-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SIJtxCaPDkRu0BAxjHTZ3EmqTVkTWqs0k05uubRywNSS1eksbAfrzqKAPP6GbLaB UMn4SGC/wvaxXcRjo20G3w== 0000025354-03-000036.txt : 20030815 0000025354-03-000036.hdr.sgml : 20030815 20030815170222 ACCESSION NUMBER: 0000025354-03-000036 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030719 ITEM INFORMATION: FILED AS OF DATE: 20030815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CPI CORP CENTRAL INDEX KEY: 0000025354 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 431256674 STATE OF INCORPORATION: DE FISCAL YEAR END: 0206 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10204 FILM NUMBER: 03851230 BUSINESS ADDRESS: STREET 1: 1706 WASHINGTON AVE CITY: ST LOUIS STATE: MO ZIP: 63103-1790 BUSINESS PHONE: 3142311575 MAIL ADDRESS: STREET 1: 1706 WASHINGTON AVE CITY: ST LOUIS STATE: MO ZIP: 63103 8-K 1 cpi8kpr81503.txt CPI CORP PRESS RELEASE ON 2ND QUARTER RESULTS FOR FY 2003 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) August 14, 2003 CPI CORP. _______________________________________________________________ (exact name of registrant as specified in its charter) Delaware 0-11227 43-1256674 _______________________________________________________________ (State or other jurisdiction (Commission file (IRS Employer of incorporation) Number) Identification No.) 1706 Washington Avenue, St. Louis, Missouri 63103-1790 _________________________________________________________________ (Address of principal executive offices) (Zip code) Registrants' telephone number, including area code (314) 231-1575 _________________________________________________________________ _________________________________________________________________ (Former name or former address, if changes since last report.) ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION A. On August 14, 2003, CPI Corp. issued the following press release announcing second quarter FY 2003 results. CPI CORP. NEWS FOR IMMEDIATE RELEASE FOR RELEASE AUGUST 14, 2003 FOR FURTHER INFORMATION CONTACT: NAME: Jane Nelson FROM: CPI Corp. ADDRESS: 1706 Washington Avenue CITY: St. Louis STATE, ZIP: Missouri 63103 TELEPHONE: (314)231-1575 -------------------------------------------------------------- FOR FURTHER INFORMATION AT FRB/WEBERSHANDWICK Diane Hettwer, Chicago 312/640-6760 CPI CORP. ANNOUNCES 2003 SECOND QUARTER RESULTS, ----------------------------------------------- ST. LOUIS, MO, AUGUST 14, 2003 - CPI CORP. (NYSE-CPY) today reported a net loss for the 12-week second quarter ended July 19, 2003 of $826,000 or $0.10 per diluted share compared to a net loss of $8,000 or less than $0.01 per diluted share for the comparable quarter in fiscal 2002. Despite higher reported sales, the quarter was negatively impacted by increased expenses incurred in anticipation of higher planned sales levels and the continuing costs, in advance of meaningful sales, associated with the Company's new ventures, mobile photography and Mexican studio operations. Net sales for the second quarter of 2003 increased $3.8 million or 7% to $61.1 million from the $57.3 million reported in the second quarter of 2002. The increase in reported sales in the second quarter is a result of the timing of Easter in 2003. As Easter was near the end of the Company's first quarter of 2003, this resulted in the delivery of Easter portraits to customers after the end of the Company's first quarter and, accordingly, the deferral of the recognition of the related sales. This increased amount of deferred revenue was recognized as revenue in the Company's 2003 second quarter as the related portraits were delivered to customers. During the second quarter of 2003, sittings were 907,000, a decrease of 2% from the 929,000 sittings generated in 2002. Excluding the positive impact of the late 2003 Easter on the second quarter of 2003, sittings declined 4% versus the reported 2% decline. The average sale per customer sitting in the second quarter of 2003 was $66.78 or 8% higher than the $61.56 realized in the second quarter of 2002. The decrease in sittings is primarily attributable to the continuing impact of competitive pressures, including increases in the number of competitors' locations. The increase in average sales per customer sitting resulted from: * The continuing strong sales performance related to the Company's March 2003 domestic-wide rollout of digitally enhanced products referred to as Portrait Creations(R). * The ongoing positive effect of the Company's decision made late in the second quarter of 2002 to begin selling customer proof sheets which had previously been provided free of charge as part of the custom offer. * The Company's continuing success in converting more of its customers to the higher value custom offer. Losses from operations for the second quarter of 2003 were $1.2 million compared to a $104,000 loss recorded in the comparable quarter of the prior year. The increased level of operating losses was attributable to a $6.3 million increase in selling, general and administrative expenses only partially offset by the $3.8 million increase in reported sales, a $327,000 decline in cost of sales, primarily resulting from reduced levels of sittings, and a $1.0 million decline in depreciation expense. The increase in selling, general and administrative expenses was primarily attributable to increases in studio employment costs and advertising expenses of $1.0 million and $1.1 million, respectively, as well as $1.2 million in costs associated with the commencement of the mobile photography and Mexican studio operations and $1.0 million in expenses relating to costs that were inventoried in the first quarter of 2003 and recognized as expenses in the second quarter at the time the related portraits were delivered to the customers. An additional $1.9 million increase in costs related to various other selling, general and administrative expenses including studio supplies and maintenance, telephone expense, employee insurance, pension expense and administrative salaries. The increase in studio employment costs was largely attributable to annual wage rate increases and increased hours to support the continuing strong sales of the Company's new digitally enhanced Portrait Creations(R) product introduced in the first quarter of 2003 coupled with additional coverage hours in certain higher volume studios. The increased advertising expenses were planned accelerated timing changes and related to Hispanic television, market research and creative development. Favorable advertising expense comparisons to the prior year are expected in the second half of 2003 as the overall advertising budget for 2003 is comparable to the total advertising spending in 2002. The decrease in depreciation expense resulted from certain assets becoming fully depreciated beginning in the second quarter of 2002. 2003 FIRST HALF RESULTS ----------------------- The Company further reported a net loss for the 24-week first half ended July 19, 2003 of $3.6 million or $0.44 per diluted share compared to a net loss of $722,000 or $0.09 per diluted share for the comparable first half in fiscal 2002. The reported net loss for the first half of 2003 was largely attributable to reported sales being comparable to the prior year period while costs were generally incurred at a level consistent with a higher planned level of sales which did not materialize. In addition, costs comparisons to the prior year first half were negatively impacted by costs approximating $2.0 million incurred in connection with the commencement of the Company's new ventures in mobile photography and Mexican studio operations in the first half of 2003. Total net sales for the first half of 2003 were $117.3 million, an increase of $100,000 from the $117.2 million recorded in 2002, as an 8% increase in average sales per customer sitting from $60.16 to $64.99 offset an 8% decrease in sittings from 1,943,000 to 1,793,000. Losses from operations for the first half of 2003 were $5.3 million compared to a $708,000 loss in the comparable first half of the prior year. The increased level of losses was attributable to the $7.8 million increase in selling, general and administrative expenses only partially offset by the $100,000 increase in reported sales, a $700,000 decline in cost of sales, primarily resulting from reduced sitting levels, and a $2.3 million decline in depreciation expense. The increase in selling, general and administrative expenses was primarily attributable to increases in studio employment costs and the planned accelerated timing of advertising expenses of $2.5 million and $2.0 million, respectively, as well as $1.9 million in costs associated with the commencement of the mobile photography and Mexican studio operations. An additional $1.2 million increase in costs related to various other selling, general and administrative expenses including studio supplies and maintenance, pension expense and administrative salaries. ELIMINATION OF EXCLUSIVITY PROVISIONS IN SEARS' AGREEMENT --------------------------------------------------------- The Company also announced today the execution of an amendment to its agreement with Sears eliminating the existing exclusivity provision from that agreement. In return for the removal of the exclusivity provision, the Company, upon certain conditions, has agreed to provide Sears with certain minimum levels of revenue through 2008, the remaining term of the current agreement. The elimination of the exclusivity provision frees the Company to explore growth opportunities previously precluded under the exclusivity provisions of the agreement. Commenting, J. David Pierson, Chairman and Chief Executive Officer, said, "Exclusive of the increase in second quarter sales which was substantially attributable to the late Easter in 2003, second quarter and year-to-date sales are comparable to those recorded in the same year-ago periods. We planned for a higher level of sales in 2003 and unfortunately have not yet achieved our goals. We have, however, incurred higher costs in anticipation of and in attempts to generate those higher sales in the second quarter and the first half compared to comparable periods of 2002." Continuing, he said, "On the revenue side, our average customer sale grew from $61.56 to $66.78 in the second quarter and from $60.16 to $64.99 in the first half, both very strong performances and significantly driven by a continuing strong customer response to our recently introduced Portrait Creations(R) products. In addition, during the second quarter we saw additional evidence that our New Mom offer is working by bringing the all-important New Mom back into our studios. Unfortunately, sittings, especially from our package customers, continue to decline. We are attempting to address this decline in our value-oriented customers through selective, more aggressive offers that we have just recently placed in the market. On the cost side, we are taking aggressive cost reduction steps in the second half to bring our overall cost structure, especially studio employment and advertising, back into line on a percentage of sales basis for the year with what will likely be a lower level of overall sales than we had planned for. In addition, we do expect our new ventures to contribute more meaningful sales in the second half that should partially negate the net negative impact that the new ventures have had on our operating results to date." Pierson added, "For the third quarter of 2003, quarter-to-date sales are comparable to the same period a year ago resulting from an approximate 2% decline in sittings being offset by a comparable increase in our sales average. We are encouraged by the partial recovery in the volume of our sittings compared to the percentage declines we have been experiencing throughout 2003 and for most of 2002." Concluding, Pierson said, "While our Sears Portrait Studio business will continue to be CPI's foundation, termination of the exclusivity provision of the Sears agreement provides us the flexibility to explore, and potentially pursue, growth opportunities beyond Sears. Moreover, the amendment to our agreement and the discussions that led up to it demonstrate the enduring strength of our relationship with Sears." NEW VENTURE UPDATE ------------------ Mobile Photography ------------------ The Company through its Every Day Expressions(R) division is now offering mobile photography services to childcare centers and youth sports associations in 27 markets throughout the United States. In addition, other "event" photography sessions (e.g. concerts, car races, etc.) are being pursued on an opportunistic basis in selected markets. Mexico ------ We have opened three additional studios inside our Mexican host Soriana and its City Club format during the second quarter bringing our total studio count to four. Current plans call for opening a minimum of eleven additional studios by the end of our fiscal year. SHARE REPURCHASE UPDATE ----------------------- On June 3, 2003, the Company announced that the Board of Directors had authorized an open market share repurchase of up to 5% of the Company's outstanding common shares. Because of the timing of the announcement, the then-current Russell 2000 Index rebalancing that was taking place and the black-out period prior to the end of our second quarter and continuing to date, the Company has yet to repurchase any shares under the recently announced authorization. * * * * * * * The Company will host a conference call for investors to discuss second quarter results on Friday, August 15, 2003 at 11:00 a.m. Eastern, 10:00 a.m. Central, 9:00 a.m. Mountain, 8:00 a.m. Pacific. To participate, please dial 800-437-4632 or 706-634-1012 at least 5 minutes before start time. To listen to a live broadcast via the Internet, go to www.companyboardroom.com or the CPI website at www.cpicorp.com at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. If you are unable to participate on the call, a replay will be available through August 22, 2003 by dialing 800-642-1687 or 706-645-9291 passcode 2121755. A replay will also be available on CPI's website for approximately 30 days. CPI Corp. is a portrait photography company offering studio photography services in the United States, Puerto Rico, and Canada through Sears Portrait Studios and in Mexico in Soriana and its City Club format. The Company also provides mobile photography services in the United States to childcare centers, sports associations and other events through Every Day Expressions(R). In addition, the Company operates searsphotos.com, an on-line photofinishing service as well as a vehicle for the Company's customers to archive, share portraits via email and order additional portraits and products. The statements contained in this press release that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 and involve risks and uncertainties. Management wishes to caution the reader that these forward-looking statements, which are identified by such words as "intends", "expects", "anticipates" or words of similar import, 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: customer demand for the Company's products and services, the overall level of economic activity in the Company's major markets, competitors' actions, manufacturing interruptions, dependence on certain suppliers, changes in the Company's relationship with Sears, Roebuck and Company ("Sears") and the condition and strategic planning of Sears, fluctuations in operating results, the condition of Prints Plus, the attraction and retention of qualified personnel and other risks as may be described in the Company's filings with the Securities and Exchange Commission. FINACIAL TABLES TO FOLLOW CPI CORP. CONDENSED STATEMENTS OF OPERATIONS-FOR THE TWELVE WEEKS ENDED JULY 19, 2003 and JULY 20, 2002 (in thousands of dollars except per share amounts) (unaudited) 12 Weeks Ended ----------------------- 07/19/03 07/20/02 ---------- ---------- Net sales $ 61,089 $ 57,314 Cost and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 8,046 8,373 Selling, general and administrative expenses 50,461 44,234 Depreciation and amortization 3,801 4,811 Other charges and impairments - - ---------- ---------- 62,308 57,418 Income (loss) from operations (1,219) (104) Interest expense 715 858 Interest income 564 694 Other income, net 26 24 ---------- ---------- Earnings (loss) from continuing operations before income taxes (1,344) (244) Income tax expense (benefit) (518) (101) ---------- ---------- Net earnings (loss) from continuing operations (826) (143) Net earnings (loss) from discontinued operations, net of income tax expense (benefits) - 135 ---------- ---------- Net earnings (loss) $ (826) $ (8) ========== ========== Earnings (loss) per common share- diluted From continuing operations $ (0.10) $ (0.01) From discontinued operations - 0.01 ---------- ---------- Net earnings (loss)- diluted $ (0.10) $ (0.00) ========== ========== Earnings (loss) per common share- basic From continuing operations $ (0.10) $ (0.01) From discontinued operations - 0.01 ---------- ---------- Net earnings (loss)- basic $ (0.10) $ (0.00) ========== ========== Weighted average number of common and common equivalent shares outstanding: Diluted 8,101 8,038 Basic 8,101 8,038 CPI CORP. CONDENSED STATEMENTS OF OPERATIONS-FOR THE TWENTY-FOUR WEEKS ENDED JULY 19, 2003 and JULY 20, 2002 (in thousands of dollars except per share amounts) (unaudited) 24 Weeks Ended ----------------------- 07/19/03 07/20/02 ---------- ---------- Net sales $ 117,344 $ 117,157 Cost and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 16,027 16,737 Selling, general and administrative expenses 98,812 91,048 Depreciation and amortization 7,825 10,080 Other charges and impairments - - ---------- ---------- 122,664 117,865 Income (loss) from operations (5,320) (708) Interest expense 1,484 1,770 Interest income 938 1,107 Other income, net 78 42 ---------- ---------- Earnings (loss) from continuing operations before income taxes (5,788) (1,329) Income tax expense (benefit) (2,233) (527) ---------- ---------- Net earnings (loss) from continuing operations (3,555) (802) Net earnings (loss) from discontinued operations, net of income tax expense (benefits) - 80 ---------- ---------- Net earnings (loss) $ (3,555) $ (722) ========== ========== Earnings (loss) per common share- diluted From continuing operations $ (0.44) $ (0.10) From discontinued operations - 0.01 ---------- ---------- Net earnings (loss)- diluted $ (0.44) $ (0.09) ========== ========== Earnings (loss) per common share- basic From continuing operations $ (0.44) $ (0.10) From discontinued operations - 0.01 ---------- ---------- Net earnings (loss)- basic $ (0.44) $ (0.09) ========== ========== Weighted average number of common and common equivalent shares outstanding: Diluted 8,101 8,035 Basic 8,101 8,035 CPI CORP. CONDENSED STATEMENTS OF OPERATIONS-FOR THE FIFTY-TWO WEEKS ENDED JULY 19, 2003 and JULY 20, 2002 (in thousands of dollars except per share amounts) (unaudited) 52 Weeks Ended ----------------------- 07/19/03 07/20/02 ---------- ---------- Net sales $ 308,832 $ 313,858 Cost and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 38,905 42,368 Selling, general and administrative expenses 237,470 232,492 Depreciation and amortization 17,802 22,869 Other charges and impairments 6,042 3,908 ---------- ---------- 300,219 301,637 Income (loss) from operations 8,613 12,221 Interest expense 3,293 3,922 Interest income 1,840 2,192 Other income, net 147 291 ---------- ---------- Earnings (loss) from continuing operations before income taxes 7,307 10,782 Income tax expense (benefit) 2,427 3,554 ---------- ---------- Net earnings (loss) from continuing operations 4,880 7,228 Net earnings (loss) from discontinued operations, net of income tax expense (benefits) (1,174) (190) ---------- ---------- Net earnings (loss) $ 3,706 $ 7,038 ========== ========== Earnings (loss) per common share- diluted From continuing operations $ 0.60 $ 0.90 From discontinued operations (0.14) (0.02) ---------- ---------- Net earnings (loss)- diluted $ 0.46 $ 0.88 ========== ========== Earnings (loss) per common share- basic From continuing operations $ 0.60 $ 0.90 From discontinued operations (0.14) (0.02) ---------- ---------- Net earnings (loss)- basic $ 0.46 $ 0.88 ========== ========== Weighted average number of common and common equivalent shares outstanding: Diluted 8,108 8,038 Basic 8,070 7,977 CPI CORP. CONDENSED BALANCE SHEETS - FOR JULY 19, 2003 AND JULY 20, 2002 (in thousands) (unaudited) 07/19/03 07/20/02 ----------- ------------ Assets Current assets: Cash and cash equivalents $ 43,985 $ 31,572 Other current assets 36,658 41,908 Net property and equipment 47,957 58,263 Other assets 37,258 36,008 ----------- ------------ Total assets $ 165,858 $ 167,751 =========== ============ Liabilities and stockholders' equity Current liabilities $ 68,125 $ 64,522 Long-term obligations 25,563 34,084 Other liabilities 22,369 14,421 Stockholders' equity 49,801 54,724 ----------- ------------ Total liabilities and stockholders' equity $ 165,858 $ 167,751 =========== ============ CPI CORP. ADDITIONAL OPERATING INFORMATION TWELVE WEEKS ENDED JULY 19, 2003 and JULY 20, 2002 (unaudited) 12 Weeks Ended ------------------ 07/19/03 07/20/02 -------- -------- Studio sittings: (in thousands) Custom 583 568 Package 324 361 -------- -------- Total sittings 907 929 ======== ======== Studio average sales per customer sitting:(in dollars) Custom $ 77.69 $ 71.48 Package $ 47.18 $ 45.96 Overall $ 66.78 $ 61.56 Capital expenditures (in thousands $) $ 5,263 $ 2,944 EBITDA is calculated as follows: Net earnings (loss) from continuing operations $ (826) $ (143) Income tax expense (benefit) (518) (101) Interest expense 715 858 Depreciation and amortization 3,801 4,811 Other non-cash charges 72 288 -------- -------- EBITDA (1) & (5) $ 3,244 $ 5,713 ======== ======== Adjusted EBITDA (2) $ 3,244 $ 5,800 EBITDA margin (3) 5.31% 9.97% Adjusted EBITDA margin (4) 5.31% 10.12% (1) EBITDA represents net earnings (loss) from continuing operations in thousands of dollars 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. CPI CORP. ADDITIONAL OPERATING INFORMATION TWELVE WEEKS ENDED JULY 19, 2003 and JULY 20, 2002 (unaudited) (CONTINUED) (2) Adjusted EBITDA is calculated as follows: 12 Weeks Ended ------------------ 07/19/03 07/20/02 -------- -------- EBITDA $ 3,244 $ 5,713 EBITDA adjustments: Executive retirements - - Strategic planning costs - - Employee severance pay - 87 Accrual for remaining lease obligations - - Other - - -------- -------- Adjusted EBITDA $ 3,244 $ 5,800 ======== ======== (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 recently issued 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 Ended -------------------- 07/19/03 07/20/02 --------- --------- EBITDA $ 3,244 $ 5,713 Income tax benefit (expense) 518 101 Interest expense (715) (858) Adjustments for items not requiring cash: Deferred income taxes (786) (106) Customer deposit liability (4,354) (1,176) Other, net (794) (978) Decrease (increase) in current assets 2,801 (3,058) Increase (decrease) in current liabilities 870 (23) Increase (decrease) in current income taxes 689 (133) --------- --------- Cash flows from continuing operations $ 1,473 $ (518) ========= ========= CPI CORP. ADDITIONAL OPERATING INFORMATION TWENTY-FOUR WEEKS ENDED JULY 19, 2003 and JULY 20, 2002 (unaudited) 24 Weeks Ended ------------------ 07/19/03 07/20/02 -------- -------- Studio sittings: (in thousands) Custom 1,104 1,146 Package 689 797 -------- -------- Total sittings 1,793 1,943 ======== ======== Studio average sales per customer sitting:(in dollars) Custom $ 76.93 $ 70.15 Package $ 45.84 $ 45.81 Overall $ 64.99 $ 60.16 Capital expenditures (in thousands $) $ 8,382 $ 4,910 EBITDA is calculated as follows: Net earnings (loss) from continuing operations $(3,555) $ (802) Income tax expense (benefit) (2,233) (527) Interest expense 1,484 1,770 Depreciation and amortization 7,825 10,080 Other non-cash charges 108 383 -------- -------- EBITDA (1) & (5) $ 3,629 $10,904 ======== ======== Adjusted EBITDA (2) $ 3,629 $11,553 EBITDA margin (3) 3.09% 9.31% Adjusted EBITDA margin (4) 3.09% 9.86% (1) EBITDA represents net earnings (loss) from continuing operations in thousands of dollars 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. CPI CORP. ADDITIONAL OPERATING INFORMATION TWENTY-FOUR WEEKS ENDED JULY 19, 2003 and JULY 20, 2002 (unaudited) (CONTINUED) (2) Adjusted EBITDA is calculated as follows: 24 Weeks Ended ------------------ 07/19/03 07/20/02 -------- -------- EBITDA $ 3,629 $10,904 EBITDA adjustments: Executive retirements - - Strategic planning costs - 649 Employee severance pay - - Accrual for remaining lease obligations - - Other - - -------- -------- Adjusted EBITDA $ 3,629 $11,553 ======== ======== (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 recently issued 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: 24 Weeks Ended -------------------- 07/19/03 07/20/02 --------- --------- EBITDA $ 3,629 $ 10,904 Income tax benefit (expense) 2,233 527 Interest expense (1,484) (1,770) Adjustments for items not requiring cash: Deferred income taxes (1,480) 51 Customer deposit liability (315) 1,027 Other, net (1,137) (4,038) Decrease (increase) in current assets (1,305) (4,707) Increase (decrease) in current liabilities 572 (2,388) Increase (decrease) in current income taxes 3,338 (544) --------- --------- Cash flows from continuing operations $ 4,051 $ (938) ========= ========= CPI CORP. ADDITIONAL OPERATING INFORMATION FIFTY-TWO WEEKS ENDED JULY 19, 2003 and JULY 20, 2002 (unaudited) 52 Weeks Ended -------------------- 07/19/03 07/20/02 --------- --------- Studio sittings: (in thousands) Custom 3,009 3,104 Package 1,859 2,316 --------- --------- Total sittings 4,868 5,420 ========= ========= Studio average sales per customer sitting:(in dollars) Custom $ 74.26 $ 69.83 Package $ 44.87 $ 41.67 Overall $ 63.04 $ 57.80 Capital expenditures (in thousands $) $ 12,514 $ 10,132 EBITDA is calculated as follows: Net earnings (loss) from continuing operations $ 4,880 $ 7,228 Income tax expense (benefit) 2,427 3,554 Interest expense 3,293 3,922 Depreciation and amortization 17,802 22,869 Other non-cash charges 4,619 370 --------- --------- EBITDA (1) & (5) $ 33,021 $ 37,943 ========= ========= Adjusted EBITDA (2) $ 34,687 $ 42,501 EBITDA margin (3) 10.69% 12.09% Adjusted EBITDA margin (4) 11.23% 13.54% (1) EBITDA represents net earnings (loss) from continuing operations in thousands of dollars 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. CPI CORP. ADDITIONAL OPERATING INFORMATION FIFTY-TWO WEEKS ENDED JULY 19, 2003 and JULY 20, 2002 (unaudited) (CONTINUED) (2) Adjusted EBITDA is calculated as follows: 52 Weeks Ended -------------------- 07/19/03 07/20/02 --------- --------- EBITDA $ 33,021 $ 37,943 EBITDA adjustments: Executive retirements 380 2,754 Strategic planning costs 39 649 Employee severance pay 916 1,155 Accrual for remaining lease obligation 250 - Other 81 - --------- --------- Adjusted EBITDA $ 34,687 $ 42,501 ========= ========= (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 recently issued 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: 52 Weeks Ended -------------------- 07/19/03 07/20/02 --------- --------- EBITDA $ 33,021 $ 37,943 Income tax benefit (expense) (2,427) (3,554) Interest expense (3,293) (3,922) Adjustments for items not requiring cash: Deferred income taxes (3,334) (1,221) Customer deposit liability (1,050) 487 Other, net (512) (6,972) Decrease (increase) in current assets 1,693 148 Increase (decrease) in current liabilities 3,348 915 Increase (decrease) in current income taxes 6,193 2,041 --------- --------- Cash flows from continuing operations $ 33,639 $ 25,865 ========= ========= SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CPI CORP. --------------------------- (Registrant) By: /s/ Gary W. Douglass --------------------------- Gary W. Douglass Authorized Officer and Principal Financial Officer Dated: AUGUST 15, 2003 -----END PRIVACY-ENHANCED MESSAGE-----