Steinmart borrows millions to pay special dividend

Steinmart plans to pay a $5 special dividend thanks to the availability of low cost financing that allowed the company to more than double the size of its credit facility.

The huge payout, much of which will be paid to Steinmart CEO Jay Stein, comes as the off-price department store retailer based in Jacksonville, FL., has enjoyed solid sales of late and been opening store more aggressively. The company’s fourth quarter same store sales grew 5.6% and total sales increased 7.3% to $387.1 million. For the year, same store sales increased 3.3% and total sales increased 4.3% to $1.3 billion.

In order to fund the $230 million needed to pay the $5 dividend, Steinmart struck a new deal to expand and extend the terms of its credit agreement with lender Wells Fargo. The new credit line totals $250 million and expires in 2020 and replaces a $100 million credit line that expires in 2017. The sizeable new credit line and cash on hand will be used for the $5 payout. Steinmart ended the third quarter with cash and equivalents of $68 million and no borrowings under its credit facility.

"Today's announcement of a $5 special dividend reflects our continued generation of strong cash flows and favorable access to the credit markets which allow us to return value to our shareholders," said Stein, chairman of the company since 1989 and beneficial owner of 34% of the company’s outstanding shares. "Even after this special dividend, we will have ample capital capacity to make long-term investments in our business, such as our accelerated store expansion."

After payment of the dividend, the company said its debt will fluctuate between approximately $150 and $200 million in 2015 based on seasonal working capital needs.