The Gymboree Corporation Reports First Quarter of Fiscal 2015 Results
June 9, 2015 | By PRN NewsWire
SAN FRANCISCO, June 9, 2015 /PRNewswire/ — The Gymboree Corporation (the “Company”) today reported consolidated financial results for the first fiscal quarter ended May 2, 2015.
First Quarter Results (13-weeks ended May 2, 2015 versus 13-weeks ended May 3, 2014)
— Net sales were $276.1 million, compared to $272.0 million in the first quarter of fiscal 2014; — Comparable sales (including online stores) were flat; — Gross profit was $105.4 million, or 38.2% of net sales, compared to $108.4 million, or 39.8% of net sales, for the first quarter of fiscal 2014; — Adjusted gross profit was $107.1 million, or 38.8% of net sales, compared to $110.2 million, or 40.5% of net sales, for the first quarter of fiscal 2014. — SG&A expense was $104.7 million, or 37.9% of net sales, compared to $102.3 million, or 37.6% of net sales, in the first quarter of fiscal 2014; — Adjusted SG&A expense was $101.1 million, or 36.6% of net sales, compared to $101.8 million, or 37.4% of net sales, in the first quarter of fiscal 2014. — Adjusted EBITDA, defined as net loss attributable to The Gymboree Corporation before interest, income taxes and depreciation and amortization, adjusted for other items as described below, was $15.6 million compared to $22.0 million for the first quarter of fiscal 2014; — Adjusted EBITDA is estimated to be negatively impacted by approximately $6 million in the first quarter as a result of the west coast port slowdown; and — Net loss attributable to The Gymboree Corporation for the quarter was $23 million compared to $13.4 million for the same quarter of fiscal 2014.
Adjusted EBITDA, Adjusted gross profit and Adjusted SG&A expense are not financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For a description of Adjusted EBITDA and a reconciliation of these measures to GAAP measures, see “Non-GAAP Financial Measures” below and Exhibit D of this press release.
Balance Sheet Highlights
— As of the end of the first quarter of fiscal 2015, there were $42.0 million in borrowings outstanding under the Company’s $225 million asset-backed loan facility and approximately $90.8 million of undrawn availability after being reduced by letters of credit of $38.1 million. — Capital expenditures were $3.1 million during the first quarter of fiscal 2015. — Inventory balances at the end of the first quarter of fiscal 2015 were $208.9 million, compared to $170.4 million at the end of the first quarter of fiscal 2014. On a per square foot basis, inventory cost was up 23% over the first quarter of fiscal 2014. Inventory units were up on a similar percentage basis. — On May 5, 2015, the Company entered into an agreement to sell and lease-back its distribution center located in Dixon, California. Net proceeds received from the sale were $25.9 million.
Fiscal 2015 Business Outlook
The Company’s fiscal 2015 outlook is based on the current economic environment trends, as well as management expectations for the remainder of the year.
For the full year, the Company continues to expect Adjusted EBITDA to be in the range of $95 million to $105 million, which includes the net impact to Adjusted EBITDA of approximately $10 million to $12 million resulting from the west coast port slowdown in the first half of the year. Based on this guidance, the Company expects to have sufficient liquidity during fiscal 2015 to service its debt and invest in the business to drive long-term growth.
Stores
During fiscal 2015, the Company continues to plan to open approximately 12 stores and expects to close approximately 30 to 40 stores.
Capital Expenditures
During fiscal 2015, the Company continues to anticipate spending approximately $25 million to $30 million for capital expenditures.
Non-GAAP Financial Measures
The Company defines “Adjusted EBITDA” as net loss attributable to The Gymboree Corporation before interest, 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. The Company is likely to exclude these items from Adjusted EBITDA in the future and may also exclude other similar items, the effect of which is uncertain but may be significant in amount. The determination of the amounts that are excluded from non-GAAP financial measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts.
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).
The live broadcast of the discussion of first quarter fiscal 2015 financial results and fiscal 2015 business outlook will be available to interested parties at 2:00 p.m. PT (5:00 p.m. ET) on Tuesday, June 9, 2015. 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 & Media” and then “Conference Calls & Webcasts.” A replay of the call will be available two hours after the broadcast through midnight PT, June 23, 2015, at 855-859-2056, passcode 43206077.
About The Gymboree Corporation
The Gymboree Corporation’s specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of May 2, 2015, the Company operated a total of 1,322 retail stores: 607 Gymboree(R) stores (553 in the United States, 48 in Canada, 1 in Puerto Rico and 5 in Australia), 170 Gymboree Outlet stores (169 in the United States and 1 in Puerto Rico), 150 Janie and Jack(R) shops and 395 Crazy 8(R) 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 704 franchised and Company-operated Gymboree Play & Music(R) centers in the United States and 41 other countries.
Forward-Looking Statements
The foregoing financial information for the first quarter of fiscal 2015 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 2015 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 recent disruptions in the west coast ports and the timing of the ports resuming normal operations, ongoing volatility in the commodities markets, uncertainties relating to high levels of consumer debt and general economic conditions, volatility in the financial markets, potential data breaches of the Company’s or the Company’s vendors or suppliers computer networks, the Company’s ability to anticipate and timely respond to changes in trends, consumer preferences and customer reactions to new merchandise (particularly given the Company’s need to build up inventory significantly in advance of potential product sales), competitive market conditions, including promotional activities of the Company’s competitors, success in meeting the Company’s delivery targets, 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, the limited data available in the future upon which to base its expectations for stabilizing sales trends, 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 January 31, 2015, filed with the Securities and Exchange Commission (“SEC”) on May 1, 2015. 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 2, 2015 May 3, 2014 ———– ———– Net sales: $261,732 $259,124 Retail 8,648 6,832 Gymboree Play & Music 5,689 6,054 Retail Franchise 276,069 272,010 Total net sales (170,712) (163,652) Cost of goods sold, including buying and occupancy expenses 105,357 108,358 Gross profit (104,710) (102,290) Selling, general and administrative expenses 647 6,068 Operating income 19 47 Interest income (21,076) (20,374) Interest expense (110) (368) Other expense, net (20,520) (14,627) Loss before income taxes (1,960) (376) Income tax expense (22,480) (15,003) Net loss (545) 1,572 Net (income) loss attributable to noncontrolling interest $(23,025) $(13,431) Net loss attributable to The Gymboree Corporation
EXHIBIT B THE GYMBOREE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) May 2, January 31, May 3, 2015 2015 2014 —- —- —- ASSETS Current assets: Cash and cash equivalents $22,363 $18,520 $24,773 Accounts receivable 25,515 25,248 22,394 Merchandise inventories 208,908 198,337 170,411 Prepaid income taxes 2,759 2,599 2,986 Prepaid expenses 18,561 6,821 18,623 Deferred income taxes 7,263 6,824 14,236 Total current assets 285,369 258,349 253,423 ——- ——- ——- Property and equipment, net 176,400 182,431 203,476 Goodwill 374,308 373,834 758,777 Other intangible assets, net 342,816 343,552 559,003 Deferred financing costs 23,984 25,622 30,754 Other assets 3,683 4,155 10,288 —– —– —— Total assets $1,206,560 $1,187,943 $1,815,721 ========== ========== ========== LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY Current liabilities: Accounts payable $105,426 $87,032 $73,345 Accrued liabilities 106,669 94,805 107,648 Line of credit borrowings 42,000 33,000 10,000 Current obligation under capital lease 565 552 515 Total current liabilities 254,660 215,389 191,508 ——- ——- ——- Long-term liabilities: Long-term debt 1,114,127 1,114,048 1,113,817 Long-term obligation under capital lease 2,704 2,850 3,269 Lease incentives and other liabilities 52,858 53,677 50,534 Unrecognized tax benefits 5,151 5,048 6,304 Deferred income taxes 129,865 129,196 215,232 Total liabilities 1,559,365 1,520,208 1,580,664 ——— ——— ——— Stockholders’ (deficit) equity (352,805) (332,265) 235,057 ——– ——– ——- Total liabilities and stockholders’ (deficit) equity $1,206,560 $1,187,943 $1,815,721 ========== ========== ==========
EXHIBIT C THE GYMBOREE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) 13 Weeks Ended ————– May 2, 2015 May 3, 2014 ———– ———– CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(22,480) $(15,003) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 10,700 11,178 Amortization of deferred financing costs and accretion of original issue discount 1,886 1,776 Interest rate cap contracts – adjustment to market 778 461 (Gain) loss on disposal/ impairment of assets (539) 359 Deferred income taxes 264 (33) Share-based compensation expense 720 1,276 Other (198) 18 Change in assets and liabilities: Accounts receivable (168) (553) Merchandise inventories (10,958) 4,776 Prepaid income taxes (154) (1,013) Prepaid expenses and other assets (11,739) 1,087 Accounts payable 18,375 (28,602) Accrued liabilities 11,350 8,897 Lease incentives and other liabilities (476) 693 —- — Net cash used in operating activities (2,639) (14,683) —— ——- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3,140) (9,353) Proceeds from sale of assets 353 – Other 8 (56) — Net cash used in investing activities (2,779) (9,409) —— —— CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from ABL facility 130,000 78,000 Payments on ABL facility (121,000) (68,000) Payments on capital lease (133) (121) Net cash provided by financing activities 8,867 9,879 —– —– Effect of exchange rate fluctuations on cash and cash equivalents 394 (443) — —- Net increase (decrease) in cash and cash equivalents 3,843 (14,656) CASH AND CASH EQUIVALENTS: Beginning of period 18,520 39,429 End of period $22,363 $24,773 ======= =======
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 2, 2015 May 3, 2014 ———– ———– Net loss attributable to The Gymboree Corporation $(23,025) $(13,431) Reconciling items (a): Interest expense 21,076 20,374 Interest income (7) (52) Income tax expense 1,305 599 Depreciation and amortization (b) 10,295 10,786 Non-cash share-based compensation expense 720 1,276 Loss on disposal/impairment on assets 133 330 Acquisition-related adjustments (c) 3,234 2,944 Other (d) 1,866 (795) —– —- Adjusted EBITDA $15,597 $22,031 ======= ======= (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 $384 Amortization of below and above market leases (impacts COGS) (133) (247) —- —- $251 $137 ==== ==== (c) Includes the following: Additional rent expense recognized due to the elimination of deferred rent and construction allowances in purchase accounting (impacts COGS) $1,886 $2,068 Sponsor fees, legal and accounting, as well as other costs incurred as a result of the Acquisition or refinancing (impacts SG&A) 1,348 876 —– — $3,234 $2,944 ====== ====== (d) Other is comprised of restructuring charges in the first quarter of fiscal 2015 and 2014 and a non-recurring change in reserves in the first quarter of fiscal 2014. OTHER NON-GAAP FINANCIAL MEASURES: ———————————- 13 Weeks Ended ————– May 2, 2015 May 3, 2014 ———– ———– Gross profit as reported $105,357 $108,358 Acquisition-related adjustments 1,753 1,821 —– —– Adjusted gross profit excluding Acquisition- related adjustments (non-GAAP measure) $107,110 $110,179 ======== ======== 13 Weeks Ended ————– May 2, 2015 May 3, 2014 ———– ———– SG&A as reported $(104,710) $(102,290) Acquisition-related adjustments 1,732 1,260 Other adjustments 1,866 (795) —– —- 3,598 465 —– — Adjusted SG&A excluding Acquisition-related and other adjustments (non-GAAP measure) $(101,112) $(101,825) ========= =========
EXHIBIT E THE GYMBOREE CORPORATION CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (In thousands) (Unaudited) For the 13 Weeks Ended May 2, 2015 ———————————- Balance Before Consolidation of VIEs VIEs* Eliminations As Reported ——————— —- ———— ———– Net sales $270,138 $8,611 $(2,680) $276,069 Cost of goods sold, including buying and occupancy expenses (169,562) (2,227) 1,077 (170,712) 100,576 6,384 (1,603) 105,357 Gross profit Selling, general and administrative expenses (100,988) (5,173) 1,451 (104,710) (412) 1,211 (152) 647 Operating (loss) income Other non operating expense (21,157) (10) – (21,167) (21,569) 1,201 (152) (20,520) (Loss) income before income taxes Income tax expense (1,304) (656) – (1,960) —— —- — —— (22,873) 545 (152) (22,480) Net (loss) income – (545) – (545) Net income attributable to noncontrolling interest $(22,873) $ – $(152) $(23,025) Net loss attributable to The Gymboree Corporation 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) – 1,572 – 1,572 Net loss attributable to noncontrolling interest Net loss attributable to The Gymboree Corporation $(13,444) $ – $13 $(13,431) ======== ================================== === ========
EXHIBIT E (continued) THE GYMBOREE CORPORATION CONDENSED CONSOLIDATING BALANCE SHEETS (In thousands) (Unaudited) May 2, 2015 ———– Balance Before Consolidation of VIEs VIEs* Eliminations As Reported ——————— —- ———— ———– Current assets $269,733 $17,770 $(2,134) $285,369 Non-current assets 916,096 5,095 – 921,191 $1,185,829 $22,865 $(2,134) $1,206,560 Total assets Current liabilities $244,625 $11,840 $(1,805) $254,660 Non-current liabilities 1,304,220 485 – 1,304,705 Total liabilities $1,548,845 $12,325 $(1,805) $1,559,365 ———- ——- ——- ———- Total stockholders’ deficit (363,016) – (329) (363,345) Noncontrolling interest – 10,540 – 10,540 $1,185,829 $22,865 $(2,134) $1,206,560 Total liabilities and stockholders’ deficit January 31, 2015 —————- Balance Before Consolidation of VIEs VIEs* Eliminations As Reported ——————— —- ———— ———– Current assets $243,682 $16,222 $(1,555) $258,349 Non-current assets 924,367 5,227 – 929,594 $1,168,049 $21,449 $(1,555) $1,187,943 Total assets Current liabilities $205,674 $11,088 $(1,373) $215,389 Non-current liabilities 1,304,384 435 – 1,304,819 $1,510,058 $11,523 $(1,373) $1,520,208 Total liabilities Total stockholders’ deficit (342,009) – (182) (342,191) Noncontrolling interest – 9,926 – 9,926 $1,168,049 $21,449 $(1,555) $1,187,943 Total liabilities and stockholders’ deficit 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 $1,796,148 $21,804 $(2,231) $1,815,721 Total assets Current liabilities $185,467 $8,131 $(2,090) $191,508 Non-current liabilities 1,388,802 354 – 1,389,156 $1,574,269 $8,485 $(2,090) $1,580,664 Total liabilities Total stockholders’ equity 221,879 – (141) 221,738 Noncontrolling interest – 13,319 – 13,319 $1,796,148 $21,804 $(2,231) $1,815,721 Total liabilities and stockholders’ equity
* 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.
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The Gymboree Corporation
CONTACT: Investor Relations contact: Tel: 415-278-7933,investor_relations@gymboree.com or Media Relations contact: Tel:415-278-7493, media_relations@gymboree.com
Web site: http://www.gymboree.com/