Coldwater Creek Announces Fourth Quarter and Fiscal Year 2012 Results

Coldwater Creek Announces Fourth Quarter and Fiscal Year 2012 Results

  *Fourth quarter 2012 comparable premium retail store sales increased 2.7
    percent, on a 13-week basis
  *Fourth quarter 2012 direct sales increased 7.7 percent
  *Fourth quarter 2012 adjusted net loss per share of $0.65, excluding gain
    on derivative liability and CEO transition costs

SANDPOINT, Idaho, March 13, 2013 (GLOBE NEWSWIRE) -- Coldwater Creek Inc.
(Nasdaq:CWTR) today reported financial results for the quarter and fiscal year
ended February 2, 2013. The Company noted that the following non-comparable
items impacted the fourth quarter and fiscal year:

  *The Company's fiscal 2012 is a 53-week year with the additional week
    falling in the fourth quarter compared to the traditional 52 weeks in
    fiscal 2011. Comparable premium retail store sales for the fourth quarter
    and full year of fiscal 2012 are presented on a 13-week and 52-week basis
    and exclude the additional week. The additional week in fourth quarter
    fiscal 2012 represented a loss of $0.13 per share;
  *The fourth quarter of fiscal 2012 included a charge, net of tax, of $0.06
    per share associated with the Company's CEO transition;
  *Due to the change in the fair value of the derivative liability related to
    the Series A Preferred Stock, the Company recorded a gain of $0.05 per
    share in the fourth quarter of fiscal 2012, and a loss of $0.10 per share
    for the full year fiscal 2012;
  *During the fourth quarter of fiscal 2011, the Company recorded a favorable
    cumulative one-time adjustment for gift card breakage that represented
    $11.8 million, or $0.39 per share, in the fourth quarter 2011 and $0.47
    per share in fiscal year 2011. In addition, the Company recorded a
    non-cash store impairment charge of $0.08 per share in the fourth quarter
    of fiscal 2011 and $0.21 per share in fiscal year 2011.

Fourth Quarter of Fiscal 2012 Operating Results

  *Consolidated net sales were $220.8 million, compared with $224.4 million
    in fourth quarter 2011, which included net sales of $11.8 million as a
    result of a favorable cumulative one-time adjustment for gift card
    breakage income. Net sales from the retail segment were $166.0 million,
    compared with $173.5 million in the same period last year. Comparable
    premium retail store sales increased 2.7 percent. Net sales decreased due
    to store closures as a result of our store optimization program and the
    impact of $10.7 million in net sales from the cumulative one-time gift
    card breakage recorded in the fourth quarter 2011. Net sales from the
    direct segment were $54.7 million compared with $50.8 million in the same
    period last year, which included $1.1 million from the cumulative one-time
    adjustment for gift card breakage.
  *Consolidated gross profit was $64.1 million, or 29.1 percent of net sales,
    compared with $73.1 million, or 32.6 percent of net sales, for fourth
    quarter 2011. The 350 basis point decline in gross profit margin was
    primarily due to the 370 basis point benefit in the fourth quarter of
    fiscal 2011 resulting from the cumulative one-time adjustment for gift
    card breakage. Adjusting for this benefit, gross margin increased 20 basis
    points driven by leverage of buying and occupancy costs offset by lower
    merchandise margins.
  *Selling, general and administrative expenses (SG&A) were $82.5 million, or
    37.4 percent of net sales, compared with $81.8 million, or 36.5 percent of
    net sales, for fourth quarter 2011. The increase in SG&A expense was
    driven by a $2.1 million pre-tax charge related to the CEO transition in
    the 2012 period offset by lower marketing expenses.
  *Net loss was $20.0 million, or $0.66 per share, and included: (i) other
    gain, net, of $1.5 million, or $0.05 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; (ii) net loss of $4.0 million, or $0.13 per
    share, incurred in the additional week in the fourth quarter fiscal 2012;
    and (iii) a charge, net of tax, of $1.7 million, or $0.06 per share
    associated with the Company's CEO transition. This compares to a net loss
    of $12.8 million, or $0.42 per share, for fourth quarter 2011 and
    included: (i) $11.8 million, or $0.39 per share, benefit due to the
    cumulative one-time adjustment related to gift card breakage; and (ii) a
    non-cash asset impairment charge of $2.3 million, or $0.08 per share,
    related primarily to under-performing stores.
  *Adjusted net loss, which excludes the gain on the derivative liability and
    the CEO transition expense for fourth quarter 2012, was $19.8 million, or
    $0.65 per share. This compares to adjusted net loss of $22.3 million, or
    $0.73 per share, excluding the cumulative one-time adjustment related to
    gift card breakage income and the non-cash store impairment charge for
    fourth quarter 2011. (Please see the table entitled "GAAP to Non-GAAP
    Reconciliation of Selected Measures" at the end of this press release.)

"Fiscal 2012 was a pivotal year for Coldwater Creek as we began to see the
positive impact of the significant changes we have made throughout our
organization. Importantly, our product offering is resonating with our
customers. In addition, we have created a compelling loyalty program, improved
our inventory management, built talent within our organization and continued
to execute on our store optimization program. This was particularly apparent
in our financial performance in the second half of the year as we achieved two
consecutive quarters of comparable premium store sales growth. Overall for the
year, we achieved a one percent increase in our comparable premium store
sales, gross margin improvement of 170 basis points, and an $18.0 million
reduction in SG&A. We ended the year with a clean inventory position and total
inventory down five percent," said Jill Dean, President and Chief Executive
Officer. "As we move into fiscal 2013, we are focused on building our brand
and enhancing our customer experience across all of our channels, consistently
delivering trend-right apparel and accessories, driving traffic, and
rigorously managing our inventory, which we believe will enable us to continue
to generate improvements in our financial performance."

Full Year Fiscal 2012 Operating Results

  *Consolidated net sales for fiscal 2012 were $742.5 million, compared with
    $773.0 million in fiscal 2011. Net sales from the retail segment were
    $574.4 million, compared with $595.2 million last fiscal year. Comparable
    premium retail store sales increased 0.8 percent. Net sales from the
    direct segment were $168.0 million, compared with $177.8 million last
    fiscal year.
  *Consolidated gross profit increased $3.8 million to $233.1 million, or
    31.4 percent of net sales, compared with $229.3 million, or 29.7 percent
    of net sales, for fiscal 2011. The 170 basis point increase in gross
    profit margin was primarily due to increased leverage of buying and
    occupancy costs and higher merchandise margins reflecting improved product
    performance. Last year's gross margin included a 110 basis point benefit
    in the fourth quarter of fiscal 2011 from the cumulative one-time
    adjustment for gift card breakage income.
  *Selling, general and administrative expenses (SG&A) were $301.8 million,
    or 40.6 percent of net sales, compared with $319.8 million, or 41.4
    percent of net sales, for fiscal 2011. The $18.0 million decline in SG&A
    was due primarily to lower marketing expense compared to last fiscal year.
  *Net loss was $81.8 million, or $2.69 per share, on 30.5 million weighted
    average shares outstanding, and included (i) other loss, net, of $2.9
    million, or $0.10 per share, related to the Series A Preferred Stock
    issued in July 2012; (ii) net loss of $4.0 million, or $0.13 per share,
    incurred in the additional week in the fourth quarter fiscal 2012; and
    (iii) a charge, net of tax, of $1.7 million, or $0.06 per share,
    associated with the Company's CEO transition. This compares to a net loss
    of $99.7 million, or $3.98 per share on 25.1 million weighted average
    shares outstanding, for fiscal 2011 and included: (i) $11.8 million, or
    $0.47 per share, due to the cumulative one-time adjustment related to gift
    card breakage income; and (ii) a non-cash asset impairment charge of $5.2
    million, or $0.21 per share, related to certain retail store assets.
  *Adjusted net loss for fiscal 2012, which excludes the loss on the
    derivative liability and the CEO transition expense, was $77.2 million, or
    $2.53 per share, on 30.5 million weighted average shares outstanding. This
    compares to adjusted net loss of $106.2 million, or $4.24 per share, on
    25.1 million weighted average shares outstanding for fiscal 2011 which
    excludes the cumulative one-time adjustment related to gift card breakage
    income for fiscal 2011 and the non-cash store impairment charge. (Please
    see the table entitled "GAAP to Non-GAAP Reconciliation of Selected
    Measures" at the end of this press release.)

Balance Sheet

At February 2, 2013, cash totaled $21.7 million and there were no borrowings
outstanding under the revolving line of credit. This compared to cash of $51.4
million and $15.0 million of outstanding borrowings under the revolving line
of credit as of January 28, 2012. Total inventory decreased 5.1 percent to
$125.2 million from $132.0 million at the end of fiscal 2011. Premium retail
store inventory per square foot, including retail inventory in the
distribution center, increased approximately 8.0 percent as compared to fiscal
2011.

Reverse Stock Split

On October 4, 2012, the Company effected a reverse stock split of its common
stock following stockholder approval. As a result of the split, every four
shares of common stock outstanding were consolidated into one share, reducing
the number of common shares outstanding on the effective date from 122.0
million to 30.5 million.

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 first quarter
of fiscal 2013 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 five premium retail stores during the fourth quarter 2012,
ending the fiscal year with 349 premium retail stores. As part of the
Company's ongoing store optimization plan, the Company closed 15 premium
retail stores in fiscal 2012. The Company's plan calls for the closure of up
to 15 stores in fiscal 2013, and a total of 45 stores since fiscal 2011.

First Quarter of Fiscal 2013 Financial Guidance

For first quarter 2013, the Company expects:

  *Comparable premium retail store sales to be down in the low single digits.
  *Gross margin improvement of 100 to 200 basis points.
  *Net loss per share in the range of $0.60-$0.80, excluding the impact of
    the change in the fair value of the derivative liability.
  *Total inventory at the end of the quarter to be down in the low single
    digits as compared to the first quarter of fiscal 2012.

Conference Call Information

Coldwater Creek will host a conference call on Wednesday, March 13, 2013, at
4:30 p.m. (Eastern) to discuss fiscal 2012 fourth quarter and year end
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 409982. 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, jewelry,
and accessories. The Company was founded in 1984 in Sandpoint, Idaho, and
sells its merchandise through premium retail stores across the country,
online, and through its mobile applications.

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 first quarter of fiscal 2013,
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
  Form 10-K, Quarterly Reports 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
CONSOLIDATED STATEMENTS OF OPERATIONS AND SUPPLEMENTAL DATA
(unaudited)
(in thousands, except for per share data and store counts)
                                                               
                              Three Months Ended      Twelve Months Ended
                              February2, January28, February2, January28,
                               2013        2012        2013        2012
Net sales:                                                      
Retail                         $166,039  $173,548  $574,425  $595,192
Direct                         54,735      50,804      168,047     177,829
                              220,774     224,352     742,472     773,021
Cost of sales                  156,629     151,223     509,351     543,693
Gross profit                   64,145      73,129      233,121     229,328
Selling, general and           82,507      81,804      301,806     319,812
administrative expenses
Loss on asset impairments      —           2,341       —           5,216
Loss from operations           (18,362)    (11,016)    (68,685)    (95,700)
Other loss (gain), net         (1,494)     —           4,025       —
Interest expense, net          3,737       755         9,596       2,275
Loss before income taxes       (20,605)    (11,771)    (82,306)    (97,975)
Income tax provision (benefit) (607)       1,058       (464)       1,719
Net loss                       $(19,998)  $(12,829)  $(81,842)  $(99,694)
Net loss per share — Basic and $(0.66)    $(0.42)    $(2.69)    $(3.98)
Diluted
Weighted average shares
outstanding — Basic and        30,523      30,407      30,477      25,065
Diluted
Supplemental Data:                                              
Catalogs mailed                16,392      16,875      55,570      58,757
Premium retail stores:                                          
Opened                         —           2           1           5
Closed                         5           5           15          15
Count at end of the fiscal     349         363         349         363
period
Square footage                 1,998       2,165       1,998       2,165
Factory outlet stores:                                          
Opened                         —           —           —           —
Closed                         —           1           —           1
Count at end of the fiscal     38          38          38          38
period
Square footage                 255         259         255         259
Spas:                                                           
Count at end of the fiscal     8           9           8           9
period
Square footage                 42          49          42          49



COLDWATER CREEK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except for per share data)
                                                                 
                                                      February2, January28,
                                                       2013        2012
ASSETS                                                            
Current assets:                                                   
Cash and cash equivalents                              $21,734   $51,365
Receivables                                            5,150       8,199
Inventories                                            125,207     131,975
Prepaid and other current assets                       17,072      9,410
Deferred income taxes                                  1,252       2,313
Total current assets                                   170,415     203,262
Property and equipment, net                            169,007     206,079
Deferred income taxes                                  2,112       1,891
Other assets                                           4,374       1,883
Total assets                                           $345,908  $413,115
LIABILITIES AND STOCKHOLDERS' EQUITY                              
Current liabilities:                                              
Accounts payable                                       $57,891   $55,130
Accrued liabilities                                    87,915      78,175
Current maturities of debt and capital lease           577         15,735
obligations
Total current liabilities                              146,383     149,040
Deferred rents                                         82,726      101,384
Long-term debt and capital lease obligations           63,784      26,575
Supplemental executive retirement plan                 10,994      12,142
Deferred income taxes                                  699         1,716
Other liabilities                                      4,186       5,845
Total liabilities                                      308,772     296,702
Commitments and contingencies                                     
Stockholders' equity:                                             
Preferred stock, $0.01 par value, 1,000 shares         —           —
authorized; 1 and 0 shares issued, respectively
Common stock, $0.01 par value, 75,000 shares
authorized; 30,531 and 30,417 shares issued,           305         304
respectively
Additional paid-in capital                             153,146     151,254
Accumulated other comprehensive loss                   (1,532)     (2,204)
Accumulated deficit                                    (114,783)   (32,941)
Total stockholders' equity                             37,136      116,413
Total liabilities and stockholders' equity             $345,908  $413,115



COLDWATER CREEK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
                                                                
                                          Twelve Months Ended
                                          February2, January28, January29,
                                           2013        2012        2011
Operating activities:                                            
Net loss                                   $(81,842)  $(99,694)  $(44,111)
Adjustments to reconcile net loss to net                         
cash used in operating activities:
Depreciation and amortization              51,437      56,743      63,329
Non-cash interest expense                  5,478       —           —
Stock-based compensation expense           2,001       2,403       2,476
Supplemental executive retirement plan     587         555         886
expense
Deferred income taxes                      (585)       (68)        (1,200)
Valuation allowance adjustments            (312)       (839)       (2,564)
Deferred marketing fees and revenue        (1,048)     (1,509)     (2,055)
sharing
Deferred rents                             (19,029)    (15,948)    (7,249)
Loss on derivative liability               2,939       —           —
Series A Preferred Stock issuance costs    1,086       —           —
Net loss on asset dispositions and other   2,295       197         447
termination charges
Loss on asset impairments                  —           5,216       3,931
Other                                      23          148         (516)
Net change in operating assets and                               
liabilities:
Receivables                                2,337       2,212       (3,584)
Inventories                                6,768       24,506      5,065
Prepaid and other current assets           (8,007)     11,198      7,168
Accounts payable                           2,869       (22,769)    (21,776)
Accrued liabilities                        (9,141)     (6,575)     (1,236)
Net cash used in operating activities      (42,144)    (44,224)    (989)
Investing activities:                                            
Purchase of property and equipment         (16,496)    (8,895)     (31,084)
Proceeds from asset dispositions           144         1,110       73
Change in restricted cash                  —           —           890
Net cash used in investing activities      (16,352)    (7,785)     (30,121)
Financing activities:                                            
Net proceeds from stock offering           —           22,945      —
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    65,000      15,000      —
debt
Payments of long-term debt and capital     (15,444)    (819)       (2,762)
lease obligations
Payment of debt and Series A Preferred     (5,895)     (695)       —
Stock issuance costs
Other                                      204         330         835
Net cash provided by (used in) financing   28,865      51,761      (1,927)
activities
Net decrease in cash and cash equivalents  (29,631)    (248)       (33,037)
Cash and cash equivalents, beginning       51,365      51,613      84,650
Cash and cash equivalents, ending          $21,734   $51,365   $51,613
Non-cash investing and financing                                 
activities:
Property and equipment purchases not yet   $390      $2,085    $540
paid
Capital lease asset additions and related  $25       $75       $1,947
obligations
Supplemental cash flow data:                                     
Interest paid, net of amount capitalized   $4,124    $2,231    $1,817
Income taxes paid (refunded), net          $3,460    $(2,112)   $(7,261)



COLDWATER CREEK INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION OF SELECTED MEASURES
(unaudited)
(in thousands, except for per share data)
                                                               
                              Three Months Ended      Twelve Months Ended
                              February2, January28, February2, January28,
                               2013        2012        2013        2012
Net loss:                                                       
GAAP basis                     $ (19,998)  $ (12,829)  $ (81,842)  $ (99,694)
Excluding:                                                      
Loss (gain) on derivative      (1,494)     —           2,939       —
liability
CEO transition costs           1,687       —           1,687       —
Gift card breakage income      —           (11,765)    —           (11,765)
Loss on asset impairments      —           2,341       —           5,216
Non-GAAP adjusted basis        $ (19,805)  $ (22,253)  $ (77,216)  $ (106,243)
Net loss per share — Basic and                                  
Diluted:
GAAP basis                     $ (0.66)    $ (0.42)    $ (2.69)    $ (3.98)
Excluding:                                                      
Loss (gain) on derivative      (0.05)      —           0.10        —
liability
CEO transition costs           0.06        —           0.06        —
Gift card breakage income      —           (0.39)      —           (0.47)
Loss on asset impairments      —           0.08        —           0.21
Non-GAAP adjusted basis        $ (0.65)    $ (0.73)    $ (2.53)    $ (4.24)

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 March13, 2013, contains non-GAAP financial
measures. These non-GAAP financial measures include adjusted net loss and net
loss per share, which excludes the loss (gain) on the derivative liability and
CEO transition costs for fiscal 2012 and the cumulative one-time adjustment
related to gift card breakage income and loss on asset impairments for fiscal
2011. 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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