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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Coldwater Creek Announces Results for Third Quarter of Fiscal 2012
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