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: firstname.lastname@example.org Media Contact: Sharon Stern / Annabelle Rinehart / Joe Berg Joele Frank, Wilkinson BrimmerKatcher Phone: 212-355-4449
Coldwater Creek Announces Results for Third Quarter of Fiscal 2013
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