Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. COLDWATER CREEK INC (1018005) 10-Q published on Dec 12, 2013 at 1:40 pm
Reporting Period: Nov 01, 2013
Our financial statements have been prepared on the basis that our business will continue as a going concern. We believe, based on our current projections, that we have sufficient sources of liquidity, including cash and cash equivalents and availability under our revolving line of credit, to fund our operations for at least the next twelve months. Our ability to fund our operations and to continue as a going concern depends upon meeting our projected future operating results, including the achievement of improvements from our merchandising and marketing initiatives, cost reduction program, store optimization program and other strategic initiatives, and the availability under our revolving line of credit, as well as the absence of any significant deterioration in consumer spending as a result of uncertain macroeconomic conditions. The ability to achieve our projected future operating results is based on a number of assumptions which involve significant judgment and estimates, which cannot be assured. If we are unable to achieve our projected operating results, we could violate one or more of our debt covenants, our liquidity could be adversely impacted and we may need to seek additional sources of liquidity. Our current level of debt could adversely affect our ability to raise additional capital to fund our operations and there is no assurance that debt or equity financing will be available in sufficient amounts or on acceptable terms. Therefore, a continuation of our recent historical operating results could result in our inability to continue as a going concern. Additional actions may include further reducing our expenditures, curtailing our operations, significantly restructuring our business, or restructuring our debt.
The second initiative involves improving our brand perception. Under the leadership of our new Chief Marketing Officer, we are in the process of rolling out new marketing programs that are designed to create more excitement about our products, build our fashion credibility, improve our brand awareness, and grow our customer file. Through our new imagery and typography we will communicate the attributes of our products to our customers with a strong and consistent voice. We will build on the brand strategy we rolled out earlier this year to drive growth by significantly improving awareness and brand affinity through authentic brand differentiation, and by becoming a trustworthy style advisor and the leading destination for stylish apparel and accessories among our target audience of women. To achieve this, we will develop our brand aesthetic, voice, and express our role of trusted style advocate across all platforms and experiences in our business. We have been working rapidly to incorporate an elevated expression of our fashion and style advocacy, which began with the 2013 holiday season.
The market price for our common stock has fluctuated and will continue to be significantly affected by, among other factors, quarterly operating results, changes in any earnings estimates publicly announced by us or by analysts, customer response to merchandise offerings, timing of retail store openings and closings, and other Company announcements. The reported high and low closing prices of our common stock during the nine months ended November 2, 2013 were $4.00 per share and $0.91 per share, respectively. The current price of our common stock may not be indicative of future market prices. The fluctuation of the market price of our common stock may have a negative impact on our results of operations and liquidity. Changes in the market price of our common stock could considerably affect the valuation of our derivative liability resulting in significant non-cash fluctuations in earnings. In addition, price volatility of our common stock may expose us to stockholder litigation, which could adversely affect our financial condition, results of operations and cash flows.
Golden Gate Capital's ownership of shares of our Series A Preferred Stock entitles it to 16.6% of the voting power in any vote of stockholders. In addition, under the Secured Term Loan agreement Golden Gate Capital's consent may be required under certain circumstances in connection with our pursuit of strategic alternatives, such as in connection with a debt refinancing if it includes an amendment to the Secured Term Loan agreement. Dennis Pence, our Chairman of the Board of Directors and co-founder, and Ann Pence, our co-founder, beneficially own common stock that entitle them to 15.4% and 12.4%, respectively, of the outstanding voting power. Either Golden Gate Capital, Dennis Pence or Ann Pence acting independently would have significant influence over and, should they act together, could effectively control the outcome of any matters submitted to stockholders, including the election of directors, approval of business combinations, and other transactions that could result from the Company's ongoing evaluation of strategic alternatives. The interests of these stockholders may not always coincide with the interests of other stockholders, which could have the effect of delaying, deterring or preventing a change of control of the Company or other transaction that may be in the best interests of other stockholders.
Our common stock is currently listed on the NASDAQ Global Select Market and we are required to meet specified financial requirements to maintain this listing, one of which is that we maintain a minimum closing price of at least $1.00 per share for our common stock. Our common stock has recently traded below $1.00 per share. If we fail to maintain the $1.00 minimum closing price for 30 consecutive business days, we may be at risk of delisting. There is no assurance that we will be able to maintain, or would be successful in regaining compliance with, the minimum price requirements in the future. Delisting, or even the issuance of a notice of potential delisting, could have a material adverse effect on the price of our shares and our ability to issue additional securities, secure financing, or complete a change in control of the Company. In the event of delisting, trading of our common stock would most likely be conducted in the over the counter market on an electronic bulletin board established for unlisted securities, which would adversely affect the market liquidity of our common stock, security analysts’ coverage of us could be reduced and customer, investor, supplier and employee confidence may be diminished.