consolidated Statements of Shareholders’ Equity

(Unaudited)

(In thousands)

													Accumulated
							Additional						Other			Total
	Common Stock						Paid-in			Retained			Comprehensive			Shareholders’
	Shares			Amount			Capital			Deficit			Income (Loss)			Equity
Balance on February 2, 2019		47,874		$	479		$	60,172		$	(17,951	)	$	253		$	42,953
Net income		-			-			-			3,969			-			3,969
Other comprehensive loss, net of tax		-			-			-			-			(16	)		(16	)
Reacquired shares, net		(87	)		(1	)		(102	)		-			-			(103	)
Issuance of restricted stock, net		278			3			(3	)		-			-			-
Share-based compensation		-			-			730			-			-			730
Dividends, net of forfeitures		-			-			-			5			-			5
Adjustment for adoption of accounting standard		-			-			-			(2,133	)		-			(2,133	)
Balance on May 4, 2019		48,065			481			60,797			(16,110	)		237			45,405
Net loss		-			-			-			(2,085	)		-			(2,085	)
Other comprehensive loss, net of tax		-			-			-			-			(16	)		(16	)
Common shares issued under employee stock purchase plan		147			1			106			-			-			107
Reacquired shares, net		(12	)		-			(11	)		-			-			(11	)
Issuance of restricted stock, net		26			-			-			-			-			-
Share-based compensation		-			-			316			-			-			316
Dividends, net of forfeitures		-			-			-			1			-			1
Balance on August 3, 2019		48,226			482			61,208			(18,194	)		221			43,717
Net loss		-			-			-			(12,092	)		-			(12,092	)
Other comprehensive loss, net of tax		-			-			-			-			(17	)		(17	)
Reacquired shares, net		(8	)		-			(6	)		-			-			(6	)
Issuance of restricted stock, net		(23	)		-			-			-			-			-
Share-based compensation		-			-			302			-			-			302
Dividends, net of forfeitures		-			-			-			3			-			3
Balance on November 2, 2019		48,195		$	482		$	61,504		$	(30,283	)	$	204		$	31,907

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

Stein Mart, Inc.

Consolidated Statements of Shareholders’ Equity, continued

(Unaudited)

(In thousands)

													Accumulated
							Additional						Other			Total
	Common Stock						Paid-in			Retained			Comprehensive			Shareholders’
	Shares			Amount			Capital			Deficit			(Loss) Income			Equity
Balance on February 3, 2018		47,978		$	480		$	56,002		$	(11,843	)	$	(246	)	$	44,393
Net income		-			-			-			7,334			-			7,334
Other comprehensive income, net of tax		-			-			-			-			4			4
Reacquired shares		(45	)		(1	)		(36	)		-			-			(37	)
Issuance of restricted stock, net		(23	)		-			-			-			-			-
Share-based compensation		-			-			995			-			-			995
Dividends, net of forfeitures		-			-			-			8			-			8
Balance on May 5, 2018		47,910			479			56,961			(4,501	)		(242	)		52,697
Net loss		-			-			-			(952	)		-			(952	)
Other comprehensive income, net of tax		-			-			-			-			5			5
Common shares issued under employee stock purchase plan		92			1			89			-			-			90
Reacquired shares		(3	)		-			(10	)		-			-			(10	)
Issuance of restricted stock, net		(61	)		(1	)		1			-			-			-
Share-based compensation		-			-			847			-			-			847
Dividends, net of forfeitures		-			-			-			34			-			34
Balance on August 4, 2018		47,938			479			57,888			(5,419	)		(237	)		52,711
Net loss		-			-			-			(16,300	)		-			(16,300	)
Other comprehensive income, net of tax		-			-			-			-			5			5
Reacquired shares		(4	)		-			(10	)		-			-			(10	)
Issuance of restricted stock, net		(36	)		-			-			-			-			-
Share-based compensation		-			-			1,131			-			-			1,131
Dividends, net of forfeitures		-			-			-			13			-			13
Balance on November 3, 2018		47,898		$	479		$	59,009		$	(21,706	)	$	(232	)	$	37,550

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

Stein Mart, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	39 Weeks Ended November 3, 2018		As Adjusted 39 Weeks Ended October 28, 2017		39 Weeks Ended			39 Weeks Ended
					November 2, 2019			November 3, 2018
Cash flows from operating activities:
Net loss	$	(10,432)	$	(23,909)	$	(10,208	)	$	(9,918	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		24,513		24,254		21,220			23,799
Share-based compensation		2,973		4,194		1,348			2,973
Store closing (benefit) charge		(180)		97
Store closing benefits						(31	)		(180	)
Impairment of property and other assets		491		640		11			693
Loss on disposal of property and equipment		139		287		44			137
Deferred income taxes		-		1,900
Changes in assets and liabilities:
Inventories		(34,773)		(20,145)		(51,240	)		(34,773	)
Prepaid expenses and other current assets		(9,018)		(207)		4,159			(9,018	)
Other assets		(1,882)		(820)		(5,348	)		(1,882	)
Accounts payable		2,559		65,298		36,976			2,559
Accrued expenses and other current liabilities		3,977		3,781		1,046			3,977
Operating lease assets and liabilities, net						(3,640	)		-
Other liabilities		(3,928)		(2,566)		(4,197	)		(3,928	)

Net cash (used in) provided by operating activities		(25,561)		52,804

Net cash used in operating activities						(9,860	)		(25,561	)
Cash flows from investing activities:
Net acquisition of property and equipment		(7,379)		(17,168)		(5,145	)		(7,379	)
Proceeds from cancelled corporate owned life insurance policies		2,514		1,504
Proceeds from canceled corporate owned life insurance policies						2,900			2,514
Proceeds from insurance claims		296		-		82			296

Net cash used in investing activities		(4,569)		(15,664)		(2,163	)		(4,569	)

Cash flows from financing activities:
Proceeds from borrowings		1,033,415		290,169		305,032			1,033,415
Repayments of debt		(997,990)		(321,187)		(288,132	)		(997,990	)
Debt issuance costs		(1,146)		-		-			(1,146	)
Cash dividends paid		(147)		(3,597)		(91	)		(147	)
Capital lease payments		(551)		(1)		(869	)		(551	)
Proceeds from exercise of stock options and other		90		328
Proceeds from exercise of stock options						107			90
Repurchase of common stock		(57)		(226)		(120	)		(57	)

Net cash provided by (used in) financing activities		33,614		(34,514)

Net cash provided by financing activities						15,927			33,614
Net increase in cash and cash equivalents		3,484		2,626		3,904			3,484
Cash and cash equivalents at beginning of year		10,400		10,604		9,049			10,400

Cash and cash equivalents at end of period	$	13,884	$	13,230	$	12,953		$	13,884

Supplemental disclosures of cash flow information:
Income taxes received	$	(332)	$	(18,103)
Income taxes paid (received)					$	117		$	(332	)
Interest paid		7,758		3,340		6,696			7,758
Accruals and accounts payable for capital expenditures		324		2,479		558			324

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

Stein Mart, Inc.

Notes to ~~Condensed~~ Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying ~~Condensed~~ Consolidated Financial Statements ~~(Unaudited)~~ have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form10-Q and Article 10 of RegulationS-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual audited financial statements. In our opinion, all adjustments (consisting primarily of normal and recurring adjustments) considered necessary for a fair presentation have been included. Due to the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. These ~~Condensed~~ Consolidated Financial Statements ~~(Unaudited)~~ should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form10-K for the year ended February ~~3, 2018,~~2, 2019, filed with the Securities and Exchange Commission (“SEC”) on ~~May 4, 2018.~~March 28, 2019.

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

~~Revenue Recognition~~Recently Adopted Accounting Standards

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU")No. ~~2014-09,~~2016-02, Leases~~Revenue from Contracts with Customers (Topic 606)~~ ~~(“ASUNo. 2014-09”).~~ ~~This update provides a single, comprehensive model for entities~~, to ~~use in accounting for revenue arising from contracts with customers~~increase transparency and ~~supersedes most current revenue recognition guidance, including industry-specific guidance. ASUNo. 2014-09~~ ~~requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects~~comparability among organizations by recognizing lease assets and liabilities on the ~~consideration to which the entity expects to be entitled in exchange for those goods or services.~~balance sheet and disclosing key information about leasing arrangements. We adopted this ASU and the related amendments as of February 3, 2019.

At transition, we elected the package of practical expedients, which allowed us to carry forward the historical lease classification, to not reassess prior conclusions related to initial direct costs, and to not reassess whether any expired or existing contracts are or contain leases. We did not elect the use of hindsight to determine the term of our leases at transition. We also elected the practical expedient to not separate non-lease components from the lease components to which they relate and instead to combine them and account for them as a single lease component. We made an accounting policy election not to capitalize leases with an initial term of twelve months or less.

Adoption of the new standard had a significant effect on our Consolidated Balance Sheets due to the addition of operating lease assets of $382.5 million and operating lease liabilities of $422.7 million, as of February ~~4, 2018, for all revenue contracts with our customers using the full retrospective approach and~~3, 2019. We also recognized a cumulative effect adjustment that increased retained ~~earnings as~~deficit by $2.1 million for transition impairments related to previously impaired leased locations. The standard did not have a significant effect on our results of ~~January 28, 2017, by less than $0.1 million as we now recognize Ecommerce sales when orders are delivered to~~operations or cash flows. Consistent with the ~~carrier and no longer reserve for orders~~optional effective date transition method, the financial information in ~~transit. Prior~~the Consolidated Balance Sheets prior to the adoption of ~~ASUNo. 2014-09,~~ our sales return liability was recorded as a net liability on the Condensed Consolidated Balance Sheets (Unaudited). We now recognize a gross return liability for the sales amounts expected to be refunded to customersthis new lease accounting guidance has not been adjusted and a corresponding asset for the recoverable cost of the merchandise expected to be returned by customers in other current assets and other current liabilities on the Condensed Consolidated Balance Sheets (Unaudited). Other changes relate primarilyis therefore not comparable to the ~~presentation~~current period presented.

See Note 8 “Leases” for additional information.

Recent Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40). This update provides additional guidance to ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which was issued in April 2015. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). This ASU is effective for annual reporting periods beginning on or after December 15, 2019, and interim periods within those annual periods with early adoption permitted in any interim period for which financial statements have not yet been issued. We do not believe that the adoption will have a material effect on our financial condition, results of ~~revenue. Revenue associated with our credit card program~~operations or cash flows.

Stein Mart, Inc.

Notes to Consolidated Financial Statements - Continued

2. Revision of Previously Issued Financial Statements

During the quarter ended May 4, 2019, we identified a financial statement misstatement related to previous impairment calculations, which resulted in an overstatement of property and ~~breakage revenue has been retrospectively reclassified to present the revenue~~equipment, net, and an understatement of retained deficit of $4.1 million and $3.4 million as of February 2, 2019 and November 3, 2018, respectively. The error also resulted in ~~other revenues, rather than as~~ an ~~offset to~~understatement of selling, general and administrative expenses of $0.2 million for the year ended February 2, 2019 and an overstatement of selling, general and administrative expenses of $0.3 million and $0.5 million for the 13 and 39 weeks ended November 3, 2018, respectively. Based on an analysis of quantitative and qualitative factors, we determined that the ~~Condensed~~error was not material to our prior interim and annual financial statements. To correct this error, we revised the accompanying Consolidated ~~Statements~~Balance Sheets as of ~~Income (Unaudited)~~February 2, 2019 and November 3, 2018 and the Statement of Operations for ~~all periods presented.~~the 13 and 39 weeks ended November 3, 2018.

3. Revenue Recognition

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

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

Our gift and merchandise return cards may not ultimately be redeemed either in full or partially. We account for this “breakage” of unused amounts as revenue in proportion to the pattern of rights exercised by the customer. ~~With the adoption of ASUNo. 2014-09,~~ ~~breakage~~Breakage revenue is recorded within other revenue in the ~~Condensed~~ Consolidated Statements of ~~Operations (Unaudited).~~Operations. During the 13 weeks ended November 2, 2019 and November 3, 2018, ~~and October 28, 2017,~~ we recognized $0.2 million ~~of breakage revenue on unused gift~~ and ~~merchandise return cards. During the 39 weeks ended November 3, 2018 and October 28, 2017, we recognized $1.1 million and $0.8~~$0.3 million, respectively, of breakage revenue on unused gift and merchandise return cards. During each of the 39 weeks ended November 2, 2019 and November 3, 2018, respectively, we recognized $1.1 million of breakage revenue on unused gift and merchandise return cards.

Stein Mart Credit ~~Card~~Cards

We offerco-branded and private label credit cards under the Stein Mart brand. These cards are issued by Synchrony Bank (“Synchrony”) in accordance with our Amended and Restated Co-Brand and Private Label Credit Card Consumer Program Agreement (the “Agreement”). Synchrony extends credit directly to card holders, provides all servicing for the credit card accounts and bears all risk of credit and fraud losses.

We receive royalty revenue from Synchrony based on card usage in our stores and at other retailers for the Stein Mart Mastercard. We also receive revenues for new accounts and gain share based on the profitability of the overall program. Credit card revenue is recorded within

~~Stein Mart, Inc.~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Unaudited)~~

other revenue in the ~~Condensed~~ Consolidated Statements of ~~Operations (Unaudited).~~Operations. These revenues are recorded as they are earned based on the occurrence of the various program activities and typically represent the majority of other revenue. On August 21, 2019, we entered into an amendment to our Agreement with Synchrony whereby Synchrony waived its rights to require us to post cash reserves to cure our failure to satisfy one or more of the quarterly financial covenants specified in the Agreement for periods through October 31, 2020 (the “Exemption Period”). As consideration for Synchrony’s entry into this amendment, we agreed to reduce the amount of fees paid to us by Synchrony under the Agreement from September 1, 2019 through the end of the Exemption Period.

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

~~Adjustments to Previously Reported Financial Statements~~10

~~The following tables set forth the adjustments made to our financial statements for the adoption of ASUNo. 2014-09,~~~~Revenue from Contracts with Customers~~ ~~(in thousands):~~

~~Condensed Consolidated Balance Sheets~~

   February 3, 2018
   As Reported Adjustment As Adjusted
Prepaid expenses and other current assets
   $             24,194 $             2,426 $         26,620
Accrued expenses and other current liabilities
   76,058 2,395 78,453
Retained deficit
   (7,949 ) 31 (7,918 )
   October 28, 2017
   As Reported Adjustment As Adjusted
Prepaid expenses and other current assets
   $ 31,371 $ 1,894 $ 33,265
Accrued expenses and other current liabilities
   78,595 1,863 80,458
Retained deficit
   (7,552 ) 31 (7,521 )
Condensed Consolidated Statements of Operations
   13 Weeks Ended October 28, 2017
   As Reported Adjustment As Adjusted
Other revenue
   $         - $         3,516 $         3,516
Selling, general and administrative expenses
   92,158 3,516 95,674
   39 Weeks Ended October 28, 2017
   As Reported Adjustment As Adjusted
Other revenue
   $         - $             10,728 $         10,728
Selling, general and administrative expenses
   263,853 10,728 274,581
Condensed Consolidated Statements of Cash Flows
   39 Weeks Ended October 28, 2017
   As Reported Adjustment As Adjusted
Prepaid expenses and other current assets
   $             (1,122 ) $             915 $             (207 )
Accrued expenses and other current liabilities
   4,696 (915 ) 3,781

Stein Mart, Inc.

Notes to ~~Condensed~~ Consolidated Financial Statements - Continued

~~(Unaudited)~~

Certificates may not ultimately be redeemed either in full or partially. We account for this “breakage” of unused amounts as revenue in proportion to the pattern of rights exercised by the customer. Breakage revenue is recorded within other revenue in the Consolidated Statements of Operations. During the 13 weeks ended November 2, 2019 and November 3, 2018, we recognized $1.6 million and $1.7 million, respectively, of breakage revenue on unused credit card reward certificates and points. During the 39 weeks ended November 2, 2019 and November 3, 2018, we recognized $5.4 million and $4.1 million, respectively, of breakage revenue on unused credit card reward certificates and points.

Revenue

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


	13 Weeks Ended November 3, 2018		13 Weeks Ended October 28, 2017		39 Weeks Ended November 3, 2018		39 Weeks Ended October 28, 2017		13 Weeks Ended November 2, 2019			13 Weeks Ended November 3, 2018		39 Weeks Ended November 2, 2019			39 Weeks Ended November 3, 2018
Store sales (1)	$	261,138	$	271,836	$	860,143	$	891,792		$	263,285	$	261,058		$	829,599	$	859,903
Ecommerce sales (1)		11,897		8,172		37,728		24,663			7,158		11,897			34,364		37,728
Licensed department commissions (2)		6,092		5,387		18,880		17,311
Licensee commissions (2)											5,689		6,092			18,695		18,880
Net sales	$	279,127	$	285,395	$	916,751	$	933,766			276,132		279,047			882,658		916,511

Credit card revenue (3)		1,754		2,230		6,243		7,596			2,382		1,754			6,737		6,243
Breakage revenue (4)		1,930		1,242		5,146		3,018			1,816		1,930			6,431		5,146
Other		50		44		136		114			93		130			311		376
Other revenue		3,734		3,516		11,525		10,728			4,291		3,814			13,479		11,765
Total revenue	$	282,861	$	288,911	$	928,276	$	944,494		$	280,423	$	282,861		$	896,137	$	928,276

(1)

Store and Ecommerce sales are net of any returns, discounts andpercentage-off coupons. During fiscal 2019, there has been a shift in online order fulfillment from vendor and/or our warehouses to our stores.

(2)

Licensed department commissions are ~~licensed department commissions received~~ net of any returns.

(3)

Credit card revenue earned from Synchrony programs.

(4)

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

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

   November 3, 2018 February 3, 2018 October 28, 2017
Reserve for sales returns
   $                   (4,888 ) $                 (4,094 ) $             (3,189 )
Cost of inventory returns
   1,919 2,426 1,894
The following table sets forth the contract liabilities and their relationship to revenue (in thousands):

   November 3, 2018 February 3, 2018 October 28, 2017
Deferred revenue contracts
   $                 (11,417 ) $             (12,512 ) $             (12,909 )
Gift card liability
   (8,774 ) (12,180 ) (8,799 )
Credit card reward liability
   (4,972 ) (4,689 ) (3,224 )
Liability for deferred revenue
   $                 (25,163 ) $               (29,381 ) $             (24,932 )

	November 2, 2019				February 2, 2019			November 3, 2018
Reserve for sales returns		$	(4,432	)	$	(3,469	)	$	(4,888	)
Cost of inventory returns			2,440			1,984			1,919

~~Contract~~

The following table sets forth the contract liabilities ~~include consideration received for gift card~~ and ~~loyalty related performance obligations which have not been satisfied as of the dates presented above.~~their relationship to revenue (in thousands):

	November 2, 2019				February 2, 2019			November 3, 2018
Deferred revenue contracts		$	(9,817	)	$	(11,017	)	$	(11,417	)
Gift card liability			(8,718	)		(12,246	)		(8,774	)
Credit card reward liability			(5,548	)		(5,583	)		(4,972	)
Liability for deferred revenue		$	(24,083	)	$	(28,846	)	$	(25,163	)

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


	39 Weeks Ended November 3, 2018			39 Weeks Ended October 28, 2017			39 Weeks Ended November 2, 2019				39 Weeks Ended November 3, 2018
Beginning balance	$	29,381		$	29,412			$	28,846		$	29,381
Current period gift cards sold and loyalty reward points earned		23,287			20,212				23,697			23,287
Net sales from redemptions (1)		(21,164	)		(20,483	)			(20,829	)		(21,164	)
Breakage and amortization (2)		(6,341	)		(4,209	)			(7,631	)		(6,341	)
Ending balance	$	25,163		$	24,932			$	24,083		$	25,163

(1)

$~~1.0~~7.3 million and ~~$0.9 million in net sales from redemptions were included in the beginning balance of contract liabilities for the 13 weeks ended November 3, 2018 and October 28, 2017, respectively.~~ $7.4 ~~and $7.3~~ million in net sales from redemptions were included in the beginning balance of contract liabilities for the 39 weeks ended November 2, 2019 and November 3, 2018, ~~and October 28, 2017,~~ respectively.

(2)

$~~0.4 million in breakage and amortization were included in the beginning balance of contract liabilities for the 13 weeks ended November 3, 2018 and October 28, 2017, respectively. $3.1~~3.4 million and ~~$2.1~~$3.1 million in breakage and amortization were included in the beginning balance of contract liabilities for the 39 weeks ended November 2, 2019 and November 3, 2018, ~~and October 28, 2017,~~ respectively.

911

Stein Mart, Inc.

Notes to ~~Condensed~~ Consolidated Financial Statements - Continued

~~(Unaudited)~~

4. Accrued Expenses and Other Current Liabilities

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


	November 3, 2018		February 3, 2018		October 28, 2017		November 2, 2019			February 2, 2019		November 3, 2018
Property taxes	$	18,424	$	17,451	$	17,364		$	19,291	$	18,852	$	18,424
Unredeemed gift and merchandise return cards		8,734		12,150		8,777			8,718		12,246		8,774
Compensation and employee benefits		8,649		7,732		7,944			7,476		9,271		8,649
Accrued vacation		7,632		7,632		7,715			4,217		4,365		7,632
Other		38,604		33,488		38,658			40,521		32,916		38,564
Accrued expenses and other current liabilities	$	82,043	$	78,453	$	80,458		$	80,223	$	77,650	$	82,043

~~Recent Accounting Pronouncements~~

~~In February 2016, the FASB issued ASUNo. 2016-02,~~ ~~Leases (Topic 842)~~. This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and also disclose key information about leasing arrangements. The main provisions of the new standard include: clarifications to the definitions of a lease, components of leases and criteria for determining lease classification; requiring virtually all leased assets, including operating leases and related liabilities, to be reflected on the lessee’s balance sheet; and expanding and adding to the required disclosures for lessees. This ASU is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual period. This guidance was additionally updated by ASU~~No. 2018-11~~ in July 2018. This update, among other things, added a transition option for lessees. Under the transition option, entities can choose to continue to apply the legacy guidance and make only annual disclosures for the comparative periods or, for those who elect the transition option, can recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than the earliest period presented. We plan to adopt these ASU’s in fiscal 2019 using the effective date transition method. The effective date transition method allows us to initially apply the new leases standard at the application date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, we have elected to apply the package of practical expedients at the transition that allows us to forgo reassessing certain conclusions reached under Accounting Standards Codification (“ASC”) 840. We do not need to assess whether any expired or existing contracts are leases or contain leases under ASC 842, classification of any expired or existing leases under ASC 842, and whether unamortized initial direct costs for existing leases meet the definition of initial direct costs under ASC 840. We currently believe the adoption of this ASU will have a significant effect on our Consolidated Balance Sheets due to the addition of our applicable leased assets and related liabilities. We do not believe the adoption of this ASU will have a significant effect on our results of operations as the lease expense under the new standard will approximate our rent expense as it is currently being recorded.

~~In August 2018, the FASB issued ASUNo. 2018-15,~~~~Intangibles—Goodwill and Other—Internal-Use~~ ~~Software (Subtopic350-40).~~~~This update provides additional guidance to ASUNo. 2015-05,~~~~Intangibles—Goodwill andOther—Internal-Use~~ ~~Software (Subtopic350-40~~, which was issued in April 2015. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain~~internal-use~~ software (and hosting arrangements that include an internal use software license). This ASU is effective for annual reporting periods beginning on or after December 15, 2019, and interim periods within those annual periods with early adoption permitted in any interim period for which financial statements have not yet been issued. We are in the process of evaluating the effect that this ASU will have on our financial condition, results of operations and cash flows.

2.5. Shareholders’ Equity

Dividends

During the 39 weeks ended November 2, 2019 and November 3, 2018, there were no cash dividends declared. We paid $0.1 million in accrued dividends on restricted shares that vested during the period. During the 39 weeks ended October 28, 2017, we paid one quarterly cash dividend of $0.075 per common share on April 14, 2017.

Stock Repurchase Plan

During the 13 weeks ended November 2, 2019 and November 3, 2018, we repurchased 8,483 shares and 3,832 shares, respectively, of our common stock in the open market at a total cost of less than $0.1 ~~million. During the 13 weeks ended October 28, 2017, we repurchased 5,636 shares of our common stock at a total cost of less than $0.1 million.~~million, respectively. During the 39 weeks ended November 2, 2019 and November 3, 2018, we repurchased 122,912 shares and 52,241 shares, respectively, of our common stock in the open market at a total cost of $0.1 million and less than $0.1 ~~million. During the 39 weeks ended October 28, 2017, we repurchased 69,122 shares of our common stock at a total cost of approximately $0.2 million.~~million, respectively. Stock repurchases during these periods were for ~~tax withholding amounts~~taxes due on the vesting of employee stock ~~awards and during 2018 and 2017, included no shares purchased on the open market under our previously authorized stock repurchase plan.~~awards. As of November ~~3, 2018,~~2, 2019, there are 366,889 shares that can be repurchased pursuant to the Board of Directors’ current authorization.

~~Stein Mart, Inc.~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Unaudited)~~

3.6. Earnings (Loss) per Share

~~Our restricted stock awards granted in 2013 containnon-forfeitable~~ ~~rights to dividends and, as such, are considered participating securities. Participating securities are to be included in the calculation of~~Basic earnings (loss) per share ~~under~~("EPS”) is computed by dividing net income (loss) by the~~two-class~~ ~~method. In applying thetwo-class~~ ~~method, income is allocated to both~~ basic weighted-average number of common ~~shares and participating securities based on their respective weighted-average~~ shares outstanding for the period.

~~The following table sets forth~~ Diluted EPS is calculated by considering the ~~calculation~~impact of ~~basic and diluted loss per~~potential common ~~share (in thousands, except per share data):~~stock equivalents on the weighted-average number of common shares outstanding. We no longer compute EPS under the two-class method since we do not have any remaining participating securities containing non-forfeitable rights to dividends.

13 Weeks Ended

November 3, 2018

13 Weeks Ended

October 28, 2017

39 Weeks Ended

November 3, 2018

39 Weeks Ended

October 28, 2017

Basic:

Net loss
   $        (16,622)    $        (14,616)    $        (10,432)    $        (23,909)
Income allocated to participating securities
   -    -    -    2
Net loss available to common shareholders
   $        (16,622)    $        (14,616)    $        (10,432)    $        (23,911)
Basic weighted-average shares outstanding
   46,743    46,447    46,674    46,292
Basic loss per common share
   $            (0.36)    $ (0.31)    $ (0.22)    $ (0.52)
Diluted:

Net loss
   $        (16,622)    $        (14,616)    $        (10,432)    $        (23,909)
Income allocated to diluted participating securities
   -    -    -    2
Net loss available to common shareholders
   $        (16,622)    $        (14,616)    $        (10,432)    $        (23,911)
Basic weighted-average shares outstanding
   46,743    46,447    46,674    46,292
Incremental shares from share-based compensation plans
   -    -    -    -
Diluted weighted-average shares outstanding
   46,743    46,447    46,674    46,292
Diluted loss per common share
   $            (0.36)    $            (0.31)    $            (0.22)    $            (0.52)

~~Diluted weighted-average shares outstanding exclude approximately 2.3 million and 2.9 million shares during~~For the 13 weeks ended November 2, 2019 and November 3, 2018, there were 0.3 million shares and ~~October 28, 2017,~~1.0 million shares, respectively, ~~which~~excluded from the diluted EPS calculation because the impact of their assumed exercise would be anti-dilutive due to net losses in those respective periods. For the 39 weeks ended November 2, 2019 and November 3, 2018, there were 0.3 million shares and 0.7 million shares, respectively, excluded from the diluted EPS calculation because the impact of their assumed exercise would be anti-dilutive due to net losses in those respective periods. These shares are ~~anti-dilutive for the periods presented. Diluted weighted-average~~comprised of a mix of performance awards, restricted stock awards, and restricted stock units.

Dilutive weighted average shares outstanding ~~exclude~~also excludes approximately 2.3 million potential common stock equivalents that were out-of-the-money during both the 13 weeks ended November 2, 2019 and November 3, 2018, respectively. Dilutive weighted average shares outstanding also excludes approximately 2.5 million and 2.7 million ~~and 2.9 million shares~~potential common stock equivalents that were out-of-the-money during the 39 weeks ended November 2, 2019 and November 3, 2018, ~~and October 28, 2017, respectively, which are anti-dilutive for the periods presented.~~respectively. These shares are comprised of a mix of stock options, ~~performance~~restricted stock awards, and restricted ~~stock. Stock options excluded were those that had exercise prices greater than the average market price of the common shares such that inclusion would have been anti-dilutive. Restricted~~ stock ~~and performance shares excluded were shares that were anti-dilutive as calculated using the treasury stock method.~~units.

4.12

Stein Mart, Inc.

Notes to Consolidated Financial Statements - Continued

7. Debt

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


	November 3, 2018		February 3, 2018		October 28, 2017		November 2, 2019				February 2, 2019			November 3, 2018
Revolving credit facility	$	156,551	$	142,387	$	147,483		$	136,000		$	119,100		$	156,551
Term loan		35,000		-		-			35,000			35,000			35,000
Promissory note		-		13,738		-
Equipment term loan		-		-		3,333
Total debt		191,551		156,125		150,816			171,000			154,100			191,551
Current portion		-		(13,738)		(3,333)
Debt issuance costs		(894)		-		(11)			(708	)		(847	)		(894	)
Long-term debt	$	190,657	$	142,387	$	147,472
Long-term debt (1)								$	170,292		$	153,253		$	190,657

~~Stein Mart, Inc.~~

~~Notes~~(1) As of the periods presented above, all debt is considered to ~~Condensed Consolidated Financial Statements - Continued~~

~~(Unaudited)~~be long-term.

Revolving Credit Facility and Equipment Term Loan

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

On February 19, 2018, we entered into Amendment No. 1 (the “Credit Agreement Amendment”) to the Credit Agreement with Wells Fargo. The Credit Agreement Amendment ~~provides~~provided for, among other things, an Accommodation Period (as defined in the Credit Agreement Amendment) during which we were not required to meet the Fixed Charge Coverage Ratio (as defined in the Credit Agreement). This change permitted us to borrow the full amount of the then applicable borrowing base until we delivered our financial statements for the Measurement Period (as defined in the Credit Agreement) ended February 28, 2018. Pursuant to the Credit Agreement Amendment, a Cash Dominion Event (as defined in the Credit Agreement Amendment) occurred as of the effective date of the Credit Agreement Amendment and at all times thereafter. ~~As a result~~Because of the Cash Dominion Event, all of our cash receipts were swept daily to repay outstanding borrowings under the Credit Agreement and the amount outstanding under the Credit Agreement was classified as a short-term obligation. ~~See~~As noted below, ~~for discussion of~~ the Third Credit Agreement ~~and the removal of~~Amendment removed the Cash Dominion Event effective September 18, 2018.

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

On September 18, 2018, we entered into Amendment No. 3 ~~the~~ (the “Third Credit Agreement Amendment”) to the Credit Agreement with Wells Fargo. The Third Credit Agreement Amendment ~~provides~~provided for, among other things, the following: (1) the increase of Aggregate Tranche A Revolving Loan Commitments (as defined in the Second Credit Agreement Amendment) from $225.0 million to $240.0 million; (2) an extension of the ~~Maturity Date~~maturity date of the Revolving Credit Facility to the earlier of (a) the maturity date of the Term Loan Agreement (as defined below) or (b) September 18, 2023; and (3) the elimination of Cash Dominion Event status and a change in Cash Dominion to be triggered only in the event of (a) the occurrence and continuance of any Event of Default or (b) Excess Availability of less than (A) 10.0% of the loan cap at any time or (B) 12.5% of the loan cap for 3three consecutive business days. During 2018, debt issuance costs of less than $0.1 million were associated with the Third Credit Agreement Amendment and are being amortized over its ~~respective~~ term. Debt issuance costs of $0.1 million remaining under the initial Credit Agreement ~~will also be~~are being amortized over the new term of the Third Credit ~~Agreement.~~Agreement Amendment. The elimination of cash dominion status changed the debt classification from a short-term to long-term obligation.

Stein Mart, Inc.

Notes to Consolidated Financial Statements - Continued

On February 26, 2019, we entered into Amendment No. 4 (the “Fourth Credit Agreement Amendment”) to the Credit Agreement with Wells Fargo. The Fourth Credit Agreement Amendment provided for, among other things, a modification to the definition of “Capital Expenditures” and “Permitted Indebtedness” as defined in the Fourth Credit Agreement Amendment.

The total amount available for borrowings under the Credit Agreement is the lesser of $240.0 million or 100 percent of eligible credit card receivables and the net recovery percentage of eligible inventories less reserves. On November ~~3, 2018,~~2, 2019, in addition to outstanding borrowings under the Credit Agreement, we had ~~$8.5~~$7.9 million of outstanding letters of credit and our ~~unused availability under~~Excess Availability (as defined in the Credit ~~Agreement~~Agreement) was ~~$74.9~~$87.0 million. ~~The amount outstanding under the Credit Agreement has been classified as a long-term obligation.~~

The Credit Agreement contains customary representations and warranties, affirmative and negative covenants (including the requirement of a 1.0 to 1.0 consolidated Fixed Charge Coverage Ratio upon the occurrence and during the continuance of any Covenant Compliance Event, as defined in the Credit Agreement), and events of default for facilities of this type and is cross-collateralized and cross-defaulted. Collateral for the Revolving Credit Facility ~~and the Equipment Term Loan~~ consists of substantially all of our personal property. Wells Fargo has a first lien on all collateral other than equipment. ~~Wells Fargo Equipment Finance had a first lien on equipment through January 22, 2018, when we repaid the Equipment Term Loan in full.~~

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

The weighted average interest rate for the amount outstanding under the Credit Agreement was ~~4.10~~3.44 percent as of November ~~3, 2018.~~2, 2019.

~~Stein Mart, Inc.~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Unaudited)~~

~~Promissory Note~~

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

The Promissory Note had a fixed interest rate of 3.58 percent per annum and an original maturity date of April 1, 2018. On March 7, 2018, we executed an amendment to the Promissory Note under which the Trustee extended the maturity date of the note from April 1, 2018, to July 1, 2018 (the “Maturity Date”). The amendment did not alter the short-term nature of the Promissory Note. The Promissory Note could be prepaid in whole or in part at any time. All unpaid principal and accrued interest on the Promissory Note would have become due and payable on the Maturity Date. The Trustee could offset payments due under the Promissory Note against amounts we would otherwise be entitled to withdraw from the Trust under the terms of the Trust Agreement. On June 29, 2018, we repaid the outstanding balance of the Promissory Note.

On July 31, 2018, we executed a second promissory note from SunTrust Bank for $13.0 million which carries a fixed interest rate of 3.58 percent per annum and an original maturity date of September 10, 2018. This note is under the same terms as the Promissory Note executed on February 2, 2018. On September 10, 2018, we repaid the outstanding balance of the Promissory Note.

We believe we are able to borrow, on a short-term basis and subject to the formal agreement of the lender, amounts up to the cash surrender value of the life insurance policies related to our executive deferred compensation plans to provide additional liquidity if needed. At November 3, 2018, the cash surrender value of our life insurance policies was $12.8 million.

Term Loan

On March 14, 2018, we entered into a Term Loan Credit Agreement with Gordon Brothers Finance Company, as administrative agent (in such capacity, the “Term Loan Agent”), and Gordon Brothers Finance Company, LLC, as lender (the “Term Loan Agreement”). The Term Loan Agreement provided for a term loan in the amount of $50.0 million (the “Term Loan”) ~~and paid in full the existing $25.0 million TrancheA-1~~ ~~Revolving Loan (as defined in the Credit Agreement) under the Credit Agreement.~~. Debt issuance costs associated with the Term Loan were capitalized in the amount of $0.9 million and ~~will be~~are being amortized over the term of the Term Loan. The net proceeds of $49.1 million from the Term Loan were used to permanently pay off the $25.0 million TrancheA-1 Revolving Loan (as defined in the Credit Agreement) and to pay down the Revolving Credit ~~Agreement.~~Facility. After utilizing proceeds from the Term Loan ~~Agreement~~ for repayment of amounts outstanding under the existing TrancheA-1 Revolving Loans, the Term Loan resulted in an increase in our Excess Availability of approximately $25.0 million under the Credit Agreement.

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

On September 18, 2018, we entered into Amendment No. 2 (the “Second Term Loan Amendment”) to the Term Loan with Gordon Brothers Finance Company. The Second Term Loan Amendment provided for, among other things, the following: (1) the reduction of the maximum amount of the Term Loan to $35.0 million; (2) an extension of the maturity date of the Term Loan Agreement to the earlier of (a) the termination date specified in the Revolving Credit Facility (as defined in the Third Credit ~~Agreement)~~Agreement Amendment), and (b) September 18, 2023; (3) the reduction of thenon-default interest rate applicable to the Term Loan under the Term Loan Agreement to a fluctuating rate of interest equal to three-month LIBOR (with a floor of 1.5%) plus 8.25% per annum; and (4) the elimination of Cash Dominion Event status and a change in Cash Dominion to be triggered only in the event of (a) the occurrence and continuance of any Event of Default or (b) Excess Availability of less than (A) 10.0% of the Revolving Loan Cap at any time or (B) 12.5% of the Revolving Loan Cap for 3three consecutive Business Days. During 2018, debt issuance costs of approximately $0.3 million were associated with the Term Loan and are being amortized over its ~~respective~~ term. The elimination of cash dominion status changed the debt classification from a short-term to long-term obligation.

On February 26, 2019, we entered into Amendment No. 3 (the “Third Term Loan Amendment”) to the Term Loan Agreement. The Third Term Loan Amendment provided for, among other things, a modification to the definition of “Capital Expenditures” and “Permitted Indebtedness” as defined in the Third Term Loan Amendment.

Stein Mart, Inc.

Notes to Consolidated Financial Statements - Continued

The Term Loan Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, ~~including~~which include the retention of the existing minimum 1.0 to 1.0 consolidated fixed charge coverage ratio under the Credit Agreement ~~which limits borrowing availability if not met~~ during periods where Revolving Excess Availability (as defined in the Term Loan Agreement) is less than the greater of $20.0 million or 10.0 percent of Combined Loan Cap (as defined in the Term Loan Agreement) for four consecutive business days ~~and events~~or during the occurrence of ~~default for a facility~~an Event of ~~this type.~~ Default (as defined in the Term Loan Agreement).

The Term Loan is secured by a second lien security interest (subordinate only to the liens securing the Credit

~~Stein Mart, Inc.~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Unaudited)~~

Agreement) on all assets securing the Credit Agreement (which consist of substantially all of our personal property), except furniture, fixtures and equipment and intellectual property, upon which the Term Loan lenders ~~will~~ have a first lien security interest. If at any time prior to the first anniversary date of the Term Loan, the Revolving Excess Availability is less than $20.0 million, if requested by the Term Loan Agent, the Term Loan will also be secured by a first lien on leasehold interests in real property with an aggregate value of not less than $10.0 million, and the Credit Agreement will be secured by a second lien on such leasehold interests.

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

The Term Loan Agent and Wells Fargo have entered into an Intercreditor Agreement dated as of March 14, 2018 (the “Intercreditor Agreement”), acknowledged by us under the Term Loan and the Credit Agreement. The Intercreditor Agreement was also amended on September 18, 2018 to incorporate the amendment to the Revolving Credit Facility and the Term Loan Agreement.

The weighted average interest rate for the amount outstanding under the Term Loan was ~~10.65~~10.35 percent as of November 3,2, 2019.

Promissory Note

We believe we can borrow, on a short-term basis and subject to the formal agreement of the lender, amounts up to the cash surrender value of the life insurance policies related to our executive deferred compensation plans to provide additional liquidity if needed. At November 2, 2019, the cash surrender value of our life insurance policies was $12.6 million.

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

On July 31, 2018, we executed a second promissory note from SunTrust Bank for $13.0 million, which carried a fixed interest rate of 3.58 percent per annum and an original maturity date of September 10, 2018. This note included the same terms as the Promissory Note executed on February 2, 2018. On September 10, 2018, we repaid the outstanding balance of the Promissory Note.

Stein Mart, Inc.

Notes to Consolidated Financial Statements - Continued

The following table sets forth the aggregate maturities of our long-term debt at November ~~3, 2018,~~2, 2019, for the following fiscal years (in thousands):


2019	$	-
2020		-	$	-
2021		-		-
2022		-		-
2023		191,551		171,000
2024				-
Thereafter		-		-

Total	$	191,551	$	171,000

8. Leases

We lease all our retail store locations, support facilities and certain equipment under operating leases. Our store leases have varying terms and are generally for 10 years with options to extend the lease term for two or more 5-year periods. Annual store rent is generally comprised of a fixed minimum amount plus an insignificant contingent amount based on a percentage of sales in excess of specified levels. Most store leases also require additional payments covering real estate taxes, common area costs and insurance. Certain lease agreements contain rent holidays, and/or rent escalation clauses. Except for contingent rent, we recognize rent expense on a straight-line basis over the lease term. Contingent rent, determined based on a percentage of sales in excess of specified levels, is recognized as rent expense when achievement of the specified sales that triggers the contingent rent is probable. Construction allowances and other such lease incentives are recorded on the Consolidated Balance Sheets and are amortized on a straight-line basis as a reduction of rent expense. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement or modification date in determining the present value of lease payments.

In addition to the operating lease assets presented on the Consolidated Balance Sheets, assets under finance leases of $6.9 million are included in property and equipment, net on the Consolidated Balance Sheets as of November 2, 2019. The remaining finance lease obligation is split between accrued expenses and other current liabilities for the short-term portion and other liabilities for the long-term portion on the Consolidated Balance Sheets.

The following table summarizes our classification of lease cost (in thousands):

		13 Weeks Ended		39 Weeks Ended
	Statement of Operations Location	November 2, 2019		November 2, 2019
Operating lease cost (1)	Selling, general and administrative expenses	$	24,622	$	72,298
Finance lease cost:
Amortization of finance lease assets	Selling, general and administrative expenses		301		613
Interest on lease liabilities	Interest expense, net		74		107
Variable lease cost	Selling, general and administrative expenses		9,468		28,728
Net lease cost		$	34,465	$	101,746

(1)	Includes lease costs for short-term leases, which are immaterial.

Stein Mart, Inc.

Notes to Consolidated Financial Statements - Continued

As of November 2, 2019, the following table summarizes the maturity of our lease liabilities (in thousands):

	Operating			Finance
	Leases			Leases			Total
Remainder of 2019	$	24,706		$	439		$	25,145
2020		98,790			2,098			100,888
2021		89,318			1,525			90,843
2022		74,336			1,259			75,595
2023		59,421			489			59,910
After 2023		113,926			1			113,927
Total lease payments		460,497			5,811			466,308
Less: Interest		(62,671	)		(581	)		(63,252	)
Present value of lease liabilities	$	397,826		$	5,230		$	403,056

The following table summarizes our lease term and discount rate:


	November 2, 2019
Weighted-average remaining lease term (years):
Operating leases		5.6
Finance leases		3.2
Weighted-average discount rate:
Operating leases		5.3	%
Finance leases		7.0	%

The following table summarizes the other information related to our lease liabilities (in thousands):

	13 Weeks Ended		39 Weeks Ended
	November 2, 2019		November 2, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,156	$	75,853
Operating cash flows from finance leases		74		107
Financing cash flows from finance leases		502		869

As of February 2, 2019, in accordance with ASC 840, Leases, the aggregate minimum non-cancelable lease payments under operating leases were as follows (in thousands):

	Operating		Finance
	Leases		Leases
2019	$	101,139	$	738
2020		93,190		574
2021		82,324		1
2022		66,820		-
2023		50,697		-
Thereafter		102,550		-
Total minimum lease payments	$	496,720		1,313
Amount representing interest				(67	)
Present value of minimum lease payments				1,246
Less: current portion				(685	)
Long-term capital lease obligations			$	561

Stein Mart, Inc.

Notes to Consolidated Financial Statements - Continued

9. Commitments and Contingencies

We are involved in various routine legal proceedings incidental to the conduct of our business. ~~During both the 13 and 39 weeks ended November 3, 2018 and October 28, 2017, we did not accrue for any actual or anticipated loss contingencies.~~ While some of these matters could be material to our results of operations or cash flows for any ~~particular~~ period if an unfavorable outcome results, we do not believe that the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our overall financial condition.

~~6. Income Taxes~~

~~Our income tax expense for~~ During both the 13 and 39 weeks ended November 2, 2019 and November 3, 2018, we did not accrue for any actual or anticipated loss contingencies.

10. Income Taxes

The provision for income taxes is based on a current estimate of the annual effective tax rate adjusted to reflect the impact of discrete items. Our effective income tax rate may fluctuate from quarter to quarter as a result of a variety of factors, including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items, and the mix of earnings. Our income tax expense for both the 13 and 39 weeks ended November 2, 2019, reflects our ~~net operating loss carryforward position along with~~estimated taxable income for the valuation allowance established against deferred tax assets during the fourth quarter of 2017. The 2017 Tax Act changed the carryback rules for 2018 and future years. As a result, we are unable to carry back our 2018 losses. The 39 weeks of 2018 expense represents certain state income tax expense.year. The effective tax rate will be close to zero percent for all of ~~2018.~~2019.

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

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

Forward-Looking Statements

This Quarterly Report on Form10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to certain risks, uncertainties or assumptions and may be affected by certain factors including, but not limited to, the matters discussed in “Item 1A. Risk Factors” of our Annual Report on Form10-K for the fiscal year ended February ~~3, 2018,~~2, 2019, filed with the Securities and Exchange Commission (“SEC”) on ~~May 4, 2018.~~March 28, 2019 and in Part II of this Quarterly Report on Form 10-Q. Wherever used, the words “plan,” “expect,” “anticipate,” “believe,” “estimate” and similar expressions identify forward-looking statements. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on beliefs and assumptions of our management and on information currently available to such management. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise our forward-looking statements in light of new information or future events. Undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Forward-looking statements are not guarantees of performance.

The following discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form10-K for the year ended February ~~3, 2018,~~2, 2019, filed with the SEC on ~~May 4, 2018.~~March 28, 2019.

Overview

We are a nationalspecialty off-price retailer offering designer and name-brand fashion apparel, home décor, accessories and shoes at everyday discount prices. We currently operate ~~288~~283 stores across 30 states.

Financial Overview for the 13 and 39 weeks Ended November ~~3, 2018~~2, 2019

●

Net sales were ~~$279.1~~$276.1 million for the 13 weeks ended November 2, 2019, compared to $279.0 million for the 13 weeks ended November 3, 2018, ~~compared to $285.4~~and $882.7 million for the 1339 weeks ended ~~October 28, 2017, and $916.8~~November 2, 2019, compared to $916.5 million for the 39 weeks ended November 3, ~~2018, compared to $933.8 million for the 39 weeks ended October 28, 2017.~~2018.

●

Comparable sales for the 13 weeks ended November ~~3, 2018, increased 1.4~~2, 2019, decreased 0.1 percent compared to the 13 weeks ended ~~October 28, 2017,~~November 2, 2018, and for the 39 weeks ended November ~~3, 2018, increased 0.4~~2, 2019, decreased 1.9 percent compared to the 39 weeks ended ~~October 28, 2017.~~November 3, 2018.

●

Net loss for the 13 weeks ended November ~~3, 2018,~~2, 2019 was ~~$16.6~~$12.1 million, or ~~$0.36~~$0.25 per basic and diluted share, compared to net loss of ~~$14.6~~$16.3 million, or ~~$0.31~~$0.35 per basic and diluted share, during the 13 weeks ended ~~October 28, 2017.~~November 3, 2018.

●

Net loss for the 39 weeks ended November ~~3, 2018,~~2, 2019 was ~~$10.4~~$10.2 million, or $0.22 per basic and diluted share, compared to net loss of ~~$23.9~~$9.9 million, or ~~$0.52~~$0.21 per basic and diluted share, during the 39 weeks ended ~~October 28, 2017.~~November 3, 2018.

●

We had ~~$190.7~~$171.0 million, ~~$156.1~~$154.1 million and ~~$150.8~~$191.6 million of direct borrowings onfrom our credit facilities as of November 2, 2019, February 2, 2019, and November 3, 2018, ~~February 3, 2018, and October 28, 2017,~~ respectively.

Stores

The following table sets forth the stores activity for the 13 and 39 weeks ended November 2, 2019 and November 3, ~~2018 and October 28, 2017:~~2018:


	13 Weeks Ended November 3, 2018			13 Weeks Ended October 28, 2017			39 Weeks Ended November 3, 2018			39 Weeks Ended October 28, 2017			13 Weeks Ended November 2, 2019		13 Weeks Ended November 3, 2018			39 Weeks Ended November 2, 2019			39 Weeks Ended November 3, 2018
Stores at beginning of period		289			292			293			290			283		289			287			293
Stores opened during the period		2			4			2			9			-		2			-			2
Stores closed during the period		(3	)		(3	)		(7	)		(6	)		-		(3	)		(4	)		(7	)
Stores at the end of period		288			293			288			293			283		288			283			288

Inventories

Inventory levels were $307.1 million as of November 2, 2019, compared to $255.9 million as of February 2, 2019 and $305.0 million as of November 3, ~~2018, compared~~2018. Total inventories increased due to ~~$270.2 million as of February 3, 2018,~~our recently launched Kids department, partially offset by fewer stores and ~~$311.3 million as of October 28, 2017. Average~~slightly lower average inventories per store, asexcluding the Kids department, at the end of ~~November 3, 2018, decreased 2.9 percent from October 28, 2017. We have intentionally operated with lower inventory levels during 2018, mainly by planning to turn faster and leaving a percentage~~the third quarter of ~~receipt dollars open to spend closer to actual delivery dates.~~2019 versus 2018.

Results of Operations

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


	13 Weeks Ended November 3, 2018			As Adjusted 13 Weeks Ended October 28, 2017			39 Weeks Ended November 3, 2018			As Adjusted 39 Weeks Ended October 28, 2017			13 Weeks Ended November 2, 2019			13 Weeks Ended November 3, 2018			39 Weeks Ended November 2, 2019			39 Weeks Ended November 3, 2018
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Other revenue		1.3	%		1.2	%		1.3	%		1.2	%		1.6	%		1.4	%		1.5	%		1.3	%
Total revenue		101.3	%		101.2	%		101.3	%		101.2	%		101.6	%		101.4	%		101.5	%		101.3	%
Cost of merchandise sold		75.0	%		76.1	%		73.2	%		75.5	%		74.9	%		75.0	%		73.8	%		73.3	%
Selling, general and administrative expenses		31.2	%		33.5	%		28.2	%		29.4	%		30.2	%		31.0	%		28.1	%		28.2	%
Operating loss		-4.8	%		-8.4	%		-0.2	%		-3.8	%		(3.5	)%		(4.7	)%		(0.3	)%		(0.1	)%
Interest expense, net		1.1	%		0.4	%		0.9	%		0.4	%		0.8	%		1.1	%		0.8	%		0.9	%
Loss before income taxes		-5.9	%		-8.8	%		-1.1	%		-4.2	%		(4.3	)%		(5.8	)%		(1.1	)%		(1.1	)%
Income tax expense (benefit)		0.1	%		-3.7	%		0.0	%		-1.6	%
Income tax expense														0.1	%		0.1	%		0.0	%		0.0	%
Net loss		-6.0	%		-5.1	%		-1.1	%		-2.6	%		(4.4	)%		(5.8	)%		(1.2	)%		(1.1	)%

(1)

Table may not foot due to rounding.

Stein Mart Credit Cards

Stein Mart has both co-branded MasterCard and Private Label Credit Cards available for our customers based on credit approvals in accordance with our Amended and Restated Co-Brand and Private Label Credit Card Consumer Program Agreement (the “Agreement”). These cards are issued by our business partner, Synchrony Bank (“Synchrony”), who bears all credit risk associated with the cards. Synchrony provides us certain direct financial benefits based on sales on the cards and other factors. On August 21, 2019, we entered into an amendment to our Agreement with Synchrony whereby Synchrony waived its rights to require us to post cash reserves to cure our failure to satisfy one or more of the quarterly financial covenants specified in the Agreement for periods through October 31, 2020 (the “Exemption Period”). As consideration for Synchrony’s entry into this amendment, we agreed to reduce the amount of fees paid to us by Synchrony under the Agreement from September 1, 2019 through the end of the Exemption Period. We expect the average reduction in monthly fees receivable will be approximately $0.1 million. We have obtained waivers for our failure to satisfy these covenants in the past and would not have expected to satisfy these covenants for at least the next four fiscal quarters had they not been exempted.

Important Information RegardingNon-GAAP Financial Measures

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

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

13 Weeks Ended
November 3, 2018

13 Weeks Ended
October 28, 2017

39 Weeks Ended
November 3, 2018

39 Weeks Ended
October 28, 2017

Decrease in comparable sales excluding sales from licensed departments (1)
(0.2)%         (6.9)%     (0.8)%     (6.5)%
Effect of growth in comparable sales of licensed departments (2)
1.6 %         0.6 %     1.2 %     0.5 %
Increase (decrease) in comparable sales including sales from licensed departments
1.4 %         (6.3)%     0.4 %     (6.0)%

	13 Weeks Ended November 2, 2019		13 Weeks Ended November 3, 2018		39 Weeks Ended November 2, 2019		39 Weeks Ended November 3, 2018
Increase (decrease) in comparable sales excluding sales from leased departments (1)	0.2	%	(0.2	)%	(2.3	)%	(0.8	)%
Impact of comparable sales of leased departments (2)	(0.3	)%	1.6	%	0.4	%	1.2	%
(Decrease) increase in comparable sales including sales from leased departments	(0.1	)%	1.4	%	(1.9	)%	0.4	%

(1)

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

(2)

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

13 and 39 ~~weeks~~Weeks Ended November ~~3, 2018,~~2, 2019, Compared to the 13 and 39 ~~weeks~~Weeks Ended ~~October 28, 2017~~November 3, 2018 (tables presented in thousands):

Net Sales

													13 Weeks Ended			13 Weeks Ended					39 Weeks Ended			39 Weeks Ended
	13 Weeks Ended November 3, 2018		13 Weeks Ended October 28, 2017		(Decrease)/ Increase		39 Weeks Ended November 3, 2018		39 Weeks Ended October 28, 2017		(Decrease)/ Increase		November 2, 2019			November 3, 2018		Variance			November 2, 2019			November 3, 2018		Variance
Net sales	$	279,127	$	285,395	$	(6,268)	$	916,751	$	933,766	$	(17,015)		$	276,132	$	279,047	$	(2,915	)		$	882,658	$	916,511	$	(33,853	)
Sales percent change:
Total net sales						(2.2)%						(1.8)%							(1.0	)%							(3.7	)%
Comparable store sales including						1.4%						0.4%
sales from leased departments
Comparable store sales including sales from leased departments																			(0.1	)%							(1.9	)%

Net sales ~~for~~include customer purchases from our stores as well as online orders. Our Ecommerce operation fulfills online orders from vendor and/or our warehouses. Store sales include online orders that are fulfilled and shipped or picked up from our stores. All online sales, regardless of fulfillment channel are referred to as omni sales. The 1.0 percent decrease in net sales is driven by fewer operating stores during the 13 weeks ended November 2, 2019, compared to the 13 weeks ended November 3, 2018, decreased compared to the 13 weeks ended October 28, 2017. The 2.2 percent decrease in net sales is primarily due to closing underperforming stores in 2018 and lower traffic in the Southeast and~~Mid-Atlantic~~ ~~states from hurricanes. The 1.4 percent increase in comparable~~2018. Comparable sales, on an owned plus licensed basis for the 13 weeks ended November ~~3, 2018,~~2, 2019, were essentially flat at a 0.1 percent decrease. The improvement in our comparable sales from the first half of fiscal 2019 was primarily driven by incremental sales from our Kids department and higher omni sales. Additionally, the number of transactions were slightly lower and units per transaction were flat, somewhat offset by higher average unit retail dollars. The higher average unit retail dollars were driven by higher regular-priced selling, ~~compared to last year’s higher clearance selling. Higher regular-priced selling for the 13 weeks ended November 3, 2018, increased the average unit retail price,~~ which ~~was partially~~more than offset ~~by lower units per transaction and number of transactions, primarily due to~~ lower clearance and promotional selling. Comparable store sales reflect stores open throughout the period and prior fiscal year and include ~~Ecommerce. Ecommerce~~omni sales. Omni sales were ~~up 76.1~~approximately 6.1 percent ~~in the 13 weeks ended November 3, 2018, which include~~of net sales. Omni sales increased 17.8 percent, including online orders shipped from our stores, and ~~contributed approximately a210-basis~~ ~~point increase~~positively affected our total comparable store sales by 90 basis points for the 13 weeks ended November 2, 2019.

The 3.7 percent decrease in net sales reflects lower comparable store sales and fewer stores for the 39 weeks ended November 2, 2019, compared to the 39 weeks ended November 3, 2018. The 1.9 percent decrease in comparable ~~sales in the same period. Comparable~~stores sales on an owned plus licensed basis for the 39 weeks ended November ~~3, 2018, increased 0.4 percent compared to the 39 weeks ended October 28, 2017. The 1.8 percent~~2, 2019, was primarily driven by a decrease in ~~net sales is due to closing underperforming stores. Ecommerce~~the number of transactions, while units per transaction and average unit retail dollars were flat. Omni sales were ~~up 95.6~~approximately 5.9 percent of net sales. Omni sales increased 12.8 percent, including online orders shipped from our stores, and ~~contributed approximately a240-basis~~ ~~point increase to~~positively affected our total comparable store sales by 60 basis points for the 39 weeks ended November ~~3, 2018.~~2, 2019.

Other Revenue

													13 Weeks Ended				13 Weeks Ended						39 Weeks Ended				39 Weeks Ended
	13 Weeks Ended November 3, 2018		13 Weeks Ended October 28, 2017		Increase		39 Weeks Ended November 3, 2018		39 Weeks Ended October 28, 2017		Increase		November 2, 2019				November 3, 2018			Variance			November 2, 2019				November 3, 2018				Variance
Other revenue	$	3,734	$	3,516	$	218	$	11,525	$	10,728	$	797		$	4,291		$	3,814		$	477			$	13,479		$	11,765		$		1,714
Percentage of net sales		1.3%		1.2%		0.1%		1.3%		1.1%		0.2%			1.6	%		1.4	%		0.2	%			1.5	%		1.3	%			0.2	%

~~Other revenue for the 13 and 39 weeks ended November 3, 2018, increased compared to the 13 and 39 weeks ended October 28, 2017.~~

The ~~slight~~ increase in other revenue for the 13 and 39 weeks ended November ~~3, 2018,~~2, 2019, is the result of higher penetration from our growing credit card ~~program.~~program, which has increased royalty, breakage and bounty income, partially offset by higher accrual of customer loyalty points.

Gross Profit

Gross profit is determined as follows:

															13 Weeks Ended				13 Weeks Ended						39 Weeks Ended				39 Weeks Ended
	13 Weeks Ended November 3, 2018		13 Weeks Ended October 28, 2017		(Decrease)/ Increase			39 Weeks Ended November 3, 2018		39 Weeks Ended October 28, 2017		(Decrease)/ Increase			November 2, 2019				November 3, 2018			Variance			November 2, 2019				November 3, 2018				Variance
Net sales	$	279,127	$	285,395	$	(6,268	)	$	916,751	$	933,766	$	(17,015	)		$	276,132		$	279,047		$	(2,915	)		$	882,658		$	916,511		$		(33,853	)
Cost of merchandise sold		209,286		217,126		(7,840	)		671,427		705,273		(33,846	)			206,721			209,286			(2,565	)			651,122			671,426				(20,304	)
Gross profit	$	69,841	$	68,269	$	1,572		$	245,324	$	228,493	$	16,831			$	69,411		$	69,761		$	(350	)		$	231,536		$	245,085		$		(13,549	)
Percentage of net sales		25.0%		23.9%		1.1%			26.8%		24.5%		2.3%				25.1	%		25.0	%		0.1	%			26.2	%		26.7	%			(0.5	)%

The gross profit rate ~~increase~~ for the 13 ~~and~~weeks ended November 2, 2019 was essentially flat compared to the 13 weeks ended November 3, 2018. The decrease in gross profit rate for the 39 weeks ended November 2, 2019 as compared to the 39 weeks ended November 3, 2018 ~~was primarily due to~~reflects higher markdowns as a higher merchandise margin rate. The higher merchandise margin rate was driven by lower markdowns, partially offset by higher Ecommerce fulfillment and shipping costs which were higher due to an increase in online orders.percentage of sales.

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

													13 Weeks Ended				13 Weeks Ended						39 Weeks Ended				39 Weeks Ended
	13 Weeks Ended November 3, 2018		13 Weeks Ended October 28, 2017		Decrease		39 Weeks Ended November 3, 2018		39 Weeks Ended October 28, 2017		Decrease		November 2, 2019				November 3, 2018			Variance			November 2, 2019				November 3, 2018				Variance
Selling, general and administrative expenses	$	86,948	$	95,674	$	(8,726)	$	258,584	$	274,581	$	(15,997)		$	83,285		$	86,626		$	(3,341	)		$	247,891		$	258,071		$		(10,180	)
Percentage of net sales		31.1%		33.5%		(2.4)%		28.2%		29.4%		(1.2)%			30.2	%		31.0	%		(0.8	)%			28.1	%		28.2	%			(0.1	)%

~~The~~

SG&A ~~decrease~~for the 13 weeks ended November 2, 2019 included a $1.9 million benefit from a Visa/Mastercard claim settlement. SG&A for the 13 weeks ended November 3, 2018 ~~was primarily the result of cost savings initiatives, lower advertising expense and the impact of closing underperforming stores. Decreases are partially offset by~~included $1.1 million in advisory fees for ~~capital alternatives that resulted in~~ the extension of our credit agreements and $0.7 million in hurricane-related ~~expenses, which we expect to be recovered from insurance in future quarters. The~~expenses. Excluding these, SG&A for the 13 weeks ended November 2, 2019 would be slightly higher than the 13 weeks ended November 3, 2018, which is primarily driven by higher advertising expenses for planned additional branded television, and higher Ecommerce expenses to support this growing business. These increases were partially offset by lower store-related expenses, including the impact of closed stores. The decrease in SG&A for the 39 weeks ended November ~~3, 2018, was~~2, 2019, excluding the discreet items above, is primarily the result of ~~cost savings,~~lower store-related expenses, including ~~closing underperforming~~the impact of closed stores, and lower incentive-based compensation. These decreases were partially offset by ~~$1.1 million in advisory fees~~higher advertising expenses for ~~capital alternatives that resulted in the extension of our credit agreements, $0.7 million in hurricane-related expenses which will be recovered from insurance in future quarters~~planned additional branded television, and ~~increased~~higher Ecommerce expenses ~~of $3.5 million. Ecommerce expenses were higher~~ to support ~~the additional sales volume.~~this growing business.

Interest Expense, Net

													13 Weeks Ended				13 Weeks Ended						39 Weeks Ended				39 Weeks Ended
	13 Weeks Ended November 3, 2018		13 Weeks Ended October 28, 2017		Increase		39 Weeks Ended November 3, 2018		39 Weeks Ended October 28, 2017		Increase		November 2, 2019				November 3, 2018			Variance			November 2, 2019				November 3, 2018			Variance
Interest expense, net	$	3,078	$	1,156	$	1,922	$	8,406	$	3,437	$	4,969		$	2,306		$	3,078			(772	)		$	7,024		$	8,406			(1,382	)
Percentage of net sales		1.1%		0.4%		0.7%		0.9%		0.4%		0.5%			0.8	%		1.1	%		(0.3	)%			0.8	%		0.9	%		(0.1	)%

~~The increase in interest~~

Interest expense decreased by $0.8 million and $1.4 million, respectively, for the 13 and 39 weeks ended November 2, 2019, compared to the 13 and 39 weeks ended November 3, ~~2018,~~2018. The decrease in interest expense is primarily due to ~~higher borrowing levels and higher interest rates, plus $0.3 million from the early termination of a portion of the Term Loan (as defined in Note 4 “Debt”~~lower average debt amounts compared to ~~the Notes to Condensed Consolidated Financial Statements (Unaudited)) in connection with the extension and amendment of our credit agreements in September.~~last year.

Income Taxes

													13 Weeks Ended				13 Weeks Ended						39 Weeks Ended				39 Weeks Ended
	13 Weeks Ended November 3, 2018		13 Weeks Ended October 28, 2017		Increase/ (Decrease)		39 Weeks Ended November 3, 2018		39 Weeks Ended October 28, 2017		Increase/ (Decrease)		November 2, 2019				November 3, 2018			Variance			November 2, 2019				November 3, 2018			Variance
Income tax expense (benefit)	$	171	$	(10,429)	$	10,600	$	291	$	(14,888)	$	15,179
Income tax expense														$	203		$	171		$	32			$	308		$	291		$	17
Effective tax rate		(1.0)%		41.6%		(42.6)%		-2.9%		38.4%		(41.3)%			(1.7	)%		(1.1	)%		(0.6	)%			(3.1	)%		(3.0	)%		(0.1	)%

~~Our effective tax rate represents the applicable combined federal and state statutory rates reduced by the federal benefit~~

The small amount of ~~state taxes deductible on federal returns, adjusted for the effect of permanent differences. The decrease in the effective~~income tax ~~rate~~ for the 13 and 39 weeks ended November ~~3, 2018, was primarily driven by~~2, 2019, reflects our net operating loss carryforward position and our valuation allowance against all net deferred tax assets established during the fourth quarter of 2017. We expect that our effective tax rate will remain near zero percentestimated taxable income for the ~~rest of fiscal 2018.~~year.

Liquidity and Capital Resources

Capital requirements and working capital needs are funded through a combination of internally generated funds, available cash, credit terms from vendors, our $240.0 million senior secured revolving credit facility pursuant to a second amended and restated credit agreement with Wells Fargo Bank ~~(“Credit Agreement”)~~ and our $35.0 million Term Loan (as discussed below).

Revolving Credit Facility and Equipment Term Loan

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

On February 19, 2018, we entered into Amendment No. 1 (the “Credit Agreement Amendment”) to the Credit Agreement with Wells Fargo. The Credit Agreement Amendment ~~provides~~provided for, among other things, an Accommodation Period (as defined in the Credit Agreement Amendment) during which we were not required to meet the Fixed Charge Coverage Ratio (as defined in the Credit Agreement). This change permitted us to borrow the full amount of the then applicable borrowing base until we delivered our financial statements for the Measurement Period (as defined in the Credit Agreement) ended February 28, 2018. Pursuant to the Credit Agreement Amendment, a Cash Dominion Event (as defined in the Credit Agreement Amendment) occurred as of the effective date of the Credit Agreement Amendment and at all times thereafter. ~~As a result~~Because of the Cash Dominion Event, all of our cash receipts were swept daily to repay outstanding borrowings under the Credit Agreement and the amount outstanding under the Credit Agreement was classified as a short-term ~~obligation on the Condensed Consolidated Balance Sheets (Unaudited). See~~obligation. As noted below, ~~for discussion of~~ the Third Credit Agreement Amendment ~~and the removal of~~removed the Cash Dominion Event effective September 18, 2018.

On March 14, 2018, we entered into the Term Loan Agreement (as defined in Note 4 “Debt” in the Notes to Condensed Consolidated Financial Statements (Unaudited)), which provided for a term loan in the amount of $50.0 million. At the same time, we entered into Amendment No. 2 (the “Second Credit Agreement Amendment”) to the Credit Agreement with Wells Fargo. The Second Credit Agreement Amendment provided for, among other things, the following: (1) the ~~permanent repayment in full of~~ $25.0 million of TrancheA-1 Revolving Loans (as defined in the Second Credit Agreement Amendment) were repaid in full with the proceeds of the Term Loan (as defined below)~~, thereby reducing the maximum amount of the revolving credit facility under the Credit Agreement to $225.0 million;~~; (2) the entry into the Intercreditor Agreement (as defined ~~in Note 4 “Debt” in the Notes to Condensed Consolidated Financial Statements (Unaudited)) between Wells Fargo Bank and Gordon Brothers Finance Company, LLC;~~below); and (3) certain other modifications and updates to coordinate the Revolving Credit ~~Agreement~~Facility with the Term Loan. ~~The net proceeds of $49.1 million from the Term Loan were used to permanently pay off the $25.0 million Tranche~~

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

On September 18, 2018, we entered into Amendment No. 3 (the “Third Credit Agreement Amendment”) to the Credit Agreement with Wells Fargo. The Third Credit Agreement Amendment ~~provides~~provided for, among other things, the following: (1) the increase of Aggregate Tranche A Revolving Loan Commitments (as defined in ~~Note 4 “Debt” in~~ the ~~Notes to Condensed Consolidated Financial Statements (Unaudited))~~Second Credit Agreement Amendment) from $225.0 million to $240.0 million; (2) an extension of the ~~Maturity Date~~maturity date of the Revolving Credit ~~Agreement~~Facility to the earlier of (a) the maturity date of the Term Loan Agreement (as defined below) or (b) September 18, 2023; and (3) the elimination of Cash Dominion Event status and a change in ~~the definition of~~ Cash Dominion ~~Event~~ to be triggered only in the event of (a) the occurrence and continuance of any Event of Default or (b) Excess Availability of less than (A) 10.0% of the ~~Loan Cap~~loan cap at any time or (B) 12.5% of the loan cap for three consecutive business days. During 2018, debt issuance costs of less than $0.1 million were associated with the Third Credit Agreement Amendment and are being amortized over its respective term. Debt issuance costs of $0.1 million remaining under the initial Credit Agreement will also be amortized over the new term of the Third Credit Agreement Amendment. The elimination of cash dominion status changed the debt classification from a short-term to long-term obligation.

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

The weighted average interest rate for the amount outstanding under the Credit Agreement was 3.44 percent as of November 2, 2019.

Term Loan

On March 14, 2018, we entered into a Term Loan ~~Cap~~Credit Agreement with Gordon Brothers Finance Company, as administrative agent (in such capacity, the “Term Loan Agent”), and Gordon Brothers Finance Company, LLC, as lender (the “Term Loan Agreement”). The Term Loan Agreement provided for ~~3 consecutive Business Days. At~~a term loan in the ~~same time,~~amount of $50.0 million (the “Term Loan”). Debt issuance costs associated with the Term Loan were capitalized in the amount of $0.9 million and is being amortized over the term of the Term Loan. The net proceeds of $49.1 million from the Term Loan were used to permanently pay off the $25.0 million Tranche A-1 Revolving Loan (as defined in the Credit Agreement) and to pay down the Revolving Credit Facility. After utilizing proceeds from the Term Loan for repayment of amounts outstanding under the existing Tranche A-1 Revolving Loans, the Term Loan resulted in an increase in our Excess Availability of approximately $25.0 million under the Credit Agreement.

On September 18, 2018, we entered into Amendment No. 2 (the “Second Term Loan Amendment”) to the Term Loan with Gordon Brothers Finance Company. The Second Term Loan Amendment ~~provides~~provided for, among other things, the following: (1) the reduction of the maximum amount of the Term Loan to $35.0 million; (2) an extension of the maturity date of the Term Loan Agreement to the earlier of (a) the termination date specified in the Revolving Credit ~~Agreement~~Facility (as defined in the Third Credit ~~Agreement)~~Agreement Amendment), and (b) September 18, 2023; (3) the reduction of thenon-default interest rate applicable to the Term Loan under the Term Loan Agreement to a fluctuating rate of interest equal to three-month LIBOR (with a floor of 1.5%) plus 8.25% per annum; and (4) the elimination of Cash Dominion Event status and a change in Cash Dominion to be triggered only in the event of (a) the occurrence and continuance of any Event of Default or (b) Excess Availability of less than (A) 10.0% of the Revolving Loan Cap at any time or (B) 12.5% of the Revolving Loan Cap for 3three consecutive Business Days. AsDuring 2018, debt issuance costs of approximately $0.3 million were associated with the Term Loan and are being amortized over its term. The elimination of cash dominion status changed the debt classification from a short-term to long-term obligation.

The Term Loan Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, which include the retention of the existing minimum 1.0 to 1.0 consolidated fixed charge coverage ratio under the Credit Agreement during periods where Revolving Excess Availability (as defined in the Term Loan Agreement) is less than the greater of $20.0 million or 10.0 percent of Combined Loan Cap (as defined in the Term Loan Agreement) for four consecutive business days during the occurrence of an Event of Default (as defined in the Term Loan Agreement). The Term Loan is secured by a second lien security interest (subordinate only to the liens securing the Credit Agreement) on all assets securing the Credit Agreement (which consist of substantially all of our personal property), except furniture, fixtures and equipment and intellectual property, upon which the Term Loan lenders have a first lien security interest.

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

The weighted average interest rate for the amount outstanding under the ~~Credit Agreement is classified~~Term Loan was 10.35 percent as ~~a long-term obligation on the Condensed Consolidated Balance Sheets (Unaudited).~~of November 2, 2019.

On February 2, 2018, we executed a short-term promissory note under which we borrowed approximately $13.7 million (the “Promissory Note”) from SunTrust Bank in its capacity as trustee under a trust agreement dated September 1, 1999. The proceeds from the Promissory Note were used to pay down borrowings under the Credit Agreement to provide additional availability under the Credit Agreement to assist us during our February low working capital period following the holiday selling season. In March 2018, we extended the due date of the Promissory Note to July 1, 2018. On June 29, 2018, we repaid the outstanding balance of the Promissory Note. On July 31, 2018, we borrowed $13.0 million under a new promissory note from SunTrust Bank. The proceeds were used to provide additional availability as we begin to purchase inventory for the second half of 2018. See Note 4 “Debt” of the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion. On September 10, 2018, we repaid the outstanding balance of the Promissory Note.

We believe we ~~are able to~~can borrow, on a short-term basis and subject to the formal agreement ~~with~~of the lender, amounts up to the cash surrender value of the life insurance policies related to our executive deferred compensation plans to provide additional liquidity if needed. At November ~~3, 2018,~~2, 2019, the cash surrender value of our life insurance policies was ~~$12.8~~$12.6 million.

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

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

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

~~merchandise during the key early spring selling period. Throughout all periods, we made our payments to vendors and their factors on a timely basis in accordance with our negotiated terms.~~

After we announced our fourth quarter 2017 results and outlook for spring 2018, in March our terms with the vendors and their factors began to be less constricted. At that same time, we also announced our Term Loan Agreement. We havenon-disclosure agreements with the major factors, credit insurers and several of our largest vendors ~~which~~that allow us to communicate our operating results and cash flows to them on a regular basis. ~~Additionally,~~Since 2018, we made periodic presentations to ~~larger groups of~~ our key vendors ~~just after our fourth quarter results were announced, in March 2018. We~~and factors and we continue to communicate our operating results and cash flows to ~~our large vendors and factors with whom we havenon-disclosure~~ ~~agreements in place.~~them. These steps have contributed to the positive movement in their credit ~~arrangements.~~arrangements with us, which has continued through the third quarter of 2019.

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

Based on our current expectations regarding our operating results, we consider our resources adequate to satisfy our cash needs for at least the next 12 months.

~~In January 2018,~~As of November 2, 2019, we announced that we hired PJ Solomon to help us evaluate strategic and capital alternatives. We hired Alvarez & Marsal as advisors in 2017 to assist in evaluating our forecasting and strategic communications with our vendors and their factors. Alvarez & Marsal also advised us on cost savingshad cash and cash ~~flow initiatives~~equivalents of $13.0 million and ~~assisted with evaluating capital alternatives which resulted~~$136.0 million in borrowings under our Credit Agreement and $35.0 million in borrowings under the Term Loan, ~~Agreement. It is possible that additional strategic alternatives will arise from these efforts.~~

for a total of $170.3 million in outstanding borrowings, net of $0.7 million in unamortized debt issuance costs. As of February 2, 2019, we had cash and cash equivalents of $9.0 million and $119.1 million in borrowings under our Credit Agreement and $35.0 million in borrowings under the Term Loan, for a total of $153.3 million in outstanding borrowings, net of $0.8 million in unamortized debt issuance costs. As of November 3, 2018, we had cash and cash equivalents of $13.9 million and $156.6 million in borrowings under our Credit Agreement and $35.0 million in borrowings under the Term Loan, for a total of $190.7 million in outstanding borrowings, net of $0.9 million in unamortized debt issuance costs. As of February 3, 2018, we had cash and cash equivalents of $10.4, and borrowings under our credit facilities of $142.4 million and $13.7 million in borrowings under the Promissory Note, for a total of $156.1 million in outstanding borrowings. As of October 28, 2017, we had cash and cash equivalents of $13.2 million and borrowings under our credit facilities were $150.8 million. The total amount available for borrowings and letters of credit under our Credit Agreement is the lesser of $240.0 million or 100 percent of eligible credit card receivables and the net recovery percentage value of inventories less reserves. On November ~~3, 2018,~~2, 2019, in addition to outstanding borrowings under the Credit Agreement and Term Loan, ~~and Promissory Note,~~ we had ~~$8.5~~$7.9 million of outstanding letters of credit. Our Excess Availability (as defined in the Credit Agreement) was ~~$74.9~~$87.0 million on November ~~3, 2018. See Note 4 “Debt”~~2, 2019. As of November 2, 2019, we had $12.6 million available to borrow, on a short-term basis and subject to the formal agreement of the ~~Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion.~~lender, which would be collateralized by life insurance policies.

Cash Flows

	39 Weeks Ended November 2, 2019				39 Weeks Ended November 3, 2018			Change
Cash (used in) provided by:
Operating activities		$	(9,860	)	$	(25,561	)	$	15,701
Investing activities			(2,163	)		(4,569	)		2,406
Financing activities			15,927			33,614			(17,687	)
Net increase in cash and cash equivalents		$	3,904		$	3,484		$	420

Cash (used in) provided by :
39 Weeks Ended

November 3, 2018

39 Weeks Ended

October 28, 2017
Change

Operating activities
   $                 (25,561 ) $                 52,804 $                 (78,365 )
Investing activities
   (4,569 ) (15,664 ) 11,095
Financing activities
   33,614 (34,514 ) 68,128

Net increase in cash and cash equivalents
   $ 3,484 $ 2,626 $ 858

Net cash used in operating activities was $9.9 million for the 39 weeks ended November 2, 2019, compared to net cash used in operating activities of $25.6 million for the 39 weeks ended November 3, ~~2018, compared to net~~2018. The decrease in cash ~~provided by~~used in operating activities was primarily due to improved credit terms from vendors and factors since the second quarter of ~~$52.8~~2018. This is partially offset by increased inventory purchases over last year.

Net cash used in investing activities was $2.2 million for the 39 weeks ended ~~October 28, 2017.~~November 2, 2019, compared to net cash used in investing activities of $4.6 million for the 39 weeks ended November 3, 2018. The ~~decrease in~~change is primarily due to reduced capital acquisitions year over year.

Net cash provided by ~~operating~~financing activities was ~~mainly due~~$15.9 million during the 39 weeks ended November 2, 2019, compared to cash provided by financing activities of $33.6 million during the ~~acceleration~~39 weeks ended November 3, 2018. During the 39 weeks ended November 2, 2019, we had net proceeds from borrowings of ~~vendor payments~~$16.9 million compared to net proceeds from borrowings of $35.4 million during the 39 weeks ended November 3, 2018 which ~~significantly reduced our accounts payable balance compared to the 39 weeks ended October 28, 2017. Also affecting operating cash flows~~ was ~~increased inventory purchases over last year. Due to improved management, our beginning inventory levels were lower this year requiring the purchase of more inventory leading into the holiday season.~~

Net cash used in investing activities was primarily from capital expenditures offset by proceeds from canceled corporate-owned life insurance policies and was $4.6 million for the 39 weeks ended November 3, 2018, compared to net cash used of $15.7 million for the 39 weeks ended October 28, 2017, primarily for capital expenditures. The decrease in capital expenditures was primarily due to lower investment in technologies, fewer remodels to existing stores and fewer tenant improvements during the 39 weeks ended November 3, 2018. We expect lower capital expenditures to continue through the end of fiscal 2018.

Net cash provided by financing activities was $33.6 million during the 39 weeks ended November 3, 2018, compared to cash used in financing activities of $34.5 million during the 39 weeks ended October 28, 2017. During the 39 weeks ended November 3, 2018, we had net proceeds of debt of $35.4 million, primarily used to pay vendors due to accelerated payment terms mostly in the first ~~quarter. We paid debt issuance costs~~quarter of ~~$1.1 million, cash dividends of $0.1~~last year. The decrease in borrowings and capital lease payments of $0.6 million. In addition, we repurchased 52,241 shares of common stock for less than $0.1 million. We also received $0.1 million from our Employee Share Purchase Plan. During the 39 weeks ended October 28, 2017, we had net repayments of debt of $31.0 million. We also paid cash dividends of $3.6 million and capital lease payments of $1.0 million. We did not pay any debt issuance costs. In addition, we repurchased 69,122 shares of common stock for $0.2 million. We also received $0.3 million from our Employee Share Purchase Plan. See Note 2 “Shareholders’ Equity”was a result of the ~~Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion.~~cash dominion discussed above.

Critical Accounting Policies and Estimates

We discuss our critical accounting policies and estimates in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form10-K for the year ended February ~~3, 2018,~~2, 2019 and filed with the SEC on ~~May 4, 2018. We~~March 28, 2019. Except for the adoption of the lease accounting standard (Topic 842), we have made no significant changes in our critical accounting policies and estimates since February ~~3, 2018.~~2, 2019.

Recent Accounting Pronouncements

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

Seasonality and Inflation

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

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

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of November ~~3, 2018,~~2, 2019, to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting ~~(as that term is defined in Rules13a-15(f)~~ ~~and15d-15(f)~~ ~~under the Exchange Act)~~ during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – ~~OTHER~~OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See the discussion of legal proceedings in Note 59 “Commitments and Contingencies” of the Notes to ~~Condensed~~ Consolidated Financial Statements ~~(Unaudited)~~ included in Item 1 of Part I of this Quarterly Report, which is incorporated by reference into this Item 1 of Part II.

ITEM 1A. RISK FACTORS

~~There~~Other than noted below, there have been no material changes in our risk factors from those described in our Annual Report on Form10-K for the year ended February ~~3, 2018.~~2, 2019.

We have received a notice from Nasdaq advising us that we do not meet the continued listing standards of The Nasdaq Global Select Market. If we are unable to maintain a listing on a national securities exchange, it could negatively impact the price and liquidity of our common stock, which could impair the value of your investment.

Our common stock is currently listed on The Nasdaq Global Select Market. In order to maintain that listing, we must satisfy minimum financial and other listing requirements. On July 8, 2019, the Nasdaq Listing Qualifications Department notified us that we did not meet the $1.00 minimum bid price for the last 30 consecutive business days as required by Rule 5450(a)(1). In accordance with Rule 5810(c)(3)(A), we have 180 calendar days, or until January 6, 2020, to regain compliance with the bid price requirement. If we are unable to comply with the bid price requirement during the applicable grace period, an additional 180 days may be granted to regain compliance if we (i) meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Global Select Market (except for the bid price requirement) and (ii) provide written notice of our intention to cure the deficiency during the second 180-day compliance period.

We plan to submit an application to Nasdaq to transfer our listing from The Nasdaq Global Select Market to The Nasdaq Capital Market prior to January 6, 2020 and request the additional 180-day compliance period offered on that market. However, there can be no assurance that we will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria.

The delisting of our common stock from The Nasdaq Global Select Market could adversely affect the market liquidity of our common stock and could result in other negative implications, including the potential loss of confidence by suppliers, customers and employees, and fewer business development opportunities. Any such developments could impair the value of your investment.

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

The following table sets forth information regarding repurchases of our common stock during the quarter ended November ~~3, 2018:~~2, 2019:


ISSUER PURCHASES OF EQUITY SECURITIES	ISSUER PURCHASES OF EQUITY SECURITIES									ISSUER PURCHASES OF EQUITY SECURITIES
Period		Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (1)		Maximum number of shares that may yet be purchased under the plans or programs (1)			Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (1)		Maximum number of shares that may yet be purchased under the plans or programs (1) (2)

August 5, 2018 - September 1, 2018			457	$	2.71		457		366,889
September 2, 2018 - October 6, 2018			990		2.24		990		366,889
October 7, 2018 - November 3, 2018			2,385		2.14		2,385		366,889

August 4, 2019 - August 31, 2019												969	$	0.74		-		366,889
September 1, 2019 - October 5, 2019												7,233		0.70		-		366,889
October 6, 2019 - November 2, 2019												281		0.82		-		366,889
Total			3,832	$	2.24		3,832		366,889			8,483	$	0.71		-		366,889

(1)

~~All stock repurchases were for tax withholding amounts due on employee stock awards. No shares were purchased on the open market pursuant to our open market repurchase program.~~ Our ~~open market repurchase program~~Open Market Repurchase Program is conducted pursuant to authorizations made from time to time by our Board of ~~Directors, including~~Directors. All repurchases of our common stock during the ~~most recent authorization~~quarter ended November 2, 2019 were for taxes due on the vesting of ~~an additional 500,000 shares by~~employee stock awards.

(2)	On November 30, 2015, the Board of Directors ~~on November 24, 2015, and~~ announced ~~on November 30, 2015.~~that it had authorized the repurchase of 500,000 shares of our common stock in addition to amounts previously authorized.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~ITEM 5. OTHER INFORMATION~~

~~Not applicable.~~

ITEM 6. EXHIBITS


~~10.1~~		Second Amendment to Term Loan Credit Agreement dated as of September 18, 2018, by and among Gordon Brothers Finance Company, as administrative agent, Gordon Brothers Finance Company LLC, as lender, Stein Mart, Inc., Stein Mart Buying Corp. and Stein Mart Holding Corp., incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form~~8-K~~ ~~filed on September 19, 2018~~
~~10.2~~		Amendment No. 3 to Second Amended and Restated Credit Agreement, dated as of September 18, 2018, by and among Wells Fargo Bank, National Association, as administrative agent, the lenders party thereto, Stein Mart, Inc., Stein Mart Buying Corp. and Stein Mart Holding Corp., incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form~~8-K~~ ~~filed on September 19, 2018~~
~~10.3~~	10.1	Amendment No. 1 to Intercreditor Agreement, dated September 18, 2018, by and among Wells Fargo Bank, National Association and Gordon Brothers Finance Company., incorporated by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form~~10-K~~ ~~filed on September 19, 2018~~
~~10.4+~~		~~Second~~ Amendment to the Amended and RestatedCo-Brand and Private Label Credit Card Consumer Program Agreement with Synchrony Bank, dated August 21, 2019, by and among the Company and Synchrony Bank, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 23, 2019.*
31.1+		Certification of Chief Executive Officer Pursuant to Rule13a-14(a) or15d-14(a)
~~31.2+~~

31.2+	Certification of Chief Financial Officer Pursuant to Rule13a-14(a) or15d-14(a)
~~32.1+~~
32.1+	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
~~32.2+~~
32.2+	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
~~101~~
101	Interactive data files from Stein Mart, Inc.’s Quarterly Report on Form10-Q for the quarter ended November ~~3, 2018,~~2, 2019, formatted in XBRL ~~(extensible~~(eXtensible Business Reporting Language): (i) the ~~Condensed~~ Consolidated Balance Sheets, ~~(Unaudited),~~ (ii) the ~~Condensed~~ Consolidated Statements of Operations, ~~(Unaudited),~~ (iii) the ~~Condensed~~ Consolidated Statements of Comprehensive ~~(Loss) Income (Unaudited),~~Loss, (iv) the ~~Condensed~~Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, ~~(Unaudited),~~ and ~~(v)~~(vi) the Notes to ~~Condensed~~ Consolidated Financial ~~Statements (Unaudited)~~Statements.

+ *	Certain portions of the exhibit have been omitted pursuant to Regulation S-K Item 601(b) because it is both (i) not material to investors and (ii) likely to cause competitive harm to the Company if publicly disclosed.

+	Filed herewith.

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Form10-Q to be signed on its behalf by the undersigned thereunto duly authorized.


			STEIN MART, INC.

Date: December 4, ~~2018~~2019	By:	~~By:~~	/s/ D. Hunt Hawkins
			D. Hunt Hawkins
			Chief Executive Officer


			/s/ ~~Gregory W. Kleffner~~James B. Brown
			~~Gregory W. Kleffner~~ James B. Brown
			Executive Vice President and Chief Financial Officer

2331


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)


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