-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GzqEPwY+3ssz9HqMko+3ZFCUTEJn3iZWp1rJQm+AZKdlfok/FWzzy8J9LjA2ttbr PB09zEiZFsLUgsLBK853zA== 0000950149-96-000722.txt : 19960620 0000950149-96-000722.hdr.sgml : 19960620 ACCESSION NUMBER: 0000950149-96-000722 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960505 FILED AS OF DATE: 19960619 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GYMBOREE CORP CENTRAL INDEX KEY: 0000786110 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 942615258 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21250 FILM NUMBER: 96582722 BUSINESS ADDRESS: STREET 1: 700 AIRPORT BLVD STE 200 CITY: BURLINGAME STATE: CA ZIP: 94010 BUSINESS PHONE: 4155790600 MAIL ADDRESS: STREET 2: 700 AIRPORT BLVD #200 CITY: BURLINGAME STATE: CA ZIP: 94010 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended MAY 5, 1996 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from _____________________ to ______________________ Commission file number 000-21250 THE GYMBOREE CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 94-2615258 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 700 AIRPORT BOULEVARD, BURLINGAME, CALIFORNIA 94010-1912 (Address of principal executive offices) (Zip code) (415) 579-0600 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares of common stock outstanding at June 2, 1996: 25,095,394 2 TABLE OF CONTENTS
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements . Consolidated Statements of Income ................... 3 Consolidated Balance Sheets ......................... 4 Condensed Consolidated Statements of Cash Flows ..... 5 Notes to Consolidated Financial Statements .......... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................. 7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders . 11 Item 6. Exhibits and Reports on Form 8-K .................... 11 Signatures ..................................................... 12
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE GYMBOREE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AND STORE DATA) ( UNAUDITED )
13 WEEKS ENDED ---------------------- MAY 5, APRIL 30, 1996 1995 -------- --------- NET SALES $ 69,103 $ 55,077 COST OF GOODS SOLD, INCLUDING BUYING AND OCCUPANCY EXPENSES (35,447) (29,574) -------- -------- GROSS PROFIT 33,656 25,503 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (20,815) (16,070) PLAY PROGRAM INCOME 128 184 -------- -------- OPERATING INCOME 12,969 9,617 INTEREST INCOME 890 690 -------- -------- INCOME BEFORE INCOME TAXES 13,859 10,307 INCOME TAXES (5,266) (4,019) -------- -------- NET INCOME $ 8,593 $ 6,288 ======== ======== NET INCOME PER SHARE: PRIMARY $ 0.34 $ 0.25 FULLY DILUTED $ 0.34 $ 0.25 WEIGHTED AVERAGE SHARES OUTSTANDING: PRIMARY 25,444 25,286 FULLY DILUTED 25,575 25,287 NUMBER OF STORES AT END OF PERIOD 305 234
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 4 THE GYMBOREE CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
ASSETS MAY 5, FEBRUARY 4, APRIL 30, 1996 1996 1995 --------- ----------- --------- CURRENT ASSETS: CASH AND CASH EQUIVALENTS $ 11,476 $ 8,755 $ 6,155 INVESTMENTS 74,983 64,893 58,455 ACCOUNTS RECEIVABLE 4,319 2,868 2,746 MERCHANDISE INVENTORIES 29,091 37,652 33,691 PREPAID EXPENSES AND OTHER 2,342 1,886 968 --------- --------- --------- TOTAL CURRENT ASSETS 122,211 116,054 102,015 --------- --------- --------- PROPERTY AND EQUIPMENT: LEASEHOLD IMPROVEMENTS 34,657 31,126 21,829 FURNITURE, FIXTURES AND EQUIPMENT 28,143 24,367 15,841 --------- --------- --------- 62,800 55,493 37,670 LESS ACCUMULATED DEPRECIATION AND AMORTIZATION (13,554) (12,085) (9,676) --------- --------- --------- 49,246 43,408 27,994 OTHER ASSETS 517 547 1,036 --------- --------- --------- TOTAL ASSETS $ 171,974 $ 160,009 $ 131,045 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: TRADE ACCOUNTS PAYABLE $ 9,794 $ 9,657 $ 9,922 ACCRUED LIABILITIES 9,843 10,736 8,734 INCOME TAXES PAYABLE 8,408 6,244 4,586 --------- --------- --------- TOTAL CURRENT LIABILITIES 28,045 26,637 23,242 --------- --------- --------- DEFERRED RENT AND OTHER 11,310 9,438 7,499 STOCKHOLDERS' EQUITY: COMMON STOCK, INCLUDING EXCESS PAID-IN CAPITAL ($.001 PAR VALUE: 100,000,000 SHARES AUTHORIZED; 25,042,605, 24,992,276 AND 24,681,903 SHARES OUTSTANDING AT MAY 5, 1996, FEBRUARY 4, 1996, AND APRIL 30, 1995, RESPECTIVELY) 57,355 56,687 54,089 RESTRICTED STOCK DEFERRED COMPENSATION (1,043) (1,139) (1,437) UNREALIZED CHANGE IN VALUE OF INVESTMENTS (269) 402 (239) RETAINED EARNINGS 76,576 67,984 47,891 --------- --------- --------- TOTAL STOCKHOLDERS' EQUITY 132,619 123,934 100,304 --------- --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 171,974 $ 160,009 $ 131,045 ========= ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 5 THE GYMBOREE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
13 WEEKS ENDED --------------------- MAY 5, APRIL 30, 1996 1995 -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: NET CASH PROVIDED BY OPERATING ACTIVITIES $ 21,077 $ 6,048 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: PURCHASES OF PROPERTY AND EQUIPMENT (8,100) (5,441) PURCHASES OF INVESTMENTS (10,761) (6,130) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (18,861) (11,571) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: PROCEEDS FROM EXERCISE OF STOCK OPTIONS 505 650 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,721 (4,873) CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 8,755 11,028 ======== ======== END OF PERIOD $ 11,476 $ 6,155 ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 6 THE GYMBOREE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The unaudited interim consolidated financial statements of The Gymboree Corporation and its wholly-owned subsidiaries (the "Company") as of and for the period ended May 5, 1996 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended February 4, 1996. The accompanying interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented and necessary to present fairly the results of operations, the financial position and cash flows for the periods presented. All such adjustments are of a normal and recurring nature. Certain prior year amounts have been reclassified to conform with the current year presentation. 2. MERCHANDISE INVENTORIES Merchandise inventories are recorded under the retail method of accounting and are stated at the lower of cost (retail method) or market. 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, (i) selected income statement data expressed as a percentage of net sales, (ii) the percentage change from the same period of the prior year in such selected income statement data and (iii) the number of stores open at the end of each such period:
AS A PERCENTAGE OF NET SALES PERCENTAGE CHANGE FOR THE THIRTEEN WEEKS ENDED IN DOLLAR AMOUNTS ---------------------------- FROM 1995 TO 1996 FOR MAY 5, APR. 30, THE THIRTEEN 1996 1995 WEEK PERIOD ------ -------- --------------------- NET SALES 100.0% 100.0% 25% COST OF GOODS SOLD, INCLUDING BUYING AND OCCUPANCY EXPENSES (51.3) (53.7) 20 ------ ------ GROSS PROFIT 48.7 46.3 32 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (30.1) (29.2) 30 PLAY PROGRAM INCOME 0.2 0.3 (30) ------ ------ OPERATING INCOME 18.8 17.4 35 INTEREST INCOME 1.3 1.3 29 ------ ------ INCOME BEFORE INCOME TAXES 20.1 18.7 34 INCOME TAXES (7.7) (7.3) 31 ------ ------ NET INCOME 12.4% 11.4% 37% ====== ====== NUMBER OF STORES AT END OF PERIOD 305 234
This Form 10-Q contains certain forward-looking statements reflecting the Company's current expectations and there can be no assurance that the Company's actual future performance will meet such expectations. Factors that could cause future performance to vary from current expectations include, but are not limited to, the factors discussed at the end of the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section. 7 8 RESULTS OF OPERATIONS (CONTINUED) THIRTEEN WEEKS ENDED MAY 5, 1996 COMPARED TO THIRTEEN WEEKS ENDED APRIL 30, 1995 NET SALES Net sales in the first quarter of fiscal 1996 increased 25% to $69.1 million compared to $55.1 million in the same period last year. Sales for the 26 stores opened in the first fiscal quarter of 1996 contributed $3.0 million of the increase in net sales. Stores opened prior to fiscal 1996, but not qualifying as comparable stores, including seven stores that were expanded in fiscal 1996, contributed $11.7 million of the increase in net sales. Comparable store net sales decreased 3% in the first quarter and were $1.2 million lower than the prior year. The decrease in comparable store net sales was primarily due to the Company's strategy of operating with lower per store inventory levels and a lower level of promotional pricing. The Company anticipates that the trend of lower per store inventory levels will continue in future periods and this trend is expected to adversely affect comparable store net sales. GROSS PROFIT Gross profit increased 32% to $33.7 million from $25.5 million in the first quarter of prior year. As a percentage of net sales, gross profit was 48.7% in the first quarter of fiscal 1996 compared to 46.3% in the same period last year. The trend of lower per store inventory levels contributed to lower promotional pricing in the first quarter of fiscal 1996 compared to the same period last year. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses ("S,G&A"), which principally consist of non-occupancy store expenses, corporate overhead and distribution expenses, increased as a percentage of net sales to 30.1% in the first quarter of fiscal 1996, compared to 29.2% in the same period last year. The increase, as a percentage of net sales, was primarily due to the funding of new business activities. These activities included the launch of the Gymboree catalog and international expansion. These increased expenses, as well as lower expense leverage related to the decrease in comparable store net sales, are expected to continue in the foreseeable future. INTEREST INCOME Net interest income increased to $890,000 from $690,000 in the prior year first quarter. The increase was due to higher average cash and investment balances as compared to the prior year. INCOME TAX The Company's effective rate in the first quarter of fiscal 1996 was 38%, compared to 39% for the same period last year. The decrease is due to a lower expected aggregate state income tax rate. 8 9 FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $21.1 million during the thirteen weeks ended May 5, 1996 compared to $6.0 million for the same period last year. The increase was primarily due to increased net income and decreased net inventory levels. At May 5, 1996, average inventory per store was approximately 34% lower than the same period last year. The decrease was primarily due to a reduction in planned inventory purchases. During the thirteen week period ended May 5, 1996, the primary sources of funds were $21.1 million generated from operating activities and $505,000 from the exercise of stock options. Uses of cash consisted primarily of $10.8 million for the purchase of investments and $8.1 million of capital expenditures related to new store openings and the relocation/expansion of certain existing stores. The combined balances of cash, cash equivalents and investments were $86.5 million at May 5, 1996, an increase of $12.8 million from February 4, 1996. Working capital as of May 5, 1996 was $94.2 million compared to $89.4 million at end of fiscal 1995. The increase in working capital was primarily due to higher cash, cash equivalents and investments balances, partially offset by lower merchandise inventories. The Company's investments are largely invested in short-to-medium term investment grade securities. The Company estimates that capital expenditures during fiscal 1996 will be approximately $30 million to $35 million, and will be principally used to open approximately 65 to 70 new stores and remodel or expand 10 to 20 existing stores, and begin the installation of a new in-store point-of-sales system for each of the Company's retail stores. The Company has no long term debt and did not require any cash borrowings in the first thirteen weeks of fiscal 1996 and 1995. The Company currently has $100 million of long-term unsecured letters of credit. As of June 2, 1996, $66.1 million was available. The Company uses these lines primarily to support letters of credit which fund its foreign sourcing of merchandise inventories. The Company anticipates that cash generated from operations, together with its existing cash resources, and funds available from its current letter of credit facility will be sufficient to satisfy its cash needs through at least fiscal 1997. 9 10 OTHER FACTORS THAT MAY AFFECT FUTURE PERFORMANCE Future operating results will depend upon many factors, including general economic conditions, levels of competition and the ability of the Company to successfully identify and respond to emerging children's fashion trends, achieve its expansion plans and effectively monitor and control costs. LOWER INVENTORY LEVELS The Company plans to operate with lower per store inventory levels throughout fiscal 1996. The Company expects this to result in downward pressure on comparable store net sales. CATALOG LAUNCH Gymboree launched a new catalog at the beginning of fiscal 1996. This will be a start-up operation, and it is anticipated that expenses will exceed revenues in fiscal 1996 in order to build this business. The success of the catalog business will depend upon a number of factors relating to consumer response, as to which the Company does not have a historical basis for prediction. INTERNATIONAL EXPANSION In fiscal 1996, the Company is planning to open approximately five retail stores in Canada. The success of this planned expansion will depend upon a number of factors, including the availability of suitable store locations, the ability to provide an adequate supply of inventory and the ability to hire and train qualified employees. As this international expansion will be a start-up operation, there can be no assurance that the Company will be able to achieve its planned expansion on a timely or profitable basis. 10 11 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders was held on May 16, 1996 at which the stockholders voted on proposals as follows:
Votes Against Votes Abstained Votes for or Withheld and Non-Votes --------- ----------- ------------- Election of Directors: Stuart G. Moldaw 21,282,229 661,244 Not Applicable William U. Westerfield 21,291,691 651,782 Not Applicable Approve an amendment of the Company's 1993 Stock Option Plan to increase the number of shares of Common Stock available for issuance thereunder by 1,000,000 shares 16,649,758 4,854,984 438,731 Approve the adoption of The Gymboree Corporation Bonus Plan 21,129,310 516,090 298,073 Ratify the appointment of Deloitte & Touche LLP as independent auditors for fiscal 1996. 21,851,589 56,693 35,191
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (11) Computation of Net Income per Share (b) No reports on Form 8-K were filed by the Registrant during the quarter for which this report is filed. 11 12 SIGNATURES 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 thereunto duly authorized. THE GYMBOREE CORPORATION (Registrant) June 10, 1996 By: /s/ Nancy J. Pedot - ------------------------ ------------------------------------------- Date Nancy J. Pedot President and Chief Executive Officer (Principal executive officer of the registrant) June 10, 1996 By: /s/ James P. Curley - ------------------------ ------------------------------------------- Date James P. Curley Senior Vice President and Chief Financial Officer and Chief Administrative Officer (Principal financial and accounting officer of the registrant) 12 13 EXHIBIT INDEX
Exhibit Number - ------ Description 11 Computation of Net Income per Share 27 Financial Data Schedule
13 EX-11 2 EXHIBIT 11 1 EXHIBIT 11 THE GYMBOREE CORPORATION COMPUTATION OF NET INCOME PER SHARE
13 WEEKS ENDED --------------------------- MAY 5, APRIL 30, 1996 1995 ----------- ----------- NET INCOME $ 8,592,527 $ 6,287,508 =========== =========== WEIGHTED AVERAGE SHARES OUTSTANDING DURING THE PERIOD: COMMON STOCK 25,027,377 24,637,213 ADD INCREMENTAL SHARES FROM ASSUMED EXERCISE OF STOCK OPTIONS 416,270 649,046 ----------- ----------- WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 25,443,647 25,286,259 =========== =========== PRIMARY NET INCOME PER SHARE $ 0.34 $ 0.25 =========== =========== WEIGHTED AVERAGE SHARES OUTSTANDING DURING THE PERIOD: COMMON STOCK 25,027,377 24,637,213 ADD INCREMENTAL SHARES FROM ASSUMED EXERCISE OF STOCK OPTIONS 547,454 649,296 ----------- ----------- WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 25,574,831 25,286,509 =========== =========== FULLY DILUTED NET INCOME PER SHARE $ 0.34 $ 0.25 =========== ===========
EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF INCOME AND THE CONSOLIDATED BALANCE SHEETS FILED AS PART OF THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS ON FORM 10-Q. 0000786110 THE GYMBOREE CORPORATION 1,000 U.S. DOLLARS 3-MOS FEB-02-1997 FEB-05-1996 MAY-05-1996 1 11,476 74,983 4,319 0 29,091 122,211 62,800 13,554 171,974 28,045 0 0 0 57,355 75,264 171,974 69,103 69,103 35,447 35,447 0 0 0 13,859 5,266 8,593 0 0 0 8,593 0.34 0.34
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