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 Quarterly Period Ended July 30, 2011

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-21915

COLDWATER CREEK INC.

(Exact name of registrant as specified in its charter)

DELAWARE

82-0419266

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

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 August 29, 2011
Common Stock ($0.01 par value)		92,688,600

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PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

COLDWATER CREEK INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for per share data)

	July 30, 2011			January 29, 2011			July 31, 2010
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	31,530		$	51,613		$	72,279
Receivables	9,296			9,561			13,106
Inventories	152,183			156,481			166,392
Prepaid and other	11,639			12,217			9,131
Income taxes recoverable	—			1,489			13,668
Prepaid and deferred marketing costs	4,293			6,902			5,798
Deferred income taxes	6,536			6,029			6,464
Total current assets	215,477			244,292			286,838
Property and equipment, net	231,448			259,349			281,386
Deferred income taxes	2,049			1,915			—
Restricted cash	—			—			890
Other	1,686			1,167			1,252
Total assets	$	450,660		$	506,723		$	570,366
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	74,541		$	76,354		$	91,555
Accrued liabilities	74,102			80,809			74,340
Income taxes payable	3,302			—			—
Current maturities of long-term debt and capital lease obligations	878			796			1,693
Current deferred marketing fees and revenue sharing	4,358			4,487			4,688
Total current liabilities	157,181			162,446			172,276
Deferred rents	108,227			116,875			122,988
Long-term debt and capital lease obligations	26,877			12,241			11,616
Supplemental Employee Retirement Plan	10,208			10,013			9,551
Deferred marketing fees and revenue sharing	5,144			5,822			6,309
Deferred income taxes	5,524			5,524			6,147
Other	1,509			793			698
Total liabilities	314,670			313,714			329,585
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 1,000 shares authorized, none issued and outstanding	—			—			—
Common stock, $0.01 par value, 300,000 shares authorized; 92,688, 92,503 and 92,325 shares issued, respectively	926			925			923
Additional paid-in capital	126,482			125,795			125,552
Accumulated other comprehensive loss	(464		)	(464		)	(349		)
Retained earnings	9,046			66,753			114,655
Total stockholders’ equity	135,990			193,009			240,781
Total liabilities and stockholders’ equity	$	450,660		$	506,723		$	570,366

The accompanying notes are an integral part of these interim financial statements.

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COLDWATER CREEK INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except for per share data)

	Three Months Ended						Six Months Ended
	July 30, 2011			July 31, 2010			July 30, 2011			July 31, 2010
Net sales	$	181,409		$	253,498		$	361,204		$	496,584
Cost of sales	136,088			168,762			261,270			320,943
Gross profit	45,321			84,736			99,934			175,641
Selling, general and administrative expenses	70,029			82,547			153,708			169,001
Loss on asset impairments	2,445			—			2,875			—
Income (Loss) from operations	(27,153		)	2,189			(56,649		)	6,640
Interest, net, and other	(455		)	(189		)	(702		)	(436		)
Income (Loss) before income taxes	(27,608		)	2,000			(57,351		)	6,204
Income tax provision	71			531			356			2,413
Net income (loss)	$	(27,679	)	$	1,469		$	(57,707	)	$	3,791
Net income (loss) per share — Basic	$	(0.30	)	$	0.02		$	(0.62	)	$	0.04
Weighted average shares outstanding — Basic	92,606			92,265			92,561			92,224
Net income (loss) per share — Diluted	$	(0.30	)	$	0.02		$	(0.62	)	$	0.04
Weighted average shares outstanding — Diluted	92,606			92,635			92,561			92,687

The accompanying notes are an integral part of these interim financial statements.

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COLDWATER CREEK INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Six Months Ended
	July 30, 2011			July 31, 2010
Operating activities:
Net income (loss)	$	(57,707	)	$	3,791
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	30,042			31,247
Stock-based compensation expense	1,162			1,601
Supplemental Employee Retirement Plan expense	278			373
Deferred income taxes	(641		)	—
Valuation allowance adjustments	(658		)	(474		)
Net loss on asset dispositions	125			181
Loss on asset impairments	2,875			—
Other	9			4
Net change in current assets and liabilities:
Receivables	265			(7,129		)
Inventories	4,298			(4,846		)
Prepaid and other and income taxes recoverable	2,067			(591		)
Prepaid and deferred marketing costs	2,609			69
Accounts payable	(3,878		)	(9,874		)
Accrued liabilities	(7,356		)	(7,005		)
Income taxes payable	3,302			—
Change in deferred marketing fees and revenue sharing	(807		)	(1,367		)
Change in deferred rents	(8,503		)	(1,670		)
Other changes in non-current assets and liabilities	739			(480		)
Net cash provided by (used in) operating activities	(31,779		)	3,830

Investing activities:
Purchase of property and equipment	(3,699		)	(15,151		)
Proceeds from asset dispositions	766			10
Net cash used in investing activities	(2,933		)	(15,141		)

Financing activities:
Proceeds from the issuance of long-term debt	15,000			—
Payments of capital lease and other financing obligations	(296		)	(1,336		)
Payment of credit facility financing costs	(680		)	—
Net change in vendor payment program	421			—
Net proceeds from exercises of stock options and ESPP purchases	184			369
Tax withholding payments	—			(93		)
Net cash provided by (used in) financing activities	14,629			(1,060		)
Net decrease in cash and cash equivalents	(20,083		)	(12,371		)
Cash and cash equivalents, beginning	51,613			84,650
Cash and cash equivalents, ending	$	31,530		$	72,279

The accompanying notes are an integral part of these interim financial statements.

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COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Organizational Structure

Coldwater Creek Inc., a Delaware corporation, together with its wholly-owned subsidiaries, headquartered in Sandpoint, Idaho, is a multi-channel specialty retailer of women’s apparel, accessories, jewelry and gift items. We operate in two operating segments: retail and direct. The retail segment consists of our premium retail stores, outlet stores and day spas. The direct segment consists of sales generated through our e-commerce web site and from orders taken from customers over the phone and through the mail. Intercompany balances and transactions have been eliminated.

The accompanying condensed consolidated financial statements are unaudited and have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The condensed consolidated balance sheet as of January 29, 2011 was derived from the audited consolidated balance sheet as of that date. The condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented and should be read in conjunction with the consolidated financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the financial position, results of operations or cash flows to be realized in future periods.

2. Significant Accounting Policies

Accounting Policies

The complete summary of significant accounting policies is included in the notes to the consolidated financial statements as presented in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

Comprehensive Income (Loss)

The following table provides a reconciliation of net income (loss) to total comprehensive income (loss):

	Three Months Ended					Six Months Ended
	July 30, 2011			July 31, 2010		July 30, 2011			July 31, 2010
	(in thousands)
Net income (loss)	$	(27,679	)	$	1,469	$	(57,707	)	$	3,791
Supplemental Employee Retirement Plan activity, net of tax	—			12		—			24
Comprehensive income (loss)	$	(27,679	)	$	1,481	$	(57,707	)	$	3,815

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and timing of revenue and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are embodied in our sales returns accrual, stock-based compensation, contingencies, income taxes, asset impairment, and our inventory obsolescence calculations. These estimates and assumptions are based on historical results as well as management’s future expectations. Actual results may vary from these estimates and assumptions.

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to the subjectivity associated with the inputs to fair value measurements as follows:

· Level 1 — Quoted prices in active markets for identical assets or liabilities;

· Level 2 — Quoted prices for similar assets or liabilities in active markets or inputs that are observable; and

· Level 3 — Unobservable inputs in which little or no market activity exists.

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As of July 30, 2011, January 29, 2011 and July 31, 2010, we held $1.0 million, $39.1 million and $69.6 million, respectively, in money market funds that are measured at fair value on a recurring basis using level 1 inputs.

During the six months ended July 30, 2011, certain long-lived assets, primarily premium store leasehold improvements, with a net carrying amount of $3.6 million were written down to their fair value of $0.7 million, resulting in an impairment charge of $2.9 million. This impairment charge was measured at fair value using Level 3 inputs (discounted cash flows).

We have financial assets and liabilities, not required to be measured at fair value on a recurring basis, which primarily consist of cash, restricted cash, receivables, payables, and long-term debt. The carrying value of cash, restricted cash, receivables, and payables materially approximate their fair values due to their short-term nature. The carrying value of long-term debt materially approximates fair value at July 30, 2011, as the interest rate is a variable rate and the debt was issued during the second quarter of fiscal 2011.

Advertising Costs

Direct response advertising includes catalogs and national magazine advertisements that contain an identifying code which allows us to track related sales. All direct costs associated with the development, production and circulation of direct response advertisements are accumulated as prepaid marketing costs. Once the related catalog or national magazine advertisement is either mailed or first appears in print, these costs are reclassified to deferred marketing costs. These costs are then amortized to selling, general and administrative expenses over the expected sales realization cycle, typically several weeks. Direct response advertising expense was $5.7 million and $8.8 million for the three months ended July 30, 2011 and July 31, 2010, respectively, and $21.6 million and $21.5 million for the six months ended July 30, 2011 and July 31, 2010, respectively.

Advertising costs other than direct response advertising, including television, store and event promotions, signage expenses and other general customer acquisition activities, are expensed as incurred or when the advertising event first takes place. Advertising expenses other than those related to direct response advertising of $5.9 million and $5.2 million for the three months ended July 30, 2011 and July 31, 2010, respectively, and $12.3 million and $10.2 million for the six months ended July 30, 2011 and July 31, 2010, respectively, are included in selling, general and administrative expense.

Income Taxes

In assessing the realizability of deferred tax assets, we consider all available evidence to determine whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. Current or previous losses are given more weight than its projected future performance. Consequently, based on all available evidence, in particular our historical cumulative losses and recent operating losses, we have a valuation allowance against a significant portion of our net deferred tax assets. In order to fully realize the deferred tax assets, we will need to generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code.

During the first quarter of fiscal 2011, we resolved $2.3 million in unrecognized tax benefits as a result of completing our Internal Revenue Service examination for fiscal years 2009, 2008, 2007 and 2006.

Stock-Based Compensation

Total stock-based compensation recognized primarily in selling, general and administrative expenses from stock options and restricted stock units (RSUs) consisted of the following:

	Three Months Ended				Six Months Ended
	July 30, 2011		July 31, 2010		July 30, 2011		July 31, 2010
	(in thousands)
Stock Options	$	404	$	522	$	812	$	1,150
RSUs	152		221		350		451
	$	556	$	743	$	1,162	$	1,601

During the six months ended July 30, 2011 and July 31, 2010, employees were granted 977,500 and 605,300 stock options, respectively. The fair value for stock option awards was estimated at the grant date using the Black-Scholes option valuation model with the following weighted average assumptions:

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	Directors and Officers
	Six Months Ended
	July 30, 2011			July 31, 2010
Risk free interest rate	2.11		%	2.46		%
Expected volatility	86		%	76		%
Expected life (in years)	5.75			5.75
Expected dividends	—			—
Weighted average fair value per option granted	$	1.11		$	2.91

	All Other Employees
	Six Months Ended
	July 30, 2011			July 31, 2010
Risk free interest rate	1.89		%	1.88		%
Expected volatility	90		%	80		%
Expected life (in years)	4.40			4.46
Expected dividends	—			—
Weighted average fair value per option granted	$	1.02		$	2.72

During the six months ended July 30, 2011 and July 31, 2010, employees were granted 568,395 and 212,387 RSUs, respectively, at a weighted average fair value of $1.51 and $4.35, respectively. During the six months ended July 30, 2011 and July 31, 2010, employees were also granted 520,000 and 255,500 performance RSUs, respectively, at a weighted average grant date fair value of $1.43 and $3.86, respectively. For the performance RSUs granted in fiscal 2011, half of the RSUs are subject to the achievement of earnings before interest expense and taxes (EBIT) for the second half of fiscal 2011 combined with fiscal 2012 and half of the RSUs are subject to the achievement of sales targets for the second half of fiscal 2011 combined with fiscal 2012. For performance RSUs granted in fiscal 2010, the RSUs are subject to the achievement of combined EBIT target for fiscal years 2010, 2011 and 2012; however, no compensation expense has been recognized for these awards as it was determined to be not probable that the performance conditions would be met. The number of shares actually awarded under performance RSUs will range from 0% to 200% of the base award amount, depending on the results during the performance period.

Interest, net, and other

Interest, net, and other consisted of the following:

	Three Months Ended						Six Months Ended
	July 30, 2011			July 31, 2010			July 30, 2011			July 31, 2010
	(in thousands)
Interest expense	$	(510	)	$	(477	)	$	(925	)	$	(920	)
Interest income	3			1			4			7
Other income	301			510			697			959
Other expense	(249		)	(223		)	(478		)	(482		)
Interest, net, and other	$	(455	)	$	(189	)	$	(702	)	$	(436	)

3. Receivables

Receivables consisted of the following:

	July 30, 2011		January 29, 2011		July 31, 2010
	(in thousands)
Trade	$	4,408	$	3,430	$	9,255
Tenant improvement allowances	1,775		3,552		2,210
Other	3,113		2,579		1,641
	$	9,296	$	9,561	$	13,106

We evaluate the credit risk associated with our receivables to determine if an allowance for doubtful accounts is necessary. At July 30, 2011, January 29, 2011 and July 31, 2010, no allowance for doubtful accounts was deemed necessary.

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4. Property and Equipment, net

Property and equipment, net, consisted of the following:

	July 30, 2011			January 29, 2011			July 31, 2010
	(in thousands)
Land	$	242		$	242		$	242
Building and land improvements	29,646			29,646			29,265
Leasehold improvements	282,764			290,447			285,269
Furniture and fixtures	122,029			124,837			118,410
Technology hardware and software	93,917			93,495			91,528
Machinery and equipment and other	36,289			37,863			37,606
Capital leases	12,706			11,816			11,778
Construction in progress	13,510			14,207			17,712
	591,103			602,553			591,810
Less: Accumulated depreciation and amortization	(359,655		)	(343,204		)	(310,424		)
	$	231,448		$	259,349		$	281,386

5. Accrued Liabilities

Accrued liabilities consisted of the following:

	July 30, 2011		January 29, 2011		July 31, 2010
	(in thousands)
Accrued payroll and benefits	$	13,797	$	12,506	$	14,214
Gift certificates and cards	27,339		31,897		24,449
Current portion of deferred rents	20,697		20,842		20,308
Deferred sales royalty	3,179		3,134		2,822
Accrued sales returns	2,918		3,383		4,243
Vendor payment program liability	421		—		—
Accrued taxes	3,722		4,815		4,968
Other	2,029		4,232		3,336
	$	74,102	$	80,809	$	74,340

To better facilitate the processing efficiency of certain vendor payments, during the first quarter of fiscal 2011 we entered into a vendor payment program with a payment processing intermediary. Under the vendor payment program, the intermediary makes regularly-scheduled payments to our vendors and we, in turn, settle monthly with the intermediary. During the six months ended July 30, 2011, we paid no interest on amounts outstanding to the intermediary as the monthly settlements were made within the agreed-upon terms. We expect the vendor payment program will continue to expand as we add additional vendors.

6. Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the combination of other potentially dilutive common shares and the weighted average number of common shares outstanding during the period. Other potentially dilutive weighted average common shares include the dilutive effect of stock options, RSUs and shares to be purchased under our Employee Stock Purchase Plan for each period using the treasury stock method. Under the treasury stock method, the exercise price of a share, the amount of compensation expense, if any, for future service that has not yet been recognized, and the amount of benefits that would be recorded in additional paid-in-capital, if any, when the share is exercised are assumed to be used to repurchase shares in the current period.

The following table sets forth the computation of basic and diluted net income (loss) per common share:

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	Three Months Ended					Six Months Ended
	July 30, 2011			July 31, 2010		July 30, 2011			July 31, 2010
	(in thousands, except per share amounts)
Net income (loss)	$	(27,679	)	$	1,469	$	(57,707	)	$	3,791
Weighted average common shares outstanding during the period (for basic calculation)	92,606			92,265		92,561			92,224
Dilutive effect of other potential common shares	—			370		—			463
Weighted average common shares and potential common shares (for diluted calculation)	92,606			92,635		92,561			92,687
Net income (loss) per common share—Basic	$	(0.30	)	$	0.02	$	(0.62	)	$	0.04
Net income (loss) per common share—Diluted	$	(0.30	)	$	0.02	$	(0.62	)	$	0.04

The computation of the dilutive effect of other potential common shares excluded options to purchase approximately 4.2 million and 2.3 million shares of common stock in the three months ended July 30, 2011 and July 31, 2010, respectively, and 3.7 million and 2.1 million shares of common stock for the six months there ended, respectively. Under the treasury stock method, the inclusion of these options would have been antidilutive.

7. Supplemental Executive Retirement Plan

Net periodic benefit cost of the Supplemental Employee Retirement Plan (SERP) consisted of the following:

	Three Months Ended				Six Months Ended
	July 30, 2011		July 31, 2010		July 30, 2011		July 31, 2010
	(in thousands)
Service cost	$	—	$	41	$	—	$	84
Interest cost	139		133		278		265
Amortization of unrecognized prior service cost	—		12		—		24
Net periodic benefit cost	$	139	$	186	$	278	$	373

As the SERP is an unfunded plan, we were not required to make any contributions during fiscal 2011 and 2010. No benefit payments were made during the periods presented.

8. Long-term Debt and Capital Lease Obligations

Long-term debt and capital lease obligations consisted of the following:

	July 30, 2011			January 29, 2011			July 31, 2010
	(in thousands)
Term loan	$	15,000		$	—		$	—
Capital lease obligations	12,755			13,037			13,309
Total long-term debt and capital lease obligations	27,755			13,037			13,309
Less:
Current maturities of long-term debt	(200		)	—			—
Current maturities capital lease obligations	(678		)	(796		)	(1,693		)
	$	26,877		$	12,241		$	11,616

During fiscal 2009, we entered into a credit facility with Wells Fargo Bank, which is secured primarily by our inventory and credit card receivables and provides a revolving line of credit of up to $70.0 million, with subfacilities for the issuance of up to $70.0 million in letters of credit and swingline advances of up to $10.0 million. The actual amount of credit that is available from time to time under the revolving line of credit is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts that may be required by the lender. On May 16, 2011, we entered into an Amended and Restated Credit Agreement (the Credit Agreement) with Wells Fargo Bank, which, among other things, extended the maturity date to May 16, 2016, provided a $15.0 million term loan due on May 16, 2016, and granted the lenders a security interest in our Sandpoint, Idaho corporate offices and certain other assets. The amount available under the $70 million revolving line of credit remains unchanged; however, we now have a future option to request an increase in the amount of the revolving line of credit for an additional $15 million, which if granted would result in a total of $85 million available, exclusive of the term loan. As of July 30, 2011, we had $22.6 million in letters of credit issued resulting

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in $47.4 million available for borrowing under our revolving line of credit.

Pursuant to the Credit Agreement, borrowings issued under the revolving line of credit will generally accrue interest at a rate ranging from 1.00% to 2.50% (determined according to the average unused availability under the credit facility (the Availability)) over a reference rate of, at the Company’s election, either LIBOR or a base rate (the Reference Rate). Letters of credit issued under the revolving line of credit will accrue interest at a rate ranging from 1.50% to 2.50% (determined according to the Availability). Commitment fees accrue at a rate ranging from 0.375% to 0.50% (determined according to the Availability), which is assessed on the average unused portion of the credit facility maximum amount. The term loan accrues interest at a rate of 6.00% over the Reference Rate, with an interest rate of 6.19% as of July 30, 2011.

The Credit Agreement has restrictive covenants that are limited to capital expenditure limitations, minimum amount of inventory to be held and minimum excess availability over the borrowing base that must be maintained. The Credit Agreement also contains various covenants relating to customary matters, such as indebtedness, liens, investments, acquisitions, mergers, dispositions and other payment restriction conditions, such as limits on our ability to pay dividends if we have outstanding borrowings on our revolving line of credit. We were in compliance with all covenants for all periods presented.

The Credit Agreement contains customary events of default for credit facilities of this type. Upon an event of default that is not cured or waived within any applicable cure periods, in addition to other remedies that may be available to the lenders, the obligations under the Credit Agreement may be accelerated, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral.

9. Commitments and Contingencies

Operating Leases

During the three months ended July 30, 2011 and July 31, 2010, we incurred aggregate rent expense under operating leases of $18.9 million and $19.9 million, respectively, including common area maintenance costs (CAM) of $3.8 million and $3.8 million, respectively, and excluding related real estate taxes of $2.9 million and $2.9 million, respectively. During the six months ended July 30, 2011 and July 31, 2010, we incurred aggregate rent expense under operating leases of $38.0 million and $39.6 million, respectively, including CAM of $7.5 million and $7.8 million, respectively, and excluding real estate taxes of $5.6 million and $5.6 million, respectively.

As of July 30, 2011, our minimum operating lease payment requirements, which include the predetermined fixed escalations of the minimum rentals and exclude contingent rental payments, CAM, real estate taxes, and the amortization of lease incentives for our operating leases totaled $534.3 million.

Legal Proceedings

We are, from time to time, involved in various legal proceedings incidental to the conduct of business. Actions filed against us from time to time include commercial, intellectual property infringement, customer and employment claims, including class action lawsuits alleging that we violated federal and state wage and hour and other laws. We believe that we have meritorious defenses to all lawsuits and legal proceedings currently pending against us. Though we will continue to vigorously defend such lawsuits and legal proceedings, we are unable to predict with certainty whether or not we will ultimately be successful. However, based on management’s evaluation, we believe that the resolution of these matters, taking into account existing contingency accruals and the availability of insurance and other indemnifications, will not materially impact our consolidated financial position, results of operations or cash flows.

On September 12, 2006, as amended on April 25, 2007, Brighton Collectibles, Inc. (Brighton) filed a complaint against us alleging, among other things, that we violated trade dress and copyright laws. On November 21, 2008, a jury in the District Court for the Southern District of California found us liable for copyright and trade dress infringement and a judgment was subsequently entered in the total amount of $8.0 million. We appealed the judgment and the court entered a temporary stay of execution pending the appeal. On December 12, 2008, as amended on September 17, 2009, Brighton filed another complaint against us in the United States District Court for the Southern District of California. The complaint alleged copyright infringement of three different Brighton designs. We settled both of these legal proceedings in July 2011.

Tax Contingencies

Our multi-channel business model subjects us to state and local taxes in numerous jurisdictions, including franchise, and sales and use tax. We collect these taxes in jurisdictions in which we have a physical presence. While we believe we have paid or accrued for all taxes based on our interpretation of applicable law, tax laws are complex and interpretations differ from state to state. In the past, we have been assessed additional taxes and penalties by various taxing jurisdictions, asserting either an error in our calculation or an

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interpretation of the law that differed from our own. It is possible that taxing authorities may make additional assessments in the future. In addition to taxes, penalties and interest, these assessments could cause us to incur legal fees associated with resolving disputes with taxing authorities.

Additionally, changes in state and local tax laws, such as temporary changes associated with “tax holidays” and other programs, require us to make continual changes to our collection and reporting systems that may relate to only one taxing jurisdiction. If we fail to update our collection and reporting systems in response to these changes, any over collection or under collection of sales taxes could subject us to interest and penalties, as well as private lawsuits and damage to our reputation. In the opinion of management, resolutions of these matters will not have a material impact on our consolidated financial position, results of operations or cash flows.

Other

We had non-cancelable inventory purchase commitments of approximately $176.5 million, $162.2 million and $207.0 million at July 30, 2011, January 29, 2011 and July 31, 2010, respectively. As of July 30, 2011, January 29, 2011 and July 31, 2010 we had $0.8 million, $0.8 million and $1.6 million, respectively, committed under our standby letter of credit related to the lease of our distribution center.

10. Co-Branded Credit Card Program

Deferred marketing fees and revenue sharing

The following table summarizes the deferred marketing fee and revenue sharing activity:

	Three Months Ended						Six Months Ended
	July 30, 2011			July 31, 2010			July 30, 2011			July 31, 2010
	(in thousands)
Deferred marketing fees and revenue sharing - beginning of period	$	9,796		$	11,738		$	10,309		$	12,364
Marketing fees received	1,287			987			2,353			2,241
Marketing fees recognized to revenue	(1,141		)	(1,288		)	(2,280		)	(2,728		)
Revenue sharing recognized to revenue	(440		)	(440		)	(880		)	(880		)
Deferred marketing fees and revenue sharing - end of period	9,502			10,997			9,502			10,997
Less — Current deferred marketing fees and revenue sharing	(4,358		)	(4,688		)	(4,358		)	(4,688		)
Long-term deferred marketing fees and revenue sharing	$	5,144		$	6,309		$	5,144		$	6,309

Sales Royalty

The amount of sales royalty recognized as revenue during the three months ended July 30, 2011 and July 31, 2010 was approximately $1.7 million and $1.8 million, respectively. During the six months ended July 30, 2011 and July 31, 2010, sales royalty revenue recognized was approximately $3.4 million and $3.8 million, respectively.

11. Segment Reporting

The following table provides certain financial data for the retail and direct segments as well as reconciliations to the condensed consolidated financial statements:

	Three Months Ended						Six Months Ended
	July 30, 2011			July 31, 2010			July 30, 2011			July 31, 2010
	(in thousands)
Net sales (a):
Retail	$	142,244		$	195,399		$	277,506		$	371,409
Direct	39,165			58,099			83,698			125,175
Net sales	$	181,409		$	253,498		$	361,204		$	496,584
Segment operating income (loss):
Retail	$	(6,683	)	$	17,764		$	(13,512	)	$	33,588
Direct	3,344			11,725			12,202			30,195
Total segment operating income (loss)	(3,339		)	29,489			(1,310		)	63,783
Corporate and other	(23,814		)	(27,300		)	(55,339		)	(57,143		)
Income (loss) from operations	$	(27,153	)	$	2,189		$	(56,649	)	$	6,640

(a) There were no sales between the retail and direct segments during the reported periods.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains various statements regarding our current initiatives, financial position, results of operations, cash flows, operating and financial trends and uncertainties, as well as certain forward-looking statements regarding our future expectations. When used in this discussion, words such as “anticipate,” “believe,” “estimate,” “expect,” “could,” “may,” “will,” “should,” “plan,” “predict,” “potential,” and similar expressions are intended to identify such forward-looking statements. Our forward-looking statements are based on our current expectations and are subject to numerous risks and uncertainties. As such, our actual future results, performance or achievements may differ materially from the results expressed in, or implied by, our forward-looking statements. Please refer to our “Risk Factors” in our most recent Annual Report on Form 10-K for the fiscal year ended January 29, 2011, as well as in this Quarterly Report on Form 10-Q and other reports we file with the Securities and Exchange Commission. The forward-looking statements in this Quarterly Report are as of the date such report is filed with the Securities and Exchange Commission, and we assume no obligation to update our forward-looking statements or to provide periodic updates or guidance.

Overview

We encourage you to read this Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the accompanying condensed consolidated financial statements and related notes. References to a fiscal year are to the calendar year in which the fiscal year begins.

Executive Summary

Net sales decreased to $181.4 million for the three months ended July 30, 2011 compared to $253.5 million for the three months ended July 31, 2010. This 28.4 percent decrease in net sales was primarily driven by a decrease in comparable premium retail store sales(1) of 30.6 percent in our retail segment and a decrease in our direct segment sales of 32.6 percent.

Gross profit for the three months ended July 30, 2011 was $45.3 million, or 25.0 percent of net sales, compared with $84.7 million, or 33.4 percent of net sales, for the three months ended July 31, 2010. The decline in gross profit margin was primarily due to the deleveraging of fixed retail occupancy expenses given the lower sales, and to a lesser extent, lower merchandise margins as a result of higher promotional activity partially offset by slightly higher initial mark up (IMU).

Selling, general and administrative expenses (SG&A) for the three months ended July 30, 2011 were $70.0 million, or 38.6 percent of net sales, compared with $82.5 million, or 32.6 percent of net sales, for the three months ended July 31, 2010. The decrease in SG&A dollars was primarily due to lower variable and fixed operating expenses, lower employee related expenses, and lower marketing expenses compared to the same period last year.

Net loss for the three months ended July 30, 2011 was $27.7 million, or $0.30 per share, compared with net income of $1.5 million, or $0.02 per diluted share, for the three months ended July 31, 2010. Net loss for the three months ended July 30, 2011 included a non-cash asset impairment charge of $2.4 million, or $0.03 per share, primarily associated with eighteen underperforming stores.

We ended the second quarter of fiscal 2011 with $31.5 million in cash and cash equivalents compared to $72.3 million at the end of the second quarter of fiscal 2010. Working capital was $58.3 million at the end of the second quarter of fiscal 2011 compared to $114.6 million at the end of the second quarter of fiscal 2010. Premium retail store inventory per square foot, including retail inventory in our distribution center, declined approximately 16.0 percent compared to the second quarter of fiscal 2010. Total inventory decreased 8.5 percent to $152.2 million at the end of the second quarter of fiscal 2011 from $166.4 million at the end of the second quarter of fiscal 2010.

(1) We define comparable premium retail stores as those stores in which the gross square footage has not changed by more than 20 percent in the previous 16 months and which have been open for at least 16 consecutive months (provided that store has been considered comparable for the entire quarter) without closure for seven consecutive days or moving to a different temporary or permanent location. Due to the extensive promotions that occur as part of the opening of a premium store, we believe waiting 16 months rather than 12 months to consider a store to be comparable provides a better view of the growth pattern of the premium retail store base. The calculation of comparable store sales varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation.

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Company Initiatives

We have announced a long-term strategic operating plan, which is designed to return to sales growth and increase our profitability. The key elements of the plan involve a merchandising revitalization plan, a comprehensive brand marketing campaign, and a retail store optimization program.

Our merchandising revitalization initiatives are designed to improve our product offering, which involves creating collections with a modern fashion sensibility in vibrant colors, prints, and patterns that offer enhanced versatility and address more aspects of our customers’ lifestyle needs. We are focused on balancing our category investments and improving inventory productivity. Significant elements of the new merchandising philosophy are reflected in the Company’s fall assortment, and will be even more fully incorporated into collections for holiday 2011 and fiscal 2012.

Our brand marketing campaign aims to restore Coldwater Creek’s brand value, which includes television, national magazine advertising, and online media. The campaign, which will be introduced this fall and holiday, is designed to increase brand engagement, traffic, and conversion with a focus on expanding the reach to a broader segment of our target demographic.

Our plan to improve overall financial performance includes a continued aggressive focus on expense and inventory management as well as a retail store optimization program. The retail store optimization program involves the closure of approximately 35 to 45 underperforming stores over the next two years, including approximately 15 stores in fiscal 2011, and will be achieved through a staged approach based primarily on early termination rights and natural lease expirations. In total, over the last twelve months ended July 30, 2011, these 35 to 45 stores generated approximately $45 million to $55 million in annualized sales. When completed, we expect these actions to generate approximately $15 million to $20 million in annualized expense reductions and approximately $8 million to $12 million in annualized improvement in pre-tax operating results based on results over the most recent twelve month period.

Outlook

During the second quarter we continued to experience weak sales and traffic trends driven by a disappointing response to our merchandise assortments. We view 2011 as a transitional year for our brand as we work to reinvigorate our product offering and reconnect with our customers. We continue to expect sales trends to remain challenging for us as we progress through this transition. In addition, weakness in consumer spending persists as a result of continued uncertain macroeconomic conditions reflected in reduced incomes and asset values, high unemployment and deterioration in the housing market. We believe these conditions continue to have a negative impact on our sales, gross margin and operating performance. As long as these conditions continue, we expect that consumer spending will remain subdued. However, over the past several months, we have implemented several new processes for merchandising, design and inventory management which we believe will position Coldwater Creek for improved performance. In the second half of fiscal 2011, we believe we will begin to see the collective efforts of our new design and merchandising teams reflected in our fall and holiday assortments, which will be supported by a comprehensive marketing campaign focused on driving traffic and conversion.

We remain committed to disciplined management of our expenses and inventory and expect to reduce SG&A year-over-year by $20 million to $25 million for fiscal 2011, inclusive of the $15.3 million we have achieved in the first half of fiscal 2011. Additionally, inventory has been planned conservatively for the balance of the year. As such, we expect total inventory to decline in the low double-digit percent range on a year-over-year basis at the end of the third quarter.

In terms of sourcing costs, we continue to believe that we will experience a reduction of 100 to 200 basis point impact on our IMU for the second half of the year.

If we are in a loss position for a quarter or the year, we do not expect to generate any significant federal income tax benefit due to our valuation allowance, and to possibly incur a small expense as a result of various state taxation requirements.

We believe we have sufficient cash and liquidity, including our revolving line of credit that we may draw on from time to time, to fund our operations throughout the remainder of the year. Although we expect our year-end cash balance to be down from last year, we expect to realize some stabilization in our cash outflow as we start to see the effects of tighter inventory buys. We also believe we have the potential for margin improvements in the second half of fiscal 2011, which will further benefit our liquidity unless we experience further deterioration in our business trends.

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Results of Operations

Comparison of the Three Months Ended July 30, 2011 with the Three Months Ended July 31, 2010:

	Three Months Ended
	July 30, 2011			% of net sales		July 31, 2010			% of net sales		$ change			% change
	(in thousands, except per share data)
Net sales:
Retail	$	142,244		78.4	%	$	195,399		77.1	%	$	(53,155	)	(27.2	)%
Direct	39,165			21.6		58,099			22.9		(18,934		)	(32.6	)
	181,409			100.0		253,498			100.0		(72,089		)	(28.4	)
Cost of sales	136,088			75.0		168,762			66.6		(32,674		)	(19.4	)
Gross profit	45,321			25.0		84,736			33.4		(39,415		)	(46.5	)
Selling, general and administrative expenses	70,029			38.6		82,547			32.6		(12,518		)	(15.2	)
Loss on asset impairments	2,445			1.4		—			0.0		2,445			*
Income (Loss) from operations	(27,153		)	(15.0	)	2,189			0.9		(29,342		)	*
Interest, net, and other	(455		)	(0.2	)	(189		)	(0.1	)	(266		)	140.7
Income (Loss) before income taxes	(27,608		)	(15.2	)	2,000			0.8		(29,608		)	*
Income tax provision	71			—		531			0.2		460			(86.6	)
Net income (loss)	$	(27,679	)	(15.2	)%	$	1,469		0.6	%	$	(29,148	)	*
Net earnings (loss) per common share- Diluted	$	(0.30	)			$	0.02
Effective income tax rate	(0.3		)%			26.6		%

* Percentage comparisons for changes between positive and negative or zero values are not considered meaningful.

Net Sales

The $53.2 million decrease in retail segment net sales for the three months ended July 30, 2011 as compared with the three months ended July 31, 2010 is primarily due to a decrease in comparable premium retail store sales of 30.6 percent, reflecting a 20.1 percent decline in traffic and a 386 basis point decline in our conversion rate while our average unit retail increased 2.8 percent. Also contributing to the decrease in retail segment net sales during the three months ended July 30, 2011 as compared with the three months ended July 31, 2010 was a $2.3 million decrease in net sales from outlet stores.

Direct segment net sales decreased $18.9 million, or 32.6 percent, during the three months ended July 30, 2011 as compared to the three months ended July 31, 2010. The decrease is primarily the result of a decrease in order volume of 30.3 percent, which is attributed to a decrease in overall consumer response to our product assortment. In addition, we experienced a shift in clearance sales from our direct segment to our retail segment with the introduction of our full-time sale section. Direct segment net sales were also negatively impacted by a decrease of $1.8 million in shipping revenue during the three months ended July 30, 2011 as compared to the three months ended July 31, 2010.

Gross Profit

The gross profit margin decreased by 8.4 percentage points during the three months ended July 30, 2011 as compared to the three months ended July 31, 2010. The gross profit margin was negatively impacted by the deleveraging of fixed expenses of 7.4 percentage points, primarily retail occupancy expenses, given the lower sales. The gross profit margin was also negatively impacted by 1.0 percentage point due to lower merchandise margins primarily as a result of higher promotional activity partially offset by slightly higher IMU.

Selling, General and Administrative Expenses

SG&A decreased $12.5 million during the three months ended July 30, 2011 as compared with the three months ended July 31, 2010, primarily driven by decreased variable and fixed operating expenses, employee related expenses, and marketing expenses. The decrease in marketing expenses was primarily due to lower catalog expenses. As a percent of net sales, SG&A increased by 6.0 percentage points in the three months ended July 30, 2011 as compared with the three months ended July 31, 2010, primarily driven by the lower net sales, partially offset by our continued efforts to control expenses.

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Loss on asset impairments

During the three months ended July 30, 2011, we recorded an impairment charge of $2.4 million related to certain long-lived assets, primarily premium store leasehold improvements. We did not have any impairment charges during the three months ended July 31, 2010.

Income (Loss) from Operations

We evaluate the performance of our operating segments based upon segment operating income, as shown below, along with segment net sales:

	Three Months Ended
	July 30, 2011			% of Segment Sales		July 31, 2010			% of Segment Sales		% Change
	(dollars in thousands)
Segment operating income (loss):
Retail	$	(6,683	)	(4.7	)%	$	17,764		9.1	%	*
Direct	3,344			8.5		11,725			20.2		(71.5	)%
Total segment operating income (loss)	(3,339		)			29,489					*
Unallocated corporate and other	(23,814		)			(27,300		)			(12.8	)
Income (loss) from operations	$	(27,153	)			$	2,189				*

* Percentage comparisons for changes between positive and negative values are not considered meaningful.

Retail segment operating income (loss) rate expressed as a percent of retail segment sales for the three months ended July 30, 2011 as compared with the three months ended July 31, 2010 decreased by 13.8 percentage points. The retail segment operating rate was negatively impacted by a 6.6 and 4.7 percentage point decline due to the deleveraging of fixed occupancy expenses and employee related expenses, respectively. In addition, impairment charges related to certain long-lived premium store assets decreased the retail segment operating rate by 1.6 percentage points. Decreased merchandise margins attributable to higher promotional activity, partially offset by higher IMU, also contributed to a 1.0 percentage point decrease to the retail segment operating rate.

Direct segment operating income rate expressed as a percent of direct segment sales for the three months ended July 30, 2011 as compared with the three months ended July 31, 2010 decreased by 11.7 percentage points. Decreased merchandise margins attributable to increased clearance activity, partially offset by higher IMU, contributed to a 6.7 percentage point decrease to the direct segment operating rate. The direct segment operating income rate was also negatively impacted by a 2.3 and 2.0 percentage point decline due to the deleveraging of marketing expenses and employee related expenses, respectively.

Unallocated corporate and other expenses decreased $3.5 million for the three months ended July 30, 2011 as compared to the three months ended July 31, 2010, due to decreases in corporate support costs and employee related expenses.

Interest, Net and Other

The increase in interest, net and other for the three months ended July 30, 2011 as compared with the same period in the prior year is primarily the result of lower other income.

Provision for Income Taxes

The provision for income taxes primarily reflects the continuing impact of the valuation allowance against our deferred tax assets.

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Comparison of the Six Months Ended July 30, 2011 with the Six Months Ended July 31, 2010:

	Six Months Ended
	July 30, 2011			% of net sales		July 31, 2010			% of net sales		$ change			% change
	(in thousands, except per share data)
Net sales:
Retail	$	277,506		76.8	%	$	371,409		74.8	%	$	(93,903	)	(25.3	)%
Direct	83,698			23.2		125,175			25.2		(41,477		)	(33.1	)
	361,204			100.0		496,584			100.0		(135,380		)	(27.3	)
Cost of sales	261,270			72.3		320,943			64.6		(59,673		)	(18.6	)
Gross profit	99,934			27.7		175,641			35.4		(75,707		)	(43.1	)
Selling, general and administrative expenses	153,708			42.6		169,001			34.0		(15,293		)	(9.0	)
Loss on asset impairments	2,875			0.8		—			0.0		2,875			*
Income (Loss) from operations	(56,649		)	(15.7	)	6,640			1.3		(63,289		)	*
Interest, net, and other	(702		)	(0.2	)	(436		)	(0.1	)	(266		)	61.0
Income (Loss) before income taxes	(57,351		)	(15.9	)	6,204			1.3		(63,555		)	*
Income tax provision	356			0.1		2,413			0.5		(2,057		)	(85.2	)
Net income (loss)	$	(57,707	)	(16.0	)%	$	3,791		0.8	%	$	(61,498	)	*
Net earnings (loss) per common share- Diluted	$	(0.62	)			$	0.04
Effective income tax rate	(0.6		)%			38.9		%

* Percentage comparisons for changes between positive and negative or zero values are not considered meaningful.

Net Sales

The $93.9 million decrease in retail segment net sales for the six months ended July 30, 2011 as compared with the six months ended July 31, 2010 is primarily due to a decrease in comparable premium retail store sales of 29.1 percent, reflecting a 17.6 percent decline in traffic and a 294 basis point decline in our conversion rate, partially offset by an increase in our average unit retail of 1.6 percent. Also contributing to the decrease in retail segment net sales during the six months ended July 30, 2011 as compared with the six months ended July 31, 2010 was a $5.0 million decrease in net sales from outlet stores.

Direct segment net sales decreased $41.5 million, or 33.1 percent, during the six months ended July 30, 2011 as compared to the six months ended July 31, 2010. The decrease is primarily the result of a decrease in order volume of 33.2 percent, which is attributed to a decrease in overall consumer response to our product assortment. In addition, we experienced a shift in clearance sales from our direct segment to our retail segment with the introduction of our full-time sale section. Direct segment net sales were also negatively impacted by a decrease of $4.0 million in shipping revenue during the six months ended July 30, 2011 as compared to the six months ended July 31, 2010.

Gross Profit

The gross profit margin decreased by 7.7 percentage points during the six months ended July 30, 2011 as compared to the six months ended July 31, 2010. The gross profit margin was negatively impacted by the deleveraging of fixed expenses of 6.4 percentage points, primarily retail occupancy expenses, given the lower sales. The gross profit margin was also negatively impacted by 1.3 percentage points due to lower merchandise margins primarily as a result of higher markdowns.

Selling, General and Administrative Expenses

SG&A decreased $15.3 million during the six months ended July 30, 2011 as compared with the six months ended July 31, 2010, primarily driven by decreased variable and fixed operating expenses and employee related expense. As a percent of net sales, SG&A increased by 8.6 percentage points in the six months ended July 30, 2011 as compared with the six months ended July 31, 2010, primarily driven by lower net sales, partially offset by our continued efforts to control expenses.

Loss on asset impairments

During the six months ended July 30, 2011, we recorded impairment charges of $2.9 million related to certain long-lived assets, primarily premium store leasehold improvements. We did not have any impairment charges during the six months ended July 31, 2010.

Income (Loss) from Operations

We evaluate the performance of our operating segments based upon segment operating income, as shown below, along with segment net sales:

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	Six Months Ended
	July 30, 2011			% of Segment Sales		July 31, 2010			% of Segment Sales		% Change
	(dollars in thousands)
Segment operating income (loss):
Retail	$	(13,512	)	(4.9	)%	$	33,588		9.0	%	*
Direct	12,202			14.6		30,195			24.1		(60.0	)%
Total segment operating income (loss)	(1,310		)			63,783					*
Unallocated corporate and other	(55,339		)			(57,143		)			(3.2	)
Income (loss) from operations	$	(56,649	)			$	6,640				*

* Percentage comparisons for changes between positive and negative values are not considered meaningful.

Retail segment operating income (loss) rate expressed as a percent of retail segment sales for the six months ended July 30, 2011 as compared with the six months ended July 31, 2010 decreased by 13.9 percentage points. The retail segment operating rate was negatively impacted by a 7.2 and 4.8 percentage point decline due to the deleveraging of fixed occupancy expenses and employee related expenses, respectively. Decreased merchandise margins attributable to higher promotional discounts and markdowns, partially offset by higher IMU, also contributed to a 1.6 percentage point decrease to the retail segment operating rate.

Direct segment operating income rate expressed as a percent of direct segment sales for the six months ended July 30, 2011 as compared with the six months ended July 31, 2010 decreased by 9.5 percentage points. The direct segment operating income rate was negatively impacted by a 4.5 and 1.9 percentage point decline due to the deleveraging of marketing expenses and employee related expenses, respectively. Decreased merchandise margins attributable to increased clearance activity, partially offset by higher IMU, also contributed to a 2.7 percentage point decrease to the direct segment operating rate.

Unallocated corporate and other expenses decreased $1.8 million for the six months ended July 30, 2011 as compared to the six months ended July 31, 2010, due to decreases in corporate support costs and employee related expenses, partially offset by increases in marketing expenses.

Interest, Net and Other

The increase in interest, net and other for the six months ended July 30, 2011 as compared with the same period in the prior year is primarily the result of lower other income.

Provision for Income Taxes

The provision for income taxes primarily reflects the continuing impact of the valuation allowance against our deferred tax assets.

Seasonality

As with many apparel retailers, our net sales, results of operations, liquidity and cash flows have fluctuated, and will continue to fluctuate, as a result of a number of factors, including the following:

· the composition, size and timing of various merchandise offerings;

· the timing and number of premium retail store openings and closings;

· the timing and number of promotions;

· the timing and number of catalog mailings;

· customer response to merchandise offerings, including the impact of economic and weather-related influences, the actions of competitors and similar factors;

· the ability to accurately estimate and accrue for merchandise returns and the cost of obsolete inventory;

· market price fluctuations in critical materials and services, including paper, production, postage and telecommunications costs;

· the timing of merchandise shipping and receiving, including any delays resulting from labor strikes or slowdowns, adverse weather conditions, health epidemics or national security measures; and

· shifts in the timing of important holiday selling seasons relative to our fiscal quarters, including Valentine’s Day, Easter, Mother’s Day, Thanksgiving and Christmas.

Our results continue to depend materially on sales and profits from the November and December holiday shopping season. In anticipation of traditionally increased holiday sales activity, we incur certain significant incremental expenses, including the hiring of

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a substantial number of temporary employees to supplement our existing workforce. Additionally, as gift items and accessories are more prominently represented in the November and December holiday season merchandise offerings, we typically expect, absent offsetting factors, to realize higher consolidated gross margins and earnings in the second half of our fiscal year.

Liquidity and Capital Resources

During fiscal 2009, we entered into a credit facility with Wells Fargo Bank, which is secured primarily by our inventory and credit card receivables and provides a revolving line of credit of up to $70.0 million, with subfacilities for the issuance of up to $70.0 million in letters of credit and swingline advances of up to $10.0 million. The actual amount of credit that is available from time to time under the revolving line of credit is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts that may be required by the lender. On May 16, 2011, we entered into an Amended and Restated Credit Agreement (the Credit Agreement) with Wells Fargo Bank, which, among other things, extended the maturity date to May 16, 2016, provided a $15.0 million term loan due on May 16, 2016, and granted the lenders a security interest in the Company’s Sandpoint, Idaho corporate offices and certain other assets. The amount available under the $70 million revolving line of credit remains unchanged; however, we now have a future option to request an increase in the amount of the revolving line of credit for an additional $15 million, which if granted would result in a total of $85 million available, exclusive of the term loan. As of July 30, 2011, we had $22.6 million in letters of credit issued resulting in $47.4 million available for borrowing under our revolving line of credit.

Pursuant to the Credit Agreement, borrowings under the revolving line of credit will generally accrue interest at a rate ranging from 1.00% to 2.50% (determined according to the average unused availability under the credit facility (the Availability)) over a reference rate of, at the Company’s election, either LIBOR or a base rate (the Reference Rate). Letters of credit issued under the revolving line of credit will accrue interest at a rate ranging from 1.50% to 2.50% (determined according to the Availability). Commitment fees accrue at a rate ranging from 0.375% to 0.50% (determined according to the Availability), which is assessed on the average unused portion of the credit facility maximum amount. The term loan accrues interest at a rate of 6.00% over the Reference Rate, with an interest rate of 6.19% as of July 30, 2011.

Net cash used in operating activities was $31.8 million during the six months ended July 30, 2011 compared to $3.8 million provided by operations during the six months ended July 31, 2010. The $35.6 million decrease in cash flows from operating activities resulted primarily from decreased net sales and gross profits, partially offset by lower operating expenses and improvements in managing our operating assets and liabilities, including decreased payments on inventory purchases.

Cash outflows from investing activities principally consisted of capital expenditures, which totaled $3.7 million during the six months ended July 30, 2011 compared to $15.2 million during the six months ended July 31, 2010. Capital expenditures during the six months ended July 30, 2011 primarily related to premium retail leasehold improvements. Capital expenditures during the six months ended July 31, 2010 primarily related to premium retail leasehold improvements and furniture and fixtures, and the expansion of our IT and distribution infrastructure.

Cash inflows from financing activities were $14.6 million during the six months ended July 30, 2011 compared with cash outflows of $1.1 million during the same period last year. The cash inflows during the six months ended July 30, 2011 were primarily derived from the proceeds from our $15.0 million term loan obtained in the second quarter of fiscal 2011. Cash outflows during the six months ended July 31, 2010 were derived from payments on our capital lease and other financing obligations.

As a result of net operating losses over the previous four fiscal quarters, our working capital has decreased to $58.3 million at July 30,

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2011 from $81.8 million at January 29, 2011 and $114.6 million at July 31, 2010. Our current ratio was 1.37 at July 30, 2011 compared with 1.50 at January 29, 2011 and 1.66 at July 31, 2010. Primarily as a result of ongoing operating losses, we may, from time to time, utilize our revolving line of credit. If we borrow under our revolving line of credit, our interest expense will increase.

We plan to limit new premium retail store openings in fiscal 2011 to five stores to which we have previously committed and to close 14 to 16 stores. As a result, our capital expenditures in 2011 will be substantially lower than our capital expenditures in fiscal 2010. Capital expenditures for the full year in fiscal 2011 are expected to be between $9.0 million and $11.0 million. At this time we do not anticipate opening any new premium retail store locations in fiscal 2012, but will continue to evaluate real estate opportunities to improve the efficiency of our store base, including the potential of relocating stores to more favorable locations.

Contractual Obligations

We have included a summary of our Contractual Obligations as of January 29, 2011 in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011. As of July 30, 2011, our minimum operating lease payment requirements, which include the predetermined fixed escalations of the minimum rentals and exclude contingent rental payments, common area maintenance costs, real estate taxes and the amortization of lease incentives, totaled $534.3 million. We also had future non-cancelable inventory purchase commitments of $176.5 million at July 30, 2011. During the first quarter of fiscal 2011, we resolved $2.3 million in unrecognized tax benefits as a result of completing our Internal Revenue Service examination for fiscal years 2009, 2008, 2007, and 2006. There have been no other material changes in contractual obligations outside the ordinary course of business since January 29, 2011.

Critical Accounting Policies and Estimates

Preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on historical results as well as future expectations. Actual results could vary from our estimates and assumptions. The description of critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in our financial instruments represents the potential loss arising from adverse changes in interest rates. We have not been materially impacted by fluctuations in foreign currency exchange rates as substantially all of our business is transacted in, and is expected to continue to be transacted in, U.S. dollars or U.S. dollar-based currencies. We do not enter into financial instruments for trading purposes and have not used, and currently do not anticipate using, any derivative financial instruments.

As of July 30, 2011, we had outstanding debt of $15.0 million under our variable rate term loan. The impact of a hypothetical 10 percent adverse change in interest rates for the term loan would have resulted in an immaterial amount of additional expense for the six months ended July 30, 2011.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our Chairman, President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of July 30, 2011. Based on that evaluation, our Chairman, President and Chief Executive Officer and Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of July 30, 2011.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the second quarter of fiscal 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the following risk factors which could materially affect our business, financial condition or future results. We have updated the following risk factors to reflect changes during the six months ended July 30, 2011 we believe to be material to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011 filed with the Securities and Exchange Commission. Other risks that we face are more fully described in our Annual Report on Form 10-K and in other reports we file with the Securities and Exchange Commission.

Additional risks and uncertainties that are not currently known or currently deemed immaterial may also adversely affect the business, financial condition, or future results of the Company.

We must successfully gauge fashion trends and changing consumer preferences.

Forecasting consumer demand for our merchandise is difficult given the nature of changing fashion trends and consumer preferences that are difficult to predict and can vary by season and from one geographic region to another. The global specialty retail business fluctuates according to changes in consumer preferences dictated, in part, by fashion and season. In addition, our merchandise assortment differs in each seasonal flow and at any given time our assortment may not resonate with our customers. On average, we begin the design process for apparel nine to ten months before merchandise is available to consumers, and we typically begin to make purchase commitments four to eight months in advance. These lead times make it difficult for us to respond quickly to changes in demand for our products. To the extent we misjudge the market for our merchandise or the products suitable for local markets, our sales will be adversely affected and the markdowns required to move the resulting excess inventory will adversely affect our results of operations.

We view 2011 as a transitional year for our brand as we implement a merchandising revitalization program to improve our product offering, which involves creating collections with a modern fashion sensibility in vibrant colors, prints, and patterns that offer enhanced versatility and address more aspects of our customers’ lifestyle needs. If these changes do not resonate with our customers, our sales, gross margins, and results of operations may be adversely affected.

Our inventory levels and merchandise assortments fluctuate seasonally, and at certain times of the year, such as during the holiday season, we maintain higher inventory levels and are particularly susceptible to risks related to demand for our merchandise. If the demand for our merchandise were to be lower than expected, causing us to hold excess inventory, we would be forced to further discount merchandise, which reduces our gross margins, results of operations and operating cash flows. If we were to carry low levels of inventory and demand is stronger than we anticipate, we may not be able to reorder merchandise on a timely basis to meet demand, which may adversely affect sales and customer satisfaction.

Economic conditions have impacted consumer spending and may adversely affect our financial position and results of operations.

Consumer spending patterns are highly sensitive to the economic climate and overall consumer confidence. Consumer spending continues to be impacted by the high levels of unemployment, declines in home values, restrictions on the availability of credit,

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volatile energy and food costs, and other negative economic conditions, nationally and regionally. We continue to be affected by challenging macroeconomic conditions which are evidenced in our business by a highly competitive retail selling environment and low retail store traffic. We believe these conditions will continue for the remainder of fiscal 2011 and for the foreseeable future. If consumer spending on apparel and accessories continues to decline and demand for our products decreases further, we may be forced to further discount our merchandise or sell it at a loss, which would adversely affect revenues, gross margins, earnings and operating cash flows. In addition, higher costs for transportation, raw materials, labor, insurance and healthcare, and other negative economic factors may adversely affect our cost of sales and operating expenses.

We may be unable to improve the value of our brand.

Our success is driven by the value of the Coldwater Creek brand. We are planning to execute a comprehensive marketing campaign to restore Coldwater Creek’s brand value, which includes television, national magazine advertising, and online media. The campaign, which will be introduced this fall and holiday, is designed to increase brand engagement and brand trial with a focus on expanding the reach to a broader segment of our target demographic. There can be no assurances that these initiatives will be successful in improving the brand’s perception. The value of the brand is largely dependant on the success of our design, merchandise assortment, and our ability to provide a consistent, high quality customer experience. However, if we are not able to improve our brand perception, we may not fully realize the benefits of any improvements to our merchandise assortment and customer experience. Deterioration of the value of our brand may adversely affect our business and results of operations.

Our revolving line of credit contains borrowing base and other provisions that may restrict our ability to access capital when needed.

The distress in the financial markets has resulted in extreme volatility in securities prices and diminished liquidity and credit availability, which may adversely affect our liquidity. Additionally, if our cash flows from operating activities do not improve substantially compared to recent periods, we may, from time to time, utilize our revolving line of credit. If we borrow under our revolving line of credit, our interest expense will increase. Although we currently do not have any borrowings under our $70 million secured revolving line of credit, we currently use it for letters of credit which reduces the amount available for borrowings. As of July 30, 2011, we had $22.6 million in letters of credit issued resulting in $47.4 million available for borrowing under our revolving line of credit. The actual amount of credit that is available from time to time under our revolving line of credit is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts that may be determined at the discretion of the lender. Consequently, it is possible that, should we need to borrow under our revolving line of credit, it may not be available in full. Additionally, our credit facility contains covenants related to capital expenditure levels and minimum inventory book value, and other customary matters. Our failure to comply with the covenants, terms and conditions of our credit facility could cause the revolving line of credit not to be available to us.

Access to additional financing from the capital markets may be limited.

Even though we have availability under our revolving line of credit, we may need to raise additional capital to fund our operations, particularly if our cash flows from operating activities do not improve substantially compared to recent periods. The sale of additional equity securities or convertible debt securities could result in dilution to our stockholders. If we incur new debt, our interest expense will increase and we may be subject to additional covenants that would restrict our operations. Newly issued securities may have rights, preferences and privileges that are senior or otherwise superior to those of our common stock. There is no assurance that equity or debt financing will be available in amounts or on terms acceptable to us. Without sufficient liquidity, we will be more vulnerable to further downturns in our business or the general economy, we may not be able to react to changes in our business or to take advantage of opportunities as they arise and we could be forced to curtail our operations, and our business could be seriously harmed.

We have incurred substantial financial commitments and fixed costs related to our retail stores that we will not be able to recover if our stores are not successful, resulting in impairment charges that will adversely affect our results of operations.

The success of an individual store location depends largely on the success of the lifestyle center, shopping mall or outlet center where the store is located, and may be influenced by changing customer demographic and consumer spending patterns. These factors cannot be predicted with complete accuracy. We are required to make long-term financial commitments when leasing retail store locations, and to incur substantial fixed costs for each store’s design, leasehold improvements, fixtures and management information systems, it could be costly for us to close those stores that do not prove successful.

The testing of our retail stores’ long-lived assets for impairment requires us to make significant estimates about our future performance and cash flows that are inherently uncertain. These estimates can be affected by numerous factors, including changes in economic conditions, our results of operations, and competitive conditions in the industry. These factors, along with fluctuations and changes from estimates in sales, gross margins, operating cash flows and earnings, may affect the timing and the fair value estimates

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used in our testing of long-lived assets, which may result in impairment charges that will adversely affect our results of operations.

We depend on key vendors for timely and effective sourcing and delivery of our merchandise.

We may experience difficulties in obtaining sufficient manufacturing capacity from our vendors. We generally maintain non-exclusive relationships with multiple vendors that manufacture our merchandise. However, we have no contractual assurances of continued supply, pricing or access to new products, and any vendor could discontinue selling to us at any time. Moreover, a key vendor may become unable to supply our inventory needs due to capacity constraints, financial instability, or other factors beyond our control, or we could decide to stop using a vendor due to quality or other issues. If we were required to change vendors or if a key vendor were unable to supply desired merchandise in sufficient quantities on acceptable terms, particularly in light of current global economic conditions, we could experience delays in filling customer orders or delivering inventory to stores until alternative supply arrangements were secured. These delays could result in lost sales and a decline in customer satisfaction. The inability of key vendors to access credit and liquidity, or the insolvency of key vendors, could lead to their failure to deliver our merchandise, which would result in lost sales and lower customer satisfaction. Also, the inability of our vendors to access credit or concerns vendors or their lenders may have with our credit worthiness may cause them to extend less favorable terms to us, which could adversely affect our cash flows, margins and financial condition, as well as limit the availability under our credit facility. Additionally, delays by our vendors in supplying our inventory needs could cause us to incur more expensive air freight charges, which may adversely affect our margins.

We may not be able to maintain our listing on the NASDAQ, which may limit the ability of our shareholders to sell shares of our common stock.

Our common stock is currently listed on the Nasdaq Global Select Market and is trading at or near $1.00. We are required to meet specified financial requirements to maintain such listing, one of which is that we maintain a minimum closing price of at least $1.00 per share for our common stock. If we fail to maintain the $1.00 minimum closing price for 30 consecutive business days, we may be at risk of delisting. Upon receipt of a deficiency notice from Nasdaq we have 180 days to attempt to regain compliance, such as through a reverse stock split. If we do not regain compliance during this initial period, we may be eligible for an additional 180 day compliance period. To qualify, we would be required to transfer to the Nasdaq Capital Market, meet the listing requirements for that market (with the exception of the minimum closing price requirement) and present a plan to regain compliance with the $1.00 minimum closing price requirement. However, if it appears to the Nasdaq that we will not be able to cure the deficiency, or if we are otherwise not eligible, our common stock would be subject to delisting. While there is a right to appeal the Nasdaq’s determination to delist our common stock, there can be no assurance they would grant our request for continued listing.

We cannot be assured that we can maintain or would be successful in regaining compliance with the minimum price requirements in the future. Delisiting, 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 or secure financing. 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.

The stock price has fluctuated and may continue to fluctuate widely.

The market price for our common stock has fluctuated and has been 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, the size of catalog mailings and other marketing initiatives, the timing of retail store openings and closings or of important holiday seasons relative to our fiscal periods, seasonal effects on sales and various factors affecting the economy in general. In addition, stock markets have experienced a high level of price and volume volatility and market prices for the stock of many companies including ours, have experienced wide price fluctuations not necessarily related to their operating performance. The reported high and low sale prices of our common stock were $3.11 per share and $1.21 per share, respectively, during the first half of fiscal 2011. The fluctuation of the market price of our common stock may have a negative impact on our liquidity and access to capital. In addition, price volatility of our common stock may expose us to stockholder litigation which may adversely affect our financial condition, results of operations and cash flows.

We may be unable to successfully realize the benefits of our store optimization program.

We continue to believe that retail expansion will be a key driver for our long term growth. However, due to our recent business performance and our focus to improve financial results, we have completed an extensive review of the performance of our stores. Based on this review, we are launching a store optimization program, which involves the closure of approximately 35 to 45 underperforming stores over the next two years, including approximately 15 stores in fiscal 2011, and will be achieved through a staged approach based primarily on early termination rights and natural lease expirations. When completed, we expect to generate

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approximately $15 million to $20 million in annualized expense reductions and approximately $8 million to $12 million in annualized improvement in pre-tax operating results based on results over the most recent twelve month period. However, there can be no assurance that the store optimization program will realize the expected benefits. Any miscalculations or shortcomings we may make in the planning and implementation of the program may adversely affect our financial position, results of operations and cash flows. Additionally, the actual number and timing of store closures will depend on a number of factors that cannot be predicted, including among other things the future performance of individual stores and negotiations with our landlords.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. RESERVED

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

(A) Exhibits:

Exhibit Number		Description of Document
10.1*		Amended and Restated Credit Agreement dated May 16, 2011 between the Company and Wells Fargo Bank, National Association (as successor by merger to Wells Fargo Retail Finance, LLC) and Wells Fargo Credit, Inc. (Confidential treatment has been requested for certain portions of the Agreement)

10.2*		Severance and Change of Control Agreement between the Company and James A. Bell dated June 15, 2011

31.1*		Certification by Dennis C. Pence of periodic report pursuant to Rule 13a-14(a) or Rule 15d-14(a)

31.2*		Certification by James A. Bell of periodic report pursuant to Rule 13a-14(a) or Rule 15d-14(a)

32.1¡		Certification by Dennis C. Pence and James A. Bell pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS^		XBRL Instance

101.SCH^		XBRL Taxonomy Extension Schema

101.CAL^		XBRL Taxonomy Extension Calculation

101.DEF^		XBRL Taxonomy Extension Definition

101.LAB^		XBRL Taxonomy Extension Label

101.PRE^		XBRL Taxonomy Extension Presentation

* Filed electronically herewith.

¡ Furnished electronically herewith.

^ Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability under these sections.

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EXHIBIT INDEX

Exhibit Number		Description of Document
10.1*		Amended and Restated Credit Agreement dated May 16, 2011 between the Company and Wells Fargo Bank, National Association (as successor by merger to Wells Fargo Retail Finance, LLC) and Wells Fargo Credit, Inc. (Confidential treatment has been requested for certain portions of the Agreement)

10.2*		Severance and Change of Control Agreement between the Company and James A. Bell dated June 15, 2011

31.1*		Certification by Dennis C. Pence of periodic report pursuant to Rule 13a-14(a) or Rule 15d-14(a)

31.2*		Certification by James A. Bell of periodic report pursuant to Rule 13a-14(a) or Rule 15d-14(a)

32.1¡		Certification by Dennis C. Pence and James A. Bell pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS^		XBRL Instance

101.SCH^		XBRL Taxonomy Extension Schema

101.CAL^		XBRL Taxonomy Extension Calculation

101.DEF^		XBRL Taxonomy Extension Definition

101.LAB^		XBRL Taxonomy Extension Label

101.PRE^		XBRL Taxonomy Extension Presentation

* Filed electronically herewith.

¡ Furnished electronically herewith.

		Page
PART I. FINANCIAL INFORMATION		3

Item 1. Financial Statements (unaudited)		3

Condensed Consolidated Balance Sheets		3

Condensed Consolidated Statements of Operations		4

Condensed Consolidated Statements of Cash Flows		5

Notes to the Condensed Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 3. Quantitative and Qualitative Disclosures About Market Risk		20

Item 4. Controls and Procedures		20

PART II. OTHER INFORMATION		21

Item 1. Legal Proceedings		21

Item 1A. Risk Factors		21

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24

Item 3. Defaults Upon Senior Securities		24

Item 4. Reserved		24

Item 5. Other Information		24

Item 6. Exhibits		24

Signatures		25

Exhibit Index		26

	COLDWATER CREEK INC.

	By:	/s/ Dennis C. Pence
		Dennis C. Pence
		Chairman of the Board of Directors
		President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ James A. Bell
		James A. Bell
		Senior Vice-President and
		Chief Financial Officer
		(Principal Financial Officer and
		Principal Accounting Officer)