ST. LOUIS, Dec. 22 /PRNewswire-FirstCall/ -- CPI Corp. (NYSE:CPY)
today reported results for the third quarter ended November 14,
2009. -- Comparable same-store sales, excluding impacts of revenue
deferral adjustments, foreign currency translation, loyalty program
revenue deferral and store closures, decreased 7% versus the
prior-year third quarter. -- Third-quarter PictureMe Portrait
Studio® brand comparable store sales, as adjusted, increased 5%
year-over-year due, in large part, to the successful integration
and digital conversion of the acquired studios. -- Third-quarter
Sears Portrait Studio brand comparable store sales, as adjusted,
decreased 18% year-over-year. -- Third-quarter Adjusted EBITDA
improved to a loss of ($0.6) million versus a loss of ($4.8)
million in the prior-year period. -- Third-quarter diluted EPS
improved to a loss of ($0.97) compared with a loss of ($2.06) a
year ago reflecting the impact of cost reductions and productivity
improvements implemented throughout the organization. -- LTM
Adjusted EBITDA improved to $50.8 million from $46.7 million as of
the end of the last quarter "Overall, we are pleased with our third
quarter performance. Although we faced top-line challenges in the
quarter, which we are addressing, we significantly improved our
financial strength through our continuing productivity and cost
control efforts. We also made considerable progress on several key
longer-term initiatives to leverage our expanded digital platform.
During the quarter, even as we reduced costs by more than 12%
versus the prior year's third quarter, we improved customer service
levels and the overall value proposition to customers, refined and
expanded our customer acquisition and retention programs, and made
progress on efforts to develop additional revenue opportunities
through expanded services and targeting of additional customer
categories," said Renato Cataldo, president and chief executive
officer. Net sales for the fiscal 2009 third quarter decreased 7%,
to $107.3 million from the $115.7 million reported in the 2008
third quarter. Excluding the negative impacts of net revenue
recognition change of ($3.5) million and store closures of ($2.7)
million and the positive effect of a shift in the calendar end of
the quarter, comparable same-store sales decreased approximately
7%. The calendar adjustment accounts for the shift in the Veteran's
Day week from the fourth quarter in 2008 to the third quarter in
2009. Veteran's Day week initiates the holiday season for portrait
activity, and therefore, this adjustment was necessary to achieve
comparability. Net sales from PMPS, on a comparable same-store
basis, excluding impacts of net revenue recognition change, loyalty
program revenue deferral, store closures and other items, totaling
$0.9 million, increased 5% in the third quarter of 2009 to $60.7
million from $58.1 million in the third quarter of 2008. The
improved PMPS sales performance for the third quarter was the
result of an approximate 25% increase in average sale per customer
sitting, offset in part by an approximate 16% decline in the number
of sittings. During the third 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, loyalty program revenue deferral, store closures and other
items, totaling $1.1 million, was $52.9 million, a decrease of 18%
from $64.4 million in the third quarter of 2008. SPS sales
performance for the third quarter was the result of a decline of
approximately 19% in the number of sittings, offset slightly by an
increase of 2% in sales per sitting. The Company also reported a
net loss of ($6.8) million, or ($0.97) per diluted share, for the
fiscal 2009 third quarter, versus a net loss of ($13.3) million, or
($2.06) per diluted share, reported for the third quarter of fiscal
2008. Third-quarter adjusted EBITDA increased to a loss of ($0.6)
million versus ($4.8) million in the prior-year period. The
improvements in net income and adjusted EBITDA year-over-year
reflect the impact of cost reductions and productivity improvements
implemented throughout the organization. Costs and expenses were
$115.4 million in the third quarter of 2009, down significantly
from the $131.5 million recorded in the third quarter of 2008. The
Company remains committed to its cost-reduction initiatives and
will continue its financial discipline heading into 2010. Cost of
sales, excluding depreciation and amortization expense was $8.0
million in the third quarter of 2009, compared with $11.3 million
in the third quarter of 2008. The decrease is principally
attributable to lower overall manufacturing production levels,
improved productivity due to lab consolidations, 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 $99.9 million for the third
quarter of 2009, compared with $109.6 million in the third 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; reduced
employee insurance costs due to lower participation and claims
levels; reduced workers' compensation expense due to improved
claims management; and other cost reductions attributable to cost
control initiatives, operating efficiencies, lower sales levels and
positive exchange rate impacts. These decreases were offset in part
by increases in higher average hourly studio rates in connection
with new studio and field initiatives; an increase due to a change
in the estimate method used for recognizing advertising cost; and
increased host commissions under contractual arrangements.
Depreciation and amortization expense was $6.3 million in the third
quarter of 2009, compared with $8.6 million in the third quarter of
2008. Depreciation expense decreased due to a reduction in expense
related to the streamlining of manufacturing facilities as well as
certain assets from the SPS digital conversion that have become
fully depreciated in fiscal 2009; however, it was offset in part by
an increase as a result of the digital equipment purchased for the
PMPS digital conversion throughout fiscal 2008. In the third
quarter of 2009, the Company recognized $1.1 million in other
charges and impairments, compared with $2.1 million recognized in
the third quarter of 2008. The current-year charges are primarily
associated with lab closures. 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. As a result of the improving
financial strength of the Company and the early busy season
results, subsequent to the end of the third quarter, the Company
elected to make a voluntary debt prepayment of $19.0 million toward
the $7.0 million required amortization payment due on December 31,
2009 and a portion of its estimated excess cash flow payment due
May 7, 2010. Fourth-Quarter Preliminary Sales Update The Company's
preliminary net sales for the first five weeks of the fourth
quarter, on a comparable same-store point-of-sale basis, excluding
the impacts of foreign currency translation, decreased 3% compared
with the corresponding period in the prior year. PMPS and SPS net
sales for the first five weeks of the fourth quarter were +5% and
-9%, respectively. Sales comparisons to the prior year have
improved in each successive week of the fourth quarter leading up
to the holiday, moving from -10% in the first week of the quarter
to +5% in the most recent week. Conference Call/Webcast Information
The Company will host a conference call and audio webcast on
Tuesday, December 22, 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 800-901-5259 or 617-786-4514 and reference
passcode 84576601 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 11175376. The
replay will be available through January 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. 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 and Walmart 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 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. Tables to follow: CPI CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per
share amounts) 16 Weeks Vs. 16 Weeks 40 Weeks Vs. 40 Weeks --------
-------- -------- -------- November November November November 14,
2009 8, 2008 14, 2009 8, 2008 Net sales $107,286 $115,688 $282,130
$308,619 Cost and expenses: Cost of sales (exclusive of
depreciation and amortization shown below) 8,032 11,288 21,643
31,412 Selling, general and administrative expenses 99,940 109,551
245,480 269,761 Depreciation and amortization 6,320 8,616 17,913
21,673 Other charges and impairments 1,144 2,093 3,751 4,946 -----
----- ----- ----- 115,436 131,548 288,787 327,792 Income (loss)
from continuing operations (8,150) (15,860) (6,657) (19,173)
Interest expense 2,542 3,866 5,961 6,753 Interest income 130 87 370
567 Other income (expense), net 236 56 253 59 --- --- --- --- Loss
from continuing operations before income tax benefit (10,326)
(19,583) (11,995) (25,300) Income tax benefit (3,524) (6,508)
(4,094) (8,727) ------ ------ ------ ------ Net loss from
continuing operations (6,802) (13,075) (7,901) (16,573) Net loss
from discontinued operations net of income tax benefit - (266) -
(625) --- ---- --- ---- Net loss ($6,802) ($13,341) ($7,901)
($17,198) ======= ======== ======= ======== Net loss per common
share - diluted From continuing operations ($0.97) ($2.02) ($1.13)
($2.56) From discontinued operations 0.00 (0.04) 0.00 (0.10) ----
----- ---- ----- Net loss - diluted ($0.97) ($2.06) ($1.13) ($2.66)
====== ====== ====== ====== Net loss per common share - basic From
continuing operations ($0.97) ($2.02) ($1.13) ($2.56) From
discontinued operations 0.00 (0.04) 0.00 (0.10) ---- ----- ----
----- Net loss - basic ($0.97) ($2.06) ($1.13) ($2.66) ======
====== ====== ====== Weighted average number of common and common
equivalent shares outstanding: Diluted 7,004 6,479 6,988 6,467
Basic 7,004 6,479 6,988 6,467 CPI CORP. CONSOLIDATED BALANCE SHEETS
NOVEMBER 14, 2009 AND NOVEMBER 8, 2008 (In thousands) November 14,
2009 November 8, 2008 ----------------- ---------------- Assets
Current assets: Cash and cash equivalents $8,286 $8,176 Other
current assets 55,170 50,439 Net property and equipment 37,759
63,424 Intangible assets 61,108 62,561 Other assets 18,973 22,944
------ ------ Total assets $181,296 $207,544 ======== ========
Liabilities and stockholders' equity Current liabilities $86,437
$76,268 Long-term debt obligations 75,458 104,866 Other liabilities
25,994 32,618 Stockholders' equity (6,593) (6,208) ------ ------
Total liabilities and stockholders' equity $181,296 $207,544
======== ======== CPI CORP. ADDITIONAL CONSOLIDATED OPERATING
INFORMATION (In thousands) 16 Weeks Vs. 16 Weeks 40 Weeks Vs. 40
Weeks -------- -------- -------- -------- November November
November November 14, 2009 8, 2008 14, 2009 8, 2008 Capital
expenditures $2,274 $6,210 $4,508 $31,198 EBITDA is calculated as
follows: Net loss from continuing operations ($6,802) ($13,075)
($7,901) ($16,573) Income tax benefit (3,524) (6,508) (4,094)
(8,727) Interest expense 2,542 3,866 5,961 6,753 Depreciation and
amortization 6,320 8,616 17,913 21,673 Other non-cash charges 180
253 596 637 --- --- --- --- EBITDA (1) & (5) ($1,284) ($6,848)
$12,475 $3,763 ======= ======= ======= ====== Adjusted EBITDA (2)
($603) ($4,756) $15,347 $8,709 EBITDA margin (3) -1.20% -5.92%
4.42% 1.22% Adjusted EBITDA margin (4) -0.56% -4.11% 5.44% 2.82%
(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 $(1,284) $(6,848) $12,475 $3,763
EBITDA adjustments: Cost associated with PMPS acquisition 914 1,247
1,645 2,296 Translation gain (283) - (283) - Proxy contest fees
(73) - 904 - Litigation costs 104 119 532 882 Sears contract
settlement costs - 689 - 1,667 Other 19 37 74 101 --- --- --- ---
Adjusted EBITDA $(603) $(4,756) $15,347 $8,709 ===== =======
======= ====== (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: 16 Weeks Vs. 16 Weeks 40 Weeks Vs.
40 Weeks -------- -------- -------- -------- November November
November November 14, 2009 8, 2008 14, 2009 8, 2008 EBITDA $(1,284)
$(6,848) $12,475 $3,763 Income tax benefit 3,524 6,508 4,094 8,727
Interest expense (2,542) (3,866) (5,961) (6,753) Adjustments for
items not requiring cash: Deferred income taxes (3,915) (7,034)
(4,452) (9,753) Deferred revenues and related costs 5,264 2,508
6,078 (279) Other, net 2,574 1,666 2,475 2,680 Decrease (increase)
in current assets (8,410) (9,174) (11,537) (5,224) Increase
(decrease) in current liabilities 2,417 7,500 (2,932) (5,839)
Increase (decrease) in current income taxes 250 252 (98) (440) ---
--- --- ---- Cash flows from continuing operations $(2,122)
$(8,488) $142 $(13,118) ==== ======= ==== ======== DATASOURCE: CPI
Corp. CONTACT: Jane Nelson of CPI Corp., +1-314-231-1575 Web Site:
http://www.cpicorp.com/
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