The Gymboree Corporation Reports Fourth Quarter and Fiscal Year 2011 Results

SAN FRANCISCO, April 25, 2012 /PRNewswire/ -- The Gymboree Corporation (the "Company") today reported consolidated financial results for the fourth fiscal quarter and the fiscal year ended January 28, 2012 ("fiscal 2011").

The results for the fourth fiscal quarter and the fiscal year ended January 29, 2011 ("fiscal 2010") presented herein reflect the Company's performance for the "combined period" consisting of the period (the "predecessor period") prior 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"), as well as the period after completion of the Acquisition (the "successor period").  The addition of the predecessor and successor period amounts is not consistent with accounting principles generally accepted in the United States ("GAAP") and may yield results that are not strictly comparable on a period-to-period basis due to the changes of accounting basis during these periods. For purposes of comparing results of operations, however, the Company believes that it is the most meaningful way to present the results of operations for fiscal 2010 and the fourth quarter of fiscal 2010.

Fourth Fiscal Quarter Ended January 28, 2012

For the fourth quarter of fiscal 2011, net sales were $355.8 million, an increase of 11.9% compared to $318.0 million in net sales for the fourth fiscal quarter of the prior year.  Comparable store sales for the quarter increased 6% versus the fourth quarter of the prior year.

Gross profit for the fourth quarter of fiscal 2011 was $126.2 million, or 35.5% of net sales, compared to $92.4 million, or 29.1% of net sales, for the fourth quarter of fiscal 2010.  Results for the fourth quarter of 2010 included $45.5 million of additional product costs resulting from purchase accounting adjustments to inventory balances effective upon closing of the Acquisition.  Excluding the impact of the purchase accounting adjustments, gross profit for the fourth quarter of fiscal 2010 was $137.9 million, or 43.4% of net sales (see Exhibit D).

SG&A expense for the fourth quarter of fiscal 2011 was $107.2 million, or 30.1% of net sales, compared to $144.7 million, or 45.5% of net sales, in the fourth quarter of the prior year.  Results for the fourth quarter of fiscal 2011 and fiscal 2010 include $6.3 million and $58.7 million, respectively, of additional costs resulting from the Acquisition, including the effect of purchase accounting adjustments and Acquisition-related charges recognized during the quarters.  Excluding these charges, SG&A expense for the fourth quarter of fiscal 2011 and fiscal 2010 was $101.0 million, or 28.4% of net sales, and $86.0 million, or 27.0% of net sales, respectively, which represents an increase of 140 basis points over fiscal 2010 (see Exhibit D).  

During the fourth quarter of fiscal 2011, the Company recorded an impairment charge of $28.3 million related to goodwill allocated to the Company's Gymboree Outlet reporting unit.  This impairment charge is a preliminary estimate and remains subject to finalization in fiscal 2012.      

Net loss for the fourth quarter of fiscal 2011 was $24.9 million compared to a net loss of $47.3 million for the same period last year.  The significant decrease in net loss primarily resulted from higher Acquisition-related costs incurred during the prior fiscal year and was partially offset by the goodwill impairment recorded in the fourth quarter of fiscal 2011.  

Net loss attributable to The Gymboree Corporation before interest (income) expense, income tax benefit and depreciation and amortization, adjusted for other items ("Adjusted EBITDA"), for the fourth quarter of fiscal 2011 decreased 28.4% to $47.2 million compared to $65.9 million for the fourth quarter of the prior year.  Adjusted EBITDA is not a performance measure under GAAP.  See "Non-GAAP Financial Measures" below.  A reconciliation of net loss attributable to The Gymboree Corporation to Adjusted EBITDA presented herein is included in Exhibit A of this press release. 

Fiscal Year Ended January 28, 2012

Net sales for fiscal 2011 were $1.2 billion, a 10.6% increase from the prior fiscal year. Comparable store sales for fiscal 2011 were up 4% compared to the prior year. 

Gross profit for fiscal year 2011 was $459.9 million, or 38.7% of net sales, compared to $458.3 million, or 42.7% of net sales, for fiscal 2010.  Excluding purchase accounting adjustments of $10.7 million and $45.5 million in fiscal 2011 and fiscal 2010, respectively, gross profit was $470.7 million, or 39.6% of net sales, and $503.8 million, or 46.9% of net sales, for fiscal 2011 and fiscal 2010, respectively (see Exhibit D). 

Adjusted EBITDA for fiscal 2011 decreased 18.7% to $192.6 million, compared to $237.0 million for the prior year (see "Non-GAAP Financial Measures" included in Exhibit A of this press release). 

Balance Sheet Highlights

As part of the Acquisition, the Company issued a total of $1.2 billion in debt, consisting of an $820 million term loan and $400 million in high-yield bonds maturing in 8 years.  An asset-backed loan ("ABL") in the amount of $225 million was also established to support working capital needs.  There were no borrowings outstanding under the ABL as of year end and approximately $127.8 million of undrawn availability.  Effective March 2012, the ABL facility was refinanced to take advantage of favorable rates and to extend the maturity date.   

Cash at the end of fiscal 2011 increased to $77.9 million from $32.1 million at the end of fiscal 2010. 

Capital expenditures for fiscal 2011 were $36.6 million.

Inventory balances at the end of fiscal 2011 were $210.2 million compared to $184.3 million at the end of fiscal 2010. The fiscal 2010 inventory balance included a $10.7 million write-up for purchase accounting adjustments.   

Fiscal 2012 Business Outlook

Sales Expectations

The Company anticipates comparable store sales growth to be flat to up in the low single digits for the first quarter and for the full year fiscal 2012.

Adjusted EBITDA

The Company expects Adjusted EBITDA for the first quarter of fiscal 2012 to be in the range of $47 million to $51 million. Overall, the Company expects Adjusted EBITDA in fiscal 2012 to increase modestly over fiscal 2011. The Company anticipates generating sufficient cash flow to service its debt and fund its growth in fiscal 2012.

New Stores

During fiscal 2012, the Company plans to open 105 new stores, including 80 Crazy 8 stores.

Capital Expenditures

During fiscal 2012, the Company anticipates spending $45 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 goodwill impairment, 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 A for a reconciliation of Adjusted EBITDA to net income.

Management Presentation

The live broadcast of the discussion of fourth quarter and fiscal 2011 financial results and fiscal 2012 business outlook will be available to interested parties at 1:00 p.m. PT (4:00 p.m. ET) on Wednesday, April 25, 2012.  To listen to the live broadcast over the internet, please log on to www.gymboree.com, click on "Company Information" at the bottom of the page, go to "Investor and Media Relations" and then "Conference Calls & Webcasts."  A replay of the call will be available two hours after the broadcast through midnight PT, Wednesday, May 9, 2012, at 855-859-2056, passcode 71019106.

About The Gymboree Corporation

The Gymboree Corporation's specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of March 31, 2012, the Company operated a total of 1,155 retail stores: 633 Gymboree® stores (588 in the United States, 41 in Canada, 1 in Puerto Rico and 3 in Australia), 153 Gymboree Outlet stores, 126 Janie and Jack® shops and 243 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 711 franchised and Company-operated Gymboree Play & Music® centers in the United States and 39 other countries.

Forward-Looking Statements

The foregoing financial information for the fourth fiscal quarter and the fiscal year ended January 28, 2012 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, cash flows and new store openings in fiscal 2012.  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 Part II, "Item 1A, Risk Factors," of the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 2011, filed with the Securities and Exchange Commission on June 29, 2011. 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. 

SOURCE The Gymboree Corporation