ST. LOUIS, Dec. 21, 2010 /PRNewswire-FirstCall/ -- CPI Corp.
(NYSE: CPY) today reported results for the fiscal 2010 third
quarter ended November 13, 2010.
- Fiscal 2010 third-quarter sales declined 1% to $106.2 million from $107.3
million in the prior-year third quarter as comparable store
declines were mostly offset by sales from newly opened Kiddie
Kandids studios.
- Comparable same-store sales in the period, described herein,
decreased 10% versus the prior-year third quarter.
- Third-quarter PictureMe Portrait Studio® brand comparable
store sales decreased 6% versus the same period last year.
- Third-quarter Sears Portrait Studio brand comparable store
sales decreased 13% versus the same period last year.
- Third-quarter Adjusted EBITDA in fiscal 2010 declined
to a loss of ($3.5 million) versus a
loss of ($0.4 million) in the
prior-year third quarter due to the impact of comparable store
declines and a special commission adjustment ($1.1 million), offset in part by productivity
improvements.
- Third-quarter diluted EPS declined to a loss of ($1.05) per share in fiscal 2010 versus a loss of
($0.97) per share in the prior-year
third quarter. Excluding other charges and impairments in
each period, EPS improved in the current year quarter to
($0.75) versus ($0.87) last year.
- Net debt, $35.1 million as of
December 20, 2010, has been reduced
by approximately $23.3 million since
the end of the third quarter.
"Top-line results in the third quarter underperformed our
expectations, and the holiday season overall will be tough as our
customers continue to be disproportionately affected by difficult
economic conditions and rising gas prices," said Renato Cataldo, President and Chief Executive
Officer, commenting on results. Continuing, Mr. Cataldo said,
"We are, nevertheless, encouraged by our sittings trends which,
although still negative, have improved markedly year over year.
Service levels and customer retention continue to show
significant improvement, and declines in new customer counts are
abating. In addition, we continue to identify opportunities
to wring out costs and improve operational execution, and we
successfully tested several promising new marketing vehicles and
programs in the period including in connection with our mobile
photography initiative. Although full year earnings will be
significantly pressured by holiday sales declines, our continued
strong cash flows have allowed us to reduce our debt balance to the
lowest levels in many years, and we believe we are very well
positioned strategically."
Net sales for the third quarter decreased 1% to $106.2 million from the $107.3 million reported in the fiscal 2009 third
quarter. Excluding the positive impacts of net store openings
($7.2 million), net revenue
recognition change ($1.0 million),
foreign currency translation ($0.8
million), and other items totaling $0.5 million, comparable same-store sales
decreased approximately 10%.
Net loss for the third quarter was ($7.7
million), or ($1.05) per
diluted share, compared with a net loss of ($6.8 million), or ($0.97) per diluted share, reported for the third
quarter of fiscal 2009. Excluding other charges and
impairments in each period, in the current year's third quarter,
the Company recorded a loss of ($0.75) per diluted share versus a loss of
($0.87) per diluted share last year.
Earnings in the period were significantly affected by
comparable store sales declines, a special commission adjustment,
and increased employee insurance and workers' compensation expense,
offset by lower production, labor and advertising costs as well as
lower interest expense and depreciation. Foreign currency
translation effects and the Kiddie Kandids studio operations did
not have a material impact on the Company's net earnings in the
third 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, foreign currency translation, store
closures and other items totaling $1.3
million, decreased 6% in the third quarter of 2010 to
$56.5 million from $60.1 million in the third quarter of 2009.
The decrease in PMPS sales performance for the third quarter
was the result of an 11% decrease in the number of sittings, offset
in part by a 6% 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 and other items totaling $0.3 million, decreased 13% in the third quarter
of 2010 to $45.8 million from
$52.8 million in the third quarter of
2009. SPS sales performance for the third quarter was
the result of a 10% decline in the number of sittings and a 4%
decline in average sale per customer sitting versus the prior-year
quarter.
Net sales from the Company's Kiddie Kandids studio operations,
excluding the impact of net revenue recognition change totaling
($0.3 million), contributed
$8.2 million in net sales in the
third quarter of 2010. The Company has opened 171 Kiddie
Kandids locations as of December 20,
2010. The Company plans to open an additional 25
locations during fiscal year 2011.
Cost of sales, excluding depreciation and amortization expense,
declined to $7.5 million in the third
quarter of 2010, from $8.0 million in
the third quarter of 2009 due to lower overall production levels as
well as continuing productivity improvements.
Selling, general and administrative (SG&A) expense increased
to $102.2 million in the third
quarter of 2010 from $99.9 million in
the prior-year quarter, primarily due to the inclusion of costs
associated with the newly opened Kiddie Kandids studios, as well as
a special commission adjustment ($1.1
million) arising from certain contractual undertakings under
the host agreement, employee insurance as a result of unfavorable
claim activity and worker's compensation due to loss experience
adjustments. These increases were offset in part by
reductions in SPS and PMPS studio employment costs from improved
scheduling, selected operating hour reductions and studio closures,
a decline in host commission expense due to lower sales levels and
reduced advertising costs.
Depreciation and amortization expense was $5.3 million in the third quarter of 2010,
compared with $6.3 million in the
third quarter of 2009. Depreciation expense decreased as a result
of the full depreciation of certain assets acquired in connection
with the 2007 acquisition of PCA and the closure of certain PMPS
locations during fiscal years 2009 and 2010.
In the third quarter of 2010, the Company recognized
$3.6 million in other charges and
impairments, compared with $1.1
million in the third quarter of 2009. The current
quarter charges include a $1.9
million downward adjustment to the carrying value of a large
facility previously classified as "held for sale" and the write-off
of $1.1 million of debt fees related
to the Company's former credit facility as a result of its new
revolving credit facility. The prior-year charge primarily
related to lab closures.
Interest expense declined $1.6
million in the third quarter of 2010 to $0.9 million from $2.5
million in the third quarter of 2009. The decrease is
primarily a result of lower average borrowings and favorable
interest rates as a result of the new credit facility.
Income tax benefit was $5.5
million and $3.5 million in
the third quarters of 2010 and 2009, respectively. The
resulting effective tax rates were 42% and 34% in 2010 and 2009,
respectively. The increase in the effective tax rate in the
third quarter of 2010 was primarily due to certain tax benefits
recognized related to a previous uncertain tax position and
miscellaneous tax return adjustments.
Capital Structure
As previously announced, the Company entered into a new
four-year, $105 million revolving
credit facility on August 30, 2010
which accords the Company greater flexibility to pursue financial
and strategic opportunities to enhance shareholder value. As
of December 20, 2010, the Company has
reduced net debt to $35.1 million,
and has a share repurchase program in place to purchase up to 1.0
million shares.
Preliminary Fourth-Quarter Net Sales
The Company's preliminary net sales on a point-of-sale (POS)
basis for the first five weeks of the fourth quarter of fiscal 2010
declined 7% to $78.2 million from
$84.5 million in the prior-year
comparable period. On a comparable same-store POS basis,
excluding the impacts of the Kiddie Kandids operations and foreign
currency translation, preliminary net sales for the first five
weeks declined approximately 14% compared with the corresponding
period in the prior year. PMPS and SPS net sales for the
first five weeks of the fourth quarter declined 9% and 18%,
respectively. Sales comparisons turned positive in recent
days and, based on bookings, are expected to remain positive
through the remainder of the holiday period.
Conference Call/Webcast Information
The Company will host a conference call and audio webcast on
Tuesday, December 21, 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 866-277-1184 or 617-597-5360
and reference passcode 78802464 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 74201807.
The replay will be available through January 4, 2011, 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Weeks
|
Vs
|
16
Weeks
|
|
40
Weeks
|
Vs
|
40
Weeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 13,
2010
|
|
November 14,
2009
|
|
November 13,
2010
|
|
November 14,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
106,174
|
|
$
107,286
|
|
$
278,086
|
|
$
282,130
|
|
|
|
|
|
|
|
|
|
|
|
Cost and expenses:
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive
of depreciation and
|
|
|
|
|
|
|
|
|
|
amortization shown
below)
|
|
7,516
|
|
8,032
|
|
19,882
|
|
21,643
|
|
Selling, general and
administrative expenses
|
|
102,220
|
|
99,940
|
|
244,920
|
|
245,480
|
|
Depreciation and
amortization
|
|
5,267
|
|
6,320
|
|
14,088
|
|
17,913
|
|
Other charges and
impairments
|
|
3,645
|
|
1,144
|
|
2,889
|
|
3,751
|
|
|
|
118,648
|
|
115,436
|
|
281,779
|
|
288,787
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(12,474)
|
|
(8,150)
|
|
(3,693)
|
|
(6,657)
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
892
|
|
2,479
|
|
3,225
|
|
5,694
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
9
|
|
67
|
|
16
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
170
|
|
236
|
|
829
|
|
253
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax
benefit
|
|
(13,187)
|
|
(10,326)
|
|
(6,073)
|
|
(11,995)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
(5,474)
|
|
(3,524)
|
|
(3,082)
|
|
(4,094)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
(7,713)
|
|
$
(6,802)
|
|
$
(2,991)
|
|
$
(7,901)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share -
diluted
|
|
$
(1.05)
|
|
$
(0.97)
|
|
$
(0.41)
|
|
$
(1.13)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share -
basic
|
|
$
(1.05)
|
|
$
(0.97)
|
|
$
(0.41)
|
|
$
(1.13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common and
|
|
|
|
|
|
|
|
|
|
common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
7,312
|
|
7,004
|
|
7,271
|
|
6,988
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
7,312
|
|
7,004
|
|
7,271
|
|
6,988
|
|
|
|
|
|
|
|
|
|
|
CPI
CORP.
|
|
ADDITIONAL
CONSOLIDATED OPERATING INFORMATION
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Weeks
|
Vs.
|
16
Weeks
|
|
40
Weeks
|
Vs.
|
40
Weeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 13,
2010
|
|
November 14,
2009
|
|
November 13,
2010
|
|
November 14,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
$
3,931
|
|
$
2,274
|
|
$
12,128
|
|
$
4,508
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA is calculated as
follows:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
(7,713)
|
|
$
(6,802)
|
|
$
(2,991)
|
|
$
(7,901)
|
|
Income tax benefit
|
|
(5,474)
|
|
(3,524)
|
|
(3,082)
|
|
(4,094)
|
|
Interest expense
|
|
892
|
|
2,479
|
|
3,225
|
|
5,694
|
|
Depreciation and
amortization
|
|
5,267
|
|
6,320
|
|
14,088
|
|
17,913
|
|
Other non-cash
charges
|
|
2,983
|
|
417
|
|
3,131
|
|
1,206
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1) & (5)
|
|
$
(4,045)
|
|
$
(1,110)
|
|
$
14,371
|
|
$
12,818
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (2)
|
|
$
(3,502)
|
|
$
(382)
|
|
$
13,542
|
|
$
15,686
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin (3)
|
|
-3.81%
|
|
-1.03%
|
|
5.17%
|
|
4.54%
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
(4)
|
|
-3.30%
|
|
-0.36%
|
|
4.87%
|
|
5.56%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
$
(4,045)
|
|
$
(1,110)
|
|
$
14,371
|
|
$
12,818
|
|
EBITDA
adjustments:
|
|
|
|
|
|
|
|
|
|
Kiddie Kandids
costs
|
|
278
|
|
-
|
|
1,178
|
|
-
|
|
Reserves for severance and
related costs
|
|
303
|
|
681
|
|
303
|
|
964
|
|
Other transition related
costs - PCA Acquisition
|
|
108
|
|
280
|
|
(1,125)
|
|
677
|
|
Translation
gain
|
|
(146)
|
|
(283)
|
|
(726)
|
|
(283)
|
|
Proxy contest
fees
|
|
-
|
|
(73)
|
|
-
|
|
904
|
|
Other
|
|
-
|
|
123
|
|
(459)
|
|
606
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
(3,502)
|
|
$
(382)
|
|
$
13,542
|
|
$
15,686
|
|
|
|
|
|
|
|
|
|
|
|
(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 13,
2010
|
|
November 14,
2009
|
|
November 13,
2010
|
|
November 14,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
(4,045)
|
|
$
(1,110)
|
|
$
14,371
|
|
$
12,818
|
|
Income tax benefit
|
|
5,474
|
|
3,524
|
|
3,082
|
|
4,094
|
|
Interest expense
|
|
(892)
|
|
(2,479)
|
|
(3,225)
|
|
(5,694)
|
|
Adjustments for items not
requiring cash:
|
|
|
|
|
|
|
|
|
|
Deferred income
taxes
|
|
(5,816)
|
|
(3,915)
|
|
(4,418)
|
|
(4,452)
|
|
Deferred revenues and
related costs
|
|
4,371
|
|
5,264
|
|
5,033
|
|
6,078
|
|
Other, net
|
|
645
|
|
1,206
|
|
548
|
|
1,286
|
|
Decrease (increase) in current
assets
|
|
(6,589)
|
|
(8,710)
|
|
(6,433)
|
|
(11,837)
|
|
Increase (decrease) in current
liabilities
|
|
10,929
|
|
3,849
|
|
6,426
|
|
(2,053)
|
|
Increase (decrease) in current
income taxes
|
|
222
|
|
250
|
|
564
|
|
(98)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from continuing
operations
|
|
$
4,299
|
|
$
(2,121)
|
|
$
15,948
|
|
$
142
|
|
|
|
|
|
|
|
|
|
|
CPI
CORP.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
NOVEMBER 13,
2010 AND NOVEMBER 14, 2009
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 13,
2010
|
|
November 14,
2009
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ 9,631
|
|
$ 8,286
|
|
Other current
assets
|
|
36,458
|
|
55,170
|
|
Net property and
equipment
|
|
36,149
|
|
37,759
|
|
Intangible
assets
|
|
59,366
|
|
61,108
|
|
Other assets
|
|
22,724
|
|
18,973
|
|
|
|
|
|
|
|
Total assets
|
|
$164,328
|
|
$181,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders'
equity
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$ 55,253
|
|
$ 86,437
|
|
Long-term debt
obligations
|
|
68,000
|
|
75,458
|
|
Other
liabilities
|
|
35,353
|
|
25,994
|
|
Stockholders' equity
(deficit)
|
|
5,722
|
|
(6,593)
|
|
|
|
|
|
|
|
Total liabilities and
stockholders'
|
|
|
|
|
|
equity
|
|
$164,328
|
|
$181,296
|
|
|
|
|
|
|
SOURCE CPI Corp.