ST. LOUIS, Aug. 31, 2011 /PRNewswire/ -- CPI Corp. (NYSE:
CPY) today reported results for the fiscal 2011 second quarter
ended July 23, 2011.
- Fiscal 2011 second-quarter sales declined 7% to $70.9 million from $76.4
million in the prior-year second quarter.
- Second-quarter PictureMe Portrait Studio® brand comparable
store sales, described herein, decreased 16% versus the same period
last year.
- Second-quarter Sears Portrait Studio brand comparable store
sales, described herein, decreased 18% versus the same period last
year.
- Second-quarter Kiddie Kandids sales increased 58% versus the
same period last year.
- Bella Pictures® operations contributed $1.2 million in net sales in the second quarter
of 2011.
- Fiscal 2011 second-quarter Adjusted EBITDA declined to a
loss of $2.0 million from a positive
$1.8 million in the prior-year second
quarter due to comparable store sales declines and initial dilution
from the Bella Pictures® Acquisition ("Bella")
($1.2 million), offset in part by
cost reductions and the impact of the late Easter holiday
($1.8 million).
- Fiscal 2011 second-quarter diluted EPS, significantly
affected by other charges and impairments totaling $1.7 million vs. a credit of $1.1 million in the prior-year quarter, declined
to a loss of ($0.89) from a loss of
($0.25) in the prior-year period.
Excluding the effects of Bella, the Easter holiday shift, and
other charges and impairments in both periods, diluted EPS declined
to a loss of ($0.75) from a loss of
($0.34) in the prior-year
period.
- The Company extended its share repurchase program and
increased the size of the program from 1.0 million to 1.5 million
shares.
"As expected, we had a tough second quarter on a comparable
sales basis which, despite cost cuts, reduced adjusted EBITDA for
the core business by $2.6
million. As a result of easier comparisons in late
third quarter and fourth quarter and tangible progress on several
promising revenue and cost initiatives, we continue to expect
favorable year-over-year EBITDA comparisons in the fourth quarter
and for the full second half," said Renato
Cataldo, chief executive officer. Continuing, Mr. Cataldo
said, "Despite facing continuing economic and industry headwinds,
we are optimistic about our ability to stabilize and grow our
top-line even as we continue to reduce cash flow break-evens to
weather any further declines in our core business. We
recently soft-launched a new photography service that leverages our
Bella photographer network and broader digital capture and
fulfillment capabilities with very encouraging results. We
are positioning Bella for rapid growth in the fragmented
$7 billion wedding market. And,
on the strength of our national scope, we are forging new strategic
relationships that could yield a step-change in the business."
Net sales for the second quarter of fiscal 2011 decreased 7% to
$70.9 million from the $76.4 million reported in the fiscal 2010 second
quarter. Net sales for the 2011 second quarter were
positively impacted by the late Easter holiday in the current year
($2.7 million), net studio openings
($1.6 million), Bella sales
($1.2 million), foreign currency
translation ($0.9 million) and other
items ($0.8 million). Excluding
the above impacts, comparable same-store sales in the quarter
decreased approximately 17%.
Net loss for the second quarter in fiscal 2011 was $6.2 million, or ($0.89) per diluted share, compared with a loss
of $1.8 million, or ($0.25) per diluted share, reported for the
second quarter of fiscal 2010. Second-quarter results were
significantly affected by comparable store sales declines, initial
dilution associated with the Bella operations and other charges and
impairments related principally to severance and litigation, as
well as the positive effect of the Easter holiday shift.
Adjusted for these items in both periods, diluted EPS
declined to a loss of ($0.75) from a
loss of ($0.34) in the prior-year
period. Adjusted EBITDA declined to a loss of $2.0 million in the second quarter of 2011 from a
positive $1.8 million in the
prior-year second quarter due to comparable store sales declines
and initial dilution from Bella ($1.2
million); offset in part by cost reductions and the impact
of the late Easter holiday ($1.8
million).
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 and other
items totaling $2.5 million,
decreased 16% in the second quarter of 2011 to $33.4 million from $39.7
million in the second quarter of 2010. The decrease in
PMPS sales for the second quarter was the result of an 18% decrease
in the number of sittings, offset in part by a 2% 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 $0.8 million, decreased 18% in the second quarter
of 2011 to $26.4 million from
$32.2 million in the second quarter
of 2010. The decrease in SPS sales for the second
quarter was the result of a 14% decline in the number of sittings
and a 5% decline in average sale per customer sitting versus the
prior-year quarter.
Net sales from the Company's Kiddie Kandids (KK) studio
operations increased 58% in the second quarter of 2011 to
$4.9 million from $3.1 million in the second quarter of 2010.
The Company operates 180 Kiddie Kandids locations as of
August 30, 2011 and plans to open an
additional 16 locations by the end of September.
The Bella operations contributed approximately $1.2 million in net sales in the second quarter
of 2011.
Cost of sales, excluding depreciation and amortization expense,
increased to $5.9 million in the
second quarter of 2011, from $5.8
million in the second 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 $67.0 million in the second
quarter of 2011, from $68.9 million
in the second 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 KK and Bella operations, which increased SG&A expense
by $1.4 million and $1.5 million, respectively, in the 2011 second
quarter.
Depreciation and amortization expense was $3.7 million in the second quarter of 2011,
compared with $4.4 million in the
second quarter of 2010. Depreciation expense decreased as a
result of the full depreciation of certain digital assets
throughout fiscal 2010.
In the second quarter of 2011, the Company recognized a charge
of $1.7 million in other charges and
impairments, compared with a net credit of $1.1 million in the second quarter of 2010.
The current-quarter charges primarily related to severance
and litigation costs. The prior-year net credit primarily
related 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.
Interest expense declined $0.4
million in the second quarter of fiscal 2011 to $0.7 million from $1.1
million in the second quarter of fiscal 2010. The
decrease is primarily a result of lower average borrowings and
favorable interest rates as a result of the new credit facility,
offset in part by a change in the interest rate swap value, which
expired in the third quarter of fiscal year 2010.
Income tax benefit was $1.9
million and $0.9 million in
the second quarters of 2011 and 2010, respectively. The
resulting effective tax rates were 23% and 34% in 2011 and 2010,
respectively. The decrease in the effective tax rate in 2011
is due primarily to a higher income ratio in lower tax
jurisdictions, a decrease in Canadian rates and an increase in U.S.
tax credits.
Capital Structure
As of the end of the second quarter of fiscal year 2011, the
Company's net debt (outstanding debt less cash) equals $53.6 million, down from $56.0 million at the end of the prior-year second
quarter.
On August 24, 2011, the Company's
Board of Directors authorized an extension of its share repurchase
program and an increase in total shares from 1.0 million to 1.5
million shares. As of August 30,
2011, the Company repurchased a total of 377,653 shares of
common stock under this program for a total purchase price of
$8.3 million.
Preliminary Third-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 third quarter
of fiscal 2011, excluding Bella, KK and foreign currency
translation, declined 16% to $25.2
million from $30.1 million in
the same period last year.
Conference Call/Webcast Information
The Company will host a conference call and audio webcast on
Wednesday, August 31, 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 800-573-4840 or 617-224-4326
and reference passcode 66502534 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 65125020.
The replay will be available through September 14, 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 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 acquisition of the operating
assets and certain liabilities 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 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, compliance
with debt covenants, 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Weeks
|
Vs.
|
12
Weeks
|
|
24
Weeks
|
Vs.
|
24
Weeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 23,
2011
|
|
July 24,
2010
|
|
July 23,
2011
|
|
July 24,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
70,864
|
|
$
76,414
|
|
$ 159,502
|
|
$ 171,913
|
|
|
|
|
|
|
|
|
|
|
|
Cost and expenses:
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive
of depreciation and
|
|
|
|
|
|
|
|
|
|
amortization shown
below)
|
|
5,917
|
|
5,844
|
|
12,311
|
|
12,366
|
|
Selling, general and
administrative expenses
|
|
67,007
|
|
68,880
|
|
140,555
|
|
142,701
|
|
Depreciation and
amortization
|
|
3,738
|
|
4,355
|
|
7,754
|
|
8,820
|
|
Other charges and
impairments
|
|
1,719
|
|
(1,052)
|
|
4,896
|
|
(756)
|
|
|
|
78,381
|
|
78,027
|
|
165,516
|
|
163,131
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from
operations
|
|
(7,517)
|
|
(1,613)
|
|
(6,014)
|
|
8,782
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
651
|
|
1,073
|
|
1,319
|
|
2,333
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense),
net
|
|
(36)
|
|
(51)
|
|
96
|
|
665
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
before income tax (benefit) expense
|
|
(8,204)
|
|
(2,737)
|
|
(7,237)
|
|
7,114
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
(1,905)
|
|
(920)
|
|
(1,600)
|
|
2,391
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
(6,299)
|
|
(1,817)
|
|
(5,637)
|
|
4,723
|
|
Net loss attributable to
noncontrolling interest
|
|
(55)
|
|
-
|
|
(140)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable
to CPI Corp.
|
|
$
(6,244)
|
|
$
(1,817)
|
|
$
(5,497)
|
|
$
4,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common
share attributable to CPI Corp. - diluted
|
|
$
(0.89)
|
|
$
(0.25)
|
|
$
(0.78)
|
|
$
0.65
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common
share attributable to CPI Corp. - basic
|
|
$
(0.89)
|
|
$
(0.25)
|
|
$
(0.78)
|
|
$
0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common and
|
|
|
|
|
|
|
|
|
|
common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
7,040
|
|
7,319
|
|
7,016
|
|
7,249
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
7,040
|
|
7,319
|
|
7,016
|
|
7,244
|
|
|
|
|
|
|
|
|
|
|
CPI
CORP.
|
|
ADDITIONAL
CONSOLIDATED OPERATING INFORMATION
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Weeks
|
Vs.
|
12
Weeks
|
|
24
Weeks
|
Vs.
|
24
Weeks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 23,
2011
|
|
July 24,
2010
|
|
July 23,
2011
|
|
July 24,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
$
1,864
|
|
$
3,406
|
|
$
3,961
|
|
$
8,197
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA is calculated as
follows:
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable
to CPI Corp.
|
|
(6,244)
|
|
(1,817)
|
|
(5,497)
|
|
4,723
|
|
Income tax (benefit)
expense
|
|
(1,905)
|
|
(920)
|
|
(1,600)
|
|
2,391
|
|
Interest expense
|
|
651
|
|
1,073
|
|
1,319
|
|
2,333
|
|
Depreciation and
amortization
|
|
3,738
|
|
4,355
|
|
7,754
|
|
8,820
|
|
Other non-cash charges,
net
|
|
(59)
|
|
68
|
|
(63)
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1) & (5)
|
|
$
(3,819)
|
|
$
2,759
|
|
$
1,913
|
|
$
18,415
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (2)
|
|
$
(2,002)
|
|
$
1,793
|
|
$
6,822
|
|
$
17,043
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin (3)
|
|
-5.39%
|
|
3.61%
|
|
1.20%
|
|
10.71%
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
(4)
|
|
-2.83%
|
|
2.35%
|
|
4.28%
|
|
9.91%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
$
(3,819)
|
|
$
2,759
|
|
$
1,913
|
|
$
18,415
|
|
EBITDA
adjustments:
|
|
|
|
|
|
|
|
|
|
Litigation
costs
|
|
451
|
|
-
|
|
2,194
|
|
-
|
|
Bella Pictures Acquisition
costs
|
|
727
|
|
-
|
|
1,443
|
|
-
|
|
Severance and related
costs
|
|
619
|
|
-
|
|
1,291
|
|
-
|
|
Other transition related
costs - PCA Acquisition
|
|
78
|
|
164
|
|
93
|
|
249
|
|
Translation
gain
|
|
32
|
|
125
|
|
(70)
|
|
(580)
|
|
Kiddie Kandids integration
costs
|
|
(152)
|
|
700
|
|
(105)
|
|
900
|
|
Early termination
fee
|
|
-
|
|
(480)
|
|
-
|
|
(480)
|
|
Gain on sale of Brampton
facility
|
|
-
|
|
(1,482)
|
|
-
|
|
(1,482)
|
|
Other
|
|
62
|
|
7
|
|
63
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
(2,002)
|
|
$
1,793
|
|
$
6,822
|
|
$
17,043
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 23,
2011
|
|
July 24,
2010
|
|
July 23,
2011
|
|
July 24,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
(3,819)
|
|
$
2,759
|
|
$
1,913
|
|
$
18,415
|
|
Income tax benefit
(expense)
|
|
1,905
|
|
920
|
|
1,600
|
|
(2,391)
|
|
Interest expense
|
|
(651)
|
|
(1,073)
|
|
(1,319)
|
|
(2,333)
|
|
Adjustments for items not
requiring cash:
|
|
|
|
|
|
|
|
|
|
Deferred income
taxes
|
|
(3,057)
|
|
(936)
|
|
(3,463)
|
|
1,398
|
|
Deferred revenues and
related costs
|
|
(2,307)
|
|
56
|
|
1,195
|
|
662
|
|
Other, net
|
|
1,954
|
|
(754)
|
|
1,523
|
|
(97)
|
|
Decrease (increase) in current
assets
|
|
3,618
|
|
754
|
|
131
|
|
156
|
|
Increase (decrease) in current
liabilities
|
|
(2,764)
|
|
(1,518)
|
|
(3,225)
|
|
(4,503)
|
|
Increase (decrease) in current
income taxes
|
|
590
|
|
(413)
|
|
(728)
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from continuing
operations
|
|
$
(4,531)
|
|
$
(205)
|
|
$
(2,373)
|
|
$
11,649
|
|
|
|
|
|
|
|
|
|
|
CPI
CORP.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
JULY 23,
2011 AND JULY 24, 2010
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
July 23,
2011
|
|
July 24,
2010
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
2,636
|
|
$
7,961
|
|
Other current
assets
|
|
23,784
|
|
33,068
|
|
Net property and
equipment
|
|
33,358
|
|
33,348
|
|
Intangible
assets
|
|
58,993
|
|
59,876
|
|
Other assets
|
|
21,661
|
|
18,269
|
|
|
|
|
|
|
|
Total assets
|
|
$
140,432
|
|
$
152,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders'
equity
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$
47,624
|
|
$
49,344
|
|
Long-term debt
obligations
|
|
56,200
|
|
53,985
|
|
Other
liabilities
|
|
31,195
|
|
34,932
|
|
Stockholders'
equity
|
|
5,413
|
|
14,261
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
|
$
140,432
|
|
$
152,522
|
|
|
|
|
|
|
SOURCE CPI Corp.