Coldwater Creek Announces Results for Third Quarter of Fiscal 2013

Coldwater Creek Announces Results for Third Quarter of Fiscal 2013

SANDPOINT, Idaho, Dec. 11, 2013 (GLOBE NEWSWIRE) -- Coldwater Creek Inc.
(Nasdaq:CWTR) today reported financial results for the three-month period
ended November 2, 2013.

Third Quarter of Fiscal 2013 Operating Results

  *Consolidated net sales were $154.5 million, compared with $188.1 million
    in third quarter 2012. Net sales from the retail segment were $120.7
    million, compared with $147.2 million in the same period last year.
    Comparable premium retail sales declined 16.8 percent for the quarter. Net
    sales from the direct segment were $33.7 million, compared with $40.9
    million in the same period last year.
  *Consolidated gross profit was $48.2 million, or 31.2 percent of net sales,
    compared with $66.1 million, or 35.1 percent of net sales, for the third
    quarter of 2012. The 390 basis point decline in gross profit margin was
    due to deleveraging of buying and occupancy expense and lower merchandise
    margins reflecting increased promotional activity.
  *Selling, general and administrative expenses (SG&A) were $70.8 million, or
    45.9 percent of net sales, compared with $76.1 million, or 40.5 percent of
    net sales, for third quarter 2012. The decrease in SG&A was across all
    categories with the most significant reductions coming from marketing and
    employee-related expenses.
  *Net loss was $23.8 million, or $0.78 per share, and included (i) other
    gain, net, of $8.0 million, or $0.26 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) a pre-tax charge of $2.3 million, or $0.07
    per share, for severance and other expenses associated with the Company's
    cost restructuring program; (iii) a non-cash asset impairment charge of
    $2.7 million, or $0.09 per share, related primarily to 27 under-performing
    stores; and (iv) a non-cash income tax charge of $2.6 million, or $0.09
    per share, related to a valuation allowance against previously recorded
    net deferred tax assets. This compares to third quarter 2012 net loss of
    $20.5 million, or $0.67 per share, which 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.
  *Adjusted net loss for the third quarter of fiscal 2013, excluding the gain
    on the derivative liability, severance expense, non-cash impairment charge
    and non-cash income tax charge, was $24.2 million, or $0.79 per share.
    This compares to an adjusted net loss of $13.7 million, or $0.45 per
    share, for third quarter 2012, excluding the loss on the derivative
    liability. (Please see the table of GAAP to Non-GAAP Reconciliation of
    Selected Measures attached to this press release.)

"In response to the disappointing performance of our fall merchandise, we took
swift action early in the third quarter to adjust our holiday assortment, and
we experienced a meaningful improvement in full-priced selling as holiday
product flowed into stores starting in mid-October. During the quarter we also
implemented a cost reduction program, which is expected to generate $20-$25
million in expense savings next year," said Jill Dean, President and Chief
Executive Officer of Coldwater Creek. "While we are encouraged by the
favorable customer response to recent deliveries, the holiday selling season
is still underway and the environment remains highly competitive. Moving
ahead, we believe the essential steps to accelerate our turnaround and to
deliver stability to our top-line involve successful execution of our
strategic merchandising and marketing initiatives, aggressive cost cutting
measures and disciplined inventory management."

Balance Sheet

At November 2, 2013, cash totaled $6.8 million, as compared with $31.3 million
at October 27, 2012. There were $15.0 million of borrowings outstanding under
the Company's revolving line of credit as of November 2, 2013. Total inventory
decreased 5.6 percent to $152.7 million from $161.7 million at the end of the
third quarter last year. Inventory per square foot, which includes inventory
in our retail stores and retail inventory in the distribution center,
decreased approximately 1.6 percent as compared to the end of the third
quarter last year.

Store Optimization Program

The Company closed one premium retail store, one factory store, and one spa
during the third quarter of 2013, ending the fiscal quarter with 343 premium
retail stores, 36 factory stores, and 7 spas. The Company's ongoing store
optimization plan calls for the closure of up to 10 additional retail stores
in fiscal 2013 for a total of approximately 50 stores since fiscal 2011.

Conference Call Information

Coldwater Creek will host a conference call on Wednesday, December 11, 2013,
at 4:30 p.m. (Eastern) to discuss fiscal 2013 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 13572958. 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 expected effect of our
cost reduction program on future expense levels and the Company's expectations
about future store closures. 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:

  *our inability to improve our brand perception and increase traffic;
  *we may encounter unexpected costs or delays with our restructuring and
    cost reduction program or these initiatives may adversely affect our other
    initiatives and our business, which may impact our ability to achieve
    anticipated expense savings;
  *the risks and uncertainties of any potential strategic alternative,
    including whether any strategic alternative will be identified and, if
    identified, whether it will be pursued and consummated;
  *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;
  *the benefits expected from aligning merchandise assortment to our brand
    strategy may not lead to improvements in our financial performance, may
    take longer to achieve than we expect, or may not resonate with our
    customers;
  *our potential inability to continue to fund our operations without
    additional sources of financing and maintain compliance with debt
    covenants if we do not generate sufficient net sales and improve our
    results of operations;
  *potential inability to attract and retain key personnel;
  *with reductions in headcount and tightly controlled expenses, we may
    experience an increase in demands on our managerial, operational and
    administrative resources, which may adversely affect our results of
    operations;
  *our partnership with Alliance Data Systems may not drive additional sales
    and create customer loyalty;
  *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 additional
    impairment charges;
  *our revolving line of credit may not be fully available due to borrowing
    base and other limitations;
  *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 initiatives to optimize our supply chain capabilities may not lead to
    reduction of our sourcing costs or improvement in our margins;
  *marketing initiatives may not be successful in improving the breadth of
    our customer base, or increasing traffic in the near term, or at all;
  *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
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
                              November2, October27, November2, October27,
                              2013        2012        2013        2012
Net sales:                                                      
Retail                         $120,739  $147,245  $357,137  $408,386
Direct                         33,746      40,879      102,779     113,312
Net sales                      154,485     188,124     459,916     521,698
Cost of sales                  106,330     122,059     316,757     352,722
Gross profit                   48,155      66,065      143,159     168,976
Selling, general and           70,832      76,106      201,756     219,299
administrative expenses
Loss on asset impairments      2,669       —           2,669       —
Loss from operations           (25,346)    (10,041)    (61,266)    (50,323)
Other loss (gain), net         (7,975)     6,797       (14,533)    5,519
Interest expense, net          3,766       3,573       10,972      5,859
Loss before income taxes       (21,137)    (20,411)    (57,705)    (61,701)
Income tax provision           2,650       115         1,880       143
Net loss                       $(23,787) $(20,526) $(59,585) $(61,844)
Net loss per share — Basic and $(0.78)   $(0.67)   $(1.95)   $(2.03)
Diluted
Weighted average shares
outstanding — Basic and        30,619      30,504      30,580      30,460
Diluted
Supplemental Data:                                              
Catalogs mailed                14,355      15,330      28,486      39,178
Premium retail stores:                                          
Opened                         —           1           —           1
Closed                         1           2           6           10
Count at end of the fiscal     343         354         343         354
period
Square footage                 1,952       2,026       1,952       2,026
Factory stores:                                                 
Opened                         1           —           1           —
Closed                         1           —           3           —
Count at end of the fiscal     36          38          36          38
period
Square footage                 227         255         227         255
Spas:                                                           
Count at end of the fiscal     7           9           7           9
period
Square footage                 36          49          36          49


COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except for per share data)
                                                                
                                          November2, February2, October27,
                                          2013        2013        2012
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                  $6,786    $21,734   $31,294
Receivables                                7,372       5,150       8,554
Inventories                                152,737     125,207     161,715
Prepaid and other current assets           18,374      17,072      13,909
Deferred income taxes                      1,021       1,252       2,819
Total current assets                       186,290     170,415     218,291
Property and equipment, net                141,949     169,007     180,640
Deferred income taxes                      —           2,112       2,207
Other assets                               3,726       4,374       4,568
Total assets                               $331,965  $345,908  $405,706
LIABILITIES AND STOCKHOLDERS' EQUITY                             
(DEFICIT)
Current liabilities:                                             
Accounts payable                           $90,297   $57,891   $91,430
Accrued liabilities                        73,788      87,915      90,060
Current maturities of debt and capital     15,624      577         560
lease obligations
Total current liabilities                  179,709     146,383     182,050
Deferred rents                             67,437      82,726      86,900
Long-term debt and capital lease           69,510      63,784      61,797
obligations
Supplemental executive retirement plan     10,770      10,994      12,431
Deferred income taxes                      1,021       699         2,512
Other liabilities                          24,651      4,186       4,275
Total liabilities                          353,098     308,772     349,965
Commitments and contingencies                                    
Stockholders' equity (deficit):                                  
Preferred stock, $0.01 par value, 1,000
shares authorized; 1, 1 and 1 shares       —           —           —
issued, respectively
Common stock, $0.01 par value, 75,000
shares authorized; 30,630, 30,531 and      306         305         305
30,520 shares issued, respectively
Additional paid-in capital                 154,461     153,146     152,397
Accumulated other comprehensive loss       (1,532)     (1,532)     (2,176)
Accumulated deficit                        (174,368)   (114,783)   (94,785)
Total stockholders' equity (deficit)       (21,133)    37,136      55,741
Total liabilities and stockholders' equity $331,965  $345,908  $405,706
(deficit)


COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
                                                                 
                                                      Nine Months Ended
                                                      November2, October27,
                                                      2013        2012
Operating activities:                                             
Net loss                                               $(59,585) $(61,844)
Adjustments to reconcile net loss to net cash used in             
operating activities:
Depreciation and amortization                          31,506      39,037
Non-cash interest expense                              6,964       3,001
Stock-based compensation expense                       1,379       1,335
Supplemental executive retirement plan expense         340         441
Deferred income taxes and valuation allowance          2,542       (369)
adjustments
Deferred credit card program revenue                   24,679      (702)
Deferred rents                                         (16,228)    (15,569)
Loss (gain) on derivative liability                    (14,533)    4,434
Series A Preferred Stock issuance costs                —           1,086
Net loss on asset dispositions and other termination   1,340       2,249
charges
Loss on asset impairments                              2,669       —
Other                                                  (398)       207
Net change in operating assets and liabilities:                   
Receivables                                            (1,847)     (1,064)
Inventories                                            (27,530)    (29,740)
Prepaid and other current assets                       (1,509)     (4,781)
Accounts payable                                       30,202      34,965
Accrued liabilities                                    (3,057)     (7,612)
Net cash used in operating activities                  (23,066)    (34,926)
Investing activities:                                             
Purchase of property and equipment                     (7,414)     (14,234)
Proceeds from asset dispositions                       891         141
Net cash used in investing activities                  (6,523)     (14,093)
Financing activities:                                             
Borrowings on revolving line of credit                 28,000      10,000
Payments on revolving line of credit                   (13,000)    (25,000)
Proceeds from the issuance of long-term debt           —           65,000
Payments of long-term debt and capital lease           (419)       (15,309)
obligations
Payment of debt and Series A Preferred Stock issuance  —           (5,895)
costs
Other                                                  60          152
Net cash provided by financing activities              14,641      28,948
Net decrease in cash and cash equivalents              (14,948)    (20,071)
Cash and cash equivalents, beginning                   21,734      51,365
Cash and cash equivalents, ending                      $6,786    $31,294
Supplemental Cash Flow Data:                                      
Interest paid, net of amount capitalized               $4,024    $2,863
Income taxes paid (refunded), net                      $(354)    $3,396


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
                              November2, October27, November2, October27,
                              2013        2012        2013        2012
Net loss:                                                       
Net loss, as reported          $(23,787) $(20,526) $(59,585) $(61,844)
Excluding:                                                      
Loss (gain) on derivative      (7,975)     6,797       (14,533)    4,434
liability
Severance charges              2,305       —           2,305       —
Loss on asset impairments      2,669       —           2,669       —
Non-cash income tax charge     2,615       —           2,615       —
Adjusted net loss              $(24,173) $(13,729) $(66,529) $(57,410)
Net loss per share — Basic and                                  
Diluted:
Net loss per share — Basic and $(0.78)   $(0.67)   $(1.95)   $(2.03)
Diluted, as reported
Excluding:                                                      
Loss (gain) on derivative      (0.26)      0.22        (0.48)      0.15
liability
Severance charges              0.07        —           0.07        —
Loss on asset impairments      0.09        —           0.09        —
Non-cash income tax charge     0.09        —           0.09        —
Adjusted net loss per share —  $(0.79)   $(0.45)   $(2.18)   $(1.88)
Basic and Diluted

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 December11, 2013, contains non-GAAP
financial measures. These non-GAAP financial measures include adjusted net
loss and adjusted net loss per share, which excludes the loss or gain on the
derivative liability, severance charges associated with the cost reduction
program, loss on asset impairments, and non-cash income tax charge related to
a valuation allowance against previously recorded net deferred tax assets.
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: Investor Relations Contact:
         Stephanie Allen
         Phone:  208-263-2266
         E-mail: stephanie.allen@thecreek.com
        
         Media Contact:
         Sharon Stern / Annabelle Rinehart / Joe Berg
         Joele Frank, Wilkinson BrimmerKatcher
         Phone: 212-355-4449
 
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