Missouri company hopes to reopen Kiddie Kandids' stores Photo studio » Bidding company says parents will get their kids' pictures. By Steven Oberbeck The Salt Lake Tribune Updated: 03/19/2010 07:11:24 PM MDT All of the assets for the now-closed Kiddie Kandids children's photography studio could go to St. Louis-based CPI Corp. for $2.6 million. An asset auction was held Friday morning in Salt Lake City. (Francisco Kjolseth / The Salt Lake Tribune file photo) One of North America's leading portrait studio operators is offering to buy all of the assets of the bankrupt Kiddie Kandids. CPI Corp. officials Friday said they plan to reopen the company's stores once the purchase is approved by the U.S. Bankruptcy Court for Utah. CPI, which operates approximately 3,000 locations principally in Sears and Walmart stores in the United States, Canada and Mexico, put in the high bid for Kiddie Kandids' assets at an auction held Friday by U.S. bankruptcy court appointed trustee Duane Gillman. St. Louis, Mo.-based CPI bid $2.6 million for all of the Utah company's assets, including its headquarters building in Sandy. "They are a good company," Gillman said of CPI following the closing of the bidding. "They know the business and they are good at it." More importantly, though, Gillman said CPI will see that Kiddie Kandid's former customers will get all the photographs of their children that are due them. "And for many of those customers those portraits are absolutely priceless." David Meyer, the chairman of CPI, said his company intends to reopen the Kiddie Kandids stores but that it hasn't yet determined when that will take place. CPI's offer still must be approved by the bankruptcy court. A hearing on that matter is expected to take place on March 30, Gillman said. Kiddie Kandids, which operated 184 studios nationwide including 134 in Babies R Us stores, filed for bankruptcy in mid-January after abruptly closing its doors. The sudden closings cost an estimated 1,400 employees their jobs, many of whom were still owed for hours they previously had worked. CPI indicated they would "reach out" to former employees when it comes time to staff the locations. And Gillman said he is hopeful the sale of Kiddie Kandid's assets will provide approximately $900,000 that can be used to pay those former employees their back wages. At the time Kiddie Kandids filed for bankruptcy, the company indicated it had only $1.2 million in assets and $39.3 million in debts. Bankruptcy court records show the company lost $4.6 million in 2007, $19.5 million in 2008 and $20.5 million last year. The company's principal investor, Sorenson Capital, blamed the demise of the 35-year-old Utah business on the economic downturn and the availability of inexpensive, user-friendly digital photography. In contrast the publicly held CPI, whose shares are listed on the New York Stock Exchange under the symbol "CPY," lost $7.69 million in its 2009 fiscal year but generated $3.58 million in profit in 2008, and $16.3 million in net income in 2007. And last month CPI's board of directors declared the company's first quarterly dividend -- 16 cents per share. steve@sltrib.com

Message from Trustee for Kiddie Kandids LLC – January 26, 2010

Many customers have inquired about photos they have ordered or purchased from Kiddie Kandids. Please be assured that the Trustee has taken and will continue to take steps to insure the safety and security of those photos whether they are in hard copy form at one of the Kiddie Kandids locations or in electronic format on a Kiddie Kandids Server. The Trustee has obtained an order of the Court appointing a "privacy ombudsman" in this case to represent the interests of customers and their privacy concerns. We expect that the ombudsman shall begin serving in the next few days.

Unfortunately, at the present time it is impossible for the Trustee to affect the delivery of any photos. The Trustee is, however, working with proposed purchasers of the Kiddie Kandids' business assets to negotiate the delivery of your photos by such purchasers. It is uncertain to what extent that may prove successful.

In the meantime, you will probably receive notice of the bankruptcy filing and instructions on filing a "proof of claim" in the Kiddie Kandids bankruptcy case. That form is also attached and downloadable from this website. To the extent there are obligations owed by Kiddie Kandids to you, you have the option of filling out the claim and filing it with the court at the address set forth on the proof of claim form. The Trustee notes that the process for getting paid on a claim filed in a bankruptcy case is usually measured in months and sometimes years. Furthermore it is impossible to predict the amount of money, if any, that may be available to pay on claims.

http://www.kiddiekandids.com/download/POC_with_Instructions.pdf

You may also receive other filings and notices made in the Kiddie Kandids case from time to time, which will inform you of the progress of the bankruptcy case.

Trustee Contact Information:

Duane H. Gillman

Chapter 7 Trustee for Kiddie Kandids LLC

Durham, Jones & Pinegar, P.C.

P.O. Box 4050, Salt Lake City, UT 84110

Tel 801.415.3000

Fax 801.415.3500

Email: kiddiekandids@utahlaw.com

Message from Kiddie Kandids Former Management Team – January 26, 2010

Dear Kiddie Kandids Customers and Employees,

We are deeply saddened by the sudden closure of Kiddie Kandids. This is a tremendous loss for everyone concerned, including our loyal customers and our many wonderful employees and their families. We were surprised and profoundly disappointed by the banks' sudden decision to immediately terminate all funding for Kiddie Kandids, which resulted in our customers and employees receiving no advance notice of the company's failure. Our hearts go out to each of you, our devoted customers and our great employees, more than words can express.

Because of the sudden and immediate loss of funding, on Tuesday, January 12, 2010, Kiddie Kandids had to file Chapter 7 bankruptcy. There is now a trustee in charge of Kiddie Kandids LLC.

Certificates of Coverage on Health Insurance

Creditable coverage letters will be mailed to Kiddie Kandids employees early next week. This is the certificate you need to get new health insurance. You should expect to receive these letters in the mail by the end of next week.

401K

Kiddie Kandids employees who were participants in the 401K plan can now rollover their investments into other accounts or take distributions. Soltis Investments Advisors is going to mail information to each plan participant on how to do this next week. Your 401K funds are safe and will not be affected in any way by the bankruptcy. To roll over your money to another account or to take a distribution, you can go to www.my401klink.com/kkp/ . Once you have logged into the site, go to the ‘Forms’ menu located under the ‘Plan Information’ heading. You will see a file available for download titled ‘Plan Termination Distribution Form’. This file contains a distribution form, a tax notice describing the tax consequences of the different distribution options, as well as a summary of the plan changes made to terminate the plan. You only need to complete and return the first page of this file. You can fax it to the Alliance Benefits Group- Rocky Mountain operations group at 801-483-1255. If participants have questions you can contact Rocky Mountain at 800-421-4758 or Soltis Investment Advisors at 800-735-1601.

W-2s for 2009

Kiddie Kandids W-2s will be mailed to all employees within the next five days. Employees should receive their W-2s in the next ten days.

Official Press Release:

Kiddie Kandids Announces Closure

Sandy, Utah – January 10, 2010 - Kiddie Kandids, a Sandy, Utah based chain of photography studios, has ceased operations, effective immediately. This shutdown occurred as the result of an abrupt and unforeseen loss of funding from is banks. Kiddie Kandids’ operations have been particularly challenged by the economic climate over the past 18 months and its lenders have informed the company that they will no longer provide funding for Kiddie Kandids’ immediate cash needs. Without continued funding, Kiddie Kandids was unable to meet its imminent financial obligations. We have exhausted all possible avenues for funding and have come to the end of the road. This is truly unfortunate in light of the great team of employees and the great customers that made Kiddie Kandids a leading national children’s photography studio. It is our hope that if the assets are purchased out of bankruptcy that the buyer will consider hiring back many of our employees.” In light of the unforeseen termination of funding by its lenders, Kiddie Kandids intends to file a voluntary petition for relief under Chapter 7 of the Bankruptcy Code in the coming days.

Prior to its closure, Kiddie Kandids was one of the nation’s premier children’s portrait studios, specializing in newborn, infant, toddler, and pre-school portrait photography. Founded in 1974, Kiddie Kandids grew from a single camera in a mall kiosk to a nationwide network of 184 hi-tech portrait studios. The majority of Kiddie Kandids’ studios are located within Babies ‘R’ Us retail stores across the country.

To All Kiddie Kandids Employees:

In an abrupt and unforeseen turn of events, Kiddie Kandids’ lenders have informed management that they will no longer fund our operations. Without continued funding, Kiddie Kandids is unable to meet its financial obligations, including its payroll. As a result, it is my unfortunate duty to inform you that, effective immediately, Kiddie Kandids must completely cease operations and relieve all employees of their positions with the company.

In the coming days, Kiddie Kandids will file Chapter 7 bankruptcy, and all decisions will then be made by a trustee appointed by the Trustee’s Office of the Federal Bankruptcy Court in Salt Lake City. Between now and then, the company will work to maximize the Chapter 7 trustee’s capability to pursue a sale to another photography studio company that could possibly restart operations, but we have no control over these events, and can not assure you that any operations will be restarted.

We realize that this sudden and deeply unfortunate news will cause great concern to you and your families, and you have many questions. We will not have the capacity to answer each of your individual questions, but please keep this in mind: because of the unforeseen termination of funding by the lenders, there is no money to pay payroll (both past and future), there is no money to reimburse expenses, and there is no money to pay our suppliers.

In regards to health insurance, we regret to inform you there is no money to pay health related bills from the company’s self-insured plan, thus you do not have health insurance. There are no COBRA programs available from defunct plans such as ours either.

Subject to your particular state laws and your employment status, you are likely to be eligible for unemployment benefits, and we would encourage you to take this letter with you to the local unemployment office.

We will attempt to setup a blog at http://kiddiekandidsinfo.blogspot.com where management or the trustee can communicate future developments. If possible, we encourage you to consult the site for additional information as it becomes available.

I deeply regret that these unfortunate events have necessitated Kiddie Kandids’ closure. I thank you each for your loyal service.

Sincerely,

Dale Merrill

President, Kiddie Kandids