Gymboree
GYMBOREE CORP (Form: 8-K, Received: 03/14/2017 16:13:40)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): March 14, 2017

 

 

THE GYMBOREE CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   000-21250   94-2615258

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

500 Howard Street, San Francisco, CA

94105

(Address of Principal Executive Offices, Including Zip Code)

(415) 278-7000

(Registrant’s Telephone Number, Including Area Code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On March 14, 2017, The Gymboree Corporation (the “Company”) issued an earnings release announcing its financial results for the 13 weeks ended January 28, 2017. A copy of the earnings release is furnished as Exhibit 99.1 to this Current Report and is incorporated herein by reference.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(a) and (b) Departure of Chairman and Chief Executive Officer

On March 14, 2017, the Company’s Chief Executive Officer and Chairman of the Board of Directors, Mark Breitbard, announced his resignation as a director and Chief Executive Officer of the Company, effective April 3, 2017, in order to pursue other opportunities. Pursuant to his amended and restated employment agreement, which was entered into in connection with his previously announced transition, Mr. Breitbard will receive his accrued but unpaid compensation upon his termination of employment.

(c) Appointment of Interim Chief Executive Officer;

On March 14, 2017, the Company appointed Mark Weikel as its interim Chief Executive Officer, effective April 3, 2017. Mr. Weikel currently serves on the board of directors of the Company and its parent, Giraffe Holding, Inc. Mr. Weikel is 61 years old.

Mr. Weikel has been a director on the Company’s board of directors and the board of directors of Giraffe Holding, Inc. (the Company’s parent) since November 2014, and will continue in those roles while serving as the Company’s interim Chief Executive Officer. Mr. Weikel has served as a Senior Business Advisor at Luxottica Group SpA from April 2014 to December 2014. Mr. Weikel was President and Chief Executive Officer of Retail Optical North America at Luxottica Group SpA from January 2013 to March 2014. Mr. Weikel served as President and General Manager of Lenscrafters at Luxottica Group SpA from January 2011 until January 2013. Mr. Weikel provided oversight and leadership to the finance, planning and allocation, business planning and operations, sourcing and production, human resources, brand marketing, visual merchandising, product/merchandising and stores functions in his roles at Luxottica Group SpA. Mr. Weikel has been a member of the Board of Directors of The Magic House since 2016. Mr. Weikel has been a member of the board of directors of Tractor Supply Company since February 2014, and serves on its compensation committee and audit committee. Mr. Weikel has also served on the board of OneSight, a non-profit organization, since 2011. Prior to that time, Mr. Weikel also served as the Chief Operating Officer of Lord & Taylor, the President and Chief Operating Officer of Victoria’s Secret Stores, and in several positions within the May Department Stores, include as the Chairman for Foley’s Department Stores.

In connection with his service on the Company’s board of directors, the Company previously entered into an indemnification agreement with Mr. Weikel, which would require the Company to indemnify him against certain liabilities that may arise in connection with his status or service as a director. This agreement will also apply to him with respect to his service as an officer of the Company. The indemnification agreement also would provide for an advancement of expenses incurred by Mr. Weikel in connection with any proceeding relating to his status as a director or officer. The Company’s form of indemnification agreement was filed with the SEC as Exhibit 10.1 to the Form 8-K filed with the SEC on March 24, 2015.

(e) Compensatory Arrangement with Interim Chief Executive Officer

In connection with Mr. Weikel’s appointment as the Company’s interim Chief Executive Officer, the Company and Mr. Weikel agreed to the terms of his employment on March 14, 2017.

Pursuant to the term sheet signed by Mr. Weikel and the Company, for the two months following April 2, 2017, Mr. Weikel will serve as our interim Chief Executive Officer. The initial term of his employment may be extended in one month increments on the same terms. Mr. Weikel will be paid $100,000 per month as full compensation for his duties during the employment period. Mr. Weikel will also be entitled to reimbursement for all reasonable business expenses, including travel and lodging expenses incurred in connection with his duties during the employment period.


Either party may terminate Mr. Weikel’s employment upon five business days’ notice. No compensation will be payable to Mr. Weikel upon any termination of his employment, other than compensation that is accrued but unpaid as of the termination date.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

No.

  

Description

99.1    Earnings release of The Gymboree Corporation dated March 14, 2017.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    THE GYMBOREE CORPORATION
Date: March 14, 2017     By:   /s/ ANDREW NORTH
      Name: ANDREW NORTH
      Title:   Chief Financial Officer


EXHIBIT INDEX

 

No.

  

Description

99.1    Earnings release of The Gymboree Corporation dated March 14, 2017.

Exhibit 99.1

 

LOGO

Investor Relations contact:

Tel: 415-278-7933

investor_relations@gymboree.com

Media Relations contact:

Tel: 415-278-7493

media_relations@gymboree.com

The Gymboree Corporation Reports Second Quarter of Fiscal 2017 Results

San Francisco, Calif., March 14, 2017 – The Gymboree Corporation (the “Company”) today reported consolidated financial results for the second fiscal quarter ended January 28, 2017. The results disclosed below are from continuing operations of the Company and exclude the discontinued operations of the divested Gymboree Play & Music (“Play & Music”) business (unless otherwise noted), which was sold on July 15, 2016. As a result of the change in the Company’s fiscal year end from the Saturday closest to the end of January to the Saturday closest to the end of July, results for the second quarter of fiscal 2017 ended January 28, 2017 are comparable to results for the fourth quarter of fiscal 2015 ended January 30, 2016.

Second Quarter Fiscal 2017 Overview:

 

    Comparable sales (including online sales) decreased 5% during the second quarter of fiscal 2017 compared to the fourth quarter of fiscal 2015;

 

    Net loss for the second quarter of fiscal 2017 was $324.9 million, which includes a $368.1 million non-cash goodwill and intangible asset impairment charge and an $11.6 million charge related to excess inventories; and

 

    Adjusted EBITDA for the second quarter of fiscal 2017 was $26.2 million compared to $45.5 during for the fourth quarter of fiscal 2015.

Second Quarter Fiscal 2017 compared to Fourth Quarter Fiscal 2015 Results (13 weeks ended January 28, 2017 versus 13 weeks ended January 30, 2016)

 

    Net sales were $356.8 million, compared to $381.4 million during the fourth quarter of fiscal 2015.

 

    Comparable sales (including online stores) decreased 5% compared to the fourth quarter of fiscal 2015.

 

    Comparable sales by brand for the second quarter of fiscal 2017 compared to the fourth quarter of fiscal 2015 and comparable sales by brand for the fourth quarter of fiscal 2015 compared to the fourth quarter of fiscal 2014 were as follows:


Comparable Sales

   13 Weeks Ended
January 28, 2017
  13 Weeks Ended
January 30, 2016

Gymboree

       -6 %       6 %

Janie and Jack

       1 %       11 %

Crazy 8

       -6 %       1 %

 

    Gross profit was $116.4 million, or 32.6% of net sales, compared to $148.8 million, or 39.0% of net sales, during the fourth quarter of fiscal 2015. The decrease in gross profit quarter-over-quarter was driven primarily by a decrease in comparable store sales attributable to the Gymboree and Crazy 8 brands, an $11.6 million charge related to excess inventories, incremental distribution costs totaling $2.4 million related to expedited shipping costs during the holiday period, and an increase in promotional (markdown) activities.

 

    Selling, general and administrative (“SG&A”) expenses were $106.2 million, or 29.8% of net sales, compared to $122.4 million, or 32.1% of net sales, during the fourth quarter of fiscal 2015. As a percentage of net sales, SG&A during the 13 weeks ended January 28, 2017 decreased by 230 basis points primarily due to lower marketing costs, store expenses and incentive compensation.

 

    During the quarter ended January 28, 2017, the Company recorded $368.1 million of non-cash goodwill and intangible asset impairment charges in connection with the Company’s recently completed annual goodwill and indefinite-lived intangible asset impairment assessment. The Company started experiencing more difficult traffic and conversion trends beginning in the second quarter of fiscal 2017. The sustained difficult performance was not anticipated in previous projections that assumed an improvement in traffic and conversion trends. As a result, the Company revised its long term assumptions to reflect lower than previously projected revenue and margin growth trends in its Gymboree and Crazy 8 brands. Since these are non-cash impairment charges, they do not have any direct impact on the Company’s liquidity or debt covenants.

 

    Loss from continuing operations, net of tax, for the quarter was $324.9 million, which includes a $368.1 million non-cash goodwill and intangible asset impairment charge, an $11.6 million charge related to excess inventories as noted above, and incremental distribution costs totaling $2.4 million related to expedited shipping costs during the holiday period, compared to income from continuing operations, net of tax, of $45.9 million during the fourth quarter of fiscal 2015.

 

    Adjusted EBITDA from continuing operations, defined as net (loss) income from continuing operations attributable to The Gymboree Corporation before interest, income taxes, and depreciation and amortization, adjusted for other items as described below, was $26.2 million compared to $45.5 million during the fourth quarter of fiscal 2015. The decrease was attributed primarily to a decrease in comparable sales attributable to the Company’s Gymboree and Crazy 8 brands, an $11.6 million charge related to excess inventories, incremental distribution costs totaling $2.4 million related to expedited shipping costs during the holiday period, and an increase in promotional (markdown) activities.

Adjusted EBITDA is not a financial measure prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For a description of Adjusted EBITDA and a reconciliation of this measure to GAAP measures, see “Non-GAAP Financial Measures” below and Exhibit D of this press release.


Six Months Ended January  28, 2017 Results (26 weeks ended January 28, 2017 versus 26 weeks ended January 30, 2016)

 

    Net sales were $636.7 million, compared to $676.9 million during the six months ended January 30, 2016.

 

    Comparable sales (including online stores) decreased 5% compared to the six months ended January 30, 2016.

 

    Comparable sales by brand for the six months ended January 28, 2017 compared to the six months ended January 30, 2016, and comparable sales by brand for the six months ended January 30, 2016 compared to the six months ended January 31, 2015, were as follows:

 

Comparable Sales

   26 Weeks Ended
January 28, 2017
  26 Weeks Ended
January 30, 2016

Gymboree

       -6 %       0 %

Janie and Jack

       2 %       7 %

Crazy 8

       -5 %       1 %

 

    Gross profit was $223.4 million, or 35.1% of net sales, compared to $263.7 million, or 39.0% of net sales, for the six months ended January 30, 2016. The decrease in gross profit year-over-year was driven primarily by a decrease in comparable store sales attributable to the Gymboree and Crazy 8 brands, a $13.0 million charge related to excess inventories, incremental distribution costs totaling $2.4 million related to expedited shipping costs during the holiday period, and an increase in promotional (markdown) activities.

 

    SG&A expenses were $211.4 million, or 33.2% of net sales, compared to $227.4 million, or 33.6% of net sales, during the six months ended January 30, 2016. As a percentage of net sales, SG&A during the 26 weeks ended January 28, 2017 decreased by 40 basis points primarily due to lower marketing costs, store expenses and incentive compensation.

 

    As discussed above, during the six months ended January 28, 2017, the Company recorded $368.1 million of non-cash goodwill and intangible asset impairment charges.

 

    Loss from continuing operations, net of tax, during the six months ended January 28, 2017 was $335.8 million compared to income from continuing operations, net of tax, of $32.9 million during the six months ended January 30, 2016.

 

    Adjusted EBITDA from continuing operations was $44.0 million compared to $72.0 million for the six months ended January 30, 2016. The decrease was attributed primarily to a decrease in comparable sales attributable to the Gymboree and Crazy 8 brands, a $13.0 million charge related to excess inventories, incremental distribution costs totaling $2.4 million related to expedited shipping costs during the holiday period, and an increase in promotional (markdown) activities.


Balance Sheet Highlights

 

    As of January 28, 2017, the Company had $1.0 billion aggregate principal amount of indebtedness that will mature over the next 12 to 22 months, approximately $871.9 million of which is due within 12 months from March 14, 2017, as more fully described below:

Current liabilities

 

    $54.0 million in borrowings outstanding under the Company’s asset-backed revolving credit facility (the “ABL facility”), due in December 2017. Undrawn line of credit availability under this facility, after being reduced by outstanding line of credit borrowings, letter of credit utilization of $34.6 million and the outstanding balance of the ABL Term Loan, was $90.7 million as of January 28, 2017, subject to a minimum amount of availability pursuant to the terms of the ABL facility. Our undrawn line of credit availability, net of the minimum amount of availability, was $67.9 million as of January 28, 2017.

 

    $48.8 million of principal outstanding under the Company’s senior secured ABL Term Loan, due in December 2017.

 

    $6.5 million of Term loan, due in March, June, September, and December 2017.

Long-term liabilities

 

    $762.6 million of principal outstanding under the Company’s $820 million senior secured term loan (the “Term Loan”), due in February 2018.

 

    $171.0 million of principal outstanding under the Company’s Senior Notes, due in December 2018.

 

    Inventory balances as of January 28, 2017 were $210.9 million, an increase of $8.1 million or 4.0% compared to $202.8 million as of January 30, 2016. On a per square foot basis, inventory cost, net of lower-of-cost-or-market reserves, was up 6% at January 28, 2017 over the same period in fiscal 2015. Inventory units were up 10% at January 28, 2017 over the same period in fiscal 2015.

Cash Flow Highlights

 

    Cash flows from operating activities decreased by $94.2 million from net cash provided by operating activities of $71.1 million during the 26 weeks ended January 30, 2016 to net cash used in operating activities of $23.1 million during the 26 weeks ended January 28, 2017. Cash flows from operating activities decreased partially because of a decrease in income before income taxes. Excluding the impact of goodwill and intangible asset impairment, depreciation and amortization and other non-cash charges, income before income taxes decreased by $8.8 million primarily because of a decline in gross profit driven by comparable sales decline and inventory charges. Cash flows from operating activities also decreased because of a $26.0 million decrease in merchandise inventories due to the timing of purchases. In addition, cash flows from operating activities decreased because of a $13.2 million decrease in prepaid expenses and other assets, and a $42.7 million decrease in accounts payable, accrued and other current liabilities due to timing of payments.

 

    Capital expenditures were $12.1 million during the six months ended January 28, 2017.


    Cash paid for interest was $32.7 million during the six months ended January 28, 2017 compared to $37.7 million during the six months ended January 30, 2016.

 

    Cash paid for income taxes was $9.6 million during the six months ended January 28, 2017.

Non-GAAP Financial Measures

The Company defines “Adjusted EBITDA” as net (loss) income attributable to The Gymboree Corporation before interest expense, interest income, income taxes, and depreciation and amortization (“EBITDA”) adjusted for other items including, goodwill and intangible asset impairment, 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 calculated in substantially the same manner as “EBITDA” under the indenture governing the Notes and “Consolidated EBITDA” under the agreement governing our Senior Credit Facilities. 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 from continuing operations to net (loss) income from continuing operations attributable to The Gymboree Corporation).

The live broadcast of second quarter fiscal 2017 financial results and fiscal 2017 business outlook will be available to interested parties at 2:00 p.m. PT (5:00 p.m. ET) on March 14, 2017. 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, Tuesday March 28, 2017, at 855-859-2056, passcode 65304456.

About The Gymboree Corporation

The Gymboree Corporation’s specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of January 28, 2017, the Company operated a total of 1,291 retail stores: 586 Gymboree ® stores (536 in the United States, 49 in Canada and 1 in Puerto Rico), 174 Gymboree Outlet stores (173 in the United States and 1 in Puerto Rico), 149 Janie and Jack ® shops (148 in the United States and 1 in Puerto Rico), and 382 Crazy 8 ® stores in the United States. The Company also operates online stores at www.gymboree.com, www.janieandjack.com and www.crazy8.com.


Forward-Looking Statements

This press release includes forward-looking statements, including statements relating to The Gymboree Corporation’s anticipated future financial performance and ability to address the challenges imposed by its capital structure, and the Company’s expectation that (i) it has the right strategies in place to continue to generate positive Adjusted EBITDA well into the future and (ii) it will be able to address its capital structure in a manner that allows it to continue operations. 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 markets, mall traffic, our ability to successfully upgrade our omni-channel platforms and technology, as well implement our omni-channel strategy, our ability to realize expected expense management initiatives and drive growth in our wholesale channel, the success of our marketing initiatives, 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 in light of the negative sales trends experienced over the holiday season), 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 and the level of promotional activity required to reduce 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 Transition Report on Form 10-K for the 26 weeks ended July 30, 2016, filed with the Securities and Exchange Commission on October 28, 2016. 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, and Crazy 8 are registered trademarks of The Gymboree Corporation.

###


EXHIBIT A

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)

 

     13 Weeks Ended     26 Weeks Ended  
     January 28,
2017
    January 30,
2016
    January 28,
2017
    January 30,
2016
 

Net sales:

        

Retail

   $ 352,898     $ 376,230     $ 629,208     $ 665,883  

Retail Franchise

     3,936       5,170       7,453       11,037  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net sales

     356,834       381,400       636,661       676,920  

Cost of goods sold, including buying and occupancy expenses

     (240,423     (232,576     (413,245     (413,189
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     116,411       148,824       223,416       263,731  

Selling, general and administrative expenses

     (106,210     (122,393     (211,364     (227,420

Goodwill and intangible asset impairment

     (368,069     —         (368,069     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

     (357,868     26,431       (356,017     36,311  

Interest expense

     (19,433     (21,377     (39,365     (43,283

Gain on extinguishment of debt

     —         41,522       —         41,522  

Other income (expense), net

     81       (459     216       (608
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (377,220     46,117       (395,166     33,942  

Income tax benefit (expense)

     52,285       (184     59,339       (1,019
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss (income) from continuing operations, net of tax

     (324,935     45,933       (335,827     32,923  

Income from discontinued operations, net of tax

     —         2,829       —         6,187  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

     (324,935     48,762       (335,827     39,110  

Net loss attributable to noncontrolling interest

     —         677       —         301  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to The Gymboree Corporation

   $ (324,935   $ 49,439     $ (335,827   $ 39,411  
  

 

 

   

 

 

   

 

 

   

 

 

 


EXHIBIT B

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

     January 28,     July 30,     January 30,  
     2017     2016     2016  

ASSETS

      

Current assets:

      

Cash and cash equivalents

   $ 22,119     $ 12,636     $ 9,774  

Restricted cash

     24,018       33,505       —    

Accounts receivable, net

     14,899       12,290       21,107  

Merchandise inventories

     210,895       232,959       202,832  

Prepaid income taxes

     2,062       2,046       2,196  

Prepaid expenses

     5,510       4,917       6,336  

Current assets of discontinued operations

     —         —         18,210  
  

 

 

   

 

 

   

 

 

 

Total current assets

     279,503       298,353       260,455  

Property and equipment, net

     134,038       143,751       155,550  

Goodwill

     123,140       357,041       356,348  

Other intangible assets, net

     164,874       300,073       303,608  

Restricted cash

     49,015       73,566       —    

Other assets

     4,928       5,728       6,170  

Other assets of discontinued operations

     —         —         58,345  
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 755,498     $ 1,178,512     $ 1,140,476  
  

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

      

Current liabilities:

      

Accounts payable

   $ 117,352     $ 134,498     $ 107,866  

Accrued and other current liabilities

     80,740       111,909       90,281  

Line of credit borrowings

     54,000       42,000       19,000  

Current portion of long-term debt, net

     53,111       5,527       —    

Current obligation under capital lease

     —         —         605  

Current liabilities of discontinued operations

     —         —         13,300  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     305,203       293,934       231,052  
  

 

 

   

 

 

   

 

 

 

Long-term liabilities:

      

Long-term debt, net

     925,928       970,902       1,040,506  

Long-term sale-leaseback financing liability, net

     25,426       25,508       25,578  

Long-term obligation under capital lease

     —         —         2,245  

Lease incentives and other liabilities

     41,252       44,167       49,355  

Unrecognized tax benefits

     6,397       6,475       5,075  

Deferred income taxes

     60,440       110,799       124,243  

Long-term liabilities of discontinued operations

     —         —         310  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     1,364,646       1,451,785       1,478,364  

Stockholders’ deficit

     (609,148     (273,273     (337,888
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 755,498     $ 1,178,512     $ 1,140,476  
  

 

 

   

 

 

   

 

 

 


EXHIBIT C         

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     26 Weeks Ended  
     January 28,
2017
    January 30,
2016
 

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net (loss) income

   $ (335,827   $ 39,110  

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

 

 

Goodwill and intangible impairment

     368,069       —    

Depreciation and amortization

     18,698       20,459  

Gain on extinguishment of debt

     —         (41,522

Inventory write-down

     12,999       448  

Amortization of deferred financing costs and accretion of original issue discount

     4,623       4,164  

Noncash interest charges

     2,210       2,168  

Loss on disposal/impairment of assets

     2,931       3,720  

Deferred income taxes

     (53,673     (1,204

Share-based compensation expense

     869       1,515  

Other

     (266     549  

Change in assets and liabilities:

    

Accounts receivable

     (2,614     (604

Merchandise inventories

     9,314       35,314  

Prepaid income taxes

     (16     425  

Prepaid expenses and other assets

     (230     12,935  

Accounts payable

     (17,145     (14,764

Accrued and other current liabilities

     (30,785     9,509  

Lease incentives and other liabilities

     (2,291     (1,116
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (23,134     71,106  
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Capital expenditures

     (12,139     (13,907

Decrease in restricted cash

     34,038       8,157  

Increase in related party loan receivable

     —         (1,741

Other

     —         161  
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     21,899       (7,330
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Proceeds from ABL facility

     319,000       187,000  

Payments on ABL facility

     (307,000     (238,000

Payments on ABL term loan

     (1,250     —    

Repurchase of notes

     —         (15,325

Payments for deferred financing costs

     —         (1,452

Payments on capital lease and sale-leaseback financing liability

     (109     (374
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     10,641       (68,151
  

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

     77       (958
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     9,483       (5,333

CASH AND CASH EQUIVALENTS:

    

Beginning of period

     12,636       23,497  
  

 

 

   

 

 

 

End of period

     22,119       18,164  

Less - cash and cash equivalents of discontinued operations, end of period

     —         (8,390
  

 

 

   

 

 

 

Cash and cash equivalents of continuing operations, end of period

   $ 22,119     $ 9,774  
  

 

 

   

 

 

 


EXHIBIT D

THE GYMBOREE CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

(Unaudited)

ADJUSTED EBITDA:

The Company defines “Adjusted EBITDA” as net (loss) income attributable to The Gymboree Corporation before interest expense, interest income, income tax expense/benefit, and depreciation and amortization (“EBITDA”) adjusted for other items, including goodwill and intangible asset impairment, 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 of the Company by investment funds sponsored by Bain Capital Private Equity, LP (formerly Bain Capital Partners, LLC) (the “Acquisition”).

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) income from continuing operations attributable to The Gymboree Corporation to Adjusted EBITDA from continuing operations:

 

     13 Weeks Ended     26 Weeks Ended  
     January 28,
2017
    January 30,
2016
    January 28,
2017
    January 30,
2016
 

Net (loss) income from continuing operations

   $ (324,935   $ 45,933     $ (335,827   $ 32,923  

Net loss from continuing operations attributable to noncontrolling interest

     —         1,600       —         3,030  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income from continuing operations attributable to The Gymboree Corporation

     (324,935     47,533       (335,827     35,953  

Reconciling items (a) :

        

Interest expense

     19,433       21,377       39,365       43,283  

Interest income

     (122     (10     (194     (16

Income tax (benefit) expense

     (52,285     118       (59,339     953  

Depreciation and amortization (b)

     9,304       10,151       18,698       19,943  

Non-cash share-based compensation expense

     493       701       869       1,515  

Loss on disposal/impairment on assets

     2,288       2,834       2,931       3,164  

Gain on extinguishment of debt

     —         (41,522     —         (41,522

Goodwill and intangible asset impairment

     368,069       —         368,069       —    

Acquisition-related adjustments (c)

     2,913       3,417       6,337       5,980  

Other (d)

     1,051       922       3,122       2,747  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA from continuing operations

   $ 26,209     $ 45,521     $ 44,031     $ 72,000  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

(b) Includes the following:

 

Amortization of intangible assets (impacts SG&A)

   $ 208     $ 384     $ 558     $ 768  

Amortization of below and above market leases (impacts COGS)

     (124     (199     (350     (397
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 84     $ 185     $ 208     $ 371  
  

 

 

   

 

 

   

 

 

   

 

 

 

(c) Includes the following:

 

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

   $ 1,737     $ 1,871     $ 3,484     $ 3,750  

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

     1,176       1,546       2,853       2,230  
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 2,913     $ 3,417     $ 6,337     $ 5,980  
  

 

 

   

 

 

   

 

 

   

 

 

 

(d) Other is comprised of restructuring and non-recurring charges.

        


EXHIBIT E

THE GYMBOREE CORPORATION

RETAIL SALES BY BRAND

(In thousands)

(Unaudited)

 

                          Total                
     Gymboree      Janie and Jack      Crazy 8      Before VIE      VIE      Total  

13 weeks ended January 28, 2017

   $ 227,635      $ 44,934      $ 80,329      $ 352,898      $ —        $ 352,898  

13 weeks ended January 30, 2016

   $ 244,237      $ 44,444      $ 85,431      $ 374,112      $ 2,118      $ 376,230  

26 weeks ended January 28, 2017

   $ 404,106      $ 79,952      $ 145,150      $ 629,208      $ —        $ 629,208  

26 weeks ended January 30, 2016

   $ 430,660      $ 78,044      $ 153,256      $ 661,960      $ 3,923      $ 665,883