SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of report (Date of earliest event reported) April 7, 2000
CPI CORP.
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(Exact Name of the Registrant as Specified in Charter)
Delaware 001-10204 43-1256674
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(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
1706 Washington Avenue, St. Louis, Missouri 63103-1790
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(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code (314)231-1575
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
(A) On April 7, 2000, CPI Corp. issued the following press
release:
CPI ANNOUNCES FISCAL YEAR 1999 RESULTS
- Special charges contribute to loss for the year
- Announces intention to sell wall decor business
- Share repurchase program expanded
ST. LOUIS, MO, April 7, 2000 - CPI Corp. (NYSE-CPY)
today announced results from the full 1999 fiscal year,
which ended February 5, 2000, were well below fiscal 1998
results.
In making the announcement, Alyn V. Essman, chairman and
chief executive officer said, "Results indicate sales for
fiscal 1999 for the Portrait Studio segment are down 2.0%
to $319.1 million versus last year's $325.5 million.
Also, full year 1999 Portrait Studio operating earnings
are $21.2 million, down from the $44.3 million reported in
fiscal 1998. Net earnings from continuing operations are
$4.9 million before taxes, down from the $32.7 million
before taxes recorded in fiscal 1998 while earnings per
share on a diluted basis from continuing operations are
$0.32 in fiscal 1999, compared to $2.08 recorded in fiscal
1998."
"In addition," Essman said, "in our continuing effort to
concentrate closely on the core photography business, we
are in the process of selling the Wall Decor business.
In so doing, we have executed a letter of intent to sell
the Prints Plus business to a holding company formed by
top management of Prints Plus and Huron Capital Partners,
LLC, a Detroit-based private equity firm. We plan to
complete the transaction this summer. As a result of our
decision to exit this business, in fiscal 1999 we provided
$10.1 million before taxes to recognize anticipated losses
on the sale. The Wall Decor segment has been treated as a
discontinued operation in fiscal 1999."
The net loss of $3.2 million for fiscal 1999 is down from
the $21.9 million net income for fiscal 1998.
Accordingly, the loss per share, on a diluted basis, is
$0.32 in fiscal 1999, compared to net earnings per share
of $2.15 in fiscal 1998.
The company also announced its Board of Directors had
authorized the purchase of up to 500,000 additional shares
of its common stock in the open market. Since resuming
its stock repurchase program on October 19, 1999, the
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Company has purchased 1.9 million shares for $45.0
million, completing the purchase of all previously
authorized stock repurchases. As of April 5, 2000,
a total of 8,091,046 shares of the Company's common
stock were outstanding.
Essman continued saying, "A confluence of loosely
connected events uniquely affected fiscal 1999,
including: major upgrade of studio personnel;
installation and training related to the new Store
Automated System (SAS); introduction of the Smile
Savers Plan(R) customer loyalty program; negotiation,
due diligence and termination of a proposed merger;
along with Y2K and other software initiatives."
"Aside from the obvious direct effect, these activities
and interruptions diverted management's attention from
the main job of producing revenue growth to supporting
the special programs we undertook this year. As has been
recited in previous quarterly releases, the most
significant activity was a planned increase in studio
employment of approximately $10 million over fiscal 1998
that included:
- pay increases to upgrade the skills of the studio
staff and compete in a tight labor market,
- special training costs to support the installation
of SAS and the introduction of the Independent
Study Programs, which offer pay increases for
enhanced skills, and
- an early, surprisingly successful seasonal
recruiting program that saddled us with
approximately eight extra weeks of inflated
payrolls preceding the Christmas season.
"In addition," Essman said, "we introduced a major new
customer loyalty program in 1999 called "Smile Savers
Plan(R)" that allowed us to maintain our market position
and should contribute substantially to customer loyalty
in the future. However, because this is a two-year
program, a significant portion of the revenue is deferred
for recognition over the life of the program. At the end
fiscal 1999, approximately $12.0 million of gross revenues
remained to be amortized over the next 1.6 years - the
remaining weighted average life of the enrollment."
In discussing the aborted merger with American Securities
Capital Partners, L.P., Essman said, "The transaction
demanded extraordinary management attention during the
"due diligence" process and months of preparation for
closing and then resulted in transaction and on-going
litigation costs of about $3.5 million in fiscal 1999."
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"Following the breakup of the transaction, we were able to
refocus our attention on the core business, instituting a
modest restructuring that generated severance costs of
$1.0 million in fiscal 1999. We also completed our Y2K
conversions, redirected our archiving initiatives, and
completed our SAS phase one installations, which resulted
in recognition of the abandonment and write-off of old
software and computer hardware, which together resulted in
additional expenses of $2.6 million before taxes."
Essman concluded, "With these activities behind us, we can
look forward to a more favorable cost structure. Having
planned no significant software or training introductions
for year 2000, we expect that the employment increases
will abate. In fact, despite our increased pay structure,
we plan an actual reduction this year in field employment
expenses. Finally, we expect the Smile Savers Plan(R)
customer loyalty program to pay dividends in terms of
repeat visits allowing us to reduce advertising
expenditures. As this program matures, we expect no
significant increase this year in deferred revenue."
"Now with our attention fully devoted to efficient
operations instead of new program installations or other
unusual transactions, portrait studio operating earnings
should return to normal profit levels generally similar
to fiscal 1998. Corporate administrative expenses are
under control, and we no longer expect to be diverted by
the Wall Decor business. With a net of 1.8 million fewer
shares outstanding since 1998, EPS should improve
dramatically."
The statements contained in this report, which are not
historical facts, are forward-looking statements that
involve risks and uncertainties. Management wishes to
caution the reader that these forward-looking statements,
such as the Company's outlook for Portrait Studios and
Wall Decor, are only predictions or expectations; actual
events or results may differ materially as a result of
risks facing the Company. Such risks include, but are not
limited to, the Company's ongoing ability to develop and
introduce attractive new products, the overall level of
economic activity in the Company's major markets, the
effectiveness of marketing activities of major
competitors, manufacturing interruptions, dependence on
certain suppliers, fluctuations in operating results, the
attraction and retention of qualified personnel, and other
risks as may be described in the Company's filings with
the Securities and Exchange Commission, including its
Form 10-K for the year ended February 6, 1999.
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CPI Corp. is a consumer services company with $319.1
million in fiscal 1999 sales from continuing operations,
operating 1,024 Sears Portrait Studios in the United
States, Puerto Rico and Canada.
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<TABLE>
CPI CORP.
CONDENSED STATEMENTS OF EARNINGS - FOR THE TWELVE WEEKS ENDED
FEBRUARY 5, 2000 AND FEBRUARY 6, 1999
(in thousands of dollars except per share amounts)
<CAPTION>
12 Weeks Ended
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02/05/00 02/06/99
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<S> <C> <C>
Net Sales:
Portrait studios $ 97,983 $ 100,901
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Operating earnings:
Portrait studios $ 13,529 $ 24,176
General corporate expense 4,212 5,863
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Income from operations 9,317 18,313
Net interest expense 409 100
Other expense 500 -
Other income 16 1,253
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Earnings from continuing
operations before income
taxes 8,424 19,466
Income tax expense 2,949 6,813
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Net earnings from continuing
operations $ 5,475 $ 12,653
========== ==========
Earnings (losses) from
discontinued operations
net of income tax benefits 2,110 2,359
Loss on disposal net of income
tax benefits of $3,548 (6,589) -
Total losses from discontinued
operations (4,479) 2,359
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Net earnings (loss) $ 996 $ 15,012
========== ==========
Earnings (loss) per common
share - diluted:
From continuing operations $ 0.60 $ 1.25
From discontinued operations $ (0.49) $ 0.23
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Net earnings (loss)-diluted $ 0.11 $ 1.48
========== ==========
Earnings (loss) per common
share - basic:
From continuing operations $ 0.61 $ 1.29
From discontinued operations $ (0.50) $ 0.24
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Net earnings (loss)-basic $ 0.11 $ 1.53
========== ==========
Weighted average number of
common and common equivalent
shares outstanding:
Diluted 9,196 10,120
Basic 8,968 9,841
</TABLE>
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<TABLE>
CPI CORP.
CONDENSED STATEMENTS OF EARNINGS - FOR THE FIFTY-TWO WEEKS
ENDED FEBRUARY 5, 2000 AND FEBRUARY 6, 1999
(in thousands of dollars except per share amounts)
<CAPTION>
52 Weeks Ended
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02/05/00 02/06/99
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<S> <C> <C>
Net Sales:
Portrait studios $ 319,135 $ 325,547
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Operating earnings:
Portrait studios $ 21,244 $ 44,276
General corporate expense 14,509 15,918
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Income from operations 6,735 28,358
Net interest expense 1,693 943
Other expense 3,500 -
Other income 3,376 5,317
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Earnings from continuing
operations before income
taxes 4,918 32,732
Income tax expense 1,721 11,456
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Net earnings from continuing
operations $ 3,197 $ 21,276
========== ==========
Earnings (losses) from
discontinued operations
net of income tax benefits 160 668
Loss on disposal net of income
tax benefits of $3,548 (6,589) -
Total losses from discontinued
operations (6,429) 668
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Net earnings (loss) $ (3,232) $ 21,944
========== ==========
Earnings (loss) per common
share - diluted:
From continuing operations $ 0.32 $ 2.08
From discontinued operations $ (0.64) $ 0.07
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Net earnings (loss)-diluted $ (0.32) $ 2.15
========== ==========
Earnings (loss) per common
share - basic:
From continuing operations $ 0.33 $ 2.14
From discontinued operations $ (0.66) $ 0.07
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Net earnings (loss)-basic $ (0.33) $ 2.21
========== ==========
Weighted average number of
common and common equivalent
shares outstanding:
Diluted 10,010 10,217
Basic 9,670 9,935
</TABLE>
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<TABLE>
CPI CORP.
CONDENSED BALANCE SHEETS - FOR FEBRUARY 5, 2000 AND
FEBRUARY 6, 1999 (in thousands)
<CAPTION>
02/05/00 02/06/99
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 49,546 $ 76,000
Other current assets 31,918 37,671
Net property and equipment 84,923 111,148
Net assets of discontinued
operations 23,177 -
Other assets 9,699 9,874
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Total assets $ 199,263 $ 234,693
========= =========
Liabilities and stockholders' equity
Current liabilities $ 42,094 $ 36,656
Long-term obligations 59,637 59,559
Other liabilities 16,275 21,962
Stockholders' equity 81,257 116,516
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Total liabilities and
stockholders' equity $ 199,263 $ 234,693
========= =========
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CPI CORP.
(Registrant)
/s/ Barry Arthur
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Barry Arthur
Authorized Officer and
Principal Financial Officer
Dated: April 13, 2000
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