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| 8-K - FORM 8-K - GYMBOREE CORP | v241467_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 Third Fiscal Quarter 2011 Results
San Francisco, Calif., November 22, 2011 – The Gymboree Corporation (the “Company”) today reported consolidated financial results for the third fiscal quarter ended October 29, 2011.
For the third fiscal quarter, net sales were $303.1 million, an increase of 7.9% compared to $280.8 million in net sales for the third fiscal quarter of the prior year. Comparable store sales for the quarter increased 2% versus the prior year.
Gross profit for the third fiscal quarter of 2011 was $130.8 million or 43.2% of net sales, compared to $138.8 million or 49.4% of net sales for the third fiscal quarter of 2010. Results for the third quarter of 2011 include approximately $3.4 million of adjustments 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 $134.2 million or 44.1% of sales.
SG&A expense for the third quarter was $99.4 million or 32.8% of net sales, compared to $82.1 million or 29.2% of net sales in the comparable quarter of the prior year. Current quarter results include $5.4 million in Acquisition-related expenses and a $7.2 million charge resulting from the transition of our Gymboree Play & Music master franchise relationship in China. Excluding these items in the current year, and $3.5 million in Acquisition-related charges incurred in the prior year, SG&A expense for the third fiscal quarter was $86.8 million or 28.6% of net sales, up 60 basis points from the adjusted prior year SG&A expense of $78.6 million or 28.0% of net sales.
Operating income for the third quarter of fiscal 2011 was $31.4 million compared to $56.7 million for the same period last year and includes $12.5 million of incremental expenses resulting from the Acquisition and Gymboree Play & Music franchise transition in the current fiscal quarter versus the same period of the prior year.
Adjusted EBITDA for the third fiscal quarter of 2011 decreased 18.7% to $60.6 million compared to $74.5 million for the comparable quarter of the prior year. Adjusted EBITDA margins decreased from 26.5% to 20.0% 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 third fiscal quarter and approximately $119.9 million of undrawn availability.
Cash on the balance sheet at the end of the third fiscal quarter was $45.7 million with an additional $119.9 million available from the undrawn portion of the ABL.
Capital expenditures for the third fiscal quarter were $11.3 million compared to $12.3 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 Company’s corporate office and distribution center.
Inventory balances at the end of the third quarter were $252.7 million compared to $171.2 million at the end of same period of the prior year. The increase in inventory values primarily reflects higher average unit costs and higher in-transit inventory versus the prior year. Excluding in-transit inventory, unit growth on a per square foot basis increased approximately 9%.
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, one-time charges that are out of the ordinary course of business, 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 third fiscal quarter 2011 financial results will be available to interested parties at 1:00 p.m. PT (4:00 p.m. ET) on Tuesday, November 22, 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, Monday, November 28, 2011, at 855-859-2056, passcode 26055525.
About The Gymboree Corporation
The Gymboree Corporation’s specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of October 29, 2011, the Company operated a total of 1,137 retail stores: 638 Gymboree® stores (593 in the United States, 41 in Canada, 3 in Australia and 1 in Puerto Rico), 153 Gymboree Outlet stores, 127 Janie and Jack® shops and 219 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 697 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 third fiscal quarter ended October 29, 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.
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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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13 Weeks Ended October 29, 2011
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13 Weeks Ended October 30, 2010
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39 Weeks Ended October 29, 2011
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39 Weeks Ended October 30, 2010
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Net sales:
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Retail
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$ | 296,445 | $ | 275,693 | $ | 815,735 | $ | 744,977 | ||||||||
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Play & Music and Other
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6,703 | 5,157 | 16,706 | 11,447 | ||||||||||||
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Total net sales
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303,148 | 280,850 | 832,441 | 756,424 | ||||||||||||
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Cost of goods sold, including
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buying and occupancy expenses
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(172,303 | ) | (142,046 | ) | (498,704 | ) | (390,549 | ) | ||||||||
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Gross profit
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130,845 | 138,804 | 333,737 | 365,875 | ||||||||||||
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Selling, general and administrative expenses
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(99,448 | ) | (82,102 | ) | (272,896 | ) | (241,515 | ) | ||||||||
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Operating income
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31,397 | 56,702 | 60,841 | 124,360 | ||||||||||||
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Interest income
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28 | 77 | 115 | 277 | ||||||||||||
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Interest expense
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(22,051 | ) | (58 | ) | (67,981 | ) | (212 | ) | ||||||||
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Loss on extinguishment of debt
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- | - | (19,563 | ) | - | |||||||||||
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Other income (expense), net
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8 | 28 | (44 | ) | 114 | |||||||||||
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Income (loss) before income taxes
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9,382 | 56,749 | (26,632 | ) | 124,539 | |||||||||||
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Income tax (expense) benefit
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(12,430 | ) | (22,353 | ) | 6,210 | (48,703 | ) | |||||||||
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Net (loss) income
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$ | (3,048 | ) | $ | 34,396 | $ | (20,422 | ) | $ | 75,836 | ||||||
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Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) (Non-GAAP Measure):
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Net (loss) income
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$ | (3,048 | ) | $ | 34,396 | $ | (20,422 | ) | $ | 75,836 | ||||||
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Interest expense
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22,051 | 58 | 67,981 | 212 | ||||||||||||
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Interest income
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(28 | ) | (77 | ) | (115 | ) | (277 | ) | ||||||||
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Income tax expense (benefit)
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12,430 | 22,353 | (6,210 | ) | 48,703 | |||||||||||
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Depreciation and amortization
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14,086 | 10,169 | 42,703 | 29,712 | ||||||||||||
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Non-cash share-based compensation expense
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1,458 | 4,013 | 4,330 | 12,551 | ||||||||||||
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Loss on disposal/impairment of assets
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1,241 | 72 | 3,501 | 832 | ||||||||||||
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Loss on extinguishment of debt
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- | - | 19,563 | - | ||||||||||||
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Gymboree Play & Music franchise transition
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7,200 | - | 7,200 | - | ||||||||||||
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Acquisition-related adjustments
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5,174 | 3,479 | 26,865 | 3,479 | ||||||||||||
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Adjusted EBITDA
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$ | 60,564 | $ | 74,463 | $ | 145,396 | $ | 171,048 | ||||||||
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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October 29,
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January 29,
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October 30,
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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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$ | 45,721 | $ | 32,124 | $ | 176,835 | ||||||
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Accounts receivable
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21,948 | 13,669 | 18,777 | |||||||||
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Merchandise inventories
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252,685 | 184,268 | 171,191 | |||||||||
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Prepaid income taxes
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17,049 | 16,116 | - | |||||||||
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Prepaid expenses and deferred income taxes
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37,704 | 11,553 | 19,697 | |||||||||
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Total current assets
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375,107 | 257,730 | 386,500 | |||||||||
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Property and Equipment, net
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207,312 | 212,491 | 218,274 | |||||||||
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Deferred Income Taxes
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- | - | 15,467 | |||||||||
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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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592,963 | 606,210 | 2,203 | |||||||||
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Deferred Financing Costs
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49,549 | 61,983 | - | |||||||||
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Other Assets
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7,605 | 15,072 | 3,142 | |||||||||
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Total Assets
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$ | 2,167,175 | $ | 2,088,125 | $ | 625,825 | ||||||
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Liabilities and Stockholders' Equity
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Current Liabilities
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Accounts payable
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$ | 68,674 | $ | 54,494 | $ | 55,775 | ||||||
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Income tax payable
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- | - | 624 | |||||||||
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Accrued liabilities
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90,835 | 81,100 | 70,776 | |||||||||
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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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207,709 | 143,794 | 127,175 | |||||||||
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Long-Term Liabilities
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Long-term debt
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1,203,650 | 1,207,791 | - | |||||||||
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Lease incentives and other deferred liabilities
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36,411 | 26,131 | 80,630 | |||||||||
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Deferred income taxes
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238,929 | 224,598 | - | |||||||||
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Total Liabilities
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1,686,699 | 1,602,314 | 207,805 | |||||||||
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Stockholders' Equity
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480,476 | 485,811 | 418,020 | |||||||||
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Total Liabilities and Stockholders' Equity
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$ | 2,167,175 | $ | 2,088,125 | $ | 625,825 | ||||||
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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39 Weeks Ended October 29, 2011
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39 Weeks Ended October 30, 2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net (loss) income
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$ | (20,422 | ) | $ | 75,836 | |||
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Adjustments to reconcile net (loss) income to net cash
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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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42,703 | 29,712 | ||||||
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Amortization of deferred financing costs and accretion of original issue discount
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5,126 | - | ||||||
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Interest rate cap contracts - adjustment to market
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15 | - | ||||||
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Loss on disposal/impairment of assets
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3,501 | 832 | ||||||
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(Benefit) provision for deferred income taxes
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(6,269 | ) | 1,102 | |||||
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Excess tax benefits from exercise and vesting of share-based awards
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- | (4,237 | ) | |||||
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Tax benefit from exercise of stock options and vesting of restricted
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stock awards and units
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- | 4,278 | ||||||
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Share-based compensation expense
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4,330 | 12,551 | ||||||
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Change in assets and liabilities:
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Accounts receivable
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(8,278 | ) | (8,860 | ) | ||||
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Merchandise inventories
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(68,106 | ) | (50,104 | ) | ||||
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Prepaid expenses and other assets
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(1,097 | ) | 521 | |||||
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Prepaid income taxes / income taxes payable
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(2,314 | ) | (4,372 | ) | ||||
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Accounts payable
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14,178 | 9,242 | ||||||
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Accrued liabilities
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9,066 | 8,005 | ||||||
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Lease incentives and other deferred liabilities
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12,778 | 3,149 | ||||||
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Net cash provided by operating activities
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1,071 | 77,655 | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Capital expenditures
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(28,080 | ) | (38,808 | ) | ||||
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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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(296 | ) | (1,074 | ) | ||||
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Net cash used in investing activities
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(29,728 | ) | (39,882 | ) | ||||
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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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(826,150 | ) | - | |||||
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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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- | 1,362 | ||||||
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Repurchases of common stock
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- | (124,610 | ) | |||||
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Excess tax benefits from exercise and vesting of share-based awards
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- | 4,237 | ||||||
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Net cash provided by (used in) financing activities
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42,050 | (119,011 | ) | |||||
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Effect of exchange rate fluctuations on cash
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204 | 401 | ||||||
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Net increase (decrease) in cash and cash equivalents
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13,597 | (80,837 | ) | |||||
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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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$ | 45,721 | $ | 176,835 | ||||