The Gymboree Corporation Reports First Fiscal Quarter 2014 Results
Company Added
Company Removed
Apply to Request List

The Gymboree Corporation Reports First Fiscal Quarter 2014 Results

SAN FRANCISCO - June 12, 2014 // PRNewswire //  The Gymboree Corporation (the "Company") today reported consolidated financial results for the first fiscal quarter ended May 3, 2014.

First Quarter Results (13-weeks ended May 3, 2014 versus 13-weeks ended May 4, 2013)

  • Net sales were $272.0 million, compared to $292.8 million in the first quarter of fiscal 2013.
  • Comparable sales (including online stores) declined 10%.
  • Gross profit was $108.4 million, or 39.8% of net sales, compared to $121.0 million, or 41.3% of net sales, for the first quarter of fiscal 2013.
  • Adjusted gross profit was $110.2 million, or 40.5% of net sales, compared to $123.6 million, or 42.2% of net sales, for the first quarter of fiscal 2013. Adjusted gross profit excludes purchase accounting adjustments of $1.8 million a and $2.6 million for the first quarter of fiscal 2014 and the first quarter of fiscal 2013, respectively, relating to the November 2010 acquisition of the Company by investment funds sponsored by Bain Capital Partners, LLC (the "Acquisition") (see Exhibit D for relevant reconciliation information).
  • SG&A expense was $102.3 million, or 37.6% of net sales, compared to $104.1 million, or 35.6% of net sales, for the first quarter of fiscal 2013.
  • Adjusted SG&A expense was $101.8 million, or 37.4% of net sales, compared to $100.3 million, or 34.2% of net sales, in the first quarter of fiscal 2013. Adjusted SG&A excludes $0.5 million and $3.9 million, respectively, of additional costs resulting from the Acquisition, including the effect of purchase accounting adjustments and non-recurring adjustments (see Exhibit D for relevant reconciliation information).
  • Net loss attributable to The Gymboree Corporation was $13.4 million compared to a net loss of $2.5 million for the first quarter of fiscal 2013.
  • Adjusted EBITDA, defined as net loss attributable to The Gymboree Corporation before interest income/expense, income taxes and depreciation and amortization, adjusted for other items described above, was $22.0 million compared to $36.0 million< for the first quarter of fiscal 2013.
  • Adjusted EBITDA is not a financial measure under U.S. generally accepted accounting principles ("GAAP"). For a description of these measures, 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 D of this press release.

Balance Sheet Highlights

  • There were $10.0 million in borrowings outstanding under the Company's $225 million asset-backed loan facility and approximately $118 million of undrawn availability after deducting for Letters of Credit and outstanding borrowings at the end of the first quarter of fiscal 2014.
  • Cash balances were at $24.8 million at the end of the first quarter of fiscal 2014, a decrease of $14.6 million from $39.4 million at the end of fiscal 2013.
  • Capital expenditures were $9.4 million during the first quarter of fiscal 2014.
  • Inventory balances at the end of the first quarter of fiscal 2014 were $170.4 million, compared to $180.8 million at the end of the first quarter of fiscal 2013. On a per square foot basis, inventory cost declined 10% and inventory units declined in the low teens.

Fiscal 2014 Business Outlook

The Company's fiscal 2014 outlook is based on current economic environment trends, as well as management expectations for the remainder of the year.

Full Year

For the full year, the Company expects Adjusted EBITDA to be approximately flat compared to fiscal 2013. Based on this guidance, the Company expects to have sufficient liquidity during fiscal 2014 to service its debt and invest in the business to drive long-term growth. Furthermore, the Company anticipates utilizing its ABL facility throughout the course of the year to support seasonal working capital needs and does not anticipate having any outstanding borrowings by fiscal year end.

New Stores

During fiscal 2014, the Company plans to open approximately 50 new stores, distributed fairly evenly across the brands, and close approximately 25 to 30 stores.

Capital Expenditures

During fiscal 2014, the Company now anticipates spending approximately $35 million to $40 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 taxes, 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 Acquisition and other non-recurring or unusual items.

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 loss attributable to The Gymboree Corporation).

Management Presentation

The live broadcast of the discussion of first quarter fiscal 2014 financial results and our business outlook will be available to interested parties at 1:00 p.m. PT (4:00 p.m. ET) on Thursday, June 12, 2014. 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 "Investors & Media" and then "Conference Calls & Webcasts." A replay of the call will be available two hours after the broadcast through midnight PT, Wednesday, June 18, 2014, at 855-859-2056, passcode 32200008.

About The Gymboree Corporation

The Gymboree Corporation's specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of May 3, 2014, the Company operated a total of 1,337 retail stores: 627 Gymboree® stores (574 in the United States, 46 in Canada, 1 in Puerto Rico and 6 in Australia), 168 Gymboree Outlet stores (166 in the United States and 2 in Puerto Rico), 146 Janie and Jack® shops and 396 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 698 franchised and Company-operated Gymboree Play & Music® centers in the United States and 41 other countries.

Forward-Looking Statements

The foregoing financial information for the first fiscal quarter of 2014 is unaudited and subject to quarter-end and year-end adjustments. This press release includes forward-looking statements, including statements relating to The Gymboree Corporation's anticipated future financial performance, especially those set forth under the heading "Fiscal 2014 Business Outlook." These forward-looking statements generally can be identified by the use of words such as "anticipate," "expect," "plan," "could," "may," "will," "believe," "estimate," "forecast," "goal," "project," and other words of similar meaning. Each forward-looking statement contained in this press release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. The Company presently considers the following risks and uncertainties to be important factors that could cause actual results to differ materially from the Company's expectations: 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, consumer preferences and customer reactions to new merchandise and 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 1, 2014, filed with the Securities and Exchange Commission ("SEC") on May 2, 2014. The Company cautions investors to carefully consider the risks associated with, and not to place considerable reliance on, the forward-looking statements contained in this press release. The forward-looking statements in this press release speak only as of the date of this document, and the Company undertakes no obligation to update or revise any of these statements.
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

(In thousands)

(Unaudited)

                   
         

13 Weeks Ended

         

May 3, 2014

 

May 4, 2013

Net sales:

         
 

Retail

   

$   259,124

 

$   280,877

 

Gymboree Play & Music 

   

6,832

 

6,328

 

Retail Franchise

   

6,054

 

5,578

   

Total net sales

   

272,010

 

292,783

 

Cost of goods sold, including buying and occupancy expenses

   

(163,652)

 

(171,810)

   

Gross profit

   

108,358

 

120,973

 

Selling, general and administrative expenses

   

(102,290)

 

(104,129)

   

Operating income

   

6,068

 

16,844

 

Interest income

   

47

 

41

 

Interest expense

   

(20,374)

 

(20,402)

 

Other income (expense), net

   

(368)

 

9

   

Loss before income taxes

   

(14,627)

 

(3,508)

 

Income tax (expense) benefit

   

(376)

 

660

   

Net loss

   

(15,003)

 

(2,848)

   

Net loss  attributable to noncontrolling interest

   

1,572

 

312

   

Net loss attributable to The Gymboree Corporation

   

$    (13,431)

 

$      (2,536)

 

EXHIBIT B

THE GYMBOREE CORPORATION

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

                 
     

May 3,

    

February 1,

    

May 4,

 
     

2014

 

2014

 

2013

 

ASSETS

             

Current assets:

             
 

Cash and cash equivalents

 

$       24,773

 

$       39,429

 

$       43,146

 
 

Accounts receivable

 

22,394

 

21,882

 

22,124

 
 

Merchandise inventories

 

170,411

 

175,495

 

180,796

 
 

Prepaid income taxes

 

2,986

 

1,979

 

3,076

 
 

Prepaid expenses

 

18,623

 

18,801

 

16,809

 
 

Deferred income taxes

 

14,236

 

13,454

 

30,647

 
 

    Total current assets

 

253,423

 

271,040

 

296,598

 
                 

Property and equipment, net

 

203,476

 

206,308

 

205,985

 

Goodwill

 

758,777

 

758,777

 

898,983

 

Other intangible assets, net

 

559,003

 

559,824

 

578,456

 

Deferred financing costs

 

30,754

 

32,455

 

38,419

 

Other assets

 

10,288

 

11,700

 

7,443

 
                 
 

    Total assets

 

$  1,815,721

 

$  1,840,104

 

$  2,025,884

 
                 
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

             

Current liabilities:

             
 

Accounts payable

 

$       73,345

 

$     101,959

 

$       57,753

 
 

Accrued liabilities

 

107,648

 

100,303

 

107,095

 
 

Line of credit

 

10,000

 

-

 

-

 
 

Current obligation under capital lease

 

515

 

503

 

-

 
 

    Total current liabilities

 

191,508

 

202,765

 

164,848

 
                 

Long-term liabilities:

             
 

Long-term debt

 

1,113,817

 

1,113,742

 

1,138,524

 
 

Long-term obligation under capital lease

 

3,269

 

3,402

 

-

 
 

Lease incentives and other liabilities

 

50,534

 

50,432

 

43,432

 
 

Unrecognized tax benefits

 

6,304

 

6,157

 

8,135

 
 

Deferred income taxes

 

215,232

 

214,464

 

231,540

 
 

    Total liabilities

 

1,580,664

 

1,590,962

 

1,586,479

 
                 

Stockholders' equity

 

235,057

 

249,142

 

439,405

 
                 
 

Total liabilities and stockholders' equity

 

$  1,815,721

 

$  1,840,104

 

$  2,025,884

 

 

EXHIBIT C

 

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

             
     

13 Weeks Ended

 
     

May 3, 2014

 

May 4, 2013

 

CASH FLOWS FROM OPERATING ACTIVITIES:

          

Net loss

$     (15,003)

 

$       (2,848)

 

Adjustments to reconcile net loss to net cash (used in)

       

  provided by operating activities:

       
 

Depreciation and amortization

11,178

 

12,822

 
 

Amortization of deferred financing costs and accretion of original issue discount

1,776

 

1,690

 
 

Interest rate cap contracts - adjustment to market

461

 

183

 
 

Loss on disposal/impairment of assets

359

 

-

 
 

Deferred income taxes

(33)

 

(2,210)

 
 

Share-based compensation expense

1,276

 

1,497

 
 

Other

18

 

314

 
 

Change in assets and liabilities:

       
   

Accounts receivable

(553)

 

5,443

 
   

Merchandise inventories

4,776

 

17,244

 
   

Prepaid income taxes

(1,013)

 

(179)

 
   

Prepaid expenses and other assets

1,087

 

409

 
   

Accounts payable

(28,602)

 

(32,377)

 
   

Accrued liabilities

8,897

 

13,395

 
   

Lease incentives and other liabilities

693

 

4,335

 
 

Net cash (used in) provided by operating activities

(14,683)

 

19,718

 
             

CASH FLOWS FROM INVESTING ACTIVITIES:

       

Capital expenditures

(9,353)

 

(10,658)

 

Other

 

(56)

 

(93)

 
 

Net cash used in investing activities

(9,409)

 

(10,751)

 
             

CASH FLOWS FROM FINANCING ACTIVITIES:

       

Proceeds from ABL facility

78,000

 

-

 

Payments on ABL facility

(68,000)

 

-

 

Payments on capital lease

(121)

 

-

 

Dividend payment to Parent

-

 

(201)

 

Capital contribution received by noncontrolling interest

-

 

1,007

 
 

Net cash provided by financing activities

9,879

 

806

 

Effect of exchange rate fluctuations on cash and cash equivalents

(443)

 

45

 

Net (decrease) increase in cash and cash equivalents

(14,656)

 

9,818

 

CASH AND CASH EQUIVALENTS:

       

Beginning of period

39,429

 

33,328

 

End of period

$      24,773

 

$      43,146

 

 

EXHIBIT D

THE GYMBOREE CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

(Unaudited)

               

ADJUSTED EBITDA:

The Company defines "Adjusted EBITDA" as net income (loss) attributable to The Gymboree Corporation before interest expense, interest income, income tax expense/benefit, and depreciation and amortization ("EBITDA") adjusted for other items, including, 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 loss attributable to The Gymboree Corporation to Adjusted EBITDA:

 

               
       

13 Weeks Ended

 
       

May 3, 2014

 

May 4, 2013

 
               

Net loss attributable to The Gymboree Corporation

     

$    (13,431)

    

$      (2,536)

 

Reconciling items (a):

             

   Interest expense 

     

20,374

 

20,402

 

   Interest income 

     

(52)

 

(26)

 

   Income tax expense (benefit)

     

599

 

(861)

 

   Depreciation and amortization (b)

     

10,786

 

12,620

 

   Non-cash share-based compensation expense 

     

1,276

 

1,497

 

   Loss on disposal/impairment on assets

     

330

 

300

 

   Acquisition-related adjustments (c)

     

2,944

 

4,093

 

   Other (d)

     

(795)

 

489

 

Adjusted EBITDA

     

$     22,031

 

$     35,978

 
               

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

               

(b) Includes the following:

             

Amortization of intangible assets (impacts SG&A)

     

$          384

 

$       2,258

 

Amortization of below and above market leases (impacts COGS)

     

(247)

 

(386)

 
       

$          137

 

$       1,872

 
               

(c) Includes the following:

             

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

     

$       2,068

 

$       2,232

 

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

     

876

 

1,120

 

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

 
       

$       2,944

 

$       4,093

 
               

(d) Other is comprised of a non-recurring change in reserves and restructuring charges.

             
               

OTHER NON-GAAP FINANCIAL MEASURES:

             
               
       

13 Weeks Ended

 
       

May 3, 2014

 

May 4, 2013

 
               

Gross profit as reported

     

$   108,358

 

$   120,973

 

Acquisition-related adjustments

     

1,821

 

2,587

 

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

     

$   110,179

 

$   123,560

 
               
               
       

13 Weeks Ended

 
       

May 3, 2014

 

May 4, 2013

 
               

SG&A as reported

     

$  (102,290)

 

$  (104,129)

 

Acquisition-related adjustments

     

1,260

 

3,378

 

Other adjustments

     

(795)

 

489

 
       

465

 

3,867

 

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

     

$  (101,825)

 

$  (100,262)

 

 

EXHIBIT E

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)

                 
   

For the 13 Weeks Ended May 3, 2014

   

Balance Before 

           
   

Consolidation of VIEs

 

VIEs*

 

Eliminations

 

As Reported

Net sales

$                      269,144

    

$  5,404

    

$        (2,538)

    

$     272,010

Cost of goods sold, including buying and occupancy expenses

(162,438)

 

(1,302)

 

88

 

(163,652)

 

Gross profit

106,706

 

4,102

 

(2,450)

 

108,358

Selling, general and administrative expenses

(98,960)

 

(5,793)

 

2,463

 

(102,290)

 

Operating income (loss)

7,746

 

(1,691)

 

13

 

6,068

Other non operating expense

(20,591)

 

(104)

 

-

 

(20,695)

 

Loss before income taxes

(12,845)

 

(1,795)

 

13

 

(14,627)

Income tax (expense) benefit

(599)

 

223

 

-

 

(376)

 

Net loss

(13,444)

 

(1,572)

 

13

 

(15,003)

 

Net loss attributable to noncontrolling interest

-

 

1,572

 

-

 

1,572

 

Net loss attributable to The Gymboree Corporation

$                      (13,444)

 

$        -

 

$              13

 

$      (13,431)

                 
                 
   

For the 13 Weeks Ended May 4, 2013

   

Balance Before 

           
   

Consolidation of VIEs

 

VIEs*

 

Eliminations

 

As Reported

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

Other non operating (expense) income

(20,483)

 

131

 

-

 

(20,352)

 

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)

 

EXHIBIT E (continued)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEETS

(In thousands)

(Unaudited)

     

May 3, 2014

     

Balance Before 

           
     

Consolidation of VIEs

 

VIEs*

 

Eliminations

 

As Reported

Current assets

$                      238,320

 

$  17,334

 

$        (2,231)

 

$     253,423

Non-current assets

1,557,828

    

4,470

    

-

 

1,562,298

Total assets

$                   1,796,148

 

$  21,804

 

$        (2,231)

    

$  1,815,721

                   

Current liabilities

$                      185,467

 

$    8,131

 

$        (2,090)

 

$     191,508

Non-current liabilities

1,388,802

 

354

 

-

 

1,389,156

Total liabilities

$                   1,574,269

 

$    8,485

 

$        (2,090)

 

$  1,580,664

                   

Total stockholders' equity

221,879

 

-

 

(141)

 

221,738

Noncontrolling interest

-

 

13,319

 

-

 

13,319

Total liabilities and stockholders' equity

$                   1,796,148

 

$  21,804

 

$        (2,231)

 

$  1,815,721

                   
     

February 1, 2014

     

Balance Before 

           
     

Consolidation of VIEs

 

VIEs*

 

Eliminations

 

As Reported

Current assets

$                      253,764

 

$  18,764

 

$        (1,488)

 

$     271,040

Non-current assets

1,564,620

 

4,444

 

-

 

1,569,064

Total assets

$                   1,818,384

 

$  23,208

 

$        (1,488)

 

$  1,840,104

                   

Current liabilities

$                      196,631

 

$    7,490

 

$        (1,356)

 

$     202,765

Non-current liabilities

1,387,828

 

370

 

(1)

 

1,388,197

Total liabilities

$                   1,584,459

 

$    7,860

 

$        (1,357)

 

$  1,590,962

                   

Total stockholders' equity

233,925

 

-

 

(131)

 

233,794

Noncontrolling interest

-

 

15,348

 

-

 

15,348

Total liabilities and stockholders' equity

$                   1,818,384

 

$  23,208

 

$        (1,488)

 

$  1,840,104

                   
     

May 4, 2013

     

Balance Before 

           
     

Consolidation of VIEs

 

VIEs*

 

Eliminations

 

As Reported

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

                   

* The Variable Interest Entities ("VIEs") include 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

###

Comments:

comments powered by Disqus
Share This Page

Subscribe to our Newsletters