ST. LOUIS, April 21 /PRNewswire-FirstCall/ -- -- Aggressive
marketing strategy and positive impact from digital conversion of
PictureMe Portrait Studio(R) brand (PMPS) drive strong holiday
season in the fourth quarter -- Fourth-quarter PMPS net sales
increase 2% to $72.5 million from $70.8 million in the prior year.
PMPS net sales increased 6% excluding impacts of foreign currency
translation and store closures -- Fourth-quarter Sears Portrait
Studio brand (SPS) net sales decline 11% to $81.4 million from
$91.8 million in the prior year. SPS net sales decreased 10%
excluding impact of foreign currency translation -- Full-year sales
increase 9% to $462.5 million due to full-year contribution of PMPS
acquisition -- Full-year Adjusted EBITDA declines to $44.2 million
and loss per diluted share dips to ($1.18) as cost reductions and
productivity improvements mitigate impact of lower same-store
sales, as well as one-time charges and transitional expenses in
conjunction with integration and digital conversion of PMPS --
Company proactively amends Credit Agreement to bolster financial
flexibility in the current economic environment -- Sales and profit
trends have turned highly favorable in recent months, leading to an
optimistic outlook for both first quarter and full-year results CPI
Corp. (NYSE:CPY) today reported results for both the fourth quarter
and year ended February 7, 2009. "Despite a difficult general
economic environment, we concluded the year on a high note with a
relatively strong holiday season," said Renato Cataldo, President
and Chief Executive Officer. "More importantly, the successful
integration and digitization of the PMPS operations during the
course of fiscal 2008 positions us for improvements in earnings and
cash flow in 2009 and 2010 even if difficult general economic
conditions persist. We have driven considerable cost out of the
system, boosted productivity significantly in both sales and
production, and improved the customer experience." Fourth-quarter
2008 Results Net sales for the 13-week fiscal 2008 fourth quarter
ended February 7, 2009, decreased $8.7 million, or 5%, to $153.9
million from the $162.6 million reported in the 12-week fiscal 2007
fourth quarter. The Company also reported net earnings of $9.5
million, or $1.42 per diluted share, for the fiscal 2008 fourth
quarter, compared with $15.7 million, or $2.45 per diluted share,
reported for the fourth quarter of fiscal 2007. The additional
operating week in the 2008 fourth quarter resulted in approximately
$7.0 million of net sales but did not materially impact net income
or net income per diluted share. Declining foreign currency
exchange rates had a significant negative impact of approximately
$4.7 million on fourth-quarter 2008 net sales but did not
materially affect net income before tax. Net earnings were
negatively impacted in the fourth quarter of 2008 compared with
2007 as a result of increases in fees incurred in relation to the
settlement of the previous Sears license agreement of $3.4 million
and a nonrecurring 2007 reduction of $1.0 million attributable to a
change in the Company's vacation and sick pay policy. During the
fourth quarter of 2008, net sales from the Company's SPS brand
decreased $10.4 million, or 11%, to $81.4 million from the $91.8
million reported in the fourth quarter of 2007. The 2008
fourth-quarter SPS net sales performance was the result of a 13%
decline in average sale per customer sitting, offset in part by a
2% increase in the total number of sittings. The average sale
decline reflects a shift toward low-price package offers during the
quarter and lower conversion of higher-priced collection and
specialty product sales. The sittings results reflect relatively
strong trends in new customer acquisition and increasing loyalty
plan customer conversions. Additionally, the unfavorable foreign
exchange rates in the fourth quarter impacted net sales by
approximately $1.7 million. Net sales related to the Company's PMPS
brand increased $1.7 million, or 2%, in the fourth quarter of 2008
to $72.5 million from $70.8 million reported in the fourth quarter
of 2007. PMPS net sales performance for the fiscal 2008 fourth
quarter was the result of a significant 17% increase in average
sale per customer sitting, offset in part by an 11% decline in
total 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
instituted 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. Additionally, the unfavorable foreign exchange rates in
the fourth quarter impacted net sales by approximately $3.0
million. Costs and expenses were $135.8 million in the fourth
quarter of 2008, compared with $134.1 million in the fourth quarter
of 2007. Cost of sales, excluding depreciation and amortization
expense, was $11.4 million in the fourth quarter of 2008, compared
with $16.6 million in the fourth quarter of 2007. Cost of sales,
excluding depreciation and amortization expense, declined as a
result of reduced production levels, gains in manufacturing
productivity, eliminated film and shipping costs stemming from the
PMPS digital conversion, and decreased overhead costs with the
integration of the PMPS operations. Selling, general and
administrative (SG&A) expenses were $107.1 million for the
fourth quarter of 2008, compared with $105.3 million in the fourth
quarter of 2007. Excluding the impact of the additional 13th
operating week in the 2008 fourth quarter, SG&A expenses
declined by approximately $4.4 million. This decrease principally
reflects the elimination of duplicative costs in connection with
the PMPS integration. Depreciation and amortization increased
slightly to $7.8 million in the fourth quarter of 2008 from $7.7
million in the fourth quarter of 2007. On a comparable 12-week
basis, depreciation and amortization declined by approximately
$397,000. In the fourth quarter of 2008 and the fourth quarter of
2007, the Company recognized $9.5 million and $4.5 million,
respectively, in other charges and impairments associated with the
PMPS acquisition (which include severance costs, severance
accruals, cure costs related to contracts assumed and other
integration-related costs in connection with the acquisition) and
certain fees incurred in relation to the previous Sears license
agreement. Fiscal 2008 Results For the 53-week fiscal year ended
February 7, 2009, the Company reported that net sales increased
$39.1 million, or 9%, to $462.5 million from the $423.4 million
reported in the 52-week fiscal year 2007 as a result of the
inclusion of the full 53 weeks of PMPS operations in 2008 compared
with only the 34-week period of ownership in 2007. A net loss was
also reported for the 53-week fiscal 2008 of $7.7 million, or
($1.18) per diluted share, compared with net earnings of $3.6
million, or $0.56 per diluted share, reported for the 52-week
fiscal 2007. Declining foreign currency exchange rates had a
significant negative impact of approximately $4.6 million on fiscal
2008 net sales but did not materially affect net income before tax.
Net earnings were negatively impacted in the 53-week fiscal year
2008 compared with the 52-week fiscal year 2007 as a result of
increases in fees incurred in relation to the settlement of the
previous Sears license agreement of $5.0 million, digital training
and travel costs related to the PMPS digital conversion of $5.4
million and a nonrecurring 2007 reduction of $3.9 million
attributable to a change in the Company's vacation and sick pay
policy. Net sales from the Company's SPS brand decreased $32.3
million, or 12%, to $242.4 million in fiscal 2008 from the $274.7
million reported in fiscal 2007. The fiscal 2008 SPS net sales
performance was the result of a 7% decline in sittings and a 5%
decline in average sale per customer sitting. Additionally, the
unfavorable foreign exchange rates in fiscal 2008 impacted net
sales by approximately $1.1 million. Net sales related to the
Company's PMPS brand increased $71.4 million, or 48%, in fiscal
2008 to $220.1 million from $148.7 million reported in fiscal 2007
due to the additional 19 weeks' sales included in fiscal 2008 and
the fact that a purchase accounting adjustment related to deferred
revenue at the date of acquisition resulted in a one-time decrease
in net sales of $8.2 million in fiscal 2007. On a comparable
same-store basis, PMPS net sales for fiscal 2008 represent an
approximate 8% decrease in net sales versus the comparable period
of the prior year (net sales from the period February 4, 2007, to
June 8, 2007, are not reported in the Company's historical
results). This sales performance resulted from an approximate 20%
decrease in sittings, offset in part by an approximate 15% increase
in average sale per customer sitting. Additionally, the unfavorable
foreign exchange rates in fiscal 2008 impacted net sales by
approximately $3.5 million. Costs and expenses were $463.6 million
in fiscal 2008, compared with $408.7 million in fiscal 2007. Cost
of sales, excluding depreciation and amortization expense, was
$41.2 million in fiscal 2008, compared with $45.3 million in fiscal
2007. The overall decrease in cost of sales, excluding depreciation
and amortization expense, is attributable to decreased production
costs resulting from lower overall manufacturing production levels,
additional gains in manufacturing productivity, savings on film and
shipping costs that resulted directly from the PMPS digital
conversion, as well as decreased overhead costs as operations have
been further streamlined in connection with the PMPS acquisition
and digital conversion. Selling, general and administrative
(SG&A) expenses were $379.4 million for fiscal 2008, compared
with $328.4 million in fiscal 2007. The increase in fiscal 2008
SG&A costs is a result of the inclusion of the full 53 weeks of
PMPS operations in 2008, compared with only the 34-week period of
ownership in 2007, a $5.4 million increase in digital training and
travel costs related to the conversion of PMPS studios incurred
during the year and a nonrecurring 2007 reduction of $3.9 million
attributable to a change in the Company's vacation and sick pay
policy. These increases are offset in part by reductions in expense
due to the elimination of duplicate costs; streamlining of
operations related to the PMPS brand; more effective cost
management, particularly in the areas of employment and insurance;
reduced host sales commissions due to lower sales; reduced
marketing expense primarily due to the timing of promotional
programs for the busy season; and a one-time gain recorded in
relation to the settlement of certain supplemental employee
retirement plan payments. Depreciation and amortization increased
to $29.4 million in fiscal 2008 from $27.3 million in fiscal 2007.
The increase is attributable to the equipment purchased for the
digital rollout. This increase is offset in part by a decline in
depreciation as a result of certain assets, acquired in connection
both with the 2005 digital conversion of SPS and the 2007
acquisition of PCA, becoming fully depreciated. In fiscal 2008 and
fiscal 2007, the Company recognized $13.6 million and $7.7 million,
respectively, in other charges and impairments associated with the
PMPS acquisition (which include severance costs, severance
accruals, cure costs related to contracts assumed and other
integration-related costs in connection with the acquisition) and
certain fees incurred in relation to the previous Sears license
agreement. Net loss from discontinued operations was $961,000 in
fiscal 2008, compared with $441,000 in fiscal 2007. In the fourth
quarter of 2008, the Company decided to discontinue its Portrait
Gallery and E-Church operations in order to eliminate the
unprofitable operations. In fiscal 2007, the Company decided to
exit its United Kingdom operation. Credit Agreement Update
Effective April 16, 2009, the Company amended its Credit Agreement
with lenders to enhance financial flexibility. Significantly, the
amendment replaces preexisting minimum EBITDA and interest coverage
covenants with a fixed charge ratio test (i.e., EBITDA minus
capital expenditures to fixed charges) and tightens the leverage
ratio test (i.e., Funded Debt to EBITDA). Details of the amended
Credit Agreement will be available in the Company's Form 8-K, which
will be filed with the Securities & Exchange Commission on
April 21, 2009. "While we were in full compliance with all debt
covenants under our existing Credit Agreement, we felt it prudent
to proactively work with our lenders to bolster our financial
structure should the current challenging general economic
conditions worsen," said Cataldo. "As a part of this process, we
have also affirmed our current dividend policy in light of our
strong and improving cash flow position." The Company has a cash
balance of approximately $30.6 million at April 20, 2009, which it
believes is adequate, together with anticipated cash flow from
operations, to fund the Company's cash requirements for the
foreseeable future. Looking Ahead The Company's preliminary net
sales for the first 10 weeks of the first quarter, on a comparable
same-store basis and excluding the impact of foreign currency
translation, increased 2% compared with the comparable period in
the prior year. SPS net sales and sittings for the first 10 weeks
of the first quarter declined 10% and 8%, respectively, and PMPS
net sales increased for the first 10 weeks of the first quarter by
16% while sittings declined 14%. "Our favorable customer trends,
coupled with our continued strides in cost reduction and
productivity enhancement, make us optimistic about both
first-quarter and full-year earnings results despite the continuing
difficult economic environment," Cataldo said. "As we shift our
attention from the integration and digitization of the PMPS
business to additional growth, productivity and customer service
initiatives, we now believe we have the pieces in place for
sustained strong improvement in earnings and cash flow over the
next few years." The Company plans to host its 2009 annual meeting
of shareholders on July 8, 2009, starting at 9:00 a.m. Central
time. The annual meeting will be held at the Company's headquarters
in St. Louis. Shareholders of record as of May 9, 2009, will be
eligible to participate in the meeting. Conference Call/Webcast
Information The Company will host a conference call and audio
webcast on Tuesday, April 21, 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 866-730-5763 or 857-350-1587
and reference passcode 91028593 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 49905077. The
replay will be available through May 5 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 Wal-Mart 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 tries to identify 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 Wal-Mart, the approval of the
Company's business practices and operations by Sears and Wal-Mart,
the termination, breach or increase of the Company's expenses by
Sears under the license agreements, or Wal-Mart under the lease
agreements, customer demand for the Company's products and
services, the economic recession and resulting decrease in consumer
spending, compliance with the NYSE listing requirements,
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. Financial tables to follow . . . CPI
CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands
except per share amounts) -------- -------- -------- -------- 13
Weeks Vs. 12 Weeks 53 Weeks Vs. 52 Weeks -------- -------- --------
-------- Feb. 07, Feb. 02, Feb. 07, Feb. 02, 2009 2008 2009 2008
-------- -------- -------- -------- Net sales $153,929 $162,575
$462,548 $423,429 Cost and expenses: Cost of sales (exclusive of
depreciation and amortization shown below) 11,423 16,690 41,218
45,284 Selling, general and administrative expenses 107,110 105,277
379,372 328,419 Depreciation and amortization 7,758 7,652 29,432
27,291 Other charges and impairments 9,494 4,467 13,557 7,695 -----
----- ------ ----- 135,785 134,086 463,579 408,689 Income (loss)
from continuing operations 18,144 28,489 (1,031) 14,740 Interest
expense 2,393 5,278 9,147 10,652 Interest income 52 579 620 1,834
Other income (expense), net 131 127 190 175 --- --- --- --- Income
(loss) from continuing operations before income tax expense
(benefit) 15,934 23,917 (9,368) 6,097 Income tax expense (benefit)
6,093 8,116 (2,644) 2,080 ----- ----- ------ ----- Net income
(loss) from continuing operations 9,841 15,801 (6,724) 4,017 Net
loss from discontinued operations net of income tax benefit (327)
(72) (961) (441) ---- --- ---- ---- Net income (loss) $9,514
$15,729 ($7,685) $3,576 ====== ======= ======= ====== Net income
(loss) per common share -diluted From continuing operations $1.47
$2.46 ($1.03) $0.63 From discontinued operations (0.05) (0.01)
(0.15) (0.07) ----- ----- ----- ----- Net income (loss) - diluted
$1.42 $2.45 ($1.18) $0.56 ===== ===== ====== ===== Net income
(loss) per common share -basic From continuing operations $1.48
$2.47 ($1.03) $0.63 From discontinued operations (0.05) (0.01)
(0.15) (0.07) ----- ----- ----- ----- Net income (loss) - basic
$1.43 $2.46 ($1.18) $0.56 ===== ===== ====== ===== Weighted average
number of common and common equivalent shares outstanding: Diluted
6,682 6,434 6,510 6,416 Basic 6,641 6,409 6,510 6,391 CPI CORP.
ADDITIONAL CONSOLIDATED OPERATING INFORMATION (In thousands)
-------- -------- -------- -------- 13 Weeks Vs. 12 Weeks 53 Weeks
Vs. 52 Weeks -------- -------- -------- -------- Feb. 07, Feb. 02,
Feb. 07, Feb. 02, 2009 2008 2009 2008 Capital expenditures $4,969
$2,378 $36,074 $14,884 EBITDA is calculated as follows: Net income
(loss) from continuing operations $9,841 $15,801 ($6,724) $4,017
Income tax expense (benefit) 6,093 8,116 (2,644) 2,080 Interest
expense 2,393 5,278 9,147 10,652 Depreciation and amortization
7,758 7,652 29,432 27,291 Other non-cash charges 801 - 1,437 79 ---
-- ----- -- EBITDA (1) & (5) $26,886 $36,847 $30,648 $44,119
======= ======= ======= ======= Adjusted EBITDA (2) $36,380 $41,314
$44,205 $51,814 EBITDA margin (3) 17.47% 22.66% 6.63% 10.42%
Adjusted EBITDA margin (4) 23.63% 25.41% 9.56% 12.24% (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 $26,886 $36,847 $30,648 $44,119 EBITDA adjustments: Sears
contract settlement costs 5,859 2,500 7,527 2,500 Cost associated
with acquisition 771 981 2,121 2,817 Reserves for severance and
related costs 1100 678 2,046 2,035 Impairment charges 739 249 739
256 Other 1,025 59 1,124 87 ----- -- ----- -- Adjusted EBITDA
$36,380 $41,314 $44,205 $51,814 ======= ======= ======= ======= (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:
-------- -------- -------- -------- 13 Weeks Vs. 12 Weeks 53 Weeks
Vs. 52 Weeks -------- -------- -------- -------- Feb. 07, Feb. 02,
Feb. 07, Feb. 02, 2009 2008 2009 2008 EBITDA $26,886 $36,847
$30,648 $44,119 Income tax (expense) benefit (6,093) (8,116) 2,644
(2,080) Interest expense (2,393) (5,278) (9,147) (10,652)
Adjustments for items not requiring cash: Deferred income taxes
6,607 6,793 (3,146) 1,455 Deferred revenues and related costs
(7,441) (7,546) (7,720) 2,655 Impairment (recovery) and related
obligations of preferred security interest - - - - Other, net 1,193
3,869 4,050 9,675 Decrease (increase) in current assets 12,637
11,952 8,716 563 Increase (decrease) in current liabilities (5,989)
(11,057) (12,674) (4,864) Increase (decrease) in current income
taxes (268) 1,370 (708) (1,001) ------- ------- ------- -------
Cash flows from continuing operations $25,139 $28,834 $12,663
$39,870 ======= ======= ======= ======= CPI CORP. CONDENSED
CONSOLIDATED BALANCE SHEETS FEBRUARY 07, 2009 AND FEBRUARY 02, 2008
(In thousands) FEB. 07, FEB. 02, 2009 2008 Assets Current assets:
Cash and cash equivalents $23,665 $59,177 Other current assets
37,815 33,658 Net property and equipment 50,887 56,280 Intangible
assets 61,664 62,956 Other assets 16,562 24,446 ------ ------ Total
assets $190,593 $236,517 ======== ======== Liabilities and
stockholders' equity Current liabilities $55,010 $83,051 Long-term
debt obligations 102,316 103,022 Other liabilities 32,432 33,470
Stockholders' equity 835 16,974 --- ------ Total liabilities and
stockholders' equity $190,593 $236,517 ======== ========
DATASOURCE: CPI Corp. CONTACT: Jane Nelson, CPI Corp.,
+1-314-231-1575 Web Site: http://www.cpicorp.com/
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