The Gymboree Corporation Reports Fourth Quarter and Fiscal Year 2012 Results

EXHIBIT A

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Quarter Ended

Quarter Ended

Year Ended

Year Ended

February 2, 2013

January 28, 2012

February 2, 2013

January 28, 2012

(14 weeks)

(13 weeks)

(53 weeks)

(52 weeks)

(in thousands)

Net sales:

Retail

$            387,798

$             348,437

$         1,234,993

$          1,164,171

Gymboree Play & Music 

5,960

4,416

23,941

13,885

Retail Franchise

3,885

2,995

16,730

10,232

Total net sales

397,643

355,848

1,275,664

1,188,288

Cost of goods sold, including buying and occupancy expenses

(252,866)

(229,643)

(794,272)

(728,346)

Gross profit

144,777

126,205

481,392

459,942

Selling, general and administrative expenses

(125,392)

(107,246)

(411,742)

(380,141)

Goodwill impairment

-

(28,300)

-

(28,300)

Operating income (loss)

19,385

(9,341)

69,650

51,501

Interest income

31

53

177

168

Interest expense

(21,477)

(21,826)

(85,640)

(89,807)

Gain (loss) on extinguishment of debt

1,023

-

(214)

(19,563)

Other expense, net

(8)

(67)

(12)

(109)

Loss before income taxes

(1,046)

(31,181)

(16,039)

(57,810)

Income tax (expense) benefit 

(4,371)

416

5,636

6,626

Net loss

(5,417)

(30,765)

(10,403)

(51,184)

Net (income) loss attributable to noncontrolling interest

(274)

5,839

2,561

5,839

Net loss attributable to The Gymboree Corporation

$               (5,691)

$             (24,926)

$               (7,842)

$             (45,345)

EXHIBIT B

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

February 2,

January 28,

2013

2012

(in thousands)

Current assets

Cash and cash equivalents

$      33,328

$      77,910

Accounts receivable

27,542

27,277

Merchandise inventories

197,935

210,212

Prepaid income taxes

2,903

3,736

Prepaid expenses

17,341

5,532

Deferred income taxes

31,383

36,115

    Total current assets

310,432

360,782

Property and equipment, net

205,325

202,152

Goodwill

898,966

899,097

Other intangible assets

580,641

599,195

Deferred financing costs

40,040

47,915

Other assets

7,809

4,646

    Total assets

$ 2,043,213

$ 2,113,787

Current liabilities

Accounts payable

$      90,133

$      79,027

Accrued liabilities

90,443

94,178

Current portion of long-term debt

-

17,698

    Total current liabilities

180,576

190,903

Long-term liabilities

Long-term debt

1,138,455

1,192,171

Lease incentives and other deferred liabilities

40,104

28,681

Unrecognized tax benefits

7,848

7,898

Deferred income taxes

234,593

245,495

    Total liabilities

1,601,576

1,665,148

Stockholders' equity

441,637

448,639

Total liabilities and stockholders' equity

$ 2,043,213

$ 2,113,787

EXHIBIT C

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Year Ended

Year Ended

February 2, 2013

January 28, 2012

(53 weeks)

(52 weeks)

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$             (10,403)

$             (51,184)

Adjustments to reconcile net loss to net cash

  provided by operating activities:

Loss on extinguishment of debt

214

15,860

Depreciation and amortization

58,847

57,930

Goodwill impairment

-

28,300

Amortization of deferred financing costs and accretion of original issue discount

6,902

6,830

Interest rate cap contracts - adjustment to market

300

51

Loss on disposal/impairment of assets

3,152

4,339

Benefit for deferred income taxes

(7,009)

(8,946)

Share-based compensation expense

4,260

5,907

Other non-cash expense

1,732

4,608

Change in assets and liabilities:

            Accounts receivable

(2,630)

(11,209)

            Merchandise inventories

12,060

(25,646)

            Prepaid expenses and other assets

(13,820)

(743)

            Prepaid income taxes

(47)

12,385

            Accounts payable

11,094

24,533

            Accrued liabilities

(5,481)

14,515

            Lease incentives and other deferred liabilities

14,623

14,015

Net cash provided by operating activities

73,794

91,545

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(47,851)

(36,565)

Acquisition of business, net of cash acquired

-

(1,352)

Other

(842)

(295)

Net cash used in investing activities

(48,693)

(38,212)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from Term Loan

-

820,000

Payments on Term Loan

(42,698)

(828,200)

Proceeds from ABL facility

14,000

60,656

Payments on ABL facility

(14,000)

(60,656)

Repurchase of Notes

(26,613)

-

Deferred financing costs

(1,344)

(6,665)

Investment by Parent

-

14,865

Investment by affiliate of Parent

2,400

-

Dividend payment to Parent

(3,273)

(12,200)

Capital contribution to noncontrolling interest

1,602

4,477

Net cash used in financing activities

(69,926)

(7,723)

Effect of exchange rate fluctuations on cash

243

176

Net (decrease) increase in cash and cash equivalents

(44,582)

45,786

CASH AND CASH EQUIVALENTS:

Beginning of period

77,910

32,124

End of period

$              33,328

$               77,910

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

Year Ended

Year Ended

February 2, 2013

January 28, 2012

February 2, 2013

January 28, 2012

(14 weeks)

(13 weeks)

(53 weeks)

(52 weeks)

(in thousands)

Net (loss) income attributable to The Gymboree Corporation

$               (5,691)

$             (24,926)

$               (7,842)

$             (45,345)

Reconciling items (a):

  Interest expense 

21,477

21,826

85,640

89,807

  Interest income 

(18)

(53)

(134)

(168)

  Income tax expense (benefit)

4,549

(416)

(6,502)

(6,626)

  Depreciation and amortization (c)

14,902

15,227

58,369

57,930

  Non-cash share-based compensation expense 

1,040

1,577

4,260

5,907

  Executive-related hiring expenses (b)

1,884

-

1,884

-

  Loss on disposal/impairment on assets

891

838

2,981

4,339

  Loss (gain) on extinguishment of debt

(1,023)

-

214

19,563

  Gymboree Play & Music franchise transition

-

-

-

7,200

  Other (e)

5,336

-

5,336

-

  Goodwill impairment

-

28,300

-

28,300

  Acquisition-related adjustments (d)

4,351

4,813

17,639

31,678

Adjusted EBITDA

$              47,698

$               47,186

$            161,845

$             192,585

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

(b) Include amounts related to the hiring of our CEO and CFO, including search-firm costs and sign-on bonuses.

(c) Includes the following (in thousands):

    Amortization of intangible assets (impacts SG&A)

$                4,340

$                 5,067

$              17,360

$               17,500

    Amortization of below and above market leases (impacts COGS)

(426)

(562)

(1,868)

(2,090)

$                3,914

$                 4,505

$              15,492

$               15,410

(d) Include the following (in thousands):

    Adjustment to cost of goods sold from an increase in the net book value of inventory as a result of purchase accounting (impacts COGS)

$                      -

$                      -

$                      -

$               10,731

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

2,286

2,425

9,211

9,699

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

1,302

1,171

4,069

5,607

    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)

763

1,217

4,359

5,641

$                4,351

$                 4,813

$              17,639

$               31,678

(e) Other is comprised of a non-recurring charge in reserves and a non-recurring charge resulting from a termination of our Shade retail concept.

OTHER NON-GAAP FINANCIAL MEASURES:

Quarter Ended

Quarter Ended

Year Ended

Year Ended

February 2, 2013

January 28, 2012

February 2, 2013

January 28, 2012

(14 weeks)

(13 weeks)

(53 weeks)

(52 weeks)

(in thousands)

Gross profit as reported

$            144,777

$             126,205

$            481,392

$             459,942

Acquisition-related adjustments

2,623

3,080

11,702

23,981

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

$            147,400

$             129,285

$            493,094

$             483,923

Quarter Ended

Quarter Ended

Year Ended

Year Ended

February 2, 2013

January 28, 2012

February 2, 2013

January 28, 2012

(14 weeks)

(13 weeks)

(53 weeks)

(52 weeks)

(in thousands)

SG&A as reported

$           (125,392)

$           (107,246)

$           (411,742)

$           (380,141)

Acquisition-related adjustments

5,642

6,238

21,429

23,107

Executive-related hiring expenses

1,884

-

1,884

-

Gymboree Play & Music franchise transition

-

-

-

7,200

Other adjustments

5,336

-

5,336

-

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

$           (112,530)

$           (101,008)

$           (383,093)

$           (349,834)

EXHIBIT E

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Unaudited)

For the quarter ended February 2, 2013

Balance Before 

Consolidation of VIEs

VIEs*

Eliminations

As Reported

(in thousands)

Net sales

$                      394,436

$   5,920

$       (2,713)

$     397,643

Cost of goods sold, including buying and occupancy expenses

(251,870)

(1,323)

327

(252,866)

Gross profit

142,566

4,597

(2,386)

144,777

Selling, general and administrative expenses

(123,197)

(4,523)

2,328

(125,392)

Operating income (loss)

19,369

74

(58)

19,385

Interest income

18

13

-

31

Interest expense

(21,477)

-

-

(21,477)

Loss on extinguishment of debt

1,023

-

-

1,023

Other income (expense), net

(18)

10

-

(8)

Loss before income taxes

(1,085)

97

(58)

(1,046)

Income tax benefit (expense)

(4,548)

177

-

(4,371)

Net loss

(5,633)

274

(58)

(5,417)

Net loss attributable to noncontrolling interest

-

(274)

-

(274)

Net loss attributable to The Gymboree Corporation

$                        (5,633)

$         -

$            (58)

$        (5,691)

For the quarter ended January 28, 2012

Balance Before 

Consolidation of VIEs

VIEs*

Eliminations

As Reported

(in thousands)

Net sales

$                      355,836

$   1,195

$       (1,183)

$     355,848

Cost of goods sold, including buying and occupancy expenses

(229,466)

(177)

-

(229,643)

Gross profit

126,370

1,018

(1,183)

126,205

Selling, general and administrative expenses

(101,599)

(6,830)

1,183

(107,246)

Goodwill impairment

(28,300)

-

-

(28,300)

Operating income (loss)

(3,529)

(5,812)

-

(9,341)

Interest income

53

-

-

53

Interest expense

(21,826)

-

-

(21,826)

Other (expense) income, net

(59)

(8)

-

(67)

Loss before income taxes

(25,361)

(5,820)

-

(31,181)

Income tax benefit (expense)

435

(19)

-

416

Net loss

(24,926)

(5,839)

-

(30,765)

Net loss attributable to noncontrolling interest

-

5,839

-

5,839

Net loss attributable to The Gymboree Corporation

$                      (24,926)

$         -

$               -

$      (24,926)

For the year ended February 2, 2013

Balance Before 

Consolidation of VIEs

VIEs*

Eliminations

As Reported

(in thousands)

Net sales

$                   1,270,866

$ 14,242

$       (9,444)

$  1,275,664

Cost of goods sold, including buying and occupancy expenses

(791,961)

(3,585)

1,274

(794,272)

Gross profit

478,905

10,657

(8,170)

481,392

Selling, general and administrative expenses

(407,184)

(12,472)

7,914

(411,742)

Operating income (loss)

71,721

(1,815)

(256)

69,650

Interest income

134

43

-

177

Interest expense

(85,640)

-

-

(85,640)

Loss on extinguishment of debt

(214)

-

-

(214)

Other income (expense), net

(90)

78

-

(12)

Loss before income taxes

(14,089)

(1,694)

(256)

(16,039)

Income tax benefit (expense)

6,503

(867)

-

5,636

Net loss

(7,586)

(2,561)

(256)

(10,403)

Net loss attributable to noncontrolling interest

-

2,561

-

2,561

Net loss attributable to The Gymboree Corporation

$                        (7,586)

$         -

$          (256)

$        (7,842)

For the year ended January 28, 2012

Balance Before 

Consolidation of VIEs

VIEs*

Eliminations

As Reported

(in thousands)

Net sales

$                   1,188,276

$   1,195

$       (1,183)

$  1,188,288

Cost of goods sold, including buying and occupancy expenses

(728,169)

(177)

-

(728,346)

Gross profit

460,107

1,018

(1,183)

459,942

Selling, general and administrative expenses

(374,494)

(6,830)

1,183

(380,141)

Goodwill impairment

(28,300)

-

-

(28,300)

Operating income (loss)

57,313

(5,812)

-

51,501

Interest income

168

-

-

168

Interest expense

(89,807)

-

-

(89,807)

Loss on extinguishment of debt

(19,563)

-

-

(19,563)

Other (expense) income, net

(101)

(8)

-

(109)

Loss before income taxes

(51,990)

(5,820)

-

(57,810)

Income tax benefit (expense)

6,645

(19)

-

6,626

Net loss

(45,345)

(5,839)

-

(51,184)

Net loss attributable to noncontrolling interest

-

5,839

-

5,839

Net loss attributable to The Gymboree Corporation

$                      (45,345)

$         -

$               -

$      (45,345)

EXHIBIT E (continued)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEETS

(Unaudited)

February 2, 2013

Balance Before 

Consolidation of VIEs

VIEs*

Eliminations

As Reported

(in thousands)

Current assets

$                      303,344

$ 11,553

$       (4,465)

$     310,432

Non-current assets

1,730,865

1,916

-

1,732,781

Total assets

$                   2,034,209

$ 13,469

$       (4,465)

$  2,043,213

Current liabilities

$                      175,555

$   9,244

$       (4,223)

$     180,576

Non-current liabilities

1,420,870

130

-

1,421,000

Total liabilities

$                   1,596,425

$   9,374

$       (4,223)

$  1,601,576

Total stockholders' equity

437,784

-

(242)

437,542

Noncontrolling interest

-

4,095

-

4,095

Total liabilities and stockholders' equity

$                   2,034,209

$ 13,469

$       (4,465)

$  2,043,213

January 28, 2012

Balance Before 

Consolidation of VIEs

VIEs*

Eliminations

As Reported

(in thousands)

Current assets

$                      355,073

$   6,692

$          (983)

$     360,782

Non-current assets

1,752,303

702

-

1,753,005

Total assets

$                   2,107,376

$   7,394

$          (983)

$  2,113,787

Current liabilities

$                      187,812

$   4,074

$          (983)

$     190,903

Non-current liabilities

1,474,189

56

-

1,474,245

Total liabilities

$                   1,662,001

$   4,130

$          (983)

$  1,665,148

Total stockholders' equity

445,375

-

-

445,375

Noncontrolling interest

-

3,264

-

3,264

Total liabilities and stockholders' equity

$                   2,107,376

$   7,394

$          (983)

$  2,113,787

*  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.