UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
CPI CORP.
---------
For the Quarter Ended April 29, 2000
--------------
Commission File Number 1-10204
-------
DELAWARE 43-1256674
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1706 Washington Avenue, St. Louis, Missouri 63103-1790
----------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(314) 231-1575
--------------
(Registrant's Telephone Number)
Indicate by check mark whether the registrant has (1)
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes [X]
No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date:
As of June 8, 2000 there were 8,016,384 shares of the
Registrant's common stock outstanding.
<PAGE>
TABLE OF CONTENTS
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PART 1. FINANCIAL INFORMATION PAGE(S)
------------------------------- -------
Item 1. Financial Statements
- Interim Condensed Consolidated Balance
Sheets - For April 29, 2000 and
February 5, 2000 3-5
- Interim Condensed Consolidated
Statement of Earnings - For the 12
Weeks Ended April 29, 2000 and
May 1, 1999 6-7
- Interim Condensed Consolidated Statement
of Changes in Stockholders' Equity -
For the 52 Weeks Ended February 5, 2000
and for the 12 Weeks Ended April 29, 2000 8-9
- Interim Condensed Consolidated Statement
of Cash Flows - For the 12 Weeks Ended
April 29, 2000 and May 1, 1999 10-11
- Notes to the Interim Condensed
Consolidated Financial Statements 12-14
Item 2. Management's Discussions and Analysis of
Results of Operations, Financial
Condition and Cash Flow 15-19
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 19
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K 20
Signature 21
Index to Exhibits 22
2
<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS - ASSETS
(UNAUDITED) (in thousands of dollars)
<CAPTION>
April 29, February 5,
2000 2000
---------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 30,676 $ 49,546
Receivables, less allowance of
$734 and $287, respectively 12,868 9,895
Inventories 11,594 11,641
Prepaid expenses and other current
assets 6,318 5,949
Refundable income taxes 989 -
Deferred tax assets 4,433 4,433
--------- -----------
Total current assets 66,878 81,464
--------- -----------
Net property and equipment 82,926 84,923
Net assets of discontinued operations 23,177 23,177
Other assets, net of amortization of
$1,291 and $1,282, respectively 8,468 9,699
--------- -----------
Total assets $181,449 $ 199,263
========= ===========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS - LIABILITIES AND
STOCKHOLDERS' EQUITY (UNAUDITED) (in thousands of dollars)
<CAPTION>
April 29, February 5,
2000 2000
--------- -----------
<S> <C> <C>
Current liabilities:
Accounts payable $ 12,832 $ 10,669
Accrued employment costs 9,308 8,638
Accrued deferred revenue 8,748 7,569
Sales taxes payable 1,697 2,615
Accrued advertising expense 3,280 1,259
Accrued expenses and other
liabilities 6,283 6,433
Income taxes - 4,911
--------- -----------
Total current liabilities 42,148 42,094
--------- -----------
Long-term debt 59,657 59,637
Other liabilities 9,237 10,469
Long-term deferred revenue 3,989 4,471
Deferred income taxes 1,337 1,335
--------- -----------
Total liabilities $ 116,368 $ 118,006
--------- -----------
</TABLE>
4
<PAGE>
<TABLE>
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS - LIABILITIES AND
STOCKHOLDERS' EQUITY (UNAUDITED) (continued) (in thousands of
dollars)
<CAPTION>
April 29, February 5,
2000 2000
--------- -----------
<S> <C> <C>
Stockholders' equity:
Preferred stock, no par value,
1,000,000 shares authorized; no
shares outstanding - -
Preferred stock, Series A, no par
value - -
Common stock, $0.40 par value,
50,000,000 shares authorized;
17,820,157 and 17,791,450 shares
outstanding at April 29, 2000 and
February 5, 2000, respectively 7,128 7,117
Additional paid-in capital 43,387 42,804
Retained earnings 234,726 233,739
Accumulated other comprehensive
income (3,272) (2,945)
---------- -----------
281,969 280,715
Treasury stock at cost, 9,761,338
and 9,030,911 shares at April 29,
2000 and February 5, 2000,
respectively (216,862) (199,426)
Unamortized deferred compensation-
restricted stock (26) (32)
---------- -----------
Total stockholders' equity 65,081 81,257
---------- -----------
Total liabilities and stockholders'
equity $ 181,449 $ 199,263
========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED) (in thousands of dollars except share and per share
amounts) Twelve weeks ended April 29, 2000 and May 1, 1999
<CAPTION>
Twelve Weeks Ended
--------------------------
April 29, May 1,
2000 1999
---------- ----------
<S> <C> <C>
Net sales $ 66,901 $ 65,074
Costs and expenses:
Cost of sales (exclusive of
depreciation expense shown below) 7,995 8,507
Selling, administrative and
general expenses 49,189 50,706
Depreciation 5,651 5,448
Amortization 31 212
---------- ----------
62,866 64,873
---------- ----------
Income from operations 4,035 201
Interest expense 1,053 1,057
Interest income 445 762
Other expense 100 -
Other income 27 1,180
---------- ----------
Earnings before income tax expense 3,354 1,086
Income tax expense 1,174 380
---------- ----------
Net earnings from continuing
operations 2,180 706
---------- ----------
Loss from discontinued operations
net of income tax benefit of
$340 - (632)
---------- ----------
Net earnings $ 2,180 $ 74
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED) (continued) (in thousands of dollars except share
and per share amounts) Twelve weeks ended April 29, 2000 and
May 1, 1999
<CAPTION>
Twelve Weeks Ended
----------------------------
April 29, May 1,
2000 1999
------------ ------------
<S> <C> <C>
Net earnings from continuing
operations - diluted $ 0.26 $ 0.07
Net loss from discontinued
operations - diluted - (0.06)
------------ ------------
Net earnings - diluted $ 0.26 $ 0.01
============ ============
Net earnings from continuing
operations - basic $ 0.26 $ 0.07
Net loss from discontinued
operations - basic - (0.06)
------------ ------------
Net earnings - basic $ 0.26 $ 0.01
============ ============
Dividends per share $ 0.14 $ 0.14
============ ============
Weighted average number of
common and common equivalent
shares outstanding- diluted 8,470,212 10,160,789
============ ============
Weighted average number of
common and common equivalent
shares outstanding- basic 8,232,583 9,899,269
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
7
<PAGE>
<TABLE>
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(in thousands of dollars except share and per share amounts)
Fifty-two weeks ended February 5, 2000
<CAPTION>
Accum Deferred
Add'l other Treasury comp'n
Common paid-in Retained comp'h stock restr'td
stock capital earnings income at cost stock Total
------ ------- --------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Feb. 6, 1999 $7,092 $41,605 $242,409 $(3,363) $(171,184) $ (43) $ 116,516
------ ------- --------- -------- ---------- -------- ----------
Issuance of common stock
(61,350 shares) 25 1,199 - - - (15) 1,209
Comprehensive income
Net loss - - (3,232) - - -
Foreign currency
translation - - - 418 - -
Comprehensive income - - - - - - (2,814)
Dividends ($0.56 per
common share) - - (5,438) - - - (5,438)
Purchase of treasury
stock, at cost - - - - (28,242) - (28,242)
Amortization of deferred
compensation-
restricted stock - - - - - 26 26
------ ------- --------- -------- ---------- -------- ----------
Balance at Feb. 5, 2000 $7,117 $42,804 $233,739 $(2,945) $(199,426) $ (32) $ 81,257
====== ======= ========= ======== ========== ======== ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
8
<PAGE>
<TABLE>
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(Continued) (in thousands of dollars except share and per share amounts)
Twelve weeks ended April 29, 2000
<CAPTION>
Accum Deferred
Add'l other Treasury comp'n
Common paid-in Retained comp'h stock restr'td
stock capital earnings income at cost stock Total
------ ------- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Feb. 5, 2000 $7,117 $42,804 $233,739 $(2,945) $(199,426) $ (32) $ 81,257
------ ------- --------- -------- ---------- -------- ----------
Issuance of common stock
(28,707 shares) 11 583 - - - - 594
Comprehensive income
Net earnings - - 2,180 - - -
Foreign currency
translation - - - (327) - -
Comprehensive income - - - - - - 1,853
Dividends ($0.14 per
common share) - - (1,193) - - - (1,193)
Purchase of treasury
stock, at cost - - - - (17,436) - (17,436)
Amortization of deferred
compensation-
restricted stock - - - - - 6 6
------ ------- --------- -------- ---------- -------- ----------
Balance at
April 29, 2000 $7,128 $43,387 $234,726 $(3,272) $(216,862) $ (26) $ 65,081
====== ======= ========= ======== ========== ======== ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
9
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED) (in thousands of dollars) Twelve weeks ended
April 29, 2000 and May 1, 2000
<CAPTION>
12 Weeks Ended
--------------------
April 29, May 1,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows provided by (used in)
operating activities $ 1,846 $ (5,906)
--------- ---------
Cash flows used in financing activities:
Issuance of common stock to employee
stock plans 594 828
Cash dividends (1,193) (1,382)
Purchase of treasury stock (17,436) -
--------- --------
Cash flows used in financing activities (18,035) (554)
--------- --------
Cash flows used in investing activities:
Additions to property and equipment (2,518) (3,518)
--------- --------
Cash flows used in investing activities (2,518) (3,518)
--------- ---------
Effect of exchange rate changes on
cash and cash equivalents (163) 167
--------- ---------
Net decrease in cash and cash equivalents (18,870) (9,811)
Cash and cash equivalents at beginning
of year 49,546 76,000
--------- ---------
Cash and cash equivalents at end of
period $ 30,676 $ 66,189
========= =========
Supplemental cash flow information:
Interest paid $ - $ -
========= =========
Income taxes paid $ 7,059 $ 6,738
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Twelve weeks ended April 29, 2000 and May 1, 1999
RECONCILIATION OF NET EARNINGS TO CASH FLOWS PROVIDED BY (USED
IN) OPERATING ACTIVITIES (UNAUDITED)
<CAPTION>
12 Weeks Ended
--------------------
April 29, May 1,
2000 1999
--------- ---------
<S> <C> <C>
Net earnings from continuing operations $ 2,180 $ 706
Adjustments for items not requiring cash:
Depreciation and amortization 5,682 5,660
Deferred income taxes 2 9
Deferred revenue 697 (74)
Amortization of noncompete agreement - (1,154)
Other (1,308) (1,275)
Decrease (increase) in current assets:
Receivables and inventories (2,926) 128
Refundable income taxes (989) (4,045)
Prepaid expenses and other current assets (368) 107
Increase (decrease) in current liabilities:
Accounts payable, accrued expenses and
other liabilities 3,787 (2,064)
Income taxes (4,911) (2,719)
-------- --------
Cash flows from continuing operations 1,846 (4,721)
Cash flows from discontinued operations - (1,185)
--------- --------
Cash flows provided by (used in)
operating activities $ 1,846 $(5,906)
========= ========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
11
<PAGE>
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments necessary for a fair presentation of the Company's
financial position as of April 29, 2000 and February 5, 2000
and the results of its operations and changes in its cash flows
for the 12 weeks ended April 29, 2000 and May 1, 1999. These
financial statements should be read in conjunction with the
financial statements and the notes included in the Company's
annual report on Form 10-K for its fiscal year ended
February 5, 2000.
2. On April 7, 2000, the Company announced it is
negotiating to sell its Wall Decor segment, a business operated
by the Company since 1993 under the name of Prints Plus, Inc.
(Prints Plus). As a result of the decision to exit this
business, in fiscal 1999, a loss of $10.1 million before taxes
was recorded to recognize anticipated losses and related
expenses in connection with the sale. The Company has
classified the Wall Decor segment as a discontinued operation
and has reclassified the prior years' financial statements to
reflect this change.
Net sales of the discontinued operations for April 29,
2000 and May 1, 1999 were $12.9 million and $12.6 million,
respectively. Operating losses of the discontinued operation
for April 29, 2000 and May 1, 1999 were $1.5 million and
$972,000, respectively.
The components of the net assets of discontinued
operations are:
<TABLE>
<CAPTION>
April 29, 2000
--------------
<S> <C>
Current assets $ 12,584
Property and equipment 15,952
Liabilities 5,359
---------
Net assets from
discontinued operations $ 23,177
=========
</TABLE>
12
<PAGE>
<TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION FROM DISCONTINUED OPERATIONS
(in thousands of dollars)
<CAPTION>
May 1, 1999
-----------
<S> <C>
Loss from discontinued operations,
net of income tax benefit of $340 $ (632)
Adjustments for items not requiring cash:
Depreciation and amortization 1,135
Decrease (increase) in current assets:
Receivables and inventories (575)
Prepaid expenses and other current assets (265)
Increase (decrease) in current liabilities:
Accounts payable, accrued expenses and
other liabilities (370)
Capital expenditures (478)
-----------
Cash flows from discontinued operations $ (1,185)
===========
</TABLE>
3. As part of the Company's disposition of its remaining
shares of Fox Photo, Inc. ("Fox") to Eastman Kodak Company in
October 1997, the Company entered into a two-year
Noncompetition and Nonsolicitation Agreement (the "Noncompete
Agreement") with Fox under which the Company agreed not to
engage in the retail photofinishing business and, subject to
certain exceptions, not to employ Fox employees without
consent. The Company received $10.0 million cash consideration
for entering into the Noncompete Agreement was amortized into
income over the two-year period of the agreement.
During the first quarter of 1999 amortization relating
to the two-year Noncompete Agreement was $1.2 million.
4. The Company currently operates a professional portrait
photography business through fixed location studios in the
United States and Canada.
13
<PAGE>
<TABLE>
SELECTED INDUSTRY SEGMENT INFORMATION (in thousands of dollars)
<CAPTION>
Twelve Weeks Ended
-----------------------------
April 29, 2000 May 1, 1999
--------------- ------------
<C> <C>
NET SALES:
Portrait Studio $ 66,901 $ 65,074
=========== ===========
INCOME FROM OPERATIONS:
Portrait Studio operating earnings $ 7,181 $ 2,951
Corporate expense (3,146) (2,750)
----------- -----------
$ 4,035 $ 201
=========== ===========
SEGMENT ASSETS:
Portrait Studio $ 98,495 $ 97,147
Wall Decor - 37,480
Corporate cash and cash equivalents 30,676 64,949
Corporate other 29,101 27,315
Net assets of discontinued
operations 23,177 -
----------- -----------
$ 181,449 $ 226,891
=========== ===========
</TABLE>
<TABLE>
GEOGRAPHIC FINANCIAL INFORMATION
--------------------------------
<CAPTION>
Twelve Weeks Ended
-----------------------------
April 29, 2000 May 1, 1999
-------------- -----------
<S> <C> <C>
NET SALES:
United States $ 62,903 $ 61,358
Canada 3,998 3,716
-------------- -----------
$ 66,901 $ 65,074
============== ===========
LONG-LIVED ASSETS:
United States $ 87,746 $ 114,666
Canada 3,648 3,716
-------------- -----------
$ 91,394 $ 118,382
============== ===========
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS - OVERVIEW
-----------------------------------------------
SAFE HARBOR STATEMENTS UNDER PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
The statements contained in this report, and in particular
in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section which are not
historical facts are forward-looking statements that involve
risks and uncertainties. Management wishes to caution the
reader that these forward-looking statements, such as the
Company's outlook for Sears, Roebuck and Company ("Sears"),
Portrait Studios, future cash requirements and capital
expenditures, 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: customer demand for the Company's products and services,
the overall level of economic activity in the Company's major
markets, competitors' actions, manufacturing interruptions,
dependence on certain suppliers, changes in the Company's
relationship with Sears and the condition and strategic
planning of Sears fluctuations in operating results, the
attractions 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 5, 2000.
FISCAL YEARS
The Company's fiscal year ends the first Saturday of
February. Accordingly, fiscal year 1999 ended February 5, 2000
and consisted of 52 weeks. The first fiscal quarters of 2000
and 1999 consisted of twelve weeks and ended April 29, 2000 and
May 1, 1999, respectively. Throughout "Management's Discussion
and Analysis of Financial Condition and Results of Operations,"
reference to 1999 will mean the fiscal year-end 1999 and
reference to first quarter 2000 and first quarter 1999 will
mean the first fiscal quarter of 2000 and 1999, respectively.
DISCONTINUED OPERATIONS
On April 7, 2000, the Company announced it is negotiating
to sell its Wall Decor segment, a business operated by the
Company since 1993 under the name Prints Plus. The Company
plans to complete this transaction sometime this summer. As a
result of the decision to exit this business, in 1999, a loss
15
<PAGE>
of $10.1 million before taxes was recorded to recognize
anticipated losses and related expenses in connection with the
sale. The Company also classified the Wall Decor segment as a
discontinued operation and has reclassified prior years'
financial statements to reflect this change.
STOCK REPURCHASE
Under various authorizations from the Company's Board of
Directors to purchase shares of its outstanding common stock
through purchases at management's discretion from time to time
at acceptable market prices, in the first quarter of 2000, the
Company purchased 730,400 shares of stock for $17.4 million at
an average stock price of $23.87. No stock was repurchased in
the first quarter of 1999. Acquired shares are held as
treasury stock and will be available for general corporate
purposes. The weighted average shares outstanding have been
adjusted to reflect the change in shares outstanding resulting
from the repurchase of the Company's common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS - RESULTS OF OPERATIONS
------------------------------------------------------------
TWELVE WEEKS ENDED APRIL 29, 2000 COMPARED TO TWELVE WEEKS
ENDED MAY 1, 1999
Net Sales
---------
Net sales for Portrait Studios increased from $65.1
million for the 12 weeks ended May 1, 1999, to $66.9 million,
or 2.8%, for the 12 weeks ended April 29, 2000. This increase
resulted from higher customer traffic, slightly offset by a
decrease in average sales per customer. The Company believes
the increase in customer traffic is a result of the success of
the Smile Savers Plan(R), a customer loyalty program designed
to increase repeat visits introduced early in 1999. However,
due to the Smile Savers Plan(R), lower average sales per
customer are incurred as sitting fees are not paid by the
customer under the program during the repeat visits.
16
<PAGE>
Income From Continuing Operations
---------------------------------
Income from continuing operations increased from $201,000
for the 12 weeks ended May 1, 1999 to $4.0 million for the 12
weeks ended April 29, 2000. This increase is due to increased
sales and decreased costs and expenses for the 12 weeks ended
April 29, 2000 compared to the 12 weeks ended May 1, 1999.
As a result of management having the opportunity to focus
on more efficient operations in the Sears Portrait Studios,
employment costs included in cost of sales and in selling,
administrative and general expenses improved slightly as a
percentage of sales for the first quarter of 2000 compared to
the first quarter of 1999. Specifically, reduced labor hours,
which resulted from fewer training hours and better management
of studio staffing, were offset by increased hourly wage rates,
which resulted from normal annual wage increases and the
implementation in 1999 of the Independent Study Program. In
addition, advertising expenditures and various administrative
support costs were down $1.8 million for the 12 weeks ended
April 29, 2000 compared to the 12 weeks ended May 1, 1999 as a
result of improvements in procedures.
Interest Expense, Interest Income, Other Expense and Other
----------------------------------------------------------
Income
------
Interest expense was relatively unchanged for the first 12
weeks of 2000 compared to the same time period in 1999.
The decrease in interest income from $762,000 for the 12
weeks ended May 1, 1999 to $445,000 for the 12 weeks ended
April 29, 2000, or 41.6%, resulted from a decrease in
investment income due to lower cash and cash equivalents
balances in first quarter 2000 compared to first quarter 1999.
The Company recognized $100,000 in other expenses for
legal and related expenses incurred during the first quarter of
2000 relating to the ongoing claims against the Company by
affiliates of American Securities Capital Partners, L.P. ("ASCP
Affiliates") and the Company's counter claim against these
entities made in connection with a terminated merger agreement
between ASCP Affiliates and the Company's management in 1999.
No similar expenses were incurred in first quarter of 1999.
The decrease in other income from $1.2 million recorded in
the first quarter of 1999 to $27,000 recorded in the first
quarter of 2000 resulted from the inclusion of $1.2 million in
first quarter 1999 of amortization relating to the two-year
Noncompete Agreement entered into in 1997 as part of the
17
<PAGE>
disposition of the Company's remaining shares of Fox Photo,
Inc. to Eastman Kodak Company.
Income Tax Expense
------------------
Income tax expense increased from $380,000 for the 12
weeks ended May 1, 1999 to $1.2 million for the 12 weeks ended
April 29, 2000, as a direct result of increased earnings.
Net Earnings
------------
Net earnings increased from $74,000 for the first quarter
1999 to $2.2 million for the first quarter 2000 due to the
various factors previously noted.
MANAGEMENT'S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION
----------------------------------------------------------
ASSETS
Total assets decreased 8.9% in first quarter 2000 from
year-end 1999, reflecting decreases in cash and cash
equivalents resulting from the seasonal cash needs of the
business and the repurchase of common stock.
LIABILITIES
Total liabilities decreased 1.4% in first quarter 2000
from year-end 1999, resulting from decreases in other
liabilities offset by seasonal increases in various other
liability areas.
STOCKHOLDERS' EQUITY
Stockholders' equity was down 19.9% for first quarter 2000
from year-end 1999 due mainly to the repurchase of $17.4
million of the Company's common stock, the distribution of $1.2
million in dividends and the recording of a $2.2 million in net
earnings for the first quarter of 2000.
MANAGEMENT'S DISCUSSION AND ANALYSIS - CASH FLOWS
-------------------------------------------------
During the first quarter of 2000, the Company generated
$1.8 million in internal funds from operations. Cash flow used
in financing activities during this timeframe amounted to $18.0
million including the purchase of $17.4 million of the
Company's common stock and the payment of $1.2 million in
dividends. Cash flows used in investing activities included
$2.5 million in capital expenditures. The net result of these
transactions was an $18.9 million decrease in cash and cash
equivalents during the first quarter of 2000.
18
<PAGE>
Through operating cash flows and existing cash and cash
equivalents, the Company believes it has sufficient liquidity
to meet cash requirements for operations, planned capital
expenditures and dividends to shareholders. In addition, the
Company is renegotiating its revolving credit agreement and
anticipates having a new agreement in place prior to the
June 16, 2000 expiration date of the existing agreement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Market risks relating to the Company's operations
result primarily from changes in interest rates and changes in
foreign exchange rates. The Company's debt obligations have
primarily fixed interest rates; therefore, the Company's
exposure to changes in interest rates is minimal. The
Company's exposure to changes in foreign exchange rates relates
to the Canadian operations, which is minimal as these
operations constitute 7.6% of the Company's total assets and
6.0% of the Company's total sales.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS:
The following exhibits are being filed as part of
this Report:
Exhibit 11.1 - Computation of Earnings per Common
Share - Diluted
Twelve Weeks Ended April 29, 2000
and May 1, 1999
Exhibit 11.2 - Computation of Earnings per Common
Share - Basic
Twelve Weeks Ended April 29, 2000
and May 1, 1999
Exhibit 27 - Financial Data Schedule
b) REPORTS ON FORM 8-K
- On March 10, 2000, CPI Corp. reported the
issuance of a press release on March 3, 2000
announcing the resignation of Mary Ann Krey from
its Board of Directors.
- On March 15, 2000, CPI Corp. reported the
issuance of a press release on March 13, 2000
announcing that it had renewed its Shareholder
Rights Plan and declaring a dividend distribution
of one Right for each outstanding share of common
stock, $.40 par value, of the Company, to
stockholders of record at the close of business
on March 23, 2000. The Company also published
the Rights Agreement between CPI Corp. and Harris
Trust and Savings Bank.
- On April 13, 2000, CPI Corp. reported the
issuance of a press release on April 7, 2000
announcing results from the full 1999 fiscal
year. In addition, CPI Corp. announced its
intention to sell its Wall Decor business and
that the share repurchase program was expanded.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CPI Corp.
(Registrant)
By: /s/ Barry Arthur
---------------------------
Barry Arthur
Authorized Officer and
Principal Financial Officer
Dated: June 9, 2000
21
<PAGE>
<TABLE>
<CAPTION>
CPI CORP.
EXHIBIT INDEX
<S> <C>
Exhibit 11.1 - Computation of Earnings per Common 23
Share - Diluted
Twelve Weeks Ended April 29, 2000 and
May 1, 1999
Exhibit 11.2 - Computation of Earnings per Common 24
Share - Basic
Twelve Weeks Ended April 29, 2000 and
May 1, 1999
Exhibit 27 - Financial Data Schedule
</TABLE>
22
