SMRT Stein Mart Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM SD

SPECIALIZED DISCLOSURE REPORT

 

 

Stein Mart, Inc.

(Exact name of the registrant as specified in its charter)

 

 

 

Florida		0-20052		64-0466198
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(IRS Employer Identification No.)

 

1200 Riverplace Boulevard, Jacksonville, FL		32207
(Address of principal executive offices)		(Zip code)

 

Gregory W. Kleffner, Executive VP & Chief Financial Officer		(904) 346-1500
Name of Corporate Secretary		Contact Phone #
(Name and telephone number, including area code, of the person to contact in connection with this report.)

 

 

Check the appropriate box to indicate the rule pursuant to which this form is being filed, and provide the period to which the information in this form applies:

 

x	Rule 13p-1 under the Securities Exchange Act (17 CFR 240.13p-1) for the reporting period from January 1 to December 31, 2014.

 

 

 

---

Section 1 – Conflict Minerals Disclosure

This Specialized Disclosure Report on Form SD, including the Conflict Minerals Report exhibit, contains forward-looking statements that are based upon management’s expectations and beliefs concerning future events impacting Stein Mart. Certain matters contained herein concerning the future, including risk mitigation steps, constitute forward-looking statements and are based upon management’s expectations and beliefs concerning future events. There can be no assurance that these future events will occur as anticipated. Forward-looking statements speak only as of the date they were 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. Forward-looking statements are no guarantees of performance. Wherever used, the words “plan”, “expect”, “anticipate”, “believe”, “estimate” and similar expressions identify forward-looking statements. Forward-looking statements contained in this report are subject to certain risks, uncertainties or assumptions and may be affected by certain factors, including but not limited to the specific factors discussed in Part I, Item 1A of the Company’s Annual Report on Form 10K under “Risk Factors” of the Company’s Annual Report for the year ended January 31, 2015. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements of the Company may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

 

Item 1.01

Conflict Minerals Disclosure and Report:

Stein Mart (the “Company”) undertook a country of origin inquiry with respect to conflict minerals used in the production of our products and has determined in good faith for the year ended December 31, 2014:

During 2014, we contracted to manufacture products for which 3TGs (as defined below) are necessary to their functionality or production (“Covered Products”). The term “3TGs” refers to columbite-tantalite (coltan), cassiterite, gold, wolframite or their derivatives, which are limited to tantalum, tin and tungsten. We have developed a conflict minerals compliance program reasonably designed to identify whether the 3TGs in our Covered Products originated in the Democratic Republic of the Congo or an adjoining country (Angola, Burundi, the Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda or Zambia) (collectively, the “Covered Countries”), or whether any of the 3TGs in our Covered Products are from recycled or scrap sources.

Description of Stein Mart’s Reasonable Country of Origin Inquiry:

Stein Mart’s reasonable country of origin inquiry (“RCOI”) employed a combination of measures to determine whether the necessary 3TGs in our products originated from the Covered Countries. Our primary means of determining country of origin of necessary 3TGs was by conducting a supply chain survey with direct vendors using the EICC-GeSI (Electronic Industry Citizenship Coalition – Global E-Sustainability Initiative) Conflict Minerals Reporting Template (CMRT), version 3.02. This supply chain survey, and the conflict minerals program as a whole, was developed and implemented with our third-party service provider.

As a result of the RCOI conducted, 73.1% of our 412 vendors surveyed provided a response. From those respondents, we identified 48 valid smelters and refiners, 37 of which have been certified as conflict-free.

Conflict Minerals Disclosure

In accordance with Rule 13p-1 under the Securities and Exchange Act of 1934 (‘Rule 13p-1’), Stein Mart has filed this Specialized Disclosure Form (Form SD) and the associated Conflict Minerals Report and both reports are posted to a publicly available internet site at http://ir.steinmart.com/.

 

2 | Page

---

Item 1.02

Exhibit

Stein Mart has included its Conflict Minerals Report as Exhibit 1.01 to this Form SD.

 

Section 2

Exhibits

 

Item 2.01

Exhibits

 

Exhibit No.		Description
Exhibit 1.01		Conflict Minerals Report as required by Items 1.01 and 1.02 of Form SD

 

3 | Page

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the duly authorized undersigned.

 

Stein Mart, Inc.
(Registrant)
/s/ Gregory W. Kleffner				May 28, 2015
Executive Vice President and Chief Financial Officer				(Date)
By (Signature and Title)*

 

*	Print name and title of the registrant’s signing executive officer under his or her signature.

 

4 | Page

Exhibit 1.01

Stein Mart, Inc.

Conflict Minerals Report

For The Year Ended December 31, 2014

This report for the year ended December 31, 2014 is presented to comply with Rule 13p-1 under the Securities Exchange Act of 1934 (the Rule).

Stein Mart has no reason to believe the 3TGs, (Tantalum, tin, tungsten and gold), present in our supply chain originated in the covered countries (the DRC: Democratic Republic of the Congo, Angola, Burundi, Central African Republic, Congo Republic, Rwanda, South Sudan, Uganda and Zambia – “Covered Countries”). We are unable with absolute assurance to determine the origin of the 3TGs in our products is not the Covered Countries and therefore cannot exclude the possibility that some may have originated in the Covered Countries. For that reason, we are required under the Rule to submit to the SEC a Conflict Minerals Report (CMR) as an Exhibit to Form SD.

1. Company Overview

This report has been prepared by management of Stein Mart, Inc. (herein referred to as “Stein Mart,” the “Company,” “we,” “us,” or “our”) and includes the activities of all subsidiaries.

Stein Mart

Headquartered in Jacksonville, Florida, Stein Mart is a national retailer offering the fashion merchandise, service and presentation of a better department or specialty store. Our focused assortment of merchandise features current season, moderate to better fashion apparel for women and men, as well as accessories, shoes and home fashions, all offered at prices competitive with off-price retail chains. Begun in the early 1900’s as a single store in Greenville, Mississippi, we operated 270 stores in 30 states and an Internet store as of January 31, 2015. Stein Mart, Inc. became a Florida corporation in 1992. Prior to 1992, Stein Mart, Inc. was incorporated in Mississippi.

Merchandising, Purchasing and Pricing

Our fashion assortment is driven primarily by seasonal fashion trends and a focus on name brand and designer merchandise complemented by a select program of private label and proprietary/exclusive merchandise. In 2014, approximately 10 percent of our sales were from private label or proprietary/exclusive merchandise. We merchandise our stores based on individual store selling characteristics, seasonal buying fluctuations and regional preferences while maintaining mostly consistent assortments from store to store.

Our merchants purchase products from approximately 1,200 vendors. We buy a majority of our merchandise at the same time and from many of the same manufacturers as traditional department/specialty stores although we generally do not require the same level of front and back-end vendor concessions, such as advertising allowances, return privileges and markdown allowances, which are common and significant in the department store industry. As a result, we believe that our buyers are able to negotiate more favorable upfront pricing terms from vendors. We also purchase merchandise opportunistically when we believe a combination of the product and the price makes it a compelling addition to our assortment. In both instances, we reflect our savings in our pricing which passes on to our customers through everyday low pricing targeted to be competitive with off-price retail chains.

Our shoe department inventory is exclusively supplied and owned by DSW, Inc. (DSW). DSW’s buyers determine each season’s fashion footwear assortment. We operate the shoe department and receive a percentage of net revenue in accordance with a supply agreement (the Supply Agreement). Commissions from this leased department are included in net sales reported in our consolidated statements of income.

---

In accordance with the Organization for Economic Cooperation and Development (OECD) Guidance and the Rule, this CMR is available on our website http://ir.steinmart.com.

2. Description of Stein Mart’s Reasonable Country of Origin Inquiry:

Stein Mart’s reasonable country of origin inquiry (RCOI) employed a combination of measures to determine whether the necessary 3TGs in our products originated from the Covered Countries. Our primary means of determining country of origin of necessary 3TGs was by conducting a supply chain survey with direct vendors using the EICC-GeSI (Electronic Industry Citizenship Coalition – Global E-Sustainability Initiative) Conflict Minerals Reporting Template (CMRT).

This supply chain survey, and the conflict minerals program as a whole, was developed and implemented with our third-party service provider.

We began our scoping process by extracting a comprehensive vendor list from our database. This list was then filtered to remove:

 

•

Inactive Vendors (minimum 1 year since last purchase)

 

•

Vendors of Branded Product for whom we have no influence over the product we purchase

This ensured all vendors surveyed provided products to Stein Mart which were available for sale in our stores in the year 2014.

To ensure our efforts targeted those vendors whose products align with the intent of the legislation, we further filtered the list to those vendors with whom we have design influence. The resulting list contained a total of 412 vendors.

We then conducted the vendor survey portion of the RCOI.

During the vendor survey, vendors were contacted via a SaaS (Software as a Service) platform which enables users to complete and track vendor communications as well as allow vendors to upload completed CMRTs directly to the platform for red flag assessment and management.

Non-responsive vendors were contacted a minimum of three times. This included follow ups from the supply chain team. Vendors were then contacted via email and phone as an escalation to ensure the importance of a response via EICC-GeSI forms was emphasized.

Our communications included education on the completion of the CMRT to alleviate any remaining confusion with vendors.

All of these communications were monitored and tracked for future reporting and transparency.

A notable addition to our program in 2014 was automated data validation on all submitted CMRTs. The goal of data validation is to increase the accuracy of submissions and identify any contradictory answers in the CMRT. This data validation was based on responses to the questions listed below.

Question 1 (Response required) – Is the conflict metal intentionally added to your product?

---

Question 2 (Response required) – Is the conflict metal necessary to the production of your company’s product and contained in the finished product that your company manufactures or contracts to manufacture?

 

•

If suppliers state (via Q1 and Q2) that their products do not contain 3TGs necessary to the function or production of said products then no further information is required and no further data validation is completed.

Question 3 – Do any of your 3TGs originate from the covered countries?

 

•

Any supplier that has any 3TGs from the covered countries, even one positive response from their supply chain, must answer yes.

Question 4– Is 100% of the 3TG in question from a recycled source?

Question 5 – Have you received info from all relevant 3TG Suppliers?

 

•

If you are not at 100%, then you can’t make definitive statements for Questions 3, 4 and 6

Question 6 – Have you identified all your Smelters?

 

•

If the answer here is yes, then question 5 must be yes. This also impacts Question 3.

All submitted forms were accepted and classified as valid or invalid so the data is retained. Suppliers were contacted in regards to invalid forms and were encouraged to resubmit a valid form. As of May 28, 2015, there were 16 invalid supplier submissions.

Conflict Minerals Policy

The Company has adopted the “Stein Mart Conflict Mineral Compliance Policy” which is publicly available in its entirety at http://ir.steinmart.com/.

For additional information about our commitment to responsible sourcing and other human rights, see Stein Mart’s Vendor Code of Conduct: https://vendors.steinmart.com/sites/SupplyChain/Documents/Vendor%20Code%20of%20Conduct.pdf

3. Due Diligence Process

3.1 Design of Due Diligence

Our due diligence measures have been designed to conform, in all material respects, with the framework in The Organization for Economic Co-operation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance) and the related supplements for gold and for tin, tantalum and tungsten.

3.2 Management Systems

As described above, Stein Mart has adopted a conflict minerals policy which is posted on our website at http://ir.steinmart.com.

---

Internal Team

Stein Mart has established a management system for conflict minerals. Our management system includes the Executive Steering Committee sponsored by the Executive Vice President and Chief Financial Officer as well as executive-level representatives and a team of subject matter experts from relevant functions such as:

 

•

Senior Vice President of Supply Chain and e-Commerce;

 

•

Senior Vice President of Planning and Allocation;

 

•

Vice President of Internal Audit;

 

•

Senior Director – Associate General Counsel;

 

•

Senior Vice President and Controller

A team of subject matter experts is responsible for implementing our conflict minerals compliance strategy and is led by the Senior Vice President of Supply Chain and e-Commerce who acts as the executive conflict minerals program manager. Senior management is briefed about the results of our due diligence efforts on a regular basis.

Control Systems

As we do not typically have a direct relationship with 3TG smelters and refiners, we are engaged and actively cooperate with other major manufacturers in retail and other sectors.

Controls include, but are not limited to, Stein Mart’s Ethical Business Conduct Policy which outlines expected behaviors for all of our employees, and our Vendor Code of Conduct and a vendor conflict minerals clause in our terms and conditions of purchase which is further described below.

We rely on our direct vendors to provide information on the origin of the 3TGs contained in components and materials supplied to us –including sources of 3TG that are supplied to them from lower tier vendors.

This is communicated in Stein Mart’s Standard Terms and Conditions which are applicable to all goods purchased with the intent to be sold in any of our retail stores. These terms include the following language:

We fully support the humanitarian goals of the Dodd Frank Act and are committed to conducting our business operations in a manner that complies with all applicable laws and regulations regarding conflict minerals. We are committed to working with our supply chain to increase transparency regarding the origin and traceability of minerals contained in our products with the goal of ensuring all products sold by us to our customers are DRC Conflict-Free. We will follow the current Organization for Economic Cooperation and Development (OECD) framework to incorporate proper due diligence measures into our supply chain regarding trade in conflict minerals.

The following requirements must be met by Stein Mart vendors:

 

•

Assist Stein Mart by responding to all inquiries regarding compliance with SEC regulations related to conflict minerals and provide all necessary declarations.

 

•

Undertake reasonable due diligence, consistent with the Organization for Economic Cooperation and Development (OECD) current guidelines, within their supply chain seek to determine the chain of custody and origin of the conflict minerals. Due diligence includes developing policies and management systems to use DRC Conflict Free minerals, including making these requirements apply to their direct vendors and sub-tier vendors and requiring them to do the same with lower tiers of vendors.

 

•

Make commercially reasonable efforts to comply with information requests on the source and origin of conflict minerals in the parts, components or materials provided to Stein Mart. This includes completion of the EICC-GeSI (Electronic Industry Citizenship Coalition – Global E-Sustainability Initiative) conflict minerals reporting template.

 

•

Maintain chain of custody data for five years and provide the same to Stein Mart upon request.

---

Stein Mart’s Terms and Conditions document may be found in its entirety at: http://smvendorportal/sites/Accounting/Documents/Stein%20Mart%20Terms%20and%20Conditions%20of%20Purchase%2008-2012.pdf

Vendor Engagement

With respect to the OECD requirement to strengthen engagement with vendors, we have provided education on the Conflict Minerals regulation, communicated the company’s understanding of expectations of the law and required compliance for a continued business relationship, and leveraged the existing communications within the company (specifically procurement) to encourage vendor interactions with us as well as understand the requirement for completion. Feedback from this engagement has allowed us to enhance the training, as well as focus and adapt it to each user’s needs. Direct vendor engagement has also allowed for our vendor communications to be more focused and ensure expectations are clear.

Grievance Mechanism

We have a longstanding grievance mechanism whereby employees and vendors can report violations of our policies. Employees may call the Stein Mart independent confidential hotline at 855-SMTLINE (855-768-5463), and request assistance.

Maintain records

We have adopted a policy to retain relevant documentation. Documentation will be retained for a period of five years.

Due Diligence Process and Results

Certain of the responses provided by suppliers to the CMRT included the names of facilities listed by the suppliers as smelters or refiners. We do not have a direct relationship with 3TG smelters and refiners and do not perform or direct audits of these entities within our supply chain. We compared the facilities listed in these responses to the list of smelters maintained by the Conflict-Free Sourcing Initiative (CFSI), the United States Department of Commerce (DoC) and the London Bouillon Market Association (LBMA) and, if a supplier indicated that the facility was certified as “Conflict-Free,” confirmed that the name was listed by CFSI.

As of May 28, 2015, we have validated 48 smelters or refiners and are working to validate an additional four smelter/refiner entries from the submitted CMRTs. Of the 48 valid smelters identified, 37 have been certified as conflict free as listed by the CFSI. The large majority of the responses received either provided data at a company or divisional level or did not specify the smelters or refiners used for materials supplied to us. We are therefore unable to determine whether the 3TGs reported by certain suppliers were contained in materials supplied to us or to validate that any of these smelters or refiners are actually in our supply chain.

Based on the smelter lists provided by suppliers via the CMRTs and publically available information, there are 36 smelters for which the source is not disclosed. Of those smelters, whose source is unknown, twenty six are certified conflict free as listed by the CFSI. Many suppliers are unable to provide the smelters or refiners used for materials supplied to us. Furthermore, many of the responses provided at the company or division level indicated an “unknown” status in terms of determining the origin of 3TGs.

In accordance with OECD Guidelines, it is important to understand risk levels associated with conflict minerals in the supply chain. Smelters not being certified DRC-Conflict Free pose a significant risk to the Supply Chain. The software used in conjunction with the services of our third party service provider classified the risk as High, Medium and Low; this Risk rating is generated based on three (3) scoring criteria:

 

•

Regulated Body: this assesses whether the smelter is a member and has an associated regulated body number (Smelter CID Number is the primary method).

---

•

Proximity:

 

•

Level 1 Country: Countries with known active ore production for tin or tantalum that are not identified as conflict regions or plausible countries of smuggling or export of tin or tantalum containing materials. Smelter Country is located in North or South America, Australia or Europe. [Example - G8 Level Countries who are known to meet OECD standards in other sectors.]

 

•

Level 2 Country: Known or plausible countries for smuggling, export out of Level 3 countries, or transit of materials containing tin or tantalum. This currently includes Kenya, Mozambique, and South Africa.

 

•

Level 3 Country: The Democratic Republic of the Congo (DRC) and its nine adjoining countries as outlined in Section 1502 of the Dodd Frank Act. These include Angola, Burundi, Central African Republic, Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia. These are also commonly referred to as “covered countries” in the Dodd Frank Act Section 1502.

 

•

Certification: If the Smelter is certified conflict-free via the Conflict-Free Sourcing Initiative (CFSI) or the London Bouillon Market Association (LBMA) Responsible Gold Program.

We also calculate supplier risk based on the chances that the supplier provides 3TGs that may originate from Non-Conflict Free sources. The value of this risk is calculated based on the risk ratings of the smelters declared by that Supplier on their CMRT.

Additionally, suppliers are evaluated on program strength (further assisting in identifying risk in the supply chain). Evaluating and tracking the strength of the program does meet the OECD Due Diligence Guidelines and can assist in making key risk mitigation decisions as the program progresses. The criteria used to evaluate the strength of the program are:

 

A.	Do you have a policy in place that includes DRC conflict-free sourcing?

 

E.	Have you implemented due diligence measures for conflict-free sourcing?

 

H.	Do you verify due diligence information received from your suppliers?

 

I.	Does your verification process include corrective action management?

When suppliers meet or exceed those criteria (Yes to at least questions A,E,H,I), they are deemed to have a strong program. When suppliers do not meet those criteria, they are deemed to have a weak program.

As part of our risk management plan to ensure vendors understand our expectations, we have provided video, recorded training, and documented instructions as well as contacts via email and phone by our Supply Chain Performance staff as an escalation to ensure the importance of a response via CMRTs was emphasized.

As described in our Conflict Minerals policy, we engage any of our vendors whom we have reason to believe are supplying us with 3TGs from sources that may support conflict in the Covered Countries to establish an alternative source of 3TGs that does not support such conflict, as provided in the OECD guidance.

We believe that the inquiries and investigations described above represent a reasonable effort to determine the mines or locations of origin of the 3TGs in our Covered Products, including (1) seeking information about 3TG smelters and refiners in our supply chain through requesting that our suppliers complete the CMRT, (2) verifying those smelters and refiners with the expanding CFSI lists, (3) conducting the due diligence review, and (4) obtaining additional documentation and verification, as applicable.

---

Our existing policy related to relevant documentation of our conflict mineral compliance process requires that documentation will be retained for a period of at least five years.

Steps to be taken to mitigate risk

We intend to take the following steps to improve the due diligence conducted to further mitigate any risk that the necessary 3TGs in our products could benefit armed groups in the Covered Countries:

 

a.	Continue to engage with vendors and direct them to training resources to attempt to increase the response rate and improve the content of the vendor survey responses.

 

b.	Engage any of our vendors found to be supplying us with 3TG from sources that support conflict in the Covered Countries to establish an alternative source of 3TG that does not support such conflict.

 

c.	Work with vendors to use the most current version of the CMRT each year as that will contain the most current smelter IDs available.

 

d.	Require the use of the smelter identification numbers. Vendor responses will not be considered complete without identification numbers.

 

e.	Request vendors to inform Stein Mart of the correlation between these smelters and the products and parts they supply to Stein Mart.