----

----

| 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) |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|

| (Title of each      class)Common Stock $.40 Par      Value |  (Name of each exchange      on which Registered)New York Stock      Exchange |
|------------------------------------------------------------|------------------------------------------------------------------------------------|

| Indicate by check      mark if the registrant is a well-known seasoned issuer, as defined in Rule      405 of the Securities Act. |   |  o Yes |   |  x  No |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-------------|--------|-------------|

| Indicate by check mark if the registrant is      not required to file reports pursuant to Section 13 or Section 15(d) of      the Act. |   |  o Yes |   |  x  No |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|--------|-------------|

| Note: | Checking      the box above will not relieve any registrant required to file reports      pursuant to Section 13 or 15(d) of the Exchange Act from their obligations      under those Sections. |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Indicate by check      mark whether the registrant (1) has filed all reports required to be filed      by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the      preceding 12 months (or for such shorter period that the registrant was      required to file such reports), and (2) has been subject to such filing      requirements for the past 90 days. |   |  x Yes |   |  o  No |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|--------|-------------|

| Indicate      by check mark if disclosure of delinquent filers pursuant to Item 405 of      Regulation S-K is not contained herein, and will not be contained, to the      best of registrant's knowledge, in definitive proxy or information      statements incorporated by reference in Part III of this Form 10-K or any      amendment to this Form 10-K. |   |   |   |  o |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|---------|

| Indicate      by check mark whether the registrant is a large accelerated filer, an      accelerated filer,  a non-accelerated filer or a smaller      reporting company.  See the definitions of “large accelerated      filer,”  “ accelerated filer” and “smaller reporting company” in      Rule 12b-2 of the Exchange Act:  (Check  one): |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   |  Large      accelerated filer o  |   |  Accelerated      filer x |   |   Non-accelerated      filer o  |   | Smaller reporting      company   o |
|--|--------|-------------------------------------------------|--------|-------------------------------------|--------|-----------------------------------------------------|--------|----------------------------------------------|

| Indicate by check mark whether the registrant      is a shell company (as defined in Rule 12b-2 of the Act). |   |   |   |   |   o |
|--------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|----------|

----

----

| PART I        |   |                                                              |                                                   |   |
|---------------|--------|-------------------------------------------------------------------|--------------------------------------------------------|--------|
|          |   |                                                              |                                                   |   |
| Item      1.  |   | Business                                                          |                                                   | 5      |
| Item      1A. |   | Risk      Factors                                                 |                                                   | 10     |
| Item      1B. |   | Unresolved      Staff Comments                                    |                                                   | 13     |
| Item      2.  |   | Properties                                                        |                                                   | 14     |
| Item      3.  |   | Legal      Proceedings                                            |                                                   | 15     |
| Item      4.  |   | Submission      of Matters to a Vote of Security Holders          |                                                   | 15     |
|          |   |                                                              |                                                   |   |
| PART II       |   |                                                              |                                                   |   |
|          |   |                                                              |                                                   |   |
| Item      5.  |   | Market      for Registrant's Common Equity, Related Stockholder   |                                                   |   |
|          |   |                                                              | Matters      and Issuer Purchases of Equity Securities |   | 15 |
| Item 6.       |   | Selected      Consolidated Financial Data                         |                                                   | 16     |
| Item 7.       |   | Management's      Discussion and Analysis of                      |                                                   |   |
|          |   |                                                              | Financial      Condition and Results of Operations     |   | 18 |
| Item      7A. |   | Quantitative      and Qualitative Disclosures About               |                                                   |   |
|          |   |                                                              | Market      Risk                                       |   | 31 |
| Item 8.       |   | Financial      Statements and Supplementary Data                  |                                                   | 32     |
| Item      9.  |   | Changes      in and Disagreements with Accountants                |                                                   |   |
|          |   |                                                              | on      Accounting and Financial Disclosure            |   | 70 |
| Item      9A. |   | Controls      and Procedures                                      |                                                   | 70     |
| Item      9B. |   | Other      Information                                            |                                                   | 74     |
|          |   |                                                              |                                                   |   |
| PART III      |   |                                                              |                                                   |   |
|          |   |                                                              |                                                   |   |
| Item      10. |   | Directors,      Executive Officers and Corporate Governance       |                                                   | 74     |
| Item      11. |   | Executive      Compensation                                       |                                                   | 74     |
| Item      12. |   | Security      Ownership of Certain Beneficial Owners              |                                                   |   |
|          |   |                                                              | and      Management and Related Stockholder Matters    |   | 74 |
| Item      13. |   | Certain      Relationships and Related Transactions, and Director |                                                   |   |
|          |   |                                                              | Independence                                           |   | 75 |
| Item      14. |   | Principal      Accounting Fees and Services                       |                                                   | 75     |
|          |   |                                                              |                                                   |   |
| PART IV       |   |                                                              |                                                   |   |
|          |   |                                                              |                                                   |   |
| Item      15. |   | Exhibits and Financial Statement      Schedules                   |                                                   | 75     |
|          |   | Signatures                                                        |                                                   | 82     |

PART I

| ·   | Difficulties      in integrating and managing personnel, financial reporting and other      systems used by the PictureMe Portrait Studio business into the      Company; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      failure of the PictureMe Portrait Studio business to perform in accordance      with the Company’s expectations; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any      future goodwill impairment charges that the Company may incur with respect      to the assets of PictureMe PortraitStudio; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Failure      to achieve anticipated synergies between the Company’s business units and      the business units of PictureMe Portrait Studio;  and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      inability to maintain Wal-Mart as ahost. |
|--------------------|---------------------------------------------------|

|                   |   | APPROXIMATE      |   |                                                     |   |          |   |
|------------------------|--------|------------------|--------|----------------------------------------------------------|--------|---------------|--------|
|                   |   | AREA      IN     |   |                                                     |   | OWNERSHIP     |   |
| LOCATION               |   | SQUARE      FEET |   | PRIMARY      USES                                        |   | OR      LEASE |   |
| Charlotte,      NC     |   | 348,000          |   | Office      Park                                         |   | Owned         |   |
| St.      Louis, MO     |   | 300,000          |   | Administration      and Portrait processing              |   | Owned         |   |
| Charlotte,      NC     |   | 160,000          |   | Administration      and Portrait processing              |   | Owned         |   |
| St.      Louis, MO     |   | 155,000          |   | Parking      Lots                                        |   | Owned         |   |
| Charlotte,      NC     |   | 60,000           |   | Administration      and Portrait processing              |   | Owned         |   |
| Charlotte,      NC     |   | 60,000           |   | Warehousing                                              |   | Leased        | (2)    |
| Brampton,      Ontario |   | 40,000           |   | Administration,      Warehousing and Portrait processing |   | Owned         |   |
| St.      Louis, MO     |   | 34,100           |   | Warehousing                                              |   | Leased        | (1)    |
| Charlotte,      NC     |   | 30,300           |   | Warehousing                                              |   | Owned         |   |
| Thomaston,      CT     |   | 25,000           |   | Administration      and Portrait processing              |   | Owned         |   |

| (1)   | Lease      term expires on June 30, 2008. |
|-----------------|-------------------------------------------|

| (2)   | Lease      term expires on April 30, 2008. |
|-----------------|--------------------------------------------|

| NUMBER                                                                                                                           |   |                                                |   |                                                                                            |
|----------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|
| OF      STUDIOS                                                                                                                  |   | COUNTRY                                             |   | LICENSOR/LESSOR                                                                                 |
|                    893            |   | United      States and Puerto Rico                  |   | Sears                                                                                           |
|                 1,702                            |   | United      States and Puerto Rico                  |   | Wal-Mart                                                                                        |
|                    112            |   | Canada                                              |   | Sears      Canada, Inc.                                                                         |
|                    253            |   | Canada                                              |   | Wal-Mart      Canada Corp.                                                                      |
|                    115            |   | Mexico                                              |   | Nueva      Wal-Mart de Mexico, S de R.L. de C.V.                                                |
|                      33 |   | United      States studios not in Sears or Wal-Mart |   | Third      parties - generally leased for at least 3 years with      some having renewaloptions |

PART II

| Item      5. | Market      for Registrant's Common Equity, Related Stockholder Matters and Issuer      Purchases of Equity Securities |
|--------------|------------------------------------------------------------------------------------------------------------------------|

| FISCAL      YEAR 2007          |   |   |   |   |   |   |   |     |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|--------|----------|--------|
| (ending      February 2, 2008) |   | HIGH   |   |   | LOW    |   |   | DIVIDEND |   |
| First      Quarter             |   | $      | 58.20  |   |   | $      | 50.00  |     |   | $ | 0.16 |   |
| Second      Quarter            |   |   | 84.40  |   |   |   | 57.51  |     |   |   | 0.16 |   |
| Third      Quarter             |   |   | 65.78  |   |   |   | 30.36  |     |   |   | 0.16 |   |
| Fourth      Quarter            |   |   | 30.84  |   |   |   | 17.11  |     |   |   | 0.16 |   |
|                           |   |   |   |   |   |   |   |     |   |   |   |   |
| FISCAL      YEAR 2006          |   |   |   |   |   |   |   |     |   |   |   |   |
| (ending      February 3, 2007) |   | HIGH   |   |   | LOW    |   |   | DIVIDEND |   |
| First      Quarter             |   | $      | 21.19  |   |   | $      | 16.49  |     |   | $ | 0.16 |   |
| Second      Quarter            |   |   | 34.85  |   |   |   | 21.20  |     |   |   | 0.16 |   |
| Third      Quarter             |   |   | 50.00  |   |   |   | 28.50  |     |   |   | 0.16 |   |
| Fourth      Quarter            |   |   | 54.65  |   |   |   | 41.06  |     |   |   | 0.16 |   |

Item6.

| thousands      except per share data                              |   |   |    |   |   |   |    | 2005       |   |   |    |   |   |   |    |
|-------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|------------|--------|--------|---------|--------|--------|--------|---------|
|                                                                   |   | 2007   |    |   | 2006   |   |    | (restated) |   |   | 2004    |   |   | 2003   |    |
|                                                              |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |
| STATEMENT      OF OPERATIONS (1)                                  |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |
| Net      sales                                                    |   | $      | 424,026 |   |   | $      | 293,803 |       |   | $      | 291,984 |   |   | $      | 281,865 |   |   | $ | 299,044 |   |
| Cost      of sales                                                |   |   | 43,871  |   |   |   | 28,128  |       |   |   | 32,651  |   |   |   | 33,855  |   |   |   | 37,742 |   |
| Selling,      general and administrative expenses                 |   |   | 333,265 |   |   |   | 221,295 |       |   |   | 224,457 |   |   |   | 222,398 |   |   |   | 229,475 |   |
| Depreciation      and amortization                                |   |   | 27,328  |   |   |   | 16,922  |       |   |   | 19,952  |   |   |   | 16,377  |   |   |   | 16,793 |   |
| Other      charges and impairments (2)                            |   |   | 5,195   |   |   |   | 1,240   |       |   |   | 2,767   |   |   |   | 15,679  |   |   |   | 5,515 |   |
|                                                              |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| Income      (loss) from operations                                |   |   | 14,367  |   |   |   | 26,218  |       |   |   | 12,157  |   |   |   | (6,444  | ) |   |   | 9,519 |   |
| Interest      expense, net (3)                                    |   |   | 8,818   |   |   |   | 1,815   |       |   |   | 1,098   |   |   |   | 981     |   |   |   | 1,344 |   |
| Impairment      (recovery) and related obligations of             |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| preferred      security interest (4)                              |   |   | -       |   |   |   | (887    | )          |   |   | -       |   |   |   | 9,789   |   |   |   | - |   |
| Loss      from debt extinguishment (5)                            |   |   | -       |   |   |   | -       |       |   |   | 529     |   |   |   | -       |   |   |   | - |   |
| Other      income, net  (6)                             |   |   | 175     |   |   |   | 144     |       |   |   | 247     |   |   |   | 263     |   |   |   | 850 |   |
| Income      tax expense (benefit)                                 |   |   | 1,951   |   |   |   | 9,107   |       |   |   | 1,905   |   |   |   | (2,189  | ) |   |   | 3,183 |   |
|                                                              |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| Income      (loss) from continuing operations                     |   |   | 3,773   |   |   |   | 16,327  |       |   |   | 8,872   |   |   |   | (14,762 | ) |   |   | 5,842 |   |
| Net      loss from discontinued operations (1)                    |   |   | (197    | )      |   |   | -       |       |   |   | -       |   |   |   | (3,746  | ) |   |   | (4,624 | ) |
|                                                              |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| Net      earnings (loss)                                          |   | $      | 3,576   |   |   | $      | 16,327  |       |   | $      | 8,872   |   |   | $      | (18,508 | ) |   | $ | 1,218 |   |
|                                                              |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| SHARE      AND PER SHARE DATA (1)                                 |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| Net      earnings (loss) from continuing operations - diluted (7) |   | $      | 0.59    |   |   | $      | 2.56    |       |   | $      | 1.13    |   |   | $      | (1.87   | ) |   | $ | 0.72 |   |
| Net      earnings (loss) from continuing operations - basic (7)   |   |   | 0.59    |   |   |   | 2.57    |       |   |   | 1.13    |   |   |   | (1.87   | ) |   |   | 0.72 |   |
| Net      earnings (loss) - diluted                                |   |   | 0.56    |   |   |   | 2.56    |       |   |   | 1.13    |   |   |   | (2.35   | ) |   |   | 0.15 |   |
| Net      earnings (loss) - basic                                  |   |   | 0.56    |   |   |   | 2.57    |       |   |   | 1.13    |   |   |   | (2.35   | ) |   |   | 0.15 |   |
|                                                              |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| Dividends                                                         |   | $      | 0.64    |   |   | $      | 0.64    |       |   | $      | 0.64    |   |   | $      | 0.64    |   |   | $ | 0.60 |   |
| Average      shares outstanding - diluted                         |   |   | 6,416   |   |   |   | 6,376   |       |   |   | 7,881   |   |   |   | 7,888   |   |   |   | 8,148 |   |
| Average      shares outstanding - basic                           |   |   | 6,391   |   |   |   | 6,353   |       |   |   | 7,854   |   |   |   | 7,888   |   |   |   | 8,082 |   |
|                                                              |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| CASH      FLOW DATA (continuing operations only)                  |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| Net      cash provided by operating activities                    |   | $      | 41,696  |   |   | $      | 37,950  |       |   | $      | 18,697  |   |   | $      | 16,477  |   |   | $ | 32,118 |   |
| Net      cash provided by (used in) financing activities (7)      |   | $      | 90,788  |   |   | $      | (43,567 | )          |   | $      | (1,223  | )      |   | $      | (24,827 | ) |   | $ | (13,929 | ) |
| Net      cash used in investing activities                        |   | $      | (99,883 | )      |   | $      | (2,358  | )          |   | $      | (17,633 | )      |   | $      | (6,597  | ) |   | $ | (14,840 | ) |
|                                                              |   |   |    |   |   |   |    |       |   |   |    |   |   |   |    |   |   |   |   |   |
| Capital      expenditures (8)                                     |   | $      | 17,113  |   |   | $      | 2,760   |       |   | $      | 20,235  |   |   | $      | 15,157  |   |   | $ | 19,405 |   |

| thousands                                                                          |   |   |    |   |   |   |   | 2005       |   |   |    |   |   |   |    |
|------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|------------|--------|--------|---------|--------|--------|--------|---------|
|                                                                               |   | 2007   |    |   | 2006   |   |   | (restated) |   |   | 2004    |   |   | 2003   |    |
| BALANCE      SHEET                                                                 |   |   |    |   |   |   |   |       |   |   |    |   |   |   |    |
|   Cash      and cash equivalents                                         |   | $      | 59,177  |   |   | $      | 26,294 |       |   | $      | 34,269  |   |   | $      | 33,883  |   |   | $ | 51,011 |    |
|        Current assets                                                         |   |   | 92,819  |   |   |   | 55,071 |       |   |   | 69,629  |   |   |   | 72,868  |   |   |   | 93,215 |   |
|        Net fixed assets                                                       |   |   | 56,280  |   |   |   | 26,693 |       |   |   | 41,282  |   |   |   | 41,658  |   |   |   | 52,735 |   |
|        Assets of business transferred under contractual arrangements      (9) |   |   | -       |   |   |   | -      |       |   |   | -       |   |   |   | -       |   |   |   | 8,975 |   |
|        Assets of supplemental retirement plan (10)                            |   |   | 3,508   |   |   |   | 3,588  |       |   |   | 3,706   |   |   |   | 6,141   |   |   |   | 11,491 |   |
|        Goodwill and intangible assets (11)                                    |   |   | 62,956  |   |   |   | 512    |       |   |   | 512     |   |   |   | 512     |   |   |   | 512 |   |
|        Other assets                                                           |   |   | 20,954  |   |   |   | 7,298  |       |   |   | 11,015  |   |   |   | 13,921  |   |   |   | 1,540 |   |
|        Total assets                                                           |   |   | 236,517 |   |   |   | 93,162 |       |   |   | 126,144 |   |   |   | 135,100 |   |   |   | 168,468 |   |
|        Current liabilities                                                    |   |   | 83,051  |   |   |   | 49,407 |       |   |   | 56,065  |   |   |   | 69,448  |   |   |   | 67,288 |   |
|        Other liabilities                                                      |   |   | 33,470  |   |   |   | 23,209 |       |   |   | 25,739  |   |   |   | 25,716  |   |   |   | 23,765 |   |
|        Long-term debt, less current maturities                                |   |   | 103,022 |   |   |   | 7,747  |       |   |   | 15,747  |   |   |   | 17,050  |   |   |   | 25,589 |   |
|        Stockholders' equity (7)                                               |   |   | 16,974  |   |   |   | 12,799 |       |   |   | 28,593  |   |   |   | 22,886  |   |   |   | 51,826 |   |

| (1)   | Following      are business areas classified as discontinued operations and for which      prior year’s consolidated financial statements were reclassified to      reflect these changes: |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | In      2007, UK operations which were acquired in the PCA      acquisition |
|---------------|----------------------------------------------------------------------------------|

| -   | In      2004, mobile photography operations and the Mexican Portrait Studio      business |
|---------------|-------------------------------------------------------------------------------------------|

| (2)   | Other      charges and impairments: |
|-----------------|-------------------------------------|

| thousands                                                               |   | 2007   |   |   | 2006   |   |   | 2005   |   |   | 2004   |   |   | 2003   |   |
|-------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reserves      for severance and related costs (a )                      |   | $      | 2,035  |   |   | $      | 878    |   |   | $      | 2,546  |   |   | $      | 3,430  |   |   | $ | 1,346 |   |
| Other      transition related costs - PCA Acquisition (b)               |   |   | 2,817  |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Impairment      charges (c)                                             |   |   | 256    |   |   |   | 179    |   |   |   | 567    |   |   |   | 6,516  |   |   |   | - |   |
| Accruals      related to accelerated vesting of supplemental retirement |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| plan      benefits and guaranteed bonuses for 2004 (d)                  |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 3,656  |   |   |   | - |   |
| Pension      plan curtailment (e)                                       |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 2,385 |   |
| Consent      solicitation costs (f)                                     |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 816    |   |   |   | 1,663 |   |
| Production      facility closure (g)                                    |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 121 |   |
| Other      (h)                                                          |   |   | 87     |   |   |   | 183    |   |   |   | (346   | )      |   |   | 1,261  |   |   |   | - |   |
|                                                                    |   | $      | 5,195  |   |   | $      | 1,240  |   |   | $      | 2,767  |   |   | $      | 15,679 |   |   | $ | 5,515 |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (a) |   | Consists      principally of expenses and related costs for employee severance,      retirements and repositioning.  In 2007, this cost is primarily      related to the PCA Acquisition.                                                                                                                                                                                                                                           |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) |   | Consists      of integration-related costs relative to the PCA Acquisition ($2.0      million), costs associated with the closure of the institutional      business acquired from PCA ($265,000) and  costs      associated with the transfer of contractual obligations from PCA to CPI      ($523,000).                                                                                                                |
| (c) |   | Consists      of 2004 write-offs and write-downs of certain previously capitalized      technology costs, 2005 parts and film inventory and other asset write-offs      resulting from the conversion from an analog film environment to the full      digital format, 2006 write-off of certain legacy equipment that will no      longer be used in the business and 2007 write-off of software that will      not be used in the business. |
| (d) |   | Consists      of costs related to accelerated vesting of executive benefits and      bonuses.                                                                                                                                                                                                                                                                                                                                                 |
| (e) |   | Represents      the charge related to the freeze on future benefit accruals under the      pension plan.                                                                                                                                                                                                                                                                                                                                      |
| (f) |   | Consists      of professional fees relative to the proxy consent      solicitation.                                                                                                                                                                                                                                                                                                                                                           |
| (g) |   | Consists      of the write-off of a remaining lease obligation.                                                                                                                                                                                                                                                                                                                                                                               |
| (h) |   | Consists      of expenses related to non-refundable loan commitment fees as well as      charges related to early contract terminations and settlements with      certain of the Company’s vendors and consultants.  2006      represents investment banking and legal services in connection with the      strategic alternative review.                                                                                     |

| (3)   | In 2007,      includes expense in of $2.9 million in connection with marking an      interest rate swap agreement to its marketvalue. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | In      2004, the Company recorded a $7.7 million valuation reserve against the      carrying value of its preferred security interest and $2.1 million of      additional accrued lease liability obligations relating to its lease      guarantees on certain of Prints Plus’ retail stores.  As the      total guarantee related to these leases had decreased with the passage of      time, the payment of rents by Prints Plus and the settlement by the      Company of certain leases rejected in bankruptcy, the related liability      was reduced by $887,000 in 2006 to reflect management’s revised estimate      of remaining potential loss. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Consists      of a make-whole fee totaling $457,000 and the write-off of unamortized      fees, both related to the early redemption of the Company’s Senior Notes      in November 2005. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6)   | In      2003, the Company recognized $503,000 in other income related to a      liquidating distribution of the Company’s membership interest in General      American Life Insurance Co. (“GA”) when GA’s stock was sold to MetLife and      $118,000 in other income related to death benefits received from a      company-owned life insurance policy on a former  executive. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7)   | The      Company recorded the repurchase of: |
|-----------------|----------------------------------------------|

| -   | 1,658,607      shares of common stock for $32.4 million in2006 |
|---------------|----------------------------------------------------------------|

| -   | 406,780      shares of common stock for $6.0 million in 2004,  and |
|---------------|--------------------------------------------------------------------|

| -   | 54,200      shares of common stock for $935,000 in2003. |
|---------------|---------------------------------------------------------|

| (8)   | 2003      includes $7.3 million representing an accrued commitment for computer      equipment and peripherals that were purchased in the fourth quarter of      2003 and paid for in 2004. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9)   | Assets      of business transferred under contractual arrangements resulted from the      sale of the discontinued Wall Décor operation of Prints      Plus.  As a result of the deteriorating financial performance of      Prints Plus and its subsequent bankruptcy declaration, in 2004 certain      assets related to the Company’s preferred security interest in Prints Plus      totaling $7.7 million were written off and the Company’s revolving line of      credit to Prints Plus was repaid in full and then    terminated. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10)   | Represents      a benefit trust established in 2000 to fund supplemental retirement      benefits for certain current and former  executives. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| (11)   | At      the time of the PCA Acquisition, the Company acquired the host agreements      with Wal-Mart, the customer lists and additional goodwill.  See      Note  7 to the Notes to Consolidated Financial Statements for      further discussion. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item7.  

|                                               |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                               |   |   |   |   |   |   |   |   |   |
| Within      Sears or Sears Grand stores:           |   |   |   |   |   |   |   |   |   |
|        United States and Puerto Rico          |   |   | 893    |   |   |   | 894    |   |   |   | 894 |   |
|        Canada                                 |   |   | 112    |   |   |   | 112    |   |   |   | 114 |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Within      Wal-Mart stores:                       |   |   |   |   |   |   |   |   |   |   |   |   |
|        United States and Puerto Rico          |   |   | 1,702  |   |   |   | -      |   |   |   | - |   |
|        Canada                                 |   |   | 253    |   |   |   | -      |   |   |   | - |   |
|        Mexico                                 |   |   | 115    |   |   |   | -      |   |   |   | - |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Locations      not within Sears or Wal-Mart stores |   |   | 33     |   |   |   | 35     |   |   |   | 38 |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                              |   |   | 3,108  |   |   |   | 1,041  |   |   |   | 1,046 |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |

| thousands,      except share and per share data                                  |   |   |    |   |   |   |    | 2005       |   |
|----------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|------------|--------|
|                                                                             |   | 2007   |    |   | 2006   |   |    | (restated) |   |
| Net      sales                                                                   |   | $      | 424,026 |   |   | $      | 293,803 |       |   | $ | 291,984 |   |
|                                                                             |   |   |    |   |   |   |    |       |   |   |   |   |
| Cost      and expenses:                                                          |   |   |    |   |   |   |    |       |   |   |   |   |
| Cost      of sales (exclusive of depreciation and amortization shown      below) |   |   | 43,871  |   |   |   | 28,128  |       |   |   | 32,651 |   |
| Selling,      general and administrative expenses                                |   |   | 333,265 |   |   |   | 221,295 |       |   |   | 224,457 |   |
| Depreciation      and amortization                                               |   |   | 27,328  |   |   |   | 16,922  |       |   |   | 19,952 |   |
| Other      charges and impairments                                               |   |   | 5,195   |   |   |   | 1,240   |       |   |   | 2,767 |   |
|                                                                             |   |   | 409,659 |   |   |   | 267,585 |       |   |   | 279,827 |   |
|                                                                             |   |   |    |   |   |   |    |       |   |   |   |   |
| Income      from continuing operations                                           |   |   | 14,367  |   |   |   | 26,218  |       |   |   | 12,157 |   |
|                                                                             |   |   |    |   |   |   |    |       |   |   |   |   |
| Interest      expense                                                            |   |   | 10,652  |   |   |   | 2,380   |       |   |   | 1,795 |   |
| Interest      income                                                             |   |   | 1,834   |   |   |   | 565     |       |   |   | 697 |   |
| Lease      guarantee reserve reduction                                           |   |   | -       |   |   |   | (887    | )          |   |   | - |   |
| Loss      from debt extinguishment                                               |   |   | -       |   |   |   | -       |       |   |   | 529 |   |
| Other      income, net                                                           |   |   | 175     |   |   |   | 144     |       |   |   | 247 |   |
| Earnings      from continuing operations before income tax expense               |   |   | 5,724   |   |   |   | 25,434  |       |   |   | 10,777 |   |
|                                                                             |   |   |    |   |   |   |    |       |   |   |   |   |
| Income      tax expense                                                          |   |   | 1,951   |   |   |   | 9,107   |       |   |   | 1,905 |   |
|                                                                             |   |   |    |   |   |   |    |       |   |   |   |   |
| Net      earnings from continuing operations                                     |   |   | 3,773   |   |   |   | 16,327  |       |   |   | 8,872 |   |
|                                                                             |   |   |    |   |   |   |    |       |   |   |   |   |
| Net      loss from discontinued operations                                       |   |   | (197    | )      |   |   | -       |       |   |   | - |   |
|                                                                             |   |   |    |   |   |   |    |       |   |   |   |   |
| NET      EARNINGS                                                                |   | $      | 3,576   |   |   | $      | 16,327  |       |   | $ | 8,872 |   |
|                                                                             |   |   |    |   |   |   |    |       |   |   |   |   |
| Net      earnings per share - diluted                                            |   | $      | 0.56    |   |   | $      | 2.56    |       |   | $ | 1.13 |   |

| ·   | Net      sales for 2007 increased $130.2 million or 44%, to $424.0 million from the      $293.8 million reported in 2006 as a result of the inclusion of net sales      of $148.8 million attributable to the Company’s PMPS brand.  In      accordance with purchase accounting guidelines, PMPS’s deferred revenue      balance at the June 8, 2007 date of acquisition was reduced by a purchase      accounting adjustment to record deferred revenue as its fair value in      PictureMe Portrait Studio’s beginning, post-acquisition balance      sheet.  This purchase accounting adjustment has the effect of      reducing revenue in periods subsequent to the acquisition for one      year.  The deferred revenue adjustment resulted in  a      reduction in net sales of $8.2 million and an increased pre-tax loss from      operations of $3.4 million for fiscal 2007. SPS      net sales for fiscal 2007 decreased $18.5 million or 6% to $275.3 million      from the $293.8 million reported in fiscal 2006. The SPS sales performance      was the result of a 14% decline in sittings partially offset by a 9%      increase in average sale per customer sitting.  The Sears      Portrait Studio brand is experiencing lower customer response to its      direct marketing programs and significantly reduced same-day      business.  PMPS reported $148.8 million in sales for fiscal 2007      (June 8, 2007 through February 2,2008). |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net      sales for 2006 increased $1.8 million, or 1%, to $293.8 million from the      $292.0 million reported in 2005. The overall increase in sales is due to a      22% increase in average sales per customer sitting, partially offset by a      18% year-over-year decline in sittings. The      Company believes that its increase in average sale per customer sitting is      principally attributable to its customers’ positive response to the      differentiated value proposition created in the digital studio      environment, the result of selected price increases and suppression of      marketing to low-spending customers as well as increased sales of higher      value products and services such as digitally-enhanced and specialty      products, portraits on CD, and on-site printing made possible by the      Company’s digital conversion.  The rate of sittings decline      experienced in 2006 compared to 2005 was largely the impact of selected      price increases instituted late in 2005 as well as the reduction of      marketing directed at customer segments determined to be      unprofitable. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cost      of sales (exclusive of depreciation and amortization) was $43.9 million,      $28.1 million and $32.7 million in 2007, 2006 and 2005,      respectively. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|    | The      increase in cost of sales in 2007 as compared to 2006 is attributable to      the inclusion of PMPS brand cost of sales from the June 8, 2007 date of      acquisition.  This increase was partially offset by decreased      production costs resulting from lower overall manufacturing production      levels, additional gains in manufacturing productivity and an improved      product mix. The      decrease in cost of sales from 2005 to 2006 resulted principally from      lower overall production levels due to the decline in sittings, improved      manufacturing productivity resulting from experience gained from operating      in a fully digital environment for the entire fiscal year, improved      product mix and savings on film and shipping costs that resulted from the      completion of the digital conversion in the second half of fiscal      2005.    These decreases were partially offset by      additional costs incurred related to increased same-day, in-studio      fulfillment of portrait orders and increased sales of large format,      specialty products not previously available in the analog film      environment. |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Selling,      general and administrative (“SG&A”) expenses were $333.3 million,      $221.3 million and $224.5 million for fiscal years 2007, 2006 and 2005,      respectively. The      increase in 2007 SG&A costs is attributable to the inclusion      of  the PMPS brand costs from the June 8, 2007 date of      acquisition.  This increase was partially offset by the net      effect of lower studio and corporate employment costs, reduced host sales      commissions, reductions in various other operating expense categories      resulting from ongoing cost reduction efforts, increased professional      service costs, increased advertising spending and increased restricted      stock amortization expense associated with past performance      awards.  The reduction in studio and employment costs included      approximately $3.9 million resulting from a change in the Company’s      vacation and sick pay policy announced in the first quarter of      2007. The      $3.2 million decrease in SG&A costs in 2006 from 2005 is      primarily attributable to reductions totaling $2.2 million in various      operating expense categories resulting from the Company’s on-going cost      reduction efforts and the absence in 2006 of approximately $1.3 million of      costs incurred in 2005 in conjunction with the Company’s digital      conversion. Additionally, the Company experienced decreases in marketing      expense ($780,000) and workers’ compensation costs      ($770,000).  Marketing expense declined due to the      implementation of new marketing strategies developed in the second half of      2005 designed to improve the efficiency and productivity of the Company’s      customer acquisition and retention activities. Workers' compensation      expense decreased due to more favorable loss      experience.  Offsetting these positive impacts, studio      employment costs increased approximately $1.4 million during 2006 due to      higher staffing levels. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Depreciation      and amortization was $27.3 million in 2007, compared to $16.9 million in      2006 and $20.0 million in 2005. The increase in 2007 is attributable      to the inclusion of PMPS depreciation and amortization from the June 8,      2007 acquisition and includes $2.8 million of amortization resulting from      the allocation of the purchase price to certain amortizable intangible      assets.  The increase from the inclusion of the PMPS      depreciation and amortization was partially offset by a decline in      depreciation and amortization related to the Company’s non-PMPS assets.      The decrease in depreciation and amortization during 2006 was principally      attributable to reduced capital spending beginning in the fourth quarter      of 2005 and continuing throughout 2006 following the significant digital      investments made in 2004 and in the first three quarters of      2005. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other      charges and impairments reflect costs incurred from strategic actions      implemented by the Company to restructure its operations, costs that are      unpredictable and atypical of the Company’s operations and additional      charges due to asset impairments.  Actions taken over the past      three years are as follows: |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| thousands                                                                                            |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                 |   |   |   |   |   |   |   |   |   |
| Recorded      as a component of income (loss) from operations:                                       |   |   |   |   |   |   |   |   |   |
|         Impairment charges                                                                 |   | $      | 256    |   |   | $      | 179    |   |   | $ | 567 |     |
|         Reserves for severance and related costs                                           |   |   | 2,035  |   |   |   | 878    |   |   |   | 2,546 |   |
|         Other transition related costs - PCA Acquisition                                   |   |   | 2,817  |   |   |   | -      |   |   |   | - |   |
|         Other                                                                              |   |   | 87     |   |   |   | 183    |   |   |   | (346 | ) |
|                                                                                                 |   |   | 5,195  |   |   |   | 1,240  |   |   |   | 2,767 |   |
| Recorded      as a component of other (income) expense following income (loss) from      operations: |   |   |   |   |   |   |   |   |   |   |   |   |
|         Lease guarantee reserve reduction                                                  |   |   | -      |   |   |   | (887   | )      |   |   | - |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Other Charges and Impairments                                                             |   | $      | 5,195  |   |   | $      | 353    |   |   | $ | 2,767 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |

| ·   | Impairment      Charges During      2007, the Company incurred $256,000 of charges related to software that      will no longer be used in the business. During      2006, the Company incurred $179,000 of charges related to the write-off of      certain legacy equipment that will no longer be used in the      business. During      2005, the completion of the U.S. digital conversion necessitated the      write-down or write-off of certain parts and film inventories and      equipment previously utilized in the analog film environment amounting to      a total of $567,000. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Reserves      for Severance and Related Costs Charges      in 2007 were $2.0 million and principally related to severance costs      resulting from the termination of legacy PCA employees in connection with      the integration of operations of the PCA Acquisition into      CPI. Charges      in 2006 were $878,000 related principally to the separation of employment      of three executives, including the Company’s former CEO. During      2005, the Company recognized $1.0 million in expense consisting      principally of severance pay and supplemental retirement plan benefits      related to the early retirement of senior executives.  Also in      2005, ongoing litigation costs related to the 2004 dismissal of certain      former executives totaling $1.4 million and the cost of an executive      search for the CEO position totaling  $165,000. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other      Transition Related Costs - PCA Acquisition During      2007, in connection with the PCA Acquisition, the Company incurred      transition-related costs associated with combining the operations of PCA      into the CPI organization ($2.0 million), costs associated with the      closure of the institutional business acquired from PCA      ($265,000) and  costs associated with the transfer of      contractual obligations from PCA to CPI  ($523,000). |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other 2007      costs relates to one-time strategic studies and legal      charges. The      Company began a process to explore strategic alternatives to enhance      shareholder value in 2006.  Investment banking and legal      services in connection with this review totaled $183,000 in      2006. The      net credit in 2005 of $346,000 relates principally to the favorable      settlement of a claim resulting in a $400,000 refund related to      previously-paid loan commitment fees and  costs. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lease      Guarantee Reserve Reduction The lease guarantee reserve reduction recorded      in 2006 represents a partial reversal of reserves initially recorded in      2004 related to operating lease guarantees associated with the Company’s      former Wall Décor segment, Prints Plus.  As the total guarantee      related to these leases decreased with the passage of time, the payment of      rents by Prints Plus and the settlement by the Company of certain leases      rejected in bankruptcy, the related liability was reduced to reflect      management’s revised estimate of remaining potential loss.  This      reserve is more fully discussed in Note 15 in the accompanying Notes to      Condensed Consolidated FinancialStatements. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest      expense was $10.7 million in 2007 compared to $2.4 million in 2006      and $1.8 million in 2005. The increase in interest expense in 2007 as      compared to 2006 is primarily the result of higher average borrowings      after the refinancing of the credit agreement to fund the PCA Acquisition      as discussed in Note 9 as well as slightly higher interest rates and      increased fees for letters of credit.  Additionally, the Company      entered into an interest rate swap agreement that resulted in $2.9 million      of interest expense in fiscal 2007 in connection with marking such swap to      market.  The increase in interest expense in 2006 was primarily      the result of increased amortization of debt financing fees resulting from      2005 refinancing activities along with increased average borrowings in      2006 as compared to 2005. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest      income was $1.8 million in 2007 as compared to $565,000 in 2006 and      $697,000 in 2005.  This 2007 increase is primarily attributable      to higher invested balances in 2007 as compared to      2006.   In 2006, the decrease is primarily attributable to      lower invested balances subsequent to the purchase of stock in the Dutch      Auction self-tender for $32.5 million, which was funded in February      2006.  This decrease was partially offset by higher interest      rates earned on invested balances. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      loss from extinguishment of debt recorded in 2005 totaling $529,000      represents the payment of a make-whole fee of $457,000 and the write-off      of unamortized fees of $72,000, both related to the refinancing of the      Company’s Senior Notes in the fourth quarter of 2005.  This is      more fully discussed in the section of Management’s Discussion and      Analysis entitled “Net Cash Used in Investing Activities” which      follows. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      income tax expense on earnings from continuing operations totaled $2.0      million, $9.1 million and $1.9 million in 2007, 2006 and 2005,      respectively.    These provisions resulted in      effective tax rates of 34.1% in 2007, 35.8% in 2006 and 17.7% in      2005.   The decrease in the effective tax rate in 2007 is      attributable to employment tax credits resulting from the PCA      Acquisition.  Tax expense in 2006 was impacted by favorable      settlements of two state tax audits and refunds of previously paid      penalties and interest.  The reduction of certain deferred tax      liabilities in 2005 (see Note 2 to the consolidated financial statements)      reduced the effective tax rate by approximately      23.0%.  Offsetting this, the initiation of a dividend      reinvestment plan to repatriate qualified earnings related to the      Company’s Canadian subsidiary and amounting to $4.6 million increased the      2005 effective tax rate by approximately3.6%. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net      losses from discontinued operations were $197,000 in 2007.  In      connection with the PCA Acquisition, the Company decided to sell the      5-portrait studio operation in the United Kingdom (the UK      operations).   The decision was made in order to eliminate the      unprofitable operation. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| thousands                                    |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|----------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                                         |   |   |    |   |   |   |    |   |   |
| Net      cash provided by (used in):         |   |   |    |   |   |   |    |   |   |
|        Operating activities (1)         |   | $      | 41,696  |   |   | $      | 37,950  |   |   | $ | 18,697 |   |
|        Investing activities             |   |   | (99,883 | )      |   |   | (2,358  | )      |   |   | (17,633 | ) |
|        Financing activities             |   |   | 90,788  |   |   |   | (43,567 | )      |   |   | (1,223 | ) |
| Effect      of exchange rate changes on cash |   |   | 282     |   |   |   | -       |   |   |   | 545 |   |
| Net      increase (decrease) in cash         |   | $      | 32,883  |   |   | $      | (7,975  | )      |   | $ | 386 |   |
|                                         |   |   |    |   |   |   |    |   |   |   |   |   |

| (1)   | Includes      cash flows used in discontinued operations of $197 in  2007 |
|-----------------|---------------------------------------------------------------------------|

| thousands                       |   |  PAYMENTS      DUE BY PERIOD |    |
|---------------------------------|--------|-----------------------------------|---------|
|                            |   |                              |    |   |   |   |   |   |   |   |   |   |   | 2013      & |   |
|                            |   | Total                             |    |   | 2008 |   |   |   | 2009-10 |   |   |   | 2011-12 |   |   | Beyond |   |
| Contractual      obligations:   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term      debt (1)         |   | $                                 | 114,425 |   |   | $ | 8,697 |   |   | $ | 2,300 |   |   | $ | 103,428 |   |   | $ | - |   |
| Interest      expense (2)       |   |                              | 30,374  |   |   |   | 7,484 |   |   |   | 14,692 |   |   |   | 8,198 |   |   |   | - |   |
| Operating      leases           |   |                              | 1,103   |   |   |   | 559 |   |   |   | 496 |   |   |   | 48 |   |   |   | - |   |
| Purchase      obligations for   |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| materials      and services (3) |   |                              | 5,853   |   |   |   | 5,436 |   |   |   | 417 |   |   |   | - |   |   |   | - |   |
| Other      liabilities (4)      |   |                              | 1,556   |   |   |   | 1,407 |   |   |   | 98 |   |   |   | 33 |   |   |   | 18 |   |
|                            |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL                           |   | $                                 | 153,311 |   |   | $ | 23,583 |   |   | $ | 18,003 |   |   | $ | 111,707 |   |   | $ | 18 |   |
|                            |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| thousands                             |   | AMOUNT      OF COMMITMENT EXPIRATION PER PERIOD |   |
|---------------------------------------|--------|-------------------------------------------------|--------|
|                                  |   |                                            |   |   |   |   |   |   |   |   |   |   |   | 2013      & |   |
|                                  |   | Total                                           |   |   | 2008 |   |   |   | 2009-10 |   |   |   | 2011-12 |   |   | Beyond |   |
| Other      commitments:               |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Standby      letters of credit (5)    |   | $                                               | 21,519 |   |   | $ | 21,519 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Contingent      lease obligations (6) |   |                                            | 744    |   |   |   | 744 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Contingent      tax liability (7)     |   |                                            | 530    |   |   |   | 530 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                  |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL                                 |   | $                                               | 22,793 |   |   | $ | 22,793 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                  |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)   | The      long-term debt agreement includes mandatory prepayments based on the      Company’s levels of cash flow and certain transactions.  The      prepayment anticipated for early 2008 has been incorporated herein, but      amounts for subsequent years are not incorporated since they are not      currently estimable. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Amounts      represent the expected cash payments of the Company’s interest expense on      its long-term debt, calculated based on the rates      in effect at February 2,2008. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Amount      represents outstanding purchase commitments at February 2,      2008.  The purchase commitments relate principally to      photographic paper, manufacturing supplies, telecommunication services,      database maintenance contracts and marketing  initiatives. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Amounts      consist primarily of accruals for severance and related costs, which are      recorded at the contractual amounts due.   As      indicated in Note 13 in the accompanying Notes to Consolidated Financial      Statements, the projected benefit obligation of the Company’s pension plan      exceeded plan assets by $12.4 million at the end of 2007 and $16.4 million      at the end of 2006.  This $4.0 million decrease in the      underfunded status between 2007 and 2006 resulted from a $1.6 million      decline in the projected benefit obligation from $51.8 million to $50.2      million and a growth in the fair value of plan assets of $2.4      million.  The projected benefit obligation decreased as a result      of annual costs associated with service costs, interest costs and changes      in actuarial gains and losses all determined in accordance with Statement      of Financial Accounting Standards No. 87.  The $2.4 million      growth in fair value of plan assets in 2007 resulted from actual returns      on plan assets of $647,000 and employer contributions of $5.0 million,      offset by benefit payments of $3.3 million.  The Company expects      to make a contribution of approximately $3.0 million to the pension plan      in 2008. The Critical Accounting Estimates section and Note 13 in the      accompanying Notes to Consolidated Financial Statements provide a more      complete description of the status of the Company’s pension      plan. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | We      primarily use stand-by letters of credit to support our various      self-insurance programs.  The letters of credit generally have a      one-year maturity and are renewedannually. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | In      July 2001, the Company announced the completion of the sale of its Wall      Décor segment, Prints Plus, which included the ongoing guarantee of      certain operating real estate leases of Prints Plus.  As of      February 2, 2008, the maximum future obligation to the Company under its      guarantee of remaining leases is approximately $1.0 million before      consideration of replacement tenant income.  To recognize the      risk associated with these leases based upon the Company’s past experience      with renegotiating lease obligations and management’s evaluation of      remaining leases, all of which is more fully described in Note 15 to the      Consolidated Financial Statements, the Company has recorded lease      obligation reserves totaling approximately $744,000 at February 2, 2008.      Based on the status of remaining leases, the Company believes that the      $744,000 reserve is adequate to cover the potential losses to be realized      under the Company’s operating leaseguarantees. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | As      a result of the purchase agreement related to the PCA Acquisition, the      Company is required to indemnify the seller for a portion of the      obligations or liabilities of the sellers or any PCA subsidiary in      respect of a pre-petition Canadian tax assessment regarding disagreed      items on Canadian audits relating primarily to transfer pricing issues      between the United States and Canada for photo pricing, management fees      and mediation fees (the “Canadian Tax Liability”).  The Company      is liable for (a) 50% of any taxes paid by the sellers in respect of the      Canadian Tax Liability up to $500,000 and (b) 80% of any taxes paid by the      seller in respect of the Canadian Tax liability that are in excess of      $500,000 provided, however, that in no event shall the Company be      obligated to pay to the sellers any amounts in excess of      $1,500,000.   Upon purchase, the Company recorded CAD      $527,355, which is the Company’s best estimate of the amount owed for the      Canadian Tax Liability. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Notional      amount | Fixed      rate paid | Variable      rate received | Effective      date     | Expiration      date    |
|----------------------|----------------------|-----------------------------|-------------------------|-------------------------|
| $57,500,000          | 4.97%                | 5.69%                       | September      17, 2007 | September      17, 2010 |

Item8

| (a)    | FINANCIAL      STATEMENTS |   | PAGES                                                                                                                                                             |
|--------|---------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                      |   |
|   | -                         |   | Report      of Independent Registered Public Accounting Firm                                                                                                      |   | 33 |
|   | -                         |   | Consolidated Balance Sheets as of February 2, 2008 and      February 3, 2007                                                                                      |   | 34-35 |
|   | -                         |   | Consolidated Statements of Operations      for the fiscal years ended February      2, 2008, February 3, 2007 and February 4, 2006                                |   | 36 |
|   | -                         |   | Consolidated Statements of      Changes in Stockholders' Equity for      the fiscal years ended February 2, 2008, February 3, 2007      and      February 4, 2006 |   | 37 |
|   | -                         |   | Consolidated Statements of Cash Flows for the      fiscal years ended February 2, 2008, February      3, 2007 and February 4, 2006                                |   |        38-40 |
|   | -                         |   | Notes to Consolidated Financial    Statements                                                                                                                     |   | 41-70 |

Consoli

|                                                                                 |   |                  |    |   |                  |   |
|--------------------------------------------------------------------------------------|--------|-----------------------|---------|--------|-----------------------|--------|
| thousands                                                                            |   | February      2, 2008 |    |   | February      3, 2007 |   |
|                                                                                 |   |                  |    |   |                  |   |
| ASSETS                                                                               |   |                  |    |   |                  |   |
| Current      assets:                                                                 |   |                  |    |   |                  |   |
| Cash      and cash equivalents                                                       |   | $                     | 59,177  |   |                  | $      | 26,294 |   |
| Restricted      cash                                                                 |   |                  | -       |   |                  |   | 1,000 |   |
| Accounts      receivable:                                                            |   |                  |    |   |                  |   |   |   |
| Trade                                                                                |   |                  | 7,469   |   |                  |   | 7,308 |   |
| Other                                                                                |   |                  | 4,030   |   |                  |   | 489 |   |
| Inventories                                                                          |   |                  | 14,296  |   |                  |   | 9,067 |   |
| Prepaid      expenses and other current assets                                       |   |                  | 5,174   |   |                  |   | 5,157 |   |
| Deferred      tax assets                                                             |   |                  | 2,673   |   |                  |   | 5,756 |   |
|                                                                                 |   |                  |    |   |                  |   |   |   |
| Total      current assets                                                            |   |                  | 92,819  |   |                  |   | 55,071 |   |
|                                                                                 |   |                  |    |   |                  |   |   |   |
| Property      and equipment:                                                         |   |                  |    |   |                  |   |   |   |
| Land                                                                                 |   |                  | 5,065   |   |                  |   | 2,765 |   |
| Building      improvements                                                           |   |                  | 34,666  |   |                  |   | 26,485 |   |
| Leasehold      improvements                                                          |   |                  | 5,426   |   |                  |   | 4,383 |   |
| Photographic,      sales and manufacturing equipment                                 |   |                  | 166,404 |   |                  |   | 123,518 |   |
|                Total                         |   |                  | 211,561 |   |                  |   | 157,151 |   |
| Less      accumulated depreciation and amortization                                  |   |                  | 155,281 |   |                  |   | 130,458 |   |
|                Property and equipment, net   |   |                  | 56,280  |   |                  |   | 26,693 |   |
| Other      investments - supplemental retirement plan                                |   |                  | 3,508   |   |                  |   | 3,588 |   |
| Goodwill                                                                             |   |                  | 18,049  |   |                  |   | 512 |   |
| Intangible      assets, net of amortization of $2.8 million at February 2,      2008 |   |                  | 44,907  |   |                  |   | - |   |
| Deferred      tax assets                                                             |   |                  | 14,439  |   |                  |   | 6,488 |   |
| Other      assets                                                                    |   |                  | 6,515   |   |                  |   | 810 |   |
|                                                                                 |   |                  |    |   |                  |   |   |   |
| TOTAL      ASSETS                                                                    |   | $                     | 236,517 |   |                  | $      | 93,162 |   |
|                                                                                 |   |                  |    |   |                  |   |   |   |
| See      accompanying notes to consolidated financial statements.                    |   |                  |    |   |                  |   |   |   |

Consolidat

|                                                                                                                                                                                                                                                                                              |   |                  |     |    |                  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|----------|---------|-----------------------|--------|
| thousands,      except share and per share data                                                                                                                                                                                                                                              |   | February      2, 2008 |     |    | February      3, 2007 |   |
|                                                                                                                                                                                                                                                                                         |   |                  |     |    |                  |   |
| LIABILITIES                                                                                                                                                                                                                                                                                  |   |                  |     |    |                  |   |
| Current      liabilities:                                                                                                                                                                                                                                                                    |   |                  |     |    |                  |   |
| Current      maturities of long-term debt                                                                                                                                                                                                                                                    |   | $                     | 8,697    |    |                  | $      | 8,333 |   |
| Accounts      payable                                                                                                                                                                                                                                                                        |   |                  | 14,369   |    |                  |   | 3,317 |   |
| Accrued      employment costs                                                                                                                                                                                                                                                                |   |                  | 10,330   |    |                  |   | 12,770 |   |
| Customer      deposit liability                                                                                                                                                                                                                                                              |   |                  | 21,255   |    |                  |   | 15,468 |   |
| Income      taxes payable                                                                                                                                                                                                                                                                    |   |                  | 387      |    |                  |   | 890 |   |
| Sales      taxes payable                                                                                                                                                                                                                                                                     |   |                  | 4,884    |    |                  |   | 2,564 |   |
| Accrued      advertising expenses                                                                                                                                                                                                                                                            |   |                  | 1,266    |    |                  |   | 684 |   |
| Accrued      expenses and other liabilities                                                                                                                                                                                                                                                  |   |                  | 21,863   |    |                  |   | 5,381 |   |
|                                                                                                                                                                                                                                                                                         |   |                  |     |    |                  |   |   |   |
| Total      current liabilities                                                                                                                                                                                                                                                               |   |                  | 83,051   |    |                  |   | 49,407 |   |
|                                                                                                                                                                                                                                                                                         |   |                  |     |    |                  |   |   |   |
| Long-term      debt, less current maturities                                                                                                                                                                                                                                                 |   |                  | 103,022  |    |                  |   | 7,747 |   |
| Accrued      pension plan obligations                                                                                                                                                                                                                                                        |   |                  | 10,490   |    |                  |   | 14,367 |   |
| Supplemental      retirement plan obligations                                                                                                                                                                                                                                                |   |                  | 3,437    |    |                  |   | 3,472 |   |
| Customer      deposit liability                                                                                                                                                                                                                                                              |   |                  | 87       |    |                  |   | 2,508 |   |
| Other      liabilities                                                                                                                                                                                                                                                                       |   |                  | 19,456   |    |                  |   | 2,862 |   |
|                                                                                                                                                                                                                                                                                         |   |                  |     |    |                  |   |   |   |
| Total      liabilities                                                                                                                                                                                                                                                                       |   |                  | 219,543  |    |                  |   | 80,363 |   |
|                                                                                                                                                                                                                                                                                         |   |                  |     |    |                  |   |   |   |
| STOCKHOLDERS'      EQUITY                                                                                                                                                                                                                                                                    |   |                  |     |    |                  |   |   |   |
| Preferred      stock, no par value, 1,000,000 shares authorized; no shares      outstanding                                                                                                                                                                                                  |   |                  | -        |    |                  |   | - |   |
| Preferred      stock, Series A, no par value, 200,000 shares authorized; no      shares outstanding                                                                                                                                                                                          |   |                  | -        |    |                  |   | - |   |
| Common      stock, $.40 par value, 50,000,000 shares authorized; 17,028,315 and      16,975,343                                                                                                                                                                                              |   |                  |     |    |                  |   |   |   |
| shares      issued at February 2, 2008 and February 3, 2007,    respectively                                                                                                                                                                                                                 |   |                  | 6,811    |    |                  |   | 6,790 |   |
| Additional      paid-in capital                                                                                                                                                                                                                                                              |   |                  | 27,872   |    |                  |   | 25,510 |   |
| Retained      earnings                                                                                                                                                                                                                                                                       |   |                  | 222,435  |    |                  |   | 222,943 |   |
| Accumulated      other comprehensive loss                                                                                                                                                                                                                                                    |   |                  | (6,725   | )       |                  |   | (9,387 | ) |
|                                                                                                                                                                                                                                                                                         |   |                  | 250,393  |    |                  |   | 245,856 |   |
| Treasury      stock - at cost, 10,619,728 and  10,618,090 shares at February      2, 2008 and                               February 3, 2007, respectively |   |                  | (233,419 | )  |                  |   | (233,057 | )  |
|                                                                                                                                                                                                                                                                                         |   |                  |     |    |                  |   |   |   |
| Total      stockholders' equity                                                                                                                                                                                                                                                              |   |                  | 16,974   |    |                  |   | 12,799 |   |
|                                                                                                                                                                                                                                                                                         |   |                  |     |    |                  |   |   |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                              |   | $                     | 236,517  |    |                  | $      | 93,162 |   |
|                                                                                                                                                                                                                                                                                         |   |                  |     |    |                  |   |   |   |
| See      accompanying notes to consolidated financial statements.                                                                                                                                                                                                                            |   |                  |     |    |                  |   |   |   |

Consolid

| thousands,      except share and per share data                                               |   |   |      |   |   |   |      | 2005       |   |
|-----------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|------------|--------|
|                                                                                          |   | 2007   |      |   | 2006   |   |      | (restated) |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |
| Net      sales                                                                                |   | $      | 424,026   |   |   | $      | 293,803   |       |   | $ | 291,984 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Cost      and expenses:                                                                       |   |   |      |   |   |   |      |       |   |   |   |   |
|         Cost of sales (exclusive of depreciation and amortization shown      below) |   |   | 43,871    |   |   |   | 28,128    |       |   |   | 32,651 |   |
|         Selling, general and administrative expenses                                |   |   | 333,265   |   |   |   | 221,295   |       |   |   | 224,457 |   |
|         Depreciation and amortization                                               |   |   | 27,328    |   |   |   | 16,922    |       |   |   | 19,952 |   |
|         Other charges and impairments                                               |   |   | 5,195     |   |   |   | 1,240     |       |   |   | 2,767 |   |
|                                                                                          |   |   | 409,659   |   |   |   | 267,585   |       |   |   | 279,827 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Income      from continuing operations                                                        |   |   | 14,367    |   |   |   | 26,218    |       |   |   | 12,157 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Interest      expense                                                                         |   |   | 10,652    |   |   |   | 2,380     |       |   |   | 1,795 |   |
| Interest      income                                                                          |   |   | 1,834     |   |   |   | 565       |       |   |   | 697 |   |
| Lease      guarantee reserve reduction                                                        |   |   | -         |   |   |   | (887      | )          |   |   | - |   |
| Loss      from debt extinguishment                                                            |   |   | -         |   |   |   | -         |       |   |   | 529 |   |
| Other      income, net                                                                        |   |   | 175       |   |   |   | 144       |       |   |   | 247 |   |
| Earnings      from continuing operations before income tax expense                            |   |   | 5,724     |   |   |   | 25,434    |       |   |   | 10,777 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Income      tax expense                                                                       |   |   | 1,951     |   |   |   | 9,107     |       |   |   | 1,905 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Net      earnings from continuing operations                                                  |   |   | 3,773     |   |   |   | 16,327    |       |   |   | 8,872 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Net      loss from discontinued operations                                                    |   |   | (197      | )      |   |   | -         |       |   |   | - |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| NET      EARNINGS                                                                             |   | $      | 3,576     |   |   | $      | 16,327    |       |   | $ | 8,872 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| NET      EARNINGS (LOSS) PER COMMON SHARE                                                     |   |   |      |   |   |   |      |       |   |   |   |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Net      earnings per share from continuing operations - diluted                              |   | $      | 0.59      |   |   | $      | 2.56      |       |   | $ | 1.13 |   |
| Net      loss per share from discontinued operations - diluted                                |   |   | (0.03     | )      |   |   | -         |       |   |   | - |   |
| Net      earnings per share - diluted                                                         |   | $      | 0.56      |   |   | $      | 2.56      |       |   | $ | 1.13 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Net      earnings per share from continuing operations - basic                                |   | $      | 0.59      |   |   | $      | 2.57      |       |   | $ | 1.13 |   |
| Net      loss per share from discontinued operations - basic                                  |   |   | (0.03     | )      |   |   | -         |       |   |   | - |   |
| Net      earnings per share - basic                                                           |   | $      | 0.56      |   |   | $      | 2.57      |       |   | $ | 1.13 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Dividends      per share                                                                      |   | $      | 0.64      |   |   | $      | 0.64      |       |   | $ | 0.64 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| Weighted      average number of common and common equivalent shares      outstanding-diluted  |   |   | 6,415,706 |   |   |   | 6,375,709 |       |   |   | 7,881,060 |   |
| Weighted      average number of common and common equivalent shares      outstanding-basic    |   |   | 6,390,961 |   |   |   | 6,352,975 |       |   |   | 7,854,192 |   |
|                                                                                          |   |   |      |   |   |   |      |       |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                             |   |   |      |   |   |   |      |       |   |   |   |   |

Consolidated

| thousands,      except share and per share data                        |   |   |    |   |       |   |    |     |   |   | Accumulated        |   |   |         |    |   | Deferred            |   |     |   |   |
|------------------------------------------------------------------------|--------|--------|---------|--------|------------|--------|---------|----------|--------|--------|--------------------|--------|--------|--------------|---------|--------|---------------------|--------|----------|--------|--------|
|                                                                   |   |   |    |   | Additional |   |    |     |   |   | other              |   |   | Treasury     |    |   | compensation      - |   |     |   |   |
|                                                                   |   | Common |    |   | paid-in    |   |    | Retained |   |   | comprehensive      |   |   | stock,       |    |   | restricted          |   |     |   |   |
|                                                                   |   | stock  |    |   | capital    |   |    | earnings |   |   | income      (loss) |   |   | at      cost |    |   | stock               |   |     | Total  |   |
|                                                                   |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |
| Balance      at February 5, 2005                                       |   | $      | 7,373   |   |       | $      | 53,301  |     |   | $      | 206,812            |   |   | $            | (10,505 | )      |                | $      | (234,031 | )      |   | $ | (64 | ) |   | $ | 22,886 |   |
|                                                                   |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
| Net      earnings (as restated)                                        |   |   | -       |   |       |   | -       |     |   |   | 8,872              |   |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | 8,872 |   |
| Total      other comprehensive loss, net of tax effect                 |   |   | -       |   |       |   | -       |     |   |   | -                  |   |   |         | (666    | )      |                |   | -        |   |   |   | - |   |   |   | (666 | ) |
|        Total comprehensive income                                 |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   | 8,206 |   |
| Issuance      of common stock to employee benefit plans,               |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
|        restricted stock awards and option exercises               |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
|        (169,878 shares), net of tax effect                        |   |   | 55      |   |       |   | 2,287   |     |   |   | -                  |   |   |         | -       |   |                |   | 490      |   |   |   | (1,041 | ) |   |   | 1,791 |   |
| Dividends      ($0.64 per common share)                                |   |   | -       |   |       |   | -       |     |   |   | (5,018             | )      |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | (5,018 | ) |
| Amortization      of deferred compensation-restricted stock            |   |   | -       |   |       |   | -       |     |   |   | -                  |   |   |         | -       |   |                |   | -        |   |   |   | 728 |   |   |   | 728 |   |
|                                                                   |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
| Balance      at February 4, 2006 (as restated)                         |   | $      | 7,428   |   |       | $      | 55,588  |     |   | $      | 210,666            |   |   | $            | (11,171 | )      |                | $      | (233,541 | )      |   | $ | (377 | ) |   | $ | 28,593 |   |
|                                                                   |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
| Net      earnings                                                      |   |   | -       |   |       |   | -       |     |   |   | 16,327             |   |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | 16,327 |   |
| Total      other comprehensive earnings, net of tax effect             |   |   | -       |   |       |   | -       |     |   |   | -                  |   |   |         | 2,128   |   |                |   | -        |   |   |   | - |   |   |   | 2,128 |   |
|        Total comprehensive income                                 |   |   | -       |   |       |   | -       |     |   |   | -                  |   |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | 18,455 |   |
| Adoption      of SFAS 158, net of tax                                  |   |   | -       |   |       |   | -       |     |   |   | -                  |   |   |         | (344    | )      |                |   | -        |   |   |   | - |   |   |   | (344 | ) |
| Surrender      of employee shares to satisfy personal                  |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
|        tax liabilities upon vesting of formerly restricted shares |   |   | -       |   |       |   | -       |     |   |   | -                  |   |   |         | -       |   |                |   | (97      | )      |   |   | - |   |   |   | (97 | ) |
| Reclassification      of deferred compensation account                 |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
|        upon adoption of SFAS 123R                                 |   |   | -       |   |       |   | (377    | )        |   |   | -                  |   |   |         | -       |   |                |   | -        |   |   |   | 377 |   |   |   | - |   |
| Purchase      of treasury stock                                        |   |   |  - |   |       |   |  - |     |   |   | -                  |   |   |         | -       |   |                |   | (32,538  | )      |   |   | - |   |   |   | (32,538 | ) |
| Retirement      of 1,658,607 common shares acquired                    |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
|        through Dutch Auction self-tender offer                    |   |   | (663    | )      |       |   | (31,875 | )        |   |   | -                  |   |   |         | -       |   |                |   | 32,538   |   |   |   | - |   |   |   | - |   |
| Issuance      of common stock to employee benefit                      |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
|        plans, restricted stock awards, option exercises           |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
|        and option modification (90,414 shares)                    |   |   | 25      |   |       |   | 494     |     |   |   | -                  |   |   |         | -       |   |                |   | 581      |   |   |   | - |   |   |   | 1,100 |   |
| Stock-based      compensation recognized                               |   |   | -       |   |       |   | 776     |     |   |   | -                  |   |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | 776 |   |
| Excess      tax benefit related to stock-based compensation            |   |   | -       |   |       |   | 904     |     |   |   | -                  |   |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | 904 |   |
| Dividends      ($0.64 per common share)                                |   |   | -       |   |       |   | -       |     |   |   | (4,050             | )      |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | (4,050 | ) |
|                                                                   |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
| Balance      at February 3, 2007                                  |   | $      | 6,790   |   |       | $      | 25,510  |     |   | $      | 222,943            |   |   | $            | (9,387  | )      |                | $      | (233,057 | )      |   | $ | - |   |   | $ | 12,799 |   |
|                                                                   |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
| Net      earnings                                                      |   |   | -       |   |       |   | -       |     |   |   | 3,576              |   |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | 3,576 |   |
| Total      other comprehensive earnings, net of tax effect             |   |   | -       |   |       |   | -       |     |   |   | -                  |   |   |         | 2,662   |   |                |   | -        |   |   |   | - |   |   |   | 2,662 |   |
|        Total comprehensive income                                 |   |   | -       |   |       |   | -       |     |   |   | -                  |   |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | 6,238 |   |
| Surrender      of employee shares to satisfy personal                  |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
|        tax liabilities upon vesting of formerly restricted shares |   |   | -       |   |       |   | -       |     |   |   | -                  |   |   |         | -       |   |                |   | (551     | )      |   |   | - |   |   |   | (551 | ) |
| Issuance      of common stock to employee benefit plans                |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
|        and restricted stock awards (61,606 shares)                |   |   | 21      |   |       |   | 237     |     |   |   | -                  |   |   |         | -       |   |                |   | 189      |   |   |   | - |   |   |   | 447 |   |
| Stock-based      compensation recognized                               |   |   | -       |   |       |   | 2,724   |     |   |   | -                  |   |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | 2,724 |   |
| Decreased      tax benefit related to stock-based compensation         |   |   | -       |   |       |   | (599    | )        |   |   | -                  |   |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | (599 | ) |
| Dividends      ($0.64 per common share)                                |   |   | -       |   |       |   | -       |     |   |   | (4,084             | )      |   |         | -       |   |                |   | -        |   |   |   | - |   |   |   | (4,084 | ) |
|                                                                   |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |
| Balance      at February 2, 2008                                       |   | $      | 6,811   |   |       | $      | 27,872  |     |   | $      | 222,435            |   |   | $            | (6,725  | )      |                | $      | (233,419 | )      |   | $ | - |   |   | $ | 16,974 |   |
|                                                                   |   |   |    |   |       |   |    |     |   |   |               |   |   |         |    |   |                |   |     |   |   |   |   |   |   |   |   |   |

Consolidated 

| thousands                                                                                     |   |   |   |   |   |   |   | 2005       |   |
|-----------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|
|                                                                                          |   | 2007   |   |   | 2006   |   |   | (restated) |   |
| Reconciliation      of net earnings to cash flows provided by operating      activities:      |   |   |   |   |   |   |   |       |   |
|                                                                                          |   |   |   |   |   |   |   |       |   |
| Net      earnings                                                                             |   | $      | 3,576  |   |   | $      | 16,327 |       |   | $ | 8,872 |   |
|                                                                                          |   |   |   |   |   |   |   |       |   |   |   |   |
| Adjustments      for items not requiring cash:                                                |   |   |   |   |   |   |   |       |   |   |   |   |
|          Depreciation and amortization                                         |   |   | 27,328 |   |   |   | 16,922 |       |   |   | 19,952 |   |
|          Loss from discontinued operations                                     |   |   | 197    |   |   |   | -      |       |   |   | - |   |
|          Stock-based compensation expense                                      |   |   | 2,724  |   |   |   | 776    |       |   |   | 811 |   |
|          Loss from extinguishment of debt                                      |   |   | -      |   |   |   | -      |       |   |   | 529 |   |
|          Loss on disposition of property, plant and equipment                  |   |   | 319    |   |   |   | 220    |       |   |   | 554 |   |
|          Loss (gain) on sale of assets held for sale                           |   |   | 62     |   |   |   | (47    | )          |   |   | (9 | ) |
|          Deferred income tax provision                                         |   |   | 1,445  |   |   |   | 9,357  |       |   |   | (130 | ) |
|          Pension, supplemental retirement plan and profit sharing      expense |   |   | 2,009  |   |   |   | 2,337  |       |   |   | 2,198 |   |
|          Lease guarantee reserve reduction                                     |   |   | -      |   |   |   | (887   | )          |   |   | - |   |
|          Other                                                                 |   |   | 621    |   |   |   | 446    |       |   |   | 323 |   |
|                                                                                          |   |   |   |   |   |   |   |       |   |   |   |   |
| Increase      (decrease) in cash flow from operating assets and    liabilities:               |   |   |   |   |   |   |   |       |   |   |   |   |
|          Receivables and inventories                                           |   |   | 13     |   |   |   | 517    |       |   |   | 709 |   |
|          Prepaid expenses and other current assets                             |   |   | 550    |   |   |   | (636   | )          |   |   | 1,436 |   |
|          Accounts payable                                                      |   |   | 8,250  |   |   |   | (555   | )          |   |   | (4,983 | ) |
|          Contribution to pension plan                                          |   |   | (5,050 | )      |   |   | -      |       |   |   | (2,050 | ) |
|          Supplemental retirement plan payments                                 |   |   | (249   | )      |   |   | (283   | )          |   |   | (989 | ) |
|          Accrued expenses and other liabilities                                |   |   | (5,833 | )      |   |   | (2,003 | )          |   |   | (2,945 | ) |
|          Income taxes payable                                                  |   |   | (1,001 | )      |   |   | (373   | )          |   |   | (1,609 | ) |
|          Deferred revenues and related costs                                   |   |   | 2,655  |   |   |   | (3,118 | )          |   |   | (3,856 | ) |
|          Other                                                                 |   |   | 4,267  |   |   |   | (1,050 | )          |   |   | (116 | ) |
|                                                                                          |   |   |   |   |   |   |   |       |   |   |   |   |
| Cash      flows provided by continuing operations                                             |   |   | 41,893 |   |   |   | 37,950 |       |   |   | 18,697 |   |
| Cash      flows used in discontinued operations                                               |   |   | (197   | )      |   |   | -      |       |   |   | - |   |
| Cash      flows provided by operating activities                                              |   | $      | 41,696 |   |   | $      | 37,950 |       |   | $ | 18,697 |   |
|                                                                                          |   |   |   |   |   |   |   |       |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                             |   |   |   |   |   |   |   |       |   |   |   |   |

| thousands                                                                                                      |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|----------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                                                                                                           |   |   |    |   |   |   |    |   |   |
| Cash      flows provided by operating activities                                                               |   | $      | 41,696  |   |   | $      | 37,950  |   |   | $ | 18,697 |   |
|                                                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
| Cash      flows provided by (used in) financing activities:                                                    |   |   |    |   |   |   |    |   |   |   |   |   |
|          Repayment of long-term obligations                                                     |   |   | (17,241 | )      |   |   | (8,333  | )      |   |   | (25,680 | ) |
|          Proceeds from long-term borrowings                                                     |   |   | 115,000 |   |   |   | -       |   |   |   | 25,000 |   |
|          Payment of debt issuance costs                                                         |   |   | (2,737  | )      |   |   | -       |   |   |   | (1,087 | ) |
|          Make-whole payment to extinguish long-term debt                                        |   |   | -       |   |   |   | -       |   |   |   | (457 | ) |
|          Restricted cash - collateral for outstanding letters of    credit                      |   |   | -       |   |   |   | -       |   |   |   | 6,154 |   |
|          Restricted cash - release (establish) compensating balance under Credit      Agreement |   |   | 1,000   |   |   |   | -       |   |   |   | (1,000 | ) |
|          Purchase of treasury stock                                                             |   |   | -       |   |   |   | (32,538 | )      |   |   | - |   |
|          Cash dividends                                                                         |   |   | (4,084  | )      |   |   | (4,050  | )      |   |   | (5,018 | ) |
|          Surrender of employee shares to satisfy personal tax liability upon      vesting       |   |   |    |   |   |   |    |   |   |   |   |   |
|            of previously restricted stock                                             |   |   | (551    | )      |   |   | (97     | )      |   |   | - |   |
|          Stock option exercises                                                                 |   |   | -       |   |   |   | 589     |   |   |   | 865 |   |
|     Tax      benefit (deficiency) excess from stock-based compensation                     |   |   | (599    | )      |   |   | 904     |   |   |   | - |   |
|          Other                                                                                  |   |   | -       |   |   |   | (42     | )      |   |   | - |   |
|                                                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
|        Cash flows provided by (used in) financing activities                                              |   |   | 90,788  |   |   |   | (43,567 | )      |   |   | (1,223 | ) |
|                                                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
| Cash      flows (used in) provided by investing activities:                                                    |   |   |    |   |   |   |    |   |   |   |   |   |
|          Acquisition of certain net assets of Portrait Corporation of      America,             |   |   |    |   |   |   |    |   |   |   |   |   |
|            net of cash and cash equivalents acquired of $487 (excluding      unpaid   |   |   |    |   |   |   |    |   |   |   |   |   |
|            costs totaling $138)                                                       |   |   | (83,010 | )      |   |   | -       |   |   |   | - |   |
|          Additions to property and equipment                                                    |   |   | (17,113 | )      |   |   | (2,760  | )      |   |   | (20,235 | ) |
|          Proceeds from sale of property and equipment                                           |   |   | 16      |   |   |   | 80      |   |   |   | 118 |   |
|          Proceeds from sale of assets held for sale                                             |   |   | 144     |   |   |   | 204     |   |   |   | 49 |   |
|          Increase in assets held by Rabbi Trust                                                 |   |   | (182    | )      |   |   | (177    | )      |   |   | (286 | ) |
|          Proceeds from Rabbi Trust used for supplemental retirement plan      payments          |   |   | 262     |   |   |   | 295     |   |   |   | 891 |   |
|          Distribution of Rabbi Trust funds in excess of related      obligations                |   |   | -       |   |   |   | -       |   |   |   | 1,830 |   |
|                                                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
|          Cash flows used in investing activities                                                |   |   | (99,883 | )      |   |   | (2,358  | )      |   |   | (17,633 | ) |
|                                                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
| Effect      of exchange rate changes on cash and cash equivalents                                              |   |   | 282     |   |   |   | -       |   |   |   | 545 |   |
|                                                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
| Net      increase (decrease) in cash and cash equivalents                                                      |   |   | 32,883  |   |   |   | (7,975  | )      |   |   | 386 |   |
|                                                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
| Cash      and cash equivalents at beginning of year                                                            |   |   | 26,294  |   |   |   | 34,269  |   |   |   | 33,883 |   |
|                                                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
| Cash      and cash equivalents at end of year                                                                  |   | $      | 59,177  |   |   | $      | 26,294  |   |   | $ | 34,269 |   |
|                                                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                                              |   |   |    |   |   |   |    |   |   |   |   |   |

| thousands                                                                                             |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                  |   |   |   |   |   |   |   |   |   |
| Supplemental      cash flow information:                                                              |   |   |   |   |   |   |   |   |   |
|          Interest paid                                                                 |   | $      | 6,509  |   |   | $      | 2,224  |   |   | $ | 1,688 |   |
|          Income taxes paid                                                             |   | $      | 2,192  |   |   | $      | 1,311  |   |   | $ | 4,668 |   |
| Supplemental      non-cash financing activities:                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|          Issuance of treasury stock under the employee Profit Sharing      Plan        |   | $      | 442    |   |   | $      | 440    |   |   | $ | 490 |   |
|          Issuance of restricted and unrestricted stock to employees and      directors |   | $      | 2,690  |   |   | $      | 785    |   |   | $ | 1,300 |   |
|          Executive retirement stock option modifications                               |   | $      | 6      |   |   | $      | 71     |   |   | $ | 177 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                                     |   |   |   |   |   |   |   |   |   |   |   |   |

Notes to Consolidated 

| Fiscal      year |   | Ended                 |   | Weeks |
|------------------|--------|-----------------------|--------|-------|
| 2007             |   | February      2, 2008 |   | 52    |
| 2006             |   | February      3, 2007 |   | 52    |
| 2005             |   | February      4, 2006 |   | 52    |

| Building      improvements                           |   | 15 to 19    years      |
|------------------------------------------------------|--------|------------------------|
| Leasehold      improvements                          |   | 5 to 15    years       |
| Photographic, sales      and manufacturing equipment |   | 2 to 7      years |

| thousands,      except per share data                                           |   | 2005   |   |
|---------------------------------------------------------------------------------|--------|--------|--------|
|                                                                            |   |   |   |
| Net      earnings - as restated                                                 |   | $      | 8,872  |   |
| Less:      Additional stock-based employee compensation                         |   |   |   |   |
|            expense determined under fair value based   |   |   |   |   |
|            method for all awards, net of related taxes |   |   | (27    | ) |
|                                                                            |   |   |   |   |
| Net      earnings - pro forma                                                   |   | $      | 8,845  |   |
|                                                                            |   |   |   |   |
| Earnings      per common share - basic                                          |   |   |   |   |
|        As      reported                                                    |   | $      | 1.13   |   |
|        Pro forma                                                           |   | $      | 1.13   |   |
| Earnings      per common share - diluted                                        |   |   |   |   |
|        As reported                                                         |   | $      | 1.13   |   |
|        Pro forma                                                           |   | $      | 1.13   |   |

| NOTE 2   - | RESTATEMENT |
|--------------------------------|-------------|

|                                  |   | Fifty-two      weeks ended |   |
|---------------------------------------|--------|----------------------------|--------|
|                                  |   | February      4, 2006      |   |
|                                  |   | As                         |   |   |   |   |   |   |   |
|                                  |   | previously                 |   |   |   |   |   | As |   |
|                                  |   | reported                   |   |   | Adjustment |   |   | restated |   |
|                                  |   |                       |   |   |   |   |   |   |   |
| Income      tax expense               |   | $                          | 4,388  |   |   | $ | 2,483 |   |   | $ | 1,905 |   |
|                                  |   |                       |   |   |   |   |   |   |   |   |   |   |
| Net      earnings                     |   |                       | 6,389  |   |   |   | 2,483 |   |   |   | 8,872 |   |
|                                  |   |                       |   |   |   |   |   |   |   |   |   |   |
| Net      earnings per share - diluted |   |                       | 0.81   |   |   |   | 0.32 |   |   |   | 1.13 |   |
|                                  |   |                       |   |   |   |   |   |   |   |   |   |   |
| Net      earnings per share - basic   |   |                       | 0.81   |   |   |   | 0.32 |   |   |   | 1.13 |   |

| Current      assets                 |   | $      | 9,880   |   |
|-------------------------------------|--------|--------|---------|--------|
| Property      and equipment         |   |   | 36,788  |   |
| Goodwill                            |   |   | 17,338  |   |
| Intangibles                         |   |   | 47,017  |   |
| Other      assets                   |   |   | 8,475   |   |
|                                |   |   |    |   |
| Total      assets acquired          |   | $      | 119,498 |   |
|                                |   |   |    |   |
| Current      liabilities assumed    |   |   | (26,634 | )      |
| Long-term      liabilities assumed  |   |   | (9,229  | )      |
|                                |   |   |    |   |
| Total      allocated purchase price |   | $      | 83,635  |   |
|                                |   |   |    |   |

|                               |   | 2007   |    |   | 2006   |   |
|------------------------------------|--------|--------|---------|--------|--------|--------|
|                               |   |   |    |   |   |   |
| Revenue                            |   | $      | 506,808 |   |   | $      | 577,408 |   |
|                               |   |   |    |   |   |   |   |   |
| Net      loss                      |   | $      | (18,124 | )      |   | $      | (24,593 | ) |
|                               |   |   |    |   |   |   |   |   |
| Basic      loss per common share   |   | $      | (2.84   | )      |   | $      | (3.87 | ) |
|                               |   |   |    |   |   |   |   |   |
| Diluted      loss per common share |   | $      | (2.84   | )      |   | $      | (3.87 | ) |

| thousands                                  |   |   |   |
|--------------------------------------------|--------|--------|--------|
|                                       |   |        |   |
| Discontinued      operations:              |   |   |   |
|                                       |   |   |   |
| Net      sales                             |   | $      | 231    |   |
|                                       |   |   |   |   |
| Operating      loss                        |   | $      | (197   | ) |
| Tax      benefit                           |   |   | -      |   |
|                                       |   |   |   |   |
| Net      loss from discontinued operations |   | $      | (197   | ) |
|                                       |   |   |   |   |

| thousands                                      |   | February      2, 2008 |   |   | February      3, 2007 |   |
|------------------------------------------------|--------|-----------------------|--------|--------|-----------------------|--------|
|                                           |   |                  |   |   |                  |   |
| Raw      materials - film, paper and chemicals |   | $                     | 4,902  |   |                  | $      | 4,086 |   |
| Portraits      in process                      |   |                  | 2,244  |   |                  |   | 777 |   |
| Finished      portraits pending delivery       |   |                  | 1,187  |   |                  |   | 369 |   |
| Frames      and accessories                    |   |                  | 634    |   |                  |   | 1,118 |   |
| Studio      supplies                           |   |                  | 3,636  |   |                  |   | 2,083 |   |
| Equipment      repair parts and supplies       |   |                  | 1,246  |   |                  |   | 428 |   |
| Other                                          |   |                  | 447    |   |                  |   | 206 |   |
|                                           |   |                  |   |   |                  |   |   |   |
| Total                                          |   | $                     | 14,296 |   |                  | $      | 9,067 |   |
|                                           |   |                  |   |   |                  |   |   |   |

|                                        |   | February      2, 2008 |   |   | February      3, 2007 |   |
|---------------------------------------------|--------|-----------------------|--------|--------|-----------------------|--------|
|                                        |   |                  |   |   |                  |   |
| PCA      acquisition                        |   | $                     | 17,338 |   |                  | $      | - |   |
|                                        |   |                  |   |   |                  |   |   |   |
| Goodwill      from prior acquisitions       |   |                  | 512    |   |                  |   | 512 |   |
|                                        |   |                  |   |   |                  |   |   |   |
| Translation      impact on foreign balances |   |                  | 199    |   |                  |   | - |   |
|                                        |   | $                     | 18,049 |   |                  | $      | 512 |   |
|                                        |   |                  |   |   |                  |   |   |   |

|                         |   |              |   |   |         |   |   | Translation    |   |   |             |   |
|------------------------------|--------|-------------------|--------|--------|--------------|--------|--------|----------------|--------|--------|------------------|--------|
|                         |   |              |   |   |         |   |   | Impact      of |   |   |             |   |
|                         |   |              |   |   | Accumulated  |   |   | Foreign        |   |   |             |   |
|                         |   | Gross      Amount |   |   | Amortization |   |   | Balances       |   |   | Net      Balance |   |
|                         |   |              |   |   |         |   |   |           |   |   |             |   |
| Acquired      host agreement |   | $                 | 43,982 |   |         | $      | (1,359 | )              |   | $      | 646              |   |   | $ | 43,269 |   |
| Acquired      customer list  |   |              | 3,035  |   |         |   | (1,440 | )              |   |   | 43               |   |   |   | 1,638 |   |
|                         |   | $                 | 47,017 |   |         | $      | (2,799 | )              |   | $      | 689              |   |   | $ | 44,907 |   |
|                         |   |              |   |   |         |   |   |           |   |   |             |   |   |   |   |   |

| 2008   | $      2,841 |
|------------------|--------------|

| 2009   | $      2,450 |
|------------------|--------------|

| 2010   | $      2,253 |
|------------------|--------------|

| 2011   | $      2,156 |
|------------------|--------------|

| 2012   | $      2,101 |
|------------------|--------------|

| thousands                                                            |   | February      2, 2008 |    |   | February      3, 2007 |   |
|----------------------------------------------------------------------|--------|-----------------------|---------|--------|-----------------------|--------|
|                                                                 |   |                  |    |   |                  |   |
| Term      loan portion of the Credit Agreement,                      |   |                  |    |   |                  |   |
|      net      of unamortized issuance costs |   | $                     | 111,719 |   |                  | $      | 16,080 |   |
| Less:      current maturities                                        |   |                  | 8,697   |   |                  |   | 8,333 |   |
|                                                                 |   | $                     | 103,022 |   |                  | $      | 7,747 |   |
|                                                                 |   |                  |    |   |                  |   |   |   |

| thousands                       |   | 2007   |    |   |
|---------------------------------|--------|--------|---------|--------|
|                            |   |   |    |   |
| 2008                            |   | $      | 8,697   |   |   |
| 2009                            |   |   | 1,150   |   |   |
| 2010                            |   |   | 1,150   |   |   |
| 2011                            |   |   | 1,150   |   |   |
| 2012                            |   |   | 102,278 |   |   |
|                            |   | $      | 114,425 |   |   |
| Unamortized      issuance costs |   |   | 2,706   |   |   |
|                            |   | $      | 111,719 |   |   |
|                            |   |   |    |   |   |

| thousands                                                |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                     |   |   |   |   |   |   |   |   |   |
| Net      earnings                                        |   | $      | 3,576  |   |   | $      | 16,327 |   |   | $ | 8,872 |   |
| Other      comprehensive income (loss):                  |   |   |   |   |   |   |   |   |   |   |   |   |
|        Foreign currency translation adjustments     |   |   | 2,510  |   |   |   | (264   | )      |   |   | 947 |   |
|  Defined      benefit plans (1)                     |   |   | 152    |   |   |   | 2,392  |   |   |   | (1,613 | ) |
| Total      accumulated other comprehensive income (loss) |   |   | 2,662  |   |   |   | 2,128  |   |   |   | (666 | ) |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      comprehensive income                          |   | $      | 6,238  |   |   | $      | 18,455 |   |   | $ | 8,206 |   |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |

| thousands                                               |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|---------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                    |   |   |   |   |   |   |   |   |   |
| Foreign      currency translation adjustments           |   | $      | (1,608 | )      |   | $      | 902    |   |   | $ | 638 |   |
| Unfunded      projected benefit obligation, net of tax: |   |   |   |   |   |   | -      |   |   |   | - |   |
| Prior      service cost                                 |   |   | 131    |   |   |   | 178    |   |   |   | - |   |
|        Unamortized net actuarial losses            |   |   | 8,202  |   |   |   | 8,307  |   |   |   | - |   |
| Minimum      pension liability, net of taxes            |   |   | -      |   |   |   | -      |   |   |   | 10,533 |   |
| Accumulated      other comprehensive loss               |   | $      | 6,725  |   |   | $      | 9,387  |   |   | $ | 11,171 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |

| thousands                                                                                     |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-----------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                          |   |   |   |   |   |   |   |   |   |
| Recorded      as a component of income from operations:                                       |   |   |   |   |   |   |   |   |   |
| Impairment      charges                                                                       |   | $      | 256    |   |   | $      | 179    |   |   | $ | 567 |   |
| Reserves      for severance and related costs                                                 |   |   | 2,035  |   |   |   | 878    |   |   |   | 2,546 |   |
| Other      transition related costs - PCA Acquisition                                         |   |   | 2,817  |   |   |   | -      |   |   |   | - |   |
| Other                                                                                         |   |   | 87     |   |   |   | 183    |   |   |   | (346 | ) |
|                                                                                          |   |   | 5,195  |   |   |   | 1,240  |   |   |   | 2,767 |   |
| Recorded      as a component of other (income) expense following income from      operations: |   |   |   |   |   |   |   |   |   |   |   |   |
| Lease      guarantee reserve reduction                                                        |   |   | -      |   |   |   | (887   | )      |   |   | - |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Other Charges and Impairments                                                      |   | $      | 5,195  |   |   | $      | 353    |   |   | $ | 2,767 |   |

| thousands                                               |   |              |   |   |      |   |   | Asset       |   |   |       |   |   |     |   |   |              |   |
|---------------------------------------------------------|--------|-------------------|--------|--------|-----------|--------|--------|-------------|--------|--------|------------|--------|--------|----------|--------|--------|-------------------|--------|
|                                                    |   | Reserve           |   |   | 2006      |   |   | Write-      |   |   |       |   |   |     |   |   | Reserve           |   |
|                                                    |   | Balance           |   |   | Charges   |   |   | Downs/      |   |   |       |   |   | Cash     |   |   | Balance           |   |
|                                                    |   | Feb.      4, 2006 |   |   | (Credits) |   |   | Impairments |   |   | Recoveries |   |   | Payments |   |   | Feb.      3, 2007 |   |
| Recorded      as a component of income from operations: |   |              |   |   |      |   |   |        |   |   |       |   |   |     |   |   |              |   |
| Impairment      charges                                 |   | $                 | -      |   |      | $      | 179    |        |   | $      | (179       | )      |   | $        | -      |   |              | $      | - |   |   | $ | - |   |
| Reserves      for severance, executive retirements/     |   |              |   |   |      |   |   |        |   |   |       |   |   |     |   |   |              |   |   |   |   |   |   |   |
| repositioning      and related costs                    |   |              | 543    |   |      |   | 878    |        |   |   | -          |   |   |     | -      |   |              |   | (972 | ) |   |   | 449 |   |
| Other                                                   |   |              | 2      |   |      |   | 183    |        |   |   | -          |   |   |     | -      |   |              |   | (185 | ) |   |   | - |   |
|                                                    |   |              | 545    |   |      |   | 1,240  |        |   |   | (179       | )      |   |     | -      |   |              |   | (1,157 | ) |   |   | 449 |   |
| Recorded      as a component of other expense           |   |              |   |   |      |   |   |        |   |   |       |   |   |     |   |   |              |   |   |   |   |   |   |   |
| following      income from operations:                  |   |              |   |   |      |   |   |        |   |   |       |   |   |     |   |   |              |   |   |   |   |   |   |   |
| Lease      guarantee reserves                           |   |              | 2,630  |   |      |   | -      |        |   |   | -          |   |   |     | (887   | )      |              |   | (999 | ) |   |   | 744 |   |
|                                                    |   |              |   |   |      |   |   |        |   |   |       |   |   |     |   |   |              |   |   |   |   |   |   |   |
| Total                                                   |   | $                 | 3,175  |   |      | $      | 1,240  |        |   | $      | (179       | )      |   | $        | (887   | )      |              | $      | (2,156 | ) |   | $ | 1,193 |   |

| thousands                                                                                       |   |              |   |   |      |   |   | Asset       |   |   |     |   |   |              |   |
|-------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|-----------|--------|--------|-------------|--------|--------|----------|--------|--------|-------------------|--------|
|                                                                                            |   | Reserve           |   |   | 2007      |   |   | Write-      |   |   |     |   |   | Reserve           |   |
|                                                                                            |   | Balance           |   |   | Charges   |   |   | Downs/      |   |   | Cash     |   |   | Balance           |   |
|                                                                                            |   | Feb.      3, 2007 |   |   | (Credits) |   |   | Impairments |   |   | Payments |   |   | Feb.      2, 2008 |   |
| Recorded      as a component of income from operations:                                         |   |              |   |   |      |   |   |        |   |   |     |   |   |              |   |
| Reserves      for severance, executive retirements/                                             |   |              |   |   |      |   |   |        |   |   |     |   |   |              |   |
| repositioning      and related costs                                                            |   | $                 | 449    |   |      | $      | 2,035  |        |   | $      | -        |   |   | $                 | (909   | ) |   | $ | 1,575 |   |
| Other      transition related costs - PCA Acquisition                                           |   |              | -      |   |      |   | 2,817  |        |   |   | -        |   |   |              | (2,345 | ) |   |   | 472 |   |
| Impairment      charges                                                                         |   |              | -      |   |      |   | 256    |        |   |   | (256     | )      |   |              | -      |   |   |   | - |   |
| Contract      terminations and settlements                                                      |   |              | -      |   |      |   | 87     |        |   |   | -        |   |   |              | (87    | ) |   |   | - |   |
|                                                                                            |   |              | 449    |   |      |   | 5,195  |        |   |   | (256     | )      |   |              | (3,341 | ) |   |   | 2,047 |   |
| Recorded      as a component of other expense following  income      from operations: |   |              |   |   |      |   |   |        |   |   |     |   |   |              |   |   |   |   |   |   |
| Lease      guarantee reserves                                                                   |   |              | 744    |   |      |   | -      |        |   |   | -        |   |   |              | -      |   |   |   | 744 |   |
|                                                                                            |   |              |   |   |      |   |   |        |   |   |     |   |   |              |   |   |   |   |   |   |
| Total                                                                                           |   | $                 | 1,193  |   |      | $      | 5,195  |        |   | $      | (256     | )      |   | $                 | (3,341 | ) |   | $ | 2,791 |   |

|                               |   | 2007        |   |   | 2006        |   |   | 2005        |   |
|------------------------------------|--------|-------------|--------|--------|-------------|--------|--------|-------------|--------|
| Dividend      yield                |   |        | 3.4    | %      |        |   | 3.4    | %           |   |   | 3.6 | % |
| Stock      volatility factor       |   |        | 37.0   | %      |        |   | 37.0   | %           |   |   | 31.0 | % |
| Risk-free      interest rate       |   |        | 3.0    | %      |        |   | 3.0    | %           |   |   | 3.0 | % |
| Expected term      of options |   | 1      year |   |   | 1      year |   |   | 1      year |   |

|                                       |   | 2007   |      |   | 2006      |   |    | 2005   |   |
|--------------------------------------------|--------|--------|-----------|--------|-----------|--------|---------|--------|--------|
|                                       |   |   |      |   | Weighted- |   |    |   |   |   | Weighted- |   |   |   |   |   | Weighted- |   |
|                                       |   |   |      |   | Average   |   |    |   |   |   | Average |   |   |   |   |   | Average |   |
|                                       |   |   |      |   | Exercise  |   |    |   |   |   | Exercise |   |   |   |   |   | Exercise |   |
|                                       |   | Shares |      |   | Price     |   |    | Shares |   |   | Price |   |   | Shares |   |   | Price |   |
| Balance      at beginning of year          |   |   | 35,046    |   |      | $      | 15.56   |   |   |   | 126,020 |   |   | $ | 20.02 |   |   |   | 229,470 |   |   | $ | 19.28 |   |
| Granted                                    |   |   | -         |   |      |   | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Cancelled      or expired                  |   |   | -         |   |      |   | -       |   |   |   | (53,933 | ) |   |   | 25.75 |   |   |   | (45,464 | ) |   |   | 23.73 |   |
| Exercised                                  |   |   | -         |   |      |   |  - |   |   |   | (37,041 | ) |   |   | 15.90 |   |   |   | (57,986 | ) |   |   | 14.18 |   |
| End      of year balance                   |   |   | 35,046    |   |      | $      | 15.56   |   |   |   | 35,046 |   |   | $ | 15.56 |   |   |   | 126,020 |   |   | $ | 20.02 |   |
|                                       |   |   |      |   |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reserved      for future grant at year-end |   |   | 1,020,639 |   |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable                                |   |   | 35,046    |   |      | $      | 15.56   |   |   |   | 35,046 |   |   | $ | 15.56 |   |   |   | 126,020 |   |   | $ | 20.02 |   |

|                          |               |   | Options      Outstanding and Exercisable |   |
|-------------------------------|--------------------|--------|------------------------------------------|--------|
|                          |               |   |                                     |   |   | Weighted-Average |   |   |   |   |
|                          |               |   |                                     |   |   | Remaining      Contractual |   |   | Weighted-Average |   |
| Range      of Exercise Prices |               |   | Shares                                   |   |   | Life      (Years) |   |   | Exercise      Price |   |
|                          |               |   |                                     |   |   |   |   |   |   |   |
| $                             | 12.96              |   |                                     |   | 10,046 |   |   |   | 2.72 |   |   | $ | 12.96 |   |
| $                             | 16.50      - 17.00 |   |                                     |   | 25,000 |   |   |   | 2.18 |   |   |   | 16.60 |   |
|                          |               |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Total                         |               |   |                                     | 35,046 |   |   |   | 2.34 |   |   | $ | 15.56 |   |

|                                                                                |   | 2007   |    |   | 2006                  |   |      | 2005   |   |
|-------------------------------------------------------------------------------------|--------|--------|---------|--------|-----------------------|--------|-----------|--------|--------|
|                                                                                |   | Shares |    |   | Grant-date      Value |   |      | Shares |   |   | Grant-date      Value |   |   | Shares |   |   | Grant-date      Value |   |
| Nonvested      stock, beginning of year                                             |   |   | 4,448   |   |                  | $      | 17.99     |   |   |   | 29,727 |   |   | $ | 17.20 |   |   |   | 5,205 |   |   | $ | 13.45 |   |
| Granted                                                                             |   |   | 53,250  |   |                  |   | 50.52     |   |   |   | 44,207 |   |   |   | 17.75 |   |   |   | 64,730 |   |   |   | 16.67 |   |
| Vested                                                                              |   |   | (55,836 | )      |                  |   | 48.81     |   |   |   | (52,223 | ) |   |   | 17.39 |   |   |   | (37,396 | ) |   |   | 16.02 |   |
| Forfeited                                                                           |   |   | (278    | )      |                  |   | 54.00     |   |   |   | (17,263 | ) |   |   | 17.83 |   |   |   | (2,812 | ) |   |   | 13.66 |   |
| Nonvested      stock, end of year                                                   |   |   | 1,584   |   |                  | $      | 18.95     |   |   |   | 4,448 |   |   | $ | 17.99 |   |   |   | 29,727 |   |   | $ | 17.20 |   |
|                                                                                |   |   |    |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reserved      for future grant at year-end                                          |   |   | 187,937 |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |   |    |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based      compensation expense related to         restricted stock |   |   |    |   |                  | $      | 2,724,102 |   |   |   |   |   |   | $ | 776,088 |   |   |   |   |   |   | $ | 727,532 |   |
|                                                                                |   |   |    |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Future      compensation expense related to nonvested stock                         |   | $      | 29,252  |   |                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| thousands                                 |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                      |   |   |   |   |   |   |   |   |   |
| Profit      sharing                       |   | $      | 526    |   |   | $      | 442    |   |   | $ | 506 |   |
| Pension      plan expense                 |   |   | 1,202  |   |   |   | 1,614  |   |   |   | 1,412 |   |
| Supplemental      retirement plan expense |   |   | 281    |   |   |   | 281    |   |   |   | 280 |   |
| Total                                     |   | $      | 2,009  |   |   | $      | 2,337  |   |   | $ | 2,198 |   |

|                   |   |       |   |   | Plan      Assets at December 31, |   |
|------------------------|--------|------------|--------|--------|----------------------------------|--------|
|                   |   | Target     |   |   |                             |   |   |   |   |
| Asset      Category    |   | Allocation |   |   | 2007                             |   |   | 2006 |   |
| Equity      securities |   |       | 60     | %      |                             |   | 61 | % |   |   | 66 | % |
| Debt      securities   |   |       | 40     | %      |                             |   | 39 | % |   |   | 34 | % |
| Total                  |   |       | 100    | %      |                             |   | 100 | % |   |   | 100 | % |

|      |   | Pension      Plan |   |   | Supplemental      Retirement |   |
|-----------|--------|-------------------|--------|--------|------------------------------|--------|
| thousands |   | Benefits          |   |   | Plan      Benefits           |   |
|      |   |              |   |   |                         |   |
| 2008      |   | $                 | 2,000  |   |                         | $      | 180 |   |
| 2009      |   |              | 2,000  |   |                         |   | 130 |   |
| 2010      |   |              | 2,100  |   |                         |   | 40 |   |
| 2011      |   |              | 2,300  |   |                         |   | 60 |   |
| 2012      |   |              | 2,400  |   |                         |   | 100 |   |
| 2013-2017 |   |              | 14,600 |   |                         |   | 1,280 |   |

|        thousands                          |   | Defined      Benefit Plans |    |
|------------------------------------------------|--------|----------------------------|---------|
|                                           |   | Pension      Plan          |    |   | Supplemental      Retirement Plan |   |
|                                                |   | 2007                       |    |   | 2006 |   |   | 2007 |   |   | 2006 |   |
| Projected      benefit obligation              |   |                       |    |   |   |   |   |   |   |   |   |   |
| Benefit      obligation at beginning of year   |   | $                          | 51,836  |   |   | $ | 52,948 |   |   | $ | 3,702 |   |   | $ | 3,777 |   |
| Service      cost                              |   |                       | 279     |   |   |   | 404 |   |   |   | 77 |   |   |   | 76 |   |
| Interest      cost                             |   |                       | 2,936   |   |   |   | 2,869 |   |   |   | 206 |   |   |   | 200 |   |
| Actuarial      losses (gains)                  |   |                       | (1,494  | ) |   |   | (2,287 | ) |   |   | (118 | ) |   |   | (68 | ) |
| Benefit      payments                          |   |                       | (3,312  | ) |   |   | (2,098 | ) |   |   | (250 | ) |   |   | (283 | ) |
|                                           |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Benefit      obligation at end of year (1) (2) |   | $                          | 50,245  |   |   | $ | 51,836 |   |   | $ | 3,617 |   |   | $ | 3,702 |   |
|                                           |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair      value of plan assets                 |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair      value at beginning of year           |   | $                          | 35,472  |   |   | $ | 33,793 |   |   | $ | - |   |   | $ | - |   |
| Actual      return on plan assets              |   |                       | 647     |   |   |   | 3,777 |   |   |   | - |   |   |   | - |   |
| Employer      contributions (3)                |   |                       | 5,050   |   |   |   | - |   |   |   | 249 |   |   |   | 283 |   |
| Benefit      payments                          |   |                       | (3,312  | ) |   |   | (2,098 | ) |   |   | (249 | ) |   |   | (283 | ) |
|                                           |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair      value at end of year                 |   | $                          | 37,857  |   |   | $ | 35,472 |   |   | $ | - |   |   | $ | - |   |
|                                           |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Funded      status                             |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Funded      status at end of year              |   | $                          | (12,388 | ) |   | $ | (16,364 | ) |   | $ | (3,617 | ) |   | $ | (3,702 | ) |
| Unrecognized      prior service cost           |   |                       | 89      |   |   |   | 133 |   |   |   | 123 |   |   |   | 154 |   |
| Unrecognized      net loss (gain)              |   |                       | 13,859  |   |   |   | 13,944 |   |   |   | (658 | ) |   |   | (573 | ) |
|                                           |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      amount recognized                     |   | $                          | 1,560   |   |   | $ | (2,287 | ) |   | $ | (4,152 | ) |   | $ | (4,121 | ) |
|                                           |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Components      of consolidated balance sheet  |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accrued      benefit liability                 |   | $                          | (12,388 | ) |   | $ | (16,364 | ) |   | $ | (3,617 | ) |   | $ | (3,702 | ) |
| Accumulated      other comprehensive loss      |   |                       | 13,948  |   |   |   | 14,077 |   |   |   | (535 | ) |   |   | (419 | ) |
|                                           |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      amount recognized                     |   | $                          | 1,560   |   |   | $ | (2,287 | ) |   | $ | (4,152 | ) |   | $ | (4,121 | ) |

| (1)   | At      February 2, 2008 and February 3, 2007, the accumulated benefit obligation      for the pension plan was $49.6 million and $51.0 million,      respectively. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | At      February 2, 2008 and February 3, 2007, the accumulated benefit obligation      for the supplemental retirement plan was $3.5 million and $3.6 million,      respectively. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | For      the supplemental retirement plan for the fiscal years ended February 2,      2008 and February 3, 2007, the employer contributions were financed      through the liquidation of      investments in the Company’s Rabbi Trust.  For the fiscal year      ended February 2, 2008, contributions to the pension plan include $771,000      that was contributed after the      measurement date but prior toyear-end. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| thousands                                                                                   |   |              |   |   | Supplemental         |   |   |   |   |
|---------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|----------------------|--------|--------|--------|--------|
|                                                                                             |   | Pension      Plan |   |   | Retirement      Plan |   |   | Total  |   |
| Prior      Service Cost, net of tax:                                                        |   |              |   |   |                 |   |   |   |   |
|        Unrealized losses on net prior service cost at February 4,      2006            |   | $                 | -      |   |                 | $      | -      |   |   | $ | - |   |
|        Net prior service cost recorded in accumulated other comprehensive      loss    |   |              | 110    |   |                 |   | 114    |   |   |   | 224 |   |
|        Recognition of net prior service cost in earnings                               |   |              | (27    | )      |                 |   | (19    | )      |   |   | (46 | ) |
|        Unrealized losses on net prior service cost at February 3,      2007            |   |              | 83     |   |                 |   | 95     |   |   |   | 178 |   |
|        Recognition of net prior service cost in earnings                               |   |              | (28    | )      |                 |   | (19    | )      |   |   | (47 | ) |
|        Unrealized losses on net prior service cost at February 2,      2008            |   | $                 | 55     |   |                 | $      | 76     |   |   | $ | 131 |   |
|                                                                                        |   |              |   |   |                 |   |   |   |   |   |   |   |
| Actuarial      (Gain) Loss, net of tax:                                                     |   |              |   |   |                 |   |   |   |   |   |   |   |
|        Unrealized losses (gains) on net actuarial (gain)/loss at February 4,      2006 |   | $                 | 10,533 |   |                 | $      | -      |   |   | $ | 10,533 |   |
|        Net actuarial gains recorded in accumulated other comprehensive      loss       |   |              | (1,191 | )      |                 |   | (371   | )      |   |   | (1,562 | ) |
|        Recognition of net actuarial (losses)/gains in earnings                         |   |              | (680   | )      |                 |   | 16     |   |   |   | (664 | ) |
|        Unrealized losses (gains) on net actuarial (gain)/loss at February 3,      2007 |   |              | 8,662  |   |                 |   | (355   | )      |   |   | 8,307 |   |
|        Net actuarial gains recorded in accumulated other comprehensive      loss       |   |              | 485    |   |                 |   | (74    | )      |   |   | 411 |   |
|        Recognition of net actuarial (losses)/gains in earnings                         |   |              | (537   | )      |                 |   | 21     |   |   |   | (516 | ) |
|        Unrealized losses (gains) on net actuarial (gain)/loss at February 2,      2008 |   | $                 | 8,610  |   |                 | $      | (408   | )      |   | $ | 8,202 |   |

| thousands                                     |   | Pension      Plan |   |   | Supplemental      Retirement Plan |   |
|-----------------------------------------------|--------|-------------------|--------|--------|-----------------------------------|--------|
|                                               |   | 2007              |   |   | 2006                              |   |   | 2005 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Components      of net periodic benefit cost  |   |              |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service      cost                             |   | $                 | 279    |   |                              | $      | 404 |   |   | $ | 468 |   |   | $ | 77 |   |   | $ | 75 |   |   | $ | 112 |   |
| Interest      cost                            |   |              | 2,936  |   |                              |   | 2,869 |   |   |   | 2,796 |   |   |   | 206 |   |   |   | 200 |   |   |   | 249 |   |
|        Expected return on plan assets    |   |              | (2,924 | )      |                              |   | (2,799 | ) |   |   | (2,831 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
|  Amortization      of prior service cost |   |              | 44     |   |                              |   | 44 |   |   |   | 44 |   |   |   | 31 |   |   |   | 31 |   |   |   | 31 |   |
|  Amortization      of net (gain) loss    |   |              | 867    |   |                              |   | 1,096 |   |   |   | 935 |   |   |   | (33 | ) |   |   | (25 | ) |   |   | (18 | ) |
| Net      gain due to settlements              |   |              | -      |   |                              |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (94 | ) |
|                                          |   |              |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      periodic benefit                     |   | $                 | 1,202  |   |                              | $      | 1,614 |   |   | $ | 1,412 |   |   | $ | 281 |   |   | $ | 281 |   |   | $ | 280 |   |

|                                                |   | Pension      Plan |   |   | Supplemental      Retirement Plan |   |
|-----------------------------------------------------|--------|-------------------|--------|--------|-----------------------------------|--------|
|                                                |   | 2007              |   |   | 2006                              |   |   | 2005 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                                |   |              |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average      assumptions used to determine |   |              |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| benefit      obligations at fiscal year end:        |   |              |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount      rate                                  |   |              | 6.00   | %      |                              |   | 5.75 | % |   |   | 5.50 | % |   |   | 6.00 | % |   |   | 5.75 | % |   |   | 5.50 | % |
| Rate      of increase in future compensation        |   |              | 3.00   | %      |                              |   | 3.00 | % |   |   | 3.75 | % |   |   | 2.00 | % |   |   | 2.00 | % |   |   | 2.00 | % |
| Weighted-average      assumptions used to determine |   |              |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net      periodic benefit cost:                     |   |              |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount      rate                                  |   |              | 5.75   | %      |                              |   | 5.50 | % |   |   | 5.75 | % |   |   | 5.75 | % |   |   | 5.50 | % |   |   | 5.75 | % |
| Expected      long-term return on plan assets       |   |              | 8.25   | %      |                              |   | 8.25 | % |   |   | 8.50 | % |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |
| Rate      of increase in future compensation        |   |              | 3.00   | %      |                              |   | 3.75 | % |   |   | 3.75 | % |   |   | 2.00 | % |   |   | 2.00 | % |   |   | 2.00 | % |
|                                                |   |              |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| thousands                           |   | Pension      Plan |   |   | Supplemental      Retirement Plan |   |
|-------------------------------------|--------|-------------------|--------|--------|-----------------------------------|--------|
|                                |   | 2007              |   |   | 2006                              |   |   | 2007 |   |   | 2006 |   |
|                                |   |              |   |   |                              |   |   |   |   |   |   |   |
| Projected      benefit obligation   |   | $                 | 50,244 |   |                              | $      | 51,836 |   |   | $ | 3,617 |   |   | $ | 3,702 |   |
| Accumulated      benefit obligation |   |              | 49,647 |   |                              |   | 50,995 |   |   |   | 3,520 |   |   |   | 3,607 |   |
| Fair      value of plan assets      |   |              | 37,857 |   |                              |   | 35,472 |   |   |   | - |   |   |   | - |   |

| thousands                       |   |   |   |   |   |   |   |  2005 |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|
|                            |   | 2007   |   |   | 2006   |   |   | (restated) |   |
| Federal                         |   |   |   |   |   |   |   |       |   |
| Current                         |   | $      | (185   | )      |   | $      | (484   | )          |   | $ | 1,631 |   |
| Deferred                        |   |   | 254    |   |   |   | 8,411  |       |   |   | (428 | ) |
| Federal      income tax         |   |   | 69     |   |   |   | 7,927  |       |   |   | 1,203 |   |
| State                           |   |   |   |   |   |   |   |       |   |   |   |   |
| Current                         |   |   | 681    |   |   |   | 140    |       |   |   | 51 |   |
| Deferred                        |   |   | (368   | )      |   |   | 813    |       |   |   | 113 |   |
| State      income tax           |   |   | 313    |   |   |   | 953    |       |   |   | 164 |   |
| Foreign                         |   |   |   |   |   |   |   |       |   |   |   |   |
| Current                         |   |   | -      |   |   |   | 94     |       |   |   | 353 |   |
| Deferred                        |   |   | 1,569  |   |   |   | 133    |       |   |   | 185 |   |
| Foreign      income tax         |   |   | 1,569  |   |   |   | 227    |       |   |   | 538 |   |
|                            |   |   |   |   |   |   |   |       |   |   |   |   |
| Total      income tax provision |   | $      | 1,951  |   |   | $      | 9,107  |       |   | $ | 1,905 |   |
|                            |   |   |   |   |   |   |   |       |   |   |   |   |

| thousands                                           |   |   |   |    |   |   |   | 2005       |   |
|-----------------------------------------------------|--------|--------|--------|---------|--------|--------|--------|------------|--------|
|                                                     |   | 2007   |   |    | 2006   |   |   | (restated) |   |
|                                                |   |   |   |    |   |   |   |       |   |
| Tax      at statutory rate (34%)                    |   | $      | 1,946  |    |   | $      | 8,648  |       |   | $ | 3,664 |   |
| State      income tax, at statutory rate, net of    |   |   |   |    |   |   |   |       |   |   |   |   |
|        federal income tax benefit              |   |   | 244    |    |   |   | 629    |       |   |   | 281 |   |
| Tax      effect of:                                 |   |   |   |    |   |   |   |       |   |   |   |   |
|        Reduction of deferred tax liabilities   |   |   | -      |    |   |   | -      |       |   |   | (2,483 | ) |
|        Expenses not deductible                 |   |   | 248    |    |   |   | 184    |       |   |   | 158 |   |
|        Tax credits and exclusions              |   |   | (691   | )       |   |   | (244   | )          |   |   | (381 | ) |
|        Valuation allowance                     |   |   | 457    |    |   |   | -      |       |   |   | (289 | ) |
|        Foreign taxes                           |   |   | 385    |    |   |   | 41     |       |   |   | 372 |   |
|        Tax settlements                         |   |   | -      |    |   |   | (151   | )          |   |   | 376 |   |
|        Tax true-ups                            |   |   | (621   | )  |   |   | -      |       |   |   | - |   |
|        US tax on 965 dividend                  |   |   | -      |    |   |   | -      |       |   |   | 242 |   |
|        US tax benefit of foreign tax deduction |   |   | (17    | )       |   |   | -      |       |   |   | (35 | ) |
|                                                |   |   |   |    |   |   |   |       |   |   |   |   |
| Applicable      income taxes                        |   | $      | 1,951  |    |   | $      | 9,107  |       |   | $ | 1,905 |   |

| Balance      at February 4, 2007                   |   | $      | -      |   |
|----------------------------------------------------|--------|--------|--------|--------|
| Increase      related to current year tax position |   |   | 2,660  |   |
|                                               |   |   |   |   |
| Balance      at February 2, 2008                   |   | $      | 2,660  |   |
|                                               |   |   |   |   |

|                                                                                         |   |   |   |   |   |   |
|-----------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| thousands                                                                               |   | 2007   |   |   | 2006   |   |
|                                                                                    |   |   |   |   |   |   |
| Deferred      tax assets                                                                |   |   |   |   |   |   |
|        Federal, state and foreign operating and capital loss      carryforwards    |   | $      | 3,806  |   |   | $      | 4,577 |   |
|        Pension and supplemental retirement plan benefits                           |   |   | 5,541  |   |   |   | 6,111 |   |
|        Reserves, principally due to accrual for financial reporting      purposes  |   |   | 3,047  |   |   |   | 3,076 |   |
|        Revenue recognition, principally due to SAB 104                             |   |   | 8      |   |   |   | 588 |   |
|        Federal and foreign tax credit carry forwards                               |   |   | 3,735  |   |   |   | 2,420 |   |
|        Interest rate swap                                                          |   |   | 1,113  |   |   |   | - |   |
|        Property and equipment, principally due to differences in      depreciation |   |   | 2,719  |   |   |   | - |   |
|        Other                                                                       |   |   | 260    |   |   |   | - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Gross      deferred tax assets                                                          |   |   | 20,229 |   |   |   | 16,772 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Deferred      tax liabilities                                                           |   |   |   |   |   |   |   |   |
|        Property and equipment, principally due to differences in      depreciation |   |   | -      |   |   |   | (1,781 | ) |
|        Other                                                                       |   |   | -      |   |   |   | (87 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Gross      deferred tax liabilities                                                     |   |   | -      |   |   |   | (1,868 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
|        Valuation allowance                                                         |   |   | (3,117 | )      |   |   | (2,660 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net      deferred tax asset                                                             |   | $      | 17,112 |   |   | $      | 12,244 |   |

| 2008                        |   | $      | 559    |   |
|-----------------------------|--------|--------|--------|--------|
| 2009                        |   |   | 339    |   |
| 2010                        |   |   | 157    |   |
| 2011                        |   |   | 40     |   |
| 2012                        |   |   | 8      |   |
| Total      minimum payments |   | $      | 1,103  |   |
|                        |   |   |   |   |

| 2008                        |   | $      | 487    |   |
|-----------------------------|--------|--------|--------|--------|
| 2009                        |   |   | 313    |   |
| 2010                        |   |   | 104    |   |
|                        |   |   |   |   |
| Total      minimum payments |   | $      | 904    |   |
|                        |   |   |   |   |

| thousands,      except per share data                                      |   | QUARTER      ENDED: |   |
|----------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                       |   |                |   |   |   |   |   |   |   |   |   |   |
|  FISCAL      YEAR 2007                                                |   | April      28, 2007 |   |   | July      21, 2007 |   |   | November      10, 2007 |   |   | February      2, 2008 |   |
|                                                                       |   | (12      weeks)     |   |   | (12      weeks) |   |   | (16      weeks) |   |   | (12      weeks) |   |
| Net      sales                                                             |   | $                   | 57,761 |   |   | $ | 68,104 |   |   | $ | 135,391 |   |   | $ | 162,770 |   |
| Gross      profit                                                          |   |                | 49,338 |   |   |   | 57,614 |   |   |   | 115,117 |   |   |   | 144,145 |   |
| Net      earnings (loss) from continuing operations                        |   |                | 2,555  |   |   |   | (4,495 | ) |   |   | (10,016 | ) |   |   | 15,729 |   |
| Net      earnings (loss) from discontinued operations                      |   |                | -      |   |   |   | (106 | ) |   |   | (91 | ) |   |   | - |   |
| Net      earnings (loss)                                                   |   |                | 2,555  |   |   |   | (4,601 | ) |   |   | (10,107 | ) |   |   | 15,729 |   |
| Net      earnings (loss) per share from continuing operations -    diluted |   | $                   | 0.40   |   |   | $ | (0.70 | ) |   | $ | (1.56 | ) |   | $ | 2.44 |   |
| Net      loss per share from discontinued operations- diluted              |   | $                   | -      |   |   | $ | (0.02 | ) |   | $ | (0.01 | ) |   | $ | - |   |
| Net      earnings (loss) per share - diluted                               |   | $                   | 0.40   |   |   | $ | (0.72 | ) |   | $ | (1.57 | ) |   | $ | 2.44 |   |
| Net      earnings (loss) per share from continuing operations -    basic   |   | $                   | 0.40   |   |   | $ | (0.70 | ) |   | $ | (1.56 | ) |   | $ | 2.45 |   |
| Net      loss per share from discontinued operations - basic               |   | $                   | -      |   |   | $ | (0.02 | ) |   | $ | (0.01 | ) |   | $ | - |   |
| Net      (loss) earnings per share - basic                                 |   | $                   | 0.40   |   |   | $ | (0.72 | ) |   | $ | (1.57 | ) |   | $ | 2.45 |   |
| Weighted      average number of common and equivalent shares - diluted     |   |                | 6,388  |   |   |   | 6,386 |   |   |   | 6,402 |   |   |   | 6,434 |   |
| Weighted      average number of common and equivalent shares - basic       |   |                | 6,363  |   |   |   | 6,386 |   |   |   | 6,402 |   |   |   | 6,409 |   |

| thousands,      except per share data                                  |   | QUARTER      ENDED: |   |
|------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                   |   |                |   |   |   |   |   |   |   |   |   |   |
| FISCAL      YEAR 2006                                                  |   | April      29, 2006 |   |   | July      22, 2006 |   |   | November      11, 2006 |   |   | February      3, 2007 |   |
|                                                                   |   | (12      weeks)     |   |   | (12      weeks) |   |   | (16      weeks) |   |   | (12      weeks) |   |
| Net      sales                                                         |   | $                   | 59,670 |   |   | $ | 56,345 |   |   | $ | 77,050 |   |   | $ | 100,738 |   |
| Gross      profit                                                      |   |                | 51,090 |   |   |   | 47,650 |   |   |   | 65,516 |   |   |   | 89,198 |   |
| Net      earnings (loss)                                               |   |                | 1,844  |   |   |   | 640 |   |   |   | (951 | ) |   |   | 14,794 |   |
| Net      earnings (loss) per share - diluted                           |   | $                   | 0.29   |   |   | $ | 0.10 |   |   | $ | (0.15 | ) |   | $ | 2.32 |   |
| Net      earnings (loss) per share - basic                             |   | $                   | 0.29   |   |   | $ | 0.10 |   |   | $ | (0.15 | ) |   | $ | 2.33 |   |
| Weighted      average number of common and equivalent shares - diluted |   |                | 6,378  |   |   |   | 6,369 |   |   |   | 6,351 |   |   |   | 6,382 |   |
| Weighted      average number of common and equivalent shares - basic   |   |                | 6,365  |   |   |   | 6,342 |   |   |   | 6,351 |   |   |   | 6,355 |   |

| a)   | Evaluation of disclosure controls and  procedures |
|----------------|---------------------------------------------------|

| b)   | Management’s Report      on Internal Controls Over Financial  Reporting |
|----------------|-----------------------------------------------------------------------------------------|

| c)   | Changes      in Internal Control |
|----------------|----------------------------------|

| d)   | Remediation      Activities |
|----------------|-----------------------------|

| ·  | Implementing      effective controls over tax depreciation amounts, which include the timely      resolution of reconciling items between the Company’s tax returns, the      Company’s tax depreciation records, and the calculations of deferred taxes      and income tax expense. |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·  | Establishing      management monitoring controls to ensure those reconciliation controls are      designed and operating effectively. |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·  | Establishing      policies and procedures to ensure the fair value of the interest rate swap      is properly determined andrecorded. |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·  | Establishing      management monitoring controls to policies and procedures over determining      and recording of the interest rate swap is designed and operating      effectively.                       |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·  | Establishing      policies and procedures to ensure the accrual for unpaid advertising costs      is properly determined and recorded.                                                                                     |
| ·  | Establishing      management monitoring controls for policies and procedures over the      determination and recording of the advertising accrual to ensure      controls are designed and operatingeffectively. |

| e)   | Report of      Independent Registered Public AccountingFirm |
|----------------|-------------------------------------------------------------|

PART III

| Item      12. | Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters |
|---------------|----------------------------------------------------------------------------------------------------------|

|                                  |   |                         |   |   |                         |   |   | Number      of securities         |   |   |      |
|---------------------------------------|--------|------------------------------|--------|--------|------------------------------|--------|--------|-----------------------------------|--------|--------|-----------|
|                                  |   |                         |   |   |                         |   |   | remaining      available for      |   |   |      |
|                                  |   | Number      of securities to |   |   | Weighted-average             |   |   | future      issuance under equity |   |   |      |
|                                  |   | be      issued upon exercise |   |   | exercise      price of       |   |   | compensation      plans           |   |   |      |
|                                  |   | of      outstanding options, |   |   | outstanding      options,    |   |   | (excluding      securities        |   |   |      |
| Plan      Category                    |   | warrants      and rights (a) |   |   | warrants      and rights (b) |   |   | reflected      in column (a)) (c) |   |   |      |
| Equity      compensation plans        |   |                         |   |   |                         |   |   |                              |   |   |      |
| approved      by security holders     |   |                         | 35,046 |   |                         | $      | 15.56  |                              |   |   | 1,218,015 |   | (1 | ) |
| Equity      compensation plans not    |   |                         |   |   |                         |   |   |                              |   |   |      |   |   |   |
| approved      by security holders (2) |   |                         | -      |   |                         |   | -      |                              |   |   | 80,232    |   | (3 | ) |
| Total                                 |   |                         | 35,046 |   |                         | $      | 15.56  |                              |   |   | 1,298,247 |   |   |   |
|                                  |   |                         |   |   |                         |   |   |                              |   |   |      |   |   |   |

| (1)   | Includes      1,020,639 shares reserved for issuance under the Company’s stock option      plan, 187,937 shares reserved for issuance under the Company’s restricted      stock plan and 9,439 shares reserved for issuance under the Company’s      employees’ profit sharing plan. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The      only plan not approved by security holders is the Company’s stock bonus      plan.  This plan was enacted in fiscal 1982 and is no longer      active.  The remaining awards granted under this plan vested in      fiscal 2003. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Represents      80,232 shares reserved for issuance under the Company’s inactive stock      bonus plan. |
|-----------------|---------------------------------------------------------------------------------------------------------------|

PART IV

| (1.)   |   | FINANCIAL STATEMENTS |   |   |                                                                              |                                                                        |   | PAGES  |
|--------|--------|----------------------|--------|--------|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------------|--------|--------|
|   |   |                 |   |   |                                                                              |                                                                        |   |   |   |   |   |   |   |   |
|   |   |                 | -      |   | Report      of Independent Registered Public Accounting Firm                      |                                                                        | 33     |
|   |   |                 | -      |   | Consolidated      Balance Sheets as of February 2, 2008 and February 3, 2007      |                                                                        | 34-35  |
|   |   |                 | -      |   | Consolidated      Statements of Operations for the fiscal years ended             |                                                                        |   |
|   |   |                 |   |   | February      2, 2008, February 3, 2007 and February 4, 2006                      |                                                                        | 36     |
|   |   |                 | -      |   | Consolidated      Statements of Changes in Stockholders' Equity for the    fiscal |                                                                        |   |
|   |   |                 |   |   |                                                                              | years      ended February 2, 2008, February 3, 2007 and February 4,    2006 |   | 37     |
|   |   |                 | -      |   | Consolidated      Statements of Cash Flows for the fiscal years ended             |                                                                        |   |
|   |   |                 |   |   |                                                                              | February      2, 2008, February 3, 2007 and February 4, 2006                |   | 38-40  |
|   |   |                 | -      |   | Notes      to Consolidated Financial Statements                                   |                                                                        | 41-70  |

| (a)   | EXHIBITINDEX |
|-----------------|--------------|

| EXHIBIT |   |                                                                                                          |
|---------|--------|---------------------------------------------------------------------------------------------------------------|
| NUMBER  |   | DESCRIPTION                                                                                                   |
|    |   |                                                                                                          |
| (3.1)   |   | Articles      of Incorporation of the Company, incorporated by reference to CPI Corp.'s      Annual Report    |
|    |   | for      fiscal year 1989 on Form 10-K, Exhibit 3.1, filed  4/30/90.                                          |
|    |   |                                                                                                          |
| (3.2)   |   | Amended      and Restated By-laws of the Company, incorporated by reference to CPI      Corp.'s               |
|    |   | Form      8-K, Exhibit 3.2, filed June 5, 2007.                                                               |
|    |   |                                                                                                          |
| (4.1)   |   | Form      of Rights Agreement, Dated as of March 13, 2000 between CPI Corp. and      Harris Trust and         |
|    |   | Savings      Bank, incorporated by reference to CPI Corp.'s Form 8-A, Exhibit 4.5,      dated March 14, 2000. |
|    |   |                                                                                                          |
| (10.1)  |   | License      Agreement Sears, Roebuck & Co. dated 1/1/99, incorporated by reference      to CPI Corp.'s   |
|    |   | Annual      Report for fiscal year 1998 on Form 10-K, Exhibit 10.28,  filed      5/5/99.            |
|    |   |                                                                                                          |
| (10.2)  |   | Second      Amendment dated 11/10/99 to License Agreement Sears, Roebuck & Co.,      incorporated         |
|    |   | by      reference to CPI Corp.'s Form 10-Q, Exhibit 5.1, filed      12/23/99.                                 |
|    |   |                                                                                                          |
| (10.3)  |   | License      Agreement Sears, Roebuck & Co. (Off Mall) dated 1/1/99, incorporated      by reference to    |
|    |   | CPI      Corp.'s Annual Report for fiscal year 1998 on Form 10-K, Exhibit 10.29,      filed 5/5/99.           |
|    |   |                                                                                                          |
| (10.4)  |   | Second      Amendment dated 11/10/99 to License Agreement Sears, Roebuck & Co.      (Off Mall),           |
|    |   | incorporated      by reference to CPI Corp.'s Form 10-Q, Exhibit 5.2, filed      12/23/99.                    |
|    |   |                                                                                                          |
| (10.5)  |   | License      Agreement Sears, Roebuck De Puerto Rico, Inc. dated 1/1/99, incorporated      by reference       |
|    |   | to      CPI Corp.'s Annual Report for fiscal year 1998 on Form 10-K, Exhibit      10.30, filed 5/5/99.        |
|    |   |                                                                                                          |
| (10.6)  |   | Development      and License Agreement dated 1/31/01 between Sears, Roebuck & Co.      and                |
|    |   | Consumer      Programs, Incorporated, incorporated by reference to CPI Corp.'s Annual      Report for         |
|    |   | fiscal      year 2000 on Form 10-K, Exhibit 10.15, filed 5/3/01.                                              |
|    |   |                                                                                                          |
| (10.7)  |   | Third      Amendment dated 6/5/02 to Sears License Agreement, incorporated      by reference to          |
|    |   | CPI      Corp.'s Form 10-Q, Exhibit 10.51, filed 6/7/02.                                                      |
|    |   |                                                                                                          |
| (10.8)  |   | Sixth      Amendment dated 11/20/02 to Sears License Agreement, incorporated by      reference to             |
|    |   | CPI      Corp.'s Form 10-Q, Exhibit 10.54, filed 12/11/02.                                                    |
|    |   |                                                                                                          |
| (10.9)  |   | Third      Amendment to Sears License Agreement (Off Mall) dated 11/20/02,      incorporated by               |
|    |   | reference      to CPI Corp.'s Form 10-Q, Exhibit 10.55, filed12/11/02.                                        |
|    |   |                                                                                                          |
| (10.10) |   | Fourth      Amendment to Sears License Agreement (Off Mall) dated 11/20/02,      incorporated by              |
|    |   | reference      to CPI Corp.'s Form 10-Q, Exhibit 10.56,      filed  12/11/02.                       |
|    |   |                                                                                                          |
| (10.11) |   | Fifth      Amendment to Sears License Agreement (Off Mall) dated 11/20/02,      incorporated by               |
|    |   | reference      to CPI Corp.'s Form 10-Q, Exhibit 10.57,      filed  12/11/02.                       |
|    |   |                                                                                                          |
| (10.12) |   | Sears      License Agreement dated 1/1/03 by and between Sears, Canada, Inc., Sears      Roebuck & Co.    |
|    |   | and      CPI Corp. incorporated, by reference to CPI Corp.'s Annual Report for      fiscal year               |
|    |   | 2002      on Form 10-K, Exhibit 10.64, filed5/16/03.                                                          |

| EXHIBIT  |   |                                                                                                             |
|----------|--------|------------------------------------------------------------------------------------------------------------------|
| NUMBER   |   | DESCRIPTION                                                                                                      |
|     |   |                                                                                                             |
| (10.13)  |   | Seventh      Amendment dated 8/11/03 to Sears License Agreement, incorporated by      reference                  |
|     |   | to      CPI Corp.'s Form 10-Q, Exhibit 10.69, filed 8/27/03.                                                     |
|     |   |                                                                                                             |
| (10.14)  |   | Eighth      Amendment dated 9/1/03 to Sears License Agreement, incorporated by      reference to                 |
|     |   | CPI      Corp.'s Form 10-Q, Exhibit 10.70, filed 12/18/03.                                                       |
|     |   |                                                                                                             |
| (10.15)  |   | Fourth      Amendment dated 6/5/02 to License Agreement by and between Sears, Roebuck      and Co.               |
|     |   | and      CPI Corp., incorporated by reference to CPI Corp.'s Annual Report for      fiscal year 2003             |
|     |   | on      Form 10-K, Exhibit 10.74, filed 4/22/04.                                                                 |
|     |   |                                                                                                             |
| (10.16)  |   | Sixth      Amendment dated 4/29/04 to License Agreement (Off Mall)  by and      between Sears,         |
|     |   | Roebuck      and Co. and CPI Corp., incorporated by reference to CPI Corp.'s Form      10-Q,                     |
|     |   | Exhibit      10.83, filed 6/10/04.                                                                               |
|     |   |                                                                                                             |
| (10.17)  |   | Extension      dated January 18, 2006 of Sears License Agreement between CPI Corp.      and                      |
|     |   | Sears      Canada, Inc., incorporated by reference to CPI Corp.'s Annual Report      for                         |
|     |   | fiscal      year 2005 on Form 10-K, Exhibit 10.58, filed 4/19/06.                                                |
|     |   |                                                                                                             |
| (10.18)  |   | Amendment      dated August 18, 2006 to Sears License Agreement between CPI      Corp.                           |
|     |   | and      Sears Canada, Inc., incorporated by reference to CPI Corp.'s Form 10-Q,      Exhibit 10.63,             |
|     |   | filed      August 25, 2006.                                                                                      |
|     |   |                                                                                                             |
| (10.19)* |   | Employment      Contract Jane E. Nelson dated 2/6/00, incorporated by reference to CPI      Corp.'s              |
|     |   | Annual      Report for fiscal year 1999 on Form 10-K, Exhibit 10.36, filed      4/26/00.                         |
|     |   |                                                                                                             |
| (10.20)* |   | CPI      Corp. 1981 Stock Bonus Plan (As Amended and Restated Effective 2/3/91),      incorporated by            |
|     |   | reference      to CPI Corp.'s Annual Report for fiscal year 1992 on Form 10-K, Exhibit      10.29, filed 5/5/93. |
|     |   |                                                                                                             |
| (10.21)* |   | First      Amendment to CPI Corp. 1981 Stock Bonus Plan (As Amended and Restated      Effective                  |
|     |   | February      3, 1991) Effective January 1, 1995, incorporated by reference to CPI      Corp.'s Annual           |
|     |   | Report      for fiscal year 2000 on  Form 10-K, Exhibit 10.30, filed      5/3/01.                      |
|     |   |                                                                                                             |
| (10.22)* |   | CPI      Corp. Deferred Compensation and Retirement Plan for Non-Management      Directors                       |
|     |   | (Amended      and Restated as of January 28, 2000), incorporated by reference to CPI      Corp.'s Annual         |
|     |   | Report      for fiscal year 2000 on Form  10-K, Exhibit 10.31, filed      5/3/01.                      |
|     |   |                                                                                                             |
| (10.23)* |   | Deferred      Compensation and Stock Appreciation Rights Plan (Amended and Restated as      of                   |
|     |   | June      6, 1996),  incorporated by reference to CPI Corp.'s Annual      Report for fiscal year 2000  |
|     |   | on      Form 10-K, Exhibit 10.32, filed 5/3/01.                                                                  |
|     |   |                                                                                                             |
| (10.24)* |   | CPI      Corp. Stock Option Plan (Amended and Restated Effective as of December 16,      1997),                  |
|     |   | incorporated      by reference to CPI Corp.'s Annual Report for fiscal year  2000      on Form 10-K,   |
|     |   | Exhibit      10.34, filed 5/3/01.                                                                                |

| EXHIBIT  |   |                                                                                                               |
|----------|--------|--------------------------------------------------------------------------------------------------------------------|
| NUMBER   |   | DESCRIPTION                                                                                                        |
|     |   |                                                                                                               |
| (10.25)* |   | CPI      Corp. Key Executive Deferred Compensation Plan (As Amended and Restated      June 6, 1996),               |
|     |   | incorporated      by reference to CPI Corp.'s Annual Report for fiscal year 2000 on Form      10-K,                |
|     |   | Exhibit      10.36, filed 5/3/01.                                                                                  |
|     |   |                                                                                                               |
| (10.26)* |   | Employment      Agreement dated 4/8/02 by and between Gary W. Douglass and CPI      Corp.,                         |
|     |   | incorporated      by reference to CPI Corp.'s Annual Report for fiscal year 2001 on Form      10-K,                |
|     |   | Exhibit      10.50, filed 5/1/02.                                                                                  |
|     |   |                                                                                                               |
| (10.27)* |   | First      Amendment to CPI Corp. Deferred Compensation and Retirement Plan for      Non-management                |
|     |   | Directors      (As Amended and Restated as of January 28, 2002), incorporated by      reference to                 |
|     |   | CPI      Corp.'s Form 10-Q, Exhibit 10.52, filed 6/7/02.                                                           |
|     |   |                                                                                                               |
| (10.28)* |   | Employment      Agreement dated 10/21/02 by and between Peggy J. Deal and CPI      Corp.,                          |
|     |   | incorporated      by reference to CPI Corp.'s Form 10-Q, Exhibit 10.58, filed      12/11/02.                       |
|     |   |                                                                                                               |
| (10.29)* |   | Employment      Agreement dated 11/15/02 by and between Thomas Gallahue and CPI      Corp.,                        |
|     |   | incorporated      by reference to CPI Corp.'s  Form 10-Q, Exhibit 10.59, filed      12/11/02.            |
|     |   |                                                                                                               |
| (10.30)  |   | First      Amendment dated 9/30/02 to CPI Corp. Retirement Plan and Trust,      incorporated by                    |
|     |   | reference      to CPI Corp.'s Annual Report for fiscal year 2002 on Form 10-K, Exhibit      10.65,                 |
|     |   | filed      5/16/03.                                                                                                |
|     |   |                                                                                                               |
| (10.31)  |   | Second      Amendment dated 11/29/02 to CPI Corp. Retirement Plan and Trust,      incorporated by                  |
|     |   | reference      to CPI Corp.'s Annual Report for fiscal year 2002 on Form 10-K, Exhibit      10.66,                 |
|     |   | filed      5/16/03.                                                                                                |
|     |   |                                                                                                               |
| (10.32)  |   | Third      Amendment dated 2/6/04 to CPI Corp. Retirement Plan and Trust,      incorporated by                     |
|     |   | reference      to CPI Corp.'s Annual Report  for fiscal year 2003 on Form 10-K,      Exhibit 10.73,      |
|     |   | filed      4/21/04.                                                                                                |
|     |   |                                                                                                               |
| (10.33)* |   | CPI      Corp. Restricted Stock Plan as Amended and Restated Effective as of April      14, 2005,                  |
|     |   | incorporated      by reference to CPI Corp.'s Annual Report for fiscal year 2004 on Form      10-K,                |
|     |   | Exhibit      10.86, filed 4/21/05.                                                                                 |
|     |   |                                                                                                               |
| (10.34)* |   | CPI      Corp. Performance Plan Adopted Effective as of April 14, 2005,      incorporated by reference             |
|     |   | to      CPI Corp.'s Annual Report for fiscal year 2004  on Form 10-K,      Exhibit 10.90, filed 4/21/05. |
|     |   |                                                                                                               |
| (10.35)* |   | CPI      Corp. Non-Employee Directors Restricted Stock Policy Pursuant to the CPI      Corp.                       |
|     |   | Restricted      Stock Plan Adopted Effective as of April 14, 2005, incorporated by      reference                  |
|     |   | to      CPI Corp.'s Annual Report for fiscal year 2004 on Form 10-K, Exhibit      10.91, filed 4/21/05.            |

| EXHIBIT  |   |                                                                                                           |
|----------|--------|----------------------------------------------------------------------------------------------------------------|
| NUMBER   |   | DESCRIPTION                                                                                                    |
|     |   |                                                                                                           |
| (10.36)* |   | CPI      Corp. Non-Employee Directors Restricted Stock Policy (Restricted Stock      Election)                 |
|     |   | Adopted      by the Company April 14, 2005, incorporated by reference to CPI Corp.'s      Annual Report        |
|     |   | for      fiscal year 2004 on Form 10-K, Exhibit 10.92, filed    4/21/05.                                       |
|     |   |                                                                                                           |
| (10.37)* |   | Restricted      Stock Award Agreement, incorporated by reference to CPI Corp.'s Annual      Report for         |
|     |   | fiscal      year 2004 on Form 10-K, Exhibit 10.93, filed 4/21/05.                                              |
|     |   |                                                                                                           |
| (10.38)* |   | First      Amendment to Employment Agreement by and between Consumer Programs      Incorprated                 |
|     |   | and      Thomas Gallahue, incorporated by reference to CPI Corp.'s Annual Report      for fiscal year          |
|     |   | 2004      on Form 10-K, Exhibit 10.95, filed 4/21/05.                                                          |
|     |   |                                                                                                           |
| (10.39)* |   | Employment      Agreement by and between CPI Corp. and Renato Cataldo, incorporated by      reference          |
|     |   | to      CPI Corp.'s Form 10-Q, Exhibit 10.102, filed 9/1/05. File      No.  1-10204                  |
|     |   |                                                                                                           |
| (10.40)* |   | Stock      Award and Restriction Agreement by and between CPI Corp. and Renato      Cataldo,                   |
|     |   | incorporated      by reference to CPI Corp.'s Form 10-Q, Exhibit 10.103, filed      9/1/05.                    |
|     |   |                                                                                                           |
| (10.41)* |   | Confidentiality,      Noncompetition and Nonsolicitation Agreement by and between CPI Corp.      and           |
|     |   | Renato      Cataldo, incorporated by reference to CPI Corp.'s Form 10-Q, Exhibit      10.104, filed 9/1/05.    |
|     |   |                                                                                                           |
| (10.42)* |   | Stock      Award and Restriction Agreement by and between CPI Corp. and Paul      Rasmussen,                   |
|     |   | incorporated      by reference to CPI Corp.'s Form 10-Q, Exhibit 10.105, filed      9/1/05.                    |
|     |   |                                                                                                           |
| (10.43)* |   | Confidentiality,      Noncompetition and Nonsolicitation Agreement by and between CPI Corp.      and           |
|     |   | Paul      Rasmussen, incorporated by reference to CPI Corp.'s Form 10-Q, Exhibit      10.106, filed 9/1/05.    |
|     |   |                                                                                                           |
| (10.44)  |   | Credit      Agreement (As Amended and Restated Effective November 30, 2005) among the      Company,            |
|     |   | the      financial institutions that are or may from time to time become parties      thereto and LaSalle      |
|     |   | National      Bank Association, incorporated by reference to CPI Corp.'s Current Report      on Form 8-K,      |
|     |   | Exhibit      10.84, filed 12/8/05.                                                                             |
|     |   |                                                                                                           |
| (10.45)  |   | Guaranty      and Collateral Agreement among CPI Corp. and the other parties thereto, as      guarantors, and  |
|     |   | LaSalle      Bank National Association, an administrative agent, incorporated by      reference to CPI Corp.'s |
|     |   | Current      Report on Form 8-K, Exhibit 10.85, filed 12/8/05.                                                 |
|     |   |                                                                                                           |
| (10.46)* |   | Retention      agreement, dated as of January 12, 2006, by and between CPI Corp. and      Thomas Gallahue,     |
|     |   | incorporated      by reference to CPI Corp.'s Current Report on Form 8-K, Exhibit 10.107,      filed 1/19/06.  |
|     |   |                                                                                                           |
| (10.47)  |   | First      Amendment to Amended and Restated Credit Agreement dated as of January 25,      2006                |
|     |   | (the      "Credit Agreement"), among the Company, the financial institutions that      are or may from         |
|     |   | time      to time become parties thereto and LaSalle Bank National Association, as      administrative agent   |
|     |   | and      arranger for the lenders, incorporated by reference to CPI Corp.'s Current      Report on Form 8-K,   |
|     |   | Exhibit      10.108, filed 1/26/06.                                                                            |

| EXHIBIT |   |                                                                                               |
|---------|--------|----------------------------------------------------------------------------------------------------|
| NUMBER  |   | DESCRIPTION                                                                                        |
|    |   |                                                                                               |
| (10.48) |   | Stock      Award and Restriction Agreement, dated April 6, 2006, by and between CPI      Corp. and |
|    |   | David      Meyer, incorporated by reference to CPI Corp.'s Current Report on Form      8-K,        |
|    |   | Exhibit      10.57, filed 4/12/06.                                                                 |
|    |   |                                                                                               |
| (10.49) |   | First      Amendment to Employment Agreement, dated as of April 25, 2006, by and      between      |
|    |   | Consumer      Programs Incorporated and Gary W. Douglass, incorporated by reference      to        |
|    |   | CPI      Corp.'s Form 8-K, Exhibit 10.60, filed May 1, 2006.                                       |
|    |   |                                                                                               |
| (10.50) |   | Letter      from the Company regarding Supplemental Retirement Benefits, dated June      28, 2006, |
|    |   | delivered      to Richard Tarpley, incorporated by reference to CPI Corp.'s Form      8-K,         |
|    |   | Exhibit      10.61, filed July 5, 2006.                                                            |
|    |   |                                                                                               |
| (10.51) |   | Letter      from the Company regarding Supplemental Retirement Benefits, dated June      28, 2006, |
|    |   | delivered      to Jane E. Nelson, incorporated by reference to CPI Corp.'s Form      8-K,          |
|    |   | Exhibit      10.62, filed July 5, 2006.                                                            |
|    |   |                                                                                               |
| (10.52) |   | First      Amendment to Retention Agreement, dated as of August 23, 2006, by and      between      |
|    |   | Consumer      Programs Incorporated and Thomas Gallahue, incorporated by reference      to         |
|    |   | CPI      Corp.'s Form 8-K, Exhibit 10.64, filed August 29, 2006.                                   |
|    |   |                                                                                               |
| (10.53) |   | Second      Amendment to Retention Agreement, dated as of October 26, 2006, by and      between    |
|    |   | Consumer      Programs Incorporated and Thomas Gallahue, incorporated by reference      to         |
|    |   | CPI      Corp.'s Form 8-K, Exhibit 10.65, filed November 1,2006.                                   |
|    |   |                                                                                               |
| (10.54) |   | Resignation      Agreement dated as of October 30, 2006, by and between CPI      Corp.             |
|    |   | and      Paul Rasmussen, incorporated by reference to CPI Corp.'s Form      8-K,                   |
|    |   | Exhibit      10.66, filed November 1, 2006.                                                        |
|    |   |                                                                                               |
| (10.55) |   | Purchase      and Sale Agreement dated as of May 1, 2007, by and among Portrait      Corporation   |
|    |   | of      America, PCA LLC, American Studios, Inc., PCA Photo Corporation of      Canada,            |
|    |   | PCA      National LLC, PCA Finance Corp., Inc., Photo Corporation of American,      Inc.,          |
|    |   | (each,      a "Seller") and CPI Corp., incorporated by reference to CPI Corp.'s form      8-K,     |
|    |   | Exhibit      2.1, filed May 3, 2007.                                                               |
|    |   |                                                                                               |
| (10.56) |   | Amendment      No. 1 to the Purchase and Sale Agreement dated as of May 1, 2007,      by           |
|    |   | and      among Portrait Corporation of America, PCA LLC, American Studios,      Inc.,              |
|    |   | PCA      Photo Corporation of Canada, PCA National LLC, PCA Finance Corp.,      Inc.,              |
|    |   | Photo      Corporation of American, Inc., (each, a "Seller") and CPI Corp.,      such              |
|    |   | amendment      effective as of May 21, 2007, incorporated by reference to CPI      Corp.'s         |
|    |   | form      8-K, Exhibit 2.1, filed May 25, 2007.                                                    |
|    |   |                                                                                               |
| (10.57) |   | Amendment      No. 2 to the Purchase and Sale Agreement dated as of June 8, 2007,      by          |
|    |   | and      among Portrait Corporation of America, PCA LLC, American Studios,      Inc.,              |
|    |   | PCA      Photo Corporation of Canada, PCA National LLC, PCA Finance Corp.,      Inc.,              |
|    |   | Photo      Corporation of American, Inc., (each, a "Seller") and CPI      Corp.,                   |   |
|    |   | incorporated      by reference to CPI Corp.'s form 8-K, Exhibit 2.3, filed June 24,      2007.     |

| EXHIBIT  |   |                                                                                                                            |
|----------|--------|---------------------------------------------------------------------------------------------------------------------------------|
| NUMBER   |   | DESCRIPTION                                                                                                                     |
|     |   |                                                                                                                            |
| (10.58)  |   | Second      Amendment and Restated Credit Agreeement dated as of June 8, 2007      among                                        |
|     |   | the      Company, the financial institutions that are or may from time to time      become parties                              |
|     |   | thereto      and LaSalle Bank National Association, as administrative agent and      arranger                                   |
|     |   | for      the lenders, incorporated herein by reference to CPI Corp.'s Form      8-K,                                            |
|     |   | Exhibit      10.1, filed June 14, 2007.                                                                                         |
|     |   |                                                                                                                            |
| (10.59)* |   | Master      Lease Agreement between Wal-Mart Stores  East, L.P., Wal-Mart      Stores, Inc.,                          |
|     |   | Wal-Mart      Louisiana, LLC, Wal-Mart Stores Texas, LP and Portrait Corporation      of                                        |
|     |   | America,      Inc., effective June 8, 2007, incorporated herein by reference to CPI      Corp.'s                                |
|     |   | Form      10-Q, Exhibit 10.59, filed August 30, 2007.                                                                           |
|     |   |                                                                                                                            |
| (10.60)  |   | First      Amendment to the Master Lease Agreement between Wal-Mart Stores, East,      LP,                                      |
|     |   | Wal-Mart      Stores, Inc., Wal-Mart Louisiana, LLC, Wal-Mart Stores Texas, LP      and                                         |
|     |   | Portrait      Corporation of America, Inc., effective June 8, 2007, incorporated herein      by                                 |
|     |   | reference      to CPI Corp.'s Form 10-Q, Exhibit 10.60, filed December 20,      2007.                                           |
|     |   |                                                                                                                            |
| (10.61)  |   | Second      Amendment to the Master Lease Agreement between Wal-Mart Stores, East,      LP,                                     |
|     |   | Wal-Mart      Stores, Inc., Wal-Mart Louisiana, LLC, Wal-Mart Stores Texas, LP      and                                         |
|     |   | Portrait      Corporation of America, Inc., effective June 8, 2007, incorporated herein      by                                 |
|     |   | reference      to CPI Corp.'s Form 10-Q, Exhibit 10.61, filed December 20,      2007.                                           |
|     |   |                                                                                                                            |
| (10.62)* |   | Employment      Agreement dated April 23, 2008, by and between CPI Corp. and Dale      Heins,                         |
|     |   | incorporated      by reference to CPI Corp.'s Form 8-K, Exhibit 10.62, filed  April 24,      2008.  File No. 1-10204. |
|     |   |                                                                                                                            |
| (10.63)  |   | Third      Amendment to the Master Lease Agreement between Wal-Mart stores, East, LP,      Wal-Mart                             |
|     |   | Stores,      Inc., Wal-Mart Louisiana, LLC, Wal-Mart Stores Texas, LP and Portrait      Corporation of                          |
|     |   | of      America, Inc.,  effective April 15, 2008.                                                                          |
|     |   |                                                                                                                            |
| (11.1)   |   | Computation      of Earnings Per Share - Diluted                                                                                |
|     |   |                                                                                                                            |
| (11.2)   |   | Computation      of Earnings Per Share - Basic                                                                                  |
|     |   |                                                                                                                            |
| (21.0)   |   | Subsidiaries      of the Registrant                                                                                             |
|     |   |                                                                                                                            |
| (23.0)   |   | Independent      Auditor's Consent                                                                                              |
|     |   |                                                                                                                            |
| (31.1)   |   | Certification      Pursuant to Rule 13a-14(a) Under the Securities and Exchange Act of      1934                                |
|     |   | by      the President and Chief Executive Officer                                                                               |
|     |   |                                                                                                                            |
| (31.2)   |   | Certification      Pursuant to Rule 13a-14(a) Under the Securities and Exchange Act of      1934                                |
|     |   | by      the Executive Vice President, Finance and 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 President and Chief Executive Officer and      the                                       |
|     |   | Executive      Vice President, Finance and Chief Financial  Officer                                                             |

SIGNATURES

|   | CPI CORP. |                                       |
|--------|-----------|--------------------------------------------|
|   |      |                                       |   |
|   | By:       | /s/Renato      Cataldo                     |   |
|   |      | Renato      Cataldo                        |   |
|   |      | President      and Chief Executive Officer |   |
|   |      |                                       |   |

|   |   |   | Signature                    |   | Title                                      |                                      | Date             |
|--------|--------|--------|------------------------------|--------|--------------------------------------------|-------------------------------------------|------------------|
|   |
|   | /s/    |   | Renato      Cataldo          |   | President      and Chief Executive Officer |                                      | May      8, 2008 |
|   |   |   | (Renato      Cataldo)        |   |                                       |                                      |             |
|   |   |   |                         |   |                                       |                                      |             |
|   | /s/    |   | David      M. Meyer          |   | Chairman      of the Board of Directors    |                                      | May      8, 2008 |
|   |   |   | (David      M. Meyer)        |   |                                       |                                      |             |
|   |   |   |                         |   |                                       |                                      |             |
|   | /s/    |   | James      J. Abel           |   | Director                                   |                                      | May      8, 2008 |
|   |   |   | (James      J. Abel)         |   |                                       |                                      |             |
|   |   |   |                         |   |                                       |                                      |             |
|   | /s/    |   | Michael      S. Koeneke      |   | Director                                   |                                      | May      8, 2008 |
|   |   |   | (Michael      S. Koeneke)    |   |                                       |                                      |             |
|   |   |   |                         |   |                                       |                                      |             |
|   | /s/    |   | Mark      R. Mitchell        |   | Director                                   |                                      | May      8, 2008 |
|   |   |   | (Mark      R. Mitchell)      |   |                                       |                                      |             |
|   |   |   |                         |   |                                       |                                      |             |
|   | /s/    |   | John      Turner White, IV   |   | Director                                   |                                      | May      8, 2008 |
|   |   |   | (John      Turner White, IV) |   |                                       |                                      |             |
|   |   |   |                         |   |                                       |                                      |             |
|   | /s/    |   | Dale      Heins              |   |                                       | Senior Vice      President, Finance, |             | May      8, 2008 |
|   |   |   | (Dale      Heins)            |   | Chief      Financial Officer and Treasurer |                                      |             |
|   |   |   |                         |   |                                       |                                      |             |
|   | /s/    |   | Rose      O'Brien            |   | Vice      President, Corporate Controller  |                                      | May      8, 2008 |
|   |   |   | (Rose      O'Brien)          |   | and      Principal Accounting Officer      |                                      |             |