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 NOVEMBER 13, 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 December 27, 2004, the Registrant had 7,757,281 common shares outstanding.

CPI CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
16 Weeks and 40 Weeks Ended November 13, 2004

			Page


PART 1. FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Interim Condensed Consolidated Balance Sheets November 13, 2004 (Unaudited) and February 7, 2004	1

		Interim Condensed Consolidated Statements of Operations (Unaudited) 16 and 40 Weeks Ended November 13, 2004 and November 8, 2003	3

		Interim Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) 40 Weeks Ended November 13, 2004	4

		Interim Condensed Consolidated Statements of Cash Flows (Unaudited) 40 Weeks Ended November 13, 2004 and November 8, 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	16

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

	Item 4.	Disclosure Controls and Procedures	29

PART II. OTHER INFORMATION

	Item 6.	Exhibits and Reports on Form 8-K	30

Signatures			31

Exhibit Index			32

CPI CORP.
Interim Condensed Consolidated Balance Sheets – Assets

PART I. FINANCIAL INFORMATION

Item 1 Financial Statements

*thousands*				November 13, 2004 (Unaudited)				February 7, 2004


ASSETS
Current assets:
	Cash and cash equivalents				$	10,923			$	51,011
	Accounts receivable:
		Due from licensor stores				19,877				7,447
		Other				121				59
	Loan receivable					5,533				—
	Inventories					12,773				11,858
	Prepaid expenses and other current assets					10,451				7,488
	Refundable income taxes					11,264				2,166
	Deferred tax assets					9,047				11,947


	Total current assets					79,989				91,976


Property and equipment:
	Land					2,765				2,765
	Building improvements					26,519				26,520
	Leasehold improvements					6,930				6,571
	Photographic, sales and manufacturing equipment					183,963				210,745

		Total				220,177				246,601
	Less accumulated depreciation and amortization					176,127				193,866

		Property and equipment, net				44,050				52,735
Assets of business transferred under contractual arrangements:
	Preferred Security					7,000				7,000
	Accrued dividends on Preferred Security					544				60
	Loan receivable					—				1,915
	Impairment reserve related to preferred security interest					(7,544	)			—
Assets of supplemental retirement plan:
	Cash surrender value of life insurance policies (net of borrowings of $1,548 at February 7, 2004)					—				11,396
	Other investments					6,212				95
Other assets, net of amortization of $1,359 at both November 13, 2004 and February 7, 2004						8,477				2,052


			TOTAL ASSETS		$	138,728			$	167,229

See accompanying notes.

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

*thousands, except share and per share data*		November 13, 2004 (Unaudited)				February 7, 2004


LIABILITIES
Current liabilities:
	Current maturities of long-term debt		$	8,580			$	8,580
	Accounts payable			13,976				15,294
	Accrued employment costs			17,643				12,297
	Customer deposit liability			34,161				24,897
	Sales taxes payable			2,645				2,524
	Accrued advertising expenses			3,108				1,803
	Accrued expenses and other liabilities			7,318				3,024


	Total current liabilities			87,431				68,419


Long-term debt, less current maturities				17,042				25,589
Accrued pension obligations				10,364				10,364
Supplemental retirement plan obligations				6,189				3,547
Customer deposit liability				4,076				4,769
Other liabilities				542				2,715


	Total liabilities			125,644				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, $0.40 par value. 50,000,000 shares authorized; 18,425,385 and 18,360,238 shares issued at November 13, 2004 and February 7, 2004, respectively				7,370				7,344
Additional paid-in capital				53,204				52,272
Retained earnings				195,211				230,394
Accumulated other comprehensive loss				(8,646	)			(9,599	)

				247,139				280,411
Treasury stock - at cost, 10,672,236 and 10,292,503 shares at November 13, 2004 and February 7, 2004, respectively				(234,031	)			(228,577	)
Unamortized deferred compensation- restricted stock				(24	)			(8	)

	Total stockholders’ equity			13,084				51,826

	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	138,728			$	167,229

See accompanying notes.

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

		16 Weeks Ended				40 Weeks Ended

*thousands, except share and per share data*		November 13, 2004		November 8, 2003		November 13, 2004		November 8, 2003

Net sales		$	78,820	$	80,731	$	182,366	$	197,808

Cost and expenses:
	Cost of sales (exclusive of depreciation and amortization shown below)		10,562		9,989		24,791		25,571
	Selling, general and administrative expenses		69,310		69,722		157,675		166,711
	Depreciation and amortization		4,897		4,775		12,443		12,547
	Other charges and impairments