Stein Mart board feared for company's future

The Jacksonville-based retailer accepted a buyout offer from Kingswood Capital Management in January.

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  • | 5:10 a.m. March 5, 2020
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Before Stein Mart Inc. agreed to a buyout offer in January by private equity firm Kingswood Capital Management, its board had concerns about the Jacksonville-based fashion retailer surviving on its own.

According to a proxy statement filed March 2 by Stein Mart for shareholders to vote on the proposal, board members discussed the issues with law firm Foley & Lardner and investment banker PJ Solomon Securities in January.

“The Board expressed concern that, over the long-term, the Company faced the potential risk of failure as a result of any future contraction of working capital, continued decline in sales or one of the many other challenges facing the Company and that such failure would likely result in major financial losses to the unsecured trade creditors and the loss of the jobs of all the employees and loss of value for the shareholders,” the proxy said.

It also discussed the possibility of a Chapter 11 bankruptcy reorganization “and concluded the Company likely would not survive bankruptcy as a going concern due to the likely contraction of available credit from vendors and factors.”

So, the board determined the buyout offer by Kingswood was the best option.

As PJ Solomon solicited bids last year, Kingswood in May proposed a deal to buy Stein Mart’s shares for $1.50 each.

However, as Stein Mart’s financial performance continued to disappoint, Kingswood lowered the price. It reduced the offer to $1.10 in July and cut it further to 75 cents in early January after weak holiday season results.

After Kingswood agreed to raise the price to 90 cents, the board accepted the offer Jan. 28 with the stock trading at 65 cents.

The initial proxy statement didn’t set the date of the shareholder meeting to vote on the proposal.

Coronavirus spares Rayonier AM

In the middle of last week’s market meltdown, Rayonier Advanced Materials Inc. reported a big loss for 2019.

At least the Jacksonville-based company said the coronavirus is not impacting its business in China.

Rayonier AM reported a loss from continuing operations of $57 million for the fourth quarter and $119 million for the full year.

“We faced a number of challenges as the impact of global trade disputes and tariffs led to a general collapse in the pricing from our commodity products, including high yield pulp, lumber, fluff and viscose,” CEO Paul Boynton said in the company’s conference call with analysts.

China is a concern because the company, which reported 2019 revenue of $1.78 billion, sells about $230 million of products in that country, Boynton said.

“While we see challenges in China related to the trade disputes and ongoing health crisis, there are also many positive signs in the region,” he said.

“On the trade dispute, the Chinese government recently announced it will allow purchasers for certain products including cellulose specialties, viscose and fluff pulp, to apply for exemptions from the tariffs,” he said.

“We are working with our customers and expect to receive exemptions later in the first quarter or early in the second quarter.”

The tariff dispute is a long-term concern but the short-term disruption of business in China from the coronavirus is not an issue so far for Rayonier AM.

“In light of the ongoing health crisis in China, we are pleased to report that to date, cellulose specialties sales orders, shipments and cash collections from our key Chinese customers continue to flow at normal levels,” Boynton said.

Rayonier AM is continuing to cut expenses to try and offset the pricing issues. The company said it is targeting $60 million to $70 million in new cost-saving measures, including $10 million to $15 million in corporate costs.

“These (corporate) cost reductions will come from a combination of headcount reductions implemented in late 2019 and reduction of external services,” Boynton said.

A Rayonier AM spokesman said the company eliminated 10 jobs at the end of 2019 but it still employs about 4,000 people, including 120 in Jacksonville.

With Rayonier AM’s stock price already beaten down by its poor results throughout the year, the stock wasn’t impacted much by the report in a week when the entire market was melting down.

Rayonier AM fell 30 cents to $2.45 last week.

D.A. Davidson analyst Steven Chercover said in a research note that “2019 was the definition of a perfect storm” and he maintained his “buy” rating on the stock.

“We feel reasonably confident that 2020 will be better with commodity prices on the rebound, but coronavirus, poor execution, or plain bad luck could ruin the script for a happy ending,” he said.

RBC Capital Markets analyst Paul Quinn maintained his “outperform” rating on Rayonier AM after last week’s report.

“While we expect that operations will improve, we think that continued weakness in commodity markets (except lumber) will slow the turnaround,” Quinn said in his note.

“Despite this, our expectation is that pricing will eventually normalize, unlocking the earnings power of the company’s assets,” he said.

St. Joe sales jump in fourth quarter

The St. Joe Co. reported improved fourth-quarter results as the real estate development company increased sales in 2019.

Revenue grew from $16.3 million in the fourth quarter of 2018 to $42.6 million in last year’s fourth quarter, St. Joe reported last week.

With that gain, St. Joe recorded a profit of $8.7 million, or 15 cents a share, compared with a slight loss in the fourth quarter of 2018.

St. Joe said it increased sales of residential homesites and commercial transactions, and also profited from the sale of nonstrategic rural land in Leon County.

St. Joe Chairman Bruce Berkowitz said in his annual letter to clients of his investment company, Fairholme Capital Management, that demographic trends are helping St. Joe.

“Record numbers of Americans are working and retiring in Florida,” he said.

“The company, with partners, has ignited residential and hospitality operations to meet accelerating demand. Over 900 homesites are under contract – four times more than two years ago.”

Berkowitz is chief investment officer of Fairholme, which controls 44.3% of St. Joe’s stock.

St. Joe, formerly based in Jacksonville, is headquartered in WaterSound in the Florida Panhandle, near most of the company’s development activities.

Publix sales rise to $9.8 billion

Publix Super Markets Inc. said March 2 fourth-quarter sales rose 5.1% to $9.8 billion and sales at stores open for more than one year rose by 3.6%

Earnings excluding securities transactions rose by a penny to 93 cents a share.

The Lakeland-based supermarket chain said based on the latest appraisal, its stock price rose from $47.10 at the end of 2019 to $48.90 as of March 1.

Publix’s stock is not publicly traded and is made available for sale only to company employees.

The price is determined by an independent valuation five times a year.

The company opened 35 supermarkets and closed seven in 2019, ending the year with 1,239 stores in seven states. 

Trailer Bridge results drop

Jacksonville-based Trailer Bridge Inc. recorded a drop in revenue and earnings in 2019, according to Seacor Holdings Inc.’s annual report.

Revenue fell 8.8% to $158.3 million and earnings fell from $16.5 million in 2018 to $3.8 million last year.

Fort Lauderdale-based Seacor owns a 55% noncontrolling interest in Trailer Bridge, which provides marine freight service between Jacksonville and Puerto Rico and the Dominican Republic.