The effect of the adjustments for fiscal 2011 was to increase previously reported net income by $0.1 million (see Note 2 in the attached materials). The impact on individual quarters was generally a reduction in first quarter income with increases in second and third quarter income. See Note 3 in the attached materials for tables that present the effect of corrections to the Consolidated Statements of Income for each quarterly period of 2011 and the first quarter of 2012.Balance Sheet Highlights Cash at year end 2012 was $67.2 million, after paying a dividend of $43.8 million, compared to $94.1 million in 2011. The Company has no debt and had no borrowings under its credit facility during 2012 or 2011. Inventories were $243.3 million at year-end 2012 compared to $218.8 million at the end of 2011. Year-end inventories were higher than last year, as planned, due to an additional week of early season spring receipts from the shift of the 53 rd week into fiscal 2012, as well as a strategy to increase wear-now merchandise to drive early first quarter selling. Capital expenditures were $45.4 million for 2012 driven by our investment in information systems, including our new merchandise information system, as well as new, relocated and remodeled stores. Store Network Six new stores were opened, five were closed and four were relocated in 2012. The company operated 263 Stein Mart stores at year-end compared to 262 at the end of 2011. 2013 Plans In 2013, we are continuing to embrace our value proposition with controlled couponing and even lower prices on selected merchandise. Our goal is to build on the sales increases we experienced in 2012 primarily by deepening our relationship with existing customers, attracting new customers and increasing our share of their spending. We expect the following factors to influence our business in 2013:
- The gross profit rate is expected to be slightly lower than in 2012 as we continue to manage our selling prices and couponing and from lower margins on e-commerce sales in the second half of the year.
- SG&A expenses are expected to increase $3-4 million as a result of the following:
- We will incur approximately $3 million in start-up costs related to the launch of our new e-commerce business and the transition of our supply chain from third-party to company-operated locations.
- Depreciation will increase by approximately $3 million as a result of recent years' investments in capital.
- 2012 SG&A included the impact of certain expenses and income not expected to reoccur in 2013, including $4.0 million of legal and accounting fees related to the restatement of our financial statements and $2.1 million of higher breakage income on unused gift and merchandise return cards as a result of changes in breakage assumptions.
- The effective tax rate for the year is expected to be approximately 39.5 percent.
- Current plans are to open four stores, close three stores and relocate four stores to better locations in their respective markets in 2013.
- Capital expenditures for 2013 are expected to be approximately $34 million, including $14 million for continuing information system upgrades, $5 million for distribution center equipment and software, and the remainder for new and relocated stores, store remodels and new fixtures.