SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended November 11, 1995
Commission File Number 1-10204
CPI CORP.
------------------------------------------------------------
(Exact Name of Registrant as Specified In Its Charter)
Delaware 43-1256674
- ---------------------------- -------------------
(State of Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1706 Washington Avenue, St. Louis, Missouri 63103-1790
- -------------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (314) 231-1575
--------------
Indicate by check mark whether the registrant has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and has been subject to such filing requirements for
the past 90 days.
Yes ______X______ No ____________
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest practicable
date.
Common Stock $.40 par value 13,866,854 shares
- --------------------------- --------------------------------
Class Outstanding at December 21, 1995
<PAGE>
CPI CORP.
INDEX
Part I. Financial Information:
Item 1. Financial Statements:
Interim Condensed Consolidated Balance
Sheets - November 11, 1995, November 12, 1994
and February 4, 1995
Interim Condensed Consolidated Statements
of Earnings - For the 16 and 40 Weeks
Ended November 11, 1995 and November 12, 1994
Interim Condensed Consolidated Statements
of Changes in Stockholders' Equity - For
the 52 Weeks Ended February 4, 1995 and
for the 40 Weeks Ended November 11, 1995
Interim Condensed Consolidated Statements
of Cash Flows - For the 40 Weeks Ended
November 11, 1995 and November 12, 1994
Notes to Interim Condensed Consolidated
Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Item 6.(a) Exhibits
Exhibit 11 - Computation of Earnings
per Common Share
Exhibit 27 - Financial Data Schedule
Part II. Other Information:
Item 6.(b) Reports on Form 8-K
Signature
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS - ASSETS
(UNAUDITED)
<CAPTION>
November 11, November 12, February 4,
1995 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current assets:
Cash $ 2,195,719 $ 5,577,392 $ 4,023,435
Short-term investments 7,291,075 12,138,025 10,326,347
Receivables 32,686,933 35,391,861 23,119,562
Inventories 37,951,392 37,102,782 33,943,140
Deferred costs applicable
to unsold portraits --- 795,551 172,645
Deferred income taxes, net 669,554 --- 244,910
Prepaid expenses and other
current assets 12,493,134 14,830,336 10,152,414
------------ ------------ ------------
Total current assets 93,287,807 105,835,947 81,982,453
------------ ------------ ------------
Net property and equipment 170,499,966 157,110,816 159,125,536
Other assets:
Intangible assets 53,289,424 57,319,447 56,362,451
Other long-term assets 3,386,417 3,039,224 3,010,636
------------ ------------ ------------
Total assets $320,463,614 $323,305,434 $300,481,076
============ ============ ============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS -
LIABILITIES (UNAUDITED)
<CAPTION>
November 11, November 12, February 4,
1995 1994 1995
------------- ------------ ------------
<S> <C> <C> <C>
Current liabilities:
Short-term borrowings $ 27,825,000 $ 29,050,000 $ 6,850,000
Current maturities of
long-term
obligations 5,007,293 146,516 127,506
Accounts payable 28,314,973 39,350,326 27,137,106
Accrued expenses and
other liabilities 29,260,802 28,767,001 25,884,038
Income taxes 2,228,835 3,380,763 9,768,352
Deferred income taxes,
net --- 1,980,948 ---
------------- -------------- -------------
Total current
liabilities 92,636,903 102,675,554 69,767,002
------------- -------------- -------------
Long-term obligations,
less current
maturities 54,791,509 59,738,368 59,742,426
Other liabilities 4,549,421 3,844,962 4,346,139
Deferred income taxes,
net 1,730,738 458,676 625,388
------------- -------------- -------------
Total liabilities 153,708,571 166,717,560 134,480,955
------------- ------------- -------------
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS -
STOCKHOLDERS' EQUITY (UNAUDITED)
<CAPTION>
November 11, November 12, February 4,
1995 1994 1995
------------- ------------- ------------
<S> <C> <C> <C>
Stockholders' equity:
Preferred stock, no
par value. 1,000,000
shares authorized;
no shares outstanding --- --- ---
Preferred stock,
Series A,no par value --- --- ---
Common stock, $.40 par
value, 50,000,000
shares authorized;
17,168,331,
17,002,180 and
17,123,599 shares
outstanding at
November 11, 1995,
November 12, 1994
and February 4, 1995,
respectively 6,867,332 6,800,872 6,849,440
Addl. paid-in capital 32,052,821 29,641,751 31,277,872
Retained earnings 205,377,004 196,511,584 206,439,841
Cumulative foreign
currency translation
adjustment (1,729,211) (1,744,767) (2,279,278)
Treasury stock, at
cost, 3,302,548,
3,302,463 and
3,302,463 shares at
November 11, 1995,
November 12, 1994
and February 4,
1995, respectively (74,532,708) (74,531,219) (74,531,219)
Unamortized deferred
compensation -
restricted stock (1,280,195) (90,347) (1,756,535)
------------- ------------- -------------
Total stockholders'
equity 166,755,043 156,587,874 166,000,121
------------- ------------- -------------
Total liabilities and
stockholder's equity $320,463,614 $323,305,434 $300,481,076
============= ============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
16 Weeks Ended
----------------------------
November 11, November 12,
1995 1994
------------- -------------
<S> <C> <C>
Net sales $171,462,013 $175,404,243
Cost and expenses:
Cost of sales (exclusive of
depreciation expense shown
below) 45,143,239 49,546,700
Selling, administrative and
general expenses 106,294,948 106,197,381
Depreciation 11,676,139 10,384,855
Amortization of intangibles 1,776,434 1,704,375
------------- -------------
Total cost and expense 164,890,760 167,833,311
------------- -------------
Income from operations 6,571,253 7,570,932
Net interest expense 1,691,149 1,435,864
Other income 161,257 90,975
------------- -------------
Earnings before income taxes 5,041,361 6,226,043
Income tax expense 1,865,380 2,394,393
------------- -------------
Net earnings $ 3,175,981 $ 3,831,650
============= =============
Net earnings per share $ 0.23 $ 0.28
============= =============
Weighted average number of
common and common equivalent
shares outstanding 14,090,218 13,829,014
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
40 Weeks Ended
----------------------------
November 11, November 12,
1995 1994
------------- -------------
<S> <C> <C>
Net sales $389,694,566 $380,159,731
Cost and expenses:
Cost of sales (exclusive of
depreciation expense shown
below) 106,093,060 113,350,422
Selling, administrative and
general expenses 239,730,077 231,227,123
Depreciation 28,421,752 24,070,230
Amortization of intangibles 4,580,764 4,255,430
------------- -------------
Total cost and expense 378,825,653 372,903,205
------------- -------------
Income from operations 10,868,913 7,256,526
Net interest expense 3,657,640 2,751,923
Other income 334,546 295,173
------------- -------------
Earnings before income taxes 7,545,819 4,799,776
Income tax expense 2,792,068 1,823,915
------------- -------------
Net earnings $ 4,753,751 $ 2,975,861
============= =============
Net earnings per share $ 0.34 $ 0.21
============= =============
Weighted average number of
common and common equivalent
shares outstanding 13,984,338 14,208,617
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
(UNAUDITED)
52 Weeks Ended February 4, 1995 and 40 Weeks Ended November 11,
1995
<CAPTION>
Additional
Common Paid-In
Stock Capital
------------ -------------
<S> <C> <C>
Balance at February 5, 1994 $ 6,791,548 $ 29,262,531
Issuance of common stock:
Profit sharing plan and trust
(19,887 shares) 7,955 327,182
Stock bonus plan (3,694 shares) 1,476 55,764
Employee stock plans
(121,150 shares) 48,461 1,632,395
Foreign currency translation --- ---
Dividends ($0.56 per
common share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------ -------------
Balance at February 4, 1995 6,849,440 31,277,872
Issuance of common stock:
Profit sharing plan and trust
(40,459 shares) 16,183 707,021
Stock bonus plan (1,429 shares) 572 20,507
Employee stock plans
(2,844 shares) 1,137 47,421
Foreign currency translation --- ---
Dividends ($0.42 per common
share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------- -------------
Balance at November 11, 1995 $ 6,867,332 $ 32,052,821
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - RETAINED EARNINGS AND CUMULATIVE FOREIGN
CURRENCY TRANSACTION ADJUSTMENT (UNAUDITED)
52 Weeks Ended February 4, 1995 and 40 Weeks Ended November 11,
1995
<CAPTION>
Cumulative
Foreign
Currency
Retained Transaction
Earnings Adjustment
------------ -------------
<S> <C> <C>
Balance at February 5, 1994 $199,547,800 $ (1,381,524)
Issuance of common stock:
Profit sharing plan and trust
(19,887 shares) --- ---
Stock bonus plan (3,694 shares) --- ---
Employee stock plans
(121,150 shares) --- ---
Foreign currency translation --- (897,754)
Dividends ($0.56 per
common share) (7,930,037) ---
Net earnings 14,822,078 ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------ -------------
Balance at February 4, 1995 206,439,841 (2,279,278)
Issuance of common stock:
Profit sharing plan and trust
(40,459 shares) --- ---
Stock bonus plan (1,429 shares) --- ---
Employee stock plans
(2,844 shares) --- ---
Foreign currency translation --- 550,067
Dividends ($0.42 per common
share) (5,816,588) ---
Net earnings 4,753,751 ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------- -------------
Balance at November 11, 1995 $205,377,004 $ (1,729,211)
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - TREASURY STOCK AT COST AND DEFERRED
COMPENSATION-RESTRICTED STOCK (UNAUDITED)
52 Weeks Ended February 4, 1995 and 40 Weeks Ended November 11,
1995
<CAPTION>
Deferred
Treasury Compensation-
Stock, Restricted
At Cost Stock
------------- -------------
<S> <C> <C>
Balance at February 5, 1994 $(58,556,032) $ (155,850)
Issuance of common stock:
Profit sharing plan and trust
(19,887 shares) --- ---
Stock bonus plan (3,694 shares) --- ---
Employee stock plans
(121,150 shares) --- (1,680,856)
Foreign currency translation --- ---
Dividends ($0.56 per
common share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost (15,975,187) ---
Amortization of deferred
compensation-restricted stock --- 80,171
------------- ------------
Balance at February 4, 1995 (74,531,219) (1,756,535)
Issuance of common stock:
Profit sharing plan and trust
(40,459 shares) --- ---
Stock bonus plan (1,429 shares) --- ---
Employee stock plans
(2,844 shares) --- ---
Foreign currency translation --- ---
Dividends ($0.42 per common
share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost (1,489) ---
Amortization of deferred
compensation-restricted stock --- 476,340
------------- -------------
Balance at November 11, 1995 $(74,532,708) $ (1,280,195)
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - TOTAL (UNAUDITED)
52 Weeks Ended February 4, 1995 and 40 Weeks Ended November 11,
1995
<CAPTION>
Total
-------------
<S> <C>
Balance at February 5, 1994 $175,508,473
Issuance of common stock:
Profit sharing plan and trust
(19,887 shares) 335,137
Stock bonus plan (3,694 shares) 57,240
Employee stock plans
(121,150 shares) ---
Foreign currency translation (897,754)
Dividends ($0.56 per
common share) (7,930,037)
Net earnings 14,822,078
Purchase of treasury stock,
at cost (15,975,187)
Amortization of deferred
compensation-restricted stock 80,171
-------------
Balance at February 4, 1995 166,000,121
Issuance of common stock:
Profit sharing plan and trust
(40,459 shares) 723,204
Stock bonus plan (1,429 shares) 21,079
Employee stock plans (2,844 shares) 48,558
Foreign currency translation 550,067
Dividends ($0.42 per common
share) (5,816,588)
Net earnings 4,753,751
Purchase of treasury stock,
at cost (1,489)
Amortization of deferred
compensation-restricted stock 476,340
-------------
Balance at November 11, 1995 $166,755,043
=============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
40 Weeks Ended
----------------------------
November 11, November 12,
1995 1994
------------- -------------
<S> <C> <C>
Cash flows provided by
operating activities $ 18,750,040 $ 10,661,757
Cash flows provided by (used in)
financing activities:
Proceeds from issuance of
short-term debt 20,975,000 29,050,000
Repayment of long-term debt (129,835) (277,259)
Issuance of common stock to
employee stock plans 792,841 388,544
Cash dividends (5,816,588) (6,012,077)
Purchase of treasury stock (1,489) (15,975,187)
------------- -------------
Cash flows provided by
(used in) financing
activities 15,819,929 7,174,021
------------- -------------
Cash flows provided by (used in)
investing activities:
Purchases of short-term
investments (10,322,389) (9,171,808)
Proceeds from maturing of
short-term investments 10,216,965 34,240,102
Additions to property and
equipment (39,796,182) (66,644,091)
Acquisitions:
Property and equipment --- (208,182)
Intangible assets --- 551,465
------------- -------------
Cash flows used in investing
activities (39,901,606) (41,232,514)
------------- -------------
Effect of exchange rate changes
on cash and equivalents 363,223 (160,838)
------------- -------------
Net decrease in cash and cash
equivalents (4,968,414) (23,557,574)
Cash and cash equivalents at
beginning of year 9,213,908 36,070,354
------------- -------------
Cash and cash equivalents at
end of period $ 4,245,494 $ 12,512,780
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
40 Weeks Ended
----------------------------
November 11, November 12,
1995 1994
------------- -------------
<S> <C> <C>
Reconciliation of net earnings
to cash flows provided by
(used in) operating activities:
Net earnings $ 4,753,751 $ 2,975,861
Adjustments for items not
requiring cash:
Depreciation and amortization 33,002,516 28,325,660
Deferred income taxes 680,706 (234,251)
Deferred compensation 203,282 (1,003,189)
Other (1,161,631) (1,532,449)
Decrease (increase) in current
assets:
Receivables and inventories (13,575,623) (22,907,014)
Deferred costs applicable to
unsold portraits 172,645 2,026,572
Prepaid expenses and other
current assets (2,340,720) (5,824,943)
Increase (decrease) in current
liabilities:
Accounts payable, accrued
expenses and other
liabilities 4,554,631 14,221,969
Income taxes (7,539,517) (5,386,459)
------------- -------------
Cash flows provided by
operating activities $ 18,750,040 $ 10,661,757
============= =============
Supplemental cash flow
information:
Interest paid $ 4,919,641 $ 3,539,437
============= =============
Income taxes paid $ 10,036,055 $ 6,338,116
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
CPI CORP.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments necessary for a fair presentation of the Company's
financial position as of November 11, 1995, November 12, 1994
and February 4, 1995 and the results of its operations and
changes in its cash flows for the 16 and 40 weeks ended November
11, 1995 and November 12, 1994. These financial statements
should be read in conjunction with the financial statements and
the notes included in the Company's annual report on Form 10-K
for its fiscal year ended February 4, 1995.
2. Short-term investments are comprised of money market instruments
which aggregated $7.3 million, $12.1 million and $10.3 million
as of November 11, 1995, November 12, 1994, and February 4,
1995, respectively, and are stated at cost which approximates
market.
Total interest income for the 16 and 40 weeks ended November 11,
1995 and November 12, 1994 was $62,000 and $170,000 and
$411,000 and $788,000, respectively.
3. Inventories consist of the following components (amounts in
thousands)
<TABLE>
CPI CORP. INVENTORIES AT NOVEMBER 11, 1995, NOVEMBER 12, 1994
AND FEBRUARY 4, 1995
<CAPTION>
Nov. 11, Nov.12, Feb. 4,
1995 1994 1995
--------- --------- ----------
<S> <C> <C> <C>
Raw materials and supplies $37,951 $36,939 $33,887
Portraits-in-process --- 164 56
-------- -------- --------
$37,951 $37,103 $33,943
======== ======== ========
</TABLE>
4. On April 28, 1995, Consumer Programs Incorporated, a wholly-
owned subsidiary of CPI Corp., entered into two separate $5.0
million credit agreements with two domestic banks. Both $5.0
million credit agreements expired on July 31, 1995 and had
interest charged at the lower of a quoted interest rate or the
bank's prime lending rate.
<PAGE>
On July 13, 1995, the Company terminated its existing $50.0
million revolving credit agreement and the two separate $5.0
million credit agreements of its wholly-owned subsidiary,
Consumer Programs Incorporated, and entered into a new, $60.0
million revolving credit agreement ("the agreement") with three
domestic banks. The new agreement, which will expire on August
31, 1997, has interest charged at the lower of a quoted
interest rate or the banks' prime lending rate. A commitment
fee of 0.1875% per annum is payable on the unused portion of
the agreement. The Company is not required to maintain
compensating balances in connection with the new agreement and
has substantially the same financial covenants in the agreement
as those set forth in the Company's $60.0 million Senior
Notes held by two insurance companies. One additional covenant
the Company has in the new agreement is the Company will pay
down to $5.0 million the balance held under the agreement for
30 consecutive days during the year.
Total interest expense for the 16 weeks ended November 11,
1995 and November 12, 1994 was $1.8 million and $1.6 million
respectively and for the 40 weeks ended November 11, 1995 and
November 12, 1994, was $4.1 million and $3.5 million,
respectively.
Total interest expense for the third quarter of 1995 was
increased $25,000 and for the first three quarters of 1995
was reduced $76,000 in connection with the Company's $40
million interest rate swap agreement as the Company had recorded
the swap agreement at its market value as of February 4, 1994
and favorable changes in the interest rate environment have
occurred since that date. In the third quarter and first three
quarters of 1994, interest expense was increased $184,000 and
$296,000, respectively, by the swap agreements. The swap
agreement matured on August 28, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
To establish a framework for discussion, selected financial data
summarizing the Company's operating results for the 16 and 40 weeks
ended November 11, 1995 and November 12, 1994, respectively,
representing the third quarter and the first three quarters of
1995, are presented in the following table and are discussed in
greater detail on subsequent pages.
<TABLE>
<CAPTION>
16 Weeks Ended
---------------------------------------
(in thousands except per share amounts)
November 11, November 12,
1995 1994
---------- ----------
<S> <C> <C>
Net sales:
Portrait Studios $ 90,894 $ 96,477
Photofinishing 58,028 59,448
Wall Decor 16,972 14,389
Other Products and Services 5,568 5,090
--------- ---------
$171,462 $175,404
========= =========
Operating earnings:
Portrait Studios $ 12,322 $ 11,975
Photofinishing (125) 1,033
Wall Decor 972 930
Other Products and Services (89) (966)
--------- ---------
13,080 12,972
General corporate expenses 6,509 5,401
--------- ---------
Income from operations 6,571 7,571
Net interest expense 1,691 1,436
Other income 161 91
--------- ---------
Earnings before income taxes 5,041 6,226
Income tax expense 1,865 2,394
--------- ---------
Net earnings $ 3,176 $ 3,832
========= =========
Earnings per common share $ 0.23 $ 0.28
========= =========
Weighted average number of
common and common equivalent
shares outstanding 14,090 13,829
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
40 Weeks Ended
---------------------------------------
(in thousands except per share amounts)
November 11, November 12,
1995 1994
---------- ----------
<S> <C> <C>
Net sales:
Portrait Studios $195,607 $192,043
Photofinishing 141,937 143,348
Wall Decor 38,460 31,907
Other Products and Services 13,691 12,862
--------- ---------
$389,695 $380,160
========= =========
Operating earnings:
Portrait Studios $ 23,736 $ 20,184
Photofinishing 1,054 1,559
Wall Decor 426 196
Other Products and Services (974) (2,263)
--------- ---------
24,242 19,676
General corporate expenses 13,374 12,420
--------- ---------
Income from operations 10,868 7,256
Net interest expense 3,657 2,751
Other income 335 295
--------- ---------
Income before income taxes 7,546 4,800
Income tax expense (benefit) 2,792 1,824
--------- ---------
Net earnings $ 4,754 $ 2,976
========= =========
Earnings per common share $ 0.34 $ .21
========= =========
Weighted average number of
common and common equivalent
shares outstanding 13,984 14,209
========= =========
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
REVENUES: Sales decreased 2.2% to $171.5 million in third quarter
of 1995 from $175.4 million in the third quarter of 1994. Factors
contributing to the reduced revenues were a decrease in both
Portrait Studio and Photofinishing sales offset slightly by an
increase in sales in the Wall Decor and Other Products and Services
segments. For the first three quarters of 1995, sales increased
2.5% to $389.7 million from $380.2 million recorded in the first
three quarters of 1994 due to increased sales in the Portrait
Studio, Wall Decor and Other Products and Services segments, offset
by a decrease in sales in the Photofinishing segment.
Portrait Studio sales decreased 5.8% to $90.9 million from $96.5
million in the third quarter of 1995. Comparison between 1995 and
1994 third quarters is difficult as a change in operations resulted
in an acceleration in sales of about two weeks occurred in the
Portrait Studio segment in the third quarter of 1994 due to the
conversion of all studios to a new freeze-frame digital imaging
system and the introduction of the new Portrait Preview System.
Under the new systems, customers are able to view and order
portraits during the photography session rather than later at the
time of portrait package delivery. Since the Company records sales
upon customer acceptance, the recognition of sales was accelerated
during the introduction of the new Portrait Preview System in 1994.
For the first three quarters of 1995, sales in the Portrait Studio
segment increased 1.9% to $195.6 million from $192.0 million
recorded in the comparable period in 1994, reflecting positive
customer acceptance of the new digital imaging technology, Portrait
Preview System and, since the latter part of fiscal year 1994, the
Custom Portraits by Sears program. As with the third quarter,
comparison between the years is difficult due to the change in
operations previously discussed.
In the Photofinishing segment, sales decreased 2.4% to $58.0
million for the third quarter of 1995 from $59.4 million recorded
in the corresponding period last year. In addition, sales for the
Photofinishing segment for the first three quarters of 1995
decreased slightly to $141.9 million from $143.3 million recorded
in the prior year. Both decreases resulted from reductions in roll
processing volumes and number of store locations, partially offset
by higher sales per roll.
Sales in the Wall Decor segment were $17.0 million in the third
quarter of 1995, a 18.0% increase from the $14.4 million in sales
recorded in the comparable period last year. For the first three
quarters of 1995, sales increased 20.5% to $38.5 million from the
$31.9 million recorded in the first three quarters of 1994. The
sales increases in both the third quarter and first three quarters
<PAGE>
were due largely to the opening of 39 new locations since last
year's first quarter. Same store sales decreased slightly for the
third quarter and first three quarters in 1995 from the comparative
periods in 1994.
In the Other Products and Services segment, which represents the
electronic publishing business, sales increased 9.4% to $5.6
million and 6.5% to $13.7 million for the third quarter and first
three quarters of 1995, respectively, from comparable periods in
1994. Average weekly sales per store for the electronic publishing
locations increased 24.5% and 21.6% for the third quarter and first
three quarters in 1995, respectively, from the third quarter and
first three quarters in 1994, reflecting the improving performance
of comparable existing stores and the closure of six marginal
locations late in 1994 and early in 1995.
OPERATING EARNINGS: Earnings from operations for the third quarter
of 1995 was relatively unchanged at $13.1 million from the
comparable period in 1994. For the first three quarters of 1995,
income from operations increased 23.2% to $24.2 million from $19.7
million recorded for the first three quarters of 1994. This
increase was primarily due to the improved operating earnings in
the Portrait Studio, Wall Decor and Other Products and Services
segments marginally offset by deteriorated operating earnings in
the Photofinishing segment.
Portrait Studio operating earnings increased 2.9% and 17.6% for the
third quarter and first three quarters of 1995, respectively, from
the comparable periods last year. As previously discussed with
revenues, comparison of operating earnings between 1995 and 1994
third quarters is difficult due to the change in operation caused
by the introduction of the Portrait Preview System in 1994 which
resulted in an acceleration in sales and an increase in operating
earnings. This new system reduced manufacturing costs for both the
third quarter and the first three quarters of 1995 over comparable
prior year periods by eliminating the production of speculative
units and thereby substantially reducing the number of portraits
produced. These savings were partially offset by increased
depreciation associated with the new system. Specifically,
additional depreciation for the new freeze-frame digital imaging
system for the third quarter and first three quarters of 1995
exceeded the comparable periods last year by $620,000 and $3.1
million, respectively.
The Photofinishing operating losses for the third quarter of 1995
were $125,000, declining from the $1.0 million operating earnings
of the comparable period last year. For the first three quarters
of 1995, operating earnings were $1.1 million, a decline of
$500,000 from 1994 levels. The declines in operating earnings were
attributable to a decline in roll processing volume.
<PAGE>
The Wall Decor segment showed a slight improvement in operating
earnings, increasing to $972,000 in the third quarter of 1995 from
the $930,000 recorded in the comparable period last year. During
the seasonally slow first three quarters of 1995, earnings for the
Wall Decor segment were $426,000, up from $196,000 recorded in
1994, reflecting the increased number of locations.
Other Products and Services operating losses were also reduced for
both the third quarter and first three quarters of 1995 due to
improved sales per store and the closure of six unprofitable stores
during the latter part of 1994 and first part of 1995 which
resulted in improved operating margins per store.
NET EARNINGS: Net earnings decreased 17.1% to $3.2 million in the
third quarter of 1995, reflecting relatively unchanged operating
earnings and increased corporate expenses caused primarily by
higher employee benefit costs. For the first three quarters of
1995, net earnings increased 59.7% to $4.8 million over the $3.0
million recorded in the prior year, reflecting improved operating
income in the Portrait Studio and Other Products and Services
segments partially offset by declining operating income in the
photofinishing segment, increased corporate expenses caused by
higher employee benefit costs and a $529,000 increase in interest
expense caused by an increase in short-term borrowings. In
addition, as a direct result of the Company's $40.0 million
interest rate swap agreement, which matured August 28, 1995,
interest expense was charged $25,000 for the third quarter of 1995
and reduced by $76,000 for the first three quarters of 1995. In
the third quarter and first three quarters of 1994, interest
expense was charged $184,000 and $296,000, respectively, due to the
impact of the interest rate swap agreement.
Earnings per share amounted to $0.23 in the third quarter of 1995
compared to $0.28 per share recorded in the prior year's third
quarter. For the first three quarters of 1995, earnings per share
were $0.34 per share compared to $0.21 per share in the comparable
period last year. Weighted average number of common and common
equivalent shares outstanding for the third quarter and the first
three quarters of 1995 and 1994 were 14,090,218 compared to
13,829,014 and 13,984,338 compared to 14,208,617, respectively.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Cash, cash equivalents and short-term investments were $9.5
million, $17.7 million and $14.3 million on November 11, 1995,
November 12, 1994 and February 4, 1995, respectively. The Company
has a $60.0 million revolving credit agreement under which short-
term borrowings amounted to $27.8 million, $29.1 million and $6.9
million on November 11, 1995, November 12, 1994 and February 4,
1995, respectively.
<PAGE>
Capital expenditures and dividends for the first three quarters of
1995 were $39.8 million and $5.8 million, respectively. These
expenditures were primarily funded by operating cash flows,
existing cash, cash equivalents and short-term investments and
increases in short-term borrowings. Capital expenditures included
the installation of the new digital imaging technology in the
Canadian Portrait Studio operation, the previously announced studio
renovation program, equipment upgrades and enhancements in the
Photofinishing operations and the opening of 22 new Prints Plus
locations.
The Company believes it has sufficient liquidity and capital
resources to meet planned capital expenditures and normal working
capital requirements.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 6(a). EXHIBITS
Exhibit 11 - Computation of Earnings per Common Share
for 16 and 40 weeks.
Exhibit 27 - Financial Data Schedule
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Item 6(b) On August 17, 1995, CPI Corp. reported that on August 3,
1995, the Board of Directors approved a Resolution to
amend CPI Corp.'s By-Laws and approved the Second
Amendment to the Rights Agreement.
<PAGE>
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.
Date: December 21, 1995 By: /s/ Barry Arthur
---------------------------
Barry Arthur
Authorized Officer and
Principal Financial Officer
<PAGE>
EXHIBIT INDEX
PART I.
Item 6(a). Exhibits
Exhibit 11 - Computation of Earnings
Per Share - 16 and 40 weeks
Exhibit 27 - Financial Data Schedule
PART I. ITEM 6(a) EXHIBITS EXHIBIT 11
<TABLE>
CPI CORP. COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Amounts)
<CAPTION>
16 Weeks Ended
---------------------
Nov. 11, Nov. 12,
1995 1994
--------- ---------
<S> <C> <C>
Primary:
Net earnings applicable
to common shares $ 3,176 $ 3,832
========= =========
Shares:
Weighted average number of
common shares outstanding 17,168 17,002
Shares issuable under employee
stock plans - weighted average 37 10
Dilutive effect of exercise of
certain stock options 188 ---
Less: Treasury stock - weighted
average (3,303) (3,183)
--------- ---------
Weighted average number of common
and common equivalent shares
outstanding 14,090 13,829
========= =========
Earnings per common and
common equivalent shares $ 0.23 $ 0.28
========= =========
</TABLE>
<PAGE>
PART I. ITEM 6(a) EXHIBITS EXHIBIT 11
<TABLE>
CPI CORP. COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Amounts)
<CAPTION>
40 Weeks Ended
---------------------
Nov. 11, Nov. 12,
1995 1994
--------- ---------
<S> <C> <C>
Primary:
Net earnings applicable
to common shares $ 4,754 $ 2,976
========= =========
Shares:
Weighted average number of
common shares outstanding 17,167 17,002
Shares issuable under employee
stock plans - weighted average 29 10
Dilutive effect of exercise of
certain stock options 91 ---
Less: Treasury stock - weighted
average (3,303) (2,803)
--------- ---------
Weighted average number of common
and common equivalent shares
outstanding 13,984 14,209
========= =========
Earnings per common and
common equivalent shares $ 0.34 $ 0.21
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> NOV-11-1995
<CASH> 2,196
<SECURITIES> 7,291
<RECEIVABLES> 34,798
<ALLOWANCES> 2,111
<INVENTORY> 37,951
<CURRENT-ASSETS> 93,288
<PP&E> 341,270
<DEPRECIATION> 170,770
<TOTAL-ASSETS> 320,464
<CURRENT-LIABILITIES> 92,637
<BONDS> 0
<COMMON> 6,867
0
0
<OTHER-SE> 159,888
<TOTAL-LIABILITY-AND-EQUITY> 320,464
<SALES> 389,695
<TOTAL-REVENUES> 389,695
<CGS> 106,093
<TOTAL-COSTS> 378,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,068
<INCOME-PRETAX> 7,546
<INCOME-TAX> 2,792
<INCOME-CONTINUING> 4,754
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,754
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
