ST. LOUIS, Sept. 1 /PRNewswire-FirstCall/ -- -- Comparable
same-store sales, excluding impacts of revenue deferral
adjustments, foreign currency translation, loyalty program revenue
deferral and store closures, decreased 8% versus the prior-year
second quarter. -- Second-quarter PictureMe Portrait Studio brand
comparable store sales, as adjusted, increased 7% year-over-year
due, in large part, to the successful integration and digital
conversion of the acquired studios -- Second-quarter Sears Portrait
Studio brand comparable store sales, as adjusted, decreased 20%
year-over-year -- Second-quarter Adjusted EBITDA increased to $4.5
million versus $2.9 million in the prior-year period. --
Second-quarter diluted EPS improved to a loss of ($0.49) compared
with a loss of ($0.56) a year ago reflecting the impact of cost
reductions and productivity improvements implemented throughout the
organization. EPS in the quarter was significantly affected by
special charges in connection with the recently completed proxy
contest and litigation costs. -- Company entered into a new
six-year license agreement with Sears Canada, effective August 19,
2009. Under the new agreement, the Company will convert all
remaining Sears Canada film studios to an all-digital format. CPI
Corp. (NYSE:CPY) today reported results for the second quarter
ended July 25, 2009. "We continue to see positive results from our
digital platform conversion, which we completed in the third
quarter of last year. We have also successfully reduced our costs
by over 11% since last year's second quarter reflecting anticipated
benefits from our integration process as well as strong overall
cost containment," said Renato Cataldo, president and chief
executive officer. "Although difficult economic conditions continue
to pressure results, we are pleased with our progress on several
longer-term initiatives, and we continue to improve upon the
Company's sales and performance management processes, including our
customer acquisition and retention programs." Net sales for the
fiscal 2009 second quarter decreased $8.2 million, or 9%, to $81.4
million from the $89.6 million reported in the 2008 second quarter.
Excluding impacts of net revenue recognition change of $3.0
million, foreign currency translation ($1.8 million), revenue
deferral related to positive response to the Company's loyalty
programs ($1.5 million), store closures ($1.7 million) and other
net adjustments of $300,000, comparable same-store sales decreased
$6.5 million or 8%. Net sales from the Company's PictureMe Portrait
Studio brand (PMPS), on a comparable same-store basis, excluding
impacts of net revenue recognition change, foreign currency
translation, loyalty program revenue deferral, store closures and
other items, totaling ($2.3 million), increased 7% in the second
quarter of 2009 to $42.6 million from $39.8 million reported in the
second quarter of 2008. PMPS sales performance for the second
quarter was the result of an approximate 25% increase in average
sale per customer sitting, offset in part by an approximate 14%
decline in the number of sittings. The Company attributes its
increase in average sale per customer sitting primarily to
customers' positive response to the new offerings made possible by
the recently completed digital conversion and the implementation of
new sales and performance management processes. The Company
believes the sittings decline reflects the difficult economic
environment, which has especially pressured customer demand in
lower income categories. During the second quarter of 2009, net
sales from the Company's Sears Portrait Studio brand (SPS), on a
comparable same-store basis, excluding impacts of net revenue
recognition change, foreign currency translation, loyalty program
revenue deferral, store closures and other items, totaling
$600,000, was $37.3 million, a decrease of 20% from $46.6 million
reported in the second quarter of 2008. SPS sales performance for
the second quarter was the result of declines in the number of
sittings and sales per sitting of approximately 19% and 1%,
respectively. The Company believes the decline in SPS brand sales
reflects the difficult economic environment which pressured
sittings volumes (particularly in the off-season) and led to an
especially pronounced reduction in walk-in business not tied to the
Company's direct marketing programs. The Company believes declines
have been mitigated in part by improving execution of the Company's
customer outreach and loyalty programs. The Company also reported a
net loss of $3.4 million, or ($0.49) per diluted share, for the
fiscal 2009 second quarter, versus a net loss of $3.6 million, or
($0.56) per diluted share, reported for the second quarter of
fiscal 2008. EPS in the quarter was significantly affected by
special charges in connection with the recently completed proxy
contest of $977,000 and litigation costs of $536,000.
Second-quarter Adjusted EBITDA increased to $4.5 million versus
$2.9 million in the prior-year period. The improvements in net
income and Adjusted EBITDA year-over-year include the impact of
cost reductions and productivity improvements implemented
throughout the organization. Costs and expenses were $84.8 million
in the second quarter of 2009, down significantly from the $93.9
million recorded in the second quarter of 2008. Cost of sales,
excluding depreciation and amortization expense, was $6.7 million
in the second quarter of 2009, compared with $8.9 million in the
second quarter of 2008. The decrease is principally attributable to
lower overall manufacturing production levels, improved product
mix, increased manufacturing productivity, the elimination of film
and related shipping costs stemming from the PMPS digital
conversion, and decreased overhead costs resulting from the
integration of the PMPS operations. Selling, general and
administrative (SG&A) expenses were $70.3 million for the
second quarter of 2009, compared with $78.1 million in the second
quarter of 2008. The decrease in SG&A expenses primarily
relates to lower studio employment costs due to scheduling
improvements and selected operating hour reductions; fiscal 2008
nonrecurring costs associated with the PMPS digital conversion;
elimination of duplicative costs in connection with the PMPS
integration; favorable foreign exchange rate translation; and
reduced workers' compensation expense due to improved claims
management. These decreases were offset in part by increases in
higher average hourly studio rates and increased sales incentives
in connection with new studio and field initiatives. Depreciation
and amortization expense was $5.6 million in the second quarter of
2009, unchanged from a year ago. Depreciation expense increased as
a result of the digital equipment purchased for the PMPS digital
conversion throughout fiscal 2008; however, it was equally offset
by a reduction in expense related to the streamlining of
manufacturing facilities and closure of unprofitable studios. In
the second quarter of 2009, the Company recognized $2.2 million in
other charges and impairments, compared with $1.3 million
recognized in the second quarter of 2008. The current-year charges
are primarily associated with the recently completed proxy contest,
certain PMPS integration charges, including severance and lab
closure costs, and litigation costs. The prior-year charges are
primarily associated with litigation costs, certain fees incurred
in connection with the settlement of the previous Sears license
agreement, and certain PMPS integration charges, including
severance and lab closure costs. In the second quarter of 2009, the
Company made a voluntary prepayment of $5.0 million of outstanding
principal of the debt. Additionally, the Company applied proceeds
of approximately $1.0 million in the second quarter of 2009 from
the sale of the Charlotte, North Carolina warehouse to the
outstanding principal of the debt in connection with certain
mandatory prepayment requirements under its credit agreement.
Company Enters Into New Six-Year License Agreement with Sears
Canada Effective August 19, 2009, the Company entered into a new
six-year license agreement with Sears Canada, pursuant to which the
Company will operate professional portrait studios in approximately
110 Sears locations in Canada. The terms of the agreement provide
greater operating flexibility than the previous contract. As a
result of this new agreement, CPI Corp. will convert all remaining
Sears Canada film studios to an all-digital format by the end of
the 2009 third quarter. "We are pleased to continue our
relationship with Sears Canada, which has been a mutually rewarding
partnership over many years," said Cataldo. "By implementing our
proven digital model within this network of high-quality stores and
leveraging the additional operating flexibility afforded by our new
agreement, we expect to improve significantly the operating
contribution of our Canadian operations." Third-Quarter Preliminary
Sales Update The Company's preliminary net sales for the first five
weeks of the third quarter, on a comparable same-store
point-of-sale basis, excluding the impacts of foreign currency
translation, decreased 6% compared with the corresponding period in
the prior year. PMPS and SPS net sales for the first five weeks of
the third quarter were +10% and -20%, respectively. Conference
Call/Webcast Information The Company will host a conference call
and audio webcast on Tuesday, September 1, 2009, at 10:00 a.m.
Central time to discuss the financial results and provide a Company
update. To participate on the call, please dial 800-706-7745 or
617-614-3472 and reference passcode 43794844 at least five minutes
before start time. The webcast can be accessed on the Company's own
site at http://www.cpicorp.com/ as well as
http://www.earnings.com/. To listen to a live broadcast, please go
to these websites at least 15 minutes prior to the scheduled start
time in order to register, download, and install any necessary
audio software. A replay will be available on the above websites as
well as by dialing 888-286-8010 or 617-801-6888 and providing
passcode 54803967. The replay will be available through September
15 by phone and for 30 days on the Internet. CPI Corp. uses the
Investor Relations page of its website at http://www.cpicorp.com/
to make information available to its investors and the public. You
can sign up to receive e-mail alerts whenever the Company posts new
information to the website. About CPI Corp. CPI Corp. has been
dedicated to helping families conveniently create cherished
photography portrait keepsakes that capture a lifetime of memories
for more than 60 years. CPI Corp. provides portrait photography
services in approximately 3,000 locations, principally in Sears and
Walmart stores. As the first in the category to convert to a fully
digital format, CPI Corp. studios offer unique posing options,
creative photography selections, a wide variety of sizes and an
unparalleled assortment of enhancements to customize each portrait
- all for an affordable price. CPI Corp. is based in St. Louis and
traded on the New York Stock Exchange (ticker: CPY).
Forward-Looking Statements The statements contained in this press
release that are not historical facts are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, and involve risks and uncertainties. The
Company identifies forward-looking statements by using words such
as "preliminary," "plan," "expect," "looking ahead," "anticipate,"
"estimate," "believe," "should," "intend" and other similar
expressions. Management wishes to caution the reader that these
forward-looking statements, such as the Company's outlook for
portrait studios, net income, future cash requirements, cost
savings, compliance with debt covenants, valuation allowances,
reserves for charges and impairments and capital expenditures, are
only predictions or expectations; actual events or results may
differ materially as a result of risks facing the Company. Such
risks include, but are not limited to: the Company's dependence on
Sears and Walmart, the approval of the Company's business practices
and operations by Sears and Walmart, the termination, breach,
limitation or increase of the Company's expenses by Sears under the
license agreements, or Walmart under the lease and license
agreements, customer demand for the Company's products and
services, the economic recession and resulting decrease in consumer
spending, manufacturing interruptions, dependence on certain
suppliers, competition, dependence on key personnel, fluctuations
in operating results, a significant increase in piracy of the
Company's photographs, widespread equipment failure, compliance
with debt covenants, high level of indebtedness, implementation of
marketing and operating strategies, outcome of litigation and other
claims, impact of declines in global equity markets to pension plan
and impact of foreign currency translation. The risks described
above do not include events that the Company does not currently
anticipate or that it currently deems immaterial, which may also
affect its results of operations and financial condition. The
Company undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise. CPI CORP. CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands except per share amounts) --------
-------- -------- -------- 12 Weeks Vs 12 Weeks 24 Weeks Vs 24
Weeks -------- -------- -------- -------- July 25, July 19, July
25, July 19, 2009 2008 2009 2008 Net sales $81,377 $89,562 $174,844
$192,930 Cost and expenses: Cost of sales (exclusive of
depreciation and amortization shown below) 6,682 8,863 13,641
19,627 Selling, general and administrative expenses 70,358 78,118
145,512 160,706 Depreciation and amortization 5,552 5,565 11,591
13,058 Other charges and impairments 2,187 1,334 2,607 2,853
-------- -------- -------- -------- 84,779 93,880 173,351 196,244
Income (loss) from continuing operations (3,402) (4,318) 1,493
(3,314) Interest expense 1,928 1,366 3,418 2,887 Interest income
118 118 240 480 Other income (expense), net 7 (2) 16 3 --------
-------- -------- -------- Loss from continuing operations before
income tax benefit (5,205) (5,568) (1,669) (5,718) Income tax
benefit (1,776) (2,156) (570) (2,218) -------- -------- --------
-------- Net loss from continuing operations (3,429) (3,412)
(1,099) (3,500) Net loss from discontinued operations net of income
tax benefit 0 (189) 0 (357) -------- -------- -------- -------- Net
loss ($3,429) ($3,601) ($1,099) ($3,857) ======= ======= =======
======= Net loss per common share - diluted From continuing
operations ($0.49) ($0.53) ($0.16) ($0.54) From discontinued
operations 0.00 (0.03) 0.00 (0.06) -------- -------- --------
-------- Net loss - diluted ($0.49) ($0.56) ($0.16) ($0.60)
======== ======== ======== ======== Net loss per common share -
basic From continuing operations ($0.49) ($0.53) ($0.16) ($0.54)
From discontinued operations 0.00 (0.03) 0.00 (0.06) --------
-------- -------- -------- Net loss - basic ($0.49) ($0.56) ($0.16)
($0.60) ======== ======== ======== ======== Weighted average number
of common and common equivalent shares outstanding: Diluted 7,005
6,468 6,977 6,459 Basic 7,005 6,468 6,977 6,459 CPI CORP.
ADDITIONAL CONSOLIDATED OPERATING INFORMATION (In thousands)
-------- -------- -------- -------- 12 Weeks Vs. 12 Weeks 24 Weeks
Vs. 24 Weeks -------- -------- -------- -------- July 25, July 19,
July 25, July 19, 2009 2008 2009 2008 Capital expenditures $1,327
$13,689 $2,234 $24,988 EBITDA is calculated as follows: Net loss
from continuing operations ($3,429) ($3,412) ($1,099) ($3,500)
Income tax benefit (1,776) (2,156) (570) (2,218) Interest expense
1,928 1,366 3,418 2,887 Depreciation and amortization 5,552 5,565
11,591 13,058 Other non-cash charges 187 250 416 384 --------
-------- -------- -------- EBITDA (1) & (5) $2,462 $1,613
$13,756 $10,611 ======== ======== ======== ========= Adjusted
EBITDA (2) $4,462 $2,947 $15,947 $13,464 EBITDA margin (3) 3.03%
1.80% 7.87% 5.50% Adjusted EBITDA margin (4) 5.48% 3.29% 9.12%
6.98% (1) EBITDA represents net earnings from continuing operations
before interest expense, income taxes, depreciation and
amortization and other non-cash charges. EBITDA is included because
it is one liquidity measure used by certain investors to determine
a company's ability to service its indebtedness. EBITDA is
unaffected by the debt and equity structure of the company. EBITDA
does not represent cash flow from operations as defined by GAAP, is
not necessarily indicative of cash available to fund all cash flow
needs and should not be considered an alternative to net income
under GAAP for purposes of evaluating the Company's results of
operations. EBITDA is not necessarily comparable with
similarly-titled measures for other companies. (2) Adjusted EBITDA
is calculated as follows: EBITDA $2,462 $1,613 $13,756 $10,611
EBITDA adjustments: Proxy contest fees 977 - 977 - Litigation costs
566 544 428 763 Cost associated with acquisition 417 184 730 946
Contract negotiations/ Sears - 472 - 978 Other 40 134 56 166
-------- -------- -------- -------- Adjusted EBITDA $4,462 $2,947
$15,947 $13,464 ======== ======== ======== ========= (3) EBITDA
margin represents EBITDA, as defined in (1), stated as a percentage
of sales. (4) Adjusted EBITDA margin represents Adjusted EBITDA, as
defined in (2), stated as a percentage of sales. (5) As required by
the SEC's Regulation G, a reconciliation of EBITDA, a non-GAAP
liquidity measure, with the most directly comparable GAAP liquidity
measure, cash flow from continuing operations follows: --------
-------- -------- -------- 12 Weeks Vs. 12 Weeks 24 Weeks Vs. 24
Weeks -------- -------- -------- -------- July 25, July 19, July
25, July 19, 2009 2008 2009 2008 EBITDA $2,462 $1,613 $13,756
$10,611 Income tax benefit 1,776 2,156 570 2,218 Interest expense
(1,928) (1,366) (3,418) (2,887) Adjustments for items not requiring
cash: Deferred income taxes (1,912) (329) (537) (2,719) Deferred
revenues and related costs (2,813) (731) 814 (2,787) Other, net 409
19 (98) 1,014 Decrease (increase) in current assets (332) 2,174
(3,127) 3,950 Increase (decrease) in current liabilities (1,194)
(11,271) (5,349) (13,339) Increase (decrease) in current income
taxes (194) (362) (348) (692) -------- -------- -------- --------
Cash flows from continuing operations $(3,726) $(8,097) $2,263
$(4,631) ======== ======== ======== ======== CPI CORP. CONSOLIDATED
BALANCE SHEETS JULY 25, 2009 AND JULY 19, 2008 (In thousands) July
25, 2009 July 19, 2008 ------------- ------------- Assets Current
assets: Cash and cash equivalents $15,052 $19,277 Other current
assets 39,406 32,660 Net property and equipment 42,386 67,208
Intangible assets 61,590 64,946 Other assets 21,567 25,764
------------- ------------- Total assets $180,001 $209,855
============= ============= Liabilities and stockholders' equity
Current liabilities $60,626 $60,998 Long-term debt obligations
88,458 105,153 Other liabilities 30,122 32,271 Stockholders' equity
795 11,433 ------------- ------------- Total liabilities and
stockholders' equity $180,001 $209,855 ============= =============
DATASOURCE: CPI Corp. CONTACT: Jane Nelson of CPI Corp.,
+1-314-231-1575 Web Site: http://www.cpicorp.com/
Copyright