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) December 5, 1997
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.)
<PAGE>
ITEM 5. OTHER EVENTS
On December 5, 1997, CPI Corp. issued the following press
release announcing third quarter results.
CPI CORP. ANNOUNCES THIRD QUARTER RESULTS
- Operating earnings in Sears Portrait Studios increase
24.2% on flat sales while wall decor segment continues
weak sales activity.
- Charges related to sale of remaining share of joint
venture obscure operating earnings increase, resulting
in net loss of $0.7 million (6 cents per share).
St. Louis, MO., December 5, 1997 - CPI Corp. (NYSE - CPY)
today reported a third quarter net loss of $0.7 million
(a loss of 6 cents per share) compared to last year's net
earnings of $5.0 million (earnings of 36 cents per share).
The 1997 third quarter results include a net after-tax
charge of $2.6 million (a charge of 21 cents per share)
related to the sale of the company's remaining 49% interest
in the Fox Photo, Inc. joint venture to Eastman Kodak. The
1996 third quarter results include a gain of 28 cents per
share related to the sale of the initial 51% interest to
Kodak. In addition, there were 13.2% fewer weighted
average common shares outstanding in the 1997 third
quarter, affecting per-share comparability with last year's
third quarter.
Although not fully comparable due to the effect of the
timing of the transaction and the service and consulting
agreements, without the effect of the sale of the
remaining 49% interest in the Fox joint venture and related
transactions in third quarter 1997, and the effect of the
original sale of the 51% interest in Fox in third quarter
1996, net earnings for third quarter 1997 would have been
$1.8 million compared to $1.2 million for third quarter
1996.
Income from operations for the third quarter's 16 WEEKS
ENDED NOVEMBER 8, 1997 increased to $5.3 million from the
$3.8 million in the 16 weeks ended November 9, 1996, with
1996 results including $0.4 million in operating earnings
from the since-disposed-of photofinishing segment. The
gain was primarily the result of a $2.0 million increase in
portrait studio earnings, plus a $1.2 million reduction in
general corporate expense due to lower photofinishing
administrative charges and the allocation of costs through
the joint venture service contract. The service contract
will continue into early 1998. Sales were also non-
comparable, decreasing to $108.2 million from $145.4
million due to the absence of any photofinishing revenues
in the 1997 quarter.
<PAGE>
For the 40 WEEKS ENDED NOVEMBER 8, 1997, the company
recorded a net loss of $1.8 million (a loss of 15 cents per
share) compared to net earning of $2.1 million (earnings of
15 cents per share) for the last year's comparable period.
Sales in 1997 were $246.8 million compared to last year's
$355.5 million. Income from operations totaled $6.8
million for the 1997 40-week period compared to last year's
$0.3 million, primarily due to higher portrait studio
earnings and lower general corporate expense. Sales for
the 40 weeks ended November 9, 1996 included $241.0 million
of combined portrait studio and wall decor sales and $114.5
million of sales for the photofinishing segment, for which
sales were recorded at the venture level in 1997.
For the 52 WEEKS ENDED NOVEMBER 8, 1997, net earnings were
$10.5 million (88 cents per share) compared to $11.7
million (84 cents per share) for the 52 weeks ended
November 9, 1996. Sales were $358.3 million vs. $505.6
million for the comparable prior period. Sales for the
1996 trailing period included $344.6 million of combined
portrait studio and wall decor sales and $161.0 million for
the photofinishing segment, for which sales were recorded
at the venture level in the 1997 trailing period.
Commenting on the results, Alyn V. Essman, chairman and
chief executive officer said, "We are pleased that third
quarter profit margin in our PORTRAIT STUDIOS segment
increased to 11.2% from last year's 9.0% even though sales
were flat at $91.2 million. Earnings in the division
increased by almost $2 million, and though it's less than
we had planned, it's still up by more than 24% over last
year. Moreover, year-to-date profits in the division are
up by $3.8 million, an improvement of over 23% as a result
of a sales increase of just under three percent, combined
with higher margin."
Turning to the wall decor segment, Essman said, "Our Prints
Plus results in 1997 continue to trail those of 1996, with
third quarter sales of $17.0 million compared to last
year's $17.7 million and an increase in operating loss to
$0.9 million from last year's $0.2 million loss due to
higher occupancy and employment expenses. Regarding 1998,
we anticipate that the marketing and operating changes
recently implemented will result in positive sales
improvements."
Concluding, Essman said, "We are focused intensely on our
core portrait studio business, and our aim is to improve
both profit margins and top-line performance going
forward. Looking ahead, we are awaiting more definitive
results regarding the fourth quarter, which continues to
run below our original expectations and still has a couple
<PAGE>
of weeks to go in the Christmas season. In another matter,
our fourth quarter earnings will benefit from after-tax
income of $1.3 million related to the non-compete
agreement with Kodak and the interest on the Kodak note due
in January 1999 which was received in conjunction with the
sale of the remaining interest in the joint venture."
This release contains certain "forward looking statements"
that are subject to risks and uncertainties. The company's
actual results and performance could differ materially
from those anticipated depending on, among other things,
customer demand for the company's services, the amount of
revenue derived from the Portrait Studio Division through
the fiscal year end and the overall level of economic
activity in the company's major market.
CPI is a consumer services company with $467.0 million in
fiscal 1996 sales from continuing operations, operating
approximately 1,200 retail locations, including 1,030
Sears Portrait Studios in the U.S., Puerto Rico and
Canada and 157 Prints Plus wall decor stores.
<PAGE>
<TABLE>
CPI CORP.
CONDENSED STATEMENTS OF EARNINGS - FOR THE 16 WEEKS ENDED
NOVEMBER 8, 1997 (in thousands except per share amounts -
unaudited)
<CAPTION>
16 Weeks Ended
----------------------
11/08/97 11/09/96
---------- ----------
<S> <C> <C>
Net Sales:
Portrait studios $ 91,166 $ 91,300
One-hour photofinishing - 36,437
Wall decor 16,990 17,698
---------- ----------
Total net sales $ 108,156 $ 145,435
Operating earnings:
Portrait studios $ 10,209 $ 8,222
One-hour photofinishing - 439
Wall decor (904) (220)
---------- ----------
Total operating earnings 9,305 8,441
General corporate expense 3,992 5,189
---------- ----------
Income from operations 5,313 3,252
Net interest expense 711 1,145
Interest in joint venture loss (1,474) (430)
Gain (Loss) from sale of
minority interest (4,189) 6,180
Other income 628 150
---------- ----------
Earnings from continuing
operations before income
taxes (433) 8,007
Income tax expense 292 2,963
---------- ----------
Net earnings from continuing
operations (725) 5,044
---------- ----------
Losses from discontinued
operations net of income
tax benefits - -
Loss on disposal net of
income tax benefits
of $1,372 - -
---------- ----------
Total losses from
discontinued operations - -
---------- ----------
Net earnings $ (725) $ 5,044
========== ==========
Earnings (loss) per
common share:
From continuing operations $ (0.06) $ 0.36
From discontinued
operations - -
---------- ----------
Net earnings (loss) per
common share $ (0.06) $ 0.36
========== ==========
Weighted average number of
common and common equivalent
shares outstanding 12,205 14,066
========== ==========
</TABLE>
<PAGE>
<TABLE>
CPI CORP.
CONDENSED STATEMENTS OF EARNINGS - FOR THE 40 WEEKS ENDED
NOVEMBER 8, 1997 (in thousands except per share amounts -
unaudited)
<CAPTION>
40 Weeks Ended
----------------------
11/08/97 11/09/96
---------- ----------
<S> <C> <C>
Net Sales:
Portrait studios $ 205,623 $ 199,654
One-hour photofinishing - 114,518
Wall decor 41,201 41,371
---------- ----------
Total net sales $ 246,824 $ 355,543
Operating earnings:
Portrait studios $ 19,873 $ 16,109
One-hour photofinishing - 82
Wall decor (3,196) (1,498)
---------- ----------
Total operating earnings 16,677 14,693
General corporate expense 9,898 14,420
---------- ----------
Income from operations 6,779 273
Net interest expense 2,226 3,153
Interest in joint venture loss (3,304) (430)
Gain (Loss) from sale of
minority interest (4,189) 6,180
Other income 877 480
---------- ----------
Earnings from continuing
operations before income
taxes (2,063) 3,350
Income tax expense (311) 1,239
---------- ----------
Net earnings from continuing
operations (1,752) 2,111
---------- ----------
Losses from discontinued
operations net of income
tax benefits - -
Loss on disposal net of
income tax benefits
of $1,372 - -
---------- ----------
Total losses from
discontinued operations - -
---------- ----------
Net earnings $ (1,752) $ 2,111
========== ==========
Earnings (loss) per
common share:
From continuing operations $ (0.15) $ 0.15
From discontinued
operations - -
---------- ----------
Net earnings (loss) per
common share $ (0.15) $ 0.15
========== ==========
Weighted average number of
common and common equivalent
shares outstanding 12,009 14,016
========== ==========
</TABLE>
<PAGE>
<TABLE>
CPI CORP.
CONDENSED STATEMENTS OF EARNINGS - FOR THE 52 WEEKS ENDED
NOVEMBER 8, 1997 (in thousands except per share amounts -
unaudited)
<CAPTION>
52 Weeks Ended
----------------------
11/08/97 11/09/96
---------- ----------
<S> <C> <C>
Net Sales:
Portrait studios $ 295,809 $ 282,963
One-hour photofinishing - 160,990
Wall decor 62,506 61,636
---------- ----------
Total net sales $ 358,315 $ 505,589
Operating earnings:
Portrait studios $ 39,420 $ 34,902
One-hour photofinishing - 2,328
Wall decor 1,554 3,432
---------- ----------
Total operating earnings 40,974 40,662
General corporate expense 14,096 20,644
---------- ----------
Income from operations 26,878 20,018
Net interest expense 2,842 4,092
Interest in joint venture loss (3,359) (430)
Gain (Loss) from sale of
minority interest (4,189) 6,180
Other income 898 740
---------- ----------
Earnings from continuing
operations before income
taxes 17,386 22,416
Income tax expense 6,885 8,045
---------- -----------
Net earnings from continuing
operations 10,501 14,371
---------- ----------
Losses from discontinued
operations net of income
tax benefits - (253)
Loss on disposal net of
income tax benefits
of $1,372 - (2,428)
---------- ----------
Total losses from
discontinued operations - (2,681)
---------- ----------
Net earnings $ 10,501 $ 11,690
========== ==========
Earnings (loss) per
common share:
From continuing operations $ 0.88 $ 1.03
From discontinued
operations - (0.19)
---------- ----------
Net earnings (loss) per
common share $ 0.88 $ 0.84
========== ==========
Weighted average number of
common and common equivalent
shares outstanding 11,975 14,013
========== ==========
</TABLE>
<PAGE>
<TABLE>
CPI CORP.
CONDENSED BALANCE SHEETS - FOR NOVEMBER 8, 1997 AND
NOVEMBER 9, 1996 (in thousands - unaudited)
<CAPTION>
NOVEMBER 8, NOVEMBER 9,
1997 1996
----------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and short-term investments $ 35,356 $ 29,724
Other current assets 98,047 63,336
Net property and equipment 125,576 133,167
Minority interest - 48,590
Other assets 5,479 4,344
----------- ------------
Total assets $ 264,458 $ 279,161
=========== ============
Liabilities and stockholders' equity
Current liabilities $ 49,186 $ 52,342
Long-term obligations 59,798 44,870
Other liabilities 19,869 9,022
Stockholders' equity 135,605 172,927
----------- ------------
Total liabilities and
stockholders' equity $ 264,458 $ 279,161
=========== ============
</TABLE>
<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.
(Registrant)
/s/ Barry Arthur
-----------------------------
Barry Arthur
Authorized Officer and
Principal Financial Officer
Dated: December 8, 1997
<PAGE>
