ST. LOUIS, Aug. 31 /PRNewswire-FirstCall/ -- CPI
Corp. (NYSE: CPY) today reported results for the fiscal 2010
second quarter ended July 24,
2010.
- Fiscal 2010 second quarter sales declined to $76.4 million from $81.4
million in the prior-year second quarter.
- Comparable same-store sales in the period, described herein,
decreased 8% versus the prior-year second quarter.
- Second-quarter PictureMe Portrait Studio® brand comparable
store sales decreased 5% quarter-over-quarter.
- Second-quarter Sears Portrait Studio brand comparable store
sales decreased 12% quarter-over-quarter.
- Second-quarter Adjusted EBITDA in fiscal 2010 declined to
$1.8 million versus $4.8 million in the prior-year second quarter
($2.7 million excluding a
non-recurring benefit in the prior year period of $2.1 million related to a shift in lab shipping
schedules).
- Second-quarter diluted EPS improved to a loss of
($0.25) per share in fiscal 2010
versus a loss of ($0.49) per share in
the prior-year second quarter.
- The Company has opened 149 Kiddie Kandids locations as of
August 30, 2010 and plans to open an
additional approximate 22 locations during its third
quarter.
- Effective August 30, 2010, the
Company entered into a new four-year, $105
million revolving credit facility to replace its existing
facility.
- The Company's Board has authorized a 1.0 million share open
market repurchase program.
"Despite experiencing top-line weakness in both our major brands
in our fiscal second quarter, historically our slowest period of
the year, we were pleased with our bottom line results and continue
to expect substantial earnings gains in fiscal 2010," said
Renato Cataldo, president and chief
executive officer. "We are making considerable progress on
our internal growth and productivity initiatives, the restarted
Kiddie Kandids operations are exceeding plan, and we are
well-positioned for the upcoming busy season."
Net sales for the second quarter decreased 6% to $76.4 million from the $81.4 million reported in the fiscal 2009 second
quarter. Excluding the negative impact of a net revenue
recognition change ($3.0 million) and
the positive impacts of net store openings ($2.7 million), foreign currency translation
($1.0 million), and other items
totaling $700,000, comparable
same-store sales decreased approximately 8%.
Net loss for the second quarter was ($1.8
million), or ($0.25) per
diluted share, compared with a net loss of ($3.4 million), or ($0.49) per diluted share, reported for the
second quarter of fiscal 2009. The reduction in net loss
year-over-year reflects the impact of cost reductions and
productivity improvements implemented throughout the organization,
as well as a reduction in other charges and impairments. In
addition, prior year second-quarter results included a nonrecurring
favorable net revenue recognition effect as a result of a change in
lab shipping schedules which benefited net earnings in the 2009
second quarter by approximately $0.20
per diluted share. Foreign currency translation effects and
the Kiddie Kandids studio operations did not have a material impact
on the Company's net earnings in the second quarter of 2010.
Net sales from the Company's PictureMe Portrait Studio® (PMPS)
brand, on a comparable same-store basis, excluding impacts of net
revenue recognition change, store closures, foreign currency
translation and other items totaling ($300,000), decreased 5% in the second quarter of
2010 to $39.0 million from
$41.1 million in the second quarter
of 2009. The decrease in PMPS sales performance for the
second quarter was the result of an 8% decrease in the number of
sittings, offset in part by a 3% increase in average sale per
customer sitting.
Net sales from the Company's Sears Portrait Studio (SPS) brand,
on a comparable same-store basis, excluding impacts of net revenue
recognition change, store closures, foreign currency translation
and other items totaling ($1.4
million), decreased 12% in the second quarter of 2010 to
$32.2 million from $36.4 million in the second quarter of 2009.
SPS sales performance for the second quarter was the result
of a decline of 8% and 4% in the number of sittings and average
sale per customer sitting, respectively, versus the prior-year
quarter.
The Kiddie Kandids studio operations contributed $3.1 million in net sales in the second quarter
of 2010, exceeding the Company's internal plan. The Company
has opened 149 Kiddie Kandids locations as of August 30, 2010, and plans to open an additional
approximate 22 locations in the third quarter.
Cost of sales, excluding depreciation and amortization expense,
declined to $5.8 million in the
second quarter of 2010, from $6.6
million in the second quarter of 2009. The decrease is
principally attributable to lower overall manufacturing production
levels, improved product mix and increased productivity from lab
consolidations.
Selling, general and administrative (SG&A) expense declined
to $68.9 million in the second
quarter of 2010 from $70.4 million in
the prior-year quarter, primarily due to reductions in studio
employment costs from improved scheduling, selected operating hour
reductions and studio closures, reduced advertising cost
attributable to more focused offers, and a decline in host
commission expense due to lower sales levels. Partially
offsetting these declines was an increase in employment expense
related to the Kiddie Kandids operations in the second quarter.
Depreciation and amortization expense was $4.4 million in the second quarter of 2010,
compared with $5.6 million in the
second quarter of 2009. Depreciation expense decreased as a
result of the full depreciation of certain assets acquired in
connection with the 2005 digital conversion of SPS and 2007
acquisition of PCA and the closure of certain PMPS locations
throughout fiscal 2009 and in the first half of 2010.
In the second quarter of 2010, the Company recognized a
$1.1 million credit in other charges
and impairments, compared with a $2.2
million charge in the second quarter of 2009. The
current quarter credit primarily relates to the gain on sale of the
Brampton, Ontario facility and an
early termination fee received from Walmart in relation to certain
early PMPS store closures, offset in part by costs incurred in
connection with the Kiddie Kandids asset acquisition. The
prior year charge primarily related to proxy contest fees, lab
closures and litigation costs.
Credit Facility
On August 30, 2010, the Company
entered into a new four-year, $105
million revolving credit agreement to replace the Company's
former facility. The new credit facility provides the Company
greater flexibility to pursue financial and strategic opportunities
to enhance shareholder value. As of August 30, 2010, the Company has $66.0 million outstanding under its new credit
facility.
Open Market Repurchase Program
On August 25, 2010, the Company’s
Board of Directors authorized a 1.0 million share open market
repurchase program. Purchases under the share repurchase
program may be made at the Company's discretion, subject to market
conditions, in the open market, in privately-negotiated
transactions or otherwise.
Preliminary Third Quarter Net Sales
The Company's preliminary net sales for the first five weeks of
the third quarter of fiscal 2010, on a comparable same-store
point-of-sale basis, excluding the impacts of the Kiddie Kandids
operations and foreign currency translation, declined approximately
7% compared with the corresponding period in the prior year.
PMPS and SPS net sales for the first five weeks of the third
quarter were -4% and -10%, respectively.
Conference Call/Webcast Information
The Company will host a conference call and audio webcast on
Tuesday, August 31, 2010, at
10:00 a.m. Central time to discuss
the financial results and provide a Company update. To
participate on the call, please dial 800-510-0146 or 617-614-3449
and reference passcode 44634546 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 83788727.
The replay will be available through September 14 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.
For more than 60 years, CPI Corp. (NYSE: CPY) has been dedicated
to helping customers conveniently create cherished photography
portrait keepsakes that capture a lifetime of memories.
Headquartered in St. Louis,
Missouri, CPI Corp. provides portrait photography services
at approximately 3,000 locations in North
America, principally in Sears, Walmart and Babies "R" Us
stores. CPI's conversion to a fully digital format allows its
studios to 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.
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, capital expenditures and
other similar statements, 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, Walmart and Toys "R" Us, the
approval of the Company's business practices and operations by
Sears, Walmart and Toys "R" Us, the termination, breach, limitation
or increase of the Company's expenses by Sears and Toys "R" Us
under the license agreements, or Walmart under the lease and
license agreements, customer demand for the Company's products and
services, the development and operation of the Kiddie Kandids
business, 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 24, 2010
|
|
July 25, 2009
|
|
July 24, 2010
|
|
July 25, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
76,414
|
|
$
81,377
|
|
$
171,913
|
|
$
174,844
|
|
|
|
|
|
|
|
|
|
|
Cost and expenses:
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive
of depreciation and
|
|
|
|
|
|
|
|
|
amortization shown
below)
|
5,844
|
|
6,605
|
|
12,366
|
|
13,610
|
|
Selling, general and
administrative expenses
|
68,880
|
|
70,435
|
|
142,701
|
|
145,543
|
|
Depreciation and
amortization
|
4,355
|
|
5,552
|
|
8,820
|
|
11,591
|
|
Other charges and
impairments
|
(1,052)
|
|
2,187
|
|
(756)
|
|
2,607
|
|
|
78,027
|
|
84,779
|
|
163,131
|
|
173,351
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
(1,613)
|
|
(3,402)
|
|
8,782
|
|
1,493
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
1,073
|
|
1,825
|
|
2,333
|
|
3,219
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
-
|
|
15
|
|
7
|
|
41
|
|
|
|
|
|
|
|
|
|
|
Other income (expense),
net
|
(51)
|
|
7
|
|
658
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax
provision (benefit)
|
(2,737)
|
|
(5,205)
|
|
7,114
|
|
(1,669)
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
(benefit)
|
(920)
|
|
(1,776)
|
|
2,391
|
|
(570)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
(1,817)
|
|
$
(3,429)
|
|
$
4,723
|
|
$
(1,099)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common
share - diluted
|
$
(0.25)
|
|
$
(0.49)
|
|
$
0.65
|
|
$
(0.16)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common
share - basic
|
$
(0.25)
|
|
$
(0.49)
|
|
$
0.65
|
|
$
(0.16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common and
|
|
|
|
|
|
|
|
|
common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
|
Diluted
|
7,319
|
|
7,005
|
|
7,249
|
|
6,977
|
|
|
|
|
|
|
|
|
|
|
Basic
|
7,319
|
|
7,005
|
|
7,244
|
|
6,977
|
|
|
|
|
|
|
|
|
|
CPI CORP.
|
|
ADDITIONAL CONSOLIDATED
OPERATING INFORMATION
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Weeks
|
Vs.
|
12 Weeks
|
|
24 Weeks
|
Vs.
|
24 Weeks
|
|
|
|
|
|
|
|
|
|
|
|
July 24, 2010
|
|
July 25, 2009
|
|
July 24, 2010
|
|
July 25, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
$
3,406
|
|
$
1,327
|
|
$
8,197
|
|
$
2,234
|
|
|
|
|
|
|
|
|
|
|
EBITDA is calculated as
follows:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
(1,817)
|
|
$
(3,429)
|
|
$
4,723
|
|
$
(1,099)
|
|
Income tax provision
(benefit)
|
(920)
|
|
(1,776)
|
|
2,391
|
|
(570)
|
|
Interest expense
|
1,073
|
|
1,825
|
|
2,333
|
|
3,219
|
|
Depreciation and
amortization
|
4,355
|
|
5,552
|
|
8,820
|
|
11,591
|
|
Other non-cash
charges
|
68
|
|
718
|
|
148
|
|
789
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1) & (5)
|
$
2,759
|
|
$
2,890
|
|
$
18,415
|
|
$
13,930
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (2)
|
$
1,793
|
|
$
4,839
|
|
$
17,043
|
|
$
16,070
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin (3)
|
3.61%
|
|
3.55%
|
|
10.71%
|
|
7.97%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
(4)
|
2.35%
|
|
5.95%
|
|
9.91%
|
|
9.19%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
$
2,759
|
|
$
2,890
|
|
$
18,415
|
|
$
13,930
|
|
EBITDA
adjustments:
|
|
|
|
|
|
|
|
|
Kiddie Kandids costs
|
700
|
|
-
|
|
900
|
|
-
|
|
Other transition related costs -
PCA Acquisition
|
(1,318)
|
|
261
|
|
(1,233)
|
|
397
|
|
Translation gain
|
125
|
|
-
|
|
(580)
|
|
-
|
|
Reserves for severance and
related costs
|
-
|
|
105
|
|
-
|
|
283
|
|
Proxy contest fees
|
-
|
|
977
|
|
-
|
|
977
|
|
Other
|
(473)
|
|
606
|
|
(459)
|
|
483
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
$
1,793
|
|
$
4,839
|
|
$
17,043
|
|
$
16,070
|
|
|
|
|
|
|
|
|
|
|
(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 24, 2010
|
|
July 25, 2009
|
|
July 24, 2010
|
|
July 25, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
$
2,759
|
|
$
2,890
|
|
$
18,415
|
|
$
13,930
|
|
Income tax (provision)
benefit
|
920
|
|
1,776
|
|
(2,391)
|
|
570
|
|
Interest expense
|
(1,073)
|
|
(1,825)
|
|
(2,333)
|
|
(3,219)
|
|
Adjustments for items not
requiring cash:
|
|
|
|
|
|
|
|
|
Deferred income
taxes
|
(936)
|
|
(1,912)
|
|
1,398
|
|
(537)
|
|
Deferred revenues and
related costs
|
56
|
|
(2,813)
|
|
662
|
|
814
|
|
Other, net
|
(754)
|
|
432
|
|
(97)
|
|
82
|
|
Decrease (increase) in current
assets
|
754
|
|
(332)
|
|
156
|
|
(3,127)
|
|
Increase (decrease) in current
liabilities
|
(1,518)
|
|
(1,747)
|
|
(4,503)
|
|
(5,902)
|
|
Increase (decrease) in current
income taxes
|
(413)
|
|
(194)
|
|
342
|
|
(348)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from continuing
operations
|
$
(205)
|
|
$
(3,725)
|
|
$
11,649
|
|
$
2,263
|
|
|
|
|
|
|
|
|
|
CPI CORP.
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
JULY 24, 2010 AND JULY 25,
2009
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 24, 2010
|
|
July 25, 2009
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
7,961
|
|
$
15,052
|
|
Other current
assets
|
33,068
|
|
39,406
|
|
Net property and
equipment
|
33,348
|
|
42,386
|
|
Intangible
assets
|
59,876
|
|
61,590
|
|
Other assets
|
18,269
|
|
21,567
|
|
|
|
|
|
|
Total assets
|
$
152,522
|
|
$
180,001
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders'
equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
$
49,344
|
|
$
60,626
|
|
Long-term debt
obligations
|
53,985
|
|
88,458
|
|
Other
liabilities
|
34,932
|
|
30,122
|
|
Stockholders'
equity
|
14,261
|
|
795
|
|
|
|
|
|
|
Total liabilities and
stockholders'
|
|
|
|
|
equity
|
$
152,522
|
|
$
180,001
|
|
|
|
|
|
SOURCE CPI Corp.
Copyright . 31 PR Newswire