ST. LOUIS, Dec. 22, 2011 /PRNewswire/ -- CPI
Corp. (NYSE: CPY) today reported results for the fiscal 2011
third quarter ended November 12,
2011.
- Fiscal 2011 third-quarter sales declined 11% to $95.0 million from $106.2
million in the prior-year third quarter.
- Third-quarter PictureMe Portrait Studio® brand
comparable store sales, described herein, decreased 15% versus the
same period last year.
- Third-quarter Sears Portrait Studio brand comparable store
sales, described herein, decreased 16% versus the same period last
year.
- Third-quarter Kiddie Kandids comparable store sales,
described herein, decreased 25% versus the same period last
year.
- Bella Pictures® operations contributed $3.6 million in net sales in the third quarter of
2011.
- Fiscal 2011 third-quarter Adjusted EBITDA declined to a loss
of ($7.5) million from a loss of
($3.5) million in the prior-year
third quarter due to comparable store sales declines, offset in
part by cost reductions.
- Fiscal 2011 third-quarter diluted EPS improved to
($1.03) compared to ($1.05) in the prior-year period primarily due to
cost reductions and certain tax benefits recognized related to a
change in the annualized effective tax rate and a previous
uncertain tax position.
"Third quarter and early holiday season sales underperformed our
expectations due in large part to less effective marketing offers,"
said Renato Cataldo, chief executive
officer. "We are responding by aggressively retooling our studio
sales and marketing programs for the new year, and we expect to
generate substantially improved results in the coming quarters.
On a more positive note, we are exceeding our cost reduction
goals and also making significant progress on our business
expansion initiatives."
Net sales for the third quarter of fiscal 2011 decreased 11% to
$95.0 million from the $106.2 million reported in the fiscal 2010 third
quarter. Net sales for the 2011 third quarter were positively
impacted by net revenue recognition change ($1.0 million), net studio openings ($600,000), Bella sales ($3.6 million) and other items ($1.1 million). Excluding the above impacts,
comparable same-store sales in the quarter decreased approximately
16%.
Net loss for the third quarter in fiscal 2011 was ($7.3) million or ($1.03) per diluted share, compared with a loss
of ($7.7) million, or ($1.05) per diluted share, reported for the third
quarter of fiscal 2010. Third-quarter results were
significantly affected by comparable store sales declines, other
charges and impairments related principally to one-time costs
associated with the opening of certain Portrait Gallery studio
locations and severance and certain tax benefits recognized related
to a change in the annualized effective tax rate and a previous
uncertain tax position. Foreign currency translation effects and
the Bella operations did not have a material impact on the
Company's results in the third quarter of 2011. Adjusted EBITDA
declined to a loss of ($7.5) million
in the third quarter of 2011 from a loss of ($3.5) million in the prior-year third quarter
due to comparable store sales declines, offset in part by cost
reductions.
Net sales from the Company's PictureMe Portrait Studio® (PMPS)
brand, on a comparable same-store basis, excluding impacts of
revenue deferral related to the loyalty program and other items
totaling $1.4 million, decreased 15%
in the third quarter of 2011 to $48.4
million from $57.0 million in
the third quarter of 2010. The decrease in PMPS sales for the third
quarter was the result of a 13% decrease in the number of sittings
and a 3% decrease in the 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, studio closures and other items totaling
$400,000, decreased 16% in the third
quarter of 2011 to $38.3 million from
$45.4 million in the third quarter of
2010. The decrease in SPS sales for the third quarter was the
result of a 13% decline in the average sale per customer sitting
and a 3% decline in the number of sittings.
Net sales from the Company's Kiddie Kandids (KK) studio
operations, on a comparable same-store basis, excluding impacts of
studio openings and other items totaling $500,000, decreased 25% in the third quarter of
2011 to $6.2 million from
$8.3 million in the third quarter of
2010. The decrease in KK sales for the third quarter was the result
of a 15% decline in the average sale per customer sitting and a 13%
decline in the number of sittings.
The Bella operations contributed approximately $3.6 million in net sales in the third quarter of
2011.
Cost of sales, excluding depreciation and amortization expense,
increased to $8.7 million in the
third quarter of 2011, from $7.5
million in the third quarter of 2010 primarily due to
incremental costs associated with the Bella operations, offset in
part by lower overall production levels.
Selling, general and administrative (SG&A) expense declined
to $93.9 million in the third quarter
of 2011, from $102.1 million in the
third quarter of 2010, as the benefits of reduced studio and
corporate employment costs, employee insurance and host store
commissions were offset in part by costs incurred in connection
with the Bella operations, which increased SG&A expense by
$1.4 million in the 2011 third
quarter.
Depreciation and amortization expense was $4.7 million in the third quarter of 2011,
compared with $5.3 million in the
third quarter of 2010. Depreciation expense decreased as a
result of the full depreciation of certain digital assets
throughout fiscal 2010.
In the third quarter of 2011, the Company recognized a charge of
$1.4 million in other charges and
impairments, compared with $3.6
million in the third quarter of 2010. The current-quarter
charges primarily related to one-time costs associated with the
opening of certain Portrait Gallery studio locations and severance.
The prior-year charges included a downward adjustment to the
carrying value of a large facility previously classified as "held
for sale" and the write-off of debt fees related to the Company's
former credit facility.
Interest expense increased to $1.3
million in the third quarter of 2011, from $0.9 million in the third quarter of fiscal 2010
primarily as the result of a favorable change to the interest rate
swap value in the prior year (the agreement expired in the third
quarter of fiscal year 2010).
Income tax benefit was ($8.0)
million and ($5.5) million in
the third quarters of 2011 and 2010, respectively. The resulting
effective tax rates were 52% and 42% in 2011 and 2010,
respectively. The change in the effective tax rate in 2011 is due
primarily to a change in the annualized effective tax rate, as well
as certain tax benefits recognized related to a previous uncertain
tax position.
Capital Structure
On December 16, 2011, the Company
entered into an amendment to the Credit Agreement (the "Amendment")
which included the following terms:
- A suspension of the leverage ratio test (as defined, Total
Funded Debt to EBITDA) for the quarter ended November 12, 2011;
- A reduction of the revolving commitment under the Credit
Agreement from $105 million to $90
million; and
- Suspension of dividend and other restricted payments, including
share repurchases, until the Company presents evidence of its
compliance with its debt covenants.
If the leverage ratio test for the quarter ended November 12, 2011 had not been suspended, the
Company would not have been in compliance with this covenant. The
Company is currently evaluating long-term financing alternatives,
which may include further amendment to the Credit Agreement.
Until such time as financing alternatives and/or amendments
are formalized, the balance outstanding under the revolving credit
facility ($73.5 million as of
November 12, 2011 and $65.0 million as of December 21, 2011) has been classified as
current in the consolidated balance sheet. While there is no
certainty, the Company expects to resolve the compliance matters at
which point we believe the debt will no longer be classified as
current.
NYSE Listing
As previously announced, the Company received notice from the
New York Stock Exchange ("NYSE") on October
12, 2011, that it is out of compliance with the NYSE's
listing standards. The Company submitted a plan to restore
compliance with continued listing standards and is awaiting comment
from the NYSE. It is possible that, depending on continuing
trading factors and the outcome of discussions with the NYSE, the
Company may need to seek listing on alternative markets in the near
future.
Preliminary Fourth-Quarter Net Sales
The Company's preliminary comparable same-store net sales on a
point-of-sale basis for the first five weeks of the fourth quarter
of fiscal 2011, excluding Bella and foreign currency translation,
declined 21% to $61.7 million from
$77.8 million in the same period last
year.
Conference Call/Webcast Information
The Company will host a conference call and audio webcast on
Thursday, December 22, 2011, at
10:00 a.m. Central time to discuss
the financial results and provide a Company update. To
participate on the call, please dial 866-510-0708 or 617-597-5377
and reference passcode 18483907 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 95838787. The
replay will be available through January 5,
2012 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 the
United States, Canada,
Mexico and Puerto Rico and offers on location wedding
photography and videography services through an extensive network
of contract photographers and videographers. CPI's conversion to a
fully digital format allows its studios and on location business 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 with respect to the
integration of the Bella Pictures® business, 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 Walmart, Sears and Toys "R" Us, the approval of the
Company's business practices and operations by Walmart, Sears and
Toys "R" Us, the termination, breach, limitation or increase of the
Company's expenses by Walmart under the lease and license
agreements and Sears and Toys "R" Us under the license agreements,
the Company's ability to comply with its debt covenants under its
revolving credit facility, the Company's ability to generate
sufficient cash flow or raise additional capital to cover its
operating expenses, the inability of the Company to pay dividends,
the Company's failure to restore compliance with the continued
listing rule of the New York Stock Exchange which could cause the
Company's common stock to be delisted from the New York Stock
Exchange, the integration of the Bella Pictures® operations into
the Company and the continued development and operation of the
Bella Pictures® business, 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,
restrictions on the Company's business imposed by agreements
governing its debt, implementation of marketing and operating
strategies, outcome of litigation and other claims, impact of
declines in global equity markets to the pension plan and the
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
Ended
|
|
40 Weeks
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
12, 2011
|
|
November
13, 2010
|
|
November
12, 2011
|
|
November
13, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
95,025
|
|
$
106,174
|
|
$
254,541
|
|
$
278,086
|
|
|
|
|
|
|
|
|
|
|
|
Cost
and expenses:
|
|
|
|
|
|
|
|
|
|
Cost of
sales (exclusive of depreciation and
|
|
|
|
|
|
|
|
|
|
amortization shown below)
|
|
8,650
|
|
7,544
|
|
20,988
|
|
19,905
|
|
Selling,
general and administrative expenses
|
|
93,890
|
|
102,139
|
|
234,423
|
|
244,655
|
|
Depreciation and amortization
|
|
4,668
|
|
5,267
|
|
12,422
|
|
14,088
|
|
Other
charges and impairments
|
|
1,449
|
|
3,645
|
|
6,344
|
|
2,889
|
|
|
|
108,657
|
|
118,595
|
|
274,177
|
|
281,537
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
(13,632)
|
|
(12,421)
|
|
(19,636)
|
|
(3,451)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
1,286
|
|
883
|
|
2,560
|
|
3,209
|
|
|
|
|
|
|
|
|
|
|
|
Other
(expense) income, net
|
|
(281)
|
|
117
|
|
(240)
|
|
587
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations before income tax benefit
|
|
(15,199)
|
|
(13,187)
|
|
(22,436)
|
|
(6,073)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
|
(7,950)
|
|
(5,474)
|
|
(9,550)
|
|
(3,082)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
(7,249)
|
|
(7,713)
|
|
(12,886)
|
|
(2,991)
|
|
Net (loss)
income attributable to noncontrolling interest
|
|
1
|
|
-
|
|
(139)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO CPI CORP.
|
|
$
(7,250)
|
|
$
(7,713)
|
|
$
(12,747)
|
|
$
(2,991)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER COMMON SHARE
Net loss
per common share attributable to CPI Corp. - diluted
|
|
$
(1.03)
|
|
$
(1.05)
|
|
$
(1.81)
|
|
$
(0.41)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
per common share attributable to CPI Corp. - basic
|
|
$
(1.03)
|
|
$
(1.05)
|
|
$
(1.81)
|
|
$
(0.41)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common and common equivalent shares
outstanding-diluted
|
|
7,040
|
|
7,312
|
|
7,027
|
|
7,271
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and
common equivalent shares outstanding-basic
|
|
7,040
|
|
7,312
|
|
7,027
|
|
7,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CPI
CORP.
|
ADDITIONAL CONSOLIDATED OPERATING
INFORMATION
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 Weeks
Ended
|
|
40 Weeks
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
12,
2011
|
|
November
13,
2010
|
|
November
12,
2011
|
|
November
13,
2010
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
|
$
4,002
|
|
$
3,931
|
|
$
7,963
|
|
$
12,128
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA is
calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to CPI Corp.
|
|
|
|
(7,250)
|
|
(7,713)
|
|
(12,747)
|
|
(2,991)
|
Income tax
benefit
|
|
|
|
(7,950)
|
|
(5,474)
|
|
(9,550)
|
|
(3,082)
|
Interest
expense
|
|
|
|
1,286
|
|
883
|
|
2,560
|
|
3,209
|
Depreciation and amortization
|
|
|
|
4,668
|
|
5,267
|
|
12,422
|
|
14,088
|
Other
non-cash charges, net
|
|
|
|
27
|
|
2,997
|
|
(36)
|
|
3,131
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1)
& (5)
|
|
|
|
$
(9,219)
|
|
$
(4,040)
|
|
$
(7,351)
|
|
$
14,355
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA (2)
|
|
|
|
$
(7,509)
|
|
$
(3,511)
|
|
$
(732)
|
|
$
13,526
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
margin (3)
|
|
|
|
-9.70%
|
|
-3.81%
|
|
-2.89%
|
|
5.16%
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA margin (4)
|
|
|
|
-7.90%
|
|
-3.31%
|
|
-0.29%
|
|
4.86%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
|
|
$
(9,219)
|
|
$
(4,040)
|
|
$
(7,351)
|
|
$
14,355
|
EBITDA adjustments:
|
|
|
|
|
|
|
|
|
|
|
Litigation
costs
|
|
|
|
(5)
|
|
-
|
|
2,189
|
|
-
|
Severance
and related costs
|
|
|
411
|
|
303
|
|
1,702
|
|
303
|
Portrait
Gallery costs
|
|
|
|
750
|
|
-
|
|
1,302
|
|
-
|
Bella
Pictures Acquisition costs
|
|
|
216
|
|
-
|
|
1,107
|
|
-
|
Translation (gain) loss
|
|
|
|
263
|
|
(146)
|
|
193
|
|
(726)
|
Other
transition related costs - PCA Acquisition
|
64
|
|
99
|
|
157
|
|
348
|
Kiddie
Kandids integration costs
|
|
|
12
|
|
264
|
|
(93)
|
|
1,178
|
Early
termination fee
|
|
|
|
-
|
|
-
|
|
-
|
|
(480)
|
Gain on
sale of Brampton facility
|
|
|
-
|
|
9
|
|
-
|
|
(1,473)
|
Other
|
|
|
|
(1)
|
|
-
|
|
62
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
$
(7,509)
|
|
$
(3,511)
|
|
$
(732)
|
|
$
13,526
|
|
|
|
|
|
|
|
|
|
|
|
(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
Ended
|
|
40 Weeks
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
12,
2011
|
|
November
13,
2010
|
|
November
12,
2011
|
|
November
13,
2010
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
$
(9,219)
|
|
$
(4,040)
|
|
$
(7,351)
|
|
$
14,355
|
Income tax
benefit
|
|
|
|
7,950
|
|
5,474
|
|
9,550
|
|
3,082
|
Interest
expense
|
|
|
|
(1,286)
|
|
(883)
|
|
(2,560)
|
|
(3,209)
|
Adjustments for items not requiring cash:
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
|
(7,221)
|
|
(5,816)
|
|
(10,684)
|
|
(4,418)
|
Deferred revenues and related
costs
|
|
|
1,413
|
|
4,371
|
|
2,608
|
|
5,033
|
Other, net
|
|
|
|
1,460
|
|
630
|
|
2,983
|
|
548
|
Decrease
(increase) in current assets
|
|
|
(7,823)
|
|
(6,588)
|
|
(7,692)
|
|
(6,433)
|
Increase
(decrease) in current liabilities
|
|
|
6,810
|
|
10,929
|
|
3,585
|
|
6,426
|
Increase
(decrease) in current income taxes
|
|
(1,757)
|
|
222
|
|
(2,485)
|
|
564
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
from continuing operations
|
|
$
(9,673)
|
|
$
4,299
|
|
$
(12,046)
|
|
$
15,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CPI
CORP.
|
CONSOLIDATED BALANCE SHEETS
|
NOVEMBER 12, 2011 AND NOVEMBER 13,
2010
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
12, 2011
|
|
November
13, 2010
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
4,589
|
|
$
9,631
|
Other current assets
|
|
38,903
|
|
36,458
|
Net property and equipment
|
|
33,190
|
|
36,149
|
Intangible assets
|
|
57,710
|
|
59,366
|
Other assets
|
|
20,969
|
|
22,724
|
|
|
|
|
|
Total assets
|
|
$
155,361
|
|
$
164,328
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders' (deficit)
equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
131,220
|
|
$
55,253
|
Long-term debt obligations
|
|
-
|
|
68,000
|
Other liabilities
|
|
27,743
|
|
35,353
|
Stockholders' (deficit) equity
|
|
(3,602)
|
|
5,722
|
|
|
|
|
|
Total liabilities and stockholders'
(deficit) equity
|
|
$
155,361
|
|
$
164,328
|
|
|
|
|
|
SOURCE CPI Corp.