The Gymboree Corporation Reports First Fiscal Quarter 2013 Results

SAN FRANCISCO, June 5, 2013 /PRNewswire/ -- The Gymboree Corporation (the "Company") today reported consolidated financial results for the first fiscal quarter ended May 4, 2013.

For the first quarter of the fiscal year ending February 1, 2014 ("fiscal 2013"), net sales were $292.8 million, a decrease of 1.7% compared to $297.8 million in net sales for the first fiscal quarter of the fiscal year ended February 2, 2013 ("fiscal 2012").  Comparable sales for the quarter decreased 5% versus the first quarter of fiscal 2012.

Gross profit for the first quarter of fiscal 2013 was $121.0 million, or 41.3% of net sales, compared to $121.8 million, or 40.9% of net sales, for the first quarter of fiscal 2012. Excluding purchase accounting adjustments of $2.6 million and $3.0 million for the first quarter of fiscal 2013 and the first quarter of fiscal 2012, respectively, relating to the November 2010 acquisition of the Company by Giraffe Holding, Inc., an entity controlled by investment funds sponsored by Bain Capital Partners, LLC (the "Acquisition"), gross profit was $123.6 million, or 42.2% of net sales, and $124.8 million, or 41.9% of net sales, for the first quarter of fiscal 2013 and the first quarter of fiscal 2012, respectively (see Exhibit D).

SG&A expense for the first quarter of fiscal 2013 was $104.1 million, or 35.6% of net sales, compared to $91.7 million, or 30.8% of net sales, in the first quarter of fiscal 2012.  Results for the first quarter of fiscal 2013 and fiscal 2012 include $3.9 million and $5.2 million, respectively, of additional costs resulting from the Acquisition, including the effect of purchase accounting adjustments and other adjustments.  Excluding these charges, SG&A expense for the first quarter of fiscal 2013 and fiscal 2012 was $100.3 million, or 34.2% of net sales, and $86.5 million, or 29.1% of net sales, respectively, which represents an increase of 510 basis points over fiscal 2012 (see Exhibit D).     

Net loss for the first quarter of fiscal 2013 was $2.8 million compared to net income of $4.2 million for the same quarter of fiscal 2012. 

Net income (loss) attributable to The Gymboree Corporation before interest (income) expense, income tax (expense) benefit and depreciation and amortization, adjusted for other items ("Adjusted EBITDA"), for the first quarter of fiscal 2013 decreased 29.2% to $36.0 million compared to $50.8 million for the first quarter of fiscal 2012.  Adjusted EBITDA is not a performance measure under GAAP.  See "Non-GAAP Financial Measures" below.  A reconciliation of net income (loss) attributable to The Gymboree Corporation to Adjusted EBITDA presented herein is included in Exhibit D of this press release.  

Balance Sheet Highlights

Effective March 2012, the Company's $225 million asset-backed loan ("ABL") facility was refinanced to take advantage of favorable rates and to extend the maturity date.  There were no borrowings outstanding under the ABL as of the end of the first fiscal quarter of fiscal 2013 and approximately $143.1 million of undrawn availability.

Cash at the end of the first quarter of fiscal 2013 was $43.1 million compared to $88.3 million at the end of the first quarter of fiscal 2012, reflecting the pay down of approximately $69.4 million of debt since the end of the first quarter last year.

Capital expenditures for the first quarter of fiscal 2013 were $10.7 million, with the majority of the cash used to fund the opening of 23 new stores during the quarter.

Inventory balances at the end of the first quarter of fiscal 2013 were $180.8 million compared to $185.7 million at the end of the first quarter of fiscal 2012. Inventory cost on a per square foot basis was down 12%, while inventory units on a per square foot basis were down in the low single digits.

Fiscal 2013 Business Outlook

In fiscal 2013, the Company is focused on improving its inventory discipline, strengthening its product assortment and continuing to drive its growth opportunities of real estate, ecommerce and international.  The Company's fiscal 2013 outlook is based on the current economic environment and trends, as well as its expectations for the balance of the year.

Full Year

For the full year, the Company continues to expect Adjusted EBITDA to grow modestly over last year and comparable sales to be flat to slightly positive. Based on this guidance, the Company expects to generate sufficient cash flow to service its debt and invest in the business to drive long term growth.

New Stores

During fiscal 2013, the Company plans to open approximately 100 new stores, with the majority being Crazy 8 stores.

Capital Expenditures

During fiscal 2013, the Company anticipates spending approximately $50 million for capital expenditures.

Non-GAAP Financial Measures

The Company defines "Adjusted EBITDA" as net income (loss) attributable to The Gymboree Corporation before interest (income) expense, income tax expense (benefit), and depreciation and amortization ("EBITDA") adjusted for other items, including loss on extinguishment of debt, non-cash share-based compensation, loss on disposal/impairment of assets and sponsor management fees and expenses, as well as the impact of purchase accounting adjustments resulting from the Acquisition.

Adjusted EBITDA is a non-GAAP measure but is considered an important supplemental measure of the Company's performance and is believed to be used frequently by securities analysts, investors and other interested parties in the evaluation of similar retail companies. Adjusted EBITDA is not a presentation made in accordance with GAAP and the Company's computation of Adjusted EBITDA may vary from others in the industry. Adjusted EBITDA should not be considered an alternative to operating income or net income, as a measure of operating performance or cash flow, or as a measure of liquidity. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. See Exhibit D for a reconciliation of Adjusted EBITDA to net income (loss).

Management Presentation

To listen live over the internet, please log on to www.gymboree.com, click on "Company Information" at the bottom of the page, go to "Investors & Media" and then "Conference Calls & Webcasts." A replay of the call will be available two hours after the broadcast through midnight PT, Tuesday, June 11, 2013, at 855-859-2056, passcode 75524872.

About The Gymboree Corporation

The Gymboree Corporation's specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of May 4, 2013, the Company operated a total of 1,280 retail stores: 634 Gymboree® stores (584 in the United States, 43 in Canada, 1 in Puerto Rico and 6 in Australia), 160 Gymboree Outlet stores (158 in the United States, 2 in Puerto Rico), 134 Janie and Jack® shops and 352 Crazy 8® stores in the United States. The Company also operates online stores at www.gymboree.com, www.janieandjack.com and www.crazy8.com, and offers directed parent-child developmental play programs at 718 franchised and Company-operated Gymboree Play & Music® centers in the United States and 42 other countries.

Forward-Looking Statements

The foregoing financial information for the first fiscal quarter ended May 4, 2013 is unaudited and subject to quarter-end and year-end adjustments.  The foregoing paragraphs contain forward-looking statements relating to The Gymboree Corporation's anticipated future financial performance, such as those relating to its comparable store sales growth, Adjusted EBITDA, capital expenditures, cash flows and new store openings in fiscal 2013.  Actual results could vary materially as a result of a number of factors, including the ongoing volatility in the commodities market for cotton, uncertainties relating to high levels of unemployment and consumer debt, volatility in the financial markets, general economic conditions, the Company's ability to anticipate and timely respond to changes in trends and consumer preferences and customer reactions to new merchandise, service levels and new concepts, competitive market conditions, success in meeting the Company's delivery targets, the Company's promotional activity, gross margin achievement, the Company's ability to appropriately manage inventory, effects of future embargos from countries used to source product, the Company's ability to attract and retain key personnel and other qualified team members, and other factors, including those discussed under "Risk Factors" in "Item 1A, Risk Factors," of the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2013 filed with the Securities and Exchange Commission ("SEC") on May 2, 2013, and its subsequent SEC filings. The forward-looking statements contained in this press release reflect the Company's expectations as of the date hereof, and the inclusion of a projection or forward-looking statement in this press release should not be regarded as a representation by the Company that its plans or objectives will be achieved. The Company undertakes no obligation to update the information provided herein. 

Gymboree, Janie and Jack, Crazy 8, and Gymboree Play & Music are registered trademarks of The Gymboree Corporation.

 

EXHIBIT A








THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


















Quarter Ended


Quarter Ended








May 4, 2013


April 28, 2012








13 Weeks


13 Weeks








(in thousands)

Net sales:









Retail





$          280,877


$          288,116


Gymboree Play & Music 





6,328


5,792


Retail Franchise





5,578


3,843



Total net sales





292,783


297,751


Cost of goods sold, including buying and occupancy expenses





(171,810)


(175,927)



Gross profit





120,973


121,824


Selling, general and administrative expenses





(104,129)


(91,739)



Operating income 





16,844


30,085


Interest income





41


59


Interest expense





(20,402)


(21,658)


Loss on extinguishment of debt





-


(1,237)


Other income (expense), net





9


(66)



Income (loss) before income taxes





(3,508)


7,183


Income tax (expense) benefit 





660


(3,013)













Net income (loss)





(2,848)


4,170


Net loss attributable to noncontrolling interest





312


826



Net (loss) income attributable to The Gymboree Corporation





$            (2,536)


$              4,996

 

 


EXHIBIT B








THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)













May 4, 2013


February 2, 2013


April 28, 2012





(in thousands)

Current assets









Cash and cash equivalents


$       43,146


$               33,328


$          88,268



Accounts receivable


22,124


27,542


25,264



Merchandise inventories


180,796


197,935


185,691



Prepaid income taxes


3,076


2,903


3,220



Prepaid expenses


16,809


17,341


3,573



Deferred income taxes


30,647


31,383


30,800



    Total current assets


296,598


310,432


336,816











Property and equipment, net


205,985


205,325


202,419


Goodwill


898,983


898,966


899,097


Other intangible assets


578,456


580,641


594,574


Deferred financing costs


38,419


40,040


46,220


Other assets


7,443


7,809


5,504












    Total assets


$  2,025,884


$          2,043,213


$     2,084,630











Current liabilities









Accounts payable


$       57,753


$               90,133


$          48,954



Accrued liabilities


107,095


90,443


91,772



Current portion of long-term debt


-


-


15,648



    Total current liabilities


164,848


180,576


156,374











Long-term liabilities









Long-term debt


1,138,524


1,138,455


1,192,241



Lease incentives and other deferred liabilities


43,432


40,104


31,082



Unrecognized tax benefits


8,135


7,848


8,172



Deferred income taxes


231,540


234,593


242,244



    Total liabilities


1,586,479


1,601,576


1,630,113











Stockholders' equity


439,405


441,637


454,517












Total liabilities and stockholders' equity


$  2,025,884


$          2,043,213


$     2,084,630


 

EXHIBIT C





THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)










Quarter Ended


Quarter Ended




May 4, 2013


April 28, 2012




13 Weeks


13 Weeks




(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income (loss)

$            (2,848)


$              4,170

Adjustments to reconcile net income (loss) to net cash




  provided by operating activities:





Loss on extinguishment of debt

-


1,237


Depreciation and amortization

12,822


14,248


Amortization of deferred financing costs and accretion of original issue discount

1,690


1,802


Interest rate cap contracts - adjustment to market

183


53


Provision (benefit) for deferred income taxes

(2,210)


2,098


Share-based compensation expense

1,497


1,407


Other

314


848


Change in assets and liabilities:




            Accounts receivable

5,443


(380)

            Merchandise inventories

17,244


24,046

            Prepaid expenses and other assets

409


1,902

            Prepaid income taxes

(179)


525

            Accounts payable

(32,377)


(30,078)

            Accrued liabilities

13,395


(5,378)

            Lease incentives and other deferred liabilities

4,335


3,476


Net cash provided by operating activities

19,718


19,976







CASH FLOWS FROM INVESTING ACTIVITIES:




Capital expenditures

(10,658)


(8,625)

Other


(93)


(176)


Net cash used in investing activities

(10,751)


(8,801)







CASH FLOWS FROM FINANCING ACTIVITIES:




Payments on Term Loan

-


(2,050)

Deferred financing costs paid

-


(1,274)

Investment by affiliate of Parent

-


2,400

Dividend payment to Parent

(201)


-

Capital contribution to noncontrolling interest

1,007


-


Net cash provided by (used in) financing activities

806


(924)

Effect of exchange rate fluctuations on cash

45


107

Net increase in cash and cash equivalents

9,818


10,358

CASH AND CASH EQUIVALENTS:




Beginning of period

33,328


77,910

End of period


$            43,146


$            88,268

 

 

EXHIBIT D










THE GYMBOREE CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited)











ADJUSTED EBITDA:










The Company defines "Adjusted EBITDA" as net income (loss) attributable to The Gymboree Corporation before interest (income) expense, income tax expense (benefit), and depreciation and amortization ("EBITDA") adjusted for other items, including gain or loss on extinguishment of debt, non-cash share-based compensation, loss on disposal/impairment of assets, sponsor management fees and expenses, as well as the impact of purchase accounting adjustments resulting from the acquisition of the Company by investment funds sponsored by Bain Capital Partners, LLC (the "Acquisition"), non-recurring and unusual items.

Adjusted EBITDA is not a performance measure under U.S. generally accepted accounting principles ("GAAP"), but is considered an important supplemental measure of the Company's performance and is believed to be used frequently by securities analysts, investors and other interested parties in the evaluation of similar retail companies. Adjusted EBITDA is not a presentation made in accordance with GAAP and the Company's computation of Adjusted EBITDA may vary from others in the industry. Adjusted EBITDA should not be considered an alternative to operating income or net income, as a measure of operating performance or cash flow, or as a measure of liquidity. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

The table below provides a reconciliation of net income (loss) attributable to The Gymboree Corporation to Adjusted EBITDA (in thousands):








Quarter Ended


Quarter Ended







May 4, 2013


April 28, 2012







13 Weeks


13 Weeks

Net (loss) income attributable to The Gymboree Corporation






$            (2,536)


$              4,996

Reconciling items (a):









Interest expense 






20,402


21,658

Interest income 






(26)


(48)

Income tax expense (benefit)






(861)


2,954

Depreciation and amortization (b)






12,620


14,162

Non-cash share-based compensation expense 






1,497


1,407

Loss on disposal/impairment on assets






300


62

Loss (gain) on extinguishment of debt






-


1,237

Restructuring charges






489


-

Acquisition-related adjustments (c)






4,093


4,398

Adjusted EBITDA






$            35,978


$            50,826










(a) Exclude amounts related to noncontrolling interest, which are already excluded from net income (loss) attributable to The Gymboree Corporation.










(b) Includes the following (in thousands):









Amortization of intangible assets (impacts SG&A)






$              2,258


$              4,340

Amortization of below and above market leases (impacts COGS)






(386)


(548)







$              1,872


$              3,792










(c) Include the following (in thousands):









Additional rent expense recognized due to the elimination of deferred rent and construction allowances in purchase accounting (impacts COGS)






$              2,232


$              2,324

Sponsor fees, legal and  accounting,  as well as other costs incurred as a result of the Acquisition or refinancing (impacts SG&A)






1,120


872

Decrease in net sales due to the elimination of deferred revenue related to the Company's co-branded credit card program in purchase accounting (impacts net sales)






741


1,202







$              4,093


$              4,398



















OTHER NON-GAAP FINANCIAL MEASURES:
























Quarter Ended


Quarter Ended







May 4, 2013


April 28, 2012







13 Weeks


13 Weeks










Gross profit as reported






$          120,973


$          121,824

Acquisition-related adjustments






2,587


2,978

Adjusted gross profit excluding Acquisition-related adjustments (non-GAAP measure)






$          123,560


$          124,802

























Quarter Ended


Quarter Ended







May 4, 2013


April 28, 2012







13 Weeks


13 Weeks










SG&A as reported






$        (104,129)


$          (91,739)










Acquisition-related adjustments






3,378


5,212

Other adjustments






489


-







3,867


5,212

Adjusted SG&A excluding Acquisition-related and other adjustments (non-GAAP measure)






$        (100,262)


$          (86,527)

 

EXHIBIT E








THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Unaudited)














For the quarter ended May 4, 2013




Balance Before 










Consolidation of VIEs


VIEs*


Eliminations


As Reported




(in thousands)


Net sales

$                      289,480


$  4,634


$        (1,331)


$     292,783


Cost of goods sold, including buying and occupancy expenses

(170,782)


(1,230)


202


(171,810)



Gross profit

118,698


3,404


(1,129)


120,973


Selling, general and administrative expenses

(101,631)


(3,646)


1,148


(104,129)



Operating income (loss)

17,067


(242)


19


16,844


Interest income

27


14


-


41


Interest expense

(20,402)


-


-


(20,402)


Other income (expense), net

(108)


117


-


9



Loss before income taxes

(3,416)


(111)


19


(3,508)


Income tax benefit (expense)

861


(201)


-


660



Net loss

(2,555)


(312)


19


(2,848)


Net loss attributable to noncontrolling interest

-


312


-


312



Net loss attributable to The Gymboree Corporation

$                        (2,555)


$        -


$              19


$        (2,536)
























For the quarter ended April 28, 2012




Balance Before 










Consolidation of VIEs


VIEs*


Eliminations


As Reported




(in thousands)


Net sales

$                      297,931


$  2,143


$        (2,323)


$     297,751


Cost of goods sold, including buying and occupancy expenses

(176,049)


(242)


364


(175,927)



Gross profit

121,882


1,901


(1,959)


121,824


Selling, general and administrative expenses

(90,894)


(2,655)


1,810


(91,739)



Operating income (loss)

30,988


(754)


(149)


30,085


Interest income

48


11


-


59


Interest expense

(21,658)


-


-


(21,658)


Loss on extinguishment of debt

(1,237)


-


-


(1,237)


Other expense, net

(42)


(24)


-


(66)



Income (loss) before income taxes

8,099


(767)


(149)


7,183


Income tax expense

(2,954)


(59)


-


(3,013)



Net income (loss)

5,145


(826)


(149)


4,170


Net loss attributable to noncontrolling interest

-


826


-


826



Net income attributable to The Gymboree Corporation

$                          5,145


$        -


$           (149)


$         4,996

 


EXHIBIT E (continued)








THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEETS

(Unaudited)




May 4, 2013




Balance Before 










Consolidation of VIEs


VIEs*


Eliminations


As Reported




(in thousands)

Current assets

$                      288,822


$  13,131


$        (5,355)


$     296,598

Non-current assets

1,726,636


2,650


-


1,729,286

Total assets

$                   2,015,458


$  15,781


$        (5,355)


$  2,025,884











Current liabilities

$                      157,669


$  12,321


$        (5,142)


$     164,848

Non-current liabilities

1,421,443


188


-


1,421,631

Total liabilities

$                   1,579,112


$  12,509


$        (5,142)


$  1,586,479











Total stockholders' equity

436,346


-


(213)


436,133

Noncontrolling interest

-


3,272


-


3,272

Total liabilities and stockholders' equity

$                   2,015,458


$  15,781


$        (5,355)


$  2,025,884














April 28, 2012




Balance Before 










Consolidation of VIEs


VIEs*


Eliminations


As Reported




(in thousands)

Current assets

$                      327,746


$  11,536


$        (2,466)


$     336,816

Non-current assets

1,746,957


857


-


1,747,814

Total assets

$                   2,074,703


$  12,393


$        (2,466)


$  2,084,630











Current liabilities

$                      149,593


$    9,098


$        (2,317)


$     156,374

Non-current liabilities

1,473,680


59


-


1,473,739

Total liabilities

$                   1,623,273


$    9,157


$        (2,317)


$  1,630,113











Total stockholders' equity

451,430


-


(149)


451,281

Noncontrolling interest

-


3,236


-


3,236

Total liabilities and stockholders' equity

$                   2,074,703


$  12,393


$        (2,466)


$  2,084,630


*  The Variable Interest Entities ("VIEs") includes the results of Gymboree (China) Commercial and Trading Co. Ltd. and Gymboree (Tianjin) Educational Information Consultation Co. Ltd.  While the Company does not control these two entities, they have been determined to be variable interest entities and their results have been consolidated by the Company.

SOURCE The Gymboree Corporation



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