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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Quarter Ended May 29, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26772
COLDWATER CREEK INC.
(Exact name of registrant as specified in its charter)
DELAWARE 82-0419266
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE COLDWATER CREEK DRIVE, SANDPOINT, IDAHO 83864
(Address of principal executive offices)
(208) 263-2266
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Shares outstanding as of May 29, 1999
- ------------------------------- ---------------------------------------
Common Stock ($.01 par value) 10,185,617
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1
<PAGE>
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets at May 29, 1999 and February 27, 1999.......... 3
Consolidated Statements of Operations for the three month periods ended
May 29, 1999 and May 30, 1998.............................................. 4
Consolidated Statements of Cash Flows for the three month periods ended
May 29, 1999 and May 30, 1998.............................................. 5
Notes to Consolidated Financial Statements................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 20
Item 2. Changes in Securities and Use of Proceeds......................... 20
Item 3. Defaults Upon Senior Securities................................... 20
Item 4. Submission of Matters to a Vote of Security Holders............... 20
Item 5. Other Information................................................. 20
Item 6. Exhibits and Reports on Form 8-K.................................. 20
This report may contain forward-looking statements that involve risks and
uncertainties. When used in this discussion, the words "anticipate," "believe,"
"estimate," "expect," and similar expressions as they relate to the Company or
its management are intended to identify such forward-looking statements. The
Company's actual results could differ materially from the results anticipated in
these forward-looking statements as a result of certain factors set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Risk Factors" and elsewhere in this report.
2
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COLDWATER CREEK INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except for share data)
<TABLE>
<CAPTION>
May 29, February 27,
1999 1999
------------------ -------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,367 $ 149
Receivables 3,267 2,683
Inventories 50,834 56,474
Prepaid expenses 956 1,234
Prepaid catalog costs 666 4,274
------------------ -------------------
Total current assets 60,090 64,814
Deferred catalog costs 2,414 3,195
Property and equipment, net of accumulated depreciation 31,181 31,236
Executive loans 1,376 1,376
------------------ -------------------
Total assets $ 95,061 $ 100,621
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ - $ 9,938
Accounts payable 20,986 17,086
Accrued liabilities 10,164 7,668
Income taxes payable 820 4,445
Deferred income taxes 1,106 1,080
------------------ -------------------
Total current liabilities 33,076 40,217
Deferred income taxes 272 298
------------------ -------------------
Total liabilities 33,348 40,515
------------------ -------------------
Commitments and contingencies - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value, 15,000,000 shares authorized,
10,185,617 and 10,183,117 issued and outstanding, respectively 102 102
Additional paid-in capital 39,325 39,287
Retained earnings 22,286 20,717
------------------ -------------------
Total stockholders' equity 61,713 60,106
------------------ -------------------
Total liabilities and stockholders' equity $ 95,061 $ 100,621
================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements
3
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COLDWATER CREEK INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except for per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
May 29, May 30,
1999 1998
---------------- -----------------
<S> <C> <C>
Net sales $ 65,135 $ 79,937
Cost of sales 30,941 38,125
---------------- -----------------
Gross profit 34,194 41,812
Selling, general and administrative expenses 31,627 40,390
---------------- -----------------
Income from operations 2,567 1,422
Interest, net, and other 46 (247)
---------------- -----------------
Income before provision for income taxes 2,613 1,175
Provision for income taxes 1,044 472
---------------- -----------------
Net income $ 1,569 $ 703
================ =================
Net income per share - Basic $ 0.15 $ 0.07
================ =================
Net income per share - Diluted $ 0.15
================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
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COLDWATER CREEK INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------
May 29, May 30,
1999 1998
------------------ -------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,569 $ 703
------------------ -------------------
Noncash items:
Depreciation and amortization 1,629 1,249
Deferred income tax benefit - (154)
Net change in current assets and liabilities:
Receivables (584) (1,085)
Inventories 5,640 (2,685)
Prepaid expenses 278 629
Prepaid catalog costs 3,608 296
Accounts payable 3,900 (6,563)
Accrued liabilities 2,496 1,705
Current and deferred income tax liabilities (3,625) -
Decrease (increase) in deferred catalog costs 781 1,571
------------------ -------------------
Net cash provided by (used in) operating activities $ 15,692 $ (4,334)
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INVESTING ACTIVITIES:
Purchase of property and equipment $ (1,574) $ (3,639)
------------------ -------------------
Net cash used in investing activities $ (1,574) $ (3,639)
----------------------------------------
FINANCING ACTIVITIES:
Net (repayments of) advances under revolving line of credit $ (9,938) $ 7,883
Net proceeds from exercise of stock options 38 131
------------------ -------------------
Net cash (used in ) provided by financing activities $ (9,900) $ 8,014
------------------ -------------------
Net increase in cash and
cash equivalents 4,218 41
Cash and cash equivalents, beginning 149 331
------------------ -------------------
Cash and cash equivalents, ending $ 4,367 $ 372
================== ===================
SUPPLEMENTAL CASH FLOW DATA:
Cash paid for interest $ 44 $ 194
Cash paid for income taxes 4,669 -
</TABLE>
The accompanying notes are an integral part of these financial statements
5
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COLDWATER CREEK INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by Coldwater Creek Inc. (the "Company"), without audit, pursuant to the
rules and regulations of the United States Securities and Exchange Commission,
and in the opinion of management, contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the Company's
financial position, results of operations and cash flows for the periods
presented. Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. The results of operations for
the interim periods disclosed within this report are not necessarily indicative
of future financial results. These consolidated financial statements are
condensed and should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K, which includes consolidated financial statements for the fiscal
year ended February 27, 1999.
The preparation of condensed consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses at the date of the condensed consolidated
financial statements. Actual results could differ from those estimates.
References to a fiscal year refer to the calendar year in which such fiscal
year commenced. The Company's fiscal year ends on the Saturday closest to
February 28. References to three month periods refer to the respective thirteen
weeks ended on the date indicated.
2. RECLASSIFICATIONS
Certain amounts in the prior period condensed consolidated financial
statements have been reclassified to be consistent with the current period
presentation.
3. RECENTLY ADOPTED ACCOUNTING STANDARDS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). Under
the provisions of SOP 98-1, software development is divided into three phases:
the preliminary project stage, which includes conceptual formulation and
selection of alternatives; the application development stage, which includes
design of chosen path, coding, installation of hardware and testing; and the
post-implementation/operation stage, which includes training and application
maintenance. Generally, only internal and external costs incurred during the
second phase, the application development stage, are capitalizable with the
exception of data conversion and training costs, which, when incurred during
this phase are to be expensed. SOP 98-1 was effective for the Company's fiscal
1999 financial statements. The adoption of SOP 98-1 did not have a material
impact on the Company's consolidated financial statements.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 requires that the costs
of start-up activities, including organizational costs, be expensed as incurred
and was effective for the Company's fiscal 1999 financial statements. The
adoption of SOP 98-5 did not have a material impact on the Company's
consolidated financial statements.
6
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COLDWATER CREEK INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 requires
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. In June 1999, the FASB issued
Statement of Financial Accounting Standard No. 137 delaying the effective date
of SFAS No. 133. SFAS No. 133, as amended, is effective for the Company's
fiscal 2001 financial statements. As the Company currently is not a party to
any derivative financial instruments and does not anticipate becoming a party to
any derivative instruments, management does not currently expect the adoption of
SFAS No. 133 to have a material impact on the Company's consolidated financial
statements.
5. EXECUTIVE LOAN PROGRAM
Effective June 30, 1997, the Company established an Executive Loan Program
under which the Company may make, at its sole discretion and with prior
approvals from the Chief Executive Officer and the Board of Directors'
Compensation Committee, secured long-term loans to key executives. Each loan is
secured by the executive's personal net assets, inclusive of all vested stock
options in the Company, bears interest at three percent per annum, and becomes
due and payable on the earlier of (i) the date ten days before the date on which
the vested stock options serving as partial security expire or (ii) ninety days
from the date on which the executive's employment with the Company terminates
for any reason.
6. EARNINGS PER SHARE
The following is a reconciliation of the number of common shares used in
the computations of net income per basic and diluted share. Net income per basic
common share is computed by dividing net income by the weighted average number
of common shares outstanding for the period. Net income per diluted common share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock (e.g., stock options) were exercised or
converted into common stock. (in thousands):
Three Months Ended
------------------------------
May 29, May 30,
1999 1998
------------------------------
Net income $ 1,569 $ 703
======= =======
Average shares outstanding used to
Determine net income per basic common
share 10,184 10,132
Net effect of dilutive stock options based
on the treasury stock method using average
market price (1) 202 500
-----------------------------
Average shares used to determine net
Income per diluted common share 10,386 10,632
=============================
(1) Anti-dilutive stock options excluded from the above computations for the
three months ended May 29, 1999 and May 30, 1998 were 754 and 242,
respectively.
7
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COLDWATER CREEK INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. CONTINGENCIES
The Company is involved in litigation and administrative proceedings
primarily arising in the normal course of its business. In the opinion of
management, the Company's recovery, if any, or the Company's liability, if any,
under any pending litigation or administrative proceedings would not materially
affect its financial position, results of operations or cash flows.
The Company's retailing business is based solely in the states of Idaho,
West Virginia and Wyoming, and accordingly, the Company only collects sales
taxes from customers residing in those states. The Company's wholly-owned
subsidiary, Coldwater Creek Outlet Stores Inc., owns and operates outlet stores
throughout the United States and pays sales tax and applicable corporate income,
franchise and other taxes to the states in which outlets are located. Various
states have attempted to collect back sales and use tax from direct marketers.
The U.S. Supreme Court has held that the various states, absent congressional
legislation, may not impose tax collection obligations on an out-of-state mail
order company whose only contacts with the taxing state are the distribution of
catalogs and other advertisement materials through the mail, and whose
subsequent delivery of purchased goods is by mail or interstate common carriers.
The Company has not received an assessment from any state. The Company
anticipates that any legislative changes, if adopted, would be applied only on a
prospective basis.
8. SUBSEQUENT EVENT SALE OF MILEPOST FOUR CATALOG
In late June of 1999, the Company completed the sale of substantially all
the assets underlying its Milepost Four men's apparel catalog. The purchase
price consisted of $2.25 million in cash resulting in a net pre-tax, non-
operating gain of $835,000. This gain will be recognized in the second fiscal
quarter ending August 28, 1999.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion may contain forward-looking statements, including
statements regarding the Company's strategy, sales trends and operations, within
the meaning of the federal securities laws which involve risks and
uncertainties. When used in this discussion, the words "anticipate," "believe,"
"estimate," "expect," and similar expressions as they relate to the Company or
its management are intended to identify such forward-looking statements. These
statements are based on management's current expectations and the Company's
actual results, performance or achievements could differ materially from the
results expressed in, or implied by, these forward-looking statements. Factors
that could cause or contribute to such differences include, among others, the
following: those associated with offering apparel merchandise such as long lead
times, increased inventory requirements, merchandise returns, and high shipping
costs; general economic and business conditions and other factors outside the
Company's control such as customer response rates, consumer preferences, and
fluctuations in paper and postage costs; competition; success of operating
initiatives; development and operating costs; advertising and promotional
efforts; brand awareness; the existence or absence of adverse publicity;
availability, locations and terms of sites for store development; changes in
business strategy or development plans; quality of management; availability,
terms and deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs; and
construction costs; as well as those factors discussed below and elsewhere in
this Form 10-Q Quarterly Report. References to a fiscal year refer to the
calendar year in which such fiscal year commences. The Company's fiscal year
ends on the Saturday closest to February 28. References to three month periods
refer to the thirteen weeks ended on the date indicated.
Overview
- ----------
Coldwater Creek Inc. (the "Company") is a specialty direct mail retailer of
apparel, gifts, jewelry and home furnishings. The Company markets its
merchandise primarily through three distinct catalogs, an interactive Internet
web site (www.coldwatercreek.com) and two full-line retail stores in Sandpoint,
Idaho and Jackson Hole, Wyoming. Northcountry, which was introduced in 1985, is
the Company's core catalog and features casual, comfortable apparel, hard-to-
find jewelry, distinctive artwork, gifts and items for the home. The Company's
premium catalog for women, Spirit of the West, was introduced in 1993 and
features fashionable, upscale apparel and hard-to-find jewelry and accessories.
In response to customer demand for the selected, upscale bed and bath products
periodically featured in Northcountry and Spirit of the West, the Company
introduced its Bed & Bath catalog in August of 1997. Bed & Bath's success to
date encouraged the Company to recently retitle this catalog as "Home" and to
expand its merchandise offerings to include furnishings for every room of the
house. In response to the significantly increasing level of customer activity
being experienced on its web site, the Company also recently expanded the number
of clearance items available for viewing and purchase from approximately 70
items to more than 600 items. By August 31, 1999, the Company expects to make
the entire spectrum of Coldwater Creek catalog items available on-line.
Through its wholly-owned subsidiary, Coldwater Creek Outlet Stores Inc.,
the Company additionally operates thirteen outlet stores throughout the United
States. These outlet stores, as well as periodic clearance catalogs and the web
site, serve as the Company's primary promotional vehicles for the disposition of
excess merchandise inventory.
The Company targets middle-to-upper income households and seeks to
differentiate itself from other catalog, retail and e-commerce operations by
offering exceptional value through superior customer service and a merchandise
assortment that reflects a casual, uniquely American spirit. The Company
believes that the successful execution of its marketing and merchandising
strategies coupled with its high customer service standards and efficient order
entry and fulfillment operations have allowed it to develop a unique brand
identity and strong relationships with its loyal customer base. The Company
plans to continue to stimulate future long-term growth through a variety of
strategic initiatives designed to expand merchandise offerings, yield higher
customer response rates, increase catalog circulation and promote customer use
of the Company's interactive commerce web site.
A key element of the Company's overall marketing strategy has been to
pursue an aggressive circulation strategy when market conditions permit. During
the three month periods ended May 29, 1999 and May 30, 1998, the Company mailed
36.4 million and 50.2 million catalogs, respectively. As a result of this
ongoing marketing investment in current and future customer growth, the costs of
which constitute the substantial majority of each fiscal period's selling,
general and administrative expenses, the Company's
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Overview (continued)
- ---------------------
proprietary mailing list increased to 7.7 million names at May 29, 1999 as
compared to 7.4 million names and 5.9 million names at February 27, 1999 and May
30, 1998, respectively. The Company's active customer file consisted of 2.1
million names at May 29, 1999, versus 2.0 million and 1.7 million names at
February 27, 1999 and May 30, 1998, respectively.
In analyzing the Company's financial position, results of operations and
cash flows, it should be noted that the Company has experienced, and will
continue to experience, seasonal fluctuations in its sales and operating results
as is typical for many specialty retailers. In past fiscal years, the Company's
net sales and profits have been heavily reliant on the November and December
holiday season. Management believes that this seasonality will continue in the
future although to a lesser degree as a result of the increased representation
of apparel and home furnishings within the Company's overall merchandise mix.
In anticipation of the increased sales activity expected during November
and December, the Company incurs certain significant additional expenses,
including the hiring of a substantial number of temporary employees to
supplement its permanent, full time staff. In addition, due to the larger
percentage of gifts and accessories offered in the second half of the fiscal
year related to holiday gift giving, the Company generally expects higher gross
margins in the second half of the fiscal year than in the first half. If, for
any reason, the Company's net sales were to fall below its expectations during
November and December, the Company's financial condition, results of operations
and cash flows would be adversely affected. The Company does not believe its
historical results of operations will necessarily be indicative of future
results.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations
- ---------------------
The following table sets forth certain information regarding the Company's
costs and expenses expressed as a percentage of net sales:
Three Months Ended
May 29, May 30,
(as a percentage of net sales) 1999 1998
------ -------
Net sales 100.0% 100.0%
Cost of sales 47.5 47.7
------ -------
Gross profit 52.5 52.3
Selling, general and
Administrative expenses 48.6 50.5
------ -------
Income from operations 3.9 1.8
Interest, net, and other 0.1 (0.3)
------ -------
Income before provision for
Income taxes 4.0 1.5
Provision for income taxes 1.6 0.6
------ -------
Net income 2.4% 0.9%
====== =======
The Company realized net sales of $65.1 million from the mailing of 36.4
million catalogs during the three months ended May 29, 1999 ("the fiscal 1999
quarter) versus net sales of $79.9 million from the mailing of 50.2 million
catalogs during the three months ended May 30, 1998 ("the fiscal 1998 quarter").
The fiscal 1999 quarter reflects the Company's three current catalog titles,
Northcountry, Spirit of the West and Bed & Bath, whereas the fiscal 1998 quarter
also included net sales of $2.9 million from 3.0 million incremental catalog
mailings primarily made to clear excess Spirit of the West merchandise inventory
as well as net sales of $3.6 million from mailings of 4.7 million of the
Company's recently sold Milepost Four men's apparel catalog. The Company's
active customer file, defined as customers who have made a purchase during the
preceding twelve months, was 2.1 million at May 29, 1999, an increase of 19.5%
from 1.7 million at May 30, 1998.
Consistent with the mailing strategy disclosed in the Company's preceding
Form 10-K Annual Report, the Company maintained a conservative posture towards
prospective catalog mailings during the fiscal 1999 quarter which substantially
accounts for the balance of the decline in net sales as compared to the fiscal
1998 quarter. During this period, the Company cultivated its proprietary house
file and focused its efforts on strengthening the balance sheet, improving
operating cash flow and positioning itself to aggressively pursue increased
sales opportunities from its pending new fall product offerings. This contrasts
with the comparable fiscal 1998 quarter during which the Company aggressively
prospected more sales by mailing more catalogs, but realized a lower return on
its marketing investment.
Gross profit decreased $7.6 million, or 18.2%, to $34.2 million for the
fiscal 1999 quarter from $41.8 million for the fiscal 1998 quarter. The
Company's gross profit percentage increased slightly to 52.5% during the fiscal
1999 quarter as compared to 52.3% during the fiscal 1998 quarter.
Selling, general and administrative expenses ("SG&A") decreased by $8.8
million, or 21.7%, to $31.6 million during the fiscal 1999 quarter from $40.4
million during the fiscal 1998 quarter. SG&A expenses also decreased as a
percentage of net sales to 48.6% during the fiscal 1999 quarter from 50.5%
during the comparative fiscal 1998 quarter. These decreases are primarily
attributable to the decreased catalog circulation costs incurred as a result of
the aforementioned contraction in prospective catalog mailings.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
- ---------------------------------
As a result of the foregoing, operating income increased by $1.1 million,
or 80.5%, to $2.6 million for the fiscal 1999 quarter from $1.4 million for the
fiscal 1998 quarter. Expressed as a percentage of net sales, operating income
was 3.9% for the fiscal 1999 quarter as compared to 1.8% for the fiscal 1998
quarter. Net income for the fiscal 1999 quarter was $1.6 million, up from $0.7
million for the 1998 quarter. Net income per basic and diluted share was $0.15
for the fiscal 1999 quarter, versus net income per basic and diluted share of
$0.07 for the fiscal 1998 quarter.
Liquidity and Capital Resources
- -------------------------------
Coldwater Creek has historically funded its growth through a combination of
funds generated from operations, trade credit arrangements and short-term bank
credit facilities. Working capital requirements generally precede the
realization of sales. The Company typically draws on its working capital lines
to produce catalogs and increase inventory levels in anticipation of future
sales realization. Standard trade credit arrangements typically require the net
amount due to be paid within sixty days of receipt of the inventory or services.
The Company has an agreement with First Security Bank, N.A., a major
Northwest commercial bank, providing for $50.0 million in credit facilities,
consisting of an unsecured revolving line of credit of $47.4 million (with a
sub-limit of $7.0 million for letters of credit) and a term standby letter of
credit of $2.6 million. At the option of the Company, the interest rate is the
bank's Prime Rate or Adjusted LIBOR [i.e., rate per annum equal to the quotient
of the London Interbank Offered Rate divided by one (1) minus the Eurocurrency
Reserve Requirement for the applicable Interest Period, rounded upward, if
necessary, to the nearest one-sixteenth of one percent], increased or decreased
by a margin based upon the Company's then EBITDA Coverage Ratio, as defined. The
agreement provides that the Company must satisfy certain specified EBITDA,
leverage and current ratio requirements and places restrictions on the Company's
ability to, among other things, sell assets, participate in mergers, incur debt,
pay dividends, and make investments or guarantees. The credit facility has a
maturity date of June 30, 2001.
Operating activities generated $15.7 million of positive cash flow during
the fiscal 1999 quarter compared to $4.3 million of negative cash flow during
the fiscal 1998 quarter. On a comparative basis, the fiscal 1999 quarter
primarily reflects the Company's higher net income complimented by the positive
cash flow effects of reduced merchandise inventories, lower prepaid catalog
costs and increased accounts payable. These positive cash flows were slightly
offset primarily by the negative cash flow effects from decreased income taxes
payable. These positive operating cash flows were primarily utilized to fund
$1.6 million of capital equipment expenditures, to fully pay-off the Company's
$9.9 million revolving line of credit balance and to increase the Company's cash
and cash equivalents balance by $4.2 million.
Investing activities consumed $1.6 million and $3.6 million of cash during
the fiscal 1999 and 1998 quarters, respectively, and consisted solely of capital
equipment purchases. The fiscal 1999 capital expenditures primarily reflect the
cost of material handling, telecommunication and information systems for the
permanent East Coast Operations Center discussed below, and to a lesser degree,
hardware and software upgrades to corporate systems. Capital expenditures
directly attributable to the Company's Year 2000 compliance program discussed
below have been, and are expected to remain, immaterial.
Financing activities during the fiscal 1999 quarter consisted substantially
of the repayment of the Company's previous $9.9 million revolving line of credit
balance whereas the fiscal 1998 quarter consisted substantially of $7.9 million
in line of credit advances. The Company had no short or long-term debt at May
29, 1999 as compared to outstanding revolving line of credit balances of $9.9
million and $18.1 million at February 27, 1999 and May 30, 1998, respectively.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
- -------------------------------------------
As a result of the foregoing, the Company had $27.0 million in working
capital at May 29, 1999 as compared to $24.6 million and $14.0 million at
February 27, 1999 and May 30, 1998, respectively. The Company's current ratio
was 1.8 at May 29, 1999 as compared to 1.6 at February 27, 1999 and 1.3 at May
30, 1998. Reflecting management's continuing efforts at increasing inventory
turnover and productivity, the Company's inventories of $50.8 million at May 29,
1999 are 10.0% and 8.8% lower than the levels which existed at February 27, 1999
and May 30, 1998.
On June 12, 1998, the Company executed a definitive operating lease
agreement with the Wood County Development Authority to establish an East Coast
Operations Center in Parkersburg, West Virginia. This agreement was primarily
entered into in order to alleviate certain capacity constraints which were being
experienced at the Company's distribution center in Sandpoint, Idaho and to
reduce the costs incurred in shipping certain merchandise orders to the majority
of the Company's customers which are located in the eastern United States. The
new operations center will approximate 600,000 square feet and be situated on
approximately 60 acres, allowing for future expansion.
In exchange for the Company's willingness to establish a long-term presence
in Parkersburg, the State of West Virginia agreed to construct and make
available to the Company, at a nominal annual lease cost, a temporary 120,000
square foot facility in the Parkersburg area from which the Company could
conduct certain order fulfillment operations until the permanent facility was
constructed and available. Construction of the temporary facility was completed
in May 1998 and the Company commenced certain order fulfillment operations in
July 1998. The establishment of these interim East Coast operations has allowed
the Company's management to implement new technologies and train new employees
on a reduced but increasing scale pending completion of the permanent operations
center.
Construction by the Wood County Development Authority of the permanent
operations center is substantially complete with order fulfillment operations
targeted to commence on or before July 31, 1999. The addition of this new
facility, supported by a new information technology platform, will provide the
Company with a consolidated base of operations capable of processing 120,000
customer orders a day thereby enabling the Company to continue its historical
commitment to providing the highest possible standard of customer service. In
addition, the new facility will enable the Company to rapidly expand its
Internet sales channel and build upon the success of its Bed & Bath line by
increasing the current offering of home furnishings. Once completed, the Company
will also transition the operations of its Parkersburg customer service call
center, currently residing in other leased premises, into the new operations
center.
The Company will incur annual lease expense for the permanent operations
center of approximately $2.2 million over the twenty year lease term. The lease
allows the Company, at its option, to (i) purchase the underlying land and
facility at a then determined fair market value or (ii) exercise up to four
successive five-year extensions.
Management's long-term brand building strategy includes the selective
opening of highly visible retail stores in high traffic areas, including major
urban areas and "destination" locations near major national parks or other
resort areas. The Company currently operates two retail store complexes located
in Sandpoint, Idaho and Jackson Hole, Wyoming. Management will continue to
consider the opening of retail stores in the future as prime locations become
available. In this regard, the Company is currently actively evaluating the
possibility of establishing retail store complexes in Seattle, Washington and
Plano, Texas during fiscal 1999. It is contemplated that each such retail store
would be leased with an average initial cash investment per store being limited
to leasehold improvements and inventory in the approximate range of $2 million
to $4 million.
During the balance of fiscal 1999, the Company plans to make between $7
million and $10 million in additional capital expenditures to support its
anticipated continued growth. The majority of these capital expenditures will
constitute equipment and technology for the East Coast Operations Center,
leasehold
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
- -------------------------------------------
improvements for new retail store locations and technological upgrades for the
interactive commerce web site. These expenditures are expected to be funded
from available cash balances, and to the extent necessary, the Company's
existing bank credit facility.
The Company believes that cash flow from operations and borrowing capacity
under its bank credit facility will be sufficient to support operations and
future growth for the foreseeable future. Thereafter, the Company may be
required to seek additional sources of funds for continued or accelerated growth
and there can be no assurance that such funds will be available on satisfactory
terms. Failure to obtain such financing could delay or prevent the Company's
planned growth, which could adversely affect the Company's business, financial
position, results of operations and cash flows.
Other Matters
- --------------
Future Outlook
- --------------
Beginning in the fourth quarter of fiscal 1997, the Company began to
experience, as did other direct retailers, a significant softening of consumer
demand particularly for upscale womens' fashions such as those featured by the
Company in its Spirit of the West catalog. In light of the continuing uncertain
state of this niche of the marketplace, the Company has modified its growth
expectations and proceeded cautiously in its mailings of Spirit of the West.
Particularly, the Company has curtailed its previously aggressive prospect
mailings of Spirit of the West until a reasonably sustained improvement in
consumer demand for upscale womens' fashions is noted. However, pending such
upturn, the Company and its new chief merchant have embarked on a program to
significantly revamp the Spirit of the West fashions. Until consumer demand for
upscale womens' apparel recovers and the Company begins to debut its new Spirit
of the West fashions beginning in the Fall of 1999, the growth and financial
performance of the Company's Northcountry and Home catalogs could be diminished
by the financial performance of Spirit of the West.
During the third quarter of fiscal 1998, the Company announced that it had
decided to discontinue its Milepost Four mens' apparel catalog as its
performance did not meet the Company's long-term growth expectations. In late
June of 1999, the Company completed the sale of substantially all the assets
underlying its Milepost Four catalog. The purchase price consisted of $2.25
million in cash resulting in a net pre-tax, non-operating gain of $835,000.
This gain will be recognized in the second fiscal quarter ending August 28,
1999. Partially offsetting this gain will be non-recurring, pre-tax start-up
expenses associated with the opening of the permanent East Coast Operations
Center of approximately $0.3 million to $0.6 million.
The Company's activity and sales through its web site
(www.coldwatercreek.com) has continued to increase at a rapid rate. While
Internet-related sales remained immaterial to the Company's overall financial
results for the fiscal 1999 quarter, the increase realized from this new sales
channel was substantial on a percentage basis. With over 600 outlet items
currently being offered, the Company's web site is also proving to be a cost-
effective channel for liquidating overstock catalog items. The Company continues
to increase the number of products offered for sale on its web site and to
improve the site's structure and capacity to handle the additional customer
demand. By the end of August, the Company anticipates being able to offer its
Internet customers the entire spectrum of merchandise featured in its three
catalog titles. During the Fall, the Company will be heavily marketing its web
site in order to fully benefit from the upcoming Christmas season. The Company's
Internet Commerce Division is personally led by Dennis Pence, the Company's Co-
Founder and Chief Executive Officer.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Other Matters (continued)
- -------------------------
Year 2000 Compliance
- ----------------------
Coldwater Creek remains engaged in an enterprise-wide Year 2000 project. A
project leader coordinates a team that includes representatives from every
department. A comprehensive project plan that defines each objective and task in
detail is guiding the team in its continuing efforts.
The Company does not sell any products that must be brought into Year 2000
compliance. However, the Company does rely upon many vendors and suppliers for
their products and services. The Company has evaluated key vendor preparedness,
as well as its own, by conducting interviews, obtaining compliance
representation letters, and when deemed necessary, conducting comprehensive
tests. Such vendors include, in addition to significant merchandise vendors,
providers of hardware and software computing products, telecommunication systems
and components, facilities and related systems, and office equipment.
Although most of the Company's major systems are supplied by third-party
vendors who bear the financial burden of bringing such systems into compliance,
the Company's project team will maintain an active dialog with these vendors to
ensure the adequacy and timeliness of required modifications. Year 2000
compliance inquiry letters have been sent to all major vendors and the responses
have been received and evaluated. Project team members have conducted site
visits to the Company's two major telecommunications vendors and its major
computer hardware vendor for detailed briefings on Year 2000 preparedness.
Additional follow-up site visits will be conducted as deemed necessary. Year
2000 compliance provisions have also been added to all significant contracts and
purchase orders.
The project team's review of the Company's major systems identified two
application systems and two system software components which were not Year 2000
compliant. The two application systems, which were an interface to the Company's
accounting system and a payroll system, have been upgraded to be Year 2000
compliant at no material cost to the Company.
The internal testing of all other applications systems for Year 2000
compliance is continuing with the majority of the testing being conducted in
conjunction with regularly scheduled upgrades. The Year 2000 compliance
shortcomings detected to date in these systems have been minor in nature and
readily corrected. As a result, the incremental cost incurred to date in testing
and modifying these systems for Year 2000 compliance has been immaterial.
The Company's Year 2000 compliance program also includes the testing of all
major systems containing embedded technologies. The Year 2000 compliance
shortcomings detected in these systems have generally involved
telecommunications components and have been minor in nature. The correcting
upgrades were completed during the first calendar quarter of 1999 at an
immaterial cost to the Company.
The Company expects to complete its Year 2000 compliance evaluation
program, including the development of contingency plans to manage all identified
areas of perceived risk, by August 1999. At this time, the Company continues to
believe that the balance of the costs to be incurred in connection with its Year
2000 compliance program will be immaterial to the Company's financial position,
results of operations and cash flows.
Recently Issued Accounting Standards Not Yet Adopted
- ----------------------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 requires that
every derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. In June 1999, the FASB issued Statement of
Financial Accounting Standard No. 137 delaying the effective date of SFAS No.
133. SFAS No. 133, as amended, is effective for the
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Other Matters (continued)
- -------------------------
Recently Issued Accounting Standards Not Yet Adopted (continued)
- ----------------------------------------------------------------
Company's fiscal 2001 financial statements. As the Company currently is not a
party to any derivative financial instruments and does not anticipate becoming a
party to any derivative instruments, management does not currently expect the
adoption of SFAS No. 133 to have a material impact on the Company's consolidated
financial statements.
Risk Factors
- ------------
Competition
- ------------
The markets for the Company's merchandise are highly competitive, and the
recent growth in these markets has encouraged the entry of many new competitors
as well as increased competition from established companies. Although the
Company believes that it does not compete directly with any single company with
respect to its entire range of merchandise, within each merchandise category the
Company has significant competitors and may face new competition from new
entrants or existing competitors who focus on market segments currently served
by the Company. These competitors include large retail operations, including
some with catalog operations, other catalog and direct marketing companies and
international competitors. The recent addition of Internet commerce operations
by a number of these retailers, as well as the emergence of a number of stand-
alone e-commerce companies, has introduced a further element of competition into
the Company's markets. With respect to the apparel merchandise offered by the
Company, the Company is in direct competition with more established catalog
operations, some with substantially greater experience in selling apparel
merchandise and which may focus on prospective customers sharing some of the
demographic characteristics of the Company's customers. Any failure on the part
of the Company to successfully market its apparel merchandise or to compete
effectively against such competitors could have a material adverse affect on the
Company's growth and could adversely affect the Company's business, financial
position, results of operations and cash flows. Many of these competitors are
larger and have significantly greater financial, marketing and other resources
than the Company. Increased catalog mailings and Internet solicitations by the
Company's competitors may adversely affect response rates to the Company's
catalog mailings and Internet offerings. In addition, because the Company
sources the majority of its merchandise from suppliers and manufacturers located
in the United States, where labor and production costs may be higher than in
foreign countries, there can be no assurance that the Company's merchandise will
or can be competitively priced when compared to merchandise offered by other
retailers. While the Company believes that it has been able to compete
successfully because of its brand recognition, the exclusivity and broad range
and quality of its merchandise, including its private label merchandise
offerings, and its customer service policies, there can be no assurance that the
Company will be able to maintain or increase its market share in the future. The
failure of the Company to compete successfully could materially and adversely
affect the Company's business, financial position, results of operations and
cash flows.
Reliance on Catalog Operations
- ------------------------------
The Company's success depends predominately on the success of its catalog
operations, which the Company believes is achieved through the efficient
targeting of its mailings, a high volume of prospect mailing when market
conditions permit, appropriate shifts in the Company's merchandise mix and the
Company's ability to achieve adequate response rates to its mailings. Catalog
mailings entail substantial paper, postage, merchandise acquisition and human
resource costs, including costs associated with catalog development and
increased inventories, virtually all of which are incurred prior to the mailing
of each catalog. As a result, the Company is not able to adjust the costs being
incurred in connection with a particular mailing to reflect the actual
performance of the catalog. If, for any reason, the Company were to
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Risk Factors (continued)
- ------------------------
Reliance on Catalog Operations (continued)
- ------------------------------------------
experience a significant shortfall in anticipated revenue from a particular
mailing, and thereby not recover the costs associated with that mailing, the
Company's financial condition, results of operations and cash flows could be
adversely affected. In addition, response rates to the Company's mailings and,
as a result, revenues generated by each mailing, can be affected by factors such
as consumer preferences, economic conditions, the timing and mix of catalog
mailings and changes in the merchandise mix, several of which may be outside the
Company's control. Furthermore, the Company historically has experienced
fluctuations in the response rates to its catalog mailings. Any inability of
the Company to accurately target the appropriate segment of the consumer catalog
market or to achieve adequate response rates could result in lower sales,
significant markdowns or write-offs of inventory, increased merchandise returns
and lower margins, which would have a material adverse effect on the Company's
business, financial position, results of operations and cash flows.
Risks Associated with Growth Strategy
- -------------------------------------
The Company's growth strategy includes primarily the following components:
introducing expanded catalog and merchandise offerings, publishing new catalog
titles, increasing catalog circulation, expanding the Company's customer base
through aggressive prospect mailings when market conditions permit, and
increasing the use of other marketing channels, such as retail stores and the
Internet. The Company's growth strategy involves various risks, including a
reliance on a high degree of prospect mailings when market conditions permit,
which may lead to less predictable response rates. The failure of the Company to
successfully implement any or all of its growth strategies could have a material
adverse effect on the Company's business, financial position, results of
operations and cash flows.
The Company believes its growth is attributable in large part to the
Company's success in meeting the merchandise, timing and service demands of an
expanding customer base with certain demographic characteristics. There can be
no assurance that the Company will be able to continually identify and offer new
merchandise that appeals to its customer base or that the introduction of new
merchandise categories or new marketing or distribution strategies, such as the
sale of the Company's merchandise through new catalog titles, retail stores or
the Internet, will be successful or profitable, or that any such efforts will
achieve sustainable acceptance in the market. Any inability on the part of the
Company to sustain the growth of its catalog operations and sales, to maintain
its current average order size and response rates or to leverage the success of
existing catalog titles to new merchandise lines, catalogs, retail stores and
the Internet could have a material adverse effect on the Company's business,
financial position, results of operations and cash flows.
Management's long-term brand building strategy includes the selective
opening of highly visible retail stores in high traffic areas, including major
urban areas and "destination locations" such as locations near major national
parks or other resort areas. The Company currently operates catalog-themed,
full-line retail stores in Sandpoint, Idaho and Jackson Hole, Wyoming.
Management will continue to consider the opening of additional retail stores in
the future as prime locations become available. To date, the Company has had
limited experience operating retail stores, particularly stores outside the
vicinity of its headquarters. The cost of opening a retail store varies
dramatically depending on several factors such as whether the Company purchases
or leases the facilities in which the store will be placed, the size of the
store, the location of the store as well as the attendant differences in the
cost of real estate and the type and range of merchandise to be offered at the
store. In addition, retail store operations entail substantial fixed
costs,including costs associated with real estate, inventory maintenance and
staffing. Failure to successfully implement this store-based strategy could
result in significant write-offs of inventory and fixtures and could have a
material adverse effect on the Company's business, financial position, results
of operations and cash flows.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Risk Factors (continued)
- ------------------------
Risks Associated with Growth Strategy (continued)
- -------------------------------------------------
Management's long-term brand building strategy also includes increased
promotion of the Company's interactive Internet commerce web site. While
Internet-related sales remained immaterial to the Company's overall financial
results for the fiscal year ended February 27, 1999 and fiscal quarter ended May
29, 1999, the increases realized from this new sales channel were substantial on
a percentage basis. Therefore, the Company recently committed to increase the
number of products offered for sale on its web site and to improve the site's
structure and capacity to handle the additional customer demand. In this regard,
the Company has formed an Internet Commerce Division to be personally led by
Dennis Pence, the Company's Co-Founder and Chief Executive Officer. The
development and expansion of the Company's e-commerce capabilities will entail
substantial fixed costs, including costs associated with computer hardware and
software, technical staffing and continuing web site maintenance and
development. Failure to successfully implement this Internet-based strategy
could result in significant write-offs of inventory and computer hardware and
software and could have a material adverse effect on the Company's business,
financial position, results of operations and cash flows.
The Company may need to raise additional funds in order to support greater
expansion, develop enhanced services, respond to competitive pressures, acquire
complementary businesses or respond to unanticipated or seasonal requirements.
In addition, various elements of the Company's growth strategies may require
additional capital, including its plans to broaden existing merchandise lines,
including its private label offerings, its plans to introduce new merchandise
and catalog titles and its aggressive mailing program when market conditions
permit. There can be no assurance that funds will be available to the Company on
terms satisfactory to the Company when needed.
Management of Expanding Operations
- ----------------------------------
The Company's growth has resulted in an increased demand on the Company's
managerial, operational and administrative resources. The Company recently has
invested significant resources in its distribution facilities, management
information systems and telephone infrastructure. However, in order to manage
currently anticipated levels of future demand, the Company will be required to
continue, among other things, to improve and integrate its management
information systems and controls, including inventory management, and attract
and retain qualified personnel, including middle management. In particular, the
Company is in the process of expanding its distribution capabilities. There can
be no assurance that any upgrades, improvements and expansions in the Company's
information or telephone systems or its current expansion of its distribution
facilities and operations will increase the productivity or efficiency of the
Company's operations or that the same will be adequate to meet the present or
future needs of the Company. Continued growth could result in a strain on the
Company's management, financial, merchandising, marketing, distribution and
other resources and the Company may experience operating difficulties, including
difficulties in training and managing an increasing number of employees,
difficulties in obtaining sufficient quantities of certain merchandise from its
vendors, problems in upgrading its management information systems and delays in
merchandise shipments. The inability of the Company to respond to and manage
these changing business conditions could have a material adverse effect on the
Company's business, financial position, results of operations and cash flows.
Quarterly and Seasonal Fluctuations
- -----------------------------------
The Company's revenue and results of operations have fluctuated and can be
expected to continue to fluctuate on a quarterly basis as a result of a number
of factors including, among other things, the timing of new merchandise and
catalog offerings, recognition of costs or net sales contributed by new
merchandise and catalog offerings, fluctuations in response rates, fluctuations
in paper, production and postage costs and expenses, merchandise returns,
adverse weather conditions that affect distribution or shipping, shifts in the
timing of holidays and changes in the Company's merchandise mix. If revenues
are below expectations in
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Risk Factors (continued)
- ------------------------
Quarterly and Seasonal Fluctuations (continued)
- -----------------------------------------------
any given period, the adverse impact of such a shortfall may be magnified by the
Company's inability to adjust spending to compensate for the shortfall.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Coldwater Creek is not exposed to financial market risks from changes in
foreign currency exchange rates and is only minimally impacted by changes in
interest rates. Borrowings under the Company's bank credit facility are at a
variable rate of interest and, based on the current level of borrowings, the
Company experiences only modest changes in interest expense when market interest
rates change. However, in the future, the Company may enter into transactions
denominated in non-U.S. currencies or increase the level of its borrowings,
which could increase the Company's exposure to these market risks. The Company
has not used, and currently does not contemplate using, any derivative financial
instruments.
19
<PAGE>
PART II
Item 1. Legal Proceedings
There are no material legal proceedings presently pending to which
Coldwater Creek Inc. or its subsidiary is a party or of which any of their
properties are the subject.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Coldwater Creek Inc. ("the Company") was
held on July 10, 1999. At such meeting, the following proposals were voted upon
and approved:
1. Proposal No. 1: To elect to the Board two directors.
For Withhold
---
Ann Pence 9,486,667 142,876
Curt Hecker 9,485,983 143,560
2. Proposal No. 2: Ratify the selection of Arthur Andersen LLP as
independent public accountants for the Company for the fiscal year ending March
4, 2000.
For Against Abstain
--- ------- -------
9,621,345 4,484 3,714
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
NUMBER DESCRIPTION OF DOCUMENT
- ------------------------------
27.1 Financial Data Schedule
There were no reports filed on Form 8-K during the three months ended May 29,
1999.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Sandpoint, State of Idaho, on this 13th day of July 1999.
COLDWATER CREEK INC.
By: /s/ Donald A. Robson
---------------------------
Donald A. Robson
Senior Vice President, Chief Financial Officer
and Treasurer (Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<PAGE>
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This schedule contains summary financial information extracted from consolidated
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<PERIOD-START> FEB-28-1999 MAR-01-1998
<PERIOD-END> MAY-29-1999 MAY-30-1998
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