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Coldwater Creek Announces Results for Third Quarter of Fiscal 2012

Coldwater Creek Announces Results for Third Quarter of Fiscal 2012

  *Comparable premium retail store sales increased 7.3 percent
  *Adjusted net loss per share of $0.45, excluding the loss on derivative
    liability, compared to net loss per share of $1.24 for the same period
    last year

SANDPOINT, Idaho, Nov. 28, 2012 (GLOBE NEWSWIRE) -- Coldwater Creek Inc.
(Nasdaq:CWTR) today reported financial results for the three-month period
ended October 27, 2012.

Third Quarter of Fiscal 2012 Operating Results

  *Consolidated net sales were $188.1 million, compared with $187.5 million
    in third quarter 2011. Net sales from the retail segment were $147.2
    million, compared with $144.1 million in the same period last year,
    primarily reflecting an increase in comparable premium retail store sales
    of 7.3 percent. Net sales from the direct segment were $40.9 million,
    compared with $43.3 million in the same period last year.
  *Consolidated gross profit increased $9.8 million to $66.1 million, or 35.1
    percent of net sales, compared with $56.3 million, or 30.0 percent of net
    sales, for third quarter 2011. The 510 basis point increase in gross
    profit margin was primarily due to increased leverage of buying and
    occupancy costs and improvements in merchandise margins reflecting
    improved product performance.
  *Selling, general and administrative expenses (SG&A) were $76.1 million, or
    40.5 percent of net sales, compared with $84.5 million, or 45.1 percent of
    net sales, for third quarter 2011. The $8.4 million decline in SG&A was
    due primarily to lower marketing expense compared to the same period last
    year.
  *Net loss was $20.5 million, or $0.67 per share on 30.5 million weighted
    average shares outstanding, and included other loss, net, of $6.8 million,
    or $0.22 per share, due to the change in the fair value of the derivative
    liability related to the Series A Preferred Stock issued in July 2012.
    This compares to a net loss of $29.2 million, or $1.24 per share on 23.6
    million weighted average shares outstanding for third quarter 2011.
  *On an adjusted basis, excluding the loss on the derivative liability, net
    loss was $13.7 million, or $0.45 per share on 30.5 million weighted
    average shares outstanding, and compares to a net loss of $29.2 million,
    or $1.24 per share on 23.6 million weighted average shares outstanding for
    third quarter 2011. (Please see the table of GAAP to Non-GAAP
    Reconciliation of Selected Measures at the end of this press release.)

"Our third quarter operating results demonstrate the significant progress we
have made to refine our assortment architecture and fundamentally change the
way our business operates. We achieved year-over-year improvements across
numerous key operating metrics driven by a favorable response to our fall
merchandise, and generated the first positive year-over-year gain in net sales
in two years, even as we continued to rationalize our store base. In addition
to a 7.3 percent increase in premium retail comparable store sales, we
realized gross margin expansion of 510 basis points and our stringent expense
disciplines resulted in an $8.4 million reduction in SG&A dollars and 460
basis points of leverage," said Dennis Pence, Chairman and Chief Executive
Officer. "We are confident that our strategic initiatives focused on
revitalizing our product, optimizing our store base, and enhancing our
marketing will allow us to continue our progress to position Coldwater Creek
for sustained improvements in our business."

Balance Sheet

At October 27, 2012, cash totaled $31.3 million, as compared with $37.9
million at October 29, 2011. There were no borrowings outstanding under the
Company's revolving line of credit as of October 27, 2012 as compared to $15
million of borrowings at the end of the third quarter last year. Premium
retail store inventory per square foot, including retail inventory in the
distribution center, declined approximately 9.3 percent as compared to the end
of the third quarter last year. Total inventory decreased 6.0 percent to
$161.7 million from $172.0 million at the end of the third quarter last year.

Reverse Stock Split

At a special meeting of stockholders held on September 21, 2012, Coldwater
Creek's stockholders approved a proposal authorizing the Board of Directors to
effect a reverse stock split of the Company's common stock. Following the
special meeting, the Board of Directors approved the reverse stock split on
the basis of one share of post-split common stock for each outstanding four
shares of pre-split common stock.The reverse split became effective and
Coldwater Creek common stock began trading on a split-adjusted basis when
trading began on October 4, 2012.The reverse stock split reduced the number
of outstanding shares of common stock to 30.5 million on October 4, 2012.

Derivative Liability

During the second quarter of fiscal 2012, in connection with the $65.0 million
term loan received from an affiliate of Golden Gate Capital, the Company
issued 1,000 shares of Series A Preferred Stock, which are convertible into an
aggregate of 6.1 million shares of common stock at a purchase price of $3.40
per share. As a result of this transaction, the Company recorded a derivative
liability of $15.7 million, which represented the fair value of the shares of
Series A Preferred Stock upon issuance. In accordance with applicable U.S.
GAAP, this derivative liability is measured at fair value on a recurring basis
with changes recorded as other gain or loss, net. The Company's fourth quarter
of fiscal 2012 earnings guidance set forth below excludes the quarterly impact
of any change in the fair value of the derivative liability due to the
inherent variability of this financial instrument.

Store Optimization Program

The Company closed two premium retail stores and opened one premium retail
store during third quarter 2012, ending the quarter with 354 premium retail
stores.As part of the Company's ongoing store optimization plan, year-to-date
in fiscal 2012, the Company has closed 10 premium retail stores.The Company's
plan calls for the closure of up to 45 stores from fiscal year 2011 through
2013.Since 2011, the Company has closed 25 total stores.

Fourth Quarter of Fiscal 2012 Financial Guidance

As a reminder, the Company's fourth quarter 2011 results included net sales of
$11.8 million as a result of a favorable cumulative one-time adjustment
related to gift card breakage.This adjustment resulted in a $0.39 benefit on
a per share basis.

For fourth quarter 2012, the Company expects:

  *Comparable premium retail store sales to be flat to down in the low single
    digits. This expectation includes the effects of recent significant
    weather events on the East Coast in early November.
  *Merchandise margin improvement of 100 to 150 basis points.
  *Gross margin results for the fourth quarter 2011 included a 370 basis
    point favorable impact from the cumulative adjustment for gift card
    breakage income.
  *Net loss per share in the range of $0.55-$0.65, excluding the impact of
    the change in the fair value of the derivative liability and any costs
    associated with the CEO transition. This compares to a net loss per share
    of $0.42, which included a $0.39 benefit related to gift card breakage
    income and a $0.08 non-cash impairment charge related to under performing
    stores.
  *Total inventory at the end of the quarter to be flat to down slightly as
    compared to the fourth quarter of fiscal 2011 and includes the impact of
    early spring product receipts due to both an earlier planned assortment
    flow and the 53^rd week.

Conference Call Information

Coldwater Creek will host a conference call on Wednesday, November28, 2012,
at 4:30 p.m. (Eastern) to discuss fiscal 2012 third quarter results. The dial
in number for the call is 877-705-6003. The call will be simultaneously
broadcast on the Investor Relations section of the Company's Web site at
www.coldwatercreek.com. A recording of the call can be accessed for one week
following the reporting date by calling (877) 870-5176 and providing
conference ID 403313. A transcript of the call will also be available in the
Investor Relations section of the Company's Web site.

Coldwater Creek is a leading specialty retailer of women's apparel, gifts,
jewelry, and accessories that was founded in 1984 and is headquartered in
Sandpoint, Idaho. The Company sells its merchandise through premium retail
stores across the country, online at www.coldwatercreek.com and through its
catalogs.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:

This news release contains "forward-looking statements" within the meaning of
the securities laws, including statements about the effect of our strategic
initiatives on our future financial results, the Company's expectations about
future store closures and, with respect to the fourth quarter of fiscal 2012,
expectations about comparable premium retail store sales, margin rate, net
loss per share, and inventory. These statements are based on management's
current expectations and are subject to a number of uncertainties, risks and
assumptions that may not fully materialize or may prove incorrect.As a
result, our actual results may differ materially from those expressed or
implied by the forward-looking statements. Important factors that could cause
actual results to differ materially from estimates or projections contained in
the forward-looking statements include, but are not limited to:

  *the inherent difficulty in forecasting consumer buying and retail traffic
    patterns and trends, which continue to be erratic and are affected by
    factors beyond our control, such as significant weather events, current
    macroeconomic conditions, high unemployment, continuing heavy promotional
    activity in the specialty retail marketplace, and competitive conditions
    and the possibility that because of lower than expected customer response,
    or because of competitive pricing pressures, we may be required to sell
    merchandise at lower than expected margins, or at a loss;
  *potential inability to attract and retain key personnel;
  *our new design aesthetic may take longer to implement than expected or may
    not resonate with our customers;
  *difficulties in forecasting consumer demand for our merchandise as a
    result of changing fashion trends and consumer preferences;
  *changing business and economic conditions resulting in our inability to
    realize our sales and earnings expectations;
  *our potential inability to recover the substantial fixed costs of our
    retail store base due to sluggish sales, which may result in impairment
    charges;
  *our potential inability to maintain compliance with debt covenants;
  *delays we may encounter in sourcing merchandise from our foreign and
    domestic vendors, including the possibility our vendors may not extend us
    credit on acceptable terms, and the potential inability of our vendors to
    finance production of the goods we order or meet our production needs due
    to raw material or labor shortages;
  *our foreign sourcing strategy may not lead to reduction of our sourcing
    costs or improvement in our margins;
  *increasing competition from discount retailers and companies that have
    introduced concepts or products similar to ours;
  *marketing initiatives may not be successful in improving the breadth of
    our customer base, or increasing traffic in the near term, or at all;
  *difficulties encountered in anticipating and managing customer returns and
    the possibility that customer returns may be greater than expected;
  *the inherent difficulties in catalog management, for which we incur
    substantial costs prior to mailing that we may not be able to recover, and
    the possibility of unanticipated increases in mailing and printing costs;
  *unexpected costs or problems associated with our efforts to manage the
    complexities of our multi-channel business model, including our efforts to
    maintain our information systems;
  *our revolving line of credit may not be fully available due to borrowing
    base and other limitations;
  *the benefits expected from our merchandising and design initiatives may
    not be achieved or may take longer to achieve than we expect;
  *the actual number and timing of planned store closures depends on a number
    of factors that cannot be predicted, including among other things the
    future performance of our individual stores and negotiations with our
    landlords;

and such other factors as are discussed in our most recent Annual Report on
Form10-K, Quarterly Report on Form 10-Q, and Current Reports on Form 8-K
filed with the U.S. Securities and Exchange Commission. You should not place
undue reliance on forward-looking statements, which are based on current
expectations and speak only as of the date of this release. We do not assume
any obligation to publicly release any revisions to forward-looking statements
to reflect events or changes in our expectations after the date of this
release.

COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND SUPPLEMENTAL DATA
(Unaudited)
(in thousands, except for per share data and store counts)
                                                               
                              Three Months Ended      Nine Months Ended
                              October27, October29, October27, October29,
                               2012        2011        2012        2011
Net sales                      $188,124  $187,465  $521,698  $548,669
Cost of sales                  122,059     131,200     352,722     392,470
Gross profit                   66,065      56,265      168,976     156,199
Selling, general and           76,106      84,519      219,299     238,008
administrative expenses
Loss on asset impairments      —           —           —           2,875
Loss from operations           (10,041)    (28,254)    (50,323)    (84,684)
Other loss, net                6,797       —           5,519       —
Interest expense, net          3,573       599         5,859       1,520
Loss before income taxes       (20,411)    (28,853)    (61,701)    (86,204)
Income tax provision           115         305         143         661
Net loss                       $ (20,526) $ (29,158) $ (61,844) $ (86,865)
Net loss per share — Basic and $(0.67)   $(1.24)   $(2.03)   $(3.73)
Diluted
Weighted average shares
outstanding — Basic and        30,504      23,573      30,460      23,284
Diluted
Supplemental Data:                                              
Segment net sales:                                              
Retail                         $147,245  $144,138  $408,386  $421,644
Direct                         40,879      43,327      113,312     127,025
Total                          $188,124  $187,465  $521,698  $548,669
Operating statistics:                                           
Catalogs mailed                15,330      11,558      39,178      40,374
Premium retail stores:                                          
Opened                         1           1           1           3
Closed                         2           1           10          10
Count at end of the fiscal     354         366         354         366
period
Square footage                 2,026       2,127       2,026       2,127
Factory outlet stores:                                          
Opened                         —           —           —           —
Closed                         —           —           —           —
Count at end of the fiscal     38          39          38          39
period
Square footage                 255         266         255         266
Spas:                                                           
Count at end of the fiscal     9           9           9           9
period
Square footage                 49          49          49          49


COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except for per share data)
                                                                
                                          October27, January28, October29,
                                           2012        2012        2011
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                  $31,294   $51,365   $37,881
Receivables                                8,554       8,199       10,871
Inventories                                161,715     131,975     171,970
Prepaid and other current assets           7,339       6,137       6,438
Prepaid and deferred marketing costs       6,570       3,273       6,639
Deferred income taxes                      2,819       2,313       6,536
Total current assets                       218,291     203,262     240,335
Property and equipment, net                180,640     206,079     219,521
Deferred income taxes                      2,207       1,891       2,054
Other assets                               4,568       1,883       1,860
Total assets                               $ 405,706  $ 413,115  $ 463,770
LIABILITIES AND STOCKHOLDERS' EQUITY                             
Current liabilities:                                             
Accounts payable                           $91,430   $55,130   $85,420
Accrued liabilities                        89,820      74,915      75,506
Income taxes payable                       240         3,260       3,305
Current maturities of debt and capital     560         15,735      15,819
lease obligations
Total current liabilities                  182,050     149,040     180,050
Deferred rents                             86,900      101,384     104,648
Long-term debt and capital lease           61,797      26,575      26,755
obligations
Supplemental Executive Retirement Plan     12,431      12,142      10,305
Deferred marketing fees and revenue        3,257       4,402       4,791
sharing
Deferred income taxes                      2,512       1,716       5,524
Other liabilities                          1,018       1,443       1,515
Total liabilities                          349,965     296,702     333,588
Commitments and contingencies                                    
Stockholders' equity:                                            
Preferred stock, $0.01 par value, 1,000
shares authorized; 1, 0 and 0 shares       —           —           —
issued, respectively
Common stock, $0.01 par value, 75,000
shares authorized; 30,520, 30,417 and      305         304         304
30,402 shares issued, respectively
Additional paid-in capital                 152,397     151,254     150,454
Accumulated other comprehensive loss       (2,176)     (2,204)     (464)
Accumulated deficit                        (94,785)    (32,941)    (20,112)
Total stockholders' equity                 55,741      116,413     130,182
Total liabilities and stockholders' equity $ 405,706  $ 413,115  $ 463,770


COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
                                                                 
                                                      Nine Months Ended
                                                      October27, October29,
                                                       2012        2011
Operating activities:                                             
Net loss                                               $ (61,844)  $ (86,865)
Adjustments to reconcile net loss to net cash used in             
operating activities:
Depreciation and amortization                          39,037      43,527
Non-cash interest expense                              3,001       —
Stock-based compensation expense                       1,335       1,635
Supplemental Executive Retirement Plan expense         441         416
Deferred income taxes                                  (26)        (646)
Valuation allowance adjustments                        (343)       (840)
Deferred marketing fees and revenue sharing            (702)       (1,150)
Deferred rents                                         (15,569)    (12,356)
Loss on derivative liability                           4,434       —
Series A Preferred Stock issuance costs                1,086       —
Net loss on asset dispositions and other termination   2,249       119
charges
Loss on asset impairments                              —           2,875
Other                                                  207         316
Net change in operating assets and liabilities:                   
Receivables                                            (1,064)     (459)
Inventories                                            (29,740)    (15,489)
Prepaid and other current assets                       (4,781)     7,531
Accounts payable                                       34,965      8,064
Accrued liabilities                                    (4,592)     (9,542)
Income taxes payable                                   (3,020)     3,305
Net cash used in operating activities                  (34,926)    (59,559)
Investing activities:                                             
Purchase of property and equipment                     (14,234)    (6,963)
Proceeds from asset dispositions                       141         795
Net cash used in investing activities                  (14,093)    (6,168)
Financing activities:                                             
Net proceeds from stock offering                       —           22,979
Borrowings on revolving line of credit                 10,000      15,000
Payments on revolving line of credit                   (25,000)    —
Proceeds from the issuance of long-term debt           65,000      15,000
Payments of long-term debt and capital lease           (15,309)    (553)
obligations
Payment of debt and Series A Preferred Stock issuance  (5,895)     (695)
costs
Other                                                  152         264
Net cash provided by financing activities              28,948      51,995
Net decrease in cash and cash equivalents              (20,071)    (13,732)
Cash and cash equivalents, beginning                   51,365      51,613
Cash and cash equivalents, ending                      $ 31,294    $ 37,881
Supplemental Cash Flow Data:                                      
Interest paid, net of amount capitalized               $ 2,863     $ 1,463
Income taxes paid (refunded), net                      $ 3,396     $ (2,627)


COLDWATER CREEK INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION OF SELECTED MEASURES
(Unaudited)
(in thousands, except for per share data)
                                                               
                              Three Months Ended      Nine Months Ended
                              October27, October29, October27, October29,
                               2012        2011        2012        2011
Net loss:                                                       
GAAP basis                     $(20,526) $(29,158) $(61,844) $(86,865)
Less — Loss on derivative      6,797       —           4,434       —
liability
Non-GAAP adjusted basis        $ (13,729) $ (29,158) $ (57,410) $ (86,865)
Net loss per share — Basic and                                  
Diluted:
GAAP basis                     $(0.67)   $(1.24)   $(2.03)   $(3.73)
Less — Loss on derivative      0.22        —           0.15        —
liability
Non-GAAP adjusted basis        $(0.45)   $(1.24)   $(1.88)   $(3.73)

About Non-GAAP Selected Measures

The Company reports its consolidated financial results in conformity with
accounting principles generally accepted in the United States (GAAP).The
accompanying press release dated November28, 2012, contains non-GAAP
financial measures. These non-GAAP financial measures include adjusted net
loss and net loss per share, which excludes the loss on the derivative
liability.Non-GAAP financial measures should not be considered as a
substitute for, or superior to, measures of financial performance prepared in
conformity with GAAP.Management believes that these non-GAAP financial
measures provide meaningful supplemental information because they exclude
activity that is not included by management when assessing the performance of
the Company.The Company may consider whether other significant items that
arise in the future should be adjusted from GAAP measures.


CONTACT: For Coldwater Creek
         Lyn Walther
         Divisional Vice President, Investor Relations
         208-265-7005
         Web site: www.coldwatercreek.com
 
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