BUSINESS ACQUISITION

On January 26, 2011, the Company acquired substantially all of the assets and certain liabilities of Bella Pictures, Inc., a provider of branded wedding photography services (the “Bella Pictures® Acquisition”). The operations acquired through the Bella Pictures® Acquisition are conducted through the Company’s subsidiary, Bella Pictures Holdings, LLC (“Bella Pictures®”).

The Bella Pictures® Acquisition was made pursuant to the Asset Purchase Agreement (the “Agreement”) dated January 26, 2011, by and among Bella Pictures Holdings, LLC, a Delaware limited liability company (“Bella Pictures®” or the “Buyer”), Bella Pictures, Inc., a Delaware corporation (the “Seller”), CPI Corp., a Delaware corporation (“CPI”), and Foundation Capital IV, L.P. (“Foundation Capital”). In consideration for the Assets purchased, the Buyer issued to the Seller Class A Units in Bella Pictures®, representing a 5% equity interest in Bella Pictures® with a fair value at the date of issuance of approximately $40,000, estimated using a discounted cash flow analysis. In addition, the Buyer assumed certain liabilities of the Seller, consisting primarily of customer deposits and the obligation to fulfill customer wedding orders booked and outstanding at the date of acquisition. In addition, the Buyer received approximately $1.4 million in cash from the Seller.

The Company accounted for the acquisition as a business combination under the guidance in ASC Topic 805. The purchase price was allocated as of February 5, 2011, based on the Company’s preliminary estimate at that time of the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed. The Company finalized the purchase price allocation as of its first quarter ended April 30, 2011. As a result of final purchase price allocation adjustments made during the Company's first quarter of fiscal 2011, the preliminary estimate of goodwill was reduced by approximately $1.0 million as of April 30, 2011, which the Company considered insignificant to the consolidated financial statements. Accordingly, the preliminary purchase price allocation as of February 5, 2011 has not been retrospectively adjusted for the final purchase price allocation adjustments.

The following unaudited pro forma summary presents the Company’s revenue, net income, diluted income per common share and basic income per common share as if the Bella Pictures® Acquisition had occurred on the first day of the periods presented (in thousands, except per share data):



	2010			2009

Revenue	$	413,517		$	430,004

Net (loss) income	5,331			812
Net loss attributable to noncontrolling interest	(281		)	(649		)
Net (loss) income attributable to CPI Corp.	$	5,612		$	1,461

Diluted (loss) income per common share attributable to CPI Corp.	$	0.77		$	0.21

Basic (loss) income per common share attributable to CPI Corp.	$	0.77		$	0.21

Pro forma adjustments have been made to reflect depreciation and amortization using asset values recognized after applying purchase accounting adjustments.

This pro forma information is presented for informational purposes only and is not necessarily indicative of actual results had the acquisition been effected at the beginning of the periods presented or future results.