-----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, EHghqYwPuT1W4mRLszmQu3SLamGduwkBxJYyJ1C/g2Nb3GMiH2t+LdsWL/lhKvM0 vL5amtlXuI0FEjHC6+Vm1Q== 0000025354-99-000031.txt : 19991216 0000025354-99-000031.hdr.sgml : 19991216 ACCESSION NUMBER: 0000025354-99-000031 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991215 ITEM INFORMATION: FILED AS OF DATE: 19991215 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: SEC FILE NUMBER: 001-10204 FILM NUMBER: 99775182 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 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) Dec. 13, 1999 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 5. OTHER EVENTS A. On December 13, 1999, CPI Corp. issued the following press release: CPI CORP. ANNOUNCES THIRD QUARTER RESULTS - Loss of 34 cents per share after special charge versus EPS of 59 cents in FY 1998 quarter - Sales down 6.8% mainly due to portrait studio results - Share repurchase program expanded ST. LOUIS, MO., DECEMBER 13, 1999 - CPI CORP. (NYSE - CPY) today announced that net sales for the 16 weeks ended November 13, 1999 declined 6.8 percent to $115.6 million, compared with last year's $124 million, with portrait studios down 8.1 percent. Net losses were $3.3 million, after a special charge, as compared with earnings of $6.1 million in last year's third quarter. The special charge of $3 million before tax primarily represented the write-off of costs related to the failed merger transaction with American Securities Capital Partners, L.P. ("ASCP") and was partially offset by the final $920,000 in amortization of a 1997 two-year non-compete agreement with Eastman Kodak Company ("Kodak"). Last year's amortization of the Kodak agreement was $1.5 million. Diluted losses per share were 34 cents for the quarter compared with 59 cents earnings per share in 1998. The weighted average number of common and equivalent shares outstanding declined 3.5 percent. For the 40 weeks ended November 13, 1999, the company recorded sales of $264.5 million compared with $268.4 million, 1.6 percent behind last year, and net losses of $4.2 million (43 cents loss per share) compared with the prior year's $6.9 million earnings (68 cents earnings per share). The current 40-week period includes $3.2 million income from amortization (pre-tax) of the non-compete agreement compared to last year's 40-week period, which included $3.85 million in non-compete amortization, and a $3.0 million merger transaction expense write-off. While third quarter sales and earnings were disappointing, management believes that the fundamentals of its core Portrait Studio business remain solid. The factors contributing to the decline in third quarter Portrait Studio sales were a lower average sale per customer and a slight reduction in the number of customer sittings. Adversely affecting the customer sales average was the Smile Savers program which was rolled out in May of 1999 and is designed to increase repeat visits and develop long-term customer loyalty by allowing customers to pay a one-time fee for unlimited customer visits for a two year period. The Smile Savers program reduced the average sale per customer because the fee paid at the time of enrollment had a dampening effect on customer purchases of other products and because Smile Savers customers visit the studios more frequently but purchase fewer products per visit. In addition, approximately 50 percent of the enrollment fee is deferred for recognition as revenue over the two year program period, rather than being recognized immediately. Management believes that the Smile Savers program will ultimately increase sales as Smile Savers visits increase and initial deferred sales are recognized as revenue. Through the end of the third quarter, a total of $7.7 million in Smile Savers revenue was deferred, bringing projections for the total Smile Savers revenue deferral through the end of the fiscal year to approximately $11 million compared with $1.1 million at the end of fiscal year 1998. For the 52 weeks ended November 13, 1999, sales were $385.6 million compared with $388.2 million for the 53 weeks ended November 14, 1998. Net earnings were $10.8 million ($1.05 earnings per share) compared with $21.4 million ($2.03 earnings per share), including $4.4 million and $5.1 million in amortization of the non-compete agreement for the respective periods as well as the $3.0 million write off of transaction expense. The company also announced that its Board of Directors had authorized the purchase of up to one million additional shares of its common stock in the open market. Since resuming its stock repurchase program on October 19, 1999, the company has purchased nearly 870,000 shares, completing the purchase of all previously authorized stock repurchases. As of December 10, 1999, a total of 9,057,939 shares of the company's common stock were outstanding. Discussing Sears Portrait Studio results, Alyn V. Essman, chairman and chief executive officer, said, "We know that 1999 has been a year of significant activity, investment and disruption and is disappointing from an earnings point of view. While sales for the 40 weeks ended November 13 are just 1.6 percent behind the comparable period for last year, our full-year earnings will suffer as a result of several factors that are related to events and developments peculiar to 1999: 1. Installation and training for new programs were responsible for about $4 million increase in studio employment and related expenses, as well as the temporary disruption of normal selling and operating routines. 2. The termination of our agreement of merger with ASCP caused the expensing of costs related to the terminated merger, which amounted to $3 million. 3. Operating results have been affected by the preparation of the company's information systems and related operations for the millennium (the Y2K issue). Further discussion of the effects of Y2K issues for the company can be found in SEC disclosure documents outlining those activities. Since those efforts are substantially complete, continuing expenses should be reduced accordingly. 4. Company-wide introduction of the Smile Savers program reduced the customer sales average and resulted in deferral of revenues as previously discussed." Continuing, Mr. Essman said, "We look forward now to year 2000 when we will be able to return to more normal conditions as we take a breather from the investment and disruption that has characterized the last few years. We expect to improve earnings next year as the Smiles Savers program begins to mature, our field staff takes full advantage of their training and we reduce expense levels, which naturally tend to escalate during periods of high investment and operating disruption. Additionally, we will reduce capital expenditures for the year 2000 as we defer installation of the full integration component of the Store Automation System (SAS) until 2001 and the first part of 2002. The impact of these activities should start to appear as early as the first quarter of 2000. Our cost reductions and efforts to drive revenue growth should provide an opportunity for profit improvement next year." Turning to the Wall Decor segment, Essman said, "Third quarter sales in our Prints Plus business showed moderate growth to $18.0 million from $17.8 million, and gross profit was marginally lower, as operating losses increased to $1.0 million from last year's $674,000 loss." Looking forward, we expect 4th quarter Sears Portrait Studio sales to be approximately the same as last year's record 4th quarter. Fourth quarter earnings, however, are difficult to predict and will be negatively affected by increased employment expenses and the absence of amortization of the non-compete agreement. The statements contained in this report, which are not historical facts, are forward-looking statements that involve risks and uncertainties. Management wishes to caution the reader that these forward-looking statements, such as the company's outlook for Sears Portrait Studios and Prints Plus, 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 ongoing ability to develop and introduce attractive new products, the overall level of economic activity in the company's major markets, the effectiveness of marketing activities of major competitors, manufacturing interruptions, dependence on certain suppliers, fluctuations in operating results, the attraction and retention of qualified personnel, Year 2000 compliance issues and other risks as may be described in the company's filings with the Securities and Exchange Commission, including its Form 10-K for the year ended February 6, 1999. CPI is a consumer services company with $389.5 million in fiscal 1998 sales, operating approximately 1,200 retail locations, including 1,033 Sears Portrait Studios in the U.S., Puerto Rico and Canada and 156 Prints Plus wall decor stores. CPI CORP. CONDENSED STATEMENTS OF EARNINGS - FOR THE SIXTEEN WEEKS ENDED NOVEMBER 13, 1999 AND November 14, 1998 (in thousands of dollars except per share amounts) (Unaudited)
16 Weeks Ended ---------------------- 11/13/99 11/14/98 ---------- ---------- Net Sales: Portrait studios $ 97,596 $ 106,171 Wall decor 17,967 17,834 ---------- ---------- Total net sales $ 115,563 $ 124,005 ========== ========== Operating earnings: Portrait studios $ 3,038 $ 13,577 Wall decor (1,045) (674) ---------- ---------- Total operating earnings 1,993 12,903 General corporate expense 4,583 4,879 ---------- ---------- Income (loss) from operations (2,590) 8,024 Net interest expense 572 311 Other expense 3,000 - Other income 1,019 1,596 ---------- ---------- Earnings (loss) from operations before income taxes (5,143) 9,309 Income tax expense (benefit) (1,800) 3,258 ---------- ---------- Net earnings (loss) $ (3,343) $ 6,051 ========== ========== Earnings (loss) per common share: Diluted $ (0.34) $ 0.59 Basic $ (0.34) $ 0.61 Weighted average number of common and common equivalent shares outstanding: Diluted 9,838 10,200 Basic 9,838 9,961
CPI CORP. CONDENSED STATEMENTS OF EARNINGS - FOR THE FORTY WEEKS ENDED JULY 24, 1999 AND JULY 25, 1998 (in thousands of dollars except per share amounts) (Unaudited)
40 Weeks Ended ---------------------- 11/13/99 11/14/98 ---------- ---------- Net Sales: Portrait studios $ 221,152 $ 224,646 Wall decor 43,302 43,710 ---------- ---------- Total net sales $ 264,454 $ 268,356 ========== ========== Operating earnings: Portrait studios $ 7,715 $ 20,099 Wall decor (3,006) (2,620) ---------- ---------- Total operating earnings 4,709 17,479 General corporate expense 10,297 10,056 ---------- ---------- Income (loss) from operations (5,588) 7,423 Net interest expense 1,279 823 Other expense 3,000 - Other income 3,361 4,065 ---------- ---------- Earnings (loss) from operations before income taxes (6,506) 10,665 Income tax expense (benefit) (2,277) 3,733 ---------- ---------- Net earnings (loss) $ (4,229) $ 6,932 ========== ========== Earnings (loss) per common share: Diluted $ (0.43) $ 0.68 Basic $ (0.43) $ 0.70 Weighted average number of common and common equivalent shares outstanding: Diluted 9,880 10,246 Basic 9,880 9,963
CPI CORP. CONDENSED STATEMENTS OF EARNINGS - FOR THE FIFTY-TWO WEEKS ENDED NOVEMBER 13, 1999 AND THE FIFTY-THREE WEEKS ENDED NOVEMBER 14, 1998 (in thousands of dollars except per share amounts) (Unaudited)
52 Weeks 53 Weeks Ended Ended ---------- ---------- 11/13/99 11/14/98 ---------- ---------- Net Sales: Portrait studios $ 322,053 $ 322,689 Wall decor 63,555 65,543 ---------- ---------- Total net sales $ 385,608 $ 388,232 ========== ========== Operating earnings: Portrait studios $ 31,891 $ 44,824 Wall decor 617 (389) ---------- ---------- Total operating earnings 32,508 44,435 General corporate expense 16,159 15,594 ---------- ---------- Income (loss) from operations 16,349 28,841 Net interest expense 1,373 598 Other expense 3,000 - Other income 4,612 5,381 ---------- ---------- Earnings (loss) from operations before income taxes 16,588 33,624 Income tax expense (benefit) 5,805 12,228 ---------- ---------- Net earnings (loss) $ 10,783 $ 21,396 ========== ========== Earnings (loss) per common share: Diluted $ 1.05 $ 2.03 Basic $ 1.09 $ 2.08 Weighted average number of common and common equivalent shares outstanding: Diluted 10,223 10,541 Basic 9,871 10,265
CPI CORP. CONDENSED BALANCE SHEETS - FOR NOVEMBER 13, 1999 AND NOVEMBER 14, 1998 (in thousands - unaudited)
11/13/99 11/14/98 --------- --------- Assets Current assets: Cash and cash equivalents $ 48,333 $ 10,247 Other current assets 61,624 96,566 Net property and equipment 112,397 113,183 Other assets 7,659 8,905 --------- --------- Total assets $ 230,013 $ 228,901 ========= ========= Liabilities and stockholders' equity Current liabilities $ 50,664 $ 50,650 Long-term obligations 59,624 59,547 Other liabilities 26,395 16,856 Stockholders' equity 93,330 101,848 --------- --------- Total liabilities and stockholders' equity $ 230,013 $ 228,901 ========= =========
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 thereunto duly authorized. CPI CORP. (Registrant) /s/ Barry Arthur ----------------------------- Barry Arthur Authorized Officer and Principal Financial Officer Dated: December 15, 1999 -----END PRIVACY-ENHANCED MESSAGE-----