Delaware (State or other jurisdiction of incorporation or organization) 1706 Washington Ave., St. Louis, Missouri (Address of principal executive offices) | 43-1256674 (I.R.S. Employer Identification No.) 63103 (Zip Code) |
Registrant’s telephone number, including area code: 314/231-1575 |
Securities registered pursuant to Section 12(b) of the Act: None |
Securities registered pursuant to Section 12(g) of the Act: | |
Common Stock, par value $0.40 per share |
PART I. | FINANCIAL INFORMATION | Page | |||
Item 1. | Financial Statements: | ||||
April 28, 2012 (Unaudited) and February 4, 2012 | |||||
12 Weeks Ended April 28, 2012 and April 30, 2011 | |||||
12 Weeks Ended April 28, 2012 and April 30, 2011 | |||||
12 Weeks Ended April 28, 2012 | |||||
12 Weeks Ended April 28, 2012 and April 30, 2011 | |||||
Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||
Quantitative and Qualitative Disclosures about Market Risk | |||||
Controls and Procedures | |||||
PART II. | OTHER INFORMATION | ||||
Risk Factors | |||||
Other Information | |||||
Exhibits | |||||
in thousands | April 28, 2012 | February 4, 2012 | ||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 5,814 | $ | 8,524 | ||||
Accounts receivable: | ||||||||
Trade | 2,850 | 4,173 | ||||||
Other | 562 | 443 | ||||||
Inventories | 8,040 | 7,952 | ||||||
Prepaid expenses and other current assets | 4,613 | 3,988 | ||||||
Refundable income taxes | — | 255 | ||||||
Total current assets | 21,879 | 25,335 | ||||||
Property and equipment: | ||||||||
Land | 2,185 | 2,185 | ||||||
Buildings and building improvements | 22,698 | 22,698 | ||||||
Leasehold improvements | 4,400 | 4,022 | ||||||
Photographic, sales and manufacturing equipment | 117,319 | 116,895 | ||||||
Property not in use (see Note 4) | 3,401 | 3,401 | ||||||
Total | 150,003 | 149,201 | ||||||
Less accumulated depreciation and amortization | 132,713 | 131,400 | ||||||
Property and equipment, net | 17,290 | 17,801 | ||||||
Prepaid debt fees | 1,015 | 1,112 | ||||||
Goodwill | 9,801 | 9,772 | ||||||
Intangible assets, net | 30,073 | 30,436 | ||||||
Deferred tax assets | 1,923 | 1,362 | ||||||
Other assets | 8,389 | 8,712 | ||||||
TOTAL ASSETS | $ | 90,370 | $ | 94,530 |
in thousands, except share and per share data | April 28, 2012 | February 4, 2012 | ||||||
(Unaudited) | ||||||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt (see Note 7) | $ | 76,088 | $ | 74,000 | ||||
Accounts payable | 4,365 | 5,322 | ||||||
Accrued employment costs | 6,750 | 6,622 | ||||||
Customer deposit liability | 14,044 | 12,930 | ||||||
Income taxes payable | 121 | — | ||||||
Sales taxes payable | 3,317 | 2,788 | ||||||
Deferred income taxes | 2,055 | 1,393 | ||||||
Accrued advertising expenses | 837 | 1,318 | ||||||
Accrued expenses and other liabilities | 10,286 | 12,131 | ||||||
Total current liabilities | 117,863 | 116,504 | ||||||
Long-term debt, less current maturities (see Note 7) | — | — | ||||||
Accrued pension plan obligations | 22,030 | 23,043 | ||||||
Other liabilities | 13,792 | 13,796 | ||||||
Total liabilities | 153,685 | 153,343 | ||||||
CONTINGENCIES (see Note 11) | ||||||||
STOCKHOLDERS' DEFICIT | ||||||||
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, 16,000,000 shares authorized; 9,110,235 and 9,134,956 shares outstanding at April 28, 2012 and February 4, 2012, respectively | 3,644 | 3,654 | ||||||
Additional paid-in capital | 31,853 | 31,892 | ||||||
Retained losses | (28,453 | ) | (23,809 | ) | ||||
Accumulated other comprehensive loss | (22,262 | ) | (22,501 | ) | ||||
(15,218 | ) | (10,764 | ) | |||||
Treasury stock - at cost, 2,097,043 shares at April 28, 2012 and February 4, 2012 | (47,900 | ) | (47,900 | ) | ||||
Total CPI Corp. stockholders' deficit | (63,118 | ) | (58,664 | ) | ||||
Noncontrolling interest in subsidiary | (197 | ) | (149 | ) | ||||
Total stockholders' deficit | (63,315 | ) | (58,813 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 90,370 | $ | 94,530 |
in thousands, except share and per share data | 12 Weeks Ended | |||||||
April 28, 2012 | April 30, 2011 | |||||||
Net sales | $ | 70,319 | $ | 88,638 | ||||
Cost and expenses: | ||||||||
Cost of sales (exclusive of depreciation and amortization shown below) | 5,441 | 6,408 | ||||||
Selling, general and administrative expenses | 61,949 | 73,534 | ||||||
Depreciation and amortization | 2,219 | 4,016 | ||||||
Other charges and impairments | 4,090 | 3,177 | ||||||
73,699 | 87,135 | |||||||
(Loss) income from operations | (3,380 | ) | 1,503 | |||||
Interest expense, net | 775 | 625 | ||||||
Other (expense) income, net | (149 | ) | 89 | |||||
(Loss) income from operations before income tax expense | (4,304 | ) | 967 | |||||
Income tax expense | 388 | 305 | ||||||
Net (loss) income | (4,692 | ) | 662 | |||||
Net loss attributable to noncontrolling interest | (48 | ) | (85 | ) | ||||
NET (LOSS) INCOME ATTRIBUTABLE TO CPI CORP. | $ | (4,644 | ) | $ | 747 | |||
NET (LOSS) INCOME PER COMMON SHARE | ||||||||
Net (loss) income per common share attributable to CPI Corp. - diluted | $ | (0.66 | ) | $ | 0.11 | |||
Net (loss) income per common share attributable to CPI Corp. - basic | $ | (0.66 | ) | $ | 0.11 | |||
Weighted average number of common and common equivalent shares outstanding-diluted | 7,014,312 | 6,998,340 | ||||||
Weighted average number of common and common equivalent shares outstanding-basic | 7,014,312 | 6,992,140 |
in thousands | 12 Weeks Ended | |||||||
April 28, 2012 | April 30, 2011 | |||||||
Net (loss) income | $ | (4,692 | ) | $ | 662 | |||
Other comprehensive income: | ||||||||
Foreign currency translation adjustments | 239 | 414 | ||||||
Comprehensive (loss) income | (4,453 | ) | 1,076 | |||||
Less: Comprehensive loss attributable to noncontrolling interest | (48 | ) | (85 | ) | ||||
Comprehensive (loss) income attributable to CPI Corp. | $ | (4,405 | ) | $ | 1,161 | |||
in thousands, except share data | |||||||||||||||||||||||||||
Common stock | Additional paid-in capital | Retained losses | Accumulated other comprehensive loss | Treasury stock, at cost | Noncontrolling interest | Total | |||||||||||||||||||||
Balance at February 4, 2012 | $ | 3,654 | $ | 31,892 | $ | (23,809 | ) | $ | (22,501 | ) | $ | (47,900 | ) | $ | (149 | ) | $ | (58,813 | ) | ||||||||
Net loss | — | — | (4,644 | ) | — | — | (48 | ) | (4,692 | ) | |||||||||||||||||
Total other comprehensive income, (consisting of foreign exchange impact) | — | — | — | 239 | — | — | 239 | ||||||||||||||||||||
Surrender of employee shares for taxes (11,596 shares) | (5 | ) | (13 | ) | — | — | — | — | (18 | ) | |||||||||||||||||
Forfeiture of restricted stock awards (13,125 shares) | (5 | ) | (109 | ) | — | — | — | — | (114 | ) | |||||||||||||||||
Forfeiture of stock options | — | (70 | ) | — | — | — | — | (70 | ) | ||||||||||||||||||
Stock-based compensation recognized | — | 153 | — | — | — | — | 153 | ||||||||||||||||||||
Balance at April 28, 2012 | $ | 3,644 | $ | 31,853 | $ | (28,453 | ) | $ | (22,262 | ) | $ | (47,900 | ) | $ | (197 | ) | $ | (63,315 | ) | ||||||||
in thousands | 12 Weeks Ended | |||||||
April 28, 2012 | April 30, 2011 | |||||||
Reconciliation of net loss to cash flows (used in) provided by operating activities: | ||||||||
Net (loss) income | $ | (4,692 | ) | $ | 662 | |||
Adjustments for items not requiring (providing) cash: | ||||||||
Depreciation and amortization | 2,219 | 4,016 | ||||||
Amortization of prepaid debt fees | 97 | 155 | ||||||
Stock-based compensation expense | (31 | ) | 254 | |||||
Loss on disposition of property and equipment | 36 | — | ||||||
Deferred income tax provision | — | (406 | ) | |||||
Pension, supplemental retirement plan and profit sharing expense | 119 | 539 | ||||||
Other | — | (58 | ) | |||||
Increase (decrease) in cash flow from operating assets and liabilities: | ||||||||
Accounts receivable | 1,205 | (3,028 | ) | |||||
Inventories | (76 | ) | (594 | ) | ||||
Prepaid expenses and other current assets | (552 | ) | 135 | |||||
Accounts payable | (955 | ) | 1,550 | |||||
Contribution to pension plan | (1,114 | ) | (513 | ) | ||||
Accrued expenses and other liabilities | (1,730 | ) | (1,498 | ) | ||||
Deferred lease fees | 371 | (1,139 | ) | |||||
Income taxes payable | 467 | (1,318 | ) | |||||
Deferred revenues and related costs | 1,003 | 3,502 | ||||||
Other | — | (101 | ) | |||||
Cash flows (used in) provided by operating activities | (3,633 | ) | 2,158 |
in thousands | 12 Weeks Ended | |||||||
April 28, 2012 | April 30, 2011 | |||||||
Cash flows (used in) provided by operating activities | (3,633 | ) | 2,158 | |||||
Cash flows provided by financing activities: | ||||||||
Borrowings under revolving credit facility | 21,348 | 39,000 | ||||||
Repayments on revolving credit facility | (19,260 | ) | (35,000 | ) | ||||
Cash dividends | — | (1,751 | ) | |||||
Purchase of treasury stock | — | (1,087 | ) | |||||
Surrender of employee shares for taxes | (18 | ) | (690 | ) | ||||
Other | — | 222 | ||||||
Cash flows provided by financing activities | 2,070 | 694 | ||||||
Cash flows used in investing activities: | ||||||||
Additions to property and equipment | (1,296 | ) | (2,097 | ) | ||||
Other | — | 57 | ||||||
Cash flows used in investing activities | (1,296 | ) | (2,040 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 149 | (44 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (2,710 | ) | 768 | |||||
Cash and cash equivalents at beginning of year | 8,524 | 5,363 | ||||||
Cash and cash equivalents at end of period | $ | 5,814 | $ | 6,131 | ||||
Supplemental cash flow information: | ||||||||
Interest paid | $ | 729 | $ | 433 | ||||
Income taxes (received) paid, net | $ | (79 | ) | $ | 2,122 | |||
Supplemental non-cash financing activities: | ||||||||
Issuance of treasury stock under the Employee Profit Sharing Plan | $ | — | $ | 752 | ||||
Issuance of common stock, restricted stock and stock options to employees and directors | $ | 28 | $ | 994 |
• | The Company granted the lenders warrants to purchase an aggregate amount equal to 19.9% of the common stock of the Company, calculated on a fully-diluted basis at the time of exercise. See further discussion in Note 12. |
• | The Company is required to engage a Chief Restructuring Officer (“CRO”) acceptable to the lenders. |
• | The Company is required to provide financial statements for each 4-week period, weekly 13-week cash flow statements and weekly compliance certificates to the lenders. |
• | The Company is required to engage an Investment Bank acceptable to the lenders to solicit offers to purchase the Company, and/or the debt outstanding under the Credit Agreement, with a targeted close of December 31, 2012. The Company will also use these resources to explore means of alternative financing. The Second Amendment requires management to develop a plan for an orderly liquidation in the event the Company is unable to execute restructuring alternatives that are acceptable to the lenders. |
• | In connection with the Second Amendment, the Company executed amendments to its host agreements with Walmart and Sears. See further discussion in Note 12. |
• | The financial covenants included in the Credit Agreement were replaced with: |
◦ | Minimum Period Cumulative EBITDAR - assigned for each 4 week period for periods five through 11, which totals $5.2 million; |
◦ | Minimum Weekly Cumulative Gross Sales Revenue - gross sales related to the Sears and Walmart contracts are established on a weekly basis and total $169.8 million for the period May 27, 2012 through January 5, 2013; |
◦ | Minimum Weekly Cash - not permitted to be less than $2.3 million for any calendar week. |
• | The Company is required to sell properties in Matthews, North Carolina and St. Louis, Missouri, with net carrying amounts of $2.74 million and $2.69 million respectively at April 28, 2012, prior to September 15, 2012. The processing facility in Charlotte, North Carolina, with a net carrying amount of $2.88 million at April 28, 2012, is required to be marketed for sale. Proceeds from these sales shall be applied to pay down the revolving loans with net proceeds obtained from the sale of the Charlotte, North Carolina facility permanently reducing the borrowing commitment levels. Additionally, the Company is required to transition all of the processing activities currently in Charlotte, North Carolina to the processing facility in St. Louis, Missouri by August 30, 2012. |
in thousands | April 28, 2012 | February 4, 2012 | ||||||
Raw materials - film, paper and chemicals | $ | 1,973 | $ | 1,668 | ||||
Portraits in process | 1,890 | 1,886 | ||||||
Bella Pictures® work in process | 273 | 379 | ||||||
Finished portraits pending delivery | 136 | 80 | ||||||
Frames and accessories | 247 | 314 | ||||||
Studio supplies | 2,384 | 2,450 | ||||||
Equipment repair parts and supplies | 698 | 742 | ||||||
Other | 439 | 433 | ||||||
Total | $ | 8,040 | $ | 7,952 |
Land | $ | 996 | ||
Buildings and building improvements (1) | 2,405 | |||
Property not in use | $ | 3,401 | ||
(1) | Cumulative depreciation expense of $247,000 and $210,000 related to the buildings and building improvements is included in the total accumulated depreciation and amortization line in the Interim Consolidated Balance Sheets at April 28, 2012 and February 4, 2012, respectively. |
in thousands | April 28, 2012 | February 4, 2012 | ||||||
PCA Acquisition | $ | 9,613 | $ | 9,613 | ||||
Translation impact on foreign balances | 188 | 159 | ||||||
Balance, end of period | $ | 9,801 | $ | 9,772 | ||||
in thousands | Net Balance at Beginning of Year | Accumulated Amortization | Translation Impact of Foreign Balances | Net Balance at End of Period | ||||||||||||
Acquired host agreement | $ | 29,958 | $ | (411 | ) | $ | 82 | $ | 29,629 | |||||||
Acquired customer lists | 202 | (27 | ) | — | 175 | |||||||||||
Acquired tradename | 276 | (7 | ) | — | 269 | |||||||||||
$ | 30,436 | $ | (445 | ) | $ | 82 | $ | 30,073 |
• | The Company granted the lenders warrants to purchase an aggregate amount equal to 19.9% of the common stock of the Company, calculated on a fully-diluted basis at the time of exercise. See further discussion in Note 12. |
• | The Company is required to engage a CRO acceptable to the lenders. |
• | The Company is required to provide financial statements for each 4-week period, weekly 13-week cash flow statements and weekly compliance certificates to the lenders. |
• | The Company is required to engage an Investment Bank acceptable to the lenders to solicit offers to purchase the Company, and/or the debt outstanding under the Credit Agreement, with a targeted close of December 31, 2012. The Company will also use these resources to explore means of alternative financing. The Second Amendment requires management to develop a plan for an orderly liquidation in the event the Company is unable to execute restructuring alternatives that are acceptable to the lenders. |
• | In connection with the Second Amendment, the Company executed amendments to its host agreements with Walmart and Sears. See further discussion in Note 12. |
• | The financial covenants included in the Credit Agreement were replaced with: |
◦ | Minimum Period Cumulative EBITDAR - assigned for each 4 week period for periods five through 11, which totals $5.2 million; |
◦ | Minimum Weekly Cumulative Gross Sales Revenue - gross sales related to the Sears and Walmart contracts are established on a weekly basis and total $169.8 million for the period May 27, 2012 through January 5, 2013; |
◦ | Minimum Weekly Cash - not permitted to be less than $2.3 million for any calendar week. |
• | The Company is required to sell properties in Matthews, North Carolina and St. Louis, Missouri, with net carrying amounts of $2.74 million and $2.69 million respectively at April 28, 2012, prior to September 15, 2012. The processing facility in Charlotte, North Carolina, with a net carrying amount of $2.88 million at April 28, 2012, is required to be marketed for sale. Proceeds from these sales shall be applied to pay down the revolving loans with net proceeds obtained from the sale of the Charlotte, North Carolina facility permanently reducing the borrowing commitment levels. Additionally, the Company is required to transition all of the processing activities currently in Charlotte, North Carolina to the processing facility in St. Louis, Missouri by August 30, 2012. |
Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value (1) (in thousands) | |||||||||||
Options outstanding, beginning of year | 146,666 | $ | 13.02 | 4.53 | ||||||||||
Granted | 50,000 | 1.11 | $ | — | ||||||||||
Forfeited | (33,333 | ) | 13.58 | $ | — | |||||||||
Options outstanding, end of period | 163,333 | $ | 9.26 | 5.57 | $ | — | ||||||||
Options exercisable at end of period | 10,001 | $ | 12.21 | 1.40 | $ | — |
(1) | Intrinsic value for activities other than exercises is defined as the difference between the Company's closing stock price on the last trading day of the fiscal 2012 first quarter and the exercise price, multiplied by the number of in-the-money options. These amounts change based on the quoted market price of the Company's stock. For exercises, intrinsic value is defined as the difference between the Company's closing stock price on the exercise date and the exercise price, multiplied by the number of options exercised. |
12 Weeks Ended | ||||||||
April 28, 2012 | ||||||||
Shares | Weighted-Average Grant-Date Value | |||||||
Nonvested stock, beginning of year | 79,729 | $ | 14.88 | |||||
Forfeited | (13,125 | ) | 13.48 | |||||
Nonvested stock, end of period | 66,604 | $ | 15.15 | |||||
Stock-based compensation expense related to nonvested stock | $ | 111,000 |
12 Weeks Ended | ||||||||||||||||
in thousands | Pension Plan | Supplemental Retirement Plan | ||||||||||||||
April 28, 2012 | April 30, 2011 | April 28, 2012 | April 30, 2011 | |||||||||||||
Components of net periodic benefit costs: | ||||||||||||||||
Interest cost | $ | 721 | $ | 711 | $ | 17 | $ | 18 | ||||||||
Expected return on plan assets | (766 | ) | (738 | ) | — | — | ||||||||||
Amortization of net loss (gain) | 147 | 386 | — | (12 | ) | |||||||||||
Net periodic benefit cost | $ | 102 | $ | 359 | $ | 17 | $ | 6 |
• | consolidate or merge with or into any other person; or |
• | dispose of all or substantially all of its respective properties or assets to any other person; or |
• | allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of the Company; or |
• | consummate a stock or share purchase agreement or other business combination with any other Person whereby such other Person acquires more than 50% of the outstanding shares of voting stock of the Company; or |
• | reorganize, recapitalize or reclassify the common stock of the Company. |
April 28, 2012 | April 30, 2011 | |||||
Within Walmart stores: | ||||||
United States and Puerto Rico | 1,191 | 1,535 | ||||
Canada | 251 | 259 | ||||
Mexico | 105 | 108 | ||||
Within Sears stores: | ||||||
United States and Puerto Rico | 812 | 854 | ||||
Canada | 110 | 110 | ||||
Within Babies "R" Us stores in the United States | 44 | 150 | ||||
Locations not within above host stores | 70 | 52 | ||||
Total | 2,583 | 3,068 | ||||
PMPS | SPS | KKPS | Other | Total | ||||||||||
Studio Count as of February 4, 2012 | 1,895 | 936 | 190 | 37 | 3,058 | |||||||||
Closures | (349 | ) | (5 | ) | (125 | ) | — | (479 | ) | |||||
Openings | 1 | — | — | 3 | 4 | |||||||||
Studio Count as of April 28, 2012 | 1,547 | 931 | 65 | 40 | 2,583 |
• | The Company granted the lenders warrants to purchase an aggregate amount equal to 19.9% of the common stock of the Company, calculated on a fully-diluted basis at the time of exercise. See further discussion in Note 12 of the Notes to Interim Consolidated Financial Statements. |
• | The Company is required to engage a Chief Restructuring Officer (“CRO”) acceptable to the lenders. |
• | The Company is required to provide financial statements for each 4-week period, weekly 13-week cash flow statements and weekly compliance certificates to the lenders. |
• | The Company is required to engage an Investment Bank acceptable to the lenders to solicit offers to purchase the Company, and/or the debt outstanding under the Credit Agreement, with a targeted close of December 31, 2012. The Company will also use these resources to explore means of alternative financing. The Second Amendment requires management to develop a plan for an orderly liquidation in the event the Company is unable to execute restructuring alternatives that are acceptable to the lenders. |
• | In connection with the Second Amendment, the Company executed amendments to its host agreements with Walmart and Sears. See further discussion in Note 12 of the Notes to Interim Consolidated Financial Statements. |
• | The financial covenants included in the Credit Agreement were replaced with: |
◦ | Minimum Period Cumulative EBITDAR - assigned for each 4 week period for periods five through 11, which totals $5.2 million; |
◦ | Minimum Weekly Cumulative Gross Sales Revenue - gross sales related to the Sears and Walmart contracts are established on a weekly basis and total $169.8 million for the period May 27, 2012 through January 5, 2013; |
◦ | Minimum Weekly Cash - not permitted to be less than $2.3 million for any calendar week. |
• | The Company is required to sell properties in Matthews, North Carolina and St. Louis, Missouri, with net carrying amounts of $2.74 million and $2.69 million respectively at April 28, 2012, prior to September 15, 2012. The processing facility in Charlotte, North Carolina, with a net carrying amount of $2.88 million at April 28, 2012, is required to be marketed for sale. Proceeds from these sales shall be applied to pay down the revolving loans with net proceeds obtained from the sale of the Charlotte, North Carolina facility permanently reducing the borrowing commitment levels. Additionally, the Company is required to transition all of the processing activities currently in Charlotte, North Carolina to the processing facility in St. Louis, Missouri by August 30, 2012. |
12 Weeks Ended | ||||||||
in thousands, except share and per share data | April 28, 2012 | April 30, 2011 | ||||||
(Unaudited) | (Unaudited) | |||||||
Net sales | $ | 70,319 | $ | 88,638 | ||||
Cost and expenses: | ||||||||
Cost of sales (exclusive of depreciation and amortization shown below) | 5,441 | 6,408 | ||||||
Selling, general and administrative expenses | 61,949 | 73,534 | ||||||
Depreciation and amortization | 2,219 | 4,016 | ||||||
Other charges and impairments | 4,090 | 3,177 | ||||||
73,699 | 87,135 | |||||||
(Loss) income from operations | (3,380 | ) | 1,503 | |||||
Interest expense, net | 775 | 625 | ||||||
Other (expense) income, net | (149 | ) | 89 | |||||
(Loss) income from operations before income tax expense | (4,304 | ) | 967 | |||||
Income tax expense | 388 | 305 | ||||||
Net (loss) income | (4,692 | ) | 662 | |||||
Net loss attributable to noncontrolling interest | (48 | ) | (85 | ) | ||||
NET (LOSS) INCOME ATTRIBUTABLE TO CPI CORP. | $ | (4,644 | ) | $ | 747 | |||
NET (LOSS) INCOME PER COMMON SHARE | ||||||||
Net (loss) income per common share attributable to CPI Corp. - diluted | $ | (0.66 | ) | $ | 0.11 | |||
Weighted average number of common and common equivalent shares outstanding-diluted | 7,014,312 | 6,998,340 |
• | Net sales for the first quarter of fiscal 2012 decreased $18.3 million, or 21%, to $70.3 million from the $88.6 million reported in the fiscal 2011 first quarter. Net sales for the 2012 first quarter were negatively impacted by net studio closings ($5.4 million) and other items ($151,000), offset in part by a net revenue recognition change ($2.9 million). Excluding the above impacts, comparable same-store sales in the quarter decreased approximately 19%. |
• | Cost of sales, excluding depreciation and amortization expense, decreased to $5.4 million in the first quarter of 2012, from $6.4 million in the first quarter of 2011 primarily due to lower overall production levels, offset in part by decreases in silver recovery receipts. |
• | Selling, general and administrative (SG&A) expense declined to $61.9 million in the first quarter of 2012, from $73.5 million in the first quarter of 2011, primarily due to net reductions in studio, field and corporate employment costs, lower host commission expense due to lower sales levels, reduced advertising expenses and lower employee insurance and benefit costs. |
• | Depreciation and amortization expense was $2.2 million in the first quarter of 2012, compared with $4.0 million in the first quarter of 2011. Expense decreased in 2012 primarily as a result of significant impairment charges recognized during the fourth quarter of fiscal year 2011, which resulted in lowering or eliminating the depreciable base on many of the Company's long-lived assets. |
• | In the first quarter of 2012, the Company recognized charges of $4.1 million in other charges and impairments, compared with $3.2 million in the first quarter of 2011. The current-quarter charges primarily relate to studio closure costs, severance and costs incurred in connection with the debt renegotiation. The prior-year charges primarily related to certain litigation costs, severance and costs incurred in connection with the Bella Pictures® Acquisition. |
12 Weeks Ended | ||||||||
in thousands | April 28, 2012 | April 30, 2011 | ||||||
(Unaudited) | (Unaudited) | |||||||
Net cash (used in) provided by: | ||||||||
Operating activities | $ | (3,633 | ) | $ | 2,158 | |||
Financing activities | 2,070 | 694 | ||||||
Investing activities | (1,296 | ) | (2,040 | ) | ||||
Effect of exchange rate changes on cash | 149 | (44 | ) | |||||
Net (decrease) increase in cash | $ | (2,710 | ) | $ | 768 |
• | The Company granted the lenders warrants to purchase an aggregate amount equal to 19.9% of the common stock of the Company, calculated on a fully diluted basis at the time of exercise. See further discussion in Note 12 of the Notes to Interim Consolidated Financial Statements. |
• | The Company is required to engage a CRO acceptable to the lenders. |
• | The Company is required to provide financial statements for each 4-week period, weekly 13-week cash flow statements and weekly compliance certificates to the lenders. |
• | The Company is required to engage an Investment Bank acceptable to the lenders to solicit offers to purchase the Company, and/or the debt outstanding under the Credit Agreement, with a targeted close of December 31, 2012. The Company will also use these resources to explore means of alternative financing. The Second Amendment requires management to develop a plan for an orderly liquidation in the event the Company is unable to execute restructuring alternatives that are acceptable to the lenders. |
• | In connection with the Second Amendment, the Company executed amendments to its host agreements with Walmart and Sears. See further discussion in Note 12 of the Notes to Interim Consolidated Financial Statements. |
• | The financial covenants included in the Credit Agreement were replaced with: |
◦ | Minimum Period Cumulative EBITDAR - assigned for each 4 week period for periods five through 11, which totals $5.2 million; |
◦ | Minimum Weekly Cumulative Gross Sales Revenue - gross sales related to the Sears and Walmart contracts are established on a weekly basis and total $169.8 million for the period May 27, 2012 through January 5, 2013; |
◦ | Minimum Weekly Cash - not permitted to be less than $2.3 million for any calendar week. |
• | The Company is required to sell properties in Matthews, North Carolina and St. Louis, Missouri, with net carrying amounts |
a) | Evaluation of Disclosure Controls and Procedures |
b) | Changes in Internal Control over Financial Reporting |
• | The Company granted the lenders warrants to purchase an aggregate amount equal to 19.9% of the common stock of the Company, calculated on a fully diluted basis at the time of exercise. See further discussion in Note 12 of the Notes to Interim Consolidated Financial Statements. |
• | The Company is required to engage a Chief Restructuring Officer (“CRO”) acceptable to the lenders. |
• | The Company is required to provide financial statements for each 4-week period, weekly 13-week cash flow statements and weekly compliance certificates to the lenders. |
• | The Company is required to engage an Investment Bank acceptable to the lenders to solicit offers to purchase the Company, and/or the debt outstanding under the Credit Agreement, with a targeted close of December 31, 2012. The Company will also use these resources to explore means of alternative financing. The Second Amendment requires management to develop a plan for an orderly liquidation in the event the Company is unable to execute restructuring alternatives that are acceptable to the lenders. |
• | In connection with the Second Amendment, the Company executed amendments to its host agreements with Walmart and Sears. See further discussion in Note 12 of the Notes to Interim Consolidated Financial Statements. |
• | The financial covenants included in the Credit Agreement were replaced with: |
◦ | Minimum Period Cumulative EBITDAR - assigned for each 4 week period for periods five through 11, which totals $5.2 million; |
◦ | Minimum Weekly Cumulative Gross Sales Revenue - gross sales related to the Sears and Walmart contracts are established on a weekly basis and total $169.8 million for the period May 27, 2012 through January 5, 2013; |
◦ | Minimum Weekly Cash - not permitted to be less than $2.3 million for any calendar week. |
• | The Company is required to sell properties in Matthews, North Carolina and St. Louis, Missouri, with net carrying amounts of $2.74 million and $2.69 million respectively at April 28, 2012, prior to September 15, 2012. The processing facility in Charlotte, North Carolina, with a net carrying amount of $2.88 million at April 28, 2012, is required to be marketed for sale. Proceeds from these sales shall be applied to pay down the revolving loans with net proceeds obtained from the sale of the Charlotte, North Carolina facility permanently reducing the borrowing commitment levels. Additionally, the Company is required to transition all of the processing activities currently in Charlotte, North Carolina to the processing facility in St. Louis, Missouri by August 30, 2012. |
• | The Company granted the lenders warrants to purchase an aggregate amount equal to 19.9% of the common stock of the Company, calculated on a fully diluted basis at the time of exercise. See further discussion under "Unregistered Sales of Equity Securities" below. |
• | The Company is required to engage a Chief Restructuring Officer (“CRO”) acceptable to the lenders. |
• | The Company is required to provide financial statements for each 4-week period, weekly 13-week cash flow statements and weekly compliance certificates to the lenders. |
• | The Company is required to engage an Investment Bank acceptable to the lenders to solicit offers to purchase the Company, and/or the debt outstanding under the Credit Agreement, with a targeted close of December 31, 2012. The Company will also use these resources to explore means of alternative financing. The Second Amendment requires management to develop a plan for an orderly liquidation in the event the Company is unable to execute restructuring alternatives that are acceptable to the lenders. |
• | In connection with the Second Amendment, the Company executed amendments to its host agreements with Walmart and Sears. See further discussion below under "Host Agreement Amendments". |
• | The financial covenants included in the Credit Agreement were replaced with: |
◦ | Minimum Period Cumulative EBITDAR - assigned for each 4 week period for periods five through 11, which totals $5.2 million; |
◦ | Minimum Weekly Cumulative Gross Sales Revenue - gross sales related to the Sears and Walmart contracts are established on a weekly basis and total $169.8 million for the period May 27, 2012 through January 5, 2013; |
◦ | Minimum Weekly Cash - not permitted to be less than $2.3 million for any calendar week. |
• | The Company is required to sell properties in Matthews, North Carolina and St. Louis, Missouri, with net carrying amounts of $2.74 million and $2.69 million respectively at April 28, 2012, prior to September 15, 2012. The processing facility in Charlotte, North Carolina, with a net carrying amount of $2.88 million at April 28, 2012, is required to be marketed for sale. Proceeds from these sales shall be applied to pay down the revolving loans with net proceeds obtained from the sale of the Charlotte, North Carolina facility permanently reducing the borrowing commitment levels. Additionally, the Company is required to transition all of the processing activities currently in Charlotte, North Carolina to the processing |
• | consolidate or merge with or into any other person; or |
• | dispose of all or substantially all of its respective properties or assets to any other person; or |
• | allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of the Company; or |
• | consummate a stock or share purchase agreement or other business combination with any other Person whereby such other Person acquires more than 50% of the outstanding shares of voting stock of the Company; or |
• | reorganize, recapitalize or reclassify the common stock of the Company. |
Lender | Percent of Common Stock Outstanding |
Fifth Third Bank | 4.7810% |
Associated Bank, N.A. | 3.7905% |
Bank of America, N.A. | 7.5810% |
Private Bank and Trust Company | 3.7905% |
EXHIBIT | ||
NUMBER | DESCRIPTION | |
10.50 | Amendment No. 2 dated June 6, 2012, to the Credit Agreement dated as of August 30, 2010, as amended, among the Company and Bank of America, N.A., as administrative agent for the lenders. | |
10.51 | 2nd Amendment dated May 18, 2012 to the License Agreement dated as of January 1, 2009, as amended, by and between Consumer Programs Incorporated, a subsidiary of the Company, and Sears, Roebuck and Co., a New York corporation and CPI Corp. (Confidential treatment requested for portions of this document.)+ | |
10.52 | Letter agreement dated June 5, 2012 between the Company and Sears, Roebuck and Co., a New York corporation transferring shares of common stock of CPI Corp. | |
10.53 | Form of Warrant executed by the Company on June 6, 2012 to purchase 19.9% of the shares of common stock of the Company, calculated on a fully-diluted basis at the time of exercise. | |
10.54 | Amendment No. 8 dated May 31, 2012, to the Master Lease Agreement, dated as of June 8, 2007, as amended, by and between the Company and Wal-Mart Stores East, LP, a Delaware limited partnership, Wal-Mart Stores, Inc., a Delaware Corporation, Wal-Mart Louisiana, LLC, a Delaware limited liability company, and Wal-Mart Stores Texas, LLC, a Texas limited partnership, and Wal-Mart Stores Arkansas, LLC, an Arkansas Limited Liability Company, incorporated herein by reference to CPI Corp's Form 8-K, Exhibit 10.1, filed June 6, 2012. (Confidential treatment requested for portions of this document.)+ | |
10.55 | Forbearance Agreement entered into on May 23, 2012, and effective as of May 24, 2012, by and among CPI Corp., certain subsidiaries of CPI Corp., Bank of America, N.A., as administrative agent for the various financial institution parties identified as lenders under the Credit Agreement dated as of August 30, 2010, as amended by that certain First Amendment to Credit Agreement dated December 16, 2011 by and among CPI Corp., Bank of America, N.A., the lenders thereto and certain subsidiaries of the Company, incorporated herein by reference to CPI Corp's Form 8-K, Exhibit 10.1, filed May 30, 2012. | |
10.56 | Joinder Agreement dated as of May 23, 2012 by Bella Pictures Holdings, LLC and by Sandy Realty Holdings, LLC for the benefit of Bank of America, N.A., as the Administrative Agent, in connection with that certain Guaranty and Collateral Agreement dated as of August 30, 2010, among the Grantors party thereto and the Administrative Agent, incorporated herein by reference to CPI Corp's Form 8-K, Exhibit 10.2, filed May 30, 2012. | |
11.1 | Computation of Per Common Share Loss - Diluted - for the 12 weeks ended April 28, 2012, and April 30, 2011. | |
11.2 | Computation of Per Common Share Loss - Basic - for the 12 weeks ended April 28, 2012, and April 30, 2011. | |
31.1 | Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 by the Chief Executive Officer. | |
31.2 | Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 by the Chief Financial Officer. | |
32.0 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer and the Chief Financial Officer. | |
101.INS^ | XBRL Instance Document |
101.SCH^ | XBRL Taxonomy Schema Document | |
101.CAL^ | XBRL Taxonomy Calculation Linkbase Document | |
101.DEF^ | XBRL Taxonomy Definition Linkbase Document | |
101.LAB^ | XBRL Taxonomy Label Linkbase Document | |
101.PRE^ | XBRL Taxonomy Presentation Linkbase Document |
^ | In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed "furnished" and "not filed". |
+ | Confidential treatment requested for portions of this document. Portions for which confidential treatment are requested are denoted by [***]. Material omitted has been filed separately with the Securities and Exchange Commission. |
A. | The Administrative Agent, the Lenders and the Company are parties to that certain Credit Agreement dated as of August 30, 2010, as amended by that certain First Amendment to Credit Agreement dated December 16, 2011 (the “First Amendment”) and the Forbearance Agreement (defined below) (as amended, the “Credit Agreement”). The Company and the Original Guarantors executed and delivered that certain Guaranty and Collateral Agreement dated as of August 30, 2010 (the “Guaranty/Collateral Agreement”), pursuant to which, among other things, the Original Guarantors guaranteed the Company's payment and performance of its obligations under the Credit Agreement and the Company and the Original Guarantors granted Administrative Agent a security interest in the Collateral (as defined therein). On December 16, 2011, the Original Guarantors executed and delivered an Unconditional Reaffirmation of Guaranty to Lenders, pursuant to which each Original Guarantor consented to the terms of the First Amendment and unconditionally reaffirmed and ratified its obligations under the Guaranty/Collateral Agreement. |
B. | As a result of certain identified defaults, the Obligors, the Administrative Agent and the Lenders entered into that certain Forbearance Agreement dated as of May 18, 2012 (the “Forbearance Agreement”). Pursuant to the terms of the Forbearance Agreement, the Administrative Agent, each Lender, and the Obligors agreed that, among other things: (i) Administrative Agent would forbear from exercising certain rights and remedies arising from the “Existing Defaults” (as defined in the Forbearance Agreement) during the term of the Forbearance Period (also defined in the Forbearance Agreement); (ii) the Additional Guarantors would execute a Joinder Agreement to the Guaranty/Collateral Agreement to assume, jointly and severally with the Original Guarantors, all of the obligations of the Company and the Original Guarantors arising under the Guaranty/Collateral Agreement; and (iii) the Credit Agreement was amended in certain respects as described in such Forbearance Agreement. |
C. | The Additional Guarantors and the Administrative Agent entered into that certain Joinder Agreement dated May 23, 2012, pursuant to which, among other things, the Additional Guarantors assumed, jointly and severally with the Original Guarantors, all of the obligations of the Company and the Original Guarantors arising under the Guaranty/Collateral Agreement. |
D | The Administrative Agent and each Lender have agreed with the Obligors to waive (on a one-time exception basis) the Existing Defaults set forth in the Forbearance Agreement (and therefore terminate the Forbearance |
1. | Definitions. Capitalized terms used and not otherwise defined herein have the meanings given them in the Credit Agreement. The terms “Credit Agreement” and “Agreement” shall mean the Credit Agreement, as amended by the First Amendment, the Forbearance Agreement, and this Second Amendment. |
2. | Waivers. On a one-time exception basis only, and in consideration for the agreements set forth in this Second Amendment, the Administrative Agent and the Lenders hereby agree to waive the Existing Defaults set forth and defined in the Forbearance Agreement. This waiver applies only to such Existing Defaults and no other Unmatured Events of Default or Events of Default. |
3. | Amendments to Credit Agreement; Effect on Forbearance Agreement. Effective as of the Second Amendment Effective Date, the Forbearance Period (as defined in the Forbearance Agreement) shall terminate. Notwithstanding the foregoing, (a) the amendments to the terms of the Credit Agreement set forth in Section 4 of the Forbearance Agreement shall remain in full force and effect (without restatement in this Second Amendment), except to the extent that the amendments contained Sections 4.1.1, 4.5, 4.7, 4.10, and 4.11 of the Forbearance Agreement are further amended herein, and (b) the post-closing obligations set forth in Section 8 of the Forbearance Agreement shall remain in full force and effect (without restatement in this Second Amendment), with the understanding and agreement that the Obligor's failure to comply with those post-closing obligations, within the time frame referenced in the Forbearance Agreement, shall constitute an Event of Default under the Credit Agreement. |
1. | Amended Definitions. The following definitions in Section 1.1 of the Credit Agreement are amended as follows: |
1. | Agreement. The definition of “Agreement” as set forth in the preamble to the Credit Agreement is amended to specifically include the First Amendment to Credit Agreement dated as of December 16, 2011 entered into between the Company and the Administrative Agent, on its own behalf and on behalf of the Lenders, the Forbearance Agreement dated as of May 18, 2012 entered into among the Company, several of the Loan Parties, the Administrative Agent and the Lenders, and the Second Amendment to Credit Agreement dated as of June 6, 2012 entered into among the Company, several of the Loan Parties, the Administrative Agent and the Lenders, as such may be further amended, modified, supplemented, and replaced and/or restated from time to time. |
2. | Applicable Margin. The definition of “Applicable Margin,” as set forth in Section 1.1 of the Credit Agreement, is amended by deleting the existing percentage listed in the column entitled “Base Rate Margin Revolving Loans” for each Level and replacing such percentage with “0.000%” for each Level. |
3. | Base Rate Definition. The definition of “Base Rate”, as set forth in Section 1.1 of the Credit Agreement, is hereby amended and restated in its entirety as follows: |
4. | Loan Documents. The definition of “Loan Documents” as set forth in Section 1.1 of the Credit Agreement is hereby amended to include the Warrant Agreement. |
5. | Loan Parties. The definition of “Loan Party” as set forth in Section 1.1 of the Credit Agreement is hereby amended to clarify that such definition, includes, without limitation, each of the Obligors defined in the Second Amendment. |
6. | Revolving Commitment. The definition of “Revolving Commitment” in Section 1.1 of the |
7. | Revolving Outstandings. The definition of “Revolving Outstandings” in Section 1.1 of the Credit Agreement is amended by the addition of the following sentence at the end thereof: |
8. | Termination Date. The definition of “Termination Date” in Section 1.1 of the Credit Agreement is deleted and replaced with the following: |
2. | Supplemental Definitions. Section 1.1 of the Credit Agreement is supplemented by the addition of the following definitions: |
1. | “Calendar Week” means a weekly period beginning on Sunday and ending on the following Saturday. |
2. | “Charlotte Property” shall have the meaning given to such term in Section 10.16 of this Agreement. |
3. | “EBITDAR” means, for any period, Forbearance EBITDA (as defined in the Forbearance Agreement) for such period plus, to the extent deducted in determining Consolidated Net Income, rental and lease expenses for such period. |
4. | “Forbearance Agreement” means that certain Forbearance Agreement dated as of May 18, 2012, among the Obligors (as defined in the Forbearance Agreement), the Administrative Agent, and the Lenders. |
5. | “Matthews Property” shall have the meaning given to such term in Section 10.16 of this Agreement. |
6. | “Minimum Weekly Cash Amount” shall have the meaning given to such term in Section 11.16 of this Agreement. |
7. | “Monthly PIK Amount” shall have the meaning given to such term in Section 4.5 of this Agreement. |
8. | “Period” shall mean each of the following fiscal periods of the Company: |
9. | “PIK Interest Rate” shall have the meaning given to such term in Section 4.5 of this Agreement.” |
10. | “PIK Obligations” means the aggregate amount of the Monthly PIK Amount plus all interest that has accrued on such amount and is outstanding at any time. |
11. | “Quarterly PIK Principal Payment Amount” shall have the meaning given to such term in |
12. | “Second Amendment” means that certain Second Amendment to Credit Agreement dated as of June 6, 2012, among the Obligors (as defined in the Second Amendment), the Lenders and the Administrative Agent. |
13. | “Second Amendment Effective Date” means the date upon which all conditions precedent to the effectiveness of the Second Amendment have been satisfied or waived in accordance with the terms of the Second Amendment. |
14. | “Second Amendment Fee” shall have the meaning given to such term in Section 5.1 of the Second Amendment. |
15. | “St. Louis Property” shall have the meaning given to such term in Section 10.16 of this Agreement. |
16. | “Warrant Agreement” shall have the meaning given to such term in Section 3.4.1 of the Second Amendment. |
17. | “Warrants” shall have the meaning given to such term in Section 3.4.1 of the Second Amendment. |
3. | Amended Provisions. The following provisions of the Credit Agreement are amended as follows: |
1. | Section 2.2.1 and Section 2.2.2 of the Credit Agreement are each amended and restated in their entireties as follows: |
“2.2.1 | Various Types of Loans. Each Revolving Loan shall be divided into tranches which are either a Base Rate Loan or a LIBOR Loan (each a “type” of Loan), as the Company shall specify in the related notice of borrowing or conversion pursuant to Section 2.2.2 or Section 2.2.3; provided that commencing on the effective date of the Forbearance Agreement and thereafter until the Termination Date, the Company shall not be permitted to request, convert or continue a Revolving Loan as a LIBOR Loan, and each outstanding LIBOR Loan shall automatically convert to a Base Rate Loan at the expiration of the Interest Period applicable thereto. |
2.2.2 | Borrowing Procedures. The Company shall give written notice (each such written notice, a “Notice of Borrowing”) substantially in the form of Exhibit D or telephonic notice (followed immediately by a Notice of Borrowing) to the Administrative Agent of each proposed borrowing not later than 11:00 A.M., St. Louis, Missouri time, on the proposed date of such borrowing. Each such notice shall be effective upon receipt by the Administrative Agent, shall be irrevocable, and shall specify the date and amount of borrowing. Promptly upon receipt of such notice, the Administrative Agent shall advise each Lender thereof. Not later than 1:00 P.M., St. Louis, Missouri time, on the date of a proposed borrowing, each Lender shall provide the Administrative Agent at the office specified by the Administrative Agent with immediately available funds covering such Lender's Applicable Percentage of such borrowing and, so long as the Administrative Agent has not received written notice that the conditions precedent set forth in Section 12 with respect to such borrowing have not been satisfied, the Administrative Agent shall pay over the funds received by the Administrative Agent to the Company on the requested borrowing date. Each borrowing shall be on a Business Day and shall be in an aggregate amount of at least $100,000 and an integral multiple of $100,000.” |
2. | Section 4 of the Credit Agreement is hereby amended by the addition of a new Section 4.5 as follows: |
“4.5 | PIK Interest. Commencing on the Second Amendment Effective Date and continuing until all components of the definition of “Paid in Full” have been satisfied, the Company agrees, as additional compensation to the Lenders in their respective Applicable Percentages, that all outstanding Revolving Loans (including both Base Rate Loans and LIBOR Loans) and all outstanding PIK Obligations shall accrue interest at a rate equal to fourteen percent (14%) per annum (the “PIK Interest Rate”) |
3. | Section 6.1.3 of the Credit Agreement is hereby amended and restated in its entirety as follows: |
“6.1.3 | Permanent Reduction of the Revolving Commitment. The Revolving Commitment shall be permanently reduced on a dollar-for-dollar basis by the amount of all Designated Proceeds paid in accordance with Section 6.2.2 (other than Designated Proceeds from the sale of the Matthews Property and the St. Louis Property and Designated Proceeds paid in accordance with Section 6.2.2.(a)(vi)).” |
4. | Section 6.2.2(a) of the Credit Agreement is hereby amended by the addition of the following subparagraph (vi): |
5. | Section 6.2.2 of the Credit Agreement is hereby amended by the addition of the following paragraph (d): |
6. | The last sentence of Section 6.3 of the Credit Agreement is hereby amended and restated as follows: |
7. | Section 9 of the Credit Agreement is amended by the addition of a new Section 9.29 as follows: |
“9.29 | Warrants. |
(c) | The capitalization of the Company is as described in the most recent periodic report included in the SEC Documents, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable, and have been issued in compliance with federal and state securities laws. The Company has not issued any capital stock since the date of its most recent periodic report included in the SEC Documents other than pursuant to the exercise of stock options under the Company's stock option plans (such issuances and any such stock options, whenever issued or granted, being collectively “Employee Equity Transactions”), pursuant to the conversion or exercise of outstanding securities that are convertible into or exercisable for Common Stock, the issuance of Common Stock to Sears in connection with entering into the Amendment, or pursuant to publicly disclosed equity financings. Except for Employee Equity Transactions and as set forth in the SEC Documents, there are no outstanding options, warrants, rights to subscribe to, calls or commitments relating to, or securities or rights convertible into, any shares of capital stock of the Company, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company or options, warrants, rights to subscribe to, calls or commitments relating to, or securities or rights convertible into, any shares of capital stock of the Company. |
8. | Section 10.1.3 of the Credit Agreement is hereby amended and restated to read in its entirety as follows: |
9. | Section 10.1.15 of the Credit Agreement is hereby amended and restated to read in its entirety as follows: |
10. | Section 10.3(b) of the Credit Agreement is hereby amended by the addition of the following sentence at the end thereof: |
11. | Section 10 of the Credit Agreement is amended by the addition of the following covenants to be inserted into the Agreement as Sections 10.14 through 10.18 respectively: |
“10.14 | Chief Restructuring Officer. Not later than June 15, 2012, the Company will hire a Chief Restructuring Officer, who will have all of the normal and customary duties, powers, and responsibilities that are possessed by such an officer including, without limitation, reporting directly to the Chief Executive Officer of the Company, leading the day-to-day restructuring efforts of the Company, and communicating with the Administrative Agent and the Lenders with respect to all matters of mutual concern to the Company, the Administrative Agent and the Lenders. The Chief Restructuring Officer must be acceptable to the Agent and the Required Lenders, in their sole discretion, and Andrew Rolfe of The Keystone Group would be acceptable to the Agent and the Required Lenders. The Chief Restructuring Officer described in this Section 10.14 shall have the decision making authority to and shall approve cash disbursements to any entity in an amount that exceeds $100,000 (excluding payroll, taxes, sales taxes, and host commissions) and to carry out the actions outlined and described in the April 4, 2012, May 16, 2012, and May 25, 2012 presentations made by The Keystone Group to the Lenders. |
10.15 | Investment Bank Engagement. With Administrative Agent's and the Required |
10.16 | Sale of Real Property Collateral. The Company and CP Inc. agree to market and sell: (a) that certain manufacturing and office facility located at 815 Matthews-Mint Hill Road, Matthews, North Carolina (“Matthews Property”); (b) that certain manufacturing and office facility located at 1706 Washington Ave., St. Louis, Missouri, together with the adjacent parking lots (“St. Louis Property”); and (c) that certain manufacturing and office facility located at 11001 Park Charlotte Blvd., Charlotte, North Carolina, together with the adjacent vacant land (“Charlotte Property”). The Company and CP Inc. agree to complete a sale of the Matthews Property and a sale/leaseback transaction for the St. Louis Property on or before September 15, 2012. The Company and CP Inc. further covenant and agree on or prior to August 30, 2012 to have transitioned all of the processing activities currently conducted at the Charlotte Property to the St. Louis Property. The disposition of the Matthews Property, the St. Louis Property and the Charlotte Property each shall constitute an Asset Disposition under this Agreement, and the Net Cash Proceeds of each such Asset Disposition shall be applied in accordance with Section 6.2.2. Notwithstanding the provisions contained in Sections 14.13 and 15.1.3, the Administrative Agent shall release any Lien on the Matthews Property, the St. Louis Property and the Charlotte Property only upon receipt of (a) written authorization for such release from the Required Lenders following review of all material terms of the proposed sale or sale/leaseback transaction (including the terms of the proposed lease), and (b) a first-priority lien on any leasehold or other interest obtained by the Company or CP Inc. in connection with the sale/leaseback transaction for the St. Louis Property. |
10.17. | Wind Down Plan. The Company agrees to provide to Administrative Agent and the Lenders on or before July 15, 2012, a wind-down plan for the Loan Parties, which shall contain an outline of the timing and steps that management intends to undertake to execute an orderly liquidation of the Loan Parties. Such plan shall be approved by the Chief Restructuring Officer of the Company and the form of which shall be satisfactory to Administrative Agent and the Required Lenders in their sole discretion. |
12. | Section 11.16 of the Agreement is hereby amended and restated in its entirety as follows: |
13. | Section 15.1.3 of the Credit Agreement is hereby amended by the addition of the following sentence: |
14. | Section 15.6.1(b)(ii) of the Credit Agreement is hereby amended to read in its entirety as follows: |
15. | Exhibit B to the Agreement, Compliance Certificate, is hereby deleted in its entirety and replaced with Exhibit B attached to this Second Amendment, and Exhibit D to the Agreement, Form of Notice of Borrowing, is hereby deleted in its entirety and replaced with Exhibit D attached to this Second Amendment. |
4. | Additional Agreements. As additional consideration, the parties hereto agree as follows: |
1. | Warrants. The Company agrees to grant to the Lenders, allocated to each Lender pro rata in proportion to its respective Applicable Percentage, warrants (“Warrants”) to purchase an aggregate amount equal to 19 and 9/10ths percent (19.9%) of the fully-diluted common shares of the Company outstanding. The exercise price for such warrants shall be $0.40 per common share, in the form attached hereto attached hereto as Exhibit C (the “Warrant Agreement”) and incorporated herein by reference. |
4. | Representations and Warranties. Each Obligor represents on its behalf, and on behalf of each other Loan Party, to the Administrative Agent and the Lenders as of the date hereof that: (i) such Obligor's execution of this Second Amendment has been duly authorized by all requisite action of such Obligor; (ii) no consents are necessary from any third parties for such Obligor's execution, delivery or performance of this Second Amendment; (iii) this Second Amendment, the Agreement, and each of the other Loan Documents, constitute the legal, valid and binding obligations of such Obligor enforceable against such Obligor in accordance with their terms, except to the extent that the enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting the enforceability of creditors rights generally or by equity principles of general application; (iv) except as previously disclosed to Administrative Agent in writing or disclosed on amended schedules to the Credit Agreement and the Guaranty/Collateral Agreement attached to this Second Amendment as Exhibit A and except with respect to the representations and warranties contained in Sections 9.5 and 9.14 of the Agreement and in Sections 5(iv), (v) and (vi) of the First Amendment, all of the representations and warranties contained in Section 9 of the Agreement and in Section 7 of the Forbearance Agreement are true and correct in all material respects with the same force and effect as if made on and as of the date of this Second Amendment except to the extent such representations and warranties expressly by their terms relate only to an earlier date; (v) after giving effect to this Second Amendment, there is no Unmatured Event of Default or Event of Default; and (vi) since the date of the Forbearance Agreement, there has been no event or occurrence that would reasonably be likely to give rise to a Material Adverse Effect. Company hereby further represents and warrants that it has disclosed to Administrative Agent and the Lenders all material facts and circumstances relating to the Loan Parties' business, assets, liabilities, properties, condition (financial or otherwise), results of operations or prospects of the Loan Parties. |
5. | Fees and Expenses. Company shall promptly pay: |
1. | An amendment fee for the agreements and terms set forth in this Second Amendment equal to One |
2. | Except as otherwise provided in Section 7.1 of this Second Amendment, all out of pocket fees, costs, expenses (including, without limitation, fees, costs, and expenses of counsel and financial advisors) and other amounts owing to Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents upon demand, including, without limitation, all reasonable fees, costs and expenses incurred by the Administrative Agent and the Lenders in connection with the preparation, negotiation, execution, and delivery of this Second Amendment. |
6. | Conditions Precedent. This Second Amendment shall become effective as of the date set forth in the introductory paragraph to this Second Amendment, but only if on or before 5:00 p.m. Central time on June 6, 2012: |
1. | The Administrative Agent (or its counsel) shall have received: |
1. | duly executed counterparts of this Second Amendment that, when taken together, bear the signature of: (i) each Obligor; (ii) the Administrative Agent, and (iii) the Lenders; |
2. | Warrant Agreements dated the date hereof by and among the Company and each of the Lenders; |
3. | copies of the fully executed amendments to the Sears Agreements and the Walmart Agreements that evidence the modifications presented to the Administrative Agent by The Keystone Group relative to certain financial concessions in favor of the Company, which amendments shall be acceptable to the Administrative Agent in its sole and absolute discretion; |
4. | a certificate of the Secretary or Assistant Secretary of each Obligor dated as of the Effective Date and certifying: (i) that attached thereto is a true and complete copy of the by-laws or operating agreement, as applicable, of such Obligor as in effect on the Effective Date or the copy of the by-laws or operating agreement, as applicable, of such Obligor, provided to the Administrative Agent and the Lenders on the Closing Date has not been amended, modified or replaced since the Closing Date and are in full force and effect; (ii) that attached thereto is a true and complete copy of the resolutions duly adopted by the Board of Directors of such Obligor authorizing the execution, delivery and performance of this Second Amendment and each other agreement, document or instrument executed or delivered by or on behalf of such Obligor in connection herewith and the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect; (iii) that attached thereto is a true and complete copy of the certificate or articles of incorporation or other formation documents of such Obligor, or the copy of the certificate or articles of incorporation or other formation documents of such Obligor provided to the Administrative Agent and the Lenders on the Closing Date has not been amended, modified or replaced since the Closing Date and are in full force and effect; and (iv) as to the incumbency and specimen signature of each officer executing this Second Amendment or any other agreement, document or instrument executed or delivered by or on behalf of such Obligor in connection herewith; |
5. | an amendment to Agent's Forbearance Agreement Fee Letter dated May 18, 2012 executed by the Administrative Agent and the Company, in form and substance satisfactory to the Administrative Agent; and |
6. | all other documents reasonably requested by the Administrative Agent in connection with the transactions contemplated by this Second Amendment. |
2. | The Company has paid in same day funds all fees that may be owing to Administrative Agent pursuant to any agent fee letter or other arrangement (as such have been amended pursuant to any amendments required by the Administrative Agent). |
7. | Post-Closing Obligations. |
1. | On or before June 16, 2012, the Company will pay all out of pocket fees, costs, expenses (including, without limitation, fees, costs, and expenses of counsel and financial advisors) and other amounts then owing to the Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents, including, without limitation, all out of pocket fees, costs, and expenses incurred by the Administrative Agent and the Lenders in connection with the preparation, negotiation, execution, and |
8. | Effect of Amendment. Except as expressly provided for herein, the execution, delivery and effectiveness of this Second Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under the Credit Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Credit Agreement, any of the other Loan Documents or any existing Unmatured Event of Default or Event of Default. |
9. | Reaffirmation. |
1. | Each Obligor hereby acknowledges and confirms that as of the date hereof: (i) the Credit Agreement and the other Loan Documents remain in full force and effect as amended hereby and shall not be impaired or limited by the execution and effectiveness of this Second Amendment; (ii) no Obligor nor any other Loan Party has any defense to its obligations under the Credit Agreement and the other Loan Documents; and (iii) the Liens of the Administrative Agent under the Loan Documents secure all the Obligations (including the increased Commitments hereunder), are reaffirmed in all respects, continue in full force and effect, have the same priority as before this Second Amendment, and are not impaired or extinguished in any respect by this Second Amendment. Until the Obligations are Paid in Full, each Obligor agrees and covenants that it is bound by the covenants and agreements set forth in this Second Amendment, the Credit Agreement, and any other Loan Document and each Obligor hereby ratifies and confirms the Obligations. This Second Amendment does not create or constitute, and is not, a novation of the Credit Agreement nor the other Loan Documents. Each Obligor hereby ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each Loan Document. |
2. | Each Original Guarantor and each Additional Guarantor hereby: (i) represents and warrants that all representations and warranties contained in the Guaranty/Collateral Agreement are true and correct in all material respects (or, with respect to any representation or warranty that is itself modified or qualified by materiality or a “Material Adverse Effect” standard, such representation and warranty is true in correct in all respects) on and as of the Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties specifically refer to an earlier date, in which case such representations and warranties are true and correct in all material respects (or, with respect to any representation or warranty that is itself modified or qualified by materiality or a “Material Adverse Effect” standard, such representation and warranty is true in correct in all respects) as of such earlier date; and (ii) acknowledges and agrees that (A) notwithstanding the conditions to effectiveness set forth in this Second Amendment, it is not required by the terms of the Credit Agreement or any other Loan Document to consent to the amendments to the Credit Agreement effected pursuant to this Second Amendment and (B) nothing in this Second Amendment, the Credit Agreement, or any other Loan Document shall be deemed to require the consent of such Guarantor to any future amendments to the Credit Agreement. |
10. | Release. As a material part of the consideration for the Administrative Agent and the Lenders entering into this Second Amendment, each Obligor (collectively “Releasor”) agrees as follows (the “Release Provision”): |
11. | Governing Law. This Second Amendment shall be governed by and construed under the laws of the State of Missouri without giving effect to choice or conflicts of law principles thereunder. |
12. | Section Titles. The section titles in this Second Amendment are for convenience of reference only and shall not be construed so as to modify any provisions of this Second Amendment. |
13. | Counterparts; Facsimile Transmissions. This Second Amendment may be executed in one or more counterparts and on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures to this Second Amendment may be given by facsimile or other electronic transmission, and such signatures shall be fully binding on the party sending the same. |
14. | Patriot Act Notice. Administrative Agent, each Lender and Bank of America (for itself and not on behalf of any other party) hereby notifies each Obligor and each other Loan Party that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Act”), it is required to obtain, verify and record information that identifies each Obligor and each other Loan Party, which information includes the name and address of each Obligor and each other Loan Party and other information that will allow the Administrative Agent, such Lender or Bank of America, as applicable, to identify the Obligors and each other Loan Party in accordance with the Act. |
15. | Incorporation By Reference. The Administrative Agent, the Lenders and the Obligors hereby agree that all of the terms of the Loan Documents are incorporated in and made a part of this Second Amendment by this reference. The Administrative Agent, the Lenders and the Obligors hereby agree that this Second Amendment and any other document referred to herein or required to be delivered hereby is a “Loan Document.” |
16. | Statutory Notice - Insurance. UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS. THE COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT IS MADE AGAINST YOU IN CONNECTION WITH THE COLLATERAL. YOU MAY LATER CANCEL ANY INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT. IF WE PURCHASE INSURANCE FOR THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR OWN. |
17. | Statutory Notice - Oral Commitments. Nothing contained in the following notice shall be deemed to limit or modify the terms of this Second Amendment and the other Loan Documents: |
I. | Reports. Enclosed herewith is a copy of the [annual audited/quarterly/period/weekly] report of the Company as at [__________] (the "Computation Date"), which report fairly presents in all material respects the financial condition and results of operations [(subject to the absence of footnotes and to normal year-end adjustments)] of the Company as of the Computation Date and has been prepared in accordance with GAAP consistently applied. |
II. | Underlying Calculations. Enclosed herewith is a copy of the spreadsheets and other calculations used to calculate the financial tests below. |
III. | Financial Tests. The Company hereby certifies and warrants to Administrative Agent, Issuing Lender and each Lender that the following is a true and correct computation as at the Computation Date of the following ratios and/or financial restrictions contained in the Credit Agreement and each of the enclosed are true and correct as at the Computation Date: |
1 | Consolidated Net Income | $___________ |
2 | Plus: | |
(A) Interest Expense | $___________ | |
(B) income tax expense | $___________ | |
(C) depreciation and amortization | $___________ | |
(D) non-cash charges (unless otherwise approved by the Administrative Agent) for all periods thereafter while this Agreement is in existence, not exceeding $3,000,000 in the cumulative aggregate | $___________ | |
(E) non-cash charges relating to any share-based compensation awards, to the extent such non-cash charges were expensed during such period in accordance with Accounting Standards Codification Topic 718 "Compensation-Stock Compensation" | $___________ | |
(F) other adjustments acceptable to the Administrative Agent (not otherwise described below) | $___________ | |
3 | Total Items No. 1 plus 2 (EBITDA) | $___________ |
4 | Plus: | |
(A) cash and non-cash charges related to asset dispositions and asset write-offs and write-downs | $___________ | |
(B) cash and non-cash charges related to studio closing costs including, without limitation, costs related to store clean up, severance and asset dispositions | $___________ | |
(C) cash and non-cash charges related to corporate restructuring costs including, without limitation, severance and related costs | $___________ | |
(D) cash and non-cash financial restructuring costs including, without limitation, fees, costs and expenses related to entering into any forbearance agreement and modification agreement with the Lenders, amending or modifying the Credit Agreement, payment of any Company, Administrative Agent or Lender consultants or advisors (e.g., The Keystone Group) and legal fees and expenses | $___________ | |
(E) cash and non-cash lease termination costs | $___________ | |
(F) fees, costs and expenses (including, without limitation, legal fees and expenses) related to defense of litigation including, without limitation, any securities litigation and litigation with TPP Acquisition, Inc. related to The Picture People | $___________ | |
(G) cash and non-cash lab consolidation costs | $___________ | |
(H) non-cash GAAP impairment charges related to asset valuation adjustments | $___________ | |
(I) changes in the deferred revenue as determined by GAAP (J) rental and lease expense | $___________ $___________ | |
5 | Total Items No. 3 plus 4 (EBITDAR) | $___________ |
B. | MINIMUM WEEKLY CUMULATIVE GROSS SALES REVENUE |
as of ___________ is: | $___________ |
C. | MINIMUM WEEKLY CASH |
1. | EXERCISE OF WARRANT. |
2. | ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. |
4. | FUNDAMENTAL TRANSACTIONS. |
8. | NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the Loan Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company |
____________ | a “Cash Exercise” with respect to _________________ Warrant Shares; and/or |
____________ | a “Cashless Exercise” with respect to _______________ Warrant Shares. |
(a) | the offer and sale of the Warrant contemplated hereby is being made in compliance with Section 4(1) of the Securities Act of 1933, as amended (the “Securities Act”), or another valid exemption from the registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws of the states of the United States; |
(b) | the undersigned has not offered to sell the Warrant by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; and |
(c) | the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of (1) a written opinion of counsel (in a form reasonably acceptable to the Company) to the effect that such transfer may be made pursuant to an exemption from registration under the Securities Act, or (2) other reasonable assurance that such securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto). |
Dated: , | ||
(Signature must conform in all respects to name of holder as specified on the face of the Warrant) | ||
Address of Transferee | ||
In the presence of: | ||
6. | Except as expressly modified by this Amendment, all other provisions of the Agreement shall remain in full force and effect. To the extent that the terms of this Amendment are inconsistent with any of the terms of the Agreement, the terms of this Amendment shall supersede and govern. |
7. | This Amendment will be governed by and construed in accordance with the laws of the State of Illinois without reference or regard to conflict of law provisions or other laws of any jurisdiction that would cause the application of the laws of any jurisdiction other than the State of Illinois. |
CONSUMER PROGRAMS INCORPORATED | SEARS, ROEBUCK AND CO. By: Sears Holdings Management Corporation, their agent | ||
By: | /s/ Dale Heins | By: | /s/ David L. Schuvie |
Name: | Dale Heins | Name: | David L. Schuvie |
Title: | Treasurer | Title: | Vice President |
Lender | Percent of Common Stock Outstanding |
Fifth Third Bank | 4.7810% |
Associated Bank, N.A. | 3.7905% |
Bank of America, N.A. | 7.5810% |
Private Bank and Trust Company | 3.7905% |
1. | EXERCISE OF WARRANT. |
2. | ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. |
4. | FUNDAMENTAL TRANSACTIONS. |
8. | NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the Loan Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its Subsidiaries, the Company shall simultaneously file such notice with the Securities and Exchange Commission pursuant to a Current Report on Form 8-K. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company. |
____________ | a “Cash Exercise” with respect to _________________ Warrant Shares; and/or |
____________ | a “Cashless Exercise” with respect to _______________ Warrant Shares. |
(a) | the offer and sale of the Warrant contemplated hereby is being made in compliance with Section 4(1) of the Securities Act of 1933, as amended (the “Securities Act”), or another valid exemption from the registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws of the states of the United States; |
(b) | the undersigned has not offered to sell the Warrant by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; and |
(c) | the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of (1) a written opinion of counsel (in a form reasonably acceptable to the Company) to the effect that such transfer may be made pursuant to an exemption from registration under the Securities Act, or (2) other reasonable assurance that such securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto). |
Dated: , | ||
(Signature must conform in all respects to name of holder as specified on the face of the Warrant) | ||
Address of Transferee | ||
In the presence of: |
in thousands, except share and per share data | 12 Weeks Ended | ||||||
April 28, 2012 | April 30, 2011 | ||||||
Diluted: | |||||||
Net (loss) income applicable to common shares | $ | (4,644 | ) | $ | 747 | ||
Shares: | |||||||
Weighted average number of common shares outstanding | 9,111,355 | 9,092,429 | |||||
Dilutive effect of exercise of certain stock options | — | 4,244 | |||||
Less: Treasury stock - weighted average | (2,097,043 | ) | (2,098,333 | ) | |||
Weighted average number of common and common equivalent shares outstanding | 7,014,312 | 6,998,340 | |||||
Net (loss) income per common and common equivalent shares | $ | (0.66 | ) | $ | 0.11 |
in thousands, except share and per share data | 12 Weeks Ended | ||||||
April 28, 2012 | April 30, 2011 | ||||||
Basic: | |||||||
Net (loss) income applicable to common shares | $ | (4,644 | ) | $ | 747 | ||
Shares: | |||||||
Weighted average number of common shares outstanding | 9,111,355 | 9,092,429 | |||||
Less: Treasury stock - weighted average | (2,097,043 | ) | (2,098,333 | ) | |||
Weighted average number of common and common equivalent shares outstanding | 7,014,312 | 6,994,096 | |||||
Net (loss) income per common and common equivalent shares | $ | (0.66 | ) | $ | 0.11 | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
CPI CORP. | ||
By: | /s/James J. Abel | |
James J. Abel | ||
Interim President and Chief Executive Officer | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
CPI CORP. | ||
By: | /s/Dale Heins | |
Dale Heins | ||
Executive Vice President, Finance, Chief Financial Officer and Treasurer |
(1) | The Quarterly Report on Form 10-Q for the quarter ended April 28, 2012 (the “Form 10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and the results of operations of the Company. |
/s/James J. Abel | /s/Dale Heins | |
James J. Abel | Dale Heins | |
Interim President and | Executive Vice President, Finance, | |
Chief Executive Officer | Chief Financial Officer and Treasurer |
DESCRIPTION OF BUSINESS AND INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
3 Months Ended |
---|---|
Apr. 28, 2012
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS AND INTERIM CONSOLIDATED FINANCIAL STATEMENTS | DESCRIPTION OF BUSINESS AND INTERIM CONSOLIDATED FINANCIAL STATEMENTS CPI Corp. ("CPI", the "Company" or "we") is a holding company engaged, through its wholly-owned subsidiaries and partnerships, in selling and manufacturing professional portrait photography of young children, individuals and families and offers other related products and services. The Company also offers wedding photography and videography services and products through its subsidiary, Bella Pictures Holdings, LLC. The Company operates 2,583 (unaudited) professional portrait studios as of April 28, 2012, throughout the U.S., Canada, Mexico and Puerto Rico, principally under lease and license agreements with Walmart and license agreements with Sears and Toys "R" Us. The Company also operates websites that support and complement its Walmart, Sears and Toys "R" Us studio operations. These websites serve as vehicles to archive, share portraits via email (after a portrait session) and order additional portraits and products. The Company also operates a website for Bella Pictures®, which serves as a vehicle to reserve/book weddings, select specialized, unique product offerings and view/edit photographs and videos from the wedding day. The Company's fiscal year ends on the first Saturday in February. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years. Fiscal year 2012 refers to the 52-week period ended February 2, 2013. Fiscal year 2011 refers to the 52-week period ended February 4, 2012. The interim consolidated financial statements as of and for the 12 weeks ended April 28, 2012, are unaudited and reflect all adjustments (consisting only of normal recurring accruals), which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the CPI Corp. 2011 Annual Report on Form 10-K for its fiscal year ended February 4, 2012. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, insurance reserves; depreciation; recoverability of long-lived assets and goodwill; defined benefit retirement plan assumptions and income tax. Actual results could differ from those estimates. Certain reclassifications have been made to the 2011 financial statements to conform with the current year presentation. For purposes of this report, the Walmart studio operations are operating within CPI Corp. under the tradenames PictureMe Portrait Studio® in the U.S., Walmart Portrait Studios in Canada and Estudios Fotografia de Walmart in Mexico, collectively "PMPS" or the "PMPS brand". The Sears studio operations are operating as Sears Portrait Studios (“SPS” or the “SPS brand”) the the Toys "R" Us studio operations are operating as Kiddie Kandids Portrait Studios (“KKPS” or the “KKPS brand”). |