The Gymboree Corporation Reports Fourth Quarter and Full Year 2010 Results

SAN FRANCISCO, April 27, 2011 /PRNewswire/ -- The Gymboree Corporation (the "Company") today reported consolidated financial results for the fourth fiscal quarter and full year ended January 29, 2011.

The results below reflect the Company's performance for the "combined period" consisting of the period prior to its acquisition by affiliates of Bain Capital Partners, LLC ("Bain Capital") in the fourth fiscal quarter of fiscal 2010 ("predecessor period"), as well as the period after completion of the transaction ("successor period").

The addition of the predecessor and successor period amounts is not consistent with 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 the year ended January 29, 2011.

Fourth Fiscal Quarter Ended January 29, 2011

For the fourth fiscal quarter, net sales were $318.0 million, an increase of 6.2% compared to $299.6 million in net sales for the fourth fiscal quarter of the prior year.  As previously reported, comparable store sales for the quarter decreased 2% versus the fourth quarter of the prior year.

Gross profit for the fourth fiscal quarter of 2010 was $92.4 million or 29.1% of net sales compared to $140.0 million or 46.7% of net sales for the fourth fiscal quarter of 2009.  Results for the fourth quarter of 2010 include $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 fiscal quarter of 2010 was $137.9 million or 43.4% of net sales, down 330 basis points from the prior year.  

SG&A expense for the fourth quarter was $144.7 million or 45.5% of net sales, compared to $86.4 million or 28.9% of net sales in the comparable quarter of the prior year.  Results for the fourth quarter of 2010 include $58.7 million of additional costs resulting from the acquisition, including the effect of purchase accounting adjustments and transaction-related charges recognized during the quarter.  Excluding these charges, SG&A expense for the fourth fiscal quarter was $86.0 million or 27.0% of net sales, down 190 basis points from the prior year.      

Net loss for the fourth quarter of fiscal 2010 was $47.3 million compared to net income of $33.2 million for the same period last year.  The significant decrease in earnings primarily resulted from the acquisition-related costs, as well as higher interest expense incurred following completion of the acquisition.  

Adjusted EBITDA for the fourth fiscal quarter of 2010 decreased 5.3% to $65.9 million compared to $69.6 million for the comparable quarter of the prior year.  A reconciliation of net income (loss) to Adjusted EBITDA presented herein is included in Exhibit A of this press release.  

Fiscal Year 2010 ended January 29, 2011

Net sales for the 52-week period ended January 29, 2011, were $1.1 billion, a 5.9% increase from the prior fiscal year. Comparable store sales for fiscal 2010 were down 2% compared to the prior year.  

Gross profit for the full fiscal year 2010 was $458.3 million or 42.7% of net sales compared to $479.9 million or 47.3% of net sales for the 2009 fiscal year.  Excluding the $45.5 million in purchasing accounting adjustments previously mentioned, gross profit for fiscal 2010 was $503.8 million or 46.9% of net sales.

Adjusted EBITDA for fiscal 2010 increased 7.0% to $237.0 million, compared to $221.3 million for the prior year.

Balance Sheet Highlights

As part of the November 2010 acquisition, the Company issued a total of $1.2 billion in debt, consisting of an $820 million seven-year 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 $148.4 million of undrawn availability.  Effective February 2011, the term loan was refinanced to lower the interest rate 50 basis points and remove select financial loan covenants.  

Cash at fiscal year end decreased to $32.1 million from $257.7 million at the end of fiscal 2009.  The decrease reflects the impact of the Company's utilization of balance sheet cash to fund the transaction.

Capital expenditures for the full fiscal year were $47.3 million, with $39.0 million used to fund 118 new store openings and 43 relocations and remodels during the fiscal year.  $8.3 million of the total amount was used to support infrastructure investments at the corporate office as well as the Company's distribution center.

Inventory balances at the end of the year were $184.3 million compared to $121.1 million at the end of fiscal 2009.  The fiscal 2010 balance includes an $11 million increase from purchase accounting adjustments resulting from the acquisition.  Excluding this adjustment, year-end inventory was $173.3 million.  

Non-GAAP Financial Measures

The Company defines "Adjusted EBITDA" as net income before interest (income) expense, income tax expense, and depreciation and amortization ("EBITDA") adjusted for other items, including 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 recent acquisition of the Company by Giraffe Holding, Inc., an entity controlled by investment funds sponsored by Bain Capital.

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.

Management Presentation

The live broadcast of the discussion of fourth quarter and full fiscal year 2010 financial results and plans for fiscal 2011 will be available to interested parties at 1:00 p.m. PT (4:00 p.m. ET) on Wednesday, April 27, 2011.  To listen to the live broadcast over the internet, please log on to www.gymboree.com, click on "Our Company" at the bottom of the page, go to "Investor and Media Relations" and then "Conference Calls, Webcasts & Presentations."  A replay of the call will be available two hours after the broadcast through midnight PT, Wednesday, May 4, 2011, at 800-642-1687, passcode 61817952.

About The Gymboree Corporation

The Gymboree Corporation's specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of April 2, 2011, the Company operated a total of 1,074 retail stores: 634 Gymboree® stores (593 in the United States, 37 in Canada, 2 in Puerto Rico and 2 in Australia), 150 Gymboree Outlet stores, 123 Janie and Jack® shops and 167 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 693 franchised and Company-operated Gymboree Play & Music® centers in the United States and 37 other countries.

Forward-Looking Statements

The foregoing paragraphs contain forward-looking statements relating to the Company's fourth fiscal quarter and full year ended January 29, 2011, as well as anticipated sales growth and future financial performance for fiscal 2011. Actual results could vary materially as a result of a number of factors, including the ongoing volatility in the commodities market for cotton, costs and uncertainties relating to high levels of unemployment and consumer debt, volatility in the financial markets, general economic conditions, customer reactions to new merchandise, service levels and new concepts, 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, competitive market conditions, and other factors. The forward-looking statements contained in this press release reflect the Company's expectations as of the date hereof. 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