CPI CORP - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED MAY 1, 2004

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10204

CPI Corp.
(Exact name of registrant as specified in its charter)

Delaware		43-1256674
(State of Incorporation)		(I.R.S. Employer Identification No.)

1706 Washington Ave., St. Louis, Missouri		63103
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (314) 231-1575

Indicate by check mark whether the Registrant [1] has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and [2] has been subject to such filing requirements for the past 90 days.

|X| Yes |_| No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

|X| Yes |_| No

As of June 7, 2004, the Registrant had 8,139,223 common shares outstanding.

CPI CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
12 Weeks Ended May 1, 2004 and April 26, 2003

			Page

PART 1. FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Interim Condensed Consolidated Balance Sheets May 1, 2004 (Unaudited) and February 7, 2004	1

		Interim Condensed Consolidated Statements of Operations (Unaudited) 12 Weeks Ended May 1, 2004 and April 26, 2003	3

		Interim Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) 12 Weeks Ended May 1, 2004	4

		Interim Condensed Consolidated Statements of Cash Flows (Unaudited) 12 Weeks Ended May 1, 2004 and April 26, 2003	5

		Notes to Interim Condensed Consolidated Financial Statements (Unaudited)	7

	Item 2.	Management’s Discussions and Analysis of Financial Condition and Results of Operations	14

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23

	Item 4.	Disclosure Controls and Procedures	23

PART II. OTHER INFORMATION

	Item 4.	Results of Votes of Security Holders	24

	Item 6.	Exhibits and Reports on Form 8-K	24

Signatures			25

Exhibit Index			26

CPI CORP.
Interim Condensed Consolidated Balance Sheets – Assets

PART I. FINANCIAL INFORMATION

Item 1 Financial Statements

*thousands*			May 1, 2004 (Unaudited)			February 7, 2004


ASSETS
Current assets:
	Cash and cash equivalents			$	45,082		$	51,011
	Accounts receivable:
		Due from licensor stores			8,688			7,447
		Other			206			59
	Inventories				10,650			11,858
	Prepaid expenses and other current assets				6,837			7,488
	Refundable income taxes				5,525			2,166
	Deferred tax assets				13,558			11,947


	Total current assets				90,546			91,976


Property and equipment:
	Land				2,765			2,765
	Building improvements				26,521			26,520
	Leasehold improvements				6,696			6,571
	Photographic, sales and manufacturing equipment				212,025			210,745

		Total			248,007			246,601
	Less accumulated depreciation and amortization				197,364			193,866

		Property and equipment, net			50,643			52,735
Assets of business transferred under contractual arrangements:
	Preferred Security				7,000			7,000
	Accrued dividends on Preferred Security				205			60
	Loan receivable				3,263			1,915
Assets of supplemental retirement plan:
	Cash surrender value of life insurance policies (net of borrowings of $1,732 and $1,548 at May 1, 2004 and February 7, 2004, respectively)				11,759			11,396
	Other investments				87			95
Other assets, net of amortization of $1,359 at both May 1, 2004 and February 7, 2004					2,163			2,052


		TOTAL ASSETS		$	165,666		$	167,229

See accompanying notes.

CPI CORP.
Interim Condensed Consolidated Balance Sheets – Liabilities and Stockholders’ Equity

*thousands, except share and per share data*		May 1, 2004 (Unaudited)				February 7, 2004

LIABILITIES
Current liabilities:
	Current maturities of long-term debt		$	8,580			$	8,580
	Accounts payable			20,180				15,294
	Accrued employment costs			14,325				12,297
	Customer deposit liability			25,455				24,897
	Sales taxes payable			852				2,524
	Accrued advertising expenses			2,342				1,803
	Accrued expenses and other liabilities			3,415				3,024


	Total current liabilities			75,149				68,419


Long-term debt, less current maturities				25,600				25,589
Accrued pension obligations				10,364				10,364
Supplemental retirement plan obligations				7,273				3,547
Customer deposit liability				4,398				4,769
Other liabilities				753				2,715


	Total liabilities			123,537				115,403


STOCKHOLDERS’ EQUITY
Preferred stock, no par value. 1,000,000 shares authorized; no shares outstanding				—				—
Preferred stock, Series A, no par value, 200,000 shares authorized; no shares outstanding				—				—
Common stock, $.40 par value. 50,000,000 shares authorized; 18,386,795 and 18,360,238 shares issued at May 1, 2004 and February 7, 2004, respectively				7,355				7,344
Additional paid in capital				52,671				52,272
Retained earnings				220,305				230,394
Accumulated other comprehensive loss				(10,174	)			(9,599	)

				270,157				280,411
Treasury stock - at cost, 10,265,456 and 10,292,503 shares at May 1, 2004 and February 7, 2004, respectively				(228,023	)			(228,577	)
Unamortized deferred compensation- restricted stock				(5	)			(8	)


	Total stockholders’ equity			42,129				51,826


	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	165,666			$	167,229

See accompanying notes.

CPI CORP.
Interim Condensed Consolidated Statements of Operations
(Unaudited)

		12 Weeks Ended

thousands, except share and per share data		May 1, 2004		April 26, 2003


Net sales		$	56,010	$	56,255

Cost and expenses:
	Cost of sales (exclusive of depreciation and amortization shown below)		8,059		7,823
	Selling, general and administrative expenses		48,044		48,510
	Depreciation and amortization		4,037		4,023
	Other charges and impairments		9,563		—

			69,703		60,356