<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
CPI CORP.
(NAME OF THE ISSUER)
CPI CORP.
SPS INTERNATIONAL HOLDINGS, INC.
SPS ACQUISITION, INC.
AMERICAN SECURITIES PARTNERS II, L.P.
ALYN V. ESSMAN
RUSSELL ISAAK
PATRICK J. MORRIS
(NAME OF PERSON(S) FILING STATEMENT)
------------------------
COMMON STOCK, PAR VALUE $0.40 PER SHARE
(TITLE OF CLASS OF SECURITIES)
125902106
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
<TABLE>
<S> <C>
CPI CORP.
ALYN V. ESSMAN SPS INTERNATIONAL HOLDINGS, INC.
RUSSELL ISAAK SPS ACQUISITION, INC.
PATRICK J. MORRIS AMERICAN SECURITIES PARTNERS II, L.P.
C/O CPI CORP. 122 EAST 42ND STREET
1706 WASHINGTON AVENUE NEW YORK, NEW YORK 10168
ST. LOUIS, MISSOURI 63103 ATTENTION: MARK BANDEEN
(314) 231-1575 (212) 476-8000
</TABLE>
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
------------------------
Copies to:
<TABLE>
<S> <C>
WILLIAM F. WYNNE, JR., ESQ. RICHARD CAPELOUTO, ESQ.
WHITE & CASE LLP SIMPSON THACHER & BARTLETT
1155 AVENUE OF THE AMERICAS 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10017
(212) 819-8200 (212) 455-2000
</TABLE>
JOHN A. RAVA, ESQ.
HUSCH & EPPENBERGER, LLC
100 NORTH BROADWAY, SUITE 1300
ST. LOUIS, MISSOURI 63102-2789
(314) 421-4800
This statement is filed in connection with (check the appropriate box):
/x/ a. The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or
Rule 13e-3(c) under the Securities Exchange Act of 1934.
/ / b. The filing of a registration statement under the Securities
Act of 1933.
/ / c. A tender offer.
/ / d. None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. /x/
------------------------
<TABLE>
<S> <C>
CALCULATION OF FILING FEE
TRANSACTION VALUATION(1) AMOUNT OF FILING FEE
$386,726,644 $77,345.33
</TABLE>
/x/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: $77,345.33 Filing party: CPI Corp.
Form or registration no.: Schedule 14-A, no. 1-10204 Date filed: July 12, 1999; August 27, 1999;
September 23, 1999 and September 27,
1999
</TABLE>
(1) Based upon Exchange Act Rule 0-11(b). Includes $37.00 per share for
9,920,007 shares of common stock of the Issuer plus an aggregate of
$19,686,385 in consideration of 1,399,233 outstanding options to purchase
common stock of the Issuer.
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<PAGE>
INTRODUCTORY NOTE
This Amendment No. 3 amends and supplements the Rule 13e-3 Transaction
Statement on Schedule 13E-3 (as amended and supplemented, the "Schedule 13E-3")
relating to the proposed merger (the "Merger") of SPS Acquisition, Inc., a
Delaware corporation ("Sub"), with and into CPI Corp., a Delaware corporation
(the "Corporation"), pursuant to the Agreement and Plan of Merger dated as of
June 15, 1999, by and among the Corporation, Sub and SPS International Holdings,
Inc., a Delaware corporation ("Parent"). In connection with the Merger, certain
officers and employees of the Corporation, including Alyn V. Essman, Russell
Isaak and Patrick J. Morris, have agreed to invest cash, shares of the
Corporation's common stock or options to purchase the Corporation's common stock
or a combination thereof in Parent in return for equity interests in Parent.
The cross reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy Statement
(the "Proxy Statement"), filed by the Corporation with the Securities and
Exchange Commission on September 27, 1999 of the information required to be
included in response to the items of Schedule 13E-3. The information set forth
in the Proxy Statement (including the appendixes thereto) is hereby expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by the information contained in the Proxy Statement.
2
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO GENERAL INSTRUCTION F
TO SCHEDULE 13E-3
<TABLE>
<CAPTION>
SCHEDULE 13E-3 RESPONSE/CAPTION IN
ITEM NUMBER AND CAPTION PROXY STATEMENT
- ------------------------ --------------------
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
<S> <C>
(a) Cover Page;
SUMMARY--General--The Parties to the Transaction; Management Investors;
SUMMARY--General--The Merger.
(b) SUMMARY--General--The Special Meeting;
INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required for Approval.
(c) SUMMARY--Comparative Market Price Data.
(d) SUMMARY--Dividends.
(e) Not applicable.
(f) TRANSACTIONS IN COMMON STOCK BY CERTAIN PERSONS.
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND.
<TABLE>
<S> <C>
(a)-(d) and Cover Page;
(g)
SUMMARY--General--The Parties to the Transaction;
SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest--Equity Investment by Management Investors.
</TABLE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
<TABLE>
<S> <C>
(a)-(b) SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest.
</TABLE>
ITEM 4. TERMS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) SUMMARY;
INTRODUCTION;
SPECIAL FACTORS;
THE MERGER;
THE MERGER AGREEMENT;
Appendix A.
(b) SUMMARY;
SPECIAL FACTORS--Certain Effects of the Merger; Plans or Proposals After the Merger;
SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest.
</TABLE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
<TABLE>
<S> <C>
(a)-(g) SUMMARY--Certain Effects of the Merger;
SPECIAL FACTORS--Certain Effects of the Merger; Plans or Proposals After the Merger;
THE MERGER--Effects of the Merger.
</TABLE>
3
<PAGE>
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
<TABLE>
<S> <C>
(a) SUMMARY--Financing of the Merger;
SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest;
THE MERGER--Financing of the Merger.
(b) THE MERGER AGREEMENT--Termination Fees; Expenses.
(c) THE MERGER--Financing of the Merger.
(d) Not applicable.
</TABLE>
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
<TABLE>
<S> <C>
(a)-(d) SUMMARY--Certain Effects of the Merger;
SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--CPI's Reasons for the Merger;
Recommendation of Our Board of Directors;
SPECIAL FACTORS--Certain Effects of the Merger; Plans or Proposals After the Merger
SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest;
SPECIAL FACTORS--Material U.S. Federal Income Tax Consequences of
the Merger to Our Stockholders.
</TABLE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a)-(b) SUMMARY;
SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of
Our Board of Directors;
SPECIAL FACTORS--CPI and the Senior Management Investors' Belief as to the
Fairness of the Merger;
SPECIAL FACTORS--SPS International, SPS Acquisition and American Securities
Partners II's Belief as to the Fairness of the Merger;
SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest.
(c) INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required For Approval.
(d)-(f) SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of
Our Board of Directors.
</TABLE>
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
<TABLE>
<S> <C>
(a)-(c) SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--Opinion of Financial Advisor;
SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of
Our Board of Directors;
Appendix C.
</TABLE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
<TABLE>
<S> <C>
(a) SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest;
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS;
TRANSACTIONS IN COMMON STOCK BY CERTAIN PERSONS.
(b) Not applicable.
</TABLE>
4
<PAGE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
<TABLE>
<S> <C>
SUMMARY--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest;
INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required for Approval;
SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest.
</TABLE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION.
<TABLE>
<S> <C>
(a)-(b) INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required For Approval;
SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of
Our Board of Directors;
SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest.
</TABLE>
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) THE MERGER--Rights of Dissenting Stockholders;
Appendix B.
(b) Not applicable.
(c) Not applicable.
</TABLE>
ITEM 14. FINANCIAL INFORMATION.
<TABLE>
<S> <C>
(a) SUMMARY--Our Financial Information and Projections
Annual Report on Form 10-K for the fiscal year ended February 6, 1999 for the Corporation,
which is incorporated by reference in the Proxy Statement.
(b) Not applicable.
</TABLE>
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
<TABLE>
<S> <C>
(a) SUMMARY;
SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--Opinion of Financial Advisor;
SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of
Interest.
(b) INTRODUCTION--Solicitation of Proxies;
EXPENSES OF SOLICITATION.
</TABLE>
ITEM 16. ADDITIONAL INFORMATION.
Proxy Statement (and the Appendixes thereto) generally
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Commitment letter from Credit Suisse First Boston for Senior Secured Credit Facility dated
June 15, 1999.*
(2) Commitment letter from Credit Suisse First Boston for Bridge Loan Facility dated June 15, 1999.*
(3) Letter agreement amending the commitment letter for Senior Secured Credit Facility dated September
8, 1999.*
(4) Letter agreement assigning a portion of the Senior Secured Credit Facility to Morgan Stanley &
Co., dated September 9, 1999.*
(5) Letter agreement assigning a portion of the Bridge Loan Facility to Morgan Stanley Senior Funding,
Inc. dated September 9, 1999.*
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
(b)(1) Opinion of Credit Suisse First Boston Corporation (Attached as Appendix C
to the Proxy Statement).
(2) Written Materials distributed to Board of Directors at May 26, 1999 meeting by
Credit Suisse First Boston Corporation.*
(3) Written Materials distributed to Board of Directors at May 7, 1998 meeting by Credit Suisse First
Boston Corporation.**
(4) Written Materials distributed to Board of Directors at December 3, 1998 meeting by Credit Suisse
First Boston Corporation.
(5) Written Materials distributed to Board of Directors at January 12, 1999 meeting by Credit Suisse
First Boston Corporation.
(6) Written Materials distributed to Board of Directors at February 4, 1999 meeting by A.G. Edwards.
(c)(1) Agreement and Plan of Merger, dated as of June 15, 1999, among Parent, Sub and the Corporation.
(Attached as Appendix A to the Proxy Statement).
(2) Form of Subscription Agreement for Accredited Investors (including voting agreements).*
(3) Guarantee of American Securities Capital Partners, L.P. dated June 15, 1999.*
(4) Form of Subscription Agreement for Accredited Investors.
(d)(1) A copy of the Proxy Statement (filed by CPI Corp. on September 27, 1999 and incorporated herein by
reference).
(e)(1) Section 262 of the Delaware General Corporation Law (Attached as Appendix B
to the Proxy Statement).
(f)(1) Not applicable.
</TABLE>
- ------------------
* Previously filed.
** Portion omitted pursuant to a request for confidential treatment filed
separately with the Securities and Exchange Commission.
6
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information set forth on the cover page and the headings
"SUMMARY--General--The Parties to the Transaction; Management Investors" and "--The Merger" of
the Proxy Statement, which information is incorporated herein by reference.
(b) Reference hereby is made to the information set forth under the headings "SUMMARY--General--The
Special Meeting" and "INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required For
Approval" in the Proxy Statement, which information is incorporated herein by reference.
(c) Reference hereby is made to the information set forth under the heading "SUMMARY--Comparative
Market Price Data" in the Proxy Statement, which information is incorporated herein by
reference.
(d) Reference hereby is made to the information set forth under the heading "SUMMARY--Dividends" in
the Proxy Statement, which information is incorporated herein by reference.
(e) Not applicable.
(f) Reference hereby is made to the information set forth under the heading "TRANSACTIONS IN COMMON
STOCK BY CERTAIN PERSONS" in the Proxy Statement, which information is incorporated herein by
reference.
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND.
<TABLE>
<S> <C>
(a)-(d) and The persons filing this statement are the Corporation, SPS International Holdings, Inc., a
(g) Delaware corporation, SPS Acquisition, Inc., a Delaware corporation, American Securities
Partners II, L.P., a Delaware limited partnership, Alyn V. Essman, Russell Isaak and Patrick J.
Morris. The address of each of SPS International Holdings, Inc., SPS Acquisition, Inc. and
American Securities Partners II, L.P. and their respective officers, directors and controlling
affiliates is 122 East 42nd Street, New York, New York 10168. SPS International Holdings, Inc.
has been organized for the purpose of holding the capital stock of SPS Acquisition, Inc. which
has been formed for the purpose of consummating the merger. Reference hereby is made to the
information set forth on the Cover Page and under the heading "SUMMARY-- General--The Parties to
the Transaction; Management Investors" and "SPECIAL FACTORS--Interests of Certain Persons in the
Merger; Potential Conflicts of Interest--Equity Investment by Management Investors" in the Proxy
Statement, which information is incorporated herein by reference.
(e)-(f) None of the Corporation, SPS International Holdings, Inc., SPS Acquisition, Inc., American
Securities Partners II, L.P., any executive officer, director, general partner or person
controlling the Corporation, SPS International Holdings, Inc., SPS Acquisition, Inc. or American
Securities Partners II, L.P. has during the last five years (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order enjoining further
violations of, or prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
</TABLE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information set forth under the headings "SPECIAL
FACTORS--Background of the Merger; Potential Conflicts of Interest" and "SPECIAL
FACTORS--Interests of Certain Persons in the Merger" in the Proxy Statement, which information
is incorporated herein by reference.
(b) Reference hereby is made to the information set forth under the headings "SPECIAL
FACTORS--Background of Merger" and "SPECIAL FACTORS--Interest of Certain Persons in the Merger;
Potential Conflicts of Interest" in the Proxy Statement, which information is incorporated
herein by reference.
</TABLE>
7
<PAGE>
ITEM 4. TERMS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information set forth under the headings "SUMMARY,"
"INTRODUCTION," "SPECIAL FACTORS," "THE MERGER," "The Merger Agreement" and Appendix A in the
Proxy Statement, which information is incorporated herein by reference.
(b) Reference hereby is made to the information set forth under the headings "SUMMARY," "SPECIAL
FACTORS--Certain Effects of the Merger; Plans or Proposals After the Merger" and "SPECIAL
FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of Interest" in the
Proxy Statement, which information is incorporated herein by reference.
</TABLE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
<TABLE>
<S> <C>
(a)-(g) Reference hereby is made to the information set forth under the headings "SUMMARY-- Certain
Effects of the Merger," "SPECIAL FACTORS--Certain Effects of the Merger; Plans or Proposals
After the Merger," and "THE MERGER--Effects of the Merger" in the Proxy Statement, which
information is incorporated herein by reference.
</TABLE>
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information set forth under the headings "SUMMARY-- Financing of
the Merger," "SPECIAL FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts
of Interest" and "THE MERGER--Financing of the Merger" in the Proxy Statement, which information
is incorporated herein by reference.
(b) Reference hereby is made to the information set forth under the heading "THE MERGER
AGREEMENT--Termination Fees; Expenses" in the Proxy Statement, which information is incorporated
herein by reference.
(c)-(d) Reference hereby is made to the information set forth under the heading "THE MERGER--Financing
of the Merger" in the Proxy Statement, which information is incorporated herein by reference.
None of Alyn V. Essman, Russell Isaak or Patrick J. Morris expects to borrow any funds in
connection with the Merger.
</TABLE>
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
<TABLE>
<S> <C>
(a)-(d) Reference hereby is made to the information set forth under the headings "SUMMARY-- Certain
Effects of the Merger," "SPECIAL FACTORS--Background of the Merger," "SPECIAL FACTORS--CPI's
Reasons for the Merger; Recommendation of Our Board of Directors," "SPECIAL FACTORS--Certain
Effects of the Merger; Potential Conflicts of Interest," "SPECIAL FACTORS--Interests of Certain
Persons in the Merger" and "SPECIAL FACTORS--Material U.S. Federal Income Tax Consequences of
the Merger to Our Stockholders" in the Proxy Statement, which information is incorporated herein
by reference.
</TABLE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a)-(b) Reference hereby is made to the information under the headings "SUMMARY," "SPECIAL
FACTORS--CPI's Reasons for the Merger; Recommendation of Our Board of Directors," "SPECIAL
FACTORS--CPI and the Senior Management Investors' Belief as to the Fairness of the Merger,"
"SPECIAL FACTORS--SPS International, SPS Acquisition and American Securities Partners II's
Belief as to the Fairness of the Merger" and "SPECIAL FACTORS-- Interests of Certain Persons in
the Merger; Potential Conflicts of Interest" in the Proxy Statement, which information is
incorporated herein by reference.
(c) The Merger is not structured to require approval by a majority of unaffiliated stockholders.
Reference hereby is made to the information under the heading "INTRODUCTION--Voting Rights;
Agreements to Vote; Vote Required For Approval" in the Proxy Statement, which information is
incorporated herein by reference.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
(d)-(f) Reference is hereby made to the information under the headings "SPECIAL FACTORS--Background of
the Merger" and "SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of Our Board of
Directors" in the Proxy Statement, which information is incorporated herein by reference.
</TABLE>
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
<TABLE>
<S> <C>
(a)-(b) Reference hereby is made to Exhibit (b)(2) hereto, the information in Appendix C of the Proxy
Statement and under the headings "SPECIAL FACTORS--Background of the Merger," "SPECIAL
FACTORS--Opinion of Financial Advisor" and "SPECIAL FACTORS--CPI's Reasons for the Merger;
Recommendation of Our Board of Directors," in the Proxy Statement, which information is
incorporated herein by reference.
</TABLE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information under the heading "SPECIAL FACTORS-- Interests of
Certain Persons in the Merger; Potential Conflicts of Interest," "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS" and "TRANSACTIONS IN COMMON STOCK BY CERTAIN PERSONS" in the Proxy Statement,
which information is incorporated herein by reference.
(b) None.
</TABLE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
<TABLE>
<S> <C>
Reference hereby is made to the information under the headings "SUMMARY--Interests of Certain
Persons in the Merger; Potential Conflicts of Interest," "INTRODUCTION--Voting Rights;
Agreements to Vote; Vote Required For Approval" and "SPECIAL FACTORS-- Interests of Certain
Persons in the Merger; Potential Conflicts of Interest" in the Proxy Statement, which
information is incorporated herein by reference.
</TABLE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
<TABLE>
<S> <C>
(a)-(b) Reference hereby is made to the information under the headings "INTRODUCTION--Voting Rights;
Agreements to Vote; Vote Required for Approval," "SPECIAL FACTORS--CPI's Reasons for the Merger;
Recommendation of Our Board of Directors" and "SPECIAL FACTORS--Interests of Certain Persons in
the Merger; Potential Conflicts of Interest" of the Proxy Statement, which information is
incorporated herein by reference.
</TABLE>
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information under the heading "THE MERGER--Rights of Dissenting
Stockholders" and in Appendix B of the Proxy Statement, which information is incorporated herein
by reference.
(b) Not applicable.
(c) Not applicable.
</TABLE>
ITEM 14. FINANCIAL INFORMATION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information under the heading "SUMMARY--Our Financial
Information and Projections" in the Proxy Statement, which information is incorporated herein by
reference. Reference is hereby made to the Annual Report on Form 10-K for the fiscal year ended
February 6, 1999 for the Corporation, which is incorporated in the Proxy Statement by reference
and incorporated herein by reference. Book value per share of the Corporation's common stock as
of February 6, 1999 and as of July 24, 1999 was $11.81 per share and $11.47 per share,
respectively.
(b) Not applicable.
</TABLE>
9
<PAGE>
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information under the headings "SUMMARY," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL FACTORS--Opinion of Financial Advisor" and "SPECIAL
FACTORS--Interests of Certain Persons in the Merger; Potential Conflicts of Interest" in the
Proxy Statement, which information is incorporated herein by reference.
(b) Reference hereby is made to the information under the heading "INTRODUCTION--Solicitation of
Proxies" and "EXPENSES OF SOLICITATION" in the Proxy Statement, which information is
incorporated herein by reference.
</TABLE>
ITEM 16. ADDITIONAL INFORMATION.
<TABLE>
<S> <C>
Reference hereby is made to the Proxy Statement, the Appendixes thereto and the exhibits hereto,
which contain additional information regarding the Merger, which information is incorporated
herein by reference.
</TABLE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Commitment letter from Credit Suisse First Boston for Senior Secured Credit Facility Loan dated
June 15, 1999.*
(2) Commitment letter from Credit Suisse First Boston for Bridge Loan Facility dated June 15,
1999.*
(3) Letter agreement amending the commitment letter for Senior Secured Credit Facility dated
September 8, 1999.*
(4) Letter agreement assigning a portion of the Senior Secured Credit Facility to Morgan Stanley &
Co. dated September 9, 1999.*
(5) Letter agreement assigning a portion of the Bridge Loan Facility to Morgan Stanley Senior
Funding, Inc. dated September 9, 1999.*
(b)(1) Opinion of Credit Suisse First Boston Corporation (Attached as Appendix C to the Proxy Statement
and incorporated herein by reference).
(2) Written Materials distributed to Board of Directors at May 26, 1999 meeting by Credit Suisse
First Boston Corporation.*
(3) Written Materials distributed to Board of Directors at May 7, 1998 meeting by Credit Suisse
First Boston Corporation.
(4) Written Materials distributed to Board of Directors at December 3, 1998 meeting by Credit Suisse
First Boston Corporation.
(5) Written Materials distributed to Board of Directors at January 12, 1999 meeting by Credit Suisse
First Boston Corporation.
(6) Written Materials distributed to Board of Directors at February 4, 1999 meeting by
A.G. Edwards.
(c)(1) Agreement and Plan of Merger, dated as of June 15, 1999, among Parent, Sub and the Corporation
(Attached as Appendix A to the Proxy Statement and incorporated herein by reference).
(2) Form of Subscription Agreement for Accredited Investors (including voting agreements).*
(3) Guarantee of American Securities Capital Partners, L.P dated June 15, 1999.*
(4) Form of Subscription Agreement for Accredited Investors.
(d)(1) Proxy Statement (filed by CPI Corp. on September 27, 1999 and incorporated herein by reference).
(e)(1) Section 262 of the Delaware General Corporation Law (Attached as Appendix B to the Proxy
Statement and incorporated herein by reference).
(f)(1) Not applicable.
</TABLE>
- ------------------
* Previously filed.
** Portion omitted pursuant to a request for confidential treatment filed
separately with the Securities and Exchange Commission.
10
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Date: September 27, 1999
CPI CORP.
By: /s/ Alyn V. Essman
-----------------------------------
Name: Alyn V. Essman
Title: Chief Executive Officer
SPS INTERNATIONAL HOLDINGS, INC.
By: /s/ Mark Bandeen
-----------------------------------
Name: Mark Bandeen
Title: Co-President
SPS ACQUISITION, INC.
By: /s/ Mark Bandeen
-----------------------------------
Name: Mark Bandeen
Title: Co-President
AMERICAN SECURITIES PARTNERS II, L.P.
By: AMERICAN SECURITIES ASSOCIATES II,
L.L.C.,
its general partner
By: /s/ Michael G. Fisch
----------------------------
Name: Michael G. Fisch
--------------------------
Title: Managing Member
-------------------------
/s/ Alyn V. Essman
--------------------------------------
Alyn V. Essman
/s/ Russell Isaak
--------------------------------------
Russell Isaak
/s/ Patrick J. Morris
--------------------------------------
Patrick J. Morris
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)(1) -- Commitment letter from Credit Suisse First Boston for Senior Secured Credit Facility Loan
dated June 15, 1999.*
(2) -- Commitment letter from Credit Suisse First Boston for Bridge Loan Facility dated June 15,
1999.*
(3) -- Letter agreement amending the commitment letter for Senior Secured Credit Facility dated
September 8, 1999.*
(4) -- Letter agreement assigning a portion of the Senior Secured Credit Facility to Morgan
Stanley & Co. dated September 9, 1999.*
(5) -- Letter agreement assigning a portion of the Bridge Loan Facility to Morgan Stanley Senior
Funding, Inc. dated September 9, 1999.*
(b)(1) -- Opinion of Credit Suisse First Boston Corporation (Attached as Appendix C
to the Proxy Statement and incorporated herein by reference).
(2) -- Written Materials distributed to Board of Directors at May 26, 1999 meeting by
Credit Suisse First Boston Corporation.*
(3) -- Written Materials distributed to Board of Directors at May 7, 1998 meeting by Credit Suisse
First Boston Corporation.**
(4) -- Written Materials distributed to Board of Directors at December 3, 1998 meeting by Credit
Suisse First Boston Corporation.
(5) -- Written Materials distributed to Board of Directors at January 12, 1999 meeting by Credit
Suisse First Boston Corporation.
(6) -- Written Materials distributed to Board of Directors at February 4, 1999 meeting by
A.G. Edwards.
(c)(1) -- Agreement and Plan of Merger, dated as of June 15, 1999, among SPS International Holdings,
Inc., SPS Acquisition, Inc. and CPI Corp. (Attached as Appendix A to the Proxy Statement
and incorporated herein by reference.)
(2) -- Form of Subscription Agreement for Accredited Investors (including voting agreements).*
(3) -- Guarantee of American Securities Capital Partners, L.P. dated June 15, 1999.*
(4) -- Form of Subscription Agreement for Accredited Investors.
(d)(1) -- Proxy Statement filed by CPI Corp. on September 27, 1999 and incorporated herein by
reference.
(e)(1) -- Section 262 of the Delaware General Corporation Law. (Attached as Appendix B to the Proxy
Statement and incorporated herein by reference).
(f)(1) -- Not applicable.
</TABLE>
- ------------------
* Previously filed.
** Portion omitted pursuant to a request for confidential treatment filed
separately with the Securities and Exchange Commission.
12
<PAGE>
May 7, 1998 CONFIDENTIAL
Materials Prepared for the Board of Directors
CPI Corp.
<PAGE>
- --------------------------------------------------------------------------------
CPI CORP.
Table of Contents
- --------------------------------------------------------------------------------
1. Executive Summary
2. Public Market Profile
3. Valuation Considerations
4. Strategic Alternatives
5. Appendix
A. PCA Transaction Overview
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
- --------------------------------------------------------------------------------
CPI CORP.
- --------------------------------------------------------------------------------
1.
Executive Summary
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 1
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Executive Summary
- --------------------------------------------------------------------------------
Although CPI has performed well in the market over the last year, the
Company continues to face a number of challenges whose resolution may
require a fundamentally different approach.
o Strong, ongoing excess cash generation with limited internal
reinvestment opportunities
o Persistent market under-valuation relative to the Company's
"intrinsic" value due to:
o Substantial mismatch of earnings and cash flow (public market
focuses on earnings and earnings growth)
o Expensive capital structure (low leverage given financial
profile)
o High perceived reinvestment risk (investor concern that free cash
may be squandered on unproductive investments)
o Poor trading liquidity (lack of critical mass in the market)
o Declining efficacy of share repurchase program
o Heavy technology/training expenditures budgeted for the current year
which will weigh down financial results and potentially exacerbate
the "value gap"
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 2
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Executive Summary (Continued)
- --------------------------------------------------------------------------------
CSFB has evaluated the following strategic alternatives in terms
of their ability to resolve the identified issues facing the
company:
Status o Employ conservative leverage and
Quo pursue opportunistic share
repurchases
Acquisition Strategy or o Deploy available debt capacity
Major New Initiatives toward complementary acquisition(s)
or Joint Ventures or other new initiatives
Public Market o Employ aggressive leverage through
Recapitalization a large one-time share buyback or
special dividend to shareholders
Sale of Merger o sell the company to either a
of the Company strategic or a financial buyer or
effect a strategic merger
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
- --------------------------------------------------------------------------------
CPI CORP.
- --------------------------------------------------------------------------------
2.
Public Market Profile
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 6
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Executive Summary
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 3
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
CPI's Recent Stock Price Performance
- --------------------------------------------------------------------------------
April 29, 1997 through April 29, 1998
Relative Daily Closing Prices
May 28, 1997 Announces First Quarter Earnings
Close: $21.125 (-2.0%)
June 24, 1997 Wasserstein Perella Initiates Equity Research Coverage with
Strong Buy
Close: $19.25 (+2.0%)
August 18, 1997 Announces Second Quarter Earnings and Continued Positive
Sales Trends
Close: $21.125 (-2.0%)
October 2, 1997 Announces Sale of Interest In Kodak JV
Close: $26.875 (+3.1%)
November 13, 1997 Announces Disappointing Third Quarter Trends
Close: $20,125 (-11.5%)
December 5, 1997 Announces Third Quarter Earnings
Close: $18.875 (+3.4%)
December 9, 1997 Announces Dutch Auction Self-Tender Offer
Close $21.563 (+10.6%)
December 30, 1997 Announces Strong Christmas Sales Trends
Close: $22.625 (+0.3%)
January 8, 1998 Announces Preliminary Results of Dutch Auction
Close: $22.25 (-1.4%)
April 9, 1998 Announces Fourth Quarter and Fiscal 1997 Earnings
Close: 26.188 (+3.5%)
Date CPI CORP
29-Apr-1997 16.2500
30-Apr-1997 16.1250
01-May-1997 16.2500
02-May-1997 17.0000
05-May-1997 16.8750
06-May-1997 17.1250
07-May-1997 17.3750
08-May-1997 16.8750
09-May-1997 16.8750
12-May-1997 17.1250
13-May-1997 17.0000
14-May-1997 17.6250
15-May-1997 18.6250
16-May-1997 18.6250
19-May-1997 18.5000
20-May-1997 18.2500
21-May-1997 18.5000
22-May-1997 18.8750
23-May-1997 19.0000
27-May-1997 19.1250
28-May-1997 19.3750
29-May-1997 19.2500
30-May-1997 18.7500
02-Jun-1997 18.7500
03-Jun-1997 18.7500
04-Jun-1997 18.6250
05-Jun-1997 18.7500
06-Jun-1997 18.7500
09-Jun-1997 19.0000
10-Jun-1997 18.7500
11-Jun-1997 18.6250
12-Jun-1997 18.5000
13-Jun-1997 18.8750
16-Jun-1997 18.7500
17-Jun-1997 18.6250
18-Jun-1997 18.8750
19-Jun-1997 19.0000
20-Jun-1997 18.8750
23-Jun-1997 18.8750
24-Jun-1997 19.2500
25-Jun-1997 19.5625
26-Jun-1997 20.3750
27-Jun-1997 20.6250
30-Jun-1997 21.0000
01-Jul-1997 21.0625
02-Jul-1997 21.1250
03-Jul-1997 20.7500
07-Jul-1997 21.0000
08-Jul-1997 21.1250
09-Jul-1997 21.2500
10-Jul-1997 21.1250
11-Jul-1997 22.0000
14-Jul-1997 22.0625
15-Jul-1997 21.6250
16-Jul-1997 21.5625
17-Jul-1997 21.3750
18-Jul-1997 21.5000
21-Jul-1997 21.1250
22-Jul-1997 21.6250
23-Jul-1997 21.3125
24-Jul-1997 20.8750
25-Jul-1997 20.6250
28-Jul-1997 20.3750
29-Jul-1997 19.9375
30-Jul-1997 20.1250
31-Jul-1997 20.3750
01-Aug-1997 20.0625
04-Aug-1997 19.9375
05-Aug-1997 20.0625
06-Aug-1997 19.7500
07-Aug-1997 19.8750
08-Aug-1997 20.1875
11-Aug-1997 20.2500
12-Aug-1997 20.2500
13-Aug-1997 20.0625
14-Aug-1997 20.4375
15-Aug-1997 21.5625
18-Aug-1997 21.1250
19-Aug-1997 21.5000
20-Aug-1997 23.3125
21-Aug-1997 23.5625
22-Aug-1997 23.4375
25-Aug-1997 23.7500
26-Aug-1997 24.3750
27-Aug-1997 24.3750
28-Aug-1997 24.3750
29-Aug-1997 23.7500
02-Sep-1997 25.2500
03-Sep-1997 25.5000
04-Sep-1997 25.0625
05-Sep-1997 25.1250
08-Sep-1997 25.3125
09-Sep-1997 26.1250
10-Sep-1997 26.0000
11-Sep-1997 25.5000
12-Sep-1997 25.6250
15-Sep-1997 25.8750
16-Sep-1997 25.6250
17-Sep-1997 26.1250
18-Sep-1997 26.3125
19-Sep-1997 26.1875
22-Sep-1997 26.3125
23-Sep-1997 26.1875
24-Sep-1997 26.5625
25-Sep-1997 25.3125
26-Sep-1997 25.1250
29-Sep-1997 25.1250
30-Sep-1997 25.5000
01-Oct-1997 26.0625
02-Oct-1997 26.8750
03-Oct-1997 27.3125
06-Oct-1997 27.0000
07-Oct-1997 27.3125
08-Oct-1997 27.3750
09-Oct-1997 25.9375
10-Oct-1997 24.7500
13-Oct-1997 24.8750
14-Oct-1997 26.0000
15-Oct-1997 25.0000
16-Oct-1997 25.5625
17-Oct-1997 25.1250
20-Oct-1997 25.4375
21-Oct-1997 25.1250
22-Oct-1997 24.0000
23-Oct-1997 25.0000
24-Oct-1997 26.1875
27-Oct-1997 25.5625
28-Oct-1997 24.5000
29-Oct-1997 25.8750
30-Oct-1997 26.5000
31-Oct-1997 26.0000
03-Nov-1997 27.5625
04-Nov-1997 27.0000
05-Nov-1997 26.8125
06-Nov-1997 25.3750
07-Nov-1997 25.0000
10-Nov-1997 23.7500
11-Nov-1997 23.6875
12-Nov-1997 22.7500
13-Nov-1997 20.1250
14-Nov-1997 19.9375
17-Nov-1997 20.0000
18-Nov-1997 18.3125
19-Nov-1997 17.7500
20-Nov-1997 18.0000
21-Nov-1997 18.9375
24-Nov-1997 18.3125
25-Nov-1997 18.1250
26-Nov-1997 18.2500
28-Nov-1997 18.6250
01-Dec-1997 18.5625
02-Dec-1997 17.9375
03-Dec-1997 18.0000
04-Dec-1997 18.2500
05-Dec-1997 18.8750
08-Dec-1997 19.5000
09-Dec-1997 21.5625
10-Dec-1997 21.5625
11-Dec-1997 21.5625
12-Dec-1997 21.5625
15-Dec-1997 21.6250
16-Dec-1997 21.5625
17-Dec-1997 21.5625
18-Dec-1997 21.7500
19-Dec-1997 21.6875
22-Dec-1997 22.0000
23-Dec-1997 22.3125
24-Dec-1997 22.1875
26-Dec-1997 22.3750
29-Dec-1997 22.5625
30-Dec-1997 22.6250
31-Dec-1997 22.6250
02-Jan-1998 22.6250
05-Jan-1998 22.6250
06-Jan-1998 22.6875
07-Jan-1998 22.5625
08-Jan-1998 22.2500
09-Jan-1998 21.9375
12-Jan-1998 21.1250
13-Jan-1998 21.0625
14-Jan-1998 20.9375
15-Jan-1998 22.2500
16-Jan-1998 22.4375
20-Jan-1998 22.2500
21-Jan-1998 22.8750
22-Jan-1998 22.8125
23-Jan-1998 22.8750
26-Jan-1998 23.0625
27-Jan-1998 23.1875
28-Jan-1998 23.3750
29-Jan-1998 23.9375
30-Jan-1998 24.0625
02-Feb-1998 24.2500
03-Feb-1998 24.1250
04-Feb-1998 24.3125
05-Feb-1998 24.5625
06-Feb-1998 23.9375
09-Feb-1998 24.2500
10-Feb-1998 24.5000
11-Feb-1998 24.5625
12-Feb-1998 24.5000
13-Feb-1998 24.4375
17-Feb-1998 25.2500
18-Feb-1998 24.6875
19-Feb-1998 25.0000
20-Feb-1998 24.5625
23-Feb-1998 24.0625
24-Feb-1998 24.5000
25-Feb-1998 24.1875
26-Feb-1998 24.1250
27-Feb-1998 24.0625
02-Mar-1998 24.1250
03-Mar-1998 23.9375
04-Mar-1998 23.8750
05-Mar-1998 23.9375
06-Mar-1998 23.6250
09-Mar-1998 23.9375
10-Mar-1998 24.0625
11-Mar-1998 24.4375
12-Mar-1998 24.4375
13-Mar-1998 24.3125
16-Mar-1998 24.3750
17-Mar-1998 24.3125
18-Mar-1998 24.3750
19-Mar-1998 24.1875
20-Mar-1998 24.3750
23-Mar-1998 24.4375
24-Mar-1998 24.6250
25-Mar-1998 24.5625
26-Mar-1998 24.3750
27-Mar-1998 24.5000
30-Mar-1998 24.6875
31-Mar-1998 25.3125
01-Apr-1998 25.8750
02-Apr-1998 25.3125
03-Apr-1998 25.2500
06-Apr-1998 25.5625
07-Apr-1998 25.3750
08-Apr-1998 25.3125
09-Apr-1998 26.1875
13-Apr-1998 26.6250
14-Apr-1998 27.2500
15-Apr-1998 27.2500
16-Apr-1998 26.5000
17-Apr-1998 26.3750
20-Apr-1998 26.0625
21-Apr-1998 26.6250
22-Apr-1998 26.3750
23-Apr-1998 26.5625
24-Apr-1998 26.5625
27-Apr-1998 26.3125
28-Apr-1998 26.1250
29-Apr-1998 26.0000
- --------------------------------------------------------------------------------
Source: FactSet Research Systems, Inc.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 4
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
CPI's Recent Stock Price Performance
- --------------------------------------------------------------------------------
One Year Stock Price Performance
Daily Closing Prices
April 29, 1997 through April 29, 1998
Date CPI CORP S&P INDUSTRIALS PCA INTL INC
---- -------- --------------- ------------
29-Apr-1997 100% 100% 100%
30-Apr-1997 99% 101% 102%
01-May-1997 100% 101% 100%
02-May-1997 105% 102% 103%
05-May-1997 104% 105% 103%
06-May-1997 105% 104% 101%
07-May-1997 107% 103% 104%
08-May-1997 104% 103% 101%
09-May-1997 104% 104% 103%
12-May-1997 105% 106% 106%
13-May-1997 105% 105% 105%
14-May-1997 108% 105% 112%
15-May-1997 115% 106% 104%
16-May-1997 115% 105% 109%
19-May-1997 114% 105% 109%
20-May-1997 112% 106% 110%
21-May-1997 114% 106% 109%
22-May-1997 116% 106% 109%
23-May-1997 117% 107% 107%
26-May-1997 117% 107% 107%
27-May-1997 118% 108% 110%
28-May-1997 119% 107% 118%
29-May-1997 118% 107% 122%
30-May-1997 115% 107% 115%
02-Jun-1997 115% 107% 120%
03-Jun-1997 115% 107% 130%
04-Jun-1997 115% 106% 138%
05-Jun-1997 115% 106% 140%
06-Jun-1997 115% 108% 138%
09-Jun-1997 117% 109% 141%
10-Jun-1997 115% 109% 141%
11-Jun-1997 115% 110% 135%
12-Jun-1997 114% 111% 139%
13-Jun-1997 116% 113% 131%
16-Jun-1997 115% 113% 138%
17-Jun-1997 115% 113% 133%
18-Jun-1997 116% 112% 128%
19-Jun-1997 117% 113% 138%
20-Jun-1997 116% 113% 139%
23-Jun-1997 116% 111% 129%
24-Jun-1997 118% 113% 134%
25-Jun-1997 120% 112% 140%
26-Jun-1997 125% 111% 140%
27-Jun-1997 127% 112% 133%
30-Jun-1997 129% 112% 128%
01-Jul-1997 130% 112% 125%
02-Jul-1997 130% 114% 123%
03-Jul-1997 128% 115% 123%
04-Jul-1997 128% 115% 123%
07-Jul-1997 129% 115% 125%
08-Jul-1997 130% 116% 125%
09-Jul-1997 131% 115% 120%
10-Jul-1997 130% 115% 125%
11-Jul-1997 135% 116% 126%
14-Jul-1997 136% 116% 131%
15-Jul-1997 133% 117% 130%
16-Jul-1997 133% 119% 129%
17-Jul-1997 132% 118% 131%
18-Jul-1997 132% 116% 133%
21-Jul-1997 130% 116% 133%
22-Jul-1997 133% 118% 130%
23-Jul-1997 131% 119% 141%
24-Jul-1997 128% 119% 144%
25-Jul-1997 127% 119% 144%
28-Jul-1997 125% 118% 142%
29-Jul-1997 123% 119% 142%
30-Jul-1997 124% 120% 146%
31-Jul-1997 125% 120% 147%
01-Aug-1997 123% 119% 142%
04-Aug-1997 123% 120% 147%
05-Aug-1997 123% 120% 144%
06-Aug-1997 122% 121% 146%
07-Aug-1997 122% 120% 146%
08-Aug-1997 124% 118% 144%
11-Aug-1997 125% 118% 142%
12-Aug-1997 125% 117% 144%
13-Aug-1997 123% 116% 141%
14-Aug-1997 126% 117% 141%
15-Aug-1997 133% 113% 138%
18-Aug-1997 130% 115% 140%
19-Aug-1997 132% 117% 140%
20-Aug-1997 143% 118% 144%
21-Aug-1997 145% 117% 144%
22-Aug-1997 144% 116% 144%
25-Aug-1997 146% 116% 146%
26-Aug-1997 150% 115% 141%
27-Aug-1997 150% 115% 147%
28-Aug-1997 150% 114% 150%
29-Aug-1997 146% 113% 147%
01-Sep-1997 146% 113% 147%
02-Sep-1997 155% 117% 144%
03-Sep-1997 157% 117% 142%
04-Sep-1997 154% 117% 144%
05-Sep-1997 155% 117% 143%
08-Sep-1997 156% 117% 150%
09-Sep-1997 161% 117% 144%
10-Sep-1997 160% 115% 142%
11-Sep-1997 157% 115% 142%
12-Sep-1997 158% 116% 142%
15-Sep-1997 159% 115% 147%
16-Sep-1997 158% 119% 150%
17-Sep-1997 161% 118% 150%
18-Sep-1997 162% 119% 153%
19-Sep-1997 161% 119% 154%
22-Sep-1997 162% 120% 147%
23-Sep-1997 161% 119% 146%
24-Sep-1997 163% 118% 148%
25-Sep-1997 156% 118% 146%
26-Sep-1997 155% 118% 151%
29-Sep-1997 155% 120% 150%
30-Sep-1997 157% 119% 150%
01-Oct-1997 160% 120% 157%
02-Oct-1997 165% 120% 158%
03-Oct-1997 168% 121% 162%
06-Oct-1997 166% 122% 158%
07-Oct-1997 168% 123% 163%
08-Oct-1997 168% 122% 162%
09-Oct-1997 160% 121% 159%
10-Oct-1997 152% 121% 160%
13-Oct-1997 153% 121% 160%
14-Oct-1997 160% 121% 158%
15-Oct-1997 154% 121% 160%
16-Oct-1997 157% 119% 154%
17-Oct-1997 155% 118% 154%
20-Oct-1997 157% 119% 154%
21-Oct-1997 155% 121% 158%
22-Oct-1997 148% 121% 154%
23-Oct-1997 154% 119% 154%
24-Oct-1997 161% 117% 152%
27-Oct-1997 157% 109% 152%
28-Oct-1997 151% 115% 154%
29-Oct-1997 159% 115% 156%
30-Oct-1997 163% 113% 154%
31-Oct-1997 160% 114% 157%
03-Nov-1997 170% 117% 156%
04-Nov-1997 166% 118% 160%
05-Nov-1997 165% 118% 158%
06-Nov-1997 156% 117% 160%
07-Nov-1997 154% 116% 155%
10-Nov-1997 146% 115% 154%
11-Nov-1997 146% 116% 158%
12-Nov-1997 140% 113% 156%
13-Nov-1997 124% 115% 154%
14-Nov-1997 123% 117% 157%
17-Nov-1997 123% 119% 154%
18-Nov-1997 113% 118% 157%
19-Nov-1997 109% 118% 157%
20-Nov-1997 111% 120% 161%
21-Nov-1997 117% 120% 160%
24-Nov-1997 113% 118% 158%
25-Nov-1997 112% 119% 155%
26-Nov-1997 112% 119% 158%
27-Nov-1997 112% 119% 158%
28-Nov-1997 115% 119% 158%
01-Dec-1997 114% 121% 159%
02-Dec-1997 110% 121% 154%
03-Dec-1997 111% 121% 160%
04-Dec-1997 112% 121% 158%
05-Dec-1997 116% 122% 158%
08-Dec-1997 120% 122% 156%
09-Dec-1997 133% 121% 155%
10-Dec-1997 133% 120% 152%
11-Dec-1997 133% 118% 144%
12-Dec-1997 133% 118% 141%
15-Dec-1997 133% 119% 141%
16-Dec-1997 133% 120% 142%
17-Dec-1997 133% 120% 142%
18-Dec-1997 134% 118% 134%
19-Dec-1997 133% 117% 128%
22-Dec-1997 135% 118% 133%
23-Dec-1997 137% 116% 134%
24-Dec-1997 137% 116% 134%
25-Dec-1997 137% 116% 134%
26-Dec-1997 138% 116% 134%
29-Dec-1997 139% 118% 134%
30-Dec-1997 139% 120% 133%
31-Dec-1997 139% 120% 134%
01-Jan-1998 139% 120% 134%
02-Jan-1998 139% 121% 134%
05-Jan-1998 139% 121% 133%
06-Jan-1998 140% 120% 133%
07-Jan-1998 139% 120% 131%
08-Jan-1998 137% 119% 131%
09-Jan-1998 135% 115% 131%
12-Jan-1998 130% 117% 130%
13-Jan-1998 130% 119% 135%
14-Jan-1998 129% 119% 139%
15-Jan-1998 137% 119% 136%
16-Jan-1998 138% 120% 138%
19-Jan-1998 138% 120% 138%
20-Jan-1998 137% 122% 134%
21-Jan-1998 141% 121% 142%
22-Jan-1998 140% 121% 138%
23-Jan-1998 141% 120% 142%
26-Jan-1998 142% 120% 139%
27-Jan-1998 143% 121% 135%
28-Jan-1998 144% 122% 134%
29-Jan-1998 147% 123% 141%
30-Jan-1998 148% 123% 142%
02-Feb-1998 149% 125% 134%
03-Feb-1998 148% 126% 138%
04-Feb-1998 150% 126% 139%
05-Feb-1998 151% 126% 138%
06-Feb-1998 147% 127% 139%
09-Feb-1998 149% 126% 142%
10-Feb-1998 151% 127% 137%
11-Feb-1998 151% 127% 138%
12-Feb-1998 151% 128% 134%
13-Feb-1998 150% 127% 134%
16-Feb-1998 150% 127% 134%
17-Feb-1998 155% 128% 134%
18-Feb-1998 152% 129% 134%
19-Feb-1998 154% 128% 131%
20-Feb-1998 151% 129% 131%
23-Feb-1998 148% 130% 128%
24-Feb-1998 151% 129% 131%
25-Feb-1998 149% 130% 131%
26-Feb-1998 148% 131% 133%
27-Feb-1998 148% 131% 141%
02-Mar-1998 148% 131% 140%
03-Mar-1998 147% 131% 142%
04-Mar-1998 147% 131% 152%
05-Mar-1998 147% 129% 142%
06-Mar-1998 145% 132% 144%
09-Mar-1998 147% 131% 146%
10-Mar-1998 148% 133% 145%
11-Mar-1998 150% 133% 145%
12-Mar-1998 150% 133% 149%
13-Mar-1998 150% 133% 146%
16-Mar-1998 150% 134% 146%
17-Mar-1998 150% 134% 144%
18-Mar-1998 150% 135% 143%
19-Mar-1998 149% 135% 145%
20-Mar-1998 150% 136% 144%
23-Mar-1998 150% 136% 139%
24-Mar-1998 152% 138% 141%
25-Mar-1998 151% 137% 141%
26-Mar-1998 150% 137% 143%
27-Mar-1998 151% 137% 144%
30-Mar-1998 152% 137% 144%
31-Mar-1998 156% 137% 144%
01-Apr-1998 159% 138% 149%
02-Apr-1998 156% 140% 144%
03-Apr-1998 155% 140% 143%
06-Apr-1998 157% 139% 139%
07-Apr-1998 156% 137% 143%
08-Apr-1998 156% 137% 147%
09-Apr-1998 161% 138% 149%
10-Apr-1998 161% 138% 149%
13-Apr-1998 164% 137% 146%
14-Apr-1998 168% 138% 144%
15-Apr-1998 168% 139% 143%
16-Apr-1998 163% 137% 139%
17-Apr-1998 162% 139% 138%
20-Apr-1998 160% 140% 138%
21-Apr-1998 164% 140% 166%
22-Apr-1998 162% 141% 164%
23-Apr-1998 163% 139% 164%
24-Apr-1998 163% 138% 164%
27-Apr-1998 162% 136% 163%
28-Apr-1998 161% 136% 163%
29-Apr-1998 160% 137% 164%
Five Year Stock Price Performance
Weekly Closing Prices
April 30, 1993 through April 29, 1998
Date CPI CORP S&P INDUSTRIALS PCA INTL INC
30-Apr-1993 100% 100% 100%
03-May-1993 96% 101% 100%
04-May-1993 99% 101% 106%
05-May-1993 96% 101% 105%
06-May-1993 99% 101% 108%
07-May-1993 98% 101% 103%
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05-Oct-1995 122% 135% 84%
06-Oct-1995 125% 135% 84%
09-Oct-1995 125% 134% 84%
10-Oct-1995 124% 134% 84%
11-Oct-1995 124% 134% 84%
12-Oct-1995 121% 135% 85%
13-Oct-1995 120% 135% 81%
16-Oct-1995 121% 135% 78%
17-Oct-1995 121% 136% 77%
18-Oct-1995 120% 136% 77%
19-Oct-1995 117% 137% 69%
20-Oct-1995 116% 136% 68%
23-Oct-1995 112% 136% 68%
24-Oct-1995 111% 136% 73%
25-Oct-1995 111% 136% 68%
26-Oct-1995 108% 134% 68%
27-Oct-1995 108% 135% 67%
30-Oct-1995 107% 136% 68%
31-Oct-1995 108% 136% 67%
01-Nov-1995 110% 136% 66%
02-Nov-1995 113% 137% 68%
03-Nov-1995 118% 137% 67%
06-Nov-1995 121% 137% 65%
07-Nov-1995 119% 137% 65%
08-Nov-1995 119% 138% 65%
09-Nov-1995 119% 138% 65%
10-Nov-1995 116% 138% 63%
13-Nov-1995 116% 138% 61%
14-Nov-1995 115% 137% 60%
15-Nov-1995 113% 139% 59%
16-Nov-1995 115% 139% 59%
17-Nov-1995 119% 140% 59%
20-Nov-1995 121% 139% 63%
21-Nov-1995 122% 140% 63%
22-Nov-1995 121% 139% 63%
23-Nov-1995 121% 139% 63%
24-Nov-1995 120% 140% 61%
27-Nov-1995 122% 140% 59%
28-Nov-1995 122% 141% 60%
29-Nov-1995 123% 142% 61%
30-Nov-1995 124% 141% 57%
01-Dec-1995 125% 141% 63%
04-Dec-1995 122% 143% 57%
05-Dec-1995 122% 144% 60%
06-Dec-1995 122% 144% 56%
07-Dec-1995 121% 143% 57%
08-Dec-1995 123% 144% 54%
11-Dec-1995 123% 144% 56%
12-Dec-1995 123% 144% 55%
13-Dec-1995 123% 145% 55%
14-Dec-1995 123% 144% 55%
15-Dec-1995 121% 144% 58%
18-Dec-1995 106% 141% 56%
19-Dec-1995 105% 142% 59%
20-Dec-1995 100% 141% 64%
21-Dec-1995 99% 142% 63%
22-Dec-1995 100% 142% 61%
25-Dec-1995 100% 142% 61%
26-Dec-1995 95% 143% 61%
27-Dec-1995 96% 143% 64%
28-Dec-1995 96% 142% 66%
29-Dec-1995 95% 143% 71%
01-Jan-1996 95% 143% 71%
02-Jan-1996 94% 144% 73%
03-Jan-1996 93% 144% 77%
04-Jan-1996 93% 144% 73%
05-Jan-1996 93% 143% 73%
08-Jan-1996 91% 144% 74%
09-Jan-1996 93% 142% 73%
10-Jan-1996 92% 139% 74%
11-Jan-1996 93% 140% 73%
12-Jan-1996 90% 140% 71%
15-Jan-1996 89% 139% 69%
16-Jan-1996 87% 141% 63%
17-Jan-1996 88% 140% 66%
18-Jan-1996 88% 141% 65%
19-Jan-1996 88% 142% 65%
22-Jan-1996 87% 143% 64%
23-Jan-1996 87% 142% 61%
24-Jan-1996 88% 144% 60%
25-Jan-1996 88% 143% 58%
26-Jan-1996 87% 145% 58%
29-Jan-1996 87% 145% 61%
30-Jan-1996 86% 147% 58%
31-Jan-1996 87% 148% 63%
01-Feb-1996 87% 149% 62%
02-Feb-1996 86% 148% 60%
05-Feb-1996 89% 149% 65%
06-Feb-1996 90% 150% 64%
07-Feb-1996 91% 151% 62%
08-Feb-1996 87% 152% 60%
09-Feb-1996 89% 152% 61%
12-Feb-1996 88% 154% 63%
13-Feb-1996 88% 153% 61%
14-Feb-1996 89% 152% 61%
15-Feb-1996 89% 152% 61%
16-Feb-1996 90% 151% 65%
19-Feb-1996 90% 151% 65%
20-Feb-1996 90% 149% 65%
21-Feb-1996 89% 151% 62%
22-Feb-1996 90% 154% 60%
23-Feb-1996 89% 154% 65%
26-Feb-1996 89% 152% 60%
27-Feb-1996 89% 151% 63%
28-Feb-1996 90% 150% 61%
29-Feb-1996 90% 149% 68%
01-Mar-1996 90% 150% 68%
04-Mar-1996 90% 151% 65%
05-Mar-1996 90% 153% 65%
06-Mar-1996 89% 152% 67%
07-Mar-1996 89% 153% 65%
08-Mar-1996 87% 148% 63%
11-Mar-1996 87% 150% 68%
12-Mar-1996 88% 150% 66%
13-Mar-1996 87% 150% 63%
14-Mar-1996 88% 151% 68%
15-Mar-1996 88% 151% 68%
18-Mar-1996 90% 153% 69%
19-Mar-1996 90% 153% 69%
20-Mar-1996 90% 152% 72%
21-Mar-1996 93% 152% 73%
22-Mar-1996 94% 152% 73%
25-Mar-1996 92% 152% 77%
26-Mar-1996 91% 153% 76%
27-Mar-1996 93% 152% 79%
28-Mar-1996 93% 152% 77%
29-Mar-1996 95% 151% 81%
01-Apr-1996 94% 153% 81%
02-Apr-1996 93% 153% 82%
03-Apr-1996 93% 153% 79%
04-Apr-1996 95% 154% 79%
05-Apr-1996 95% 154% 79%
08-Apr-1996 94% 151% 77%
09-Apr-1996 95% 151% 77%
10-Apr-1996 93% 149% 79%
11-Apr-1996 94% 149% 77%
12-Apr-1996 94% 150% 79%
15-Apr-1996 93% 151% 79%
16-Apr-1996 94% 152% 77%
17-Apr-1996 92% 151% 90%
18-Apr-1996 90% 151% 90%
19-Apr-1996 89% 152% 85%
22-Apr-1996 89% 152% 89%
23-Apr-1996 90% 153% 87%
24-Apr-1996 92% 153% 91%
25-Apr-1996 96% 154% 87%
26-Apr-1996 100% 154% 87%
29-Apr-1996 100% 154% 87%
30-Apr-1996 103% 154% 90%
01-May-1996 104% 154% 90%
02-May-1996 105% 152% 87%
03-May-1996 99% 151% 85%
06-May-1996 103% 151% 85%
07-May-1996 104% 151% 87%
08-May-1996 103% 152% 87%
09-May-1996 103% 152% 87%
10-May-1996 104% 153% 90%
13-May-1996 102% 156% 92%
14-May-1996 103% 157% 92%
15-May-1996 104% 157% 87%
16-May-1996 103% 157% 100%
17-May-1996 104% 158% 106%
20-May-1996 104% 159% 105%
21-May-1996 104% 159% 105%
22-May-1996 104% 160% 105%
23-May-1996 104% 160% 105%
24-May-1996 106% 160% 105%
27-May-1996 106% 160% 105%
28-May-1996 108% 159% 105%
29-May-1996 107% 157% 105%
30-May-1996 101% 159% 105%
31-May-1996 97% 158% 110%
03-Jun-1996 92% 158% 103%
04-Jun-1996 93% 159% 106%
05-Jun-1996 93% 160% 106%
06-Jun-1996 96% 159% 103%
07-Jun-1996 96% 159% 104%
10-Jun-1996 98% 159% 102%
11-Jun-1996 100% 159% 103%
12-Jun-1996 99% 158% 106%
13-Jun-1996 98% 158% 105%
14-Jun-1996 99% 157% 105%
17-Jun-1996 98% 157% 106%
18-Jun-1996 98% 156% 107%
19-Jun-1996 97% 156% 105%
20-Jun-1996 96% 157% 105%
21-Jun-1996 97% 158% 107%
24-Jun-1996 97% 158% 106%
25-Jun-1996 97% 158% 106%
26-Jun-1996 97% 157% 105%
27-Jun-1996 98% 158% 108%
28-Jun-1996 98% 158% 108%
01-Jul-1996 98% 159% 108%
02-Jul-1996 99% 158% 106%
03-Jul-1996 99% 158% 108%
04-Jul-1996 99% 158% 108%
05-Jul-1996 99% 155% 107%
08-Jul-1996 98% 154% 110%
09-Jul-1996 95% 154% 111%
10-Jul-1996 93% 155% 110%
11-Jul-1996 93% 152% 110%
12-Jul-1996 93% 152% 110%
15-Jul-1996 93% 150% 110%
16-Jul-1996 88% 147% 106%
17-Jul-1996 87% 149% 109%
18-Jul-1996 90% 151% 105%
19-Jul-1996 90% 150% 108%
22-Jul-1996 89% 149% 106%
23-Jul-1996 87% 147% 105%
24-Jul-1996 84% 147% 108%
25-Jul-1996 84% 148% 106%
26-Jul-1996 82% 149% 104%
29-Jul-1996 82% 148% 106%
30-Jul-1996 86% 149% 108%
31-Jul-1996 85% 150% 106%
01-Aug-1996 84% 152% 108%
02-Aug-1996 83% 155% 108%
05-Aug-1996 84% 155% 105%
06-Aug-1996 86% 155% 110%
07-Aug-1996 89% 156% 110%
08-Aug-1996 104% 155% 108%
09-Aug-1996 108% 155% 108%
12-Aug-1996 107% 156% 107%
13-Aug-1996 105% 155% 106%
14-Aug-1996 105% 155% 108%
15-Aug-1996 106% 155% 110%
16-Aug-1996 104% 156% 110%
19-Aug-1996 113% 156% 116%
20-Aug-1996 111% 156% 113%
21-Aug-1996 110% 155% 113%
22-Aug-1996 110% 157% 112%
23-Aug-1996 110% 156% 110%
26-Aug-1996 110% 155% 108%
27-Aug-1996 110% 156% 110%
28-Aug-1996 110% 156% 106%
29-Aug-1996 110% 154% 105%
30-Aug-1996 109% 153% 108%
02-Sep-1996 109% 153% 108%
03-Sep-1996 110% 153% 107%
04-Sep-1996 110% 154% 106%
05-Sep-1996 110% 152% 106%
06-Sep-1996 110% 154% 107%
09-Sep-1996 110% 155% 108%
10-Sep-1996 109% 156% 107%
11-Sep-1996 109% 156% 108%
12-Sep-1996 110% 157% 109%
13-Sep-1996 110% 159% 106%
16-Sep-1996 111% 160% 106%
17-Sep-1996 110% 160% 103%
18-Sep-1996 110% 160% 106%
19-Sep-1996 110% 161% 107%
20-Sep-1996 112% 161% 110%
23-Sep-1996 110% 161% 107%
24-Sep-1996 110% 161% 108%
25-Sep-1996 110% 161% 108%
26-Sep-1996 110% 161% 106%
27-Sep-1996 111% 161% 106%
30-Sep-1996 111% 161% 106%
01-Oct-1996 112% 161% 109%
02-Oct-1996 114% 162% 108%
03-Oct-1996 115% 162% 106%
04-Oct-1996 116% 164% 110%
07-Oct-1996 122% 165% 112%
08-Oct-1996 123% 164% 108%
09-Oct-1996 123% 163% 109%
10-Oct-1996 124% 163% 113%
11-Oct-1996 125% 164% 110%
14-Oct-1996 125% 165% 108%
15-Oct-1996 125% 165% 110%
16-Oct-1996 125% 165% 107%
17-Oct-1996 124% 166% 108%
18-Oct-1996 117% 166% 106%
21-Oct-1996 116% 166% 107%
22-Oct-1996 111% 165% 106%
23-Oct-1996 113% 165% 100%
24-Oct-1996 114% 164% 100%
25-Oct-1996 113% 164% 102%
28-Oct-1996 113% 163% 101%
29-Oct-1996 113% 163% 97%
30-Oct-1996 114% 163% 99%
31-Oct-1996 113% 164% 97%
01-Nov-1996 113% 164% 98%
04-Nov-1996 110% 164% 97%
05-Nov-1996 104% 166% 97%
06-Nov-1996 104% 168% 100%
07-Nov-1996 107% 169% 97%
08-Nov-1996 104% 170% 97%
11-Nov-1996 105% 170% 98%
12-Nov-1996 104% 170% 97%
13-Nov-1996 104% 170% 100%
14-Nov-1996 104% 171% 97%
15-Nov-1996 104% 172% 100%
18-Nov-1996 104% 171% 97%
19-Nov-1996 104% 173% 97%
20-Nov-1996 104% 173% 98%
21-Nov-1996 103% 173% 98%
22-Nov-1996 102% 174% 102%
25-Nov-1996 102% 176% 116%
26-Nov-1996 101% 176% 114%
27-Nov-1996 101% 175% 114%
28-Nov-1996 101% 175% 114%
29-Nov-1996 101% 176% 115%
02-Dec-1996 101% 176% 114%
03-Dec-1996 101% 174% 111%
04-Dec-1996 101% 173% 115%
05-Dec-1996 100% 173% 104%
06-Dec-1996 100% 172% 103%
09-Dec-1996 101% 175% 102%
10-Dec-1996 99% 174% 102%
11-Dec-1996 101% 173% 102%
12-Dec-1996 99% 170% 102%
13-Dec-1996 99% 170% 102%
16-Dec-1996 98% 168% 103%
17-Dec-1996 97% 169% 102%
18-Dec-1996 97% 170% 102%
19-Dec-1996 99% 173% 100%
20-Dec-1996 104% 174% 102%
23-Dec-1996 99% 174% 98%
24-Dec-1996 97% 175% 98%
25-Dec-1996 97% 175% 98%
26-Dec-1996 97% 176% 98%
27-Dec-1996 98% 176% 102%
30-Dec-1996 99% 175% 102%
31-Dec-1996 99% 172% 105%
01-Jan-1997 99% 172% 105%
02-Jan-1997 100% 172% 103%
03-Jan-1997 100% 174% 100%
06-Jan-1997 101% 174% 100%
07-Jan-1997 106% 176% 100%
08-Jan-1997 105% 174% 100%
09-Jan-1997 110% 176% 100%
10-Jan-1997 108% 177% 100%
13-Jan-1997 108% 177% 100%
14-Jan-1997 108% 179% 104%
15-Jan-1997 107% 179% 113%
16-Jan-1997 106% 180% 113%
17-Jan-1997 107% 181% 111%
20-Jan-1997 107% 181% 111%
21-Jan-1997 106% 182% 110%
22-Jan-1997 108% 183% 111%
23-Jan-1997 109% 181% 110%
24-Jan-1997 109% 179% 113%
27-Jan-1997 108% 178% 111%
28-Jan-1997 108% 178% 110%
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30-Jan-1997 109% 183% 112%
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05-Feb-1997 111% 180% 105%
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10-Feb-1997 112% 182% 106%
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13-Feb-1997 113% 188% 108%
14-Feb-1997 111% 187% 106%
17-Feb-1997 111% 187% 106%
18-Feb-1997 115% 188% 110%
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20-Feb-1997 114% 186% 107%
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24-Feb-1997 115% 187% 102%
25-Feb-1997 114% 188% 104%
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03-Mar-1997 110% 184% 106%
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31-Mar-1997 100% 176% 108%
01-Apr-1997 100% 176% 103%
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07-Apr-1997 103% 177% 110%
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11-Apr-1997 102% 171% 105%
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15-Apr-1997 100% 176% 103%
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18-Apr-1997 100% 179% 100%
21-Apr-1997 99% 178% 95%
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24-Apr-1997 96% 180% 98%
25-Apr-1997 95% 179% 101%
28-Apr-1997 95% 180% 102%
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30-Apr-1997 96% 187% 103%
01-May-1997 96% 186% 101%
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05-May-1997 100% 193% 104%
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07-May-1997 103% 190% 105%
08-May-1997 100% 191% 102%
09-May-1997 100% 192% 104%
12-May-1997 101% 195% 106%
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14-May-1997 104% 195% 113%
15-May-1997 110% 197% 105%
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19-May-1997 110% 195% 110%
20-May-1997 108% 196% 111%
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23-May-1997 113% 198% 108%
26-May-1997 113% 198% 108%
27-May-1997 113% 199% 110%
28-May-1997 115% 199% 119%
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30-May-1997 111% 198% 116%
02-Jun-1997 111% 198% 121%
03-Jun-1997 111% 197% 131%
04-Jun-1997 110% 196% 139%
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06-Jun-1997 111% 200% 140%
09-Jun-1997 113% 201% 142%
10-Jun-1997 111% 202% 142%
11-Jun-1997 110% 203% 136%
12-Jun-1997 110% 206% 140%
13-Jun-1997 112% 208% 132%
16-Jun-1997 111% 208% 139%
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23-Jun-1997 112% 204% 130%
24-Jun-1997 114% 209% 135%
25-Jun-1997 116% 207% 141%
26-Jun-1997 121% 206% 141%
27-Jun-1997 122% 207% 134%
30-Jun-1997 124% 207% 129%
01-Jul-1997 125% 208% 126%
02-Jul-1997 125% 211% 124%
03-Jul-1997 123% 213% 124%
04-Jul-1997 123% 213% 124%
07-Jul-1997 124% 213% 126%
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23-Jul-1997 126% 219% 142%
24-Jul-1997 124% 220% 145%
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28-Jul-1997 121% 219% 144%
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30-Jul-1997 119% 222% 148%
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01-Aug-1997 119% 220% 144%
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06-Aug-1997 117% 224% 147%
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08-Aug-1997 120% 218% 145%
11-Aug-1997 120% 219% 144%
12-Aug-1997 120% 216% 145%
13-Aug-1997 119% 215% 142%
14-Aug-1997 121% 216% 142%
15-Aug-1997 128% 210% 139%
18-Aug-1997 125% 213% 141%
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20-Aug-1997 138% 219% 145%
21-Aug-1997 140% 216% 145%
22-Aug-1997 139% 215% 145%
25-Aug-1997 141% 215% 147%
26-Aug-1997 144% 213% 142%
27-Aug-1997 144% 213% 148%
28-Aug-1997 144% 211% 152%
29-Aug-1997 141% 209% 148%
01-Sep-1997 141% 209% 148%
02-Sep-1997 150% 216% 145%
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08-Sep-1997 150% 216% 152%
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01-Oct-1997 154% 221% 158%
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06-Oct-1997 160% 225% 159%
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27-Oct-1997 151% 202% 153%
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27-Feb-1998 143% 242% 142%
02-Mar-1998 143% 242% 141%
03-Mar-1998 142% 243% 143%
04-Mar-1998 141% 242% 154%
05-Mar-1998 142% 239% 143%
06-Mar-1998 140% 244% 145%
09-Mar-1998 142% 243% 147%
10-Mar-1998 143% 245% 146%
11-Mar-1998 145% 246% 146%
12-Mar-1998 145% 246% 150%
13-Mar-1998 144% 246% 147%
16-Mar-1998 144% 248% 147%
17-Mar-1998 144% 248% 145%
18-Mar-1998 144% 249% 144%
19-Mar-1998 143% 250% 146%
20-Mar-1998 144% 252% 145%
23-Mar-1998 145% 252% 140%
24-Mar-1998 146% 254% 142%
25-Mar-1998 146% 254% 142%
26-Mar-1998 144% 254% 144%
27-Mar-1998 145% 252% 145%
30-Mar-1998 146% 253% 145%
31-Mar-1998 150% 254% 145%
01-Apr-1998 153% 256% 150%
02-Apr-1998 150% 259% 145%
03-Apr-1998 150% 259% 144%
06-Apr-1998 151% 257% 140%
07-Apr-1998 150% 254% 144%
08-Apr-1998 150% 253% 148%
09-Apr-1998 155% 254% 150%
10-Apr-1998 155% 254% 150%
13-Apr-1998 158% 253% 147%
14-Apr-1998 161% 255% 145%
15-Apr-1998 161% 256% 144%
16-Apr-1998 157% 254% 140%
17-Apr-1998 156% 257% 140%
20-Apr-1998 154% 258% 139%
21-Apr-1998 158% 259% 167%
22-Apr-1998 156% 260% 165%
23-Apr-1998 157% 258% 165%
24-Apr-1998 157% 255% 165%
27-Apr-1998 156% 251% 164%
28-Apr-1998 155% 251% 165%
29-Apr-1998 154% 253% 165%
- --------------------------------------------------------------------------------
Source: FactSet Research Systems, Inc.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 5
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Review of Self Tender Offer Results
- --------------------------------------------------------------------------------
November 1996 January 1998
o 2,250,000 shares purchased o 1,999,215 shares purchased
at $19.00 per share at $23.00 per share
o Significant oversubscription at o 15% underscribed at high end
the low end of price range of price range
(offer nearly 100%
oversubscribed at $19.00) o Results parallel the consistent
unavailability of stock in the
o 60% of total shares open-market
outstanding tendered at or
below $22.00 per share
The stock remains unavailable for meaningful open-market repurchases.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 6
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
CPI's Public Market Trading Multiples
- --------------------------------------------------------------------------------
CPI Corp.
(Dollars in Millions)
---------------------------------------------------
Recent Stock Price(1) $26.00
LTM High/Low $28.00/$15.44
Fully Diluted Shares Outstanding(2) 10.00
------
Equity Market Value $260.4
(+) Debt(3) 60.0
(-) Receivable from Kodak(4) 38.0
(-) Cash & Equivalents(3) 15.3
------
Adjusted Market Value $267.1
---------------------------------------------------
Market Trading Multiples
- --------------------------------------------------------------------------------
ADJUSTED MARKET VALUE/ EQUITY MARKET VALUE/
---------------------------------- ------------------------------------
OPERATING OPERATING NET IBES NET BOOK
REVENUES(5) CASH FLOW(5) INCOME INCOME(5) INCOME(5) VALUE
- --------------------------------------------------------------------------------
1999E 0.7x 4.3x 10.1x 17.3x NA -
1998E 0.7 5.1 11.6 19.4 18.2 -
LTM 0.7 5.1 9.5 18.4 18.4 2.6x
- --------------------------------------------------------------------------------
Note: Fiscal year ends in January of the following year.
(1) Stock price as of April 29, 1998.
(2) As of February 7, 1998 (including net option shares).
(3) As of the fiscal year ended February 7, 1998.
(4) Present value of the $43.9 million non-interest bearing note from Kodak due
January 1, 1999 less the present value of the estimated cash taxes due upon
maturation of the Kodak note.
(5) Based on CPI Corp. Base Case projections detailed later. Net Income excludes
the amortization of the non-compete agreement with Kodak and all gains or
losses associated with the JV.
(6) Based on IBES consensus earnings estimates.
- --------------------------------------------------------------------------------
Source: FactSet Research Systems, Inc.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
7
CONFIDENTIAL
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Comparable Company Forward Trading Multiples
- --------------------------------------------------------------------------------
CPI's forward trading multiples relative to peers reflect a substantial
disparity between earnings and cash flow.
<TABLE>
<CAPTION>
1998E TRADING MULTIPLES
(Dollars In Millions)
- ----------------------------------------------------------------------------------------------------------------------------------
ADJUSTED VALUE AS EQUITY VALUE/ 1998E MARGINS
EQUITY ADJUSTED A MULTIPLE OF: ------------- ------------- LONG TERM
MARKET MARKET ------------------- CALENDAR LTM GROWTH DEBT/
VALUE VALUE SALES EBITDA EBIT NET INCOME BOOK VALUE EBITDA EBIT ESTIMATE CAPITAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CPI Corp. $260.4 $267.1 0.7x 5.1x 11.6x 19.4x 2.6x 14.1% 6.2% NA 37.0%
PCA International(1) $181.7 $220.2 0.8x 4.7x 7.1x 14.1x 4.1x 16.5% 10.9% 20.0% 53.2%
Jostens Inc. $895.4 $943.8 1.2x 7.2x 8.9x 15.1x 7.4x 16.5% 13.5% 10.0% 34.6%
Cole National $554.2 $813.9 0.8x 8.0x 11.4x 17.4x 4.0x 10.1% 7.1% 20.0% 67.9%
Seattle Film Works $162.4 $147.1 1.3x 7.3x 10.4x 13.7x 4.4x 17.5% 14.6% 22.5% 0.0%
MOTO PHOTO(2) $ 18.8 $ 24.3 0.6x 7.3x 9.7x 13.2x 5.0x 8.0% 6.0% NA 74.9%
Eastman Kodak $23,287.5 $23,735.3 1.6x 8.2x 11.6x 17.9x 7.4x 19.5% 13.8% 10.0% 27.5%
Polaroid Corp. $2,003.8 $2,663.0 1.2x 7.1x 10.4x 17.5x 4.1x 16.5% 11.2% 12.0% 60.4%
Applied Graphics(3) $1,118.3 $1,238.3 2.8x 14.7x 18.1x 33.8x 2.5x 19.4% 15.7% 30.0% 25.2%
<CAPTION>
1999E TRADING MULTIPLES
(Dollars In Millions)
- ----------------------------------------------------------------------------------------------------------------------------------
ADJUSTED VALUE AS EQUITY VALUE/ 1999E MARGINS
EQUITY ADJUSTED A MULTIPLE OF: ------------- ------------- LONG TERM
MARKET MARKET ------------------- CALENDAR LTM GROWTH DEBT/
VALUE VALUE SALES EBITDA EBIT NET INCOME BOOK VALUE EBITDA EBIT ESTIMATE CAPITAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CPI Corp. $260.4 $267.1 0.7x 4.3x 10.1x 17.3x 2.6x 15.9% 6.8% NA 37.0%
PCA International(1) $181.7 $220.2 0.7x 4.1x 6.1x 11.0x 4.1x 16.4% 11.2% 20.0% 53.2%
Jostens Inc. $895.4 $943.8 1.1x 6.6x 8.2x 13.8x 7.0x 16.9% 13.6% 10.0% 34.6%
Cole National $554.2 $813.9 N/A N/A N/A 14.3x 4.0x N/A N/A 20.0% 67.9%
Seattle Film Works $162.4 $147.1 1.1x 6.5x 7.9x 13.4x 4.4x 17.0% 14.1% 22.5% 0.0%
MOTO PHOTO(2) $ 18.8 $ 24.3 N/A N/A N/A N/A 5.0x N/A N/A NA 74.9%
Eastman Kodak $23,287.5 $23,735.3 1.5x 7.6x 10.5x 14.6x 7.4x 20.0% 14.5% 10.0% 27.5%
Polaroid Corp. $2,003.8 $2,663.0 1.1x 6.5x 9.4x 12.4x 4.1x 17.0% 11.8% 12.0% 60.4%
Applied Graphics(3) $1,118.3 $1,238.3 1.9x 9.0x 10.9x 22.7x 2.5x 20.8% 17.1% 30.0% 25.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Note: Projections based on Value Line and Investext equity research, except net income which is based on calendarized IBES
estimates (CPI fiscal estimate used).
(1) PCA International based on closing price of $21.50 on April 21, 1998 (before annouuncement of the proposed LBO at $26.50 per
share).
(2) MOTO PHOTO multiples are based on LTM results as of December 31, 1997.
(3) Applied Graphics Technology presented pro forma for the pending acquisition of Devon Group.
- --------------------------------------------------------------------------------
</TABLE>
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
- --------------------------------------------------------------------------------
CPI CORP.
- --------------------------------------------------------------------------------
3.
Valuation Considerations
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 8
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Historical Results -- Operating Segments
- --------------------------------------------------------------------------------
Portrait Studios
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
1993A-1998P
1993A 1994A 1995A 1996A 1997A 1998P CAGR
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $238.2 $276.4 $279.6 $289.8 $303.7 $314.6 5.2%
% Growth -- 16.0% 1.2% 3.6% 4.8% 0.8%
Total Sittings (000's) 5,998 6,476 5,642 6,022 5,471(1) 5,410 (2.0)%
% Growth -- 8.0% -12.9% 6.7% -9.1% -1.1%
Operating Cash Flow $35.7 $50.7 $60.2 $56.6 $64.6 $59.8 10.8%
% Margin 15.0% 18.4% 21.5% 19.5% 21.3% 19.5%
Operating Income $29.3 $38.5 $42.6 $35.7 $44.6 $35.0
% Margin 12.3% 13.9% 15.2% 12.3% 14.7% 12.7%
Capital Expenditures $19.0 $57.7 $24.8 $18.1 $21.2 $27.0 7.3%
% of Sales 8.0% 20.9% 8.9% 6.2% 7.0% 8.8%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes effect of 53rd week (approximately 70,000 sittings).
Wall Decor
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
1993A-1998P
1993A 1994A 1995A 1996A 1997A 1998P CAGR
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $46.1 $50.1 $58.8 $62.9 $63.0 $65.2 6.9%
% Growth -- 8.7% 17.5% 7.0% 0.3% 2.1%
Operating Cash Flow $6.5 $7.7 $8.2 $6.9 $2.7 $5.8 (2.1)%
% Margin 14.0% 15.4% 13.9% 11.0% 4.3% 9.0%
Operating Income $4.4 $5.5 $5.4 $3.3 ($1.0) $0.9 (28.5)%
% Margin 9.7% 11.0% 9.1% 5.3% -1.5% 1.3%
Capital Expenditures $14.1 $8.0 $9.4 $8.0 $2.0 1.6% (35.1)%
% of Sales 30.5% 16.0% 16.0% 12.7 3.2% 2.5%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 9
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Base Case Projections--Operating Segments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portrait Studios - Base Case
1998P-2003P
1997A 1998P 1999P 2000P 2001P 2002P 2003P CAGR
----- ----- ----- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $303.7 $314.5 $323.4 $341.1 $359.4 $370.9 $382.4 4.5%
% Growth 4.8% 0.8% 5.6% 5.5% 5.4% 3.2% 3.1%
Total Sittings (000's) 5,471(1) 5,410 5,518 5,629 5,741 5,741 5,741 1.2%
% Growth -9.1% -1.1% 2.0% 2.0% 2.0% 0.0% 0.0%
Operating Cash Flow $64.6 $59.8 $69.5 $79.1 $87.5 $90.8 $94.0 9.5%
% Margin 21.3% 19.5% 21.5% 23.2% 24.4% 24.5% 24.6%
Operating Income $44.6 $35.0 $41.8 $55.0 $67.6 $71.5 $74.5 13.9%
% Margin 14.7% 12.7% 12.9% 16.1% 18.8% 19.3% 19.5%
Capital Expenditures $21.2 $27.0 $12.0 $12.4 $12.7 $13.1 $13.5 (12.9)%
% of Sales 7.0% 8.8% 3.7% 3.6% 3.5% 3.5% 3.5%
</TABLE>
Note: Base Case assumes 2% annual sittings growth until 2001, flat sittings
from 2002-2007, and an annual $2.00 price increase in average sale.
(1) Excludes effect of 53rd week (approximately 70,000 sittings).
<TABLE>
<CAPTION>
Wall Decor - Base Case
1998P-2003P
1997A 1998P 1999P 2000P 2001P 2002P 2003P CAGR
----- ----- ----- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $63.0 $65.2 $66.3 $68.3 $70.3 $72.5 $74.6 3.0%
% Growth 0.3% 2.1% 3.0% 3.0% 3.0% 3.0% 3.0%
Operating Cash Flow $2.7 $5.8 $6.3 $6.7 $7.2 $7.7 $8.1 6.9%
% Margin 4.3% 9.0% 9.5% 9.8% 10.2% 10.6% 10.9%
Operating Income ($1.0) $0.9 $1.6 $2.2 $2.7 $3.3 $3.8 35.7%
% Margin -1.5% 1.3% 2.5% 3.2% 3.9% 4.5% 5.1%
Capital Expenditures $2.0 $1.6 $2.0 $2.1 $2.1 $2.2 $2.3 6.8%
% of Sales 3.2% 2.5% 3.0% 3.0% 3.9% 3.0% 3.0%
</TABLE>
<TABLE>
<CAPTION>
Corporate - Base Case
1998P-2003P
1997A 1998P 1999P 2000P 2001P 2002P 2003P CAGR
----- ----- ----- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate Expenses $15.4 $15.0 $17.0 $17.4 $17.8 $18.3 $18.7 2.5%
% of Consolidated Sales 4.2% 4.5% 4.4% 4.2% 4.1% 4.1% 4.1%
Capital Expenditures $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 0.0%
</TABLE>
Note: Corporate expense includes corporate depreciation estimated to be
approximately $3.0 million annually.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 10
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Historical and Projected Results -- Operating Segments
- --------------------------------------------------------------------------------
Portrait Studios - Sales, Operating Cash Flow and Operating Income
<TABLE>
<CAPTION>
1997A 1998P 1999P 2000P 2001P 2002P 2003P
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $303.7 $314.5 $323.4 $341.1 $359.4 $370.9 $382.4
Operating Cash Flow $64.6 $59.8 $69.5 $79.1 $87.5 $90.8 $94.0
Operating Income $44.6 $35.0 $41.8 $55.0 $67.6 $71.5 $74.5
</TABLE>
Wall Decor - Sales, Operating Cash Flow and Operating Income
<TABLE>
<CAPTION>
1997A 1998P 1999P 2000P 2001P 2002P 2003P
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $63.0 $65.2 $66.3 $68.3 $70.3 $72.5 $74.6
Operating Cash Flow $2.7 $5.8 $6.3 $6.7 $7.2 $7.7 $8.1
Operating Income ($1.0) $0.9 $1.6 $2.2 $2.7 $3.3 $3.8
</TABLE>
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 11
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Base Case Projections -- Consolidated CPI
- --------------------------------------------------------------------------------
Consolidated - Base Case (1)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1998P-2003P
1997A 1998P(2) 1999P 2000P 2001P 2002P 2003P CAGR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $366.7 $370.6 $389.7 $409.4 $429.7 $443.3 $457.0 4.3%
% Growth 4.0% 1.1% 5.2% 5.1% 5.0% 3.2% 3.1%
EBITDA $51.9 $52.1 $61.8 $71.5 $79.9 $83.2 $86.4 10.7%
% Margin 14.1% 14.1% 15.9% 17.5% 18.6% 18.8% 18.9%
EBIT $28.2 $23.1 $26.5 $39.8 $52.5 $56.5 $59.6 20.9%
% Margin 7.7% 6.2% 6.8% 9.7% 12.2% 12.7% 13.0%
Earnings Per Share $1.41(3) $1.34(3) $1.50 $2.46 $3.45 $3.89 $4.29 26.2%
% Growth 33.0% (4.8)% 11.6% 64.1% 40.1% 12.9% 10.4%
- -------------------------------------------------------------------------------------------------------------------
Cash $15.3 $43.7(4) $58.2 $79.6 $96.5 $115.9 $138.0
- -------------------------------------------------------------------------------------------------------------------
Debt $60.0 $60.0 $60.0 $60.0 $51.4 $42.8 $34.3
Equity $102.1 $97.0 $94.2 $102.5 $119.6 $140.3 $164.1
Debt/Capital 37.0% 38.2% 38.9% 36.9% 30.1% 23.4% 17.3%
Debt/EBITDA 1.2x 1.2x 1.0x 0.8x 0.6x 0.5x 0.4x
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Projections exclude income related to the amortization of the non-compete
agreement with Kodak of approximately $5 million in 1998 and $3.2 million in
1999.
(1) From 1998P-2007P, $10 million of free cash flow is applied annually to open
market share repurchases. Excess cash is assumed to accumulate and earn
5.0% interest income.
(2) Based on strategic plan presented to the Board of Directors.
(3) 1997A and 1998E EPS exclude gain (loss) on sale of Kodak JV.
(4) Fiscal year end cash balance reflects the maturation of the Kodak note (face
value of $43.9 million) and the payment of $4.1 million of cash taxes
related to the sale of Kodak JV.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 12
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Discounted Cash Flow Analysis
- --------------------------------------------------------------------------------
Preliminary Valuation Analysis - BASE CASE
(Dollars in Milions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
VALUE RANGE AS A MULTIPLE OF 1997A, 1998P AND 1999P
--------------------------------------------------------------
PRELIMINARY ENTERPRISE UNLEVERED
OPERATING SEGMENT VALUE RANGE YEAR SALES EBITDA EBIT NET INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997A 1.4x - 1.7x 6.7x - 7.8x 9.8x - 11.3x 15.5X - 18.0X
Portrait Studios $ 435 - $ 505 1998P 1.4x - 1.6x 7.3x - 8.4x 11.2x - 13.0x 17.8X - 20.7X
1999P 1.3x - 1.6x 6.3x - 7.3x 10.4x - 12.1x 16.5X - 19.2X
1997A 0.6x - 0.7x 14.7x - 16.5x NM - NM NM - NM
Wall Decor $ 40 - $ 45 1998P 0.6x - 0.7x 6.9x - 7.7x 48.0 - 54.0x 76.2X - 85.8X
1999P 0.6x - 0.7x 6.4x - 7.2x 24.4 - 27.4x 28.7X - 43.6X
Corporate(2) ($95) - ($85)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ENTERPRISE VALUE: $ 380 - $ 465
ADJUSTMENTS:
- -------------------------------------------------------------
(+) Cash(3) $ 15.3 - $ 15.3
(+) Present Value of Kodak Note(4) 38.0 - 38.0
(-) Debt(3) (60.0) - (60.0)
- -------------------------------------------------------------
TOTAL ADJUSTMENTS: ($6.7) - ($6.7)
TOTAL EQUITY VALUE: 373.3 - $458.3
Fully Diluted Shares Outstanding(5) 9.874 - 9.874
- -------------------------------------------------------------
Implied Value per Share $37.81 - $46.42
% Premium to Market(6) 45.4% - 78.5%
- -------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------
Note: Preliminary valuation is as of fiscal year ended 1/31/98.
(1) Based on Terminal EBITDA Multiples of 5.5x - 6.5x and a WACC of 11.0% -
12.0%.
(2) Based on a discounted cash flow analysis of projected corporated expenses.
(3) As of the fiscal year ended February, 1998.
(4) Present value of Kodak Note (face value of $43.9 million at 1/1/99 less
estimated cash taxes of $4.1 million) assuming a 7.0% discount rate.
(5) As of the fiscal year ended February, 1998 reflecting the purchase of
1,999,215 shares through the recently completed Dutch Auction.
(6) Based on CPY share price of $26.00 as of 4/29/98.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 13
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Portrait Studios DCF Sensitivity Analysis
- --------------------------------------------------------------------------------
CPI's high fixed cost position makes its valuation highly sensitive to
future sales growth assumptions.
<TABLE>
<CAPTION>
Valuation Sensitivity Analysis - Sales Growth(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Assumed 10 Year CAGR in Sales - Portrait Studios
+2.0% +2.5% +3.0% +3.5% +4.0% +4.5% +5.0%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Value $244.2 $284.3 $325.8 $368.7 $413.0 $458.8 $506.1
Value Per Share $24.73 $28.80 $33.00 $37.34 $41.83 $46.47 $51.26
% Premium (Discount) to Market (4.9)% 10.8% 26.9% 43.6% 60.9% 78.7% 97.2%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Implied values based on Terminal EBITDA Multiple of 6.0x and a WACC of
11.5%.
(1) Valuation impacts based on CPI's mix of fixed versus variable costs.
Based on the above analysis, CPI's current stock market
value implies a long term sales growth and EBITDA margin for
Portrait Studios of approximately 2.2% and 19.0%, respectively.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 14
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Leveraged Buyout Analysis
- --------------------------------------------------------------------------------
CPI's strong implied LBO valuation (even before any assumed cost savings) is
reflective of the Company's strong, stable cash flow and considerable debt
capacity.
(Dollars in Millions)
- --------------------------------------------------------------------------------
LEVERAGED BUYOUT ANALYSIS
- --------------------------------------------------------------------------------
- ------------------------------------------ ----------------------------------
Transaction Multiples Transaction Value
- ------------------------------------------ ----------------------------------
----------------------------------
Purchase Price Per Share $35.00
1997A 1998P % Premium to Market 34.6%
----- ------ ----------------------------------
Price/Earnings(1) 24.8x 26.1x Equity Purchase Price 361.8
Enterprise Value/EBITDA(1) 7.1x 7.1x Adjusted Purchase Price 368.5
LBO Equity 100.0
- ------------------------------------------ ----------------------------------
Equity Rates of Return Credit Statistics
- ------------------------------------------ ----------------------------------
Year five Values Terminal EBITDA Multiple 1997PF 1998P
- ---------------- ------------------------ ------ -----
5.0x 6.0x 7.0x Debt/Capital 73.8% 75.6%
---- ---- ---- Debt/EBITDA 5.4x 5.5x
EBITDA $83.2 $83.2 $83.2 EBITDA/Interest 2.1x 2.1x
Enterprise Value 416.1 499.4 582.6
Net Debt 173.2 173.2 173.2 ----------------------------------
----- ----- -----
Implied Equity
Value $243.0 $326.2 $409.4
===== ===== =====
- ------------------------------------------
Five Year IRR 19.4% 26.7% 32.6%
- ------------------------------------------
- --------------------------------------------------------------------------------
Note: Analysis based on Base Case projections excluding any potential cost
---------
savings. Analysis includes estimated fees and assumes all options are
exercised.
(1) Transaction multiples based on CPI Base Case projections.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 15
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Comparable Acquisition Analysis
- --------------------------------------------------------------------------------
Selected Acquisition Precedents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Adjusted Purchase Purchase Price
Equity Adjusted Price as a Multiple of: as a Multiple of:
---------------------------------- ------------------
Announcement Acquiror/ Description Purchase Purchase LTM LTM Operating LTM Operating LTM Net LTM Book
Date Target of Target Price Price Sales Cash Flow Income Income Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Apr-98 Jupiter Partners/ Operates portrait $229.2 $267.8 1.1x 7.0x 11.7x 24.8x 5.1x
PCA Interna- studios within Kmart
tional(1) and Wal-mart stores.
Jan-97 PCA International/ Operates portrait $53.6 $66.0 0.6x 16.8x NM NM 7.1x
American studios locations.
Studios(2) [Adjusted multiples
based on peak
margins (1993) 7.5x 9.9x ]
Aug-96 Eastman Kodak/ Provides photofinish- $110.0 $110.0 0.6x 9.6x NM NA NA
Fox Photo ing services,
wholesale and retail
photo supplies.
Aug-94 Eastman Kodak/ Provides photo $300.0 $568.0 0.7x NA NA NA NA
Qualex processing and
finishing services.
Aug-91 CPI Corp./ Provides photofinish- $27.0 $62.9 0.9x 5.1x 9.0x 10.2x 7.5x
Fox Photo ing services, wholesale
and retail photo
supplies.
Jul-91 Qualex/ Provides photo $75.0 $75.0 0.8x NA NA NA NA
Guardian Photo processing services.
</TABLE>
- ----------
(1) Based on $26.50 acquisition price per share announced 4/21/98.
(2) Adjusted transaction multiples based on American Studios peak margins (1993)
applied to LTM sales.
<TABLE>
<CAPTION>
CPI's Implied Takeover Valuation Based on Acquisition Precedents (LTM Multiples)
- --------------------------------------------------------------------------------
LTM LTM MULTIPLES OF IMPLIED IMPLIED EQUITY VALUE
BASIS OF MULTIPLE FINANCIAL RESULTS COMPARABLE TRANSACTIONS ENTERPRISE VALUE PER SHARE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $366.7 0.8x - 1.1x $293 - $403 $29.04 - $40.18
Operating Cash Flow $51.9 6.0x - 7.5x $311 - $389 $30.85 - $38.73
Operating Income $28.2 10.0x - 12.0x $282 - $338 $27.88 - $33.60
CSFB Reference Range $300 - $400 $29.71 - $39.84
</TABLE>
- ----------
Note: Implied valuation based on CPI operating results for the year ended
February 7, 1998.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 16
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Valuation Summary -- Consolidated CPI Corp.
- --------------------------------------------------------------------------------
CSFB'S preliminary valuation analysis reveals a significant gap between CPI's
private and public market values.
PRELIMINARY VALUATION SUMMARY - CONSOLIDATED CPI CORP.
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IMPLIED VALUATION MULTIPLES
------------------------------------------------------
ENTERPRISE UNLEVERED
VALUATION METHODOLOGY VALUE RANGE YEAR REVENUES EBITDA EBIT NET INCOME
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DISCOUNTED CASH FLOW ANALYSIS $380 - $460 1999P 1.0x - 1.2x 6.1x - 7.4x 14.3x - 17.4x 22.8x - 27.6x
Implied Price Per share $37.81 - $45.91 1998P 1.0x - 1.2x 7.3x - 8.8x 16.5x - 19.9x 26.1x - 31.6x
% Premium/(Discount) to Market 45.4% - 76.6%
COMPARABLE COMPANY ANALYSIS $250 - $300 1999P 0.6x - 0.8x 4.0x - 4.9x 9.4x - 11.3x 15.0x - 18.0x
Implied Price Per share $24.65 - $29.71 1998P 0.7x - 0.8x 4.8x - 5.8x 10.8x - 13.0x 17.2x - 20.6x
% Premium/(Discount) to Market -5.2% - 14.3%
COMPARABLE ACQUISITION ANALYSIS $300 - $400 1999P 0.8x - 1.0x 4.9x - 6.5x 11.3x - 15.1x 18.0x - 24.0x
Implied Price Per share $29.71 - $39.84 1998P 0.8x - 1.1x 5.8x - 7.7x 13.0x - 17.3x 20.6x - 27.5x
% Premium/(Discount) to Market 14.3% - 53.2%
LEVERAGED BUYOUT ANALYSIS $320 - $360 1999P 0.8x - 0.9x 5.2x - 5.8x 12.1x - 13.6x 19.2x - 21.6x
Implied Price Per share $31.73 - $35.79 1998P 0.9x - 1.0x 6.1x - 6.9x 13.9x - 15.6x 22.0x - 24.8x
% Premium/(Discount) to Market 22.1% - 37.6%
</TABLE>
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 17
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Summary Perspectives
- --------------------------------------------------------------------------------
Our preliminary analysis is based solely on the CPI Base Case projections.
o CPI Base Case scenario was prepared by Management to represent a
"most-likely" outcome
A potential acquiror would analyze CPI under a range of scenarios. While
addressing downside scenarios, a potential acquiror will closely scrutinize
CPI's fixed cost structure:
General Corporate Expense
FY '98 Business Plan vs. FY '97 Actual
[CONFIDENTIAL TREATEMENT REQUESTED]
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
- --------------------------------------------------------------------------------
CPI CORP.
- --------------------------------------------------------------------------------
4.
Strategic Alternatives
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 18
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Spectrum of Strategic Alternatives
- --------------------------------------------------------------------------------
Status Quo
- ----------
Key Issues
o Utilization of ongoing free cash flows
o Appropriate leverage targets
o Internal investment opportunities
o Efficacy of continued share repurchases
Acquisition Strategy or Major New Initiative or JV
- --------------------------------------------------
Key Issues
o Acquisition debt capacity
o Universe of complementary acquisitions
o Acquisition track record
o Anticipated market receptivity
Public Market Recapitalization
- ------------------------------
Key Issues
o Debt capacity/pro forma debt ratings
o Special dividend versus self-tender offer
o Anticipated liquidity and trading performance of equity stub
o Pro forma management ownership
Sale or Merger of the Company
- -----------------------------
Key Issues
o Universe of buyers (strategic versus financial)
o Acquisition precedents
o Technological risks/opportunities
o Perceived integration benefits
o EPS impact on acquiror (how dilutive?)
o Form of consideration
o Pooling versus purchase
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
19
CONFIDENTIAL
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Perspectives on an Ongoing Share Repurchase Program
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preliminary Financial Consequences
- ----------------------------------------------------------------------------------------------------------------
Base Case 1998P 1999P 2000P 2001P 2002P 2003P CAGR
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Per Share $1.34 $1.50 $2.46 $3.45 $3.89 $4.29 $26.2%
%Growth 8.3% 11.6% 64.1% 40.1% 12.9% 10.4%
Cash Balance $43.7 $58.2 $79.6 $96.5 $115.9 $138.0
- ----------------------------------------------------------------------------------------------------------------
Net Debt /EBITDA 0.3x 0.0x 0.0x 0.0x 0.0x 0.0x
EBITDA /Interest 42.5x 13.7x 15.9x 17.8x 21.6x 26.9
Debt/Capital 38.2% 38.9% 36.9% 30.1% 23.4% 17.3%
Cumulative Amount Repurchased ($MM) $10.0 $20.0 $30.0 $40.0 $50.0 $60.0
Cumulative Shares Repurchased 0.3 0.6 0.9 1.0 1.2 1.4
Repurchase Price Per Share $30.00 $35.00 $41.82 $55.14 $58.34 $64.39
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
50.0% Debt / Capital Target 1998P 1999P 2000P 2001P 2002P 2003P CAGR
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Per Share $1.34 $1.58 $2.66 $3.83 $4.48 $5.14 $30.8%
%Growth 8.3% 17.5% 68.8% 43.9% 16.8% 14.8%
Accretion/(Dilution) $0.00 $0.08 $0.20 $0.39 $0.59 $0.594
% Accretion/(Dilution) 0.0% 5.2% 8.2% 11.2% 15.1% 19.6%
Cash Balance $6.8 $24.0 $37.0 $28.3 $18.5 $8.2
Net Debt /EBITDA 1.0x 0.6x 0.3x 0.3x 0.3x 0.3x
EBITDA /Interest 42.5x 13.7x 15.9x 17.8x 21.6x 26.9
Debt/Capital 50.0% 50.0% 50.0% 50.0% 50.0% 50.0%
Cumulative Amount Repurchased ($MM) $46.9 $53.7 $71.7 $106.7 $144.7 $185.2
Cumulative Shares Repurchased 1.6 1.8 2.2 2.7 3.3 3.8
Repurchase Price Per Share $30.00 $35.00 $45.26 $61.32 $67.13 $77.04
- ----------------------------------------------------------------------------------------------------------------------------------
Note: All cases assume the indicated share repurchase occurs on the last day of each fiscal year. The Base Case assumes $10 million
of share repurchases each year. The %50.0 Debt / Capital Targe Cae assumes all free cash flow and available debt capacity
(up to 50.0%) are applied to repurchase stock at the stated price.
</TABLE>
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
20
CONFIDENTIAL
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Perspectives on a Public Market Recapitalization
- --------------------------------------------------------------------------------
Recapitalization Analysis - $200 Million
---------------------------------------------------------------------------
1998E EBITDA Multiple 5.75x 6.00x 6.25x
---------------------------------------------------------------------------
Special Dividend ($ million) $200.0 $200.0 $200.0
Value of Equity Stub ($ million) $83.4 $96.5 $109.5
Special Dividend Per Share $20.26 $20.26 $20.26
Value of Equity Stub Per Share 8.45 9.77 11.09
------ ------ ------
Implied Recapitalization Value $28.71 $30.03 $31.34
% Premium / (Discount) to Market 10.4% 15.5% 20.6%
<TABLE>
<CAPTION>
Pro Forma Income Statement and Capitalization
(Dollars in Millions, Except per Share Data)
- ------------------------------------------------------------------------------------------------------------------------
Base Case 1997PF 1998P 1999P 2000P 2001P 2002P 2003P '99'-03 CAGR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Base Case
- ---------
EPS -- $1.34 $1.50 $2.46 $3.45 $3.89 $4.29 30.1%
%Growth -- -- 11.6% 64.1% 40.1% 12.9% 10.4%
Debt $60.0 $60.0 $60.0 $60.0 51.4 $42.8 $34.3
Equity $120.1 $97.0 $94.2 $102.5 $119.6 $140.3 $164.1
Pro Forma
- ---------
EPS -- $0.25 $0.44 $2.36 $2.79 $3.18 $3.89 72.6%
%Growth -- -- 75.7% 438.7% 18.2% 14.0% 22.3%
Debt $226.0 $221.0 $199.0 $169.5 $135.2 $97.6 $75.0
Equity ($97.9) ($98.5) ($96.2) ($82.4) ($59.1) ($31.6) (0.2)
Debt/EBITDA 4.4x 4.2x 3.2x 2.4x 1.7x 1.2x 0.9x
EBITDA/Interest Expense 3.5x 2.7x 3.3x 4.2x 5.4x 7.0x 9.7x
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 21
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Perspectives on a Public Market Recapitalization (continued)
- --------------------------------------------------------------------------------
Advantages
- ----------
o Generates an immediate payment to shareholders (via a special dividend or
buyback) while significantly boosting expected equity returns to continuing
shareholders
o Generates substantial tax-shield benefits for shareholders through the
aggressive use of debt
o Alleviates reinvestment risk while imposing a greater discipline on capital
budgeting and expense management by requiring that free cash be dedicated
toward debt paydown
o Offers opportunity to further concentrate Management ownership, thereby more
closely aligning Management's interests with shareholders'
Disadvantages
- -------------
o Exacerbates existing liquidity issues (equity stub may trade poorly in the
aftermarket)
o Reduces financial flexibility to react to technological changes or fundamental
industry shifts
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 22
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Perspectives on a Sale of the Company
- --------------------------------------------------------------------------------
CPI would be viewed as highly attractive asset by strategic and financial
buyers alike.
o Leading market position
o Broad geographic coverage in North America
o Large, loyal customer base with attractive demographics
o Superior customer service capabilities
o Well positioned to benefit from emerging technologies in digital
imaging and archiving
o Improved industry fundamentals
o Strong, stable cash generation with minimal capital requirements
However, many potential corporate buyers would face near-term earnings
dilution due to the unavailability of pooling accounting and relatively
high goodwill charges.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 23
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Perspectives on CPI Partners or Acquirors
- --------------------------------------------------------------------------------
Selected Potential Strategic Buyers
-----------------------------------
o Potential strategic acquiror #1
o Potential strategic acquiror #2
o Potential strategic acquiror #3
o Potential strategic acquiror #4
o Potential strategic acquiror #5
o Potential strategic acquiror #6
o Potential strategic acquiror #7
o Potential strategic acquiror #8
o Potential strategic acquiror #9
o Potential strategic acquiror #10
o Potential strategic acquiror #11
o Potential strategic acquiror #12
o Potential strategic acquiror #13
Selected Potential Financial Buyers
-----------------------------------
o Potential financial acquiror #1
o Potential financial acquiror #2
o Potential financial acquiror #3
o Potential financial acquiror #4
o Potential financial acquiror #5
o Potential financial acquiror #6
o Potential financial acquiror #7
o Potential financial acquiror #8
o Potential financial acquiror #9
o Potential financial acquiror #10
o Potential financial acquiror #11
o Potential financial acquiror #12
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
- --------------------------------------------------------------------------------
CPI CORP.
- --------------------------------------------------------------------------------
A.
PCA Transaction Overview
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 24
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
PCA International -- Transaction Overview
- --------------------------------------------------------------------------------
PCA International Inc. and Jupiter Partners L.P., a New York-based
investment firm that was formerly associated with Forstmann Little,
announced on April 21, 1998 that they have entered into a merger
agreement under which Jupiter Partners and PCA's senior management will
acquire a majority of PCA for $26.50 per share (a 23.3% premium to the
prior day's closing price and a 20.5% premium to PCA's stock price four
weeks prior).
Terms of the agreement include the following:
o Shareholders of common stock can elect to receive $26.50 in cash for
each share or to retain (subject to proration) a share of stock in
the surviving entity
o Public shareholders will be permitted to retain (subject to
proration) a continuing equity interest in the Company of no more
than approximately 4.5% and no less than approximately 3.4% of the
current outstanding shares of the Company
o The transaction will be accounted for as a recapitalization (which
avoids recognition of purchase goodwill)
PCA Press release estimated the value of the deal at about $276 million
including the refinancing of existing debt
The transaction, expected to be completed in July, has been approved by
PCA's Board and is subject to the approval of its shareholders.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 25
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
PCA International -- Transaction Value and Multiples
- --------------------------------------------------------------------------------
PCA International
(Dollars in Millions)
---------------------
Acquisition Price(1) $26.50
Fully Diluted Shares Outstanding(1) 8.7
-------
Equity Purchase Price(2) $229.2
(+) Debt(3) 50.8
(-) Cash & Equivalents(3) 12.3
-------
Adjusted Purchase Price $267.8
-------
Implied Transaction Multiples
- -----------------------------
ADJUSTED MARKET VALUE/ EQUITY MARKET VALUE/
I/B/E/S
OPERATING OPERATING NET NET BOOK
REVENUES CASH FLOW INCOME INCOME INCOME VALUE
1999E(4) 0.8X 5.0X 7.4X 12.3X 13.5X(5) --
1998E(4) 0.9 5.7 8.6 16.1 18.3(5) --
LTM 1.1 7.0 11.7 24.8 24.8 5.1x
- ----------
(1) Based on the proposed offer price announced April 20, 1998.
(2) Included net option shares.
(3) As per 10-K dated February 1, 1998.
(4) Based on Investext equity research estimates dated December 15, 1997. Since
December, PCA's consensus estimates have dropped from $1.65 to $1.45 for
1998E and from $2.15 to $1.96 for 1999E.
(5) Based on consensus earnings estimates (as supplied by I/B/E/S).
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
- --------------------------------------------------------------------------------
CPI CORP.
- --------------------------------------------------------------------------------
5.
Appendix
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
December 1998 CONFIDENTIAL
Materials Prepared for Discussion PRELIMINARY ANALYSIS
CPI Corp.
<PAGE>
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Table of Contents
- --------------------------------------------------------------------------------
1. Executive Summary
2. Market Profile and Valuation Perspectives
3. Strategic Alternatives
4. Appendix
A. PCA Case Study
B. Debt Financing Environment
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
SECTION 1
<PAGE>
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
1.
Executive Summary
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 1
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Executive Summary
- --------------------------------------------------------------------------------
CPI, though a market leader and consistent cash flow generator, continues
to be challenged by a public market value that is far lower than its
potential value as a private company.
A number of factors have consistently restrained CPI's market valuation:
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Mismatch Between Earnings & Cash Flow
o CPI's current earnings substantially understate the cash generation
and future earning power of the Company due to temporarily high
non-cash charges and technology/training expenses which are weighing
down earnings.
o Investments in new programs such as digital archiving risk
exacerbating the value gap in the market by delaying earnings
growth.
[GRAPHIC OMITTED] Poor Trading Liquidity
o CPI lacks the critical mass in the market to trade efficiently - the
Company's limited public float restrains liquidity.
o Illiquidity discounts in the current volatile equity markets are at
historically high levels.
[GRAPHIC OMITTED] Expensive Capital Structure
o CPI has vast underutilized debt capacity based on its cash
generation which translates into a higher than necessary cost of
capital.
[GRAPHIC OMITTED] High Perceived Reinvestment Risk
o CPI's limited outlets for its surplus cash create investor
uncertainty in the market as to whether cash flow will be reinvested
productively.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 2
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Executive Summary (cont'd)
- --------------------------------------------------------------------------------
The following strategic alternatives have been evaluated in terms of their
ability to relieve the issues confronting the Company.
[GRAPHIC OMITTED] Stay the Course
o Undertake smaller open market repurchases on an opportunistic basis
(supplemented with periodic self tender offers to discharge excess
cash) without materially altering the Company's capital structure.
[GRAPHIC OMITTED] Acquisition Strategy
o Deploy available balance sheet capacity towards acquisitions of
complementary businesses that increase the scale and scope of CPI's
operations.
[GRAPHIC OMITTED] Public Market Recapitalization
o Employ more aggressive leverage in the capital structure through a
large one-time share buyback or special dividend to shareholders.
[GRAPHIC OMITTED] Sale / LBO
o Sell the Company to a strategic buyer or take the Company private in
partnership with a financial sponsor.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 3
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Executive Summary (cont'd)
- --------------------------------------------------------------------------------
The current environment presents significant obstacles to public
strategies pointing to the LBO alternative as the best means of bridging
the value gap in the market:
[GRAPHIC OMITTED] Stockholders Awaiting "Value Event"
o CPI's share repurchase strategy is losing effectiveness as a means
of discharging excess cash due to a persistent unavailability of
shares. Key shareholders are awaiting a "liquidity event" and are
reluctant to forgo a potential change of control premium.
[GRAPHIC OMITTED] Strategic Process Yielded No Offers
o Upon confidential investigation, key strategic buyers/partners,
while convinced of the value gap in market, could not justify the
strategic logic of a combination with CPI.
[GRAPHIC OMITTED] Appealing Story to Leveraged Buyers
o CPI's leading market position and strong, stable cash generation
make the Company a solid LBO candidate likely to stimulate
significant interest from a number of potential financial sponsors.
o Recent PCA sale process confirms the appeal of the "portrait studio"
story to leveraged buyers and financing markets.
[GRAPHIC OMITTED] Financing is Available
o Despite recent liquidity issues, the financial sponsor, high yield
and leveraged loan markets have reopened for established story
credits like CPI.
--------------------------------------------------------------------------
CSFB believes preliminarily that an LBO could be executed at prices in
excess of $32.00 per share
--------------------------------------------------------------------------
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
SECTION 2
<PAGE>
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
2.
Market Profile And Valuation Perspectives
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 4
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
CPI's Recent Stock Price Performance
- --------------------------------------------------------------------------------
December 2, 1997 to December 2, 1998
Relative Daily Closing Prices
[GRAPHIC OMITTED]
Date Price
02-Dec-1997 17.9375
03-Dec-1997 18.0000
04-Dec-1997 18.2500
05-Dec-1997 18.8750
08-Dec-1997 19.5000
09-Dec-1997 21.5625
10-Dec-1997 21.5625
11-Dec-1997 21.5625
12-Dec-1997 21.5625
15-Dec-1997 21.6250
16-Dec-1997 21.5625
17-Dec-1997 21.5625
18-Dec-1997 21.7500
19-Dec-1997 21.6875
22-Dec-1997 22.0000
23-Dec-1997 22.3125
24-Dec-1997 22.1875
26-Dec-1997 22.3750
29-Dec-1997 22.5625
30-Dec-1997 22.6250
31-Dec-1997 22.6250
02-Jan-1998 22.6250
05-Jan-1998 22.6250
06-Jan-1998 22.6875
07-Jan-1998 22.5625
08-Jan-1998 22.2500
09-Jan-1998 21.9375
12-Jan-1998 21.1250
13-Jan-1998 21.0625
14-Jan-1998 20.9375
15-Jan-1998 22.2500
16-Jan-1998 22.4375
20-Jan-1998 22.2500
21-Jan-1998 22.8750
22-Jan-1998 22.8125
23-Jan-1998 22.8750
26-Jan-1998 23.0625
27-Jan-1998 23.1875
28-Jan-1998 23.3750
29-Jan-1998 23.9375
30-Jan-1998 24.0625
02-Feb-1998 24.2500
03-Feb-1998 24.1250
04-Feb-1998 24.3125
05-Feb-1998 24.5625
06-Feb-1998 24.9375
09-Feb-1998 24.2500
10-Feb-1998 24.5000
11-Feb-1998 24.5625
12-Feb-1998 24.5000
13-Feb-1998 24.4375
17-Feb-1998 25.2500
18-Feb-1998 24.6875
19-Feb-1998 25.0000
20-Feb-1998 24.5625
23-Feb-1998 24.0625
24-Feb-1998 24.5000
25-Feb-1998 24.1875
26-Feb-1998 24.1250
27-Feb-1998 24.0625
02-Mar-1998 24.1250
03-Mar-1998 23.9375
04-Mar-1998 23.8750
05-Mar-1998 23.9375
06-Mar-1998 23.6250
09-Mar-1998 23.9375
10-Mar-1998 24.0625
11-Mar-1998 24.4375
12-Mar-1998 24.4375
13-Mar-1998 24.3125
16-Mar-1998 24.3750
17-Mar-1998 24.3125
18-Mar-1998 24.3750
19-Mar-1998 24.1875
20-Mar-1998 24.3750
23-Mar-1998 24.4375
24-Mar-1998 24.6250
25-Mar-1998 24.5625
26-Mar-1998 24.3750
27-Mar-1998 24.5000
30-Mar-1998 24.6875
31-Mar-1998 25.3125
01-Apr-1998 25.8750
02-Apr-1998 25.3125
03-Apr-1998 25.2500
06-Apr-1998 25.5625
07-Apr-1998 25.3750
08-Apr-1998 25.3125
09-Apr-1998 26.1875
13-Apr-1998 26.6250
14-Apr-1998 27.2500
15-Apr-1998 27.2500
16-Apr-1998 26.5000
17-Apr-1998 26.3750
20-Apr-1998 26.0625
21-Apr-1998 26.6250
22-Apr-1998 26.3750
23-Apr-1998 26.5625
24-Apr-1998 26.5625
27-Apr-1998 26.3125
28-Apr-1998 26.1250
29-Apr-1998 26.0000
30-Apr-1998 25.9375
01-May-1998 24.0000
04-May-1998 25.7500
05-May-1998 25.8125
06-May-1998 25.9375
07-May-1998 26.0625
08-May-1998 26.2500
11-May-1998 26.2500
12-May-1998 25.9375
13-May-1998 25.8125
14-May-1998 25.5000
15-May-1998 25.4375
18-May-1998 25.0625
19-May-1998 24.6875
20-May-1998 24.5625
21-May-1998 24.9375
22-May-1998 24.1250
26-May-1998 25.0000
27-May-1998 25.5000
28-May-1998 25.6250
29-May-1998 25.6250
01-Jun-1998 26.3750
02-Jun-1998 27.0000
03-Jun-1998 27.0000
04-Jun-1998 26.5000
05-Jun-1998 26.3125
08-Jun-1998 26.0000
09-Jun-1998 26.0000
10-Jun-1998 25.9375
11-Jun-1998 26.0625
12-Jun-1998 25.8750
15-Jun-1998 25.5000
16-Jun-1998 25.7500
17-Jun-1998 25.4375
18-Jun-1998 25.3750
19-Jun-1998 25.2500
22-Jun-1998 25.1250
23-Jun-1998 25.3750
24-Jun-1998 24.5625
25-Jun-1998 24.3750
26-Jun-1998 24.2500
29-Jun-1998 23.5000
30-Jun-1998 23.8125
01-Jul-1998 24.6250
02-Jul-1998 25.7500
06-Jul-1998 26.0000
07-Jul-1998 26.3125
08-Jul-1998 26.7500
09-Jul-1998 26.6875
10-Jul-1998 26.2500
13-Jul-1998 26.6250
14-Jul-1998 26.6875
15-Jul-1998 26.6250
16-Jul-1998 26.5625
17-Jul-1998 26.6250
20-Jul-1998 26.7500
21-Jul-1998 26.6875
22-Jul-1998 27.0625
23-Jul-1998 27.0625
24-Jul-1998 26.4375
27-Jul-1998 26.3750
28-Jul-1998 26.1875
29-Jul-1998 25.6250
30-Jul-1998 25.6875
31-Jul-1998 25.0000
03-Aug-1998 24.5000
04-Aug-1998 24.7500
05-Aug-1998 25.3750
06-Aug-1998 25.3125
07-Aug-1998 25.3750
10-Aug-1998 25.0000
11-Aug-1998 24.5625
12-Aug-1998 24.7500
13-Aug-1998 24.6250
14-Aug-1998 24.6250
17-Aug-1998 24.6875
18-Aug-1998 25.1875
19-Aug-1998 24.6250
20-Aug-1998 24.7500
21-Aug-1998 24.0000
24-Aug-1998 23.8750
25-Aug-1998 21.4375
26-Aug-1998 20.8125
27-Aug-1998 20.5625
28-Aug-1998 20.7500
31-Aug-1998 20.1250
01-Sep-1998 20.1250
02-Sep-1998 19.3750
03-Sep-1998 18.1250
04-Sep-1998 19.0625
08-Sep-1998 18.8125
09-Sep-1998 18.6250
10-Sep-1998 18.3750
11-Sep-1998 19.0000
14-Sep-1998 19.5625
15-Sep-1998 19.6875
16-Sep-1998 20.4375
17-Sep-1998 21.0000
18-Sep-1998 22.8125
21-Sep-1998 23.0625
22-Sep-1998 23.6250
23-Sep-1998 24.1875
24-Sep-1998 24.0000
25-Sep-1998 23.1250
28-Sep-1998 23.4375
29-Sep-1998 23.7500
30-Sep-1998 23.6875
01-Oct-1998 23.1250
02-Oct-1998 22.7500
05-Oct-1998 21.6875
06-Oct-1998 21.5000
07-Oct-1998 21.1875
08-Oct-1998 20.6250
09-Oct-1998 20.5000
12-Oct-1998 21.1875
13-Oct-1998 21.0625
14-Oct-1998 22.1250
15-Oct-1998 23.1250
16-Oct-1998 23.0625
19-Oct-1998 23.7500
20-Oct-1998 23.3125
21-Oct-1998 23.8750
22-Oct-1998 23.9375
23-Oct-1998 23.6250
26-Oct-1998 23.8750
27-Oct-1998 23.6250
28-Oct-1998 23.7500
29-Oct-1998 23.1250
30-Oct-1998 22.9375
02-Nov-1998 22.6250
03-Nov-1998 22.5625
04-Nov-1998 22.3125
05-Nov-1998 21.9375
06-Nov-1998 22.9375
09-Nov-1998 21.8750
10-Nov-1998 21.8125
11-Nov-1998 21.5000
12-Nov-1998 21.5000
13-Nov-1998 21.4375
16-Nov-1998 21.2500
17-Nov-1998 21.3750
18-Nov-1998 21.1875
19-Nov-1998 21.3125
20-Nov-1998 21.2500
23-Nov-1998 21.2500
24-Nov-1998 21.1250
25-Nov-1998 21.5625
27-Nov-1998 21.6250
30-Nov-1998 21.3750
01-Dec-1998 21.1250
02-Dec-1998 21.0625
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 5
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
CPI's Public Market Trading Multiples
- --------------------------------------------------------------------------------
Market Trading Multiples -- Public Data
(Dollars in Millions)
================================================================================
Recent Stock Price(1) $21.13
LTM High / Low $17.44/$27.44
Fully Diluted Shares Outstanding(2) 10.0
----------------
Equity Market Value $211.7
(+) Debt(3) 60.0
(-) Receivable from Kodak(3) 42.5
(-) Cash & Equivalents(3) 6.8
----------------
Adjusted Market value $222.4
- --------------------------------------------------------------------------------
================================================================================
ADJUSTED MARKET VALUE/ EQUITY MARKET VALUE/
---------------------------------------- --------------------
NET BOOK
REVENUES(4) EBITDA(4) EBIT(4) INCOME(4) VALUE
- --------------------------------------------------------------------------------
1999E 0.6x 3.6x 7.7x 13.2x --
1998E 0.6 3.9 8.6 14.6 --
LTM 0.6 4.4 8.5 14.6 2.1
- --------------------------------------------------------------------------------
Note: Fiscal year ends in January of the following year.
(1) Stock price as of December 1, 1998.
(2) As of September 3, 1998 (including net option shares).
(3) As of July 25, 1998.
(4) Based on Value Line projections.
Market Trading Multiples -- Internal Data (6)
(Dollars in Millions)
================================================================================
Recent Stock Price(1) $21.13
LTM High / Low $17.44/$27.44
Fully Diluted Shares Outstanding(2) 10.0
----------------
Equity Market Value $211.7
(+) Debt(3) 60.0
(-) Receivable from Kodak(3) 42.5
(-) Cash & Equivalents 6.8
(-) Est. Wall Decor Proceeds(4) 32.0
----------------
Adjusted Market Value $190.4
- --------------------------------------------------------------------------------
================================================================================
ADJUSTED MARKET VALUE/ EQUITY MARKET VALUE/
---------------------------------------- --------------------
NET BOOK
REVENUES(5) EBITDA(5) EBIT(5) INCOME(5) VALUE
- --------------------------------------------------------------------------------
1999E 0.6x 3.6x 7.5x 11.4x 2.3x
1998E 0.6 4.0 8.6 12.4 2.3
LTM 0.6 4.1 7.1 14.6 2.3
- --------------------------------------------------------------------------------
Note: Fiscal year ends in January of the following year.
(1) Stock price as of December 1, 1998.
(2) As of September 3, 1998 (including net option shares).
(3) As of July 25, 1998.
(4) Estimated proceeds from sale of Wall Decor including $27 million of cash
and a $5 million note.
(5) Based on CPI Base Case projections.
(6) Ex. Wall Decor.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 6
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Preliminary Financial Projections
- --------------------------------------------------------------------------------
Portrait Studios -- Base Case
<TABLE>
<CAPTION>
===============================================================================================================================
1998P-2003P
1997A 1998E 1999P 2000P 2001P 2002P 2003P CAGR
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $303.7 $316.3 $334.0 $352.3 $371.2 $383.1 $394.4 4.5%
% Growth 4.8% 4.1% 5.6% 5.5% 5.4% 3.2% 3.0%
Total Sittings (000's) 5,471(1) 5,553 5,699 5,814 5,929 6,048 6,048 1.7%
% Growth (9.1)% 1.5% 2.6% 2.0% 2.0% 2.0% 0.0%
Operating Cash Flow 66.6 60.8 66.7 77.0 88.9 92.9 94.2
% Margin 21.9% 19.2% 20.0% 21.9% 23.9% 24.2% 23.9%
Operating Income 44.6 36.8 40.3 49.4 61.1 65.2 68.4
% Margin 14.7% 11.7% 12.1% 14.0% 16.5% 17.0% 17.3%
Capital Expenditures 13.9 16.0 18.7 33.0 12.7 13.1 13.5
% of Sales 9.6% 5.1% 5.6% 9.4% 3.4% 3.4% 3.4%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes effect of 53rd week (approximately 70,000 sittings).
Note: Base Case assumes 2% annual sittings growth until 2001, flat sittings from
2002-2008, and an annual $2.00 price increase in average sale.
Corporate -- Base Case
<TABLE>
<CAPTION>
===============================================================================================================================
1998P-2003P
1997A 1998E 1999P 2000P 2001P 2002P 2003P CAGR
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate Expenses $ 15.4 $ 14.8 $ 15.1 $ 15.4 $ 15.7 $ 16.0 $ 16.3 2.0%
% of Consolidated Sales 5.1% 4.7% 4.5% 4.4% 4.2% 4.2% 4.1%
Capital Expenditures $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Note: Base Case projections based on guidance from CPI Management. Cash
flow margins are estimated to rise as CPI fixed technology and labor
expenses are better leveraged through sales increases.
(2) Corporate expense includes corporate depreciation estimated to be
approximately $1.0 million annually.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 7
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Preliminary Discounted Cash Flow Analysis
- --------------------------------------------------------------------------------
Preliminary Valuation Analysis -- BASE CASE
(Dollars in Millions)
<TABLE>
<CAPTION>
==================================================================================================================================
VALUE RANGE AS A MULTIPLE OF 1998E AND 1999P
---------------------------------------------------------------------------
OPERATING SEGMENT PRELIMINARY ENTERPRISE UNLEVERED NET
VALUE RANGE (1) YEAR SALES EBITDA EBIT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Portrait Studios $400 - $450 1998E 1.3x - 1.4x 6.7x - 7.5x 10.8x - 12.1x 16.2x - 17.7x
1999P 1.2x - 1.4x 6.0x - 6.7x 10.0x - 11.3x 13.3x - 15.0x
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Corporate Overhead (110) - (100)
- --------------------------------------------------------------------------------
TOTAL ENTERPRISE VALUE: $ 290 - $ 350
ADJUSTMENTS:
- --------------------------------------------------------------------------------
(+) Cash(3) $ 84.6 - $ 84.6
(+) Wall Decor Note 5.0 - 5.0
(-) Debt (60.0) - (60.0)
- --------------------------------------------------------------------------------
TOTAL ADJUSTMENTS: $ 29.6 - $ 29.6
TOTAL EQUITY VALUE: $ 320 - $ 380
Fully Diluted Shares Outstanding(4) 10.0 - 10.0
- --------------------------------------------------------------------------------
Implied Value per Share $31.91 - $37.89
% Premium to Market(5) 51.1% - 79.4%
- --------------------------------------------------------------------------------
Note: DCF valuation as of FYE 1998E.
(1) Based on Terminal EBITDA Multiples of 5.5x-6.5x and a WACC of 11.0%.
(2) Present value of projected corporate expenses assuming a perpetuity growth
rate of 2% and an 11% discount rate.
(3) Estimated balance as of FYE 1998 reflects maturity of Kodak note and
estimated cash proceeds from sale of Wall Decor.
(4) As of September 3, 1998.
(5) Based on CPY share price of $21.125.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 8
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Preliminary DCF Sensitivity Analysis
- --------------------------------------------------------------------------------
CPI's high fixed cost position makes its valuation highly sensitive to
future sales growth assumptions.
Valuation Sensitivity Analysis -- Sales Growth(1)
<TABLE>
<CAPTION>
=============================================================================================================
ASSUMED 10 YEAR CAGR IN SALES - PORTRAIT STUDIOS
1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Value $ 175 $ 212 $ 261 $ 291 $ 332 $ 375 $ 420
Value Per Share $ 17.31 $ 21.15 $ 25.98 $ 28.99 $ 33.10 $ 37.41 $ 41.83
% Premium (Discount) to Market (18.1%) (0.1%) 23.0% 37.2% 56.7% 77.1% 98.0%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Implied values based on Terminal EBITDA Multiple of 6.0x and a discount
rate of 11.0%
(1) Valuation impacts based on CPI's mix of fixed versus variable costs.
- --------------------------------------------------------------------------------
Based on the above valuation methodology, CPI's current stock market value
implies a long term sales growth rate and average EBITDA margin for Portrait
Studios of only 2.0% and 19.0%, respectively.
- --------------------------------------------------------------------------------
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 9
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Preliminary Comparable Company Trading Analysis
- --------------------------------------------------------------------------------
(Dollars in Millions)
<TABLE>
<CAPTION>
====================================================================================================
ENTERPRISE
SHARE PRICE VALUE/EBITDA:
AS A % OF EQUITY ENTERPRISE 1998E ----------------
COMPANY 52-WEEK HIGH VALUE VALUE EBITDA 1998E 1999E
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
CPI Corp. 76.8% $ 211.0 $ 221.2 $ 52.1 4.2x 3.6x
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
PCA International(2) 92.3% 75.8 299.0 43.6 6.9x 6.4x
- ----------------------------------------------------------------------------------------------------
Seattle FilmWorks 23.7% 53.7 42.7 13.5 3.2x 3.0x
Cole National 35.8% 219.8 478.5 115.6 4.1x 3.7x
Jostens, Inc. 93.2% 873.3 1,047.8 125.9 8.3x 7.6x
Applied Graphics 22.3% 304.9 507.3 75.1 4.5x 3.9x
American Greetings 79.3% 3,104.1 3,512.4 382.0 9.2x 8.5x
- ----------------------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
LONG TERM
PRICE/EARNINGS 1998E EPS
---------------- EBITDA DEBT/ GROWTH
COMPANY 1998E 1999E MARGIN CAPITAL RATE(1)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
CPI Corp. 11.3x 10.6x 14.9% 0.0%(3) 10%
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
PCA International(2) 17.7x 14.6x 12.8% 219.3% NA
- -------------------------------------------------------------------------------------
Seattle FilmWorks 7.3x 7.8x 19.1% 0.0% 13%
Cole National 9.4x 8.9x 10.4% 66.1% 19%
Jostens, Inc. 16.0x 14.5x 16.1% 70.5% 10%
Applied Graphics 12.8x 10.2x 17.7% 33.1% 16%
American Greetings 16.0x 14.4x 16.7% 23.5% 10%
- -------------------------------------------------------------------------------------
</TABLE>
(1) Source: I/B/E/S and First Call.
(2) Last trade completed 9/17/98, narrow public float, implied trading
multiples (Bloomberg).
Deal closed on 8/25/98, and was delisted on 8/26/98
(3) CPI's existing total debt of $60 million is more than offset by
estimated Kodak note proceeds, Wall Decor sale proceeds and existing
cash
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 10
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Preliminary Comparable Acquisition Analysis
- --------------------------------------------------------------------------------
Selected Acquisition Precedents
<TABLE>
<CAPTION>
===================================================================================================================
EQUITY ADJUSTED
ANNOUNCEMENT ACQUIROR/ PURCHASE PURCHASE
DATE TARGET DESCRIPTION OF TARGET PRICE PRICE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apr-98 Jupiter Partners/ Operates portrait studios within Kmart and $ 233.5 $ 294.3
PCA International(1) Wal-mart Stores.
Jan-97 PCA International/ Operates portrait studio locations. $ 53.6 $ 66.0
American Studios(2) [Adjusted multiples based on peak margins (1993)
Aug-96 Eastman Kodak/ Provides photofinishing services, wholesale and $ 110.0 $ 110.0
Fox Photo retail photo supplies.
Aug-94 Eastman Kodak/ Provides photo processing and finishing $ 300.0 $ 568.0
Qualex services.
Aug-91 CPI Corp./ Provides photofinishing services, wholesale and $ 27.6 $ 62.9
Fox Photo retail photo supplies.
Jul-91 Qualex/ Provides photo processing services. $ 75.0 $ 75.0
Guardian Photo
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
===================================================================================================
ADJUSTED PURCHASE PRICE PURCHASE PRICE AS
AS A MULTIPLE OF: A MULTIPLE OF:
------------------------------------ ---------------------
ANNOUNCEMENT ACQUIROR/ LTM LTM OPERATING LTM OPERATING LTM NET LTM BOOK
DATE TARGET SALES CASH FLOW INCOME INCOME VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Apr-98 Jupiter Partners / 1.2x 7.4x 12.2x 26.3x NM
PCA International(1)
Jan-97 PCA International/ 0.6x 16.8x NM NM 7.1x
American Studios(2) 7.5x 9.9x]
Aug-96 Eastman Kodak/ 0.6x 9.6x NM NA NA
Fox Photo
Aug-94 Eastman Kodak/ 0.7x NA NA NA NA
Qualex
Aug-91 CPI Corp. / 0.9x 5.1x 9.0x 10.2x 7.5x
Fox Photo
Jul-91 Qualex / 0.8x NA NA NA NA
Guardian Photo
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Data as per SEC Form 8-K.
(2) Adjusted transaction multiples based on American Studios peak margins
(1993) applied to LTM sales.
Implied Takeover Valuation Based on Acquisition Precedents
<TABLE>
<CAPTION>
====================================================================================================================================
% PREMIUM
1998E MULTIPLES OF IMPLIED ENTERPRISE IMPLIED EQUITY VALUE PER (DISCOUNT) TO
BASIS OF MULTIPLE 1998E FINANCIAL RESULTS COMPARABLE TRANSACTIONS VALUE SHARE MARKET
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $316.6 0.8x - 1 .2x $253 - $380 $28.22 - $40.88 33.6% - 93.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow $47.1 6.0x - 8.0x $283 - $377 $31.21 - $40.58 47.7% - 92.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Income $22.1 10.0x - 12.0x $221 - $265 $22.83 - $29.48 8.1% - 39.6%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Implied valuation based on CPI operating results for FYE 1999E.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 11
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Preliminary Valuation Summary
- --------------------------------------------------------------------------------
CSFB's preliminary valuation analysis reveals a significant gap between
CPI's private and public market values.
Preliminary Valuation Summary
(Dollars in Millions, Except per Share Amounts)
<TABLE>
<CAPTION>
============================================================================================================================
IMPLIED VALUATION MULTIPLES
------------------------------------------------------------------
ENTERPRISE UNLEVERED NET
VALUATION METHODOLOGY VALUE RANGE YEAR REVENUES EBITDA EBIT INCOME
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discounted Cash Flow Analysis $ 290 - $ 350 1998P 0.9x - 1.1x 6.2x - 7.4x 13.1x - 15.8x 20.6x - 24.8x
- -----------------------------------------------------
Implied Price Per Share $31.91 - $37.89 1999P 0.9x - 1.0x 5.5x - 6.7x 11.5x - 13.9x 17.4x - 21.0x
% Premium/Discount to Market 51.1% - 79.4%
- -----------------------------------------------------
Comparable Company Analysis $ 175 - $ 225 1998P 0.6x - 0.7x 3.7x - 4.8x 7.9x - 10.2x 12.4x - 16.0x
- -----------------------------------------------------
Implied Price Per Share $19.74 - $24.73 1999P 0.5x - 0.7x 3.3x - 4.3x 6.9x - 8.9x 10.5x - 13.5x
% Premium / (Discount) to Market (6.6)% - 24.7%
- -----------------------------------------------------
Comparable Acquisition Analysis $ 275 - $ 375 1998P 0.9x - 1.2x 5.8x - 8.0x 12.4x - 17.0x 19.5x - 26.6x
- -----------------------------------------------------
Implied Price Per Share $30.37 - $40.34 1999P 0.8x - 1.1x 5.2x - 7.1x 10.9x - 14.9x 16.5x - 22.5x
% Premium / (Discount) to Market 43.8% - 90.7%
- -----------------------------------------------------
Leveraged Buyout Analysis $ 300 - $ 325 1998P 0.9x - 1.0x 6.4x - 6.9x 13.6x - 14.7x 21.3x - 23.0x
- -----------------------------------------------------
Implied Price Per Share $32.21 - $34.69 1999P 0.9x - 1.0x 5.7x - 6.2x 11.9x - 12.9x 18.0x - 19.5x
% Premium / (Discount) to Market 52.5% - 64.2%
- -----------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Implied enterprise values are as of FYE 1998E and exclude Wall Decor
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
SECTION 3
<PAGE>
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
3.
Strategic Alternatives
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 12
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Spectrum of Strategic Alternatives
- --------------------------------------------------------------------------------
Key Issues
[GRAPHIC OMITTED] Stay the Course
o Utilization of ongoing free cash flows
o Appropriate leverage targets
o Internal investment opportunities
o Efficacy of continued share repurchases
[GRAPHIC OMITTED] Acquisition Strategy
o Debt capacity
o Universe of complementary acquisitions
o Acquisition track record
o Anticipated market receptivity
[GRAPHIC OMITTED] Public Market Recapitalization
o Special dividend versus self-tender offer
o Debt capacity/pro forma debt ratings
o Anticipated liquidity and trading performance of equity stub
o Pro forma management ownership
[GRAPHIC OMITTED] Sale/LBO
o Universe of buyers (strategic versus financial)
o Acquisition precedents
o Technological risks/opportunities
o Perceived integration benefits
o EPS impact on acquiror (how dilutive?)
o Form of consideration
o Pooling versus purchase
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 13
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Stay the Course With Continuing Share Repurchases
(Theoretical but Difficult to Execute)
- --------------------------------------------------------------------------------
Modest Open Market Program
<TABLE>
<CAPTION>
====================================================================================================================================
BASE CASE 1998E 1999P 2000P 2001P 2002P 2003P 2004P '99-'04 CAGR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Per Share $ 1.38 $ 1.59 $ 2.28 $ 3.14 $ 3.59 $ 4.01 $ 4.66 23.9%
% Growth 29.0% 15.5% 42.8% 38.0% 14.4% 11.4% 16.3%
- ----------------------------------------------------------------------------------------------------------------------
Cash Balance $ 74.6 $ 80.6 $ 81.0 $ 109.1 $ 130.0 $ 156.4 $ 178.6
- ----------------------------------------------------------------------------------------------------------------------
Net Debt/EBITDA 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x
EBITDA/Interest nmf nmf nmf nmf nmf nmf nmf
Debt/Capital 38.9% 39.0% 37.6% 34.7% 27.9% 21.2% 14.8%
Cumulative Amount Repurchased ($MM) $ 10.0 $ 20.0 $ 30.0 $ 40.0 $ 50.0 $ 60.0 $ 70.0
Cumulative Shares Repurchased (MM) 0.4 0.9 1.1 1.4 1.5 1.7 1.9
Repurchase Price Per Share $ 23.24 $ 23.91 $ 34.14 $ 47.12 $ 53.91 $ 60.08 $ 69.85
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Share Repurchase Program
====================================================================================================================================
50.0% DEBT/CAPITAL TARGET 1998E 1999P 2000P 2001P 2002P 2003P 2004P '99-'04 CAGR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Per Share $ 1.38 $ 1.72 $ 2.62 $ 3.73 $ 4.47 $ 5.19 $ 6.35 29.9%
% Growth 29.0% 24.6% 52.3% 42.4% 19.8% 16.1% 22.4%
Accretion/(Dilution) -- $ 0.08 $ 0.27 $ 0.52 $ 0.80 $ 1.13 $ 1.65
% Accretion/(Dilution) -- 4.9% 11.5% 16.2% 21.8% 27.8% 35.1%
Cash Balance $ 10.0 $ 10.0 $ 10.0 $ 10.0 $ 10.0 $ 10.0 $ 10.0
Debt/EBITDA 1.0x 0.8x 0.7x 0.5x 0.4x 0.3x 0.2x
EBITDA/Interest 15.6x 17.5x 24.1x 26.1x 35.7x 50.6x 64.5x
Debt/Capital 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0%
Cumulative Amount Repurchased ($MM) $ 55.1 $ 69.1 $ 82.1 $ 111.6 $ 144.1 $ 180.4 $ 216.4
Cumulative Shares Repurchased (MM) 2.2 2.7 3.1 3.6 4.1 4.5 4.9
Repurchase Price Per Share $ 25.35 $ 25.80 $ 39.37 $ 55.99 $ 67.10 $ 77.86 $ 95.20
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: All cases assume the indicated share repurchase occurs on the last day of
each fiscal year at a P/E multiple of 15x trailing earnings. The Base Case
assumes $10 million of share repurchases each year. Initial repurchase in
Aggressive Share Repurchase case is assumed to be executed at a 20%
premium.
The 50.0% Debt/Capital Target Case assumes all free cash flow and
available debt capacity (up to 50.0% Debt/Capital) are applied to
repurchase stock at the stated price (with minimum cash balance of $10
million).
EPS Figures in 1998 and 1999 exclude non-compete amortization income of
$.32 and $.22 respectively.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 14
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Stay the Course With Continuing Share Repurchases (cont'd)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Advantages
- --------------------------------------------------------------------------------
o Retains ample liquidity on the balance sheet to pursue internal
investment/acquisition opportunities as they arise
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Disadvantages
- --------------------------------------------------------------------------------
o Limited ability to buy back shares due to lack of liquidity and
shareholder reluctance to forgo a potential takeover premium
o Fails to address the continuing wide value gap that exists in the market
o Vast untapped debt capacity even in aggressive share repurchase scenario
o Risk that investments in new programs such as digital archiving will
merely exacerbate the value gap by delaying earnings growth
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Important Note: Modest and Aggressive Share Repurchase scenarios are largely
theoretical due to CPI's limited public float and the company's persistent
inability to acquire shares.
- --------------------------------------------------------------------------------
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 15
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Public Market Recapitalization via Special Dividend
- --------------------------------------------------------------------------------
Recapitalization Analysis
================================================================================
1999P EBITDA Multiple 4.0X 4.5X 5.0X
- --------------------------------------------------------------------------------
Implied 1999 P/E Multiple 10.6x 13.7x 16.9x
- --------------------------------------------------------------------------------
Special Dividend ($ million) $ 155.9 $ 155.9 $ 155.9
Value of Equity Stub ($ million) 88.0 114.3 140.6
- --------------------------------------------------------------------------------
Special Dividend Per Share $ 15.55 $ 15.55 $ 15.55
Value of Equity Stub Per Share 8.77 11.40 14.02
------- ------- -------
Implied Recapitalization Value $ 24.32 $ 26.95 $ 29.57
% Premium/(Discount) to Market 15.1% 27.6% 40.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pro Forma Income Statement and Capitalization
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
=====================================================================================================================
1998E 1999P 2000P 2001P 2002P 2003P 2004P '99-'04 CAGR
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Base Case
EPS $ 1.38 $ 1.59 $ 2.28 $ 3.14 $ 3.59 $ 4.01 $ 4.66 23.9%
% Growth -- 15.5% 42.8% 38.0% 14.4% 11.4% 16.3%
Debt $ 60.0 $ 60.0 $ 60.0 $ 60.0 $ 50.0 $ 40.0 $ 30.0
Equity $ 94.1 $ 94.0 $ 99.8 $ 112.7 $ 129.0 $ 148.3 $ 172.4
Recap Case
EPS $ 1.38 $ 0.83 $ 1.46 $ 2.21 $ 2.63 $ 3.01 $ 3.60 34.0%
% Growth -- (40.0%) 75.7% 51.3% 19.2% 14.5% 19.4%
Debt $ 150.0 $ 132.5 $ 123.0 $ 85.4 $ 44.2 $ 0.0 $ 0.0
Equity ($ 55.3) ($ 47.0) ($ 32.4) ($ 10.3) $ 16.1 $ 46.3 $ 82.4
Debt/EBITDA 3.2x 2.5x 2.0x 1.2x 0.6x 0.0x 0.0x
EBITDA/Interest Expense 4.1x 4.6x 6.3x 8.1x 12.7x 29.0x NMF
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Base excludes non-compete amortization earnings of $.32 in 1998 and $.22
in 1999.
Driver is assumed bank facility with 3.5x Senior Debt/EBITDA limitation.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 16
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Public Market Recapitalization via Self Tender Offer
- --------------------------------------------------------------------------------
Self Tender Offer Assumptions
================================================================================
# of Shares Repurchased 5.9 million
% Repurchased 58.9%
Repurchase Price $26.41
Premium to Market Price(1) 25.0%
Total Repurchase Amount $155.9 million
- --------------------------------------------------------------------------------
Recapitalization Analysis
================================================================================
4.0x 4.5x 5.0x
1999P EBITDA multiple
- --------------------------------------------------------------------------------
Implied 1999 P/E multiple 10.6x 13.7x 16.9x
- --------------------------------------------------------------------------------
Shares Repurchased ($ million) $ 155.9 $ 155.9 $ 155.9
Value of Equity Stub ($ million) 88.0 $ 114.3 $ 140.6
Value of Equity Stub Per Share $ 21.33 $ 5.00 $ 34.09
% Premium/(Discount) to Market 1.0% 31.2% 61.4%
- --------------------------------------------------------------------------------
Pro Forma Income Statement and Capitalization
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
========================================================================================================================
1998E 1999P 2000P 2001P 2002P 2003P 2004P '99-'04 CAGR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Base Case
EPS $ 1.38 $ 1.59 $ 2.28 $ 3.14 $ 3.59 $ 4.01 $ 4.66 23.9%
% Growth -- 15.5% 42.8% 38.0% 14.4% 11.4% 16.3%
Debt $ 60.0 $ 60.0 $ 60.0 $ 60.0 $ 50.0 $ 40.0 $ 30.0
Equity $ 94.1 $ 94.0 $ 99.8 $ 112.7 $ 129.0 $ 148.3 $ 172.4
Recap Case
EPS $ 1.38 $ 2.02 $ 3.54 $ 5.36 $ 6.39 $ 7.32 $ 8.74 34.0%
% Growth -- 46.4% 75.7% 51.3% 19.2% 14.5% 19.4%
Debt $ 150.0 $ 132.5 $ 123.0 $ 85.4 $ 44.2 $ 0.0 $ 0.0
Equity ($ 55.3) ($ 47.0) ($ 32.4) ($ 10.3) $ 16.1 $ 46.3 $ 82.4
Debt/EBITDA 3.2x 2.5x 2.0x 1.2x 0.6x 0.0x 0.0x
EBITDA/Interest Expense 4.1x 4.6x 6.3x 8.1x 12.7x 29.0x NMF
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Base excludes non-compete amortization earnings of $.32 in 1998 and $.22
in 1999.
Driver is assumed bank facility with 3.5x Senior Debt/EBITDA limitation.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 17
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Public Market Recapitalization (cont'd)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Advantages
- --------------------------------------------------------------------------------
o Generates an immediate payment to shareholders (via a special dividend or
buyback) while significantly boosting expected equity returns to
continuing shareholders
o Generates substantial tax-shield benefits for shareholders through the
aggressive use of debt, and realigns the capital structure towards a more
desirable debt/equity ratio
o Alleviates reinvestment risk while imposing a greater discipline on
capital budgeting and expense management by requiring that free cash be
dedicated toward debt paydown
o Offers opportunity (assuming management non-participation) to further
concentrate management ownership, thereby more closely aligning
management's interests with shareholders'
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Disadvantages
- --------------------------------------------------------------------------------
o Exacerbates existing liquidity issues (equity stub may trade poorly in the
aftermarket)
o Reduces financial flexibility to react to technological changes or
fundamental industry shifts
o May be viewed as coercive by key shareholders (many shareholders will be
compelled to sell shares into offer due to liquidity concerns)
o Cannot leverage as aggressively as in an LBO (lenders prefer to see new
equity committed to the credit by a financial sponsor)
o Entails considerable tax liability for many shareholders if effected via a
special dividend
- --------------------------------------------------------------------------------
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 18
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Acquisition Strategy
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Advantages
- --------------------------------------------------------------------------------
o Potentially strengthens the Company's competitive position while offering
opportunity for operational synergies
o Provides a means of realigning the Company's capital structure
o Increases scale of Company which ultimately could improve trading
liquidity
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Disadvantages
- --------------------------------------------------------------------------------
o Limited acquisition opportunities that are complementary with core
business
o Shareholders are unlikely to support acquisitions absent a highly
compelling strategic logic
o Strategy not expected to bridge the value gap that currently exists in the
market
- --------------------------------------------------------------------------------
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
19
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Strategic Buyer/Partner Process Overview
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Process Overview
- --------------------------------------------------------------------------------
o The following potential strategic partners were contacted:
o Potential strategic partner 1
o Potential strategic partner 2
o Potential strategic partner 3
o Potential strategic partner 4
o Potential strategic partner 5
o Potential strategic partner 6
o Formal presentations were delivered to senior level executives of
potential strategic partner 1, potential strategic partner 2, potential
strategic partner 3, potential strategic partner 5
o Process confirmed attractiveness of CPI's franchise and new program
initiatives (e.g. digital archiving)
o Buyers recognized value gap in the market but could not adapt that value
to their strategic agenda
----------------------------------------------
Confidentiality of process was preserved
with no leakage into the public markets
----------------------------------------------
- --------------------------------------------------------------------------------
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
20
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Leveraged Buyout Perspectives
- --------------------------------------------------------------------------------
CPI is likely to have strong appeal as an LBO candidate
o Market leader with strong technology position
o Easing competitive pricing environment
o Strong, stable cash generation with minimal longer-term
capital requirements
Recent PCA transaction confirmed the interest of financial buyers and the
leveraged lending market in the "portrait studio" story
o PCA's auction process generated strong proposals from four
potential financial buyers
o Ultimate transaction valued PCA at approximately 7.4x trailing
EBITDA
--------------------------------------------------------------------------
Preliminary LBO analysis based on the current financing environment (and
excluding any potential cost rationalization) yields valuations for CPI in
excess of $32.00 per share
--------------------------------------------------------------------------
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
21
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Preliminary Leveraged Buyout Analysis
- --------------------------------------------------------------------------------
CPI's strong implied LBO valuation (even before any assumed cost savings)
is reflective of the Company's strong, stable cash flow and ample debt
capacity.
Leveraged Buyout Analysis
(Dollars in Millions)
================================================================================
Transaction Multiples
- --------------------------------------------------------------------------------
1998E
-----
Price / Earnings (1) 21.8x
Enterprise Value / EBITDA (1) 7.0x
- --------------------------------------------------------------------------------
================================================================================
Equity Rates of Return
- --------------------------------------------------------------------------------
Year Five Values Terminal EBITDA Multiple
- ---------------- ------------------------
5.5x 6.0x 6.5x
---- ---- ----
EBITDA $78.9 $78.9 $78.9
Enterprise Value 434.0 473.3 512.9
Net Debt (111.1) (111.1) (111.1)
------ ------ ------
Implied Equity Value $322.9 $362.2 $401.8
====== ====== ======
- --------------------------------------------------------------------------------
Five Year IRR 29.1% 32.1% 38.5%
- --------------------------------------------------------------------------------
================================================================================
Transaction Value
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Purchase Price Per Share $33.00
% Premium to Market 56.2%
- --------------------------------------------------------------------------------
Equity Purchase Price $331.0
Adjusted Purchase Price 312.5
LBO Equity 90.0
- --------------------------------------------------------------------------------
================================================================================
Credit Statistics
- --------------------------------------------------------------------------------
1998E 1999P
----- -----
Debt / Capital 72.5% 71.8%
Senior Debt / EBITDA 2.9x 2.4x
Total Debt / EBITDA 5.0x 4.3x
EBITDA / Cash Interest 2.1x 2.3x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note: Analysis based on Base Case projections EXCLUDING any potential cost
savings. Analysis includes estimated fees and assumes all options are
exercised.
(1) Transaction multiples based on 1998E CPI Base case projections, without
Wall Decor segment.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
22
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Potential Financial Buyers
- --------------------------------------------------------------------------------
CSFB has identified a number of potential financial buyers that could have a
strong interest in CPI
1 Potential financial acquiror
2 Potential financial acquiror
3 Potential financial acquiror
4 Potential financial acquiror
5 Potential financial acquiror
6 Potential financial acquiror
7 Potential financial acquiror
8 Potential financial acquiror
9 Potential financial acquiror
10 Potential financial acquiror
11 Potential financial acquiror
12 Potential financial acquiror
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
23
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Selected Potential Financial Buyer Profiles
- --------------------------------------------------------------------------------
1 Potential strategic acquiror
2 Potential strategic acquiror
3 Potential strategic acquiror
4 Potential strategic acquiror
5 Potential strategic acquiror
6 Potential strategic acquiror
7 Potential strategic acquiror
8 Potential strategic acquiror
9 Potential strategic acquiror
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
24
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Indicative Sale Process / Timetable
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1.
COMPLETE COMPANY
EVALUATION
- --------------------------------------------------------------------------------
o Finalize Due Diligence
o Review Objectives, Timing
- --------------------------------------------------------------------------------
Early December
- --------------------------------------------------------------------------------
2.
PREPARATION PHASE
- --------------------------------------------------------------------------------
o Develop Positioning Strategy
o Complete Information Memorandum
o Establish Guidelines for Process
o Discuss / Resolve Key Issues
o Complete Prospective Buyers List
- --------------------------------------------------------------------------------
Late December /
Early January
- --------------------------------------------------------------------------------
3.
DEVELOP/IMPLEMENT
MARKETING STRATEGY
- --------------------------------------------------------------------------------
o Contact 10+/- Prospective Financial Buyers
o Negotiate and Obtain Confidentiality Agreements
o Distribute Information Package
o Handle Questions
o Prepare Management Presentation and Data Room
o Prepare Key Documents (Contract)
- --------------------------------------------------------------------------------
Early January /
Mid January
- --------------------------------------------------------------------------------
4.
EVALUATION OF BUYER
INTEREST/
DUE DILIGENCE
- --------------------------------------------------------------------------------
o Evaluate Indications of Interest
o Narrow field of candidates to 3-5 Buyers for Round Two
o Distribute Draft Purchase Agreement
o Coordinate Data Room Visits for Select Buyers
o Conduct Management Presentations / Distribute Supplemental Data
- --------------------------------------------------------------------------------
Late January /
Early February
- --------------------------------------------------------------------------------
5.
EXECUTION PHASE
- --------------------------------------------------------------------------------
o Evaluate Proposals
o Determine "End Game" Tactics
o Structure Transaction / Confirm Financing
o Sign Definitive Agreement
o Obtain Regulatory Approvals
o Negotiate and Close Transaction
- --------------------------------------------------------------------------------
Early March /
Late March
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
SECTION 4
<PAGE>
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
4.
Appendix
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
EXHIBIT A
<PAGE>
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
A.
PCA Case Study
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
25
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
PCA International -- Transaction Overview
- --------------------------------------------------------------------------------
o On April 20, 1998, PCA International Inc. and Jupiter Partners L.P.
-- a New York-based investment firm that was formerly associated
with Forstmann Little -- entered into a merger agreement under which
Jupiter Partners and PCA's senior management acquired a majority of
PCA for $26.50 per share. This purchase price represents a 23.3%
premium to the pre-announcement stock price and a 20.5% premium to
PCA's stock price four weeks prior.
o SEC filings state the value of the deal at about $294.3 million
including the refinancing of existing debt. This price equates to a
7.4x LTM EBITDA purchase multiple.
o Terms of the agreement include the following:
(i) Shareholders of common stock could elect to receive
$26.50 in cash for each share or to retain (subject to
proration) a share of stock in the surviving entity.
(ii) Public shareholders were permitted to retain (subject to
proration) a continuing equity interest in the Company
of no more than approximately 4.5% and no less than
approximately 3.4% of the current outstanding shares of
the Company. Post closing, public shareholders owned
3.9% of PCA.
(iii) The transaction was accounted for as a recapitalization
(which avoids recognition of purchase goodwill).
o $150 million of senior secured credit facilities, rated B2/BB-,
closed on August 25, 1998.
o $100 million high yield deal, rated Caa1/B-, was launched and pulled
due to adverse market conditions. Financing gap is currently
supported via a $100 million funded bridge loan.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
26
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
PCA -- How it Unfolded
- --------------------------------------------------------------------------------
o In the spring of 1997, the PCA Board began to examine alternative
strategies for enhancing shareholder value.
o In June and early July, Needham & Company -- then engaged as the
Board's financial advisor -- solicited offers from financial buyers
via a traditional auction process.
o In mid July, the Company received proposals from four potential
purchasers, with two proposals below $26.50 per share and two
proposals above $26.50 per share (one of which was Jupiter
Partners).
o The PCA Board determined to proceed in final negotiations with the
bidder other than Jupiter. In the course of such negotiations, the
proposed buyer required that the ultimate purchase price would be
contingent upon the 1997 retail season.
o The PCA Board was unwilling to proceed with a transaction subject to
a contingency of this nature, and sale negotiations were terminated.
o On March 9, 1998, Jupiter approached PCA's President regarding a
renewed interest in the Company, and preliminarily proposed $26.00
per share. This offer was deemed, by the Company, as unacceptable.
However, talks informally resumed.
o On April 2, 1998, the Board provided Jupiter the "go ahead" to
proceed with due diligence as the sole potential buyer, as another
full blown auction process would be disruptive to the Company's
operations.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
27
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
PCA -- How it Unfolded (cont'd)
- --------------------------------------------------------------------------------
o On April 20, 1998, the PCA Board reconvened by telephone to discuss
the draft merger agreement proposed by Jupiter, with a purchase
price of $26.50 per share. Needham & Company delivered to the Board,
on the same day, the fairness opinion that declared the proposed
consideration as desirable from a financial perspective. The Board
unanimously approved the transaction, and a press release was
issued.
[GRAPHIC OMITTED]
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
Date Price
26-Nov-1997 24.7500
28-Nov-1997 24.7500
01-Dec-1997 24.8750
02-Dec-1997 24.0000
03-Dec-1997 24.9375
04-Dec-1997 24.6250
05-Dec-1997 24.6250
08-Dec-1997 24.3750
09-Dec-1997 24.2500
10-Dec-1997 23.7500
11-Dec-1997 22.5000
12-Dec-1997 22.0000
15-Dec-1997 22.0000
16-Dec-1997 22.2500
17-Dec-1997 22.2500
18-Dec-1997 21.0000
19-Dec-1997 20.0000
22-Dec-1997 20.7500
23-Dec-1997 21.0000
24-Dec-1997 21.0000
26-Dec-1997 21.0000
29-Dec-1997 21.0000
30-Dec-1997 20.7500
31-Dec-1997 21.0000
02-Jan-1998 21.0000
05-Jan-1998 20.7500
06-Jan-1998 20.7500
07-Jan-1998 20.5000
08-Jan-1998 20.5000
09-Jan-1998 20.5000
12-Jan-1998 20.3750
13-Jan-1998 21.1250
14-Jan-1998 21.7500
15-Jan-1998 21.2500
16-Jan-1998 21.5000
20-Jan-1998 21.0000
21-Jan-1998 22.2500
22-Jan-1998 21.5000
23-Jan-1998 22.2500
26-Jan-1998 21.7500
27-Jan-1998 21.1250
28-Jan-1998 21.0000
29-Jan-1998 22.0000
30-Jan-1998 22.2500
02-Feb-1998 21.0000
03-Feb-1998 21.5000
04-Feb-1998 21.7500
05-Feb-1998 21.6250
06-Feb-1998 21.6875
09-Feb-1998 22.2500
10-Feb-1998 21.3750
11-Feb-1998 21.6250
12-Feb-1998 21.0000
13-Feb-1998 21.0000
17-Feb-1998 21.0000
18-Feb-1998 21.0000
19-Feb-1998 20.5000
20-Feb-1998 20.5000
23-Feb-1998 20.0000
24-Feb-1998 20.5000
25-Feb-1998 20.5000
26-Feb-1998 20.7500
27-Feb-1998 22.0000
02-Mar-1998 21.8750
03-Mar-1998 22.1250
04-Mar-1998 23.8125
05-Mar-1998 22.1250
06-Mar-1998 22.5000
09-Mar-1998 22.7500
10-Mar-1998 22.6875
11-Mar-1998 22.6250
12-Mar-1998 23.2500
13-Mar-1998 22.7500
16-Mar-1998 22.7500
17-Mar-1998 22.5000
18-Mar-1998 22.3750
19-Mar-1998 22.6250
20-Mar-1998 22.5000
23-Mar-1998 21.7500
24-Mar-1998 22.0000
25-Mar-1998 22.0000
26-Mar-1998 22.3750
27-Mar-1998 22.5000
30-Mar-1998 22.5000
31-Mar-1998 22.5000
01-Apr-1998 23.2500
02-Apr-1998 22.5000
03-Apr-1998 22.3750
06-Apr-1998 21.7500
07-Apr-1998 22.3750
08-Apr-1998 23.0000
09-Apr-1998 23.2500
13-Apr-1998 22.7500
14-Apr-1998 22.5000
15-Apr-1998 22.3750
16-Apr-1998 21.7500
17-Apr-1998 21.6250
20-Apr-1998 21.5000
21-Apr-1998 25.9375
22-Apr-1998 25.6250
23-Apr-1998 25.6250
24-Apr-1998 25.6250
27-Apr-1998 25.4688
28-Apr-1998 25.5000
29-Apr-1998 25.6250
30-Apr-1998 25.6250
01-May-1998 25.7500
04-May-1998 25.6250
05-May-1998 25.8750
06-May-1998 25.7500
07-May-1998 25.6875
08-May-1998 25.6250
11-May-1998 25.6250
12-May-1998 25.6250
13-May-1998 25.6250
14-May-1998 25.6563
15-May-1998 25.6250
18-May-1998 25.6250
19-May-1998 25.6250
20-May-1998 25.6250
21-May-1998 25.8125
22-May-1998 25.6250
26-May-1998 25.8125
27-May-1998 25.6250
28-May-1998 25.7500
29-May-1998 25.8750
01-Jun-1998 25.7500
02-Jun-1998 25.8438
03-Jun-1998 25.8125
04-Jun-1998 26.0000
05-Jun-1998 25.7500
08-Jun-1998 25.6875
09-Jun-1998 25.7500
10-Jun-1998 25.7500
11-Jun-1998 25.6875
12-Jun-1998 25.6875
15-Jun-1998 25.7500
16-Jun-1998 25.7500
17-Jun-1998 25.7500
18-Jun-1998 25.5000
19-Jun-1998 25.1250
22-Jun-1998 25.0625
23-Jun-1998 25.0000
24-Jun-1998 25.0000
25-Jun-1998 25.0000
26-Jun-1998 25.0000
29-Jun-1998 25.0000
30-Jun-1998 25.2500
01-Jul-1998 25.0000
02-Jul-1998 25.0000
06-Jul-1998 25.1250
07-Jul-1998 25.0000
08-Jul-1998 25.2500
09-Jul-1998 25.3750
10-Jul-1998 25.6250
13-Jul-1998 25.6875
14-Jul-1998 25.6875
15-Jul-1998 25.5625
16-Jul-1998 25.7500
17-Jul-1998 25.5625
20-Jul-1998 25.5625
21-Jul-1998 25.6250
22-Jul-1998 25.5625
23-Jul-1998 25.6875
24-Jul-1998 25.8125
27-Jul-1998 25.6875
28-Jul-1998 25.6250
29-Jul-1998 25.6250
30-Jul-1998 25.5000
31-Jul-1998 25.6250
03-Aug-1998 25.6875
04-Aug-1998 25.5000
05-Aug-1998 25.5000
06-Aug-1998 25.5313
07-Aug-1998 25.5000
10-Aug-1998 25.1250
11-Aug-1998 25.0000
12-Aug-1998 24.5000
13-Aug-1998 24.3750
14-Aug-1998 25.2500
17-Aug-1998 25.5625
18-Aug-1998 25.8750
19-Aug-1998 25.6250
20-Aug-1998 25.7500
21-Aug-1998 24.7500
24-Aug-1998 24.9375
25-Aug-1998 26.7500
26-Aug-1998 26.7500
27-Aug-1998 26.7500
28-Aug-1998 26.7500
31-Aug-1998 26.7500
01-Sep-1998 26.7500
02-Sep-1998 26.7500
03-Sep-1998 26.7500
04-Sep-1998 26.7500
08-Sep-1998 26.7500
09-Sep-1998 26.7500
10-Sep-1998 26.7500
11-Sep-1998 26.7500
14-Sep-1998 26.7500
15-Sep-1998 26.7500
16-Sep-1998 25.5000
17-Sep-1998 25.5000
<PAGE>
28
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
PCA International vs. CPI Corp.
- --------------------------------------------------------------------------------
PCA -- Historical Financial Results
(Dollars in Millions)
================================================================================
1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
Sales $149.1 $144.9 $144.7 $156.1 $242.9
% Growth (2.8%) (0.0%) 7.8% 55.6%
EBITDA $13.4 $15.0 $21.8 $14.8 $38.3
% Sales 9.0% 10.4% 15.7% 9.5% 15.8%
CAPEX $21.9 $14.7 $6.3 $13.4 $12.1
% Sales 14.7% 10.1% 4.4% 8.6% 5.0%
- --------------------------------------------------------------------------------
CPI Portrait Studios -- Historical Financial Results
(Dollars in Millions)
================================================================================
1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
Sales $238.2 $276.4 $279.5 $289.8 $303.7
% Growth 16.0% 1.1% 3.7% 4.8%
EBITDA $36.3 $50.7 $60.2 $56.7 $66.6
% Sales 15.2% 18.4% 21.5% 19.6% 21.9%
CAPEX $19.0 $57.7 $24.8 $17.8 $13.9
% Sales 8.0% 20.9% 8.9% 6.1% 4.6%
- --------------------------------------------------------------------------------
(1) Excludes corp. overhead expenses
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
29
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
PCA International -- Transaction Value and Multiples
- --------------------------------------------------------------------------------
PCA International
(Dollars in Millions)
================================================================================
SOURCES OF FINANCING USES OF FINANCING
- --------------------------------------------------------------------------------
Senior Bank Debt (1) $129.3 Equity Purchase Price $233.5 (3)
Bridge Loan 100.0 Net Debt $45.7
Equity Investment (2) 65.0 Transaction Costs 15.1
------ ------
Total Financing Sources $294.3 Adjusted Purchase Price $294.3
- --------------------------------------------------------------------------------
(1) $150 million credit facility of which $129.3 million was drawn at closing
(including $4.3 million in letters of credit).
(2) Includes $51.9 million cash equity contribution from Jupiter and $13.1
million of rollover equity from management and existing public
shareholders.
(3) Includes common stock converted into the right to receive $26.50 in cash,
rollover equity and payments made in cancellation of outstanding PCA
options and warrants.
================================================================================
KEY CREDIT STATISTICS (1)
- --------------------------------------------------------------------------------
Adjusted Total Sales $238.9
Adjusted Total EBITDA 39.7
Pro Forma Interest Expense 22.2
Senior Bank Debt Outstanding 129.3
Total Debt Outstanding 229.3
Senior Debt /EBITDA 3.3x
Total Debt/EBITDA 5.8x
Pro Forma Interest Coverage 1.8x
- --------------------------------------------------------------------------------
(2) Source: SEC Form 8-K dated July 30, 1998.
================================================================================
IMPLIED TRANSACTION MULTIPLES
- --------------------------------------------------------------------------------
Adjusted Purchase Price/ Adjusted Sales 1.2x
Adjusted Purchase Price/ Adjusted EBITDA 7.4x
Equity Purchase Price/Net Income 26.3x
- --------------------------------------------------------------------------------
================================================================================
BANK FACILITY DETAILS (1)
- --------------------------------------------------------------------------------
MATURITY LIBOR+
-------- ------
$25 Million Revolver 8/03 225 bps
$35 Million Term-A 8/03 225 bps
$90 Million Term-B 8/05 275 bps
- --------------------------------------------------------------------------------
(1) Source: SEC Form 8-K dated July 30, 1998.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
EXHIBIT B
<PAGE>
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
B.
Debt Financing Environment
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
30
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Current Syndicated Loan Market Snapshot
- --------------------------------------------------------------------------------
o Despite recent volatility and strained liquidity, the leveraged loan
market remains open for business. Given the right credit (less
cyclical, reasonable leverage, "smart" equity capital) and banking
relationships, deals will continue to get done.
o Leveraged loan volume totaled $72 billion during the 3rdQ98,
bringing YTD volume to $212 billion, surpassing 1997's full year
volume of $194 billion.
o Deals that do not require year end executions are being postponed to
Q1 1999, with the expectation of increased market capacity.
[The following tables were depicted as bar charts in the printed material.]
- -------------------------------- --------------------------------
Total Loan Volume Leveraged Loan Volume
(Dollars in Billions) (Dollars in Billions)
- -------------------------------- --------------------------------
1991 $234 1991 $21
1992 $389 1992 $40
1993 $375 1993 $28
1994 $665 1994 $81
1995 $817 1995 $101
1996 $888 1996 $135
1997 $1,112 1997 $194
3Q 98 $681 3Q 98 $212
Source: Loan Pricing Corporation Source: Loan Pricing Corporation
- -------------------------------- --------------------------------
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
31
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Current High Yield Market Snapshot
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Conditions
- --------------------------------------------------------------------------------
12/31/97 11/13/98
-------- --------
US Treasury 10 year: 5.47% 4.81%
Double B spreads: +273 +390
Single B spreads: +386 +669
3 Month LIBOR: 5.89% 5.40%
DJIA: 7,908 8,919
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
New Issuance
- --------------------------------------------------------------------------------
(Dollars in billions) 1997 1997 YTD 1998 YTD
---- -------- --------
Public: $21.4 $18.3 $17.0
Rule 144A: 111.3 101.0 114.3
------ ------ ------
Total $132.7 $119.3 $131.3
------ ------ ------
% Increase: 84.3% -- 10.1%
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mutual Funds Flow
- --------------------------------------------------------------------------------
(Dollars in millions) Inflow (Outflow)
----------------
October 14: (566)
October 21: 79
October 28: 1249
November 4: 1051
November 11: 1221
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Key Factors
- --------------------------------------------------------------------------------
o 1998 High Yield began at a torrid pace
o Six month volume up 65% over record year in 1997
o Demand drove spreads to near 10-year lows
o Global volatility, technical illiquidity created correction
o Russian debt default August 17, 1998
o Fear of US recession
o Margin calls on hedge funds and leveraged investors
o Mutual fund outflows in 9 out of 12 weeks surrounding 8/17
o New issue market shut down from mid-August to mid-October
o Volume down 86%
o $10.3 BN in pulled deals since May versus $10BN in past 3 years
o Only situational new issues completed
o Recently, the high yield market has reopened
o $5.2 BN priced since the end of October
o Frequent issuers, large equity capital, defensive
o $2.3 BN in mutual funds inflows erase recent outflows
o With $585 Bn in assets, high yield creates monthly inflows of $6 Bn
o Increased pension money allocated to asset class
o Outlook for 1999 high yield is positive
o Stability in Japan and Brazil
o US fundamentals - low inflation, full-employment, low interest
o High yield default rates remain near 1%
o Hedge fund/leveraged investor forced selling will subside
- --------------------------------------------------------------------------------
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
32
CONFIDENTIAL
- ------==================--------------------------------------------------------
CPI Corp. PRELIMINARY ANALYSIS
Leverage Multiples of Comparable High Yield Transactions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
====================================================================================================================
AMOUNT TOTAL SENIOR
ISSUE DATE COMPANY SECURITY COUPON ($MILLIONS) RATINGS DEBT/EBITDA DEBT/EBITDA
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 6, 1998 Albecca Sr. Sub Nts 10.750% $200 B3/B- 5.8x 1.4x
October 5, 1998 National Vision Sr. Nts 12.750% $125 B2/B+ 3.8x 3.8x
March 10, 1997 Cole National Group Sr. Sub Nts 9.875% $150 B1/B+ 3.7x 2.0x
August 14, 1997 Cole National Group Sr. Sub Nts 8.625% $125 B1/B+ 2.8x(1) 0.0x
April 17, 1998 Eye Care Centers Sr. Sub Nts 9.125% $100 B3/B- 5.7x 2.3x
April 20, 1998 Finlay Enterprises Sr. Debs 9.000% $75 B2/B 4.6x 4.6x
April 14, 1998 Finlay Fine Jewelry Sr. Nts 8.375% $150 Ba3/B+ 3.7x 3.7x
April 14, 1998 The Boyds Collection Sr. Sub Nts 9.000% $165 B2/B- 6.2x 4.1x
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Decrease reflects repayment of $165.0 mm Sr. Notes coupled with
contribution to capital of $58.4 mm.
- --- CREDIT | FIRST ----------------------------------------------- CPI CORP. --
SUISSE | BOSTON
<PAGE>
January 1999 CONFIDENTIAL
PRELIMINARY ANALYSIS
Materials Prepared for Discussion
CPI Corp.
<PAGE>
CONFIDENTIAL 1
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Executive Summary
- --------------------------------------------------------------------------------
We have analyzed Management's alternative plan which envisions lower
capital expenditures and new program expenses than the original base case
with no diminution in the sales forecast.
The modified plan entails higher margins, earnings and cash flow than the
original plan presented to the Board and therefore implies higher values
for the company in both a private market and public market context.
With this in mind, we have re-evaluated all options and conclude that:
o Stay the Course fails to address the company's trading illiquidity,
expensive capital structure, and limited outlets for excess cash and
debt capacity
o Public Market Recapitalization alternatives (i) exacerbate the company's
illiquidity in the market, (ii) do not permit as aggressive a leveraging
of the company as an LBO, and (iii) may be viewed as coercive by CPI's
top shareholders, many of whom will be compelled to sell out at less
than a change-of-control value due to liquidity concerns
o Strategic Sale/Merger alternatives, while attractive in concept, have
been vigorously pursued with no results. Importantly, a financial buyer
process will not preclude a strategic transaction if ultimately there
is interest by one or more strategic parties
o The LBO alternative, by contrast, generates an immediate return for
shareholders based on the cash flow value of the business unleashed
through a significant leveraging--the LBO delivers powerful cost of
capital, management incentive, and disciplinary benefits that permit a
financial sponsor to pay a substantial premium to current shareholders
for control.
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 2
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
CPI's Public Market Profile
- --------------------------------------------------------------------------------
Public perception of the alternatives should be analyzed in light of:
o Recent public comments
o Observations from CSFB's repurchase desk
o CPI's recent stock price performance
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 3
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Recent Public Comments(1)
- --------------------------------------------------------------------------------
"Have we gotten any further with regard to how we're going to be spending
the huge amount of money that we're going to have in the till towards year
end. I think we're going to have close to $80 million in cash and
securities, and I was hoping to find out what we might be doing with that
sum of money." -- G. Stein, Ryback Management(2)
"Since we've had two tenders, one at 19 and one at 23 and the stock right
now is 21 1/2, do you really think that a buyback is going to be the
answer? We've tried in the past to do something, but apparantly no one's
catching the drift, so do we perhaps follow along the lines of PCA and take
ourselves private?" -- G. Stein, Ryback Management
"Can you realistically consider buying back more stock - a significant
amount of stock - or would you end up really reducing the public
capitalization to kind of an untenable point" -- P. Engderlin, FAC Equities
"My frustration is seeing the great growth you've shown here and none of it
really showing up in the EBIT line. If we have similar growth [next year],
will you see any kind of that incremental margin - that we're hoping to be
70% - showing up?" -- C. Schmactenberger, Timucuan Asset Management(3)
"To use [its] cash to enhance shareholder value, we believe the company
could pay a large dividend, do another Dutch Auction tender offer, or
possibly take the company private" -- First Albany Equity Research
(12/23/98)
- ---------------
(1) Source: 12/15/98 CPI Investor Conference Call.
(2) Ryback owns 8.14% of CPI's shares outstanding as of September 1998.
(3) Timucuan owns 4.46% of CPI's outstanding as of September 1998.
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 4
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Observations from CSFB's Share Repurchase Desk
- --------------------------------------------------------------------------------
CPI's open market program continues to be extraordinarily difficult to
implement due to:
o The stock's poor trading liquidity - average daily volume over the
past three months was only 17,000 shares
o The persistent unavailability of blocks of size - blocks of shares
available for sale have typically been scarce (none has been available
for over a month) and small (under 5,000 shares)
Periodic self-tender offers remain CPI's only viable approach to
discharging cash to shareholders over time but will continue to
aggravate the company's already strained trading liquidity.
A Public Market Recapitalization, while theoretically attractive,
would so strain the company's trading liquidity that the pro forma
trading value becomes difficult to predict.
o Low-cap companies frequently languish in the market with P/E multiples
in the single-digits even where the fundamentals would tend to support
multiples in the teens
o Near-term trading values (post-recap) could easily be below the tender
price as large shareholders seek to sell down any residual stake in
the company due to liquidity concerns
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 5
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
CPI's Stock Price Performance - Update
- --------------------------------------------------------------------------------
While the quarterly earnings release failed to move the stock price, the
First Albany "buy" announcement boosted the stock price nearly 10% - but
on only 60,000 shares traded.
December 29, 1997 to December 29, 1998
- --------------------------------------------------------------------------------
December 30, 1997 Announces Strong Christmas Sales Trends
Close: $22.675 (+0.3%)
January 8, 1998 Announces Preliminary Results of Dutch Auction
Close: $22.25 (-1.4%)
April 8, 1998 Announces 4Q and YE 1997 Earnings ($1.22 vs. $1.06)
Close: $26.188 (+3.5%)
April 21, 1998 Announcement of PCA Acquisition by Jupiter
Close: $26.625 (+2.5%)
June 2, 1998 Announces 1Q Results (-$0.05 vs. $0.12)
Close: $21.438 (-9.0%)
August 25, 1998 Announces 2Q Results ($0.13 vs. $0.12)
Close: $21.438 (-9.0%)
August 31, 1998 Dow Closes at 7,539, Down 12% from 1 Week Prior
Close: $20.125
December 15, 1998 Announces 3Q Results ($0.61 vs. -$0.06)
Close: $21.50 (-0.6%)
December 23, 1998 Reiterated "buy" by First Albany Corp.
Close: $26.00 (+9.2%)
Date CPI CORP
29-Dec-1997 22.5625
30-Dec-1997 22.6250
31-Dec-1997 22.6250
02-Jan-1998 22.6250
05-Jan-1998 22.6250
06-Jan-1998 22.6875
07-Jan-1998 22.5625
08-Jan-1998 22.2500
09-Jan-1998 21.9375
12-Jan-1998 21.1250
13-Jan-1998 21.0625
14-Jan-1998 20.9375
15-Jan-1998 22.2500
16-Jan-1998 22.4375
20-Jan-1998 22.2500
21-Jan-1998 22.8750
22-Jan-1998 22.8125
23-Jan-1998 22.8750
26-Jan-1998 23.0625
27-Jan-1998 23.1875
28-Jan-1998 23.3750
29-Jan-1998 23.9375
30-Jan-1998 24.0625
02-Feb-1998 24.2500
03-Feb-1998 24.1250
04-Feb-1998 24.3125
05-Feb-1998 24.5625
06-Feb-1998 23.9375
09-Feb-1998 24.2500
10-Feb-1998 24.5000
11-Feb-1998 24.5625
12-Feb-1998 24.5000
13-Feb-1998 24.4375
17-Feb-1998 25.2500
18-Feb-1998 24.6875
19-Feb-1998 25.0000
20-Feb-1998 24.5625
23-Feb-1998 24.0625
24-Feb-1998 24.5000
25-Feb-1998 24.1875
26-Feb-1998 24.1250
27-Feb-1998 24.0625
02-Mar-1998 24.1250
03-Mar-1998 23.9375
04-Mar-1998 23.8750
05-Mar-1998 23.9375
06-Mar-1998 23.6250
09-Mar-1998 23.9375
10-Mar-1998 24.0625
11-Mar-1998 24.4375
12-Mar-1998 24.4375
13-Mar-1998 24.3125
16-Mar-1998 24.3750
17-Mar-1998 24.3125
18-Mar-1998 24.3750
19-Mar-1998 24.1875
20-Mar-1998 24.3750
23-Mar-1998 24.4375
24-Mar-1998 24.6250
25-Mar-1998 24.5625
26-Mar-1998 24.3750
27-Mar-1998 24.5000
30-Mar-1998 24.6875
31-Mar-1998 25.3125
01-Apr-1998 25.8750
02-Apr-1998 25.3125
03-Apr-1998 25.2500
06-Apr-1998 25.5625
07-Apr-1998 25.3750
08-Apr-1998 25.3125
09-Apr-1998 26.1875
13-Apr-1998 26.6250
14-Apr-1998 27.2500
15-Apr-1998 27.2500
16-Apr-1998 26.5000
17-Apr-1998 26.3750
20-Apr-1998 26.0625
21-Apr-1998 26.6250
22-Apr-1998 26.3750
23-Apr-1998 26.5625
24-Apr-1998 26.5625
27-Apr-1998 26.3125
28-Apr-1998 26.1250
29-Apr-1998 26.0000
30-Apr-1998 25.9375
01-May-1998 24.0000
04-May-1998 25.7500
05-May-1998 25.8125
06-May-1998 25.9375
07-May-1998 26.0625
08-May-1998 26.2500
11-May-1998 26.2500
12-May-1998 25.9375
13-May-1998 25.8125
14-May-1998 25.5000
15-May-1998 25.4375
18-May-1998 25.0625
19-May-1998 24.6875
20-May-1998 24.5625
21-May-1998 24.9375
22-May-1998 25.1250
26-May-1998 25.0000
27-May-1998 25.5000
28-May-1998 25.6250
29-May-1998 25.6250
01-Jun-1998 26.3750
02-Jun-1998 27.0000
03-Jun-1998 27.0000
04-Jun-1998 26.5000
05-Jun-1998 26.3125
08-Jun-1998 26.0000
09-Jun-1998 26.0000
10-Jun-1998 25.9375
11-Jun-1998 26.0625
12-Jun-1998 25.8750
15-Jun-1998 25.5000
16-Jun-1998 25.7500
17-Jun-1998 25.4375
18-Jun-1998 25.3750
19-Jun-1998 25.2500
22-Jun-1998 25.1250
23-Jun-1998 25.3750
24-Jun-1998 24.5625
25-Jun-1998 24.3750
26-Jun-1998 24.2500
29-Jun-1998 23.5000
30-Jun-1998 23.8125
01-Jul-1998 24.6250
02-Jul-1998 25.7500
06-Jul-1998 26.0000
07-Jul-1998 26.3125
08-Jul-1998 26.7500
09-Jul-1998 26.6875
10-Jul-1998 26.2500
13-Jul-1998 26.6250
14-Jul-1998 26.6875
15-Jul-1998 26.6250
16-Jul-1998 26.5625
17-Jul-1998 26.6250
20-Jul-1998 26.7500
21-Jul-1998 26.6875
22-Jul-1998 27.0625
23-Jul-1998 27.0625
24-Jul-1998 26.4375
27-Jul-1998 26.3750
28-Jul-1998 26.1875
29-Jul-1998 25.6250
30-Jul-1998 25.6875
31-Jul-1998 25.0000
03-Aug-1998 24.5000
04-Aug-1998 24.7500
05-Aug-1998 25.3750
06-Aug-1998 25.3125
07-Aug-1998 25.3750
10-Aug-1998 25.0000
11-Aug-1998 24.5625
12-Aug-1998 24.7500
13-Aug-1998 24.6250
14-Aug-1998 24.6250
17-Aug-1998 24.6875
18-Aug-1998 25.1875
19-Aug-1998 24.6250
20-Aug-1998 24.7500
21-Aug-1998 24.0000
24-Aug-1998 23.8750
25-Aug-1998 21.4375
26-Aug-1998 20.8125
27-Aug-1998 20.5625
28-Aug-1998 20.7500
31-Aug-1998 20.1250
01-Sep-1998 20.1250
02-Sep-1998 19.3750
03-Sep-1998 18.1250
04-Sep-1998 19.0625
08-Sep-1998 18.8125
09-Sep-1998 18.6250
10-Sep-1998 18.3750
11-Sep-1998 19.0000
14-Sep-1998 19.5625
15-Sep-1998 19.6875
16-Sep-1998 20.4375
17-Sep-1998 21.0000
18-Sep-1998 22.8125
21-Sep-1998 23.0625
22-Sep-1998 23.6250
23-Sep-1998 24.1875
24-Sep-1998 24.0000
25-Sep-1998 23.1250
28-Sep-1998 23.4375
29-Sep-1998 23.7500
30-Sep-1998 23.6875
01-Oct-1998 23.1250
02-Oct-1998 22.7500
05-Oct-1998 21.6875
06-Oct-1998 21.5000
07-Oct-1998 21.1875
08-Oct-1998 20.6250
09-Oct-1998 20.5000
12-Oct-1998 21.1875
13-Oct-1998 21.0625
14-Oct-1998 22.1250
15-Oct-1998 23.1250
16-Oct-1998 23.0625
19-Oct-1998 23.7500
20-Oct-1998 23.3125
21-Oct-1998 23.8750
22-Oct-1998 23.9375
23-Oct-1998 23.6250
26-Oct-1998 23.8750
27-Oct-1998 23.6250
28-Oct-1998 23.7500
29-Oct-1998 23.1250
30-Oct-1998 22.9375
02-Nov-1998 22.6250
03-Nov-1998 22.5625
04-Nov-1998 22.3125
05-Nov-1998 21.9375
06-Nov-1998 21.9375
09-Nov-1998 21.8750
10-Nov-1998 21.8125
11-Nov-1998 21.5000
12-Nov-1998 21.5000
13-Nov-1998 21.4375
16-Nov-1998 21.2500
17-Nov-1998 21.3750
18-Nov-1998 21.1875
19-Nov-1998 21.3125
20-Nov-1998 21.2500
23-Nov-1998 21.2500
24-Nov-1998 21.1250
25-Nov-1998 21.5625
27-Nov-1998 21.6250
30-Nov-1998 21.3750
01-Dec-1998 21.1250
02-Dec-1998 21.0625
03-Dec-1998 21.0625
04-Dec-1998 21.6250
07-Dec-1998 21.6875
08-Dec-1998 21.6250
09-Dec-1998 21.6250
10-Dec-1998 21.5000
11-Dec-1998 22.0000
14-Dec-1998 21.6250
15-Dec-1998 21.5000
16-Dec-1998 21.2500
17-Dec-1998 21.3125
18-Dec-1998 21.9375
21-Dec-1998 23.4375
22-Dec-1998 23.8125
23-Dec-1998 26.0000
24-Dec-1998 26.0625
28-Dec-1998 26.0625
29-Dec-1998 26.4375
- --------------------------------------------------------------------------------
Source: Fact Set Research Systems, Inc.
(Dollar amounts in parentheses represent current quarter vs. prior period
quarter earnings)
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 6
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
CPI's Public Market Trading Multiples -- Update
- --------------------------------------------------------------------------------
Despite the recent run-up in the stock price, CPI's public market trading
multiples continue to reflect a severe undervaluation of the company's
strong cash generation.
Market Trading Multiples - Public Data
(Dollars in Millions)
Recent Stock Price(1) $26.50
LTM High/Low $18.13/$27.44
Fully Diluted Shares Outstanding(2) 10.0
-------------
Equity Market Value $260.0
(+) Debt(3) 60.0
(-) Receivable from Kodak(3) 43.5
(-) Cash & Equivalents 10.2
-------------
Adjusted Market Value $266.9
ADJUSTED MARKET VALUE/ EQUITY MARKET VALUE/
--------------------------------- --------------------
NET BOOK
REVENUES(4) EBITDA(4) EBIT(4) INCOME($) VALUE(4)
----------- --------- ------- --------- --------
1999E 0.7 4.4x 9.9x 16.3x 2.2x
1998E 0.7 5.1 11.9 19.3 2.4x
Note: Fiscal year ends in January of the following year.
(1) Stock prices as of December 31, 1998.
(2) As of December 21, 1998 (including option shares).
(3) As of November 14, 1998
(4) Based on Value Line projections.
Market Trading Multiples - Internal Data(5)
(Dollars in Millions)
Recent Stock Price(1) $26.50
LTM High/Low $18.13/$27.44
Fully Diluted Shares Outstanding(2) 10.0
-------------
Equity Market Value $260.6
(+) Debt(3) 60.0
(-) Receivable from Kodak(3) 43.5
(-) Cash & Equivalents 10.2
(-) Est. Wall Decor Proceeds(4) 32.2
-------------
Adjusted Market Value $234.9
ADJUSTED MARKET VALUE/ EQUITY MARKET VALUE/
--------------------------------- --------------------
NET BOOK
REVENUES EBITDA EBIT INCOME VALUE
-------- ------ ---- ------ -----
1999E I A 0.7x 4.4x 9.1x 16.1x 2.9x
1998E II A 0.7 4.3 8.0 12.8 2.9x
1998E I A 0.7 5.1 11.3 19.9 2.9
Note: Fiscal year ends in January of the following year.
(1) Stock prices as of December 31, 1998.
(2) As of December 21, 1998 (including option shares).
(3) As of November 14, 1998
(4) Estimated proceeds from sale of Wall Decor including $27 million of
cash and a $5 million note.
(5) Ex. Wall Decor
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 7
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Financial Projection Summary -- Case I A versus Case II A
- --------------------------------------------------------------------------------
The analysis which follows is based on two different cases: Case I A (which
reflects minor housekeeping adjustments made to the plan shared with the
Board on 12/3/98) and Case II A (which envisions a meaningful lower cost
structure with no change in the sales forecast.
o Upon further analysis, CPI management has made minor
modifications to the financial projections provided in last
December's Board presentation. In sum, Case I A provides a
slightly higher EBITDA forecast that is 3.3% higher than last
month's presentation ($27 million higher on a cumulative basis
for '99P thru '08P).
o For Case I A and Case II A, the projections for Revenues and Cost
of Goods Sold are identical. The few differences between these
two cases are based upon CAPEX spending and related operating
costs.
o Case I A assumes a full build-out of the SAS and Archiving
projects in '00 and '01, at a total cost approximating $22
million. These systems are also accompanied by higher Fixed
Costs, year to year, which surpass Case II by $37 million (on a
cumulative basis from '99P thru '08P).
o Case II A excludes the entire SAS and Archiving build-out. In
lieu of these large CAPEX investments, Advertising expenditures
are increased over Case I A levels in order to maintain adequate
customer goodwill. However, as these Advertising dollars surpass
Case I A by only a cumulative $16 million (from '99P thru '08P),
the Case II A Revenues are generated with a substantially lower
cost base than Case I A.
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 8
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Financial Projections -- Case I A versus Case II A
- --------------------------------------------------------------------------------
Portrait Studios - Case I A versus Case II A
<TABLE>
<CAPTION>
CASE I A CASE II A
------------------------------------------ ------------------------------------------
1998E 1999P 2000P 2001P 2002P 2003P 1999P 2000P 2001P 2002P 2003P
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $316.3 $334.0 $371.2 $382.8 $394.3 $370.9 $334.0 $352.3 $371.2 $382.8 $394.3
% Growth 4.1% 5.6% 5.5% 5.4% 3.1% 3.0% 5.6% 5.5% 5.4% 3.1% 3.0%
Operating Cash Flow 58.6 66.3 76.1 88.2 92.1 95.7 67.6 81.2 90.9 94.2 97.4
% Margin 18.5% 19.9% 21.6% 23.8% 24.1% 24.3% 20.2% 23.0% 24.5% 246% 24.7%
Operating Income 34.6 39.9 48.5 60.4 64.4 69.9 43.1 58.4 66.5 70.4 77.1
% Margin 10.9% 11.9% 13.8% 16.3% 16.8% 17.7% 12.9% 16.6% 17.9% 18.4% 19.6%
Capital Expenditures 16.0 18.7 33.0 12.7 13.1 13.5 $16.1 13.4 12.7 13.1 13.5
% of Sales 5.1% 9.4% 3.4% 3.4% 3.4% 3.4% 4.8% 3.8% 3.4% 3.4% 3.4%
</TABLE>
(1) Excludes effect of 53rd week (approximately 70,000 sittings).
Note: Base Case assumes 2% annual sittings growth until 2001, flat
sittings from 2002-2008, and an annual increase in average sale.
Portrait Studios - Case I A versus Case II A
<TABLE>
<CAPTION>
CASE I A CASE II A
------------------------------------------ ------------------------------------------
1998E 1999P 2000P 2001P 2002P 2003P 1999P 2000P 2001P 2002P 2003P
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate Expenses $13.8 $14.1 $14.6 $14.9 $15.1 $14.1 $14.1 $14.3 $14.6 $14.9 $15.1
% of Consolidated Sales 4.7% 4.2% 4.1% 3.9% 3.9% 3.8% 4.2% 4.1% 3.9% 3.9% 3.8%
Capital Expenditures $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0
</TABLE>
(1) Note: Base Case Projections based on guidance from CPI Management. Cash
flow margins are estimated to rise as CPI fixed technology and labor
expenses are better leveraged through sales increases.
(2) Corporate expenses includes corporate depreciation estimated to be
approximately $1.0 million annually.
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI-CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 9
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Portrait Studio Financials - Case I A versus Case II A
- --------------------------------------------------------------------------------
Sales (Dollars in Millions)
<TABLE>
<CAPTION>
1998E 1999P 2000P 2001P 2002P 2003P 1999P 2000P 2001P 2002P 2003P
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $316.3 $334.0 $371.2 $382.8 $394.3 $370.9 $334.0 $352.3 $371.2 $382.8 $394.3
</TABLE>
Operating Income (Dollars in Millions)
<TABLE>
<CAPTION>
1998E 1999P 2000P 2001P 2002P 2003P 1999P 2000P 2001P 2002P 2003P
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Income 34.6 39.9 48.5 60.4 64.4 69.9 43.1 58.4 66.5 70.4 77.1
</TABLE>
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 10
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary DCF Analysis - Case I A versus Case II A
- --------------------------------------------------------------------------------
CASE I A
(Dollars in Millions)
- ----------------------------------------------------------------------
PRELIMINARY ENTERPRISE
OPERATING SEGMENT VALUE RANGE(1)
- ----------------- ----------------------
Portrait Studios $400 - $450
Corporate Overhead(2) (100) - (90)
TOTAL ENTERPRISE VALUE: $300 - $360
98E Enterprise Value/EBITDA Range 6.6x - 7.9x
99P Enterprise Value/EBITDA Range 5.6x - 6.8x
TOTAL ADJUSTMENTS(3): $29.6 - $29.6
TOTAL EQUITY VALUE: $440 - $390
Implied Value per Share(4) $32.86 - $38.85
% Premium to Market (5) 24.0% - 46.6%
CASE II A
(Dollars in Millions
- ----------------------------------------------------------------------
PRELIMINARY ENTERPRISE
OPERATING SEGMENT VALUE RANGE(1)
- ----------------- ----------------------
Portrait Studios $450 - $475
Corporate Overhead(2) (100) - (90)
TOTAL ENTERPRISE VALUE: $325 - $385
98E Enterprise Value/EBITDA Range 7.1x - 8.4x
99P Enterprise Value/EBITDA Range 6.0x - 7.1x
TOTAL ADJUSTMENTS(3): $29.6 - $29.6
TOTAL EQUITY VALUE: $355 - $415
Implied Value per Share(4) $35.39 - $41.38
% Premium to Market(5) 33.6% - 56.2%
- ---------------
Note: DCF valuation as of FYE 1998E.
(1) Based on Terminal EBITDA Multiples of 5.5x-6.5x and a WACC of 11.0%.
(2) Present value of projected corporate expenses assuming a perpetuity growth
rate of 2% and an 11% discount rate.
(3) Adjustments include cash of $84.6 million (reflecting maturity of Kodak
note and cash proceeds from sale of Wall Decor unit), Wall Decor note of
$5.0 million and long term debt of $60.0 million.
(4) Based on fully diluted shares outstanding of 10.0 million.
(5) Based on CPI share price of $26.50.
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 11
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Valuation Summary - Case I A versus Case II A
- --------------------------------------------------------------------------------
(Dollars in Millions, Except per Share Amounts)
CASE I A CASE II A
ENTERPRISE ENTERPRISE
VALUATION METHODOLOGY VALUE RANGE VALUE RANGE
- --------------------- ----------- -----------
Discounted Cash Flow Analysis $300 - $360 $325 - $385
Implied Price Per Share $32.86 - $38.85 $35.36 - $41.34
% Premium/(Discount) to Market 24.0% - 46.6% 33.4% - 56.0%
Comparable Company Analysis $200 - $250 $225 - $275
Implied Price Per Share $22.89 - $27.88 $25.39 - $30.37
% Premium/(Discount) to Market (13.6)% - 5.2% (4.2)% - 14.6%
Comparable Acquisition Analysis $275 - $375 $300 - $400
Implied Price Per Share $30.37 - $40.34 $32.86 - $42.83
% Premium/(Discount) to Market 14.6% - 52.2% 24.0% - 61.6%
Leveraged Buyout Analysis $300 - $350 $300 - $375
Implied Price Per Share $32.86 - $37.85 $32.86 - $40.34
% Premium/(Discount) to Market 24.0% - 42.8% 24.0% - 52.2%
- ----------
Note: Implied enterprise values are as of FYE 1998E and exclude Wall Decor.
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 12
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Examining the Options
- --------------------------------------------------------------------------------
Stay the Course
Public Market Recapitalization
Strategic Sale/LBO
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
13
CONFIDENTIAL
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Stay the Course With Continuing Share Repurchases
(Theoretical but May be Impossible to Execute)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pro Forma Income Statement and Capitalization
(Dollars in Millions, Except per Share Data)
- --------------------------------------------------------------------------------------------------------------------------
Base Case 1998E 1999P 2000P 2001P 2002P 2003P 2004P '99-'04 CAGR
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Per Share $1.38 $1.85 $2.97 $3.67 $4.11 $4.79 $5.33 23.5%
%Growth 34.2% 60.6% 23.3% 12.3% 16.4% 11.3%
- --------------------------------------------------------------------------------------------------------------------------
Cash Balance $67.9 $80.4 $102.2 $123.7 $147.5 $177.6 $205.3
- --------------------------------------------------------------------------------------------------------------------------
Net Debt / EBITDA $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
EBITDA / Interest 69.8x 83.1x NMF NMF NMF NMF NMF
Debt / Capital 39.9% 39.2% 36.2 29.3% 22.7% 16.6% 11.2%
Cumulative Amount Repurchased ($MM) $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0
Cumulative Shares Repurchased (MM) 0.4 0.7 0.9 1.1 1.3 1.4 1.5
- --------------------------------------------------------------------------------------------------------------------------
Repurchase Price Per Share $27.00 $30.00 $44.61 $54.99 $61.72 $71.83 $79.91
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Aggressive Share Repurchase Program - Case II A - Contemplates periodic self-tender offers
- --------------------------------------------------------------------------------------------------------------------------
50.0% DEBT / CAPITAL TARGET 1998E 1999P 2000P 2001P 2002P 2003P 2004P '99-'04 CAGR
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Per Share $1.38 $2.00 $3.40 $4.38 $5.10 $6.19 $7.17 28.1%
%Growth 44.7% 70.5% 28.6% 16.5% 21.4% 15.9%
Accretion / (Dilution) $0.15 $0.43 $0.71 $0.99 $1.40 $1.84
%Accretion / (Dilution) 7.9% 14.6% 19.3% 24.1% 29.2% 34.6%
Cash Balance $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0
Debt / EBITDA 0.8x 0.6x 0.4x 0.3x 0.2x 0.1x 0.1x
EBITDA / Interest 15.5x 18.5x 26.6x 36.5x 48.9x 69.7x 75.4x
Debt / Capital 50.0% 50.0% 50.0 50.0% 50.0% 50.0% 50.0%
Cumulative Amount Repurchased ($MM) $53.5 $70.5 $96.5 $130.0 $165.5 $206.3 $246.8
Cumulative Shares Repurchased (MM) 1.8 2.4 2.9 3.4 3.9 4.3 4.7
- --------------------------------------------------------------------------------------------------------------------------
Repurchase Price Per Share $29.00 $32.00 $51.07 $65.66 $76.49 $92.86 $107.62
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: All cases assume the indicated share repurchase occurrs on the last day
of each fiscal year at a P/E multiple of 15.0x trailing earnings. The
Base Case assumes $10 million of share repurchases each year. Initial
repurchase in Aggressive Share Repurchase case is assumed to be executed
at a 10% premium.
The 50.0% Debt/Capital Target Case assumes all free cash flow and
available debt capacity (up to 50.0% Debt/Capital) are applied to
repurchase stock at the stated price (with a minimum cash balance of $10
million maintained throughout the forecast horizon). EPS Figures in 1998
and 1999 exclude non-compete amortization income of $.32 and $.22
respectively.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 14
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Valuation Implications -- Case I A versus Case II A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OPEN MARKET PROGRAM AGGRESSIVE SHARE REPURCHASE PROGRAM
CASE I A FORECAST 2004E TRADING VALUE 2004E TRADING VALUE
----------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Assumed P/E Multiple 11.0x 13.0x 15.0x 11.0x 13.0x 15.0x
------ ------ ------ ------ ------ ------
Implied EV/EBITDA Multiple 3.7x 4.6x 5.6x 5.0x 5.9x 6.8x
Implied Price Per Share $54.99 $64.99 $74.99 $72.42 $85.59 $98.76
------ ------ ------ ------ ------ ------
<CAPTION>
Equity Discount Rate Present Value (12/31/98) Present Value (12/31/98)
-------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
11.0x 13.0x 15.0x 11.0x 13.0x 15.0x
------ ------ ------ ------ ------ ------
@13% $26.41 $31.22 $36.02 $34.79 $41.11 $47.44
@15% $23.77 $28.10 $32.42 $31.31 $37.00 $42.70
@17% $21.44 $25.34 $29.23 $28.23 $33.37 $38.50
</TABLE>
<TABLE>
<CAPTION>
OPEN MARKET PROGRAM AGGRESSIVE SHARE REPURCHASE PROGRAM
CASE II A FORECAST 2004E TRADING VALUE 2004E TRADING VALUE
------------------ ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Assumed P/E Multiple 11.0x 13.0x 15.0x 11.0x 13.0x 15.0x
------ ------ ------ ------ ------ -------
Implied EV/EBITDA Multiple 3.8x 4.8x 5.9x 5.3x 6.2x 6.8x
Implied Price Per Share $58.60 $69.26 $79.91 $78.92 $93.27 $107.62
------ ------ ------ ------ ------ -------
<CAPTION>
Equity Discount Rate Present Value (12/31/98) Present Value (12/31/98)
-------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
11.0x 13.0x 15.0x 11.0x 13.0x 15.0x
------ ------ ------ ------ ------ ------
@13% $28.15 $33.27 $38.38 $37.91 $44.80 $51.69
@15% $25.34 $29.94 $34.55 $34.12 $40.32 $46.53
@17% $22.85 $27.00 $31.15 $30.77 $36.36 $41.95
</TABLE>
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 15
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Public Market Recapitalization via Special Dividend
- --------------------------------------------------------------------------------
Recapitalization Analysis - Case II A
1999P EBITDA Multiple 4.5x 5.0x 5.5x
------ ------ ------
Implied 1999 P/E Multiple 11.2x 13.6x 16.1x
------ ------ ------
Special Dividend ($ million) $153.3 $153.3 $153.3
Value of Equity Stub(1) ($ million) 105.5 132.8 160.0
Special Dividend per Share $15.29 $15.29 $15.29
Value of Equity Stub per Share 10.52 13.24 15.96
------ ------ ------
Implied Recapitalization Value $25.80 $28.52 $31.24
% Premium/(Discount) to Market (1.7)% 8.7% 19.0%
----------
(1) (1999 EBITDA x Multiple) - 1998E YE Net Debt.
Pro Forma Income Statement and Capitalization - Case II A
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
1998E 1999P 2000P 2001P 2002P 2003P 2004P '99-'04 CAGR
------- ------- ------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Base Case - II A
EPS $1.38 $1.85 $2.97 $3.67 $4.11 $4.79 $5.33 23.5%
% Growth 34.2% 60.6% 23.3% 12.3% 16.4% 11.3%
Debt $60.0 $60.0 $60.0 $51.4 $42.8 $34.3 $25.7
Equity $90.6 $93.0 $105.6 $123.8 $145.5 $172.6 $203.7
Recap Case - IIA
EPS $1.38 $1.08 $2.13 $2.78 $3.22 $3.85 $4.30 31.8%
% Growth (22.0)% 97.9% 30.7% 15.6% 19.6% 11.7%
Net Debt $140.0 $118.7 $87.6 $47.4 $4.0 $0.0 $0.0
Equity $(52.7) $(41.9) $(20.6) $7.3 $39.6 $78.2 $121.3
Net Debt/EBITDA 3.1x 2.2x 1.3x 0.6x 0.0x 0.0x 0.0x
EBITDA/Interest 4.0x 4.8x 7.0x 10.8x 21.1x NMF NMF
</TABLE>
- ----------
Note: Base excludes non-compete amortization earnings of $.32 in 1998 and
$.22 in 1999. Driver is assumed bank facility with 3.5x Senior
Debt/EBITDA limitation.
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
16
CONFIDENTIAL
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Public Market Recapitalization via Self Tender Offer
- --------------------------------------------------------------------------------
Self Tender Offer Assumptions
---------------------------------------------------------------------------
# of Shares Repurchased 5.1 million
% Repurchased 50.9%
Repurchase Price $30.00
Premium to Market Price(1) 13.2%
Total Repurchase Amount $15.3 million
---------------------------------------------------------------------------
Recapitalization Analysis - Case II A
---------------------------------------------------------------------------
1999P EBITDA Multiple 4.5x 5.0x 5.5x
---------------------------------------------------------------------------
Implied 1999 P/E Multiple 11.2x 13.6x 16.1x
---------------------------------------------------------------------------
Shares Repurchased ($ million) $153.3 $153.3 $153.3
Value of Equity Stub ($ million) $105.5 $132.8 $160.0
Value of Equity Stub per Share $21.44 $26.99 $32.53
% Premium / (Discount) to Market (18.0)% 3.0% 24.0%
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pro Forma Income Statement and Capitalization - Case II A
(Dollars in Millions, Except per Share Data)
- ------------------------------------------------------------------------------------------------------------------------
Base Case 1998E 1999P 2000P 2001P 2002P 2003P 2004P '99'-04 CAGR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Base Case - II A
- -----------------
EPS $1.38 $1.85 $2.97 $3.67 $4.11 $4.79 $5.33 23.5%
%Growth 34.2% 60.6% 23.3% 12.3% 16.4% 11.3%
Debt $60.0 $60.0 $60.0 $51.4 42.8 $34.3 $25.7
Equity $90.6 $93.0 $105.6 $123.8 $145.5 $172.6 $203.7
Recap Case - II A
- -----------------
EPS $1.38 $2.19 $4.34 $5.67 $6.56 $7.85 $8.76 31.9%
%Growth
Debt $140.0 $118.7 $87.6 $47.4 $4.0 $0.0 $0.0
Equity ($52.7) ($41.9) ($20.8) $7.3 $39.6 $78.2 $121.3
Debt/EBITDA 3.1x 2.2x 1.3x 0.6x 0.0x 0.0x 0.0x
EBITDA/Interest Expense 4.0x 4.8x 7.0x 10.8x 21.1x NMF NMF
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Base excludes non-compete amortization earnings of $.32 in 1998 and $.22
in 1999.
Driver is assumed bank facility with 3.5x Senior Debt/EBITDA limition.
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 17
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Preliminary Leveraged Buyout Analysis
- --------------------------------------------------------------------------------
Leveraged Buyout Analysis - Case II A
(Dollars in Millions)
Transaction Multiples
- ---------------------
1998E
-------
Adjusted Purchase Price/EBITDA(1) 7.3x
Equity Purchase Price/Earnings 25.4x
Equity Rates of Return
Year Five Values Terminal EBITDA Multiple
- ---------------- ------------------------------
5.5x 6.0x 6.5x
---- ---- ----
EBITDA $83.3 $83.3 $83.3
Enterprise Value 458.0 499.6 541.3
Net Debt (98.2) (98.2) (98.2)
------ ------ ------
Implied Equity Value $359.8 $401.4 $443.1
====== ====== ======
Five Year IRR 29.2% 32.0% 34.7%
Transaction Value
Purchase Price Per Share $35.00
% Premium to Market 32.1%
Equity Purchase Price $351.0
Adjusted Purchase Price 333.0
LBO Equity 100.0
Credit Statistics
1998E 1999P
----- -----
Debt / Capital 70.9% 69.8%
Senior Debt / EBITDA 3.3x 2.6x
Total Debt / EBITDA 5.5x 4.4x
EBITDA / Cash Interest 1.9x 2.3x
- ---------------
Note: Analysis based on Base Case projections excluding any potential cost
savings. Analysis includes estimated fees and assumes all options are
exercised.
(1) Transaction multiples based on 1998E CPI Base Case projections, without
Wall Decor segment.
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 18
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Conclusions
- --------------------------------------------------------------------------------
Based on the foregoing analysis, an LBO (effected through a financial buyer
process) appears to best accomplish the Company's strategic objectives:
o Resolves the company's cash deployment and trading liquidity issues
o Generates an immediate return for shareholders based on the cash flow
value of the business
o Delivers powerful cost of capital, management incentive and
disciplinary benefits which permit a financial sponsor to pay a
substantial premium to current shareholders for control
o Provides a solution which shareholders clearly desire
- --------------------------------------------------------------------------------
CREDIT | FIRST CPI CORP.
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 19
- --------------------------------------------------------------------------------
CPI CORP. PRELIMINARY ANALYSIS
Appendix: Indicative Sale Process / Timetable
- --------------------------------------------------------------------------------
1. COMPLETE COMPANY EVALUATION
o Finalize Due Diligence
o Review Objectives, Timing
LATE JANUARY
2. PREPARATION PHASE
o Develop Positioning Strategy
o Complete Information Memorandum
o Establish Guidelines for Process
o Discuss / Resolve Key Issues
o Complete Prospective Buyers List
LATE JANUARY / EARLY FEBRUARY
3. DEVELOP/IMPLEMENT MARKETING STRATEGY
o Contact 10(plus/minus) Prospective Financial Buyers
o Negotiate and Obtain Confidentiality Agreements
o Distribute Information Package
o Handle Questions
o Prepare Management Presentation and Data Room
o Prepare Key Documents (Contract)
EARLY FEBRUARY / MID FEBRUARY
4. EVALUATION OF BUYER INTEREST / DUE DILIGENCE
o Evaluate Indications of Interest
o Narrow field of candidates to 3-5 Buyers for Round Two
o Distribute Draft Purchase Agreement
o Coordinate Data Room Visits for Select Buyers
o Conduct Management Presentations / Distribute Supplemental Data
LATE FEBRUARY / EARLY MARCH
5. EXECUTION PHASE
o Evaluate Proposals
o Determine "End Game" Tactics
o Structure Transaction / Confirm Financing
o Sign Definitive Agreement
o Obtain Regulatory Approvals
o Negotiate and Close Transaction
EARLY APRIL / LATE APRIL
- --------------------------------------------------------------------------------
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL
Independent Financial Advisor's Special Report
to Non-Management Members of
Board of Directors of CPI Corp.
A.G. Edwards
INVESTMENT BANKING
February 4, 1999
<PAGE>
Table of Contents
A.G. Edwards
INVESTMENT BANKING
<PAGE>
CONFIDENTIAL
Table of Contents
Section
-------
Introduction ..................................................... I
Scope of Review .................................................. II
Selected Observations and Conclusions ............................ III
Appendices
----------
Engagement Letter ................................................ A
Historical Stock Price Performance ............................... B
Analysis of Equity Research Coverage ............................. C
Average Daily Volume ............................................. D
Shareholder Profile .............................................. E
Trading Analysis ................................................. F
Projections and Valuation Over Time .............................. G
<PAGE>
SECTION I
<PAGE>
CONFIDENTIAL
Introduction
A.G. Edwards' Engagement
|_| By letter agreement, dated January 21, 1999, CPI Corp. ("Company") engaged
A.G. Edwards & Sons, Inc. ("A.G. Edwards") to serve as independent
financial advisor to the non-management members of the Board of Directors
of the Company (the "Non-Management Board"). Said agreement and the
related indemnification agreement are attached hereto as Appendix A.
Scope of Engagement
|_| A.G. Edwards was directed to perform an independent review ("Review") of
(i) the analyses previously delivered to the Company's Board of Directors
("the Board") by the Company's financial advisor, Credit Suisse First
Boston ("CS First Boston" or "Financial Advisor"), (ii) the information
available to the Board in connection with its decision to conduct a
controlled auction among financial buyers for the possible sale of the
Company, and (iii) the protocol planned by the Board and CS First Boston
to implement the foregoing.
|_| A.G. Edwards also executed a confidentiality agreement, dated January 14,
1999, with the Company.
|_| A.G. Edwards was requested to complete the Review by early February, and
there were no scope limitations placed on our engagement by the Board or
management.
Page 1
<PAGE>
SECTION II
<PAGE>
CONFIDENTIAL
Scope of Review
As part of its engagement, A.G. Edwards' activities included, but were not
limited to, the following:
|_| Held an organizational meeting with Nick Reding and Lee Liberman on
January 14, 1999 at A.G. Edwards' executive offices. Company's counsel,
Bill Wynne of White & Case in New York, was present telephonically for
the meeting.
|_| Reviewed CS First Boston's Board Presentations:
- Dutch Auction Self-Tender Offer (September 4, 1997)
- Dutch Auction Self-Tender Offer (December 4, 1997)
- Strategic Alternatives (May 7, 1998)
- Strategic Alternatives (December 1998)
- Strategic Alternatives (January 1999)
|_| Reviewed the following presentation materials:
- July 1998 Strategic Transaction Overview
- PowerPoint overview presented to Sears
|_| Reviewed the following documents and information:
- The Company's SEC filings, including audited and unaudited financial
statements
- Management's current 1998 estimate and ten year forecast
- Minutes from certain Board meetings in which discussions were held
relative to strategic alternatives between January 5, 1996 and
December 3, 1998
- Annual Business Plans for 1996, 1997 and 1998
- Budget Variance Reports
- Equity research analyst reports published on the Company
|_| Held a four and one-half hour meeting in Chicago on January 27, 1999 with
CS First Boston to review relevant facts and opinions.
|_| Held a three hour meeting in St. Louis on January 29, 1999 with the
Company's CFO to review the Company's historical financial trends as well
as past and current financial forecasts.
Page 2
<PAGE>
CONFIDENTIAL
Scope of Review
(continued)
|_| Held a forty-five minute meeting in St. Louis on January 29, 1999 with the
Company's Chief Executive Officer to review selected strategic issues.
|_| Held numerous phone conversations with Nick Reding as well as with the
Company's counsel regarding this engagement.
|_| Reviewed other information, studies and analyses, as well as economic and
market criteria, deemed relevant to evaluate CS First Boston's Board
Presentations.
Certain Limitations
|_| In conducting its Review, A.G. Edwards has assumed accuracy and
completeness in all historic financial information presented.
|_| In conducting its Review, A.G. Edwards was advised that the current
forecasts were reasonably prepared on a basis that reflects the best
current judgments and estimates of Company's management.
|_| A.G. Edwards has NOT issued and is NOT issuing a fairness opinion with
respect to any transaction and has NOT attempted to make any independent
evaluation or appraisal of the Company's assets.
|_| A.G. Edwards Review is solely for the confidential use of the Company's
Board of Directors as set forth in the Engagement Letter.
Page 3
<PAGE>
SECTION III
<PAGE>
CONFIDENTIAL
Selected Observations and Conclusions
Basis for Views
|_| A.G. Edwards has extensive investment banking experience including public
underwriting and private placements of securities and has served as
financial advisor on buy-side and sell-side mergers and acquisitions,
valuations of securities and other related assignments. The observations,
conclusions and judgments expressed herein are based on A.G. Edwards'
knowledge and experience with strategic alternatives available to public
companies and its understanding of services performed by financial
advisors. A.G. Edwards was not engaged as an expert on the Company or the
industry in which the Company competes.
Selected Observations
|_| All parties have fully cooperated with A.G. Edwards which has permitted us
to meet the requested timetable.
|_| Based on our experience with mid-cap and small-cap public companies, we
note the following:
- The Company's outside directors are experienced.
- The Company's management is highly knowledgeable about the Company's
industry and competition.
- The Company's financial advisor and legal counsel are highly
qualified.
|_| The Board appears to be very involved, with well-attended monthly
meetings, and appears to be regularly briefed on its legal duties and the
Company's strategic alternatives and results of operations.
|_| The Company's stock price performance has lagged the performance of market
indices and its primary comparable company PCA International. (See
Appendix B)
|_| The Company does not enjoy meaningful research coverage nor a meaningful
trading volume. (See Appendices C and D)
|_| The Company's stock is primarily held by institutions and insiders.
Several institutions hold large blocks of the Company's stock leaving a
small public float. (See Appendix E)
Page 4
<PAGE>
CONFIDENTIAL
Selected Observations and Conclusions
(continued)
Selected Observations (continued)
|_| The Company's stock is currently trading near a three-year high and 50% of
the volume has traded between $17.50 and $23.50 since the beginning of
1995. (See Appendix F)
|_| The Company's management appears to have some difficulty in accurately
forecasting the Company's future sales and expenses. The lack of reliable
projections has impacted past valuations and may become an important issue
in a sale process. (See Appendix G)
|_| The Financial Advisor's Board Presentations were professionally prepared
and appear to be generally accurate.
Selected Conclusions
|_| Based on our review, A.G. Edwards concludes:
- During the past year, CS First Boston has reviewed the Company's
strategic alternatives on multiple occasions with the Board.
- During the past ten years, the Company's Board and management have
attempted to execute most of the available strategic alternatives,
including:
|_| status quo;
|_| strategic acquisitions/diversifications;
|_| status quo with significant Dutch Auction self-tenders and
stock repurchases; and
|_| strategic "joint venture."
Page 5
<PAGE>
CONFIDENTIAL
Selected Observations and Conclusions
(continued)
Certain Challenges
|_| Company is primarily owned by institutional investors interested in market
appreciation for their clients and beneficiaries.
|_| The current market price for the Company's common stock MAY NOT REFLECT
FAIR MARKET VALUE due to:
- illiquid trading market with limited float and trading volume
- the impact of the Company's Dutch Auctions and stock repurchases
- limited research coverage
- complex financial reports
|_| Investors require public companies to enhance shareholder value, typically
through internal or external growth stories, best understood by
demonstrated earnings growth.
- The Company's management has not identified any meaningful
independent growth opportunities, nor is it aware of any growth
opportunities associated with its relationship with Sears.
- Neither the Company nor its Financial Advisor can identify any
natural acquisition targets for the Company.
- The Company's marketplace is generally stagnant so that increasing
market share requires competitive pressure through pricing or
service levels.
- The Company's current business plan generates cash flow but no
meaningful earnings.
Page 6
<PAGE>
CONFIDENTIAL
Selected Observations and Conclusions
(continued)
Limited Strategic Alternatives
Our discussion with management and the Board's Financial Advisor suggests the
following limitations on each of the alternatives:
Strategic Action
(1) Pure status quo
(2) Pure status quo with portrait studios only
(3) "Stay the course" with additional stock buy-backs
(4) Public or private equity
Limitations
(i) Portrait studios and Wall Decor are not interactive; limited growth
opportunities; high level of institutional shareholder unrest.
(ii) Generates cash but not earnings due, in part, to technology investments,
training and servicing with apparent price increases; limited growth
opportunities; high level of institutional shareholder unrest.
(iii) Last Dutch Auction was undersubscribed; open market repurchases
ineffective due to illiquidity and blackouts; institutional shareholders
want "control premium" transaction.
(iv) Company has no need for equity, which would further increase cost of
capital.
Page 7
<PAGE>
CONFIDENTIAL
Selected Observations and Conclusions
(continued)
Limited Strategic Alternatives (continued)
Strategic Action
(5) Public recapitalization
(6) Strategic acquisition
(7) Strategic "Joint Venture"
(8) Controlled auction to LBO funds
Limitations
(v) While leverage would reduce cost of capital, "equity stub" may prove
unacceptable to market, particularly due to compulsion on institutional
shareholders who would not get "control premium."
(vi) Past transactions in photocopying, photofinishing and Wall Decor have
been ineffective; commitment to Sears precludes certain other
transactions; there are no identifiable acquisition targets.
(vii) Only four of six potential "partners" received initial presentation; no
indications of interest possibly due to significant goodwill under
purchase accounting and apparent lack of growth opportunities.
(viii) Financial buyer would exploit cash flow opportunity and would likely
impose overhead and cost discipline.
Page 8
<PAGE>
CONFIDENTIAL
Selected Observations and Conclusions
(continued)
Discussion Topics
|_| Viability of Company as a public company.
|_| Effectiveness of strategic alternatives.
|_| Based on our understanding of the advice of the Company's Financial
Advisor and legal counsel, the CEO and Nick Reding have confirmed that:
- The non-management directors will supervise the auction process.
- The Financial Advisor will coordinate the auction process with
confidentiality and stand-still agreements with potential buyers.
- The first round bidders will receive an offering memorandum
containing historic data and a one year financial forecast.
- The second round bidders will have controlled access to:
|_| data room with a representative of the Financial Advisor; and
|_| management interviews with a representative of the Financial
Advisor.
- All reasonable steps will be taken to maximize shareholder value.
Page 9
<PAGE>
CONFIDENTIAL
Selected Observations and Conclusions
(continued)
Discussion Topics (continued)
|_| Certain financial buyers MAY:
- Not offer a "control premium" substantially in excess of current
market price;
- Have lower valuation ranges than currently expected due to:
|_| Sears' agreement
|_| technology challenges
|_| available assets to support lending base
- Not perceive the Company as an acquisition platform;
- Not focus on exclusivity with Sears (e.g. Jupiter/PCA
[K-mart/Wal-Mart]);
- Utilize "slash and burn" tactics to reduce corporate/divisional
overhead and to delay/cancel technology investments in order to
"harvest" cash and reduce debt;
- Not perceive adequate exit strategies.
Report of Independent Financial Advisor
|_| Based on, and subject to the foregoing, A.G. Edwards is pleased to advise
the non-management members of the Board that, from a financial point of
view, during the course of our Review:
(1) Nothing has come to our attention which causes us to disagree with
the current recommendations of CS First Boston to the Board as set
forth in the December 1998 and January 1999 Board Presentation
materials;
(2) Nothing has come to our attention which causes us to believe that
the Board of Directors does not have adequate financial advice on
which to base a good faith business judgement for the best interests
of shareholders; and
(3) The Company has planned an appropriate sales protocol to promote
competition among bidders, avoid potential conflicts with management
and maximize shareholder value.
Page 10
<PAGE>
Appendices
A.G. Edwards
INVESTMENT BANKING
<PAGE>
APPENDIX A
<PAGE>
[LETTERHEAD OF A.G. Edwards & Sons, Inc.]
January 21, 1999
CONFIDENTIAL
CPI Corp.
1706 Washington Avenue
St. Louis, MO 63103
Attn: Jane Nelson
Secretary
Dear Ms. Nelson:
We understand that CPI Corp. (the "Company") is contemplating a possible merger
or sale of substantially all of the Company's equity in one or more transactions
(a "Transaction"). The non-management members of the Board of Directors of the
Company (the "Board") have requested that A.G. Edwards & Sons, Inc. ("Edwards")
perform an independent review of: the analyses previously furnished by the
Company's financial advisor (the "Financial Advisor") between September 1997 and
the present, the Board's decision process with respect to its decision to sell
the Company, as well as the sale protocol to be undertaken by the Financial
Advisor. This letter will confirm the arrangements under which the Company will
retain Edwards to act as financial advisor to the non-management members of the
Board.
The Scope of the Engagement
You have agreed to engage Edwards to provide you with independent financial
advisory services. During this engagement, we will review available data
concerning the history, current operation and prospects of the Company,
including the Company's most recently available financial projections. In
particular, Edwards will review materials prepared by the management of the
Company for the Financial Advisor, materials presented by the Financial Advisor
or other advisors to the Board and materials previously provided to and
correspondence with prospective buyers of the Company, if any. Edwards will have
the opportunity to interview the Financial Advisor and members of management.
Edwards will also conduct such other analyses as it deems necessary. In its
analysis, Edwards will rely on the financial statements of and other information
relating to the Company and the potential acquirers (collectively, the
"Information") that are provided to it by the Company or the Financial Advisor
and will assume that the Information is accurate in all material respects.
Edwards will not attempt to independently verify the accuracy or completeness of
any of the Information, nor will it make any independent evaluation or appraisal
of the assets of the Company or any potential acquirers. As part of its
engagement, Edwards will not issue a fairness opinion relating to any
Transaction. Additional assignments, if any, would be set forth in a separate
engagement letter.
<PAGE>
CPI Corp.
January 21, 1999
Page 2
Upon completion of our work, we will present to the Board the results of our
review. The nature and scope of our investigation as well as the scope, form and
substance of our analysis shall be such as we consider appropriate. It is
understood that any analysis presented by Edwards during the course of
participating in meetings with the Company, as well as any written materials
provided by Edwards, will be solely for the confidential use of the Board and
will not be reproduced, summarized, described, characterized or referred to or
given to any other person for any purpose (other than as required by law)
without Edwards' prior written consent (it being understood, however, that the
Company may include and will consult with Edwards prior to including an accurate
summary of Edwards' role and views in any shareholder disclosure document).
Fees Payable to Edwards
You have agreed to pay Edwards a fee (the "Fee") for this engagement of $150,000
consisting of $75,000 payable upon execution of this letter agreement and the
rest of which will be due upon the delivery of our analysis. In addition you
have agreed to reimburse Edwards for all of its reasonable out-of-pocket
expenses which shall be billed separately, including reasonable attorney and
other professional fees, travel, document procurement and computer services, and
all other reasonable out-of-pocket fees.
The Indemnification of Edwards
You have agreed to indemnify and hold harmless Edwards pursuant to the
Indemnification Agreement which is attached and incorporated into this letter.
Miscellaneous Provisions
This agreement may be terminated at any time by either the Company or Edwards
with or without cause effective upon written notice to that effect to the other
party, provided, however, that (i) any fees earned and expenses incurred prior
to such termination will become immediately payable upon such notification and
(ii) all indemnification obligations shall survive such termination.
If the terms of this engagement letter as set forth are satisfactory, kindly
sign the enclosed copy of this letter and return to Edwards. By signing in the
space provided below, the undersigned represents that he is authorized to bind
the Board and, for purposes of the Fee and the reimbursement of expenses
described above, the Company, to the terms of this letter. This letter may be
executed by each party in separate counterparts, each of which will be deemed an
original, and all such counterparts will together constitute one and the same
instrument.
<PAGE>
CPI Corp.
January 21, 1999
Page 3
We look forward to working with you on this important assignment and appreciate
very much the opportunity to be of service to CPI Corp.
Sincerely,
A.G. EDWARDS & SONS, INC.
By: /s/ Paul F. Pautler
---------------------------------------
Paul F. Pautler
Managing Director - Investment Banking
Accepted and agreed:
CPI Corp.
By: /s/ Jane E. Nelson
---------------------------------------
Title: Secretary
------------------------------------
Dated: January 21, 1999
------------------------------------
<PAGE>
CPI Corp.
A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, MO 63103
Attention: Paul F. Pautler
Gentlemen:
A.G. Edwards & Sons, Inc. ("Edwards") has been engaged by CPI Corp.
("Company") pursuant to a letter agreement of even date herewith, as the same
may be amended or modified from time to time hereafter ("Engagement Letter").
In connection with the engagement of Edwards pursuant to the Engagement
Letter (the "Engagement"), the Company, its successors and assigns, will
indemnify and hold harmless Edwards and each of the Other Indemnified Parties
(as defined below) from and against any and all losses, claims, damages,
liabilities, judgments, actions, suits or proceedings of any kind or nature
(collectively, "Losses") and costs or expenses incurred by them of any kind or
nature, including but not limited to all reasonable fees and expenses of their
counsel and all reasonable travel and other expenses incurred by them, in
connection with the investigation of, preparation for, defense or settlement of
any pending or threatened claim, litigation, proceeding, appeal or other legal
action (collectively, "Expenses") in connection with or arising out of or
relating to the Engagement; provided, however, that the Company shall not be
obligated to indemnify Edwards or the Other Indemnified Parties with respect to
Losses or Expenses which are finally judicially determined, by a court of
competent jurisdiction within the United States, to have resulted primarily from
the gross negligence or willful misconduct of Edwards.
As used herein, the "Other Indemnified Parties" shall mean and include
each and all of the following: Edwards' affiliates, the respective, directors,
officers, agents, consultants and employees of and counsel to Edwards and its
affiliates, each person controlling (within the meaning of the Securities Act of
1933, as amended) Edwards or any of its affiliates, and the successors, assigns,
heirs and personal representatives of any of the foregoing.
If multiple claims are brought in arbitration in connection with or
arising out of or relating to the Engagement, with respect to at least one of
which indemnification is provided for in this letter, any arbitration award
shall be conclusively deemed to be based on claims as to which indemnification
is provided for in this letter, except to the extent the arbitration award
expressly states that the award, or any portion thereof, is based solely on a
claim as to which indemnification is not available.
<PAGE>
If the indemnification referred to in this letter should, for any reason
whatsoever, be unenforceable, unavailable or otherwise insufficient to hold
Edwards and the Other Indemnified Parties harmless other than because of the
proviso contained in the second paragraph, then the Company shall, in lieu of
indemnifying Edwards and the Other Indemnified Parties, contribute to such
amount paid or payable by such indemnified party or parties for Losses and
Expenses in such proportion as is appropriate (i) to reflect the relative
benefits received by the Company on the one hand and Edwards and the Other
Indemnified Parties on the other hand, or (ii) if the allocation on that basis
is not permitted by applicable law, to reflect the relative benefits referred to
in clause (i) above and also the relative fault of Edwards and the Other
Indemnified Parties and the Company, as well as any other relevant equitable
considerations; provided, however, that in no event shall the aggregate
contribution of Edwards and the Other Indemnified Parties exceed the amount of
the fee actually received by Edwards pursuant to the Engagement Letter.
Neither Edwards nor any of the Other Indemnified Parties shall have any
liability whatsoever to the Company or its affiliates, directors, officers,
employees, agents or shareholders, directly or indirectly, in connection with or
arising out of or related to the Engagement, except Losses incurred by the
Company which are finally judicially determined, by a court of competent
jurisdiction within the United Sates, to have resulted primarily from the gross
negligence or willful misconduct of Edwards in fulfilling its duties under the
Engagement Letter. In no event, regardless of the theory advanced, shall Edwards
or the Other Indemnified Parties be liable for any consequential, indirect,
incidental or special damages of any nature.
The Company will not, without the prior written consent of Edwards,
settle, compromise or consent to the entry of any judgment in any pending or
threatened claim, litigation, proceeding, appeal or other action related to the
Engagement unless the settlement, compromise or consent includes an express
unconditional release of Edwards and the Other Indemnified Parties from all
liability and obligations arising therefrom.
The Company's obligations referred to herein shall be in addition to any
rights that Edwards and the Other Indemnified Parties may otherwise have. The
Company's obligations referred to herein will remain operative regardless of any
termination or completion of Edwards' services.
Sincerely,
CPI Corp.
By: /s/ Jane E. Nelson
-----------------------------
Secretary
-----------------------------
-----------------------------
Date: January 21, 1999
---------------------------
<PAGE>
APPENDIX B
<PAGE>
CONFIDENTIAL
Historical Stock Price Performance
CPJ Corp.'s stock price has lagged market indices.
Indexed Price of CPI Corp and Major Indicies
1/1/95 - 2/2/99
Indexed Prices
<TABLE>
<CAPTION>
CPI Corp Russell 2000 S&P 500 Composite
<S> <C> <C> <C>
12/31/94 100.00 100.00 100.00
1/6/95 93.71 99.09 100.31
1/13/95 90.21 99.84 101.46
1/20/95 87.41 99.71 101.20
1/27/95 81.82 99.25 102.42
2/3/95 82.52 100.17 104.22
2/10/95 81.12 101.99 104.83
2/17/95 82.52 101.74 104.94
2/24/95 80.42 102.04 106.28
3/3/95 87.41 102.61 105.69
3/10/95 81.82 102.26 106.60
3/17/95 85.31 102.78 107.89
3/24/95 86.01 103.39 109.08
3/31/95 88.81 104.16 109.02
4/7/95 88.11 103.86 110.27
4/13/95 93.71 105.44 110.88
4/21/95 96.50 104.85 110.72
4/28/95 93.01 106.31 112.07
5/5/95 97.90 106.10 113.25
5/12/95 102.10 107.78 114.43
5/19/95 99.30 108.06 113.05
5/26/95 98.60 108.07 114.02
6/2/95 100.70 108.75 115.95
6/9/95 107.69 109.93 114.95
6/16/95 108.39 112.16 117.54
6/23/95 106.99 113.44 119.69
6/30/95 106.99 113.29 118.61
7/7/95 106.29 115.57 121.14
7/14/95 116.78 117.78 121.91
7/21/95 121.68 116.04 120.54
7/28/95 118.88 119.52 122.57
8/4/95 110.49 119.14 121.70
8/11/95 107.69 119.46 120.87
8/18/95 103.50 121.54 121.76
8/25/95 103.50 121.57 121.95
9/1/95 116.78 122.29 122.77
9/8/95 116.08 125.59 124.69
9/15/95 117.48 125.54 127.02
9/22/95 116.08 124.64 126.66
9/29/95 123.78 123.97 127.25
10/6/95 118.18 120.55 126.83
10/13/95 113.29 120.65 127.27
10/20/95 109.79 120.95 127.91
10/27/95 102.10 117.65 126.22
11/3/95 111.19 120.94 128.59
11/10/95 109.79 121.55 129.06
11/17/95 111.89 121.36 130.66
11/24/95 113.29 120.73 130.64
12/1/95 118.18 123.72 132.16
12/8/95 116.08 124.44 134.45
12/15/95 114.69 123.99 134.20
12/22/95 94.41 124.74 133.25
12/29/95 89.51 126.21 134.11
1/5/96 87.41 124.70 134.28
1/12/96 85.31 121.88 131.04
1/19/96 83.22 121.94 133.22
1/26/96 81.82 124.31 135.35
2/2/96 81.12 126.91 138.45
2/9/96 83.92 128.26 142.92
2/16/96 84.62 128.45 141.09
2/23/96 83.92 130.12 143.51
3/1/96 84.62 129.45 140.30
3/8/96 81.82 127.50 137.94
3/15/96 83.22 129.85 139.66
3/22/96 88.81 131.60 141.66
3/29/96 89.51 132.12 140.55
4/4/96 89.51 133.72 142.80
4/12/96 88.81 132.28 138.64
4/19/96 83.92 135.21 140.46
4/26/96 94.41 138.93 142.28
5/3/96 93.71 138.54 139.71
5/10/96 97.90 140.26 141.98
5/17/96 98.60 144.04 145.65
5/24/96 100.00 145.63 147.74
5/31/96 91.61 144.53 145.69
6/7/96 90.91 143.33 146.60
6/14/96 93.71 141.83 144.98
6/21/96 91.61 137.89 145.20
6/28/96 92.31 138.45 146.02
7/5/96 93.01 135.72 143.15
7/12/96 88.11 129.29 140.70
7/19/96 85.31 128.43 139.08
7/26/96 77.62 125.65 138.46
8/2/96 78.32 129.58 144.25
8/9/96 102.10 130.79 144.16
8/16/96 98.60 131.37 144.84
8/23/96 104.20 132.52 145.24
8/30/96 102.80 133.36 141.96
9/6/96 103.50 133.45 142.77
9/13/96 104.20 136.12 148.18
9/20/96 105.59 136.93 149.59
9/27/96 104.90 138.01 149.41
10/4/96 109.09 139.52 152.73
10/11/96 118.18 138.96 152.56
10/18/96 110.49 138.94 154.77
10/25/96 106.99 136.99 152.62
11/1/96 106.29 135.71 153.24
11/8/96 98.60 137.63 159.13
11/15/96 97.90 138.41 160.61
11/22/96 96.50 139.77 163.03
11/29/96 95.10 141.44 164.83
12/6/96 94.41 142.00 161.04
12/13/96 93.71 141.47 158.65
12/20/96 97.90 142.48 163.06
12/27/96 92.31 143.46 164.78
1/3/97 94.41 144.53 162.87
1/10/97 102.10 146.23 165.37
1/17/97 100.70 146.94 169.00
1/24/97 102.80 147.04 167.77
1/31/97 103.50 147.57 171.18
2/7/97 105.59 146.49 171.92
2/14/97 104.90 147.44 176.04
2/21/97 108.39 146.34 174.57
2/28/97 102.80 143.81 172.19
3/7/97 102.80 145.97 175.27
3/14/97 100.70 144.21 172.70
3/21/97 97.90 140.49 170.73
3/27/97 94.41 139.38 168.50
4/4/97 97.90 136.15 165.02
4/11/97 96.50 135.50 160.61
4/18/97 94.41 136.50 166.86
4/25/97 89.51 134.15 166.65
5/2/97 95.10 141.39 177.01
5/9/97 94.41 144.36 179.58
5/16/97 104.20 145.90 180.67
5/23/97 106.29 150.05 184.43
5/30/97 104.90 152.08 184.70
6/6/97 104.90 154.63 186.82
6/13/97 105.59 156.60 194.50
6/20/97 105.59 157.21 195.68
6/27/97 115.38 156.78 193.20
7/3/97 116.08 158.24 199.65
7/11/97 123.08 160.67 199.60
7/18/97 120.28 162.12 199.29
7/25/97 115.38 163.18 204.41
8/1/97 112.24 165.45 206.23
8/8/97 112.94 165.44 203.27
8/15/97 120.63 163.20 196.14
8/22/97 131.12 166.05 201.09
8/29/97 132.87 169.13 195.85
9/5/97 140.56 172.97 202.29
9/12/97 143.36 175.78 201.17
9/19/97 146.50 178.61 206.96
9/26/97 140.56 179.29 205.81
10/3/97 152.80 183.54 210.12
10/10/97 138.46 185.74 210.55
10/17/97 140.56 179.46 205.58
10/24/97 146.50 178.75 205.03
10/31/97 145.45 173.05 199.15
11/7/97 139.86 173.84 201.95
11/14/97 111.54 171.12 202.14
11/21/97 105.94 173.77 209.70
11/28/97 104.20 171.72 208.03
12/5/97 105.59 174.97 214.21
12/12/97 120.63 168.81 207.59
12/19/97 121.33 167.77 206.15
12/26/97 125.17 168.35 203.90
1/2/98 126.57 174.36 212.30
1/9/98 122.73 164.94 201.99
1/16/98 125.52 170.25 209.36
1/23/98 127.97 169.68 208.50
1/30/98 134.62 171.77 213.44
2/6/98 133.92 177.94 220.45
2/13/98 136.71 181.45 222.11
2/20/98 137.41 181.33 225.19
2/27/98 134.62 184.47 228.48
3/6/98 132.17 185.22 229.86
3/13/98 136.01 187.24 232.68
3/20/98 136.36 189.43 239.33
3/27/98 137.06 190.59 238.52
4/3/98 141.26 194.04 244.45
4/9/98 146.50 191.74 241.83
4/17/98 147.55 194.52 244.46
4/24/98 148.60 191.85 241.23
5/1/98 134.27 193.70 244.08
5/8/98 146.85 191.52 241.28
5/15/98 142.31 188.70 241.41
5/22/98 140.56 184.93 241.79
5/29/98 143.36 182.39 237.51
6/5/98 147.20 181.43 242.53
6/12/98 144.76 176.38 239.26
6/19/98 141.26 175.14 239.65
6/26/98 135.66 179.85 246.74
7/2/98 144.06 183.06 249.62
7/10/98 146.85 183.11 253.52
7/17/98 148.95 184.68 258.40
7/24/98 147.90 175.18 248.39
7/31/98 139.86 167.66 244.01
8/7/98 141.96 166.08 237.21
8/14/98 137.76 160.88 231.40
8/21/98 134.27 158.03 235.43
8/28/98 116.08 143.21 223.65
9/4/98 106.64 138.63 212.05
9/11/98 106.29 141.24 219.71
9/18/98 127.62 145.10 222.11
9/25/98 129.37 147.40 227.48
10/2/98 127.27 139.68 218.30
10/9/98 114.69 127.18 214.34
10/16/98 129.02 136.95 230.02
10/23/98 132.17 146.61 233.12
10/30/98 128.32 151.05 239.22
11/6/98 122.73 159.90 248.44
11/13/98 119.93 155.52 245.11
11/20/98 118.88 157.49 253.35
11/27/98 120.98 160.60 259.61
12/4/98 120.98 159.12 256.22
12/11/98 123.08 157.92 253.98
12/18/98 122.73 158.74 258.68
12/24/98 145.80 161.99 267.00
12/31/98 148.25 168.54 267.65
1/8/99 150.35 172.24 277.63
1/15/99 150.70 170.57 270.70
1/22/99 150.35 168.73 266.77
1/29/99 147.90 170.64 278.62
2/1/99 147.20 170.19 277.18
Percent +47.2% +70.2% +177.2%
Gain
</TABLE>
Page 11
<PAGE>
CONFIDENTIAL
Historical Stock Price Performance
CPI Corp.'s stock price has lagged its primary comp, PCA International.
Indexed Price of CPI Corp. and Selected Comparable Companies
1/1/95 -- 2/2/99
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
CPY PCAI FOTO CNJ
---------------------------------------------------------------------------------
Date CPI Corp. PCA Int'l Inc Seattle Filmworks Cole National Corp
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/1/95 100.0000 100.0000 100.0000 100.0000
06-Jan-95 93.7063 103.6145 102.8986 97.4026
13-Jan-95 90.2098 100.0000 105.0725 94.8052
20-Jan-95 87.4126 90.3614 105.7971 89.6104
27-Jan-95 81.8182 89.1566 102.8986 96.1039
03-Feb-95 82.5175 86.7470 100.0000 90.9091
10-Feb-95 81.1189 89.1566 105.0725 92.2078
17-Feb-95 82.5175 91.5663 111.2319 89.6104
24-Feb-95 80.4196 93.9759 121.7391 89.6104
03-Mar-95 87.4126 93.9759 124.6377 87.0130
10-Mar-95 81.8182 103.6145 115.9420 98.7013
17-Mar-95 85.3147 100.0000 121.7391 97.4026
24-Mar-95 86.0140 98.7952 109.7826 96.1039
31-Mar-95 88.8112 96.9880 126.0870 98.7013
07-Apr-95 88.1119 93.9759 128.2609 93.5065
13-Apr-95 93.7063 98.7952 130.4348 97.4026
21-Apr-95 96.5035 92.7711 134.7826 97.4026
28-Apr-95 93.0070 101.2048 143.4783 94.8052
5/5/95 97.9021 103.6145 147.8261 98.7013
12-May-95 102.0979 101.2048 144.5652 106.4935
19-May-95 99.3007 100.0000 139.1304 105.1948
26-May-95 98.6014 106.0241 138.0435 102.5974
02-Jun-95 100.6993 107.2289 128.2609 101.2987
09-Jun-95 107.6923 106.0241 136.9565 100.0000
16-Jun-95 108.3916 108.4337 134.7826 94.8052
23-Jun-95 106.9930 112.0482 152.1739 103.8961
30-Jun-95 106.9930 113.2530 147.8261 107.7922
07-Jul-95 106.2937 120.4819 154.3478 112.9870
14-Jul-95 116.7832 119.2771 163.0435 118.1818
21-Jul-95 121.6783 130.1205 167.3913 120.7792
28-Jul-95 118.8811 130.1205 176.0869 116.8831
04-Aug-95 110.4895 127.7109 169.5652 124.6753
11-Aug-95 107.6923 127.7109 189.1304 128.5714
18-Aug-95 103.4965 127.7109 199.4565 125.9740
25-Aug-95 103.4965 127.7109 197.8261 125.9740
01-Sep-95 116.7832 120.4819 184.7826 129.8700
9/8/95 116.0839 126.5060 176.0869 129.8700
15-Sep-95 117.4825 125.3012 180.4348 128.5714
22-Sep-95 116.0839 130.1205 178.2609 129.8700
29-Sep-95 123.7762 127.7109 191.3043 125.9740
06-Oct-95 118.1818 125.3012 184.7826 128.5714
13-Oct-95 113.2867 120.4819 204.3478 127.2727
20-Oct-95 109.7902 101.2048 195.6522 133.7662
27-Oct-95 102.0979 100.0000 173.9130 131.1688
03-Nov-95 111.1888 100.0000 180.4348 131.1688
10-Nov-95 109.7902 94.5783 176.0869 123.3766
17-Nov-95 111.8881 87.9518 178.2609 124.6753
24-Nov-95 113.2867 90.9639 176.0869 144.1559
01-Dec-95 118.1818 93.9759 167.3913 145.4545
08-Dec-95 116.0839 81.3253 169.5652 141.5584
15-Dec-95 114.6853 86.7470 181.5217 129.8700
22-Dec-95 94.4056 91.5663 180.4348 132.4675
29-Dec-95 89.5105 106.0241 180.4348 144.1559
05-Jan-96 87.4126 109.6386 184.7826 125.9740
1/12/96 85.3147 106.0241 178.2609 116.8831
19-Jan-96 83.2168 96.3855 200.0000 112.9870
26-Jan-96 81.8182 86.7470 200.0000 114.2857
02-Feb-96 81.1189 89.1566 204.3478 111.6883
09-Feb-96 83.9161 91.5663 202.1739 116.8831
16-Feb-96 84.6154 96.3855 193.4783 111.6883
23-Feb-96 83.9161 96.3855 202.1739 111.6883
01-Mar-96 84.6154 101.2048 230.4348 120.7792
08-Mar-96 81.8182 93.9759 215.2174 131.1688
15-Mar-96 83.2168 101.2048 217.3913 138.9610
22-Mar-96 88.8112 109.6386 252.7174 140.2600
29-Mar-96 89.5105 121.0843 254.3478 140.2600
04-Apr-96 89.5105 118.0723 252.7174 154.5455
12-Apr-96 88.8112 118.0723 244.5652 158.4416
19-Apr-96 83.9161 127.7109 244.5652 175.3247
26-Apr-96 94.4056 130.1205 268.2065 175.3247
03-May-96 93.7063 127.7109 264.1304 183.1169
10-May-96 97.9021 133.7349 244.5652 188.3117
5/17/96 98.6014 158.4337 234.7826 197.4026
24-May-96 100.0000 156.6265 238.0435 207.7922
31-May-96 91.6084 163.8554 231.5217 210.3896
07-Jun-96 90.9091 155.4217 241.3044 207.7922
14-Jun-96 93.7063 156.6265 254.3478 211.6883
21-Jun-96 91.6084 160.2410 229.8913 222.0779
28-Jun-96 92.3077 161.4458 211.9565 207.7922
05-Jul-96 93.0070 160.2410 239.6739 201.2987
12-Jul-96 88.1119 165.0600 221.7391 193.5065
19-Jul-96 85.3147 161.4458 239.6739 187.0130
26-Jul-96 77.6224 155.4217 231.5217 175.3247
02-Aug-96 78.3217 161.4458 238.0435 194.8052
09-Aug-96 102.0979 161.4458 211.9565 194.8052
16-Aug-96 98.6014 163.8554 210.3261 196.1039
23-Aug-96 104.1958 163.8554 230.7065 194.8052
30-Aug-96 102.7972 161.4458 242.9348 197.4026
06-Sep-96 103.4965 160.2410 259.2391 197.4026
13-Sep-96 104.1958 159.0361 244.5652 207.7922
9/20/96 105.5944 163.8554 265.7609 203.8961
27-Sep-96 104.8951 159.0361 273.9131 238.9610
04-Oct-96 109.0909 163.8554 262.5000 257.1429
11-Oct-96 118.1818 163.8554 257.6087 261.0390
18-Oct-96 110.4895 159.0361 283.6956 249.3506
25-Oct-96 106.9930 151.8072 277.1739 245.4545
01-Nov-96 106.2937 146.9879 241.3044 250.6494
08-Nov-96 98.6014 144.5783 251.0869 258.4416
15-Nov-96 97.9021 149.3976 257.6087 253.2468
22-Nov-96 96.5035 151.8072 259.2391 253.2468
29-Nov-96 95.1049 171.0843 255.9783 272.7273
06-Dec-96 94.4056 154.2169 267.3913 274.0260
13-Dec-96 93.7063 151.8072 264.1304 270.1300
20-Dec-96 97.9021 153.0121 231.5217 271.4286
27-Dec-96 92.3077 151.8072 251.0869 266.2338
03-Jan-97 94.4056 149.3976 244.5652 287.0130
10-Jan-97 102.0979 149.3976 198.9131 289.6104
17-Jan-97 100.6993 166.2651 216.0326 289.6104
1/24/97 102.7972 168.6747 234.7826 293.5065
31-Jan-97 103.4965 162.6506 231.5217 296.1039
07-Feb-97 105.5944 158.4337 238.0435 289.6104
14-Feb-97 104.8951 157.8313 244.5652 277.9221
21-Feb-97 108.3916 159.0361 238.0435 293.5065
28-Feb-97 102.7972 151.8072 221.7391 332.4675
07-Mar-97 102.7972 151.8072 228.2609 355.8442
14-Mar-97 100.6993 156.6265 216.8478 338.9610
21-Mar-97 97.9021 156.6265 225.0000 332.4675
27-Mar-97 94.4056 155.4217 215.2174 325.9740
04-Apr-97 97.9021 156.6265 195.6522 327.2727
11-Apr-97 96.5035 156.6265 205.4348 323.3766
18-Apr-97 94.4056 149.3976 198.0978 346.7532
25-Apr-97 89.5105 150.6024 190.7609 340.2597
02-May-97 95.1049 155.4217 195.6522 349.3506
09-May-97 94.4056 155.4217 225.0000 348.0519
16-May-97 104.1958 163.8554 222.5544 345.4546
23-May-97 106.2937 161.4458 232.3369 385.7143
5/30/97 104.8951 173.4940 229.8913 393.5065
06-Jun-97 104.8951 208.4337 242.1196 407.7922
13-Jun-97 105.5944 197.5904 239.6739 427.2727
20-Jun-97 105.5944 209.6385 242.1196 451.9481
27-Jun-97 115.3846 200.0000 237.2283 467.5324
03-Jul-97 116.0839 185.5422 266.5761 466.8831
11-Jul-97 123.0769 190.3614 264.1304 467.5324
18-Jul-97 120.2797 200.0000 273.9131 490.2597
25-Jul-97 115.3846 216.8675 254.3478 485.0649
01-Aug-97 112.2378 214.4578 261.6848 461.0390
08-Aug-97 112.9371 216.8675 251.9022 467.5324
15-Aug-97 120.6294 207.2289 234.7826 452.5974
22-Aug-97 131.1189 216.8675 239.6739 460.3896
29-Aug-97 132.8671 221.6868 236.0054 462.9870
05-Sep-97 140.5594 215.6626 234.7826 454.5454
12-Sep-97 143.3566 214.4578 222.5544 431.1689
19-Sep-97 146.5035 231.3253 234.7826 436.3636
26-Sep-97 140.5594 227.7108 228.6685 423.3766
10/3/97 152.7972 243.3735 209.1033 468.8311
10-Oct-97 138.4615 240.9639 205.4348 466.2338
17-Oct-97 140.5594 232.5300 202.9891 464.9351
24-Oct-97 146.5035 228.9157 198.0978 452.5974
31-Oct-97 145.4545 236.1446 195.6522 440.2597
07-Nov-97 139.8600 233.7349 190.7609 379.2208
14-Nov-97 111.5385 236.1446 187.0924 363.6364
21-Nov-97 105.9441 240.9639 188.3152 367.5325
28-Nov-97 104.1958 238.5542 193.2065 358.4416
05-Dec-97 105.5944 237.3494 207.8804 371.4286
12-Dec-97 120.6294 212.0482 204.2119 359.7403
19-Dec-97 121.3287 192.7711 217.6631 322.7273
26-Dec-97 125.1748 202.4097 238.4511 292.2078
02-Jan-98 126.5734 202.4097 220.1087 312.3376
09-Jan-98 122.7273 197.5904 206.0462 295.4546
16-Jan-98 125.5245 207.2289 210.3261 321.4286
23-Jan-98 127.9720 214.4578 190.7609 322.0779
30-Jan-98 134.6154 214.4578 180.9783 344.1558
2/6/98 133.9161 209.0361 176.0869 361.0390
13-Feb-98 136.7133 202.4097 178.5326 355.8442
20-Feb-98 137.4126 197.5904 185.8696 345.4546
27-Feb-98 134.6154 212.0482 185.8696 348.7013
06-Mar-98 132.1678 216.8675 174.8641 346.7532
13-Mar-98 136.0140 219.2771 167.5272 383.7662
20-Mar-98 136.3636 216.8675 163.8587 370.1300
27-Mar-98 137.0629 216.8675 163.8587 390.9091
03-Apr-98 141.2587 215.6626 171.1956 421.4286
09-Apr-98 146.5035 224.0964 157.7446 393.5065
17-Apr-98 147.5524 208.4337 179.7554 390.2597
24-Apr-98 148.6014 246.9880 190.7609 392.8571
01-May-98 134.2657 248.1928 185.8696 383.7662
08-May-98 146.8531 246.9880 204.2119 381.1689
15-May-98 142.3077 246.9880 190.7609 372.0779
22-May-98 140.5594 246.9880 167.5272 378.5714
29-May-98 143.3566 249.3976 168.7500 403.2467
05-Jun-98 147.2028 248.1928 165.0815 403.2467
6/12/98 144.7552 247.5903 134.5109 374.0260
19-Jun-98 141.2587 242.1687 135.7337 389.6104
26-Jun-98 135.6643 240.9639 132.0652 401.2987
02-Jul-98 144.0559 240.9639 153.4647 405.8442
10-Jul-98 146.8531 246.9880 154.0761 390.2597
17-Jul-98 148.9510 246.3855 134.5109 379.8700
24-Jul-98 147.9021 248.7952 134.5109 363.6364
31-Jul-98 139.8600 246.9880 119.8370 342.8571
07-Aug-98 141.9581 245.7831 100.2717 310.3896
14-Aug-98 137.7622 243.3735 97.8261 304.5454
21-Aug-98 134.2657 238.5542 92.9348 271.4286
28-Aug-98 116.0839 257.8313 78.2609 231.1688
04-Sep-98 106.6434 257.8313 78.2609 206.4935
11-Sep-98 106.2937 257.8313 73.3696 214.9351
18-Sep-98 127.6224 75.8152 216.8831
25-Sep-98 129.3706 74.5924 225.9740
02-Oct-98 127.2727 66.0326 210.3896
09-Oct-98 114.6853 61.1413 195.4545
10/16/98 129.0210 61.7527 208.4416
23-Oct-98 132.1678 73.3696 218.1818
30-Oct-98 128.3217 73.3696 215.5844
06-Nov-98 122.7273 111.2772 207.1429
13-Nov-98 119.9301 95.3804 194.8052
20-Nov-98 118.8811 68.4783 194.8052
27-Nov-98 120.9790 68.4783 162.9870
04-Dec-98 120.9790 58.6957 161.0390
11-Dec-98 123.0769 59.3071 161.6883
18-Dec-98 122.7273 91.7120 151.9480
24-Dec-98 145.8042 110.0544 146.7533
31-Dec-98 148.2518 90.4891 177.9221
08-Jan-99 150.3497 78.2609 155.8441
15-Jan-99 150.6993 73.3696 166.8831
22-Jan-99 150.3497 78.2609 166.8831
29-Jan-99 147.9021 75.8152 172.7273
03-Feb-99 151.3986 77.6495 166.2338
- -----------------------------------------------------------------------------------------------------
Percent Gain 51.4% 157.8% -22.4% 66.2%
- -----------------------------------------------------------------------------------------------------
<CAPTION>
JOS AGTX AM SPII
--------------------------------------------------------------------------------
Applied Graphics American
Date Jostens, Inc. Technologies, Inc. Greetings Corp S&P 500 Index
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/1/95 100.0000 100.0000 100.0000
06-Jan-95 100.0000 99.0741 99.9872
13-Jan-95 97.3333 100.9259 101.1269
20-Jan-95 101.3333 97.2222 100.8621
27-Jan-95 98.6667 96.7593 101.3114
03-Feb-95 99.3333 103.7037 102.9917
10-Feb-95 104.0000 106.9444 103.9342
17-Feb-95 112.6667 107.8704 104.1077
24-Feb-95 107.3333 108.3333 105.2620
03-Mar-95 109.3333 109.2593 105.0538
10-Mar-95 109.3333 109.2593 106.2428
17-Mar-95 110.0000 113.6574 107.6492
24-Mar-95 112.0000 112.0370 109.0245
31-Mar-95 106.0000 110.6481 108.9825
07-Apr-95 107.3333 103.9352 109.6546
13-Apr-95 103.3333 104.6296 110.4637
21-Apr-95 105.3333 104.1667 110.4583
28-Apr-95 107.3333 100.9259 111.9176
5/5/95 107.3333 103.7037 112.9386
12-May-95 110.6667 106.0185 114.0838
19-May-95 104.0000 103.2407 112.8747
26-May-95 107.3333 104.1667 113.6966
02-Jun-95 108.0000 104.6296 115.1413
09-Jun-95 107.3333 106.5394 114.8417
16-Jun-95 111.3333 108.3333 117.4883
23-Jun-95 110.6667 107.4074 119.5266
30-Jun-95 113.3333 108.7963 118.6572
07-Jul-95 115.3333 111.1111 121.1887
14-Jul-95 114.0000 115.2778 122.3338
21-Jul-95 113.3333 111.1111 120.8197
28-Jul-95 120.6667 113.4259 122.7064
04-Aug-95 122.6667 112.0370 121.5247
11-Aug-95 120.0000 113.8889 120.7467
18-Aug-95 121.3333 112.0370 121.4151
25-Aug-95 122.0000 113.8889 121.1576
01-Sep-95 123.3333 113.4259 121.6234
9/8/95 124.6667 113.6574 123.6799
15-Sep-95 122.6667 112.5000 125.4224
22-Sep-95 122.0000 111.5741 125.4169
29-Sep-95 125.3333 112.9630 125.3895
06-Oct-95 126.6667 113.6574 124.6480
13-Oct-95 127.3333 118.5185 124.6662
20-Oct-95 128.0000 115.2778 125.7073
27-Oct-95 120.6667 117.1296 124.3429
03-Nov-95 123.3333 114.8148 126.6680
10-Nov-95 121.3333 100.0000 127.2415
17-Nov-95 127.3333 100.4630 128.9419
24-Nov-95 129.3333 100.0000 128.9310
01-Dec-95 132.0000 100.4630 130.0780
08-Dec-95 132.0000 100.4630 132.6679
15-Dec-95 131.3333 100.0000 132.2935
22-Dec-95 131.3333 99.3056 131.2195
29-Dec-95 129.3333 102.3148 131.7218
05-Jan-96 125.3333 101.8519 132.1127
1/12/96 123.3333 99.0741 128.7885
19-Jan-96 116.0000 96.2963 130.7848
26-Jan-96 116.0000 95.3704 133.2925
02-Feb-96 121.3333 99.5370 136.4267
09-Feb-96 127.3333 103.4722 140.5052
16-Feb-96 120.6667 103.2407 139.0550
23-Feb-96 122.6667 100.9259 141.7545
01-Mar-96 122.6667 102.7778 138.1984
08-Mar-96 120.6667 105.5556 136.6459
15-Mar-96 122.0000 106.0185 139.1993
22-Mar-96 120.6667 100.0000 140.3920
29-Mar-96 119.3333 102.3148 139.1390
04-Apr-96 117.3333 102.7778 141.5481
12-Apr-96 115.3333 102.7778 137.8879
19-Apr-96 117.3333 100.0000 98.1482 139.6559
26-Apr-96 121.3333 101.6204 102.3148 141.6924
03-May-96 116.6667 116.6667 99.5370 139.6157
10-May-96 118.0000 111.1111 99.5370 141.1627
5/17/96 118.0000 103.7037 101.3889 145.4184
24-May-96 119.3333 112.9630 101.8519 147.4530
31-May-96 120.6667 109.2593 100.4630 145.8037
07-Jun-96 122.0000 108.3333 98.6111 146.7608
14-Jun-96 109.3333 115.7407 98.6111 145.0896
21-Jun-96 106.0000 115.7407 96.7593 145.4019
28-Jun-96 105.3333 117.5926 101.3889 145.4512
05-Jul-96 103.3333 107.4074 94.9074 142.7864
12-Jul-96 98.6667 85.1852 94.4444 140.0084
19-Jul-96 94.6667 107.4074 89.8148 138.2714
26-Jul-96 94.6667 100.9259 91.6667 137.4897
02-Aug-96 104.0000 110.1852 90.2778 143.0166
09-Aug-96 104.6667 105.5556 92.1296 142.9745
16-Aug-96 103.3333 105.5556 96.2963 143.4074
23-Aug-96 101.3333 103.7037 92.5926 143.8293
30-Aug-96 99.3333 104.6296 95.3704 140.7079
06-Sep-96 102.0000 107.4074 94.4444 141.6358
13-Sep-96 105.3333 118.5185 99.5370 146.8631
9/20/96 107.3333 116.6667 103.7037 148.7955
27-Sep-96 108.6667 109.2593 105.3241 148.1489
04-Oct-96 114.6667 127.7778 108.7963 151.1936
11-Oct-96 116.0000 125.9259 110.6481 151.2429
18-Oct-96 115.3333 123.1481 110.1852 153.3397
25-Oct-96 116.6667 115.7407 106.4815 150.7205
01-Nov-96 114.6667 113.8889 108.3333 150.7500
08-Nov-96 114.6667 120.3704 111.3426 156.7277
15-Nov-96 110.6667 126.8519 109.7222 158.2930
22-Nov-96 114.0000 131.4815 106.4815 160.4610
29-Nov-96 113.3333 140.7407 104.6296 161.9386
06-Dec-96 110.6667 176.8519 102.7778 158.6217
13-Dec-96 109.3333 183.3333 99.0741 156.6145
20-Dec-96 118.0000 195.3704 101.3889 160.3788
27-Dec-96 115.3333 193.5185 105.0926 162.1797
03-Jan-97 115.3333 211.1111 104.1667 160.7770
10-Jan-97 112.6667 193.0556 103.7037 163.5587
17-Jan-97 112.0000 194.4444 108.3333 166.8043
1/24/97 114.0000 199.0741 109.2593 165.2225
31-Jan-97 110.0000 201.8519 104.8611 168.5796
07-Feb-97 108.6667 194.4444 109.2593 168.5997
14-Feb-97 111.3333 190.7407 111.1111 172.0918
21-Feb-97 110.6667 199.0741 112.9630 170.7932
28-Feb-97 114.6667 195.3704 114.8148 168.7439
07-Mar-97 114.6667 195.3704 113.6574 170.7804
14-Mar-97 117.3333 237.9630 116.4352 169.1896
21-Mar-97 120.0000 229.6296 116.2037 167.1841
27-Mar-97 120.6667 233.3333 118.0556 165.7340
04-Apr-97 115.3333 267.5926 109.7222 162.5285
11-Apr-97 118.0000 251.8519 110.1852 158.0647
18-Apr-97 124.6667 240.7408 114.8148 164.8664
25-Apr-97 127.3333 227.7778 114.3519 164.8792
02-May-97 128.0000 212.9630 118.5185 174.3183
09-May-97 130.0000 261.1111 116.8981 177.1600
16-May-97 130.6667 240.7408 122.6852 178.5337
23-May-97 130.0000 253.7037 125.4630 182.5629
5/30/97 131.3333 244.4444 126.8519 182.7419
06-Jun-97 134.0000 290.7408 130.0926 184.2377
13-Jun-97 139.3333 281.4815 133.3333 191.8759
20-Jun-97 140.0000 283.3333 136.5741 192.6522
27-Jun-97 141.3333 268.5185 137.0370 190.6066
03-Jul-97 142.0000 279.6296 132.8704 196.7160
11-Jul-97 145.0000 272.2222 130.3241 197.2220
18-Jul-97 132.3333 283.3333 126.0417 197.5215
25-Jul-97 135.3333 292.5926 124.3056 202.2173
01-Aug-97 136.0000 275.9259 126.8519 203.1488
08-Aug-97 131.0000 275.9259 125.4630 201.1945
15-Aug-97 124.0000 279.6296 130.5556 193.3134
22-Aug-97 127.3333 288.8889 129.6296 198.5242
29-Aug-97 128.6667 305.5556 128.7037 193.1161
05-Sep-97 133.0000 328.7037 132.8704 199.4119
12-Sep-97 138.0000 363.8889 130.5556 197.9343
19-Sep-97 141.6667 396.2963 134.7222 203.0867
26-Sep-97 141.3333 419.4445 130.3241 201.8831
10/3/97 147.0000 432.4074 134.4907 205.6930
10-Oct-97 136.3333 450.9259 141.2037 206.5460
17-Oct-97 130.6667 388.8889 139.1204 200.9260
24-Oct-97 128.0000 351.8518 139.3519 200.0621
31-Oct-97 124.3333 396.2963 128.4722 194.6174
07-Nov-97 126.0000 374.0741 132.4074 197.3535
14-Nov-97 125.3333 355.5556 134.4907 198.5626
21-Nov-97 127.3333 349.0741 136.1111 205.3076
28-Nov-97 128.0000 344.4444 136.1111 203.4703
05-Dec-97 127.3333 391.6667 138.8889 208.2281
12-Dec-97 125.6667 382.4074 135.6481 201.3187
19-Dec-97 119.0000 333.3333 134.9537 199.7406
26-Dec-97 120.3333 347.2222 137.5000 197.7370
02-Jan-98 123.6667 385.1852 142.3611 206.0456
09-Jan-98 121.6667 344.4444 142.8241 196.7818
16-Jan-98 122.3333 376.3889 151.8519 204.2739
23-Jan-98 118.6667 368.9815 155.3241 204.5241
30-Jan-98 120.3333 396.2963 160.4167 209.2600
2/6/98 132.0000 375.9259 164.1204 215.6326
13-Feb-98 128.3333 371.2963 159.2593 217.1796
20-Feb-98 124.3333 443.5185 164.8148 220.0654
27-Feb-98 125.3333 437.9630 168.9815 223.5192
06-Mar-98 127.3333 427.7778 172.4537 224.6407
13-Mar-98 127.6667 405.5555 175.2315 226.8452
20-Mar-98 129.0000 388.8889 178.2407 232.4323
27-Mar-98 126.0000 374.0741 173.6111 232.6770
03-Apr-98 127.3333 396.2963 177.0833 238.5947
09-Apr-98 127.0000 383.3333 178.4722 234.4980
17-Apr-98 123.6667 374.0741 176.3889 237.0806
24-Apr-98 126.3333 370.3704 175.2315 235.4277
01-May-98 128.3333 359.2592 173.6111 238.2696
08-May-98 127.0000 351.3889 171.2963 236.6532
15-May-98 139.3333 363.8889 178.2407 236.4633
22-May-98 137.3333 362.9630 179.6296 236.4925
29-May-98 134.6667 357.4074 175.9259 232.4250
05-Jun-98 135.6667 343.5185 181.2500 237.3546
6/12/98 130.0000 315.5092 178.7037 233.6706
19-Jun-98 133.3333 356.4815 178.4722 234.6076
26-Jun-98 130.3333 329.6296 185.1852 241.8239
02-Jul-98 132.0000 332.4074 188.6574 243.5645
10-Jul-98 136.3333 396.2963 194.2130 246.4320
17-Jul-98 135.6667 407.8704 192.1296 252.1543
24-Jul-98 120.0000 372.4537 171.7593 243.4348
31-Jul-98 120.3333 382.4074 171.0648 238.7883
07-Aug-98 121.6667 274.0741 168.9815 233.3930
14-Aug-98 120.6667 259.2592 157.4074 228.7812
21-Aug-98 117.0000 221.2963 151.6204 233.8971
28-Aug-98 109.0000 169.4444 139.3519 223.2690
04-Sep-98 104.3333 160.6481 132.1759 212.9148
11-Sep-98 110.0000 170.3704 145.3704 220.4015
18-Sep-98 111.0000 137.9630 147.9167 221.5558
25-Sep-98 112.3333 94.9074 148.1481 227.6800
02-Oct-98 110.3333 88.8889 150.6944 218.2554
09-Oct-98 104.6667 77.7778 151.6204 215.1267
10/16/98 109.0000 58.3333 161.5741 229.4132
23-Oct-98 111.0000 62.0370 149.7685 233.1100
30-Oct-98 120.3333 88.4259 148.6111 239.2100
06-Nov-98 124.6667 114.8148 155.3241 248.2585
13-Nov-98 121.0000 102.7778 154.3981 245.8658
20-Nov-98 123.3333 99.0741 154.8611 253.6227
27-Nov-98 124.6667 100.0000 158.3333 259.5989
04-Dec-98 131.0000 98.1482 155.7870 256.4209
11-Dec-98 131.6667 100.9259 150.9259 256.4300
18-Dec-98 129.0000 93.5185 149.7685 259.5276
24-Dec-98 136.6667 105.5556 151.3889 268.7640
31-Dec-98 139.6667 122.2222 152.0833 270.1613
08-Jan-99 137.3333 121.2963 162.7315 278.9648
15-Jan-99 132.3333 112.9630 157.4074 273.4032
22-Jan-99 131.0000 108.3333 144.9074 270.1357
29-Jan-99 122.6667 106.4815 146.2963 283.4012
03-Feb-99 118.3333 108.3333 142.1296 280.2524
- ----------------------------------------------------------------------------------------------------
Percent Gain 18.3% 8.3% 42.1% 180.3%
- ----------------------------------------------------------------------------------------------------
</TABLE>
Source: FactSet (weekly)
Page 12
<PAGE>
APPENDIX C
<PAGE>
CONFIDENTIAL
Analysis of Equity Research Coverage
CPI Corp. does not enjoy meaningful research coverage by Wall Street analysts.
[The following table was depicted as a bar graph in the printed materials.]
Number of Current Consensus
Company Name Year EPS Estimates (a) Recommendations (b)
- ------------ ---------------------- -------------------
Cole National 5 2.8
Applied Graphics 4 1.8
American Greetings 4 2.0
Seattle FilmWorks 3 2.0
Jostens 2 2.0
CPI Corp 1 2.0
- ----------
(a) Source: First Call
Only includes analysts who have published FY1999 estimates.
(b) Source: Dow Jones as of 2/2/99
Average analysts' recommendations on the following scale:
1.0 - 2.4 = Buy
2.5 - 3.4 = Hold
3.5 - 5.0 = Sell
Page 13
<PAGE>
CONFIDENTIAL
Analysis of Equity Research Coverage
Estimated vs. Actual EPS ($)
12/96 - 12/98
The Company's stock price has not appeared to reflect research earnings
estimates and the Company's earnings announcements.
[GRAPHIC OMITTED]
Estimated/Actual EPS
----------------------------------------------------------- Closing
Fiscal 1996 Fiscal 1997 Fiscal 1998 Fiscal 1999 Price
12/96 0.81 1.32 16.750
01/97 0.81 1.32 18.500
02/97 0.77* 1.25 18.375
03/97 1.25 16.875
04/97 1.25 16.125
05/97 1.22 1.40 18.750
06/97 1.17 1.63 21.000
07/97 1.14 1.63 20.375
08/97 1.25 1.67 23.750
09/97 1.25 1.67 25.500
10/97 1.31 1.77 26.000
11/97 1.20 1.68 18.625
12/97 1.13 1.60 22.625
01/98 1.13 1.61 24.063
02/98 1.09* 1.57 24.063
03/98 1.57 25.313
04/98 1.59 25.938
05/98 1.59 25.625
06/98 1.86 23.813
07/98 1.96 2.15 25.000
08/98 1.86 1.99 20.125
09/98 1.86 1.99 23.688
10/98 1.86 1.99 22.938
11/98 1.86 1.99 21.375
12/98 1.95 2.04 26.500
01/99 1.95 2.04 27.125
* Actual EPS boxed above at end of time-series of estimates for Fiscal 1996 and
Fiscal 1997.
Page 14
<PAGE>
APPENDIX D
<PAGE>
CONFIDENTIAL
Average Daily Volume
1/97 - 1/99
The Company has not enjoyed a significant trading volume in its stock.
[GRAPHIC OMITTED]
Trading Analysis: Average Daily Volume
Average Daily
Volume
12/96 28,642.86
01/97 22,345.46
02/97 19,010.53
03/97 23,025.00
04/97 28,122.73
05/97 22,733.33
06/97 20,752.38
07/97 30,600.00
08/97 41,300.00
09/97 19,200.00
10/97 61,391.31
11/97 58,105.26
12/97 80,345.45
01/98 22,175.00
02/98 14,778.95
03/98 15,940.91
04/98 44,380.95
05/98 13,250.00
06/98 15,300.00
07/98 15,790.91
08/98 18,000.00
09/98 17,619.05
10/98 14,859.09
11/98 10,530.00
12/98 24,204.54
01/99 17,368.75
Page 15
<PAGE>
APPENDIX E
<PAGE>
CONFIDENTIAL
Shareholder Profile
================================================================================
Institutions (a) Shrs. Held % of Total
- ---------------- ---------- ----------
First Union Corporation 487,850 4.96%
Timucuan Asset Management 438,225 4.46%
Barclays Bank PLC 266,931 2.72%
California Public Employee Retirement 230,600 2.35%
Rosenberg Institutional Equity Mgmt. 190,700 1.94%
UMB Bank 185,100 1.88%
Manley Fuller Asset Management 153,975 1.57%
Wachovia Corporation 150,900 1.54%
Westpeak Investment Advisors 143,300 1.46%
LSV Asset Management 135,240 1.38%
All Other 1,568,708 15.96%
--------- -----
All Institutions 3,951,529 40.20%
5% Beneficial Owners (b) Shrs. Held % of Total
- ------------------------ ---------- ----------
New South Capital Management 1,205,469 12.26%
First Pacific Advisors 1,095,650 11.15%
Ryback Management Corp. 800,000 8.14%
Dimensial Fund Advisors 494,400 5.03%
--------- -----
Total 5% Beneficial Holdings 3,595,519 36.58%
Directors and Officers (c) Title Shrs. Held % of Total
- -------------------------- ----- ---------- ----------
Alyn V. Essman CEO, Chairman 625,115 6.36%
Russell Isaak President 300,943 3.06%
Patrick J. Morris Sr. Exec. VP 153,049 1.56%
Barry C. Arthur CFO 54,904 0.56%
Milford Bohm Director 30,000 0.31%
Fran Scheper Exective VP - HR 9,251 0.09%
Nicholas Reding Director 1,200 0.01%
Mary Ann Krey Director 1,000 0.01%
Robert Virgil Director 600 0.01%
Martin Sneider Director 500 0.01%
Lee Liberman Director 400 0.00%
--------- -----
Total Directors & Officers Holdings 1,176,962 11.97%
- --------------------------------------------------------------------------------
Summary
- -------
Insider Holdings
Directors and Officers as a Group 1,176,962 12.0%
5% Beneficial Owners 3,595,519 36.6%
--------- -----
4,772,481 48.6%
Public Holdings
Institutional 3,951,529 40.2%
Retail and Other 1,105,719 11.2%
--------- -----
5,057,248 51.4%
Total Shares Outstanding (d) 9,829,729 100.0%
================================================================================
(a) Source: CDA Spectrum; excludes 5% beneficial owners.
(b) Source: CDA Spectrum.
(c) Source: Proxy Statement dated May 8, 1998.
(d) Source: Form 10-Q dated November 14, 1998.
Page 16
<PAGE>
CONFIDENTIAL
Shareholder Profile
Composition of Ownership 12/31/96 vs. 9/30/98
================================================================================
TOP 20 OWNERS
Owner Name 9/30/98
- ---------- -------
NEWSOUTH CAPITAL MGMT. 1,205,469
FIRST PACIFIC ADVISORS 1,095,650
RYBACK MANAGEMENT CORP 800,000
First Union Corporation 487,850
Timucuan Asset Mgmt Inc 438,225
BARCLAYS BANK PLC 266,931
CALIF PUBLIC EMP RET SYS 230,600
Rosenberg Inst. Eq. Mgmt 190,700
UMB BANK N A 185,100
Manley Fuller Asset Mgmt 153,975
Westpeak Invt Advisors 143,300
Lsv Asset Management 135,240
COLLEGE RETIRE EQUITIES 120,215
BANKERS TRUST N Y CORP 116,798
Travelers Inc 116,495
Vanguard Group Inc 110,700
Mellon Bank Corporation 85,815
Prudential Ins Co/amer 81,700
American Express Finl 75,164
Calif State Teachers Ret 65,298
TOP 20 OWNERS
Owner Name 12/31/96
- ---------- --------
NEWSOUTH CAPITAL MGMT. 1,312,187
FIRST PACIFIC ADVISORS 1,242,850
RYBACK MANAGEMENT CORP 956,100
Fidelity Mgmt & Res Corp 694,100
Dimensional Fund Advs. 476,800
CALIF PUBLIC EMP RET SYS 455,600
BARCLAYS BANK PLC 366,964
Baupost Group Inc 284,769
BANKERS TRUST N Y CORP 244,484
Texas Teacher Retirm Sys 200,000
COLLEGE RETIRE EQUITIES 198,187
UMB BANK N A 168,050
Academy Capital Mgmt Inc 157,892
Wachovia Corporation 140,125
Brinson Partners Inc 139,000
Soros Fund Management Co 132,000
W T G & Co LP 106,507
Mercantile Banc/missouri 85,378
Peregrine Capital Mgmt 84,000
Wilshire Assoc Inc 82,000
- ----------
Source: CDA Spectrum
(a) Total represents those institutions that reported in that quarter.
(b) Source: CPI Proxy statements.
(c) Companies that appear on both lists are bolded.
Page 17
<PAGE>
APPENDIX F
<PAGE>
CONFIDENTIAL
Trading Analysis
1996-1999
<TABLE>
<CAPTION>
====================================================================================================================
1996 1997 1998
=================== =================== =================
Price Per Share Volume % Volume % Volume %
------------------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Greater Than 28.000
27.500 28.000
27.000 27.500 256,700 100.00% 163,700 100.00%
26.500 27.000 120,600 97.17% 530,500 96.57%
- --------------------------------------------------------------------------------------------------------------------
Current price range: 26.000 26.500 264,100 95.84% 548,900 85.46%
- --------------------------------------------------------------------------------------------------------------------
25.500 26.000 335,300 92.93% 352,800 73.96%
25.000 25.500 643,700 89.23% 202,000 66.57%
24.500 25.000 404,300 82.14% 407,900 62.34%
24.000 24 500 96,200 77.68% 551,800 53.80%
23.500 24.000 103,500 76.62% 299,300 42.24%
23.000 23.500 146,300 75.48% 196,200 35.97%
22.500 23.000 153,500 73.87% 295,200 31.86%
22.000 22.500 104,400 72.18% 157,000 25.67%
21.500 22.000 689,500 71.03% 272,500 22.39%
21.000 21.500 231,100 100.00% 1,009,700 63.43% 333,900 16.68%
20.500 21.000 596,100 98.07% 198,300 52.30% 131,300 9.68%
20.000 20.500 241,000 93.08% 672,500 50.11% 66,600 6.93%
19.500 20.000 98,100 91.06% 231,800 42.70% 68,800 5.54%
19.000 19.500 1,037,700 90.24% 400,100 40.14% 29,900 4.10%
18.500 19.000 1,224,200 81.55% 801,600 35.73% 165,700 3.47%
18.000 18.500 457,500 71.31% 683,900 26.90%
17.500 18.000 449,500 67.48% 638,100 19.36%
17.000 17.500 809,000 63.71% 693,300 12.33%
16.500 17.000 1,654,200 56.94% 238,900 4.69%
16.000 16.500 818,600 43.10% 126,400 2.05%
15.500 16.000 1,481,500 36.24% 59,800 0.66%
15.000 15 500 961,400 23 84%
14.500 15.000 1,524,000 15.80%
14.000 14.500 352,500 3.04%
13.500 14.000 10,700 0.09%
13.000 13.500
Less Than 13.000
----------- ---------- ----------
Total Shares for Period 11,947,100 9,072,500 4,774,000
Cumulative % of Total Traded 45.71% 34.71% 18.27%
% Traded of Current Shares Out. (a) 85.86% 77.36% 48.07%
Wtd. Average Share Price $17.07 $20.98 $24.03
<CAPTION>
===============================================================================================
1999 (a) 1996-1999 (a)
================ ==================
Price Per Share Volume % Volume %
------------------------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Greater Than 28.000
27.500 28.000
27.000 27.500 11,400 100.00% 431,800 100.00%
26.500 27.000 308,300 96.66% 959,400 98.35%
- -----------------------------------------------------------------------------------------------
Current price range: 26.000 26.500 21,200 6.22% 834,200 94.68%
- -----------------------------------------------------------------------------------------------
25.500 26.000 688,100 91.48%
25.000 25.500 845,700 88.85%
24.500 25.000 812,200 85.62%
24.000 24 500 648,000 82.51%
23.500 24.000 402,800 80.03%
23.000 23.500 342,500 78.49%
22.500 23.000 448,700 77.18%
22.000 22.500 261,400 75.46%
21.500 22.000 962,000 74.46%
21.000 21.500 1,574,700 70.78%
20.500 21.000 925,700 64.75%
20.000 20.500 980,100 61.21%
19.500 20.000 398,700 57.46%
19.000 19.500 1,467,700 55.94%
18.500 19.000 2,191,500 50.32%
18.000 18.500 1,141,400 41.93%
17.500 18.000 1,087,600 37.57%
17.000 17.500 1,502,300 33.41%
16.500 17.000 1,893,100 27.66%
16.000 16.500 945,000 20.41%
15.500 16.000 1,541,300 16.80%
15.000 15 500 961,400 10.90%
14.500 15.000 1,524,000 7.22%
14.000 14.500 352,500 1.39%
13.500 14.000 10,700 0.04%
13.000 13.500
Less Than 13.000
-------- -----------
Total Shares for Period 340,900 26,134,500
Cumulative % of Total Traded 1.30% 100.00%
% Traded of Current Shares Out. (a) 3.43% 263.17%
Wtd. Average Share Price $26.74 $19.83
</TABLE>
- ----------
(a) Thru February 2, 1999.
(b) Based on 13,914,244, 11,727,040, 9,930,827, and 9,930,827 shares
outstanding in 1996, 1997, 1998, and 1999 respectively.
Page 18
<PAGE>
CONFIDENTIAL
Trading Analysis
1/95 - 2/99
1/1/95 - 2/2/99
[GRAPHIC OMITTED]
1/1/95 - 2/2/99
Price Volume % Volume
$13.00 - $14.50 585,900 33.4% between $13.00 and $17.50
$14.50 - $16.00 5,464,500
$16.00 - $17.50 5,244,500
-------------------
$17.50 - $19.00 6,170,100 49.9% between $17.50 and $23.50
$19.00 - $20.50 4,500,500
$20.50 - $22.00 5,183,300
$22.00 - $23.50 1,052,600
-------------------
$23.50 - $25.00 1,863,000 16.7% between $23.50 and $28.00
$25.00 - $26.50 2,379,900
$26.50 - $28.00 1,420,600
Page 19
<PAGE>
APPENDIX G
<PAGE>
CONFIDENTIAL
Projections and Valuation Over Time
<TABLE>
<CAPTION>
===================================================================================================================
September 4, 1997 December 4, 1997 May 7, 1998 July 1998
-------------------- -------------------- ---------------------- ----------------------
Portrait Studios 1998 1999 2000 1998 1999 2000 1998 1999 2000 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Base Case
- ---------
Sales $306.2 $323.4 $341.1 $306.2 $323.4 $341.1
EBITDA 59.8 69.5 79.1 60.2 68.7 79.5
Capex 27.0 12.0 12.4 22.0 19.2 19.5
Optimistic Case
- ---------------
Sales $324.8 $341.1 $354.7 $314.2 $329.9 $343.1
EBITDA 76.2 85.3 90.1 70.2 79.0 83.6
Capex 29.6 24.3 15.5 29.6 24.3 15.5
Downside Case
- -------------
Sales $312.6 $315.8 $318.9 $302.4 $305.4 $308.4
EBITDA 68.0 67.9 64.1 61.9 62.0 61.6
Capex 29.6 20.3 11.5 29.6 20.3 11.5
<CAPTION>
==================================================================
December 1998 January 1999
---------------------- ----------------------
Portrait Studios 1998 1999 2000 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C>
Base Case Case IA
- --------- ----------------------
Sales $316.3 $334.0 $352.3 $316.3 $334.0 $352.3
EBITDA 60.8 66.7 77.0 58.6 66.3 76.1
Capex 16.0 18.7 33.0 16.0 18.7 33.0
Optimistic Case Case IIA
- --------------- ----------------------
Sales $316.3 $334.0 $352.3
EBITDA 58.6 67.6 81.2
Capex 16.0 16.1 13.4
Downside Case
- -------------
Sales
EBITDA
Capex
</TABLE>
<TABLE>
<CAPTION>
September 4, 1997 December 4, 1997 May 7, 1998 July 1998
-------------------- -------------------- -------------------- --------------------
1998 1999 2000 1998 1999 2000 1998 1999 2000 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Enterprise Valuation
- --------------------
DCF $380 - $460
Comps 250 - 300
Transactions 300 - 400
LBO 320 - 360
DCF
Comps
Transactions
LBO
<CAPTION>
December 1998(a) January 1999(a)
-------------------- --------------------
1998 1999 2000 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C>
Enterprise Valuation Case IA
- -------------------- ----------------------
DCF $322 - $382 $332 - $392
Comps 207 - 257 232 - 282
Transactions 307 - 407 307 - 407
LBO 332 - 357 332 - 382
Case IIA
----------------------
DCF $357 - $417
Comps 257 - 307
Transactions 332 - 432
LBO 332 - 407
</TABLE>
- ----------
(a) The valuations in December 1998 and January 1999 included $32 million in
assumed sale proceeds from the anticipated sale of the Wall Decor
business.
Page 20
<PAGE>
SUBSCRIPTION AGREEMENT, dated as of June 15, 1999 (the "Agreement"),
between SPS International Holdings, Inc. a Delaware corporation (the "Company"),
and the individual named on the signature page hereto (the "Stockholder").
WHEREAS, concurrently herewith, the Company, SPS Acquisition, Inc., a
Delaware corporation and a wholly owned subsidiary of the company
("Acquisition"), and CPI Corp., a Delaware corporation ("CPI"), are entering
into an Agreement and Plan of Merger dated as of the date hereof (the "Merger
Agreement") pursuant to which, among other things, Acquisition agrees to merger
(the "Merger") into CPI;
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, the Company and Acquisition have required the Stockholder and certain
other Management Investors referred to below to enter into this Agreement and
the Stockholders Agreement dated as of the date hereof (the "Stockholders
Agreement");
WHEREAS, as of the date hereof, Stockholder beneficially owns directly
or indirectly shares of CPI common stock, par value $0.40 per share (the "CPI
Common Stock");
WHEREAS, pursuant to a plan and arrangement between American Securities
Partners II, L.P. and American Securities Partners II(B), L.P. (collectively,
"ASP") and the Management Investors referred to below the Company is being
formed with ASP contributing cash and each Management Investor contributing
shares of CPI Common Stock (the "Rollover Shares") having a value equal to the
Merger Consideration (as defined in the Merger Agreement) multiplied by the
number of Rollover Shares (the "Rollover Shares Value") and cash (the "Cash
Consideration") in exchange for shares of common stock of the Company, par value
$.01 per share (the "Common Stock") in a transaction intended by the parties to
be governed by Section 351 of the Internal Revenue Code of 1986, as amended;
WHEREAS, the Stockholder also owns options to purchase CPI Common Stock
(the "Rollover Options") having an aggregate value equal to the excess of the
Merger Consideration over the exercise price of all such Rollover Options
multiplied by the number of Rollover Options having such exercise price being
converted into Company Options, as hereinafter defined, (the "Rollover Options
Value", and together with the Rollover Shares Value and the Cash Consideration,
the "Aggregate Consideration") which the Stockholder intends to convert into
options to purchase Common Stock (the "Company Options");
WHEREAS, the Stockholder has agreed that the Aggregate Consideration to
be contributed by him or her will be at least equal to the value set forth on
Schedule I attached hereto (the "Minimum Aggregate Consideration");
WHEREAS, Stockholder has agreed, among other things, to not sell,
transfer or otherwise dispose of the number of shares of CPI Common Stock owned
directly or indirectly by him or her listed on Schedule II hereto (the
"Shares"); and
<PAGE>
2
WHEREAS, this Agreement is one of several agreements being entered into
by the Company on or after the date hereof with certain persons who are or will
be key employees of the Company or one of its subsidiaries (collectively with
the Stockholder, the "Management Investors");
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
EXCHANGE AND PURCHASE
1.1 Delivery of Rollover Shares. On the terms and subject to the
conditions contained in this Agreement and the 351 transfer agreement in
substantially the form attached hereto as Exhibit A (the "Transfer Agreement"),
at the Closing (as defined in the Merger Agreement), the Stockholder shall
deliver stock certificates (duly endorsed to the Company) evidencing the
Rollover Shares to the Company.
1.2 Issuance and Delivery of Common Stock. On the terms and subject to
the conditions contained in this Agreement and the Transfer Agreement, in
consideration of the contribution and delivery of the Rollover Shares referred
to in Section 1.1, the Company shall, at the Closing, issue to the Stockholder
the number of shares of Common Stock (at a price per share equal to the price
per share paid by ASP and its affiliates for Common Stock) equal in value to the
Rollover Shares Value.
1.3 Conversion of Rollover Options. On the terms and subject to the
conditions contained in this Agreement, at the Closing, all of the Rollover
Options of the Stockholder shall automatically be converted into Company Options
equal in value to the Rollover Options Value and with an exercise price per
share of Common Stock determined by the Company and the Stockholder in good
faith which will (i) preserve the excess, if any, of the Merger Consideration
(as defined in the Merger Agreement) over the exercise price of the Rollover
Options and (ii) minimize the dilution to be suffered by the non-management
investors in the Company as of the Effective Time; provided, however, that in no
event shall the exercise price for a Company Option be less per share than 30%
of the price per share paid by ASP and its affiliates for Common Stock pursuant
to Section 1.4 hereof. The Company Options will be subject to same terms and
conditions as the Rollover Options except that the Company Options will be fully
vested and their duration will be ten (10) years from the Effective Time.
1.4 Purchase of Common Stock. Pursuant to the terms and subject to the
conditions set forth in this Agreement, the Stockholder hereby subscribes for
and agrees to purchase, and the Company hereby agrees to issue and sell to the
Stockholder, the number of shares of Common Stock, at a price per share equal to
the price per share paid by ASP and its affiliates for Common Stock, having a
value equal to the Cash Consideration.
1.5 Minimum Aggregate Consideration. At the Closing, the Aggregate
Consideration contributed by Stockholder shall be at least equal to the Minimum
Aggregate<PAGE>
3
Consideration. Stockholder shall provide written notice to the Company, no more
than thirty (30) days after the signing of this Agreement, indicating the
Rollover Shares Value, the Rollover Options Value and the amount of cash being
contributed by him or her.
ARTICLE II
CLOSING
2.1 Time and Place The Closing hereunder shall take place concurrently
with the Closing of the Merger prior to the effective time of the Merger (the
"Closing Date") and at such time as the Company shall direct on at least five
business days' prior notice to the Stockholder and shall occur at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017, or
at such other place as the parties may mutually agree.
2.2 Delivery At the Closing, the Stockholder (or the Stockholder's
representative) shall deliver to the Company (i) all stock certificates
evidencing the Rollover Shares, (ii) documents and/or instruments representing
the Rollover Options and (iii) the Cash Consideration by delivery of a certified
check or by wire transfer in immediately available funds (which such Cash
Consideration when added to the Rollover Shares Value and the Rollover Options
Value shall be at least equal to the Minimum Aggregate Consideration).
ARTICLE III
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
3.1 Conditions to the Obligations of the Company. (a) The obligations
of the Company under this Agreement shall be subject to the conditions that (i)
the Stockholder shall have executed and delivered the Stockholders Agreement in
substantially the form attached hereto as Exhibit A, (ii) the representations
and warranties of the Stockholder in Sections 4.2 and 4.3 of this Agreement
shall be true and correct as of the Closing Date in all material respects, (iii)
the Stockholder shall not have breached his obligations under Section 5 of this
Agreement and (iv) all conditions to the obligation of the Company and
Acquisition to consummate the Merger have been satisfied or waived.
3.2 Conditions to the Obligations of the Stockholder The obligations of
the Stockholder under this Agreement shall be subject to the conditions that (i)
the Company shall have executed and delivered the Stockholders Agreement and
(ii) the representations and warranties of the Company in Section 4.1 of this
Agreement shall be true and correct as of the Closing Date in all material
respects.
<PAGE>
4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
4.1 Representations and Warranties of the Company. The Company
represents and warrants to the Stockholder as follows:
(a) the Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate power and authority to execute and deliver this Agreement and the
Stockholders Agreement and to perform its obligations hereunder and thereunder.
The execution, delivery and performance by the Company of this Agreement and the
Stockholders Agreement has been duly authorized by all necessary corporate and
legal action by the Company, and no other corporate proceeding by the Company is
necessary for the execution, delivery and performance by the Company of this
Agreement or the Stockholders Agreement. This Agreement and the Stockholders
Agreement have been duly executed and delivered by the Company and, assuming
they are duly executed and delivered by the Stockholder, constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms.
(b) the Common Stock to be issued to the Stockholder pursuant to this
Agreement, when issued and delivered in accordance with the terms hereof, will
be duly and validly issued and, upon receipt by the Company of the Purchase
Price therefor, will be fully paid and nonassessable with no personal liability
attached to the ownership thereof and will not be subject to any preemptive
rights under the Delaware General Corporation Law; and
(c) the execution, delivery and performance by the Company of this
Agreement and the Stockholders Agreement will not (i) conflict with the
certificate of incorporation or bylaws of the Company or any of its subsidiaries
or (ii) result in any breach of any terms or conditions of, or constitute a
default under, any contract, agreement or instrument to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or (iii) conflict with or violate any law, rule,
regulation, ordinance, writ, injunction, judgment or decree applicable to the
Company or any of its subsidiaries or by which any of their assets may be bound
or affected.
4.2 Representations, Warranties and Covenants of the Stockholder. The
Stockholder represents and warrant to the Company as follows:
(a) Competency; Power; Enforceability; Noncontravention. The
Stockholder is competent to and has sufficient capacity to execute and deliver
this Agreement and the Stockholders Agreement and to perform his obligations
hereunder and thereunder. This Agreement and the Stockholders Agreement have
been duly executed and delivered by the Stockholder.
(b) Assuming the due execution and delivery of this Agreement and the
Stockholders Agreement by the Company, this Agreement and the Stockholders
Agreement
<PAGE>
5
constitute valid and binding obligations of the Stockholder, enforceable against
the Stockholder in accordance with their terms.
(c) The execution, delivery and performance of this Agreement and the
Stockholders Agreement by the Stockholder will not (i) conflict with or violate
any law, rule, regulation, ordinance, writ, injunction, judgment or decree
applicable to the Stockholder or by which any of his assets may be bound or
affected or (ii) result in any breach of any terms or conditions of, or
constitute a default under, any contract, agreement or instrument to which the
Stockholder is a party or by which the Stockholder is bound.
(d) Investment Intention; No Resales. The Stockholder hereby represents
and warrants that he is acquiring the Common Stock for investment solely for his
own account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof. The Stockholder agrees and
acknowledges that he will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any shares of Common Stock,
or solicit any offers to purchase or otherwise acquire or pledge any shares of
Common Stock, unless such offer, transfer, sale, assignment, pledge,
hypothecation or other disposition complies with the provisions hereof and of
the Stockholders Agreement.
(e) Common Stock Unregistered. The Stockholder acknowledges and
represents that he has been advised by the Company that:
(1) the offer and sale of the Common Stock have not been and will not
be registered under the Securities Act;
(2) the Common Stock must be held indefinitely and the Stockholder must
continue to bear the economic risk of the investment in the Common Stock unless
the offer and sale of such Common Stock is subsequently registered under the
Securities Act and all applicable state securities laws or an exemption from
such registration is available;
(3) there is no established market for the Common Stock and it is not
anticipated that there will be any public market for the Common Stock in the
foreseeable future;
(4) Rule 144 promulgated under the Securities Act is not presently
available with respect to the sale of any securities of the Company, and, except
as set forth in the Stockholders Agreement, the Company has made no covenant to
make such Rule available;
(5) when and if shares of Common Stock may be disposed of without
registration under the Securities Act in reliance on Rule 144, such disposition
can be made only in limited amounts in accordance with the terms and conditions
of such Rule;
(6) if the Rule 144 exemption is not available, public offer or sale of
Common Stock without registration will require compliance with some other
exemption under the Securities Act;
(7) if any shares of Common Stock are at any time disposed of in
accordance with Rule 144, the Stockholder will deliver to the Company at or
prior to the time of such disposition
<PAGE>
6
an executed Form 144 (if required by Rule 144) and such other documentation as
the Company may reasonably require in connection with such sale;
(8) a restrictive legend in the form set forth in the Stockholders
Agreement shall be placed on the certificates representing Common Stock; and
(9) a notation shall be made in the appropriate records of the Company
indicating that the Common Stock is subject to restrictions on transfer and, if
the Company should at some time in the future engage the services of a
securities transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to the Common Stock.
4.3 Additional Investment Representations. The Stockholder represents
and warrants that:
(a) Ownership of Rollover Shares and Rollover Options. The Stockholder
(or accounts or trusts controlled or beneficially owned by Stockholder) is the
owner of the Rollover Shares and the Rollover Options and has the power to
dispose of the Rollover Shares and Rollover Options. To Stockholder's knowledge,
the Rollover Shares are validly issued, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof. On the date hereof, the
Rollover Shares are owned of record and beneficially by Stockholder. Stockholder
has sole voting power and sole power of disposition with respect to all of the
Rollover Shares, with no restrictions, subject to applicable federal securities
laws, on the Stockholder's rights of disposition pertaining thereto. On the date
hereof, Stockholder has, and on the date of any Closing hereunder Stockholder
will have, good, valid and marketable title to the Rollover Shares and Rollover
Options free and clear of all claims, liens, encumbrances, security interests
and charges of any nature whatsoever (other than the encumbrance created by this
Agreement), and shall not be subject to any preemptive right of any stockholder
of CPI. The contribution of the Rollover Shares to Company hereunder will
transfer to Company good, valid and marketable title to the Rollover Shares,
free and clear of all claims, liens, encumbrances, security interests and
charges of any nature whatsoever.
(b) the Stockholder's financial situation is such that he can afford to
bear the economic risk of holding the Common Stock for an indefinite period of
time, has adequate means for providing for his current needs and personal
contingencies, and can afford to suffer a complete loss of his investment in the
Common Stock;
(c) the Stockholder's knowledge and experience in financial and
business matters are such that he is capable of evaluating the merits and risks
of the investment in the Common Stock, as contemplated by this Agreement;
(d) the Stockholder understands that the Common Stock is a speculative
investment which involves a high degree of risk of loss of his investment
therein, there are substantial restrictions on the transferability of the Common
Stock and, on the Closing Date and for an indefinite period following the
Closing, there will be no public market for the Common Stock and, accordingly,
it may not be possible for the Stockholder to liquidate his investment in case
of emergency, if at all;
<PAGE>
7
(c) the terms of the Stockholders Agreement provide that in the event
that the Stockholder ceases to be an employee of CPI, the Company, ASP (as
defined in the Stockholders Agreement) and their designated affiliates have the
right to repurchase the Common Stock at a price which may, in certain
circumstances, be less than the fair market value of such stock;
(f) the Stockholder understands and has taken cognizance of all the
risk factors related to the purchase of Common Stock and, other than as set
forth in this Agreement, no representations or warranties have been made to the
Stockholder or his representatives concerning the Common Stock or the Company,
its subsidiaries or their prospects or other matters;
(g) in making his decision to purchase the Common Stock hereby
subscribed for, the Stockholder has relied upon independent investigations made
by him or her and, to the extent believed by the Stockholder to be appropriate,
his representatives, including his own professional, financial, tax and other
advisors;
(h) the Stockholder has been given the opportunity to examine all
documents and to ask questions of, and to receive answers from, the Company and
its representatives concerning the Company and its subsidiaries and the terms
and conditions of the purchase of the Common Stock and to obtain any additional
information, in each case as the Stockholder or his representatives deems
necessary;
(i) all information which the Stockholder has provided to the Company
and its representatives concerning the Stockholder and his financial position is
complete and correct as of the date of this Agreement; and
(j) the Stockholder is an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act.
ARTICLE V
AGREEMENT RELATING TO CPI COMMON STOCK
5.1 Disposition of Shares. The Stockholder shall not, as long as the
Merger Agreement has not been terminated, sell, transfer or otherwise dispose
of, pledge or otherwise encumber, any Shares after the date hereof (except as
provided for in this Agreement), or agree to do any of the foregoing.
5.2 Stop Transfer Order. The Stockholder hereby agrees to cause CPI's
transfer agent to be notified that there is a stop transfer order with respect
to all Shares so long as the Merger Agreement has not been terminated.
<PAGE>
8
ARTICLE VI
MISCELLANEOUS
6.1 Recapitalizations, Exchanges, Etc., Affecting Common Stock. The
provisions of this Agreement shall apply, to the full extent set forth herein
with respect to Common Stock, to any and all shares of capital stock of the
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in exchange for, or in substitution for Common Stock, by reason of any stock
dividend, stock split, stock issuance, reverse stock split, combination,
recapitalization, reclassification, merger, consolidation or otherwise. Upon the
occurrence of any of such events, amounts hereunder shall be appropriately
adjusted, in good faith, by the Board of Directors of the Company.
6.2 Stockholder's Employment by the Company. Nothing contained in this
Agreement shall be deemed to obligate the Company or any subsidiary of the
Company to employ the Stockholder in any capacity whatsoever or to prohibit or
restrict the Company (or any such subsidiary) from terminating the employment,
if any, of the Stockholder at any time or for any reason whatsoever, with or
without Cause (as defined in the Stockholders Agreement), it being understood
that this Section 6.2 shall have no effect on any separate written employment
agreement between Stockholder and CPI.
6.3 Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefits of the parties hereto and their respective heirs,
legal representatives, successors and assigns. No assignment of any of the
rights or obligations of the Stockholder shall be permitted except as expressly
contemplated hereby; any purported assignment in violation of this provision
shall be null and void ab initio.
6.4 Amendment Waiver. This Agreement may be amended only by a written
instrument signed by the parties hereto. No waiver by either party hereto of any
of the provisions hereof shall be effective unless set forth in a writing
executed by the party so waiving.
6.5 Governing Law. This Agreement shall be governed by and construed in
all respects under the laws of the State of New York. Any action to enforce
which arises out of or in any way relates to any of the provisions of this
Agreement may be brought and prosecuted in such court or courts located within
the State of New York as provided by law; and the parties consent to the
jurisdiction of such court or courts located within the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by New York law.
6.6 Notices. Any notices or communications permitted or required
hereunder shall be deemed sufficiently given if hand-delivered, or sent by (x)
registered or certified mail return receipt requested, (y) telecopy or other
electronic transmission service (to the extent receipt is confirmed) or (z) by
overnight courier, in each case to the parties at their respective addresses and
telecopy numbers set forth below, or to such other address of which any party
may notify the other party in writing.
<PAGE>
9
(a) If to the Company, to it at the following address:
SPS International Holdings, Inc.
c/o American Securities Capital Partners, L.P.
122 East 42nd Street
Suite 2400
New York, NY 10168
Attention: Mark Bandeen
Telecopy: (212) 697-5524
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard Capelouto, Esq.
Telecopy: (212) 455-2502
(b) If to the Stockholder, to him or her at the address or telecopy
number as shown on the stock register of the Company.
6.7 Integration. This Agreement and the documents referred to herein or
delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
6.8 Counterparts. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
6.9 Injunctive Relief. The Stockholder, on behalf of Stockholder and
his permitted transferees, and the Company, on its own behalf and on behalf of
its successors and assigns, each acknowledges and agrees that a violation of any
of the terms of this Agreement will cause the other irreparable injury for which
adequate remedy at law is not available. Accordingly, it is agreed that the
Company or the Stockholder, as the case may be, shall be entitled to an
injunction, restraining order or other equitable relief to prevent breaches of
the provisions to this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which it or he may be
entitled at law or equity.
6.10 Rights to Negotiate. Nothing in this Agreement shall be deemed to
restrict or prohibit the Company from purchasing shares of Common Stock from the
Stockholder at any time upon such terms and conditions and at such price as may
be mutually agreed upon between the Company and the Stockholder, whether or not
at the time of such purchase circumstances exist which specifically grant the
Company the right to purchase, or the Stockholder the right to
<PAGE>
10
sell, shares of Common Stock pursuant to the terms of this Agreement or the
Stockholders Agreement.
6.11 Rights Cumulative; Waiver. The rights and remedies of the
Stockholder and the Company under this Agreement shall be cumulative and not
exclusive of any rights or remedies which either would otherwise have hereunder
or at law or in equity or by statute, and no failure or delay by either party in
exercising any right or remedy shall impair any such right or remedy or operate
as a waiver of such right or remedy, nor shall any single or partial exercise of
any power or right preclude such party's other or further exercise or the
exercise of any other power or right. The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be construed as a waiver
of any preceding or succeeding breach and no failure by either party to exercise
any right or privilege hereunder shall be deemed a waiver of such party's rights
or privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SPS International Holdings, Inc.
By: ________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STOCKHOLDER:
------------------------
Name:
