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| 8-K - FORM 8-K - GYMBOREE CORP | v233345_8k.htm |
EXHIBIT 99.1
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Investor Relations contact:
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Jeffrey P. Harris
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Tel: 415-278-7933
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investor_relations@gymboree.com
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Media Relations contact:
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Tel: 415-278-7493
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media_relations@gymboree.com
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The Gymboree Corporation Reports Second Fiscal Quarter 2011 Results
San Francisco, Calif., August 24, 2011 – The Gymboree Corporation (the “Company”) today reported consolidated financial results for the second fiscal quarter ended July 30, 2011.
For the second fiscal quarter of 2011, net sales were $259.0 million, an increase of 16.3% compared to $222.7 million in net sales for the second fiscal quarter of the prior year. Comparable store sales for the quarter increased 8% versus the second quarter of the prior year.
Gross profit for the second fiscal quarter of 2011 was $92.0 million or 35.5% of net sales compared to $96.9 million or 43.5% of net sales for the second fiscal quarter of 2010. Results for the second quarter of 2011 include approximately $3.4 million of additional costs resulting from 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”), including the effect of purchase accounting adjustments and transaction-related charges recognized during the quarter. Excluding these costs, gross profit for the quarter was $95.4 million or 36.6% of sales.
SG&A expense for the second quarter was $88.9 million or 34.3% of net sales, compared to $77.9 million or 35.0% of net sales in the comparable quarter of the prior year. Excluding Acquisition-related charges of $5.3 million, SG&A expense for the second fiscal quarter was $83.6 million or 32.1% of net sales, down 290 basis points from the prior year.
Net loss for the second quarter of fiscal 2011 was $6.9 million compared to net income of $12.3 million for the same period last year and reflects the impact of $21.9 million of incremental interest expense over the prior year resulting from the addition of approximately $1.2 billion of debt on the balance sheet during the fourth fiscal quarter of fiscal 2010.
Adjusted EBITDA for the second fiscal quarter of 2011 decreased 23.5% to $25.5 million compared to $33.3 million for the comparable quarter of the prior year. Adjusted EBITDA margins decreased from 15.0% to 9.8% due primarily to lower gross profit margins. A reconciliation of net income (loss) to Adjusted EBITDA is included in Exhibit A of this press release.
Balance Sheet Highlights
As part of the Acquisition, the Company incurred a total of $1.2 billion in debt, consisting of an $820 million seven-year term loan and $400 million in high-yield notes 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 $40 million of borrowings outstanding under the ABL as of the end of the second fiscal quarter and approximately $75.8 million of undrawn availability.
Cash at the end of the second fiscal quarter decreased to $54.8 million from $132.4 million at the end of the second quarter of fiscal 2010. The decrease reflects the impact of the Company’s utilization of cash to fund the transaction.
Capital expenditures for the second fiscal quarter were $8.9 million compared to $13.1 million in the prior year. The vast majority of cash used during the quarter was to fund the opening of 27 new stores. Smaller amounts of cash were utilized to support infrastructure investments at the corporate office and the Company’s distribution center.
Inventory balances at the end of the second quarter were $215.9 million compared to $145.5 million at the end of same period of the prior year. The increase in inventory values primarily reflects higher average unit costs, higher in-transit inventory and higher store count versus the prior year. Excluding in-transit inventory, unit growth on a per square foot basis increased approximately 6%.
Non-GAAP Financial Measures
Adjusted EBITDA is calculated in substantially the same manner as “EBITDA” under the indenture governing the notes and “Consolidated EBITDA” under the agreement governing the Company’s senior secured indebtedness. The Company defines "Adjusted EBITDA" as net income (loss) before interest income, interest 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, sponsor management fees and expenses, and loss on extinguishment of debt, 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 (loss), 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 second fiscal quarter 2011 financial results will be available to interested parties at 1:00 p.m. PT (4:00 p.m. ET) on Wednesday, August 24, 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, August 31, 2011, at 800-642-1687, passcode 92027712.
About The Gymboree Corporation
The Gymboree Corporation’s specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of July 30, 2011, the Company operated a total of 1,111 retail stores: 636 Gymboree® stores (594 in the United States, 39 in Canada, 2 in Australia and 1 in Puerto Rico), 152 Gymboree Outlet stores, 125 Janie and Jack® shops and 198 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 700 franchised and Company-operated Gymboree Play & Music® centers in the United States and 36 other countries.
Forward-Looking Statements
The foregoing financial information for the second fiscal quarter ended July 30, 2011, 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. These are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. 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 the Company’s Registration Statement on Form S-4 filed by the Company with the Securities and Exchange Commission on May 16, 2011. 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.
EXHIBIT A
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($ in thousands)
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Successor
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Predecessor
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Successor
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Predecessor
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|||||||||||||
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13 Weeks Ended
July 30, 2011
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13 Weeks Ended
July 31, 2010
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26 Weeks Ended
July 30, 2011
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26 Weeks Ended
July 31, 2010
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Net sales:
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Retail
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$ | 253,407 | $ | 219,293 | $ | 519,290 | $ | 469,284 | ||||||||
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Play & Music and Other
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5,629 | 3,456 | 10,003 | 6,290 | ||||||||||||
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Total net sales
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259,036 | 222,749 | 529,293 | 475,574 | ||||||||||||
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Cost of goods sold, including buying and occupancy expenses
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(167,004 | ) | (125,853 | ) | (326,400 | ) | (248,504 | ) | ||||||||
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Gross profit
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92,032 | 96,896 | 202,893 | 227,070 | ||||||||||||
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Selling, general and administrative expenses
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(88,881 | ) | (77,897 | ) | (173,448 | ) | (159,412 | ) | ||||||||
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Operating income
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3,151 | 18,999 | 29,445 | 67,658 | ||||||||||||
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Interest income
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34 | 109 | 87 | 200 | ||||||||||||
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Interest expense
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(21,927 | ) | (65 | ) | (45,930 | ) | (155 | ) | ||||||||
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Loss on extinguishment of debt
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- | - | (19,563 | ) | - | |||||||||||
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Other (expense) income, net
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(80 | ) | 59 | (51 | ) | 87 | ||||||||||
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(Loss) income before income taxes
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(18,822 | ) | 19,102 | (36,012 | ) | 67,790 | ||||||||||
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Income tax benefit (expense)
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11,891 | (6,848 | ) | 18,640 | (26,350 | ) | ||||||||||
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Net (loss) income
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$ | (6,931 | ) | $ | 12,254 | $ | (17,372 | ) | $ | 41,440 | ||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) (Non-GAAP Measure):
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Successor
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Predecessor
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Successor
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Predecessor
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|||||||||||||
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13 Weeks Ended
July 30, 2011
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13 Weeks Ended
July 31, 2010
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26 Weeks Ended
July 30, 2011
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26 Weeks Ended
July 31, 2010
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($ in thousands)
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Net (loss) income
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$ | (6,931 | ) | $ | 12,254 | $ | (17,372 | ) | $ | 41,440 | ||||||
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Interest expense
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21,927 | 65 | 45,930 | 155 | ||||||||||||
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Interest income
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(34 | ) | (109 | ) | (87 | ) | (200 | ) | ||||||||
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Income tax (benefit) expense
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(11,891 | ) | 6,848 | (18,640 | ) | 26,350 | ||||||||||
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Depreciation and amortization
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14,372 | 9,958 | 28,617 | 19,544 | ||||||||||||
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Non-cash share-based compensation expense
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1,469 | 3,977 | 2,872 | 8,538 | ||||||||||||
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Loss on disposal/impairment on assets
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1,492 | 326 | 2,260 | 759 | ||||||||||||
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Loss on extinguishment of debt
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- | - | 19,563 | - | ||||||||||||
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Acquisition-related adjustments
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5,085 | - | 21,691 | - | ||||||||||||
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Adjusted EBITDA
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$ | 25,489 | $ | 33,319 | $ | 84,834 | $ | 96,586 | ||||||||
EXHIBIT B
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in thousands)
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Successor
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Predecessor
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July 30,
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January 29,
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July 31,
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2011
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2011
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2010
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Assets
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Current Assets
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Cash and cash equivalents
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$ | 54,762 | $ | 32,124 | $ | 132,416 | ||||||
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Accounts receivable
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19,342 | 13,669 | 19,070 | |||||||||
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Merchandise inventories
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215,866 | 184,268 | 145,501 | |||||||||
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Prepaid income taxes
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15,467 | 16,116 | 20,733 | |||||||||
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Prepaid expenses and deferred income taxes
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52,678 | 11,553 | 19,495 | |||||||||
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Total current assets
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358,115 | 257,730 | 337,215 | |||||||||
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Property and Equipment, net
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207,901 | 212,491 | 217,819 | |||||||||
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Deferred Income Taxes
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- | - | 16,630 | |||||||||
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Goodwill
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934,639 | 934,639 | 239 | |||||||||
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Other Intangible Assets
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597,409 | 606,210 | 1,330 | |||||||||
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Deferred Financing Costs
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51,237 | 61,983 | - | |||||||||
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Other Assets
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9,939 | 15,072 | 3,284 | |||||||||
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Total Assets
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$ | 2,159,240 | $ | 2,088,125 | $ | 576,517 | ||||||
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Liabilities and Stockholders' Equity
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Current Liabilities
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Accounts payable
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$ | 72,397 | $ | 54,494 | $ | 43,381 | ||||||
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Accrued liabilities
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74,581 | 81,100 | 74,063 | |||||||||
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Line of credit
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40,000 | - | - | |||||||||
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Current portion of long-term debt
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8,200 | 8,200 | - | |||||||||
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Total current liabilities
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195,178 | 143,794 | 117,444 | |||||||||
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Long-Term Liabilities
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Long-term debt
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1,205,631 | 1,207,791 | - | |||||||||
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Lease incentives and other deferred liabilities
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32,841 | 26,131 | 78,889 | |||||||||
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Deferred income taxes
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244,115 | 224,598 | - | |||||||||
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Total Liabilities
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1,677,765 | 1,602,314 | 196,333 | |||||||||
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Stockholders' Equity
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481,475 | 485,811 | 380,184 | |||||||||
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Total Liabilities and Stockholders' Equity
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$ | 2,159,240 | $ | 2,088,125 | $ | 576,517 | ||||||
EXHIBIT C
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
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Successor
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Predecessor
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26 Weeks
Ended July 30,
2011
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26 Weeks
Ended July 31,
2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net (loss) income
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$ | (17,372 | ) | $ | 41,440 | |||
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Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
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Write-off of deferred financing costs and original issue discount
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15,860 | - | ||||||
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Depreciation and amortization
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28,617 | 19,544 | ||||||
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Amortization of deferred financing costs and accretion of original issue discount
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3,370 | - | ||||||
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Loss on disposal/impairment of assets
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2,260 | 759 | ||||||
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(Benefit) provision for deferred income taxes
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(19,913 | ) | 725 | |||||
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Excess tax benefits from exercise and vesting of share-based awards
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- | (3,834 | ) | |||||
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Tax benefit from exercise of stock options and vesting of restricted stock awards and units
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- | 3,864 | ||||||
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Share-based compensation expense
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2,872 | 8,538 | ||||||
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Change in assets and liabilities:
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Accounts receivable
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(5,667 | ) | (9,156 | ) | ||||
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Merchandise inventories
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(31,467 | ) | (24,445 | ) | ||||
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Prepaid expenses and other assets
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(606 | ) | 216 | |||||
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Prepaid income taxes
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(198 | ) | (26,034 | ) | ||||
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Accounts payable
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17,890 | (3,140 | ) | |||||
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Accrued liabilities
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(7,148 | ) | 9,521 | |||||
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Lease incentives and other deferred liabilities
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8,184 | 2,672 | ||||||
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Net cash (used in) provided by operating activities
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(3,318 | ) | 20,670 | |||||
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Capital expenditures
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(16,784 | ) | (26,530 | ) | ||||
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Acquisition of business, net of cash acquired
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(1,352 | ) | - | |||||
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Other
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(213 | ) | - | |||||
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Net cash used in investing activities
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(18,349 | ) | (26,530 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from Term Loan
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820,000 | - | ||||||
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Payments on Term Loan
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(824,100 | ) | - | |||||
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Proceeds from ABL facility
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60,656 | - | ||||||
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Payments on ABL facility
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(20,656 | ) | - | |||||
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Deferred financing costs
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(6,665 | ) | - | |||||
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Investment by Parent
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14,865 | - | ||||||
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Exercise of stock options
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- | 997 | ||||||
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Repurchases of common stock
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- | (124,492 | ) | |||||
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Excess tax benefits from exercise and vesting of share-based awards
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- | 3,834 | ||||||
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Net cash provided by (used in) financing activities
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44,100 | (119,661 | ) | |||||
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Effect of exchange rate fluctuations on cash
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205 | 265 | ||||||
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Net increase (decrease) in cash and cash equivalents
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22,638 | (125,256 | ) | |||||
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CASH AND CASH EQUIVALENTS:
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Beginning of period
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32,124 | 257,672 | ||||||
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End of period
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$ | 54,762 | $ | 132,416 | ||||