Gymboree (GYMB) 10-Q 2012 Q2 Quarterly report

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 July 28, 2012

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 incorporation or organization)	(IRS Employer Identification No.)
500 Howard Street, San Francisco, California	94105
(Address of principal executive offices)	(Zip Code)

(415) 278-7000

(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  ¨    No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

* The Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, but is not required to file such reports under such sections.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated Filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of September 10, 2012, the registrant had 1,000 shares of common stock outstanding, par value $0.001 per share, all of which are owned by Giraffe Holding, Inc., the registrant’s indirect parent holding company, and are not publicly traded.

TABLE OF CONTENTS

Part I—FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS	3
CONDENSED CONSOLIDATED BALANCE SHEETS	3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS	5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	32
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
Item 4. CONTROLS AND PROCEDURES	41
Part II—OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS	42
Item 5. OTHER INFORMATION	42
Item 6. EXHIBITS	44
SIGNATURES	45

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Part I — FINANCIAL INFORMATION

Item  1. FINANCIAL STATEMENTS

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	July 28, 2012			January 28, 2012			July 30, 2011
Assets
Current Assets:
Cash and cash equivalents	$	54,555		$	77,910		$	54,762
Accounts receivable, net of allowance of $200, $114 and $163		25,173			27,277			19,342
Merchandise inventories		220,209			210,212			215,866
Prepaid income taxes		5,295			3,736			15,467
Prepaid expenses		4,498			5,532			5,440
Deferred income taxes		41,328			36,115			47,238
Total current assets		351,058			360,782			358,115
Property and Equipment:
Land and buildings		22,428			22,428			22,405
Leasehold improvements		159,770			146,497			135,535
Furniture, fixtures and equipment		90,061			82,606			76,125
		272,259			251,531			234,065
Less accumulated depreciation and amortization		(69,624	)		(49,379	)		(26,164	)
		202,635			202,152			207,901
Goodwill		899,097			899,097			927,397
Other Intangible Assets		589,943			599,195			609,009
Deferred Financing Costs		44,695			47,915			51,237
Other Assets		5,006			4,646			9,939
Total Assets	$	2,092,434		$	2,113,787		$	2,163,598
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	84,964		$	79,027		$	72,397
Accrued liabilities		89,906			94,178			74,581
Line of credit		—			—			40,000
Current portion of long-term debt		—			17,698			8,200
Total current liabilities		174,870			190,903			195,178
Long-Term Liabilities:
Long-term debt		1,192,312			1,192,171			1,205,631
Lease incentives and other deferred liabilities		34,045			28,681			24,444
Unrecognized tax benefits		7,407			7,898			8,397
Deferred income taxes		239,985			245,495			248,473
Total Liabilities		1,648,619			1,665,148			1,682,123
Commitments and Contingencies		—			—			—
Stockholders’ Equity:
Common stock, including additional paid-in capital ($.001 par value: 1,000 shares authorized, issued and outstanding)		521,615			519,589			526,354
Accumulated deficit		(76,661	)		(68,389	)		(40,416	)
Accumulated other comprehensive loss		(5,783	)		(5,825	)		(4,463	)
Total Stockholders’ Equity		439,171			445,375			481,475
Noncontrolling interest		4,644			3,264			—
Total Equity		443,815			448,639			481,475
Total Liabilities and Stockholders’ Equity	$	2,092,434		$	2,113,787		$	2,163,598

See notes to condensed consolidated financial statements.

3

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)

	13 Weeks Ended						26 Weeks Ended
	July 28, 2012			July 30, 2011			July 28, 2012			July 30, 2011
Net sales:
Retail	$	259,114		$	253,407		$	547,230		$	519,290
Gymboree Play & Music		5,799			3,349			11,591			6,274
Retail Franchise		3,839			2,280			7,682			3,729
Total net sales		268,752			259,036			566,503			529,293
Cost of goods sold, including buying and occupancy expenses		(179,564	)		(167,004	)		(355,491	)		(326,400	)
Gross profit		89,188			92,032			211,012			202,893
Selling, general and administrative expenses		(95,595	)		(88,881	)		(187,334	)		(173,448	)
Operating (loss) income		(6,407	)		3,151			23,678			29,445
Interest income		45			34			104			87
Interest expense		(21,193	)		(21,927	)		(42,851	)		(45,930	)
Loss on extinguishment of debt		—			—			(1,237	)		(19,563	)
Other expense, net		(24	)		(80	)		(90	)		(51	)
Loss before income taxes		(27,579	)		(18,822	)		(20,396	)		(36,012	)
Income tax benefit		13,513			11,891			10,500			18,640
Net loss		(14,066	)		(6,931	)		(9,896	)		(17,372	)
Net loss attributable to noncontrolling interest		798			—			1,624			—
Net loss attributable to The Gymboree Corporation	$	(13,268	)	$	(6,931	)	$	(8,272	)	$	(17,372	)

See notes to condensed consolidated financial statements.

4

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	13 Weeks Ended						26 Weeks Ended
	July 28, 2012			July 30, 2011			July 28, 2012			July 30, 2011
Net loss	$	(14,066	)	$	(6,931	)	$	(9,896	)	$	(17,372	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(30	)		19			(59	)		552
Unrealized net (loss) gain on cash flow hedges, net of tax of $232, $-, $263, and $-		(336	)		(3,129	)		99			(5,253	)
Total other comprehensive (loss) income, net of tax		(366	)		(3,110	)		40			(4,701	)
Comprehensive loss		(14,432	)		(10,041	)		(9,856	)		(22,073	)
Comprehensive loss attributable to noncontrolling interest		842			—			1,656			—
Comprehensive loss attributable to The Gymboree Corporation	$	(13,590	)	$	(10,041	)	$	(8,200	)	$	(22,073	)

See notes to condensed consolidated financial statements

5

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	26 Weeks Ended
	July 28, 2012			July 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(9,896	)	$	(17,372	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Write-off of deferred financing costs and original issue discount		1,237			15,860
Depreciation and amortization		28,923			28,617
Amortization of deferred financing costs and accretion of original issue discount		3,471			3,370
Interest rate cap contracts—adjustment to market		114			—
Loss on disposal/impairment of assets		1,264			2,260
Benefit for deferred income taxes		(10,880	)		(19,913	)��
Share-based compensation expense		2,917			2,872
Other non-cash expense		1,430			—
Change in assets and liabilities:
Accounts receivable		(312	)		(5,667	)
Merchandise inventories		(10,084	)		(31,467	)
Prepaid expenses and other assets		933			(606	)
Prepaid income taxes		(1,557	)		(198	)
Accounts payable		5,944			17,890
Accrued liabilities		(9,680	)		(7,148	)
Lease incentives and other deferred liabilities		6,612			8,184
Net cash provided by (used in) operating activities		10,436			(3,318	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(18,516	)		(16,784	)
Acquisition of business, net of cash acquired		—			(1,352	)
Other		(231	)		(213	)
Net cash used in investing activities		(18,747	)		(18,349	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Term Loan		—			820,000
Payments on Term Loan		(17,698	)		(824,100	)
Proceeds from ABL facility		—			60,656
Payments on ABL facility		—			(20,656	)
Deferred financing costs		(1,347	)		(6,665	)
Investment by Parent		—			14,865
Investment by affiliate of Parent		2,400			—
Capital contribution to noncontrolling interest		1,595			—
Net cash (used in) provided by financing activities		(15,050	)		44,100
Effect of exchange rate fluctuations on cash		6			205
Net (decrease) increase in cash and cash equivalents		(23,355	)		22,638
CASH AND CASH EQUIVALENTS:
Beginning of period		77,910			32,124
End of period	$	54,555		$	54,762
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures incurred, but not yet paid	$	8,058		$	5,800
Non-cash capital contribution to noncontrolling interest	$	1,430		$	—
OTHER CASH FLOW INFORMATION:
Cash paid for income taxes, net of refunds received	$	2,747		$	1,068
Cash paid for interest	$	40,277		$	41,434

See notes to condensed consolidated financial statements.

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THE GYMBOREE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The unaudited interim condensed consolidated financial statements, which include The Gymboree Corporation (the “Company,” “we” or “us”) and our 100%-owned subsidiaries, as well as Gymboree (China) Commercial and Trading Co. Ltd. (“Gymboree China”) and Gymboree (Tianjin) Educational Information Consultation Co. Ltd. (“Gymboree Tianjin”) (collectively, the “Joint Venture” or “VIEs”), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with generally accepted accounting principles have been omitted. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended January 28, 2012 filed with the Securities and Exchange Commission on April 26, 2012.

The accompanying interim condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. All such adjustments are of a normal and recurring nature, except the loss on extinguishment of debt further described in Notes 4 and 5, recorded in the 13 week period ended April 28, 2012 and the 13 week period ended April 30, 2011, respectively, and a $10.7 million adjustment to cost of goods sold resulting from an increase in the net book value of inventory as a result of purchase accounting related to the Merger (as defined below) recorded in the 13 week period ended April 30, 2011.

The results of operations for the 13 and 26 weeks ended July 28, 2012 are not necessarily indicative of the operating results that may be expected for the 53 week period ending February 2, 2013 (“fiscal 2012”) or any future period.

Reclassifications

Retail Franchise net sales, previously reported in Other net sales for the 13 and 26 weeks ended July 30, 2011, have been separately disclosed to conform to the current year presentation.

Correction of Other Classifications

In the accompanying condensed consolidated balance sheet as of July 30, 2011, we reclassified approximately $4.4 million of leasehold improvement costs previously reported within “land and buildings” to be reported within “leasehold improvements” to properly classify such costs. Our net property and equipment balance as of July 30, 2011 did not change as a result of such reclassifications.

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Correction of Merger Purchase Price Allocation

In the accompanying condensed consolidated balance sheet as of July 30, 2011, we made adjustments to goodwill and to certain of our other intangible assets and deferred tax liabilities as a result of correcting the final purchase price allocation related to the acquisition (the “Merger” and, together with the related transactions, collectively, the “Transaction”) of the Company by certain investment funds sponsored by Bain Capital Partners, LLC (“Bain Capital”), on November 23, 2010 (the “Transaction Date”). Amounts previously reported as of July 30, 2011 have been restated to reflect these adjustments, as summarized in the following table (in thousands):

	As of July 30, 2011
	Balance as Previously Reported			Adjustments			Corrected Balance
Goodwill	$	934,639		$	(7,242	)	$	927,397
Trade names	$	560,291		$	6,900		$	567,191
Franchise agreements		1,808			4,700			6,508
Customer relationships, below market leases, and co-branded credit card agreement		35,310			—			35,310
Other Intangible Assets	$	597,409		$	11,600		$	609,009
Total Assets	$	2,159,240		$	4,358		$	2,163,598
Long-term deferred income tax liability	$	(244,115	)	$	(4,358	)	$	(248,473	)
Total Liabilities	$	(1,677,765	)	$	(4,358	)	$	(1,682,123	)

2. Recently Issued Accounting Standards

In May 2011, the Financial Accounting Standards Board (the “FASB”) issued guidance to amend the accounting and disclosure requirements on fair value measurements. The new guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, this guidance requires entities to disclose the categorization by level of the fair value hierarchy for items that are not measured at fair value in the statement of financial position but for which the fair value is required to be disclosed. We adopted this guidance as of January 29, 2012. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

In June 2011, the FASB issued guidance to amend the presentation of comprehensive income. This new guidance requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. We early adopted this guidance effective for our fiscal year ended January 28, 2012, as permitted under the standard, and applied it retrospectively to the 13 and 26 week periods ended July 30, 2011, as required, to present the total of comprehensive income, the

8

components of net income, and the components of other comprehensive income in two separate consecutive statements.

In September 2011, the FASB issued guidance to amend the testing of goodwill for impairment. This new guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. This guidance was effective January 29, 2012.

In December 2011, the FASB issued guidance to amend the disclosure requirements regarding the offsetting of assets and liabilities related to financial and derivative instruments. This new guidance requires an entity to disclose quantitative information in a tabular format to allow users of their financial statements to evaluate the effect or potential effect on the entity’s financial position of netting arrangements. This new guidance will be effective for us as of February 3, 2013. We are currently evaluating the impact of this guidance on our financial statement presentation of our derivative and financial instruments.

In July 2012, the FASB issued guidance to amend the testing of indefinite-lived intangible assets for impairment. This new guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the indefinite-lived intangible asset is impaired, as a basis for determining whether a qualitative impairment test should be performed. This guidance will be effective for us as of February 3, 2013. We do not anticipate a material impact to our consolidated financial statements upon adoption.

3. Goodwill and Intangible Assets and Liabilities

Intangible Assets and Liabilities:

Intangible assets and liabilities consist of the following (in thousands):

9

	July 28, 2012
	Gross Carrying Amount			Accumulated Amortization			Net Amount
Intangible Assets Not Subject to Amortization:
Trade names	$	567,405					$	567,405
Intangible Assets Subject to Amortization:
Customer relationships		36,400		$	(26,612	)		9,788
Below market leases		7,052			(2,322	)		4,730
Co-branded credit card agreement		4,000			(1,035	)		2,965
Franchise agreements		6,600			(1,545	)		5,055
		54,052			(31,514	)		22,538
Total other intangible assets	$	621,457		$	(31,514	)	$	589,943
Intangible Liabilities Subject to Amortization:
Above market leases (included in Lease Incentives and Other Deferred Liabilities)	$	(16,627	)	$	5,834		$	(10,793	)

	January 28, 2012
	Gross Carrying Amount			Accumulated Amortization			Net Amount
Intangible Assets Not Subject to Amortization:
Trade names	$	567,288					$	567,288
Intangible Assets Subject to Amortization:
Customer relationships		36,400		$	(18,699	)		17,701
Below market leases		7,055			(1,637	)		5,418
Co-branded credit card agreement		4,000			(727	)		3,273
Franchise agreements		6,600			(1,085	)		5,515
		54,055			(22,148	)		31,907
Total other intangible assets	$	621,343		$	(22,148	)	$	599,195
Intangible Liabilities Subject to Amortization:
Above market leases (included in Lease Incentives and Other Deferred Liabilities)	$	(16,631	)	$	4,114		$	(12,517	)

10

	July 30, 2011
	Gross Carrying Amount			Accumulated Amortization			Net Amount
Intangible Assets Not Subject to Amortization:
Trade names	$	567,191					$	567,191
Intangible Assets Subject to Amortization:
Customer relationships		36,400		$	(10,786	)		25,614
Below market leases		7,064			(948	)		6,116
Co-branded credit card agreement		4,000			(420	)		3,580
Franchise agreements		6,600			(92	)		6,508
		54,064			(12,246	)		41,818
Total other intangible assets	$	621,255		$	(12,246	)	$	609,009
Intangible Liabilities Subject to Amortization:
Above market leases (included in Lease Incentives and Other Deferred Liabilities)	$	(16,644	)	$	2,411		$	(14,233	)

During the 13 and 26 week periods ended July 28, 2012 and July 30, 2011, we recorded net amortization income of approximately $0.5 million and $1.0 million, respectively, in cost of goods sold (“COGS”). During the 13 week periods ended July 28, 2012 and July 30, 2011, we recorded amortization expense of approximately $4.4 million and $4.1 million, respectively, in selling, general and administrative expenses (“SG&A”). During the 26 week periods ended July 28, 2012 and July 30, 2011, we recorded amortization expense of approximately $8.7 million and $8.3 million, respectively, in SG&A. We estimate that amortization expense (income) related to intangible assets and liabilities will be as follows for the remainder of fiscal 2012 and each of the next five fiscal years (in thousands):

	Below Market		Above Market			Other
Fiscal	Leases		Leases			Intangibles		Total
2012 (remaining 27 weeks)	$	687	$	(1,559	)	$	8,680	$	7,808
2013		1,160		(2,634	)		3,409		1,935
2014		1,065		(2,055	)		1,534		544
2015		841		(1,611	)		1,534		764
2016		484		(1,460	)		1,393		417
2017		343		(1,048	)		332		(373	)

Goodwill:

In the fourth quarter of fiscal 2011, due to higher average unit costs and a higher level of markdown selling, we concluded that there was goodwill impairment in the Gymboree Outlet reporting unit. We recorded an estimate of impairment for goodwill of $28.3 million in the fourth quarter of fiscal 2011. The impairment charge was subject to finalization of fair values, which we have now completed, with no material change to the previously recorded estimate.

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4. Line of Credit

As part of the Transaction, we entered into a senior secured asset-based revolving credit facility, which was amended and restated in March 2012 to, among other things, lower the interest rate and extend the maturity date (as so amended and restated, the “ABL”). As a result of this amendment and restatement, we recorded a loss on extinguishment of debt of $1.2 million during the 13 weeks ended April 28, 2012. The ABL provides senior secured financing of up to $225 million, subject to a borrowing base. Availability under the ABL is subject to the assets of the Company, any subsidiary co-borrowers and any subsidiary guarantors that are available to collateralize the borrowings thereunder, and is reduced by the level of outstanding letters of credit. As of July 28, 2012, availability under the ABL was approximately $176.7 million. The ABL provides us the right to request up to $125 million of additional commitments under this facility (or, if less, the amount permitted under the Term Loan described in Note 5), subject to the satisfaction of certain conditions. Principal amounts outstanding under the ABL are due and payable in full in March 2017. Borrowings under the ABL bear interest at a rate per annum equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00% or (b) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs (“Adjusted LIBOR”), in each case plus an applicable margin. In addition to paying interest on outstanding principal under the ABL, we are required to pay a commitment fee on unutilized commitments thereunder of 0.375% per annum. If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the ABL exceeds the lesser of (a) the commitment amount and (b) the borrowing base, we will be required to repay outstanding loans and/or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount. The ABL contains financial and other covenants that, among other things, restrict our ability to incur additional indebtedness and pay dividends. As of July 28, 2012, we were in compliance with these covenants. As of July 28, 2012, there was $40.1 million of commercial and standby letters of credit outstanding and no borrowings outstanding. The obligations under the ABL are secured, subject to certain exceptions, by substantially all of our assets. We and our 100%-owned domestic subsidiaries have fully and unconditionally guaranteed our obligations under the ABL.

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5. Long-Term Debt

Long-term debt consists of (in thousands):

	July 28, 2012		January 28, 2012			July 30, 2011
Senior secured term loan facility, net of discount of $1,791, $1,931 and $2,069	$	792,312	$	809,869		$	813,831
9.125% senior notes		400,000		400,000			400,000
Subtotal		1,192,312		1,209,869			1,213,831
Less current portion		—		(17,698	)		(8,200	)
Long-term debt—less current portion	$	1,192,312	$	1,192,171		$	1,205,631

As part of the Transaction, we entered into an agreement with several lenders to establish an $820 million senior secured term loan facility (“Term Loan”). The Term Loan allows us to request additional tranches of term loans in an aggregate amount not to exceed $200 million, subject to the satisfaction of certain conditions, provided that such amount will be subject to reduction by the amount of any additional commitments incurred under the ABL described in Note 4. The interest rate for borrowings under the Term Loan is, at our option, a base rate plus an additional marginal rate of 2.5% or the Adjusted LIBOR rate (with a 1.5% floor) plus an additional rate of 3.5%. The Term Loan requires us to make quarterly payments each equal to 0.25% of the original $820 million principal amount of the Term Loan made on the closing date plus accrued and unpaid interest thereon, with the balance due in February 2018. The Term Loan also has mandatory and voluntary pre-payment provisions, including a requirement that we prepay the Term Loan with a certain percentage of our annual excess cash flow. We prepaid $15.6 million of the Term Loan with a portion of our excess cash flow for fiscal 2011 during the 13 weeks ended July 28, 2012. We may (but are not required to) apply a portion of this prepayment toward our quarterly amortization payments payable under the Term Loan in fiscal 2012 and fiscal 2013. The Term Loan is presented net of the related original issue discount (“OID”), which was $4.1 million on the Transaction Date. Accretion of OID is included in interest expense and was not material for the 13 and 26 weeks ended July 28, 2012 or July 30, 2011. In February 2011, we refinanced the Term Loan through an amendment and restatement of our existing credit agreement to lower the interest rate, remove certain financial covenants and extend the maturity date from November 2017 to February 2018. During the 13 weeks ended April 30, 2011, we recorded a loss on extinguishment of debt of approximately $19.6 million as a result of the refinancing, which included the write-off of approximately $14.1 million in deferred financing costs and $1.8 million of OID related to the original Term Loan. The obligations under the Term Loan are secured, subject to certain exceptions, by substantially all of our assets and those of our 100%-owned domestic subsidiaries. The Company and our 100% owned domestic subsidiaries also have fully and unconditionally guaranteed the Company’s obligations under the Term Loan.

As part of the Transaction, we issued $400 million aggregate principal amount of 9.125% senior notes due in December 2018 (the “Notes”). Interest on the Notes is payable semi-annually. If the Company or our subsidiaries sell certain assets, we generally must either invest the net cash proceeds from such sale in our business within a certain period of time, use the proceeds to

13

prepay senior secured debt, or make an offer to purchase a principal amount of the Notes equal to the excess net cash proceeds at a redemption price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest. Upon a change in control, we may also be required to make an offer to purchase all of the Notes at a redemption price equal to 101% of the principal amount of the Notes redeemed plus accrued and unpaid interest. The Notes also contain optional redemption provisions, but subject to certain exceptions, we will not be entitled to redeem the Notes at our option prior to December 1, 2014. The Notes are unsecured senior obligations of the Company. The Company and our 100%-owned domestic subsidiaries have fully and unconditionally guaranteed the Company’s obligations under the Notes (see Note 11).

Interest expense was $21.2 million and $42.9 million for the 13 and 26 weeks ended July 28, 2012, including $1.7 million and $3.5 million, respectively, of amortization of deferred financing costs and accretion of OID. For the 13 and 26 weeks ended July 30, 2011, interest expense was $21.9 million and $45.9 million, respectively, including $1.7 million and $3.4 million, respectively, of amortization of deferred financing costs and accretion of OID.

6. Fair Value Measurements

The accounting guidance for fair value measurements prioritizes the inputs used in measuring fair value into the following hierarchy:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3—Unobservable inputs for the asset or liability, which reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety is classified is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present our assets and liabilities measured at fair value on a recurring basis as of July 28, 2012, January 28, 2012, and July 30, 2011 aggregated by the level in the fair value hierarchy within which those measurements fall. There were no purchases, sales, issuances, or settlements related to recurring Level 3 measurements during the 13 and 26 weeks ended July 28, 2012 or July 30, 2011. There were no transfers into or out of Level 1 and Level 2 during the 13 and 26 weeks ended July 28, 2012 or July 30, 2011.

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	July 28, 2012
	Quoted Prices in  Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
	(in thousands)
Assets
Money market funds	$	29,176	$	—	$	—	$	29,176
Interest rate caps		—		1,087		—		1,087
Total	$	29,176	$	1,087	$	—	$	30,263
Liabilities
Forward foreign exchange contracts	$	—	$	14	$	—	$	14

	January 28, 2012
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
	(in thousands)
Assets
Money market funds	$	57,365	$	—	$	—	$	57,365
Interest rate caps		—		1,361		—		1,361
Total	$	57,365	$	1,361	$	—	$	58,726
Liabilities
Forward foreign exchange contracts	$	—	$	13	$	—	$	13

	July 30, 2011
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
	(in thousands)
Assets
Money market funds	$	45,214	$	—	$	—	$	45,214
Interest rate caps		—		6,667		—		6,667
Total	$	45,214	$	6,667	$	—	$	51,881
Liabilities
Forward foreign exchange contracts	$	—	$	91	$	—	$	91

Our cash equivalents, which are primarily placed in money market funds, are valued at their original purchase prices plus interest that has accrued at the stated rate. The carrying value of these funds is considered to approximate fair value due to the short maturity of these instruments.

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The fair value of our interest rate caps was determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) were based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, were incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of these contracts for the effect of nonperformance risk, we have considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our interest rate caps fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by our counterparties. However, as of July 28, 2012, January 28, 2012, and July 30, 2011, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our interest rate cap positions and determined that the credit valuation adjustment was not significant to the overall valuation. As a result, we classified our interest rate caps derivative valuations in Level 2 of the fair value hierarchy.

The fair value of our forward foreign exchange contracts was determined using the market approach and Level 2 inputs. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. We had no other financial assets or liabilities measured at fair value as of July 28, 2012, January 28, 2012 and July 30, 2011.

The carrying value of cash and cash equivalents, receivables, payables and line of credit balances approximates their estimated fair values due to the short maturities of these instruments. We estimate the fair value of our long-term debt using interest rates currently available to us for issuance of notes payable and long-term debt (including current maturities). These interest rates are considered Level 2 inputs. The estimated fair value of long-term debt is as follows (in thousands):

	July 28, 2012				January 28, 2012				July 30, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term loan	$	792,312	$	756,658	$	809,869	$	721,609	$	813,831	$	792,737
Notes		400,000		373,000		400,000		358,000		400,000		386,000
	$	1,192,312	$	1,129,658	$	1,209,869	$	1,079,609	$	1,213,831	$	1,178,737

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We measure certain non-financial assets and liabilities, including long-lived assets, at fair value on a non-recurring basis. During the 13 weeks ended July 28, 2012, we recorded charges related to the impairment of assets at under-performing stores, which reduced the carrying amount of the applicable long-lived assets from $0.9 million to their fair value of zero. During the 13 and 26 weeks ended July 30, 2011, we recorded charges related to the impairment of

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assets at under-performing stores, which reduced the carrying amount of the applicable long-lived assets from $1.3 million and $2.0 million, respectively, to their fair value of zero.

The fair market value of these non-financial assets was determined using the income approach and Level 3 inputs, which required management to make significant estimates about future cash flows. Management estimates the amount and timing of future cash flows based on its experience and knowledge of the retail market in which each store operates. These impairment charges are included in SG&A expenses in the accompanying condensed consolidated statements of operations.

During the fourth quarter of fiscal 2011, we recorded a preliminary estimate of goodwill impairment of $28.3 million that was finalized during the second quarter of fiscal 2012, with no material change to the previously recorded estimate.

7. Derivative Instruments

We enter into forward foreign exchange contracts with respect to certain purchases in United States dollars of inventory to be sold in our retail stores in Canada. The purpose of these contracts is to protect our margins on the eventual sale of the inventory from fluctuations in the exchange rate for Canadian and United States dollars. The term of these forward exchange contracts is generally less than one year. These contracts are treated as cash-flow hedges. Amounts reported in accumulated other comprehensive loss related to these forward foreign exchange contracts will be reclassified to cost of goods sold over a three-month period. We also enter into forward foreign exchange contracts with respect to short-term intercompany balances between U.S. and Canadian entities. The purpose of these contracts is to protect us from fluctuations in the exchange rate for Canadian and United States dollars upon the settlement of such balances. These contracts are not designated as hedges. Consequently, changes in the fair value of these contracts are included in other income.

We have four interest rate caps to hedge against rising interest rates associated with our Term Loan (see Note 6) above the strike rate of the cap through December 23, 2016, the maturity date of the caps. All four caps were designated on the date of execution as cash-flow hedges. In December 2010, we paid approximately $12.1 million to enter into these caps. This premium, and any related amounts reported in accumulated other comprehensive loss, are being amortized to interest expense through December 23, 2016, as interest payments are made on the underlying Term Loan. We estimate that approximately $0.6 million will be reclassified from accumulated other comprehensive loss to interest expense within the next 12 months.

For a derivative instrument designated as a cash-flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive loss and is subsequently recognized in earnings when the hedged exposure is recognized in earnings. Gains or losses on the derivative representing either hedge components excluded from the assessment of effectiveness or hedge ineffectiveness are recognized in earnings.

We had the following outstanding derivatives designated as cash-flow hedges (US dollars in thousands):

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	July 28, 2012				January 28, 2012				July 30, 2011
	Number of Instruments		Notional (USD)		Number of Instruments		Notional (USD)		Number of Instruments		Notional (USD)
Interest rate derivatives
Purchased Caps		4	$	700,000		4	$	700,000		4	$	700,000
Foreign exchange derivatives
Forward foreign exchange contracts		6		7,684		12		14,154		6		6,173
Total		10	$	707,684		16	$	714,154		10	$	706,173

In addition to the cash-flow hedges above, as of July 30, 2011, we had one forward foreign exchange contract with a notional amount of $2.0 million that was not designated as a hedge. We had no such foreign exchange contracts as of July 28, 2012 or January 28, 2012. The table below presents the fair value of all of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets (in thousands).

	July 28, 2012				January 28, 2012				July 30, 2011
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Interest rate derivatives
Balance Sheet Location		Other Assets				Other Assets				Other Assets
Purchased Caps	$	1,087			$	1,361			$	6,667
Foreign exchange derivatives
Balance Sheet Location				Accrued liabilities				Accrued liabilities				Accrued liabilities
Forward foreign exchange contracts			$	14			$	13			$	91
Total	$	1,087	$	14	$	1,361	$	13	$	6,667	$	91

The tables below present the effect of all of our derivative financial instruments on the condensed consolidated statements of operations (in thousands). No amounts were reclassified from accumulated other comprehensive loss into earnings as a result of forecasted transactions that failed to occur or as a result of hedge ineffectiveness.

	13 weeks ended July 28, 2012
	Amount of Gain / (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain / (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Interest rate derivatives
Purchased Caps	$	(897	)	Interest expense	$	(61	)
Foreign exchange derivatives
Forward foreign exchange contracts		88		Cost of goods sold		6
Total	$	(809	)		$	(55	)

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	13 weeks ended July 30, 2011
	Amount of Loss Recognized in OCI on Derivative (Effective Portion)			Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion)
Interest rate derivatives
Purchased Caps	$	(3,169	)	Interest expense	$	—
Foreign exchange derivatives
Forward foreign exchange contracts		(189	)	Cost of goods sold		(71	)
Total	$	(3,358	)		$	(71	)

	26 weeks ended July 28, 2012
	Amount of Gain / (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain / (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Interest rate derivatives
Purchased Caps	$	(160	)	Interest expense	$	(114	)
Foreign exchange derivatives
Forward foreign exchange contracts		71		Cost of goods sold		87
Total	$	(89	)		$	(27	)

	26 weeks ended July 30, 2011
	Amount of Loss Recognized in OCI on Derivative (Effective Portion)			Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion)
Interest rate derivatives
Purchased Caps	$	(5,194	)	Interest expense	$	—
Foreign exchange derivatives
Forward foreign exchange contracts		(253	)	Cost of goods sold		(170	)
Total	$	(5,447	)		$	(170	)

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8. Share-based Compensation

Share-based compensation expense is included as a component of selling, general and administrative expenses and consisted of the following (in thousands):

	13 Weeks Ended				26 Weeks Ended
	July 28, 2012		July 30, 2011		July 28, 2012		July 30, 2011
Stock options	$	1,510	$	1,469	$	2,917	$	2,872
Total	$	1,510	$	1,469	$	2,917	$	2,872

9. Variable Interest Entity

Gymboree China, Gymboree Tianjin and the Company are indirectly controlled by Gymboree Holding, Ltd. and investment funds sponsored by Bain Capital. Gymboree China and Gymboree Tianjin have been determined to be variable interest entities, and we (as well as our 100%-owned subsidiaries) are a member of a related party group that controls the VIEs and absorbs the economics of the VIEs. Based on our relationship with the VIEs, we determined that we are most closely associated with the VIEs, and therefore, consolidate them as the primary beneficiary. However, as we have a 0% ownership interest in the VIEs, 100% of the results of operations of the VIEs are recorded as noncontrolling interest. The assets of the VIEs cannot be used by us. The liabilities of the VIEs are comprised mainly of short-term accrued expenses, and their creditors have no recourse to our general credit or assets.

The following tables reflect the impact of the VIEs on the condensed consolidated balance sheets as of July 28, 2012 and January 28, 2012 and the condensed consolidated statements of operations for the 13 and 26 weeks ended July 28, 2012 (in thousands):

Condensed Consolidating Balance Sheets

	July 28, 2012
	Balance Before Consolidation of VIEs		VIEs		Eliminations			As Reported
Current assets	$	342,064	$	11,594	$	(2,600	)	$	351,058
Non-current assets		1,740,298		1,078		—			1,741,376
Total assets	$	2,082,362	$	12,672	$	(2,600	)	$	2,092,434
Current liabilities	$	169,413	$	7,950	$	(2,493	)	$	174,870
Non-current liabilities		1,473,671		78		—			1,473,749
Total liabilities		1,643,084		8,028		(2,493	)		1,648,619
Total stockholders’ equity		439,278		—		(107	)		439,171
Noncontrolling interest		—		4,644		—			4,644
Total liabilities and stockholders’ equity	$	2,082,362	$	12,672	$	(2,600	)	$	2,092,434

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	January 28, 2012
	Balance Before Consolidation of VIEs		VIEs		Eliminations			As Reported
Current assets	$	355,073	$	6,692	$	(983	)	$	360,782
Non-current assets		1,752,303		702		—			1,753,005
Total assets	$	2,107,376	$	7,394	$	(983	)	$	2,113,787
Current liabilities	$	187,812	$	4,074	$	(983	)	$	190,903
Non-current liabilities		1,474,189		56		—			1,474,245
Total liabilities		1,662,001		4,130		(983	)		1,665,148
Total stockholders’ equity		445,375		—		—			445,375
Noncontrolling interest		—		3,264		—			3,264
Total liabilities and stockholders’ equity	$	2,107,376	$	7,394	$	(983	)	$	2,113,787

Condensed Consolidating Statements of Operations

	For the 13 weeks ended July 28, 2012
	Balance Before Consolidation of VIEs			VIEs			Eliminations			As Reported
Net sales	$	267,491		$	3,056		$	(1,795	)	$	268,752
Cost of goods sold, including buying and occupancy expenses		(178,513	)		(1,202	)		151			(179,564	)
Selling, general and administrative		(94,308	)		(2,965	)		1,678			(95,595	)
Operating loss		(5,330	)		(1,111	)		34			(6,407	)
Other non-operating expense		(21,201	)		29			—			(21,172	)
Income (loss) before income taxes		(26,531	)		(1,082	)		34			(27,579	)
Income tax benefit		13,229			284			—			13,513
Net loss		(13,302	)		(798	)		34			(14,066	)
Net loss attributable to noncontrolling interest		—			798			—			798
Net loss attributable to The Gymboree Corporation	$	(13,302	)	$	—		$	34		$	(13,268	)

	For the 26 weeks ended July 28, 2012
	Balance Before Consolidation of VIEs			VIEs			Eliminations			As Reported
Net sales	$	565,422		$	5,199		$	(4,118	)	$	566,503
Cost of goods sold, including buying and occupancy expenses		(354,562	)		(1,444	)		515			(355,491	)
Selling, general and administrative		(185,202	)		(5,620	)		3,488			(187,334	)
Operating income (loss)		25,658			(1,865	)		(115	)		23,678
Other non-operating expense		(44,090	)		16			—			(44,074	)
Loss before income taxes		(18,432	)		(1,849	)		(115	)		(20,396	)
Income tax benefit		10,275			225			—			10,500
Net loss		(8,157	)		(1,624	)		(115	)		(9,896	)
Net loss attributable to noncontrolling interest		—			1,624			—			1,624
Net loss attributable to The Gymboree Corporation	$	(8,157	)	$	—		$	(115	)	$	(8,272	)

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10. Segments

We have four reportable segments: retail stores, Gymboree Play & Music, retail franchise, and one reportable segment related to the activities of our consolidated VIEs. These reportable segments were identified based on how our business is managed and evaluated. The retail stores segment includes four operating segments (brands), which sell high-quality apparel for children: Gymboree (including an online store), Gymboree Outlet, Janie and Jack (including an online store), and Crazy 8 (including an online store). These four operating segments have been aggregated into one reportable segment because, in our judgment, these operating segments have similar historical economic characteristics and/or are expected to have similar economic characteristics and similar long-term financial performance in the future. Gross margin is the principal measure we consider in determining whether the economic characteristics are similar. In addition, each operating segment has similar products, production processes and type or class of customer. We believe that disaggregating our operating segments would not provide material additional information. Corporate overhead (costs related to our distribution center and shared corporate services) is included in the retail stores segment. Amounts previously reported have been reclassified to conform to the addition of the retail franchise reportable segment to the current year presentation. Additionally, we completed the allocation of goodwill and certain other intangible assets to our reporting units and segments during the fourth quarter of fiscal 2011, and have restated the segment disclosures below as of July 30, 2011, resulting in the allocation of $16.4 million and $23.6 million of goodwill, and $36.2 million and $4.7 million of certain other intangible assets, to our Gymboree Play & Music and retail franchise reportable segments, respectively, and in the allocation of $39.8 million of goodwill to our Canada and Australia geographical segments.

The following table provides the summary financial data of each reportable segment (in thousands):

	13 Weeks Ended July 28, 2012
	Retail Stores			Gymboree Play & Music		Retail Franchise		VIEs			Intersegment Elimination			Total
Net sales	$	258,473		$	5,152	$	3,866	$	3,056		$	(1,795	)	$	268,752
Operating income (loss)		(8,615	)		1,715		1,570		(1,111	)		34			(6,407	)
Total assets		1,992,120			60,812		29,430		12,672			(2,600	)		2,092,434

	13 Weeks Ended July 30, 2011
	Retail Stores		Gymboree Play & Music		Retail Franchise		Total
Net sales	$	253,407	$	3,349	$	2,280	$	259,036
Operating income		610		1,519		1,022		3,151
Total assets		2,073,998		59,352		30,248		2,163,598

	26 Weeks Ended July 28, 2012
	Retail Stores		Gymboree Play & Music		Retail Franchise		VIEs			Intersegment Elimination			Total
Net sales	$	546,502	$	11,202	$	7,718	$	5,199		$	(4,118	)	$	566,503
Operating income (loss)		19,004		3,635		3,019		(1,865	)		(115	)		23,678
Total assets		1,992,120		60,812		29,430		12,672			(2,600	)		2,092,434

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	26 Weeks Ended July 30, 2011
	Retail Stores		Gymboree Play & Music		Retail Franchise		Total
Net sales	$	519,290	$	6,274	$	3,729	$	529,293
Operating income		25,146		2,585		1,714		29,445
Total assets		2,073,998		59,352		30,248		2,163,598

Interest expense, depreciation and amortization expense and capital expenditures have not been separately disclosed above as the amounts primarily relate to the retail segment. The Gymboree Play & Music and VIE reportable segments recorded intersegment revenues of $0.1 million and $1.7 million, respectively, for the 13 weeks ended July 28, 2012 and $0.6 million and $3.5 million, respectively, for the 26 weeks ended July 28, 2012. There were no other material intersegment revenues.

We attribute retail store revenues to individual countries based on selling location. For Gymboree Play & Music and retail franchise, all sales were attributed to the United States. The following tables provide the summary financial data of each geographical segment (in thousands):

	13 Weeks Ended July 28, 2012
	Canada		Australia		China		Total International
Net sales	$	12,011	$	670	$	1,398	$	14,079
Long-lived assets		45,222		6,515		1,078		52,815

	13 Weeks Ended July 30, 2011
	Canada		Australia		Total International
Net sales	$	11,039	$	524	$	11,563
Long-lived assets		44,271		6,072		50,343

	26 Weeks Ended July 28, 2012
	Canada		Australia		China		Total International
Net sales	$	21,890	$	1,270	$	1,740	$	24,900
Long-lived assets		45,222		6,515		1,078		52,815

	26 Weeks Ended July 30, 2011
	Canada		Australia		Total International
Net sales	$	19,936	$	1,012	$	20,948
Long-lived assets		44,271		6,072		50,343

11. Condensed Guarantor Data

The Company and its 100%-owned domestic subsidiaries have fully and unconditionally guaranteed the Notes. The following condensed consolidating financial information presents the financial position, results of operations and cash flows of The Gymboree Corporation and the guarantor and non-guarantor subsidiaries. The VIEs financial results are included in the non-guarantor subsidiaries. As of July 30, 2011, all of our goodwill and $3.6 million of certain other intangible assets had been allocated to The Gymboree Corporation for the purposes of our guarantor and non-guarantor subsidiaries disclosure. During the fourth quarter of fiscal 2011, we

23

completed the allocation of goodwill and certain other intangible assets to our guarantor and non-guarantor subsidiaries, which resulted in $887.6 million and $39.8 million of goodwill being allocated to guarantor and non-guarantor subsidiaries, respectively and $3.6 million of other intangible assets being allocated to our guarantor subsidiaries. These adjustments have been reflected in the tables below for prior periods. Intercompany transactions are eliminated.

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEETS

(In thousands)

	As of July 28, 2012
	The Gymboree Corporation		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	29,930	$	9,563	$	15,062	$	—		$	54,555
Accounts receivable, net of allowance		1,508		21,491		2,174		—			25,173
Merchandise inventories		—		215,794		4,310		105			220,209
Prepaid income taxes		3,727		679		889		—			5,295
Prepaid expenses		2,936		1,236		326		—			4,498
Deferred income taxes		29,180		12,320		—		(172	)		41,328
Intercompany receivable		—		425,880		—		(425,880	)		—
Total current assets		67,281		686,963		22,761		(425,947	)		351,058
Property and Equipment, net		17,249		176,594		8,792		—			202,635
Deferred Income Taxes		12,449		—		1,843		(14,292	)		—
Goodwill		—		859,297		39,800		—			899,097
Other Intangible Assets		—		589,772		171		—			589,943
Deferred Financing Costs		44,695		—		—		—			44,695
Other Assets		1,087		812		3,107		—			5,006
Investment in Subsidiaries		1,941,856		—		—		(1,941,856	)		—
Total Assets	$	2,084,617	$	2,313,438	$	76,474	$	(2,382,095	)	$	2,092,434
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	3,796	$	80,570	$	598	$	—		$	84,964
Accrued liabilities		29,796		53,515		6,595		—			89,906
Deferred income taxes		—		—		169		(169	)		—
Intercompany payable		415,545		—		9,763		(425,308	)		—
Total current liabilities		449,137		134,085		17,125		(425,477	)		174,870
Long-Term Liabilities:
Long-term debt		1,192,312		—		—		—			1,192,312
Lease incentives and other liabilities		3,997		33,025		4,430		—			41,452
Deferred income taxes		—		254,277		—		(14,292	)		239,985
Total Liabilities		1,645,446		421,387		21,555		(439,769	)		1,648,619
Commitments and Contingencies		—		—		—		—			—
Total Stockholders’ Equity		439,171		1,892,051		50,275		(1,942,326	)		439,171
Noncontrolling interest		—		—		4,644		—			4,644
Total Equity		439,171		1,892,051		54,919		(1,942,326	)		443,815
Total Liabilities and Stockholders’ Equity	$	2,084,617	$	2,313,438	$	76,474	$	(2,382,095	)	$	2,092,434

24

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEETS

(In thousands)

	As of January 28, 2012
	The Gymboree Corporation		Guarantor Subsidiaries			Non-guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	58,910	$	6,387		$	12,613	$	—		$	77,910
Accounts receivable, net of allowance		4,676		20,886			1,715		—			27,277
Merchandise inventories		—		206,661			3,389		162			210,212
Prepaid income taxes		3,605		263			—		(132	)		3,736
Prepaid expenses		3,689		1,538			305		—			5,532
Deferred income taxes		22,163		14,426			—		(474	)		36,115
Intercompany receivable		—		413,415			—		(413,415	)		—
Total current assets		93,043		663,576			18,022		(413,859	)		360,782
Property and Equipment, net		18,794		174,573			8,785		—			202,152
Deferred Income Taxes		12,623		—			1,784		(14,407	)		—
Goodwill		—		859,297			39,800		—			899,097
Other Intangible Assets		—		599,000			195		—			599,195
Deferred Financing Costs		47,915		—			—		—			47,915
Other Assets		1,361		813			2,472		—			4,646
Investment in subsidiaries		1,927,724		—			—		(1,927,724	)		—
Total Assets	$	2,101,460	$	2,297,259		$	71,058	$	(2,355,990	)	$	2,113,787
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	6,412	$	71,510		$	1,105	$	—		$	79,027
Accrued liabilities		32,892		57,432			3,854		—			94,178
Income tax payable		—		—			132		(132	)		—
Current portion of long-term debt		17,698		—			—		—			17,698
Deferred income taxes		—		—			474		(474	)		—
Intercompany payable		402,815		—			10,116		(412,931	)		—
Total current liabilities		459,817		128,942			15,681		(413,537	)		190,903
Long-Term Liabilities:
Long-term debt		1,192,171		—			—		—			1,192,171
Lease incentives and other liabilities		4,097		27,743			4,739		—			36,579
Deferred income taxes		—		259,902			—		(14,407	)		245,495
Total Liabilities		1,656,085		416,587			20,420		(427,944	)		1,665,148
Commitments and Contingencies		—		—	��		—		—			—
Total Stockholders’ Equity		445,375		1,880,672			47,374		(1,928,046	)		445,375
Noncontrolling interest		—		—			3,264		—			3,264
Total Equity		445,375		1,880,672			50,638		(1,928,046	)		448,639
Total Liabilities and Stockholders’ Equity	$	2,101,460	$	2,297,259		$	71,058	$	(2,355,990	)	$	2,113,787

25

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEETS

(In thousands)

	As of July 30, 2011
	The Gymboree Corporation		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	46,223	$	4,151	$	4,388	$	—		$	54,762
Accounts receivable, net of allowance		482		18,571		289		—			19,342
Merchandise inventories		—		212,231		3,540		95			215,866
Prepaid income taxes		16,016		—		550		(1,099	)		15,467
Prepaid expenses		2,591		2,849		—		—			5,440
Deferred income taxes		—		348,926		—		(348,926	)		—
Intercompany receivable		35,385		11,809		44		—			47,238
Total current assets		100,697		598,537		8,811		(349,930	)		358,115
Property and Equipment, net		20,055		180,023		7,823		—			207,901
Deferred Income Taxes		12,983		—		877		(13,860	)		—
Goodwill		—		887,597		39,800		—			927,397
Other Intangible Assets		—		608,781		228		—			609,009
Deferred Financing Costs		51,237		—		—		—			51,237
Other Assets		6,667		860		2,412		—			9,939
Investment in subsidiaries		1,921,400		—		—		(1,921,400	)		—
Total Assets	$	2,113,039	$	2,275,798	$	59,951	$	(2,285,190	)	$	2,163,598
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	4,473	$	67,627	$	297	$	—		$	72,397
Accrued liabilities		27,006		46,103		1,472		—			74,581
Income tax payable		—		1,099		—		(1,099	)		—
Line of credit		40,000		—		—		—			40,000
Current portion of long-term debt		8,200		—		—		—			8,200
Intercompany payable		341,309		—		7,132		(348,441	)		—
Total current liabilities		420,988		114,829		8,901		(349,540	)		195,178
Long-Term Liabilities:
Long-term debt		1,205,631		—		—		—			1,205,631
Lease incentives and other liabilities		4,945		23,730		4,166		—			32,841
Deferred income taxes		—		262,333		—		(13,860	)		248,473
Total Liabilities		1,631,564		400,892		13,067		(363,400	)		1,682,123
Commitments and Contingencies		—		—		—		—			—
Stockholders’ Equity		481,475		1,874,906		46,884		(1,921,790	)		481,475
Total Liabilities and Stockholders’ Equity	$	2,113,039	$	2,275,798	$	59,951	$	(2,285,190	)	$	2,163,598

26

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE 13 WEEKS ENDED JULY 28, 2012

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Net sales:
Retail	$	435		$	251,094		$	14,762		$	(7,177	)	$	259,114
Gymboree Play & Music		—			5,041			758			—			5,799
Retail Franchise		—			3,839			—			—			3,839
Intercompany revenue		11,898			545			1,658			(14,101	)		—
Total net sales		12,333			260,519			17,178			(21,278	)		268,752
Cost of goods sold, including buying and occupancy expenses		(1,335	)		(173,570	)		(11,076	)		6,417			(179,564	)
Gross profit		10,998			86,949			6,102			(14,861	)		89,188
Selling, general and administrative expenses		(13,133	)		(92,088	)		(5,349	)		14,975			(95,595	)
Operating (loss) income		(2,135	)		(5,139	)		753			114			(6,407	)
Interest income		22			—			23			—			45
Interest expense		(21,193	)		—			—			—			(21,193	)
Loss on extinguishment of debt		—			—			—			—			—
Other (expense) income, net		(32	)		—			8			—			(24	)
(Loss) income before income taxes		(23,338	)		(5,139	)		784			114			(27,579	)
Income tax benefit (expense)		15,444			(3,209	)		1,278			—			13,513
Equity in loss of affiliates, net of tax		(5,374	)		—			—			5,374			—
Net (loss) income		(13,268	)		(8,348	)		2,062			5,488			(14,066	)
Net loss attributable to noncontrolling interest		—			—			798			—			798
Net (loss) income attributable to The Gymboree Corporation	$	(13,268	)	$	(8,348	)	$	2,860		$	5,488		$	(13,268	)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE 13 WEEKS ENDED JULY 30, 2011

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Net sales:
Retail	$	321		$	246,592		$	12,252		$	(5,758	)	$	253,407
Gymboree Play & Music		—			3,349			—			—			3,349
Retail Franchise		—			2,280			—			—			2,280
Intercompany revenue		9,045			222			—			(9,267	)		—
Total net sales		9,366			252,443			12,252			(15,025	)		259,036
Cost of goods sold, including buying and occupancy expenses		(1,323	)		(164,187	)		(7,641	)		6,147			(167,004	)
Gross profit		8,043			88,256			4,611			(8,878	)		92,032
Selling, general and administrative expenses		(12,194	)		(82,127	)		(3,378	)		8,818			(88,881	)
Operating (loss) income		(4,151	)		6,129			1,233			(60	)		3,151
Interest income		10			—			24			—			34
Interest expense		(21,927	)		—			—			—			(21,927	)
Other expense, net		(80	)		—			—			—			(80	)
(Loss) income before income taxes		(26,148	)		6,129			1,257			(60	)		(18,822	)
Income tax benefit (expense)		15,644			(3,285	)		(468	)		—			11,891
Equity in earnings of affiliates, net of tax		3,573			—			—			(3,573	)		—
Net (loss) income	$	(6,931	)	$	2,844		$	789		$	(3,633	)	$	(6,931	)

27

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE 26 WEEKS ENDED JULY 28, 2012

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Net sales:
Retail	$	828		$	533,352		$	26,465		$	(13,415	)	$	547,230
Gymboree Play & Music		—			10,579			1,012			—			11,591
Retail Franchise		—			7,682			—			—			7,682
Intercompany revenue		23,693			1,315			3,459			(28,467	)		—
Total net sales		24,521			552,928			30,936			(41,882	)		566,503
Cost of goods sold, including buying and occupancy expenses		(2,669	)		(346,144	)		(19,036	)		12,358			(355,491	)
Gross profit		21,852			206,784			11,900			(29,524	)		211,012
Selling, general and administrative expenses		(25,650	)		(179,656	)		(11,461	)		29,433			(187,334	)
Operating (loss) income		(3,798	)		27,128			439			(91	)		23,678
Interest income		53			—			51			—			104
Interest expense		(42,851	)		—			—			—			(42,851	)
Loss on extinguishment of debt		(1,237	)											(1,237	)
Other expense, net		(51	)		(1	)		(38	)		—			(90	)
(Loss) income before income taxes		(47,884	)		27,127			452			(91	)		(20,396	)
Income tax benefit (expense)		25,633			(15,749	)		616			—			10,500
Equity in earnings of affiliates, net of tax		13,979			—			—			(13,979	)		—
Net (loss) income		(8,272	)		11,378			1,068			(14,070	)		(9,896	)
Net loss attributable to noncontrolling interest		—			—			1,624			—			1,624
Net (loss) income attributable to The Gymboree Corporation	$	(8,272	)	$	11,378		$	2,692		$	(14,070	)	$	(8,272	)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE 26 WEEKS ENDED JULY 30, 2011

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Net sales:
Retail	$	613		$	506,658		$	22,307		$	(10,288	)	$	519,290
Gymboree Play & Music		—			6,274			—			—			6,274
Retail Franchise		—			3,729			—			—			3,729
Intercompany revenue		20,360			457			—			(20,817	)		—
Total net sales		20,973			517,118			22,307			(31,105	)		529,293
Cost of goods sold, including buying and occupancy expenses		(2,646	)		(320,128	)		(14,287	)		10,661			(326,400	)
Gross profit		18,327			196,990			8,020			(20,444	)		202,893
Selling, general and administrative expenses		(23,726	)		(163,688	)		(6,425	)		20,391			(173,448	)
Operating (loss) income		(5,399	)		33,302			1,595			(53	)		29,445
Interest income		10			26			51			—			87
Interest expense		(45,930	)		—			—			—			(45,930	)
Loss on extinguishment of debt		(19,563	)		—			—			—			(19,563	)
Other expense, net		(44	)		—			(7	)		—			(51	)
(Loss) income before income taxes		(70,926	)		33,328			1,639			(53	)		(36,012	)
Income tax benefit (expense)		33,305			(14,034	)		(631	)		—			18,640
Equity in earnings of affiliates, net of tax		20,249			—						(20,249	)		—
Net (loss) income	$	(17,372	)	$	19,294		$	1,008		$	(20,302	)	$	(17,372	)

28

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE 13 WEEKS ENDED JULY 28, 2012

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations		Consolidated
Net (loss) income	$	(13,268	)	$	(8,348	)	$	2,062		$	5,488	$	(14,066	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		—			—			(30	)		—		(30	)
Unrealized net (loss) gain on cash flow hedges, net of tax of $232		(550	)		—			214			—		(336	)
Total other comprehensive (loss) gain, net of tax		(550	)		—			184			—		(366	)
Comprehensive (loss) income		(13,818	)		(8,348	)		2,246			5,488		(14,432	)
Comprehensive loss attributable to noncontrolling interest		—			—			842			—		842
Comprehensive (loss) income attributable to The Gymboree Corporation	$	(13,818	)	$	(8,348	)	$	3,088		$	5,488	$	(13,590	)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE 13 WEEKS ENDED JULY 30, 2011

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated
Net (loss) income	$	(6,931	)	$	2,844	$	789	$	(3,633	)	$	(6,931	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		—			—		19		—			19
Unrealized net (loss) gain on cash flow hedges, net of tax of $-		(3,169	)		—		40		—			(3,129	)
Total other comprehensive (loss) income, net of tax		(3,169	)		—		59		—			(3,110	)
Comprehensive (loss) income	$	(10,100	)	$	2,844	$	848	$	(3,633	)	$	(10,041	)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE 26 WEEKS ENDED JULY 28, 2012

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries		Non-guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) income	$	(8,272	)	$	11,378	$	1,068		$	(14,070	)	$	(9,896	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		—			—		(59	)		—			(59	)
Unrealized net gain loss on cash flow hedges, net of tax of $263		64			—		35			—			99
Total other comprehensive income (loss), net of tax		64			—		(24	)		—			40
Comprehensive (loss) income		(8,208	)		11,378		1,044			(14,070	)		(9,856	)
Comprehensive loss attributable to noncontrolling interest		—			—		1,656			—			1,656
Comprehensive (loss) income attributable to The Gymboree Corporation	$	(8,208	)	$	11,378	$	2,700		$	(14,070	)	$	(8,200	)

29

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE 26 WEEKS ENDED JULY 30, 2011

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries		Non-guarantor Subsidiaries			Eliminations			Consolidated
Net (loss) income	$	(17,372	)	$	19,294	$	1,008		$	(20,302	)	$	(17,372	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		—			—		552			—			552
Unrealized net loss on cash flow hedges, net of tax of $-		(5,194	)		—		(59	)		—			(5,253	)
Total other comprehensive (loss) income, net of tax		(5,194	)		—		493			—			(4,701	)
Comprehensive (loss) income	$	(22,566	)	$	19,294	$	1,501		$	(20,302	)	$	(22,073	)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE 26 WEEKS ENDED JULY 28, 2012

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used in) provided by operating activities	$	(23,768	)	$	32,186		$	2,018		$	—		$	10,436
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(1,207	)		(16,428	)		(881	)		—			(18,516	)
Investment in subsidiaries		(180	)		—			—			180			—
Other		—			(116	)		(115	)		—			(231	)
Net cash used in investing activities		(1,387	)		(16,544	)		(996	)		180			(18,747	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany transfers		12,820			(12,466	)		(354	)		—			—
Payments on Term Loan		(17,698	)		—			—			—			(17,698	)
Deferred financing costs		(1,347	)		—			—			—			(1,347	)
Investment by Parent		—			—			180			(180	)		—
Investment by affiliate of Parent		2,400			—			—			—			2,400
Capital contribution to noncontrolling interest		—			—			1,595			—			1,595
Net cash (used in) provided by financing activities		(3,825	)		(12,466	)		1,421			(180	)		(15,050	)
Effect of exchange rate fluctuations on cash		—			—			6			—			6
Net (decrease) increase in cash and cash equivalents		(28,980	)		3,176			2,449			—			(23,355	)
CASH AND CASH EQUIVALENTS:
Beginning of Period		58,910			6,387			12,613			—			77,910
End of Period	$	29,930		$	9,563		$	15,062		$	—		$	54,555

30

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE 26 WEEKS ENDED JULY 30, 2011

(In thousands)

	The Gymboree Corporation			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used in) provided by operating activities	$	(53,542	)	$	48,466		$	1,758		$	—	$	(3,318	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(1,633	)		(14,209	)		(942	)		—		(16,784	)
Acquisition of business, net of cash acquired		(1,352	)		—			—			—		(1,352	)
Other		(17	)		(196	)		—			—		(213	)
Net cash used in investing activities		(3,002	)		(14,405	)		(942	)		—		(18,349	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany transfers		39,510			(36,440	)		(3,070	)		—		—
Proceeds from Term Loan		820,000			—			—			—		820,000
Payments on Term Loan		(824,100	)		—			—			—		(824,100	)
Proceeds from ABL facility		60,656			—			—			—		60,656
Payments on ABL facility		(20,656	)		—			—			—		(20,656	)
Deferred financing costs		(6,665	)		—			—			—		(6,665	)
Investment by Parent		14,865			—			—			—		14,865
Net cash provided by (used in) financing activities		83,610			(36,440	)		(3,070	)		—		44,100
Effect of exchange rate fluctuations on cash		—			—			205			—		205
Net increase (decrease) in cash and cash equivalents		27,066			(2,379	)		(2,049	)		—		22,638
CASH AND CASH EQUIVALENTS:
Beginning of Period		19,157			6,530			6,437			—		32,124
End of Period	$	46,223		$	4,151		$	4,388		$	—	$	54,762

The Company and its guarantor subsidiaries participate in a cash pooling program. As part of this program, cash balances are generally swept on a daily basis between the guarantor subsidiary bank accounts and those of the Company. In addition, we pay expenses on behalf of our guarantor and non-guarantor subsidiaries on a regular basis. These types of transactions have been accounted for as intercompany transfers within financing activities.

The Company’s transactions include interest, tax payments and intercompany sales transactions related to administrative costs incurred by the Company, which are billed to guarantor and non-guarantor subsidiaries on a cost plus basis. All intercompany transactions are presumed to be settled in cash and therefore are included in operating activities. Non-operating cash flow changes have been classified as financing activities.

12. Income Taxes

We believe that it is reasonably possible that the total amount of unrecognized tax benefits of $7.3 million will decrease by as much as $2.8 million during the next twelve months due to the resolution of certain tax contingencies and lapses of applicable statutes of limitations.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Stockholders of

The Gymboree Corporation

We have reviewed the accompanying condensed consolidated balance sheets of The Gymboree Corporation and subsidiaries (the “Company”) as of July 28, 2012 and July 30, 2011, and the related condensed consolidated statements of operations and comprehensive loss for the thirteen and twenty-six week periods then ended, and of cash flows for the twenty-six week periods then ended. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of The Gymboree Corporation and subsidiaries as of January 28, 2012, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the fiscal year then ended (not presented herein); and in our report dated April 26, 2012, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph relating to a change in the Company’s method of presenting comprehensive income for the fiscal year ended January 28, 2012, due to the adoption of Financial Accounting Standards Board Accounting Update No. 2011-05,Presentation of Comprehensive Income. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 28, 2012, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

As discussed in Note 2 to the condensed consolidated interim financial statements, the Company changed its method of presenting comprehensive income during the fiscal year ended January 28, 2012, due to the adoption of Financial Accounting Standards Board Accounting Update No. 2011-05,Presentation of Comprehensive Income. The change in presentation has been applied retrospectively to the thirteen and twenty-six week periods ended July 30, 2011.

/s/DELOITTE & TOUCHE LLP

San Francisco, California

September 10, 2012

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements

This quarterly report contains forward-looking statements. You can identify forward-looking statements because they contain words such as “believe,” “expect,” “may,” “will,” “should,” “could,” “seek,” “intend,” “plan,” “estimate,” or “anticipate” or similar expressions that concern our strategy, plans or intentions. All statements we make relating to: future sales, costs and expenses and gross profit percentages; the continuation of historical trends; our ability to operate our business under our capital and operating structure; the sufficiency of our cash balances and cash generated from operating and financing activities for future liquidity and capital resource needs; and any cash flow that may be available for prepayment of a portion of our indebtedness under the Term Loan (as defined below) are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we had expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.

Important factors that could cause actual results to differ materially from our expectations (“cautionary statements”) are disclosed under “Item 1A, Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended January 28, 2012, filed with the Securities and Exchange Commission on April 26, 2012 (the “Fiscal 2011 Annual Report”). We encourage you to read these risk factors disclosures carefully. We caution investors not to place substantial reliance on the forward-looking statements contained in this quarterly report. These statements, like all statements in this quarterly report, speak only as of the date of this quarterly report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments, except as otherwise required by law.

General

The Gymboree Corporation (“we,” “us,” “our,” “Gymboree” and “Company”) is one of the largest children’s apparel specialty retailers in North America, offering collections of high-quality apparel and accessories. As of July 28, 2012, we operated a total of 1,191 retail stores, as follows: 631 Gymboree^® stores (including 586 in the United States, 41 in Canada, 1 in Puerto Rico and 3 in Australia), 155 Gymboree Outlet stores, 127 Janie and Jack^® shops, and 278 Crazy 8^® stores in the United States, as well as 3 online stores atwww.gymboree.com,www.janieandjack.com andwww.crazy8.com. We also offer directed parent-child developmental play programs at 712 franchised and Company-operated Gymboree Play & Music^® centers in the United States and 40 other countries. In addition, as of July 28, 2012, third-party overseas partners operated 33 Gymboree retail stores in the Middle East and South Korea, Gymboree (China) Commercial and Trading Co. Ltd. (“Gymboree China”) operated five Gymboree retail stores in China, and Gymboree (Tianjin) Educational Information Consultation Co. Ltd. (“Gymboree Tianjin”) provided various services on Gymboree Play & Music’s behalf to

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Gymboree Play & Music’s franchisees in China (Gymboree China and Gymboree Tianjin shall be collectively referred to as the “Joint Venture” or VIEs”).

During the second quarter of fiscal 2012, we opened 27 stores, of which 22 were Crazy 8 stores. During the remainder of fiscal 2012, we plan to open approximately 64 new stores consisting mostly of Crazy 8 stores.

Results of Operations

13 weeks ended July 28, 2012, compared to 13 weeks ended July 30, 2011

Net Sales

Net retail sales for the second quarter of fiscal 2012 increased to $259.1 million from $253.4 million in the same period last year, an increase of $5.7 million, or 2.2%. The increase in net retail sales was due to The Gymboree Corporation’s net store and square footage growth of 80 stores and approximately 189,000 square feet, respectively. There were 1,191 stores open at July 28, 2012 compared to 1,111 at July 30, 2011. This was partially offset by a decrease in comparable store sales for the second quarter of fiscal 2012 of 1% compared to the same period in the prior year.

Gymboree Play & Music net sales for the second quarter of fiscal 2012 increased to $5.8 million from $3.3 million in the same period last year, an increase of $2.5 million or 75.7%. This increase was primarily due to the termination of our agreement with a Gymboree Play & Music master franchisee in China in the third quarter of fiscal 2011. Upon this termination, we assumed the role of master franchisor, resulting in the recording of an additional $2.8 million in revenue for the second quarter of fiscal 2012 from the unit franchisees. We previously recorded revenue net of the fee paid to the previous master franchisor for servicing the unit franchisees.

Retail franchise net sales for the second quarter of fiscal 2012 increased to $3.8 million from $2.3 million in the same period last year, an increase of $1.5 million or 65.2%. As of July 28, 2012, our third-party overseas partners operated 33 Gymboree stores, compared to ten stores as of the end of the same period last year.

Gross Profit

Gross profit for the second quarter of fiscal 2012 decreased to $89.2 million from $92.0 million in the same period last year. As a percentage of net sales, gross profit for the second quarter of fiscal 2012 decreased 2.3 percentage points to 33.2% from 35.5% in the same period last year. The decrease was primarily due to higher average unit costs resulting from higher commodity prices (primarily cotton). The reported gross profit reflects purchase accounting adjustments of $3.0 million and $3.4 million for the second quarter of fiscal 2012 and the second quarter of fiscal 2011, respectively, relating to our November 2010 acquisition by Giraffe Holding, Inc., an entity controlled by investment funds sponsored by Bain Capital Partners, LLC (the “Acquisition”).

Selling, General and Administrative Expenses

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Selling, general and administrative (“SG&A”) expenses, which principally consist of non-occupancy store expenses, corporate overhead, and distribution expenses, increased to $95.6 million in the second quarter of fiscal 2012 compared to $88.9 million in the same period last year. As a percentage of net sales, SG&A expenses increased to 35.6% for the second quarter of fiscal 2012 compared to 34.3% in the same period last year. Results for the second quarter of fiscal 2012 and fiscal 2011 include $5.3 million and $5.3 million, respectively, of additional costs resulting from the Acquisition, including the effect of purchase accounting adjustments. This increase was primarily due to retail store expenses deleveraging due to the comparable store sales decrease and due to increased expenses related to the VIEs.

Interest Expense

Interest expense decreased to $21.2 million in the second quarter of fiscal 2012 compared to $21.9 million in the same period last year. The decrease of $0.7 million is primarily related to the repayment of $21.5 million of our debt.

Income Taxes

The effective tax rate for the second quarter of fiscal 2012 and 2011 was 49.0% and 63.2%, respectively. The effective tax rate decreased in fiscal 2012 due to the resolution of certain tax contingencies. The actual fiscal 2012 effective tax rate will ultimately depend on several variables, including the mix of earnings between domestic and international operations, our overall level of earnings in fiscal 2012, and the potential resolution of tax contingencies. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty.

26 weeks ended July 28, 2012, compared to 26 weeks ended July 30, 2011

Net Sales

Net retail sales for the 26 weeks ended July 28, 2012 increased to $547.2 million from $519.3 million in the same period last year, an increase of $27.9 million, or 5.4%. Comparable store sales for the 26 weeks ended July 28, 2012 were relatively unchanged compared to the same period in the prior year. The increase in net retail sales was due to net store and square footage growth of 80 stores and approximately 189,000 square feet, respectively. There were 1,191 stores open at the end of the second quarter of fiscal 2012 compared to 1,111 as of the end of the same period last year.

Gymboree Play & Music net sales for the 26 weeks ended July 28, 2012 increased to $11.6 million from $6.3 million in the same period last year, an increase of $5.3 million or 84.1%. This increase was primarily due to the termination of our agreement with a Gymboree Play & Music master franchisee in China in the third quarter of fiscal 2011. Upon this termination, we assumed the role of master franchisor, resulting in the recording of an additional $4.7 million in revenue for the 26 weeks ended July 28, 2012 from the unit franchisees. We previously recorded revenue net of the fee paid to the previous master franchisor for servicing the unit franchisees.

Retail franchise net sales for the 26 weeks ended July 28, 2012 increased to $7.7 million from $3.7 million in the same period last year, an increase of $4.0 million or 108%. As of July 28,

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2012, our third-party overseas partners operated 33 Gymboree stores, compared to ten stores as of the end of the same period last year.

Gross Profit

Gross profit for the 26 weeks ended July 28, 2012 increased to $211.0 million from $202.9 million in the same period last year. As a percentage of net sales, gross profit for the 26 weeks ended July 28, 2012 decreased 1.1 percentage points to 37.2% from 38.3% in the same period last year due primarily to higher average unit costs resulting from higher commodity prices (primarily cotton). The 26 weeks ended July 30, 2011 included a $10.7 million adjustment to cost of goods sold from an increase in the net book value of inventory as a result of purchase accounting. The section titled “Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) (Non-GAAP Measure)” included elsewhere in this quarterly report shows the purchase accounting adjustments that impact gross profit.

Selling, General and Administrative Expenses

SG&A expenses increased to $187.3 million for the 26 weeks ended July 28, 2012 from $173.4 million in the same period last year. As a percentage of net sales, SG&A expenses increased to 33.1% for the 26 weeks ended July 28, 2012 compared to 32.8% in the same period last year. The 26 weeks ended July 28, 2012 and July 30, 2011 include $10.5 million and $11.4 million, respectively, of additional costs resulting from the Acquisition, including the effect of purchase accounting adjustments. This increase was primarily due to increased expenses related to the VIEs partially offset by a decrease in impairment charges related to under-performing stores.

Interest Expense

Interest expense decreased to $42.9 million for the 26 weeks ended July 28, 2012 from $45.9 million in the same period last year. The decrease of $3.0 million is primarily related to fees paid in connection with the refinancing of our $820 million senior secured term loan facility (“Term Loan”) in the first quarter of fiscal 2011, as well as lower interest payments due to the repayment of $21.5 million of our debt.

Loss on Extinguishment of Debt

Loss on extinguishment of debt was approximately $1.2 million for the 26 weeks ended July 28, 2012 compared to $19.6 million in the same period last year. In March 2012, we amended and restated our senior secured asset-based revolving credit facility (as so amended and restated, “ABL” or “ABL Facility” and, together with the Term Loan, collectively, the “Senior Credit Facilities”) to, among other things, lower the interest rate and extend the maturity date. The loss recorded in the first quarter of fiscal 2011 was due to the refinancing of our Term Loan in February 2011.

Income Taxes

The effective tax rate for the 26 weeks ended July 28, 2012 and July 30, 2011 was 51.5% and 51.7%, respectively. The actual fiscal 2012 effective tax rate will ultimately depend on several variables, including the mix of earnings between domestic and international operations, our overall level of earnings in fiscal 2012, and the potential resolution of tax contingencies. Management believes that an adequate provision has been made for any adjustments that may

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result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty.

Seasonality

Our business is impacted by the general seasonal trends characteristic of the apparel and retail industries. Sales from retail operations in the past several years have been highest during the third and fourth fiscal quarters, somewhat lower during the first fiscal quarter, and lowest during the second fiscal quarter. Consequently, the results for any fiscal quarter are not necessarily indicative of results for the full year. These historical quarterly trends may not continue in the future.

Financial Condition

Liquidity and Capital Resources

Cash and cash equivalents were $54.6 million at July 28, 2012, representing a decrease of $23.3 million from January 28, 2012. As of July 28, 2012 and January 28, 2012, cash and cash equivalents include $7.6 million and $4.9 million, respectively, held by the two entities that make up the VIEs, which we have determined to be variable interest entities of which we are the primary beneficiary, and the results of which we have consolidated into our financial statements (see Note 9 to the condensed consolidated financial statements included elsewhere in this quarterly report). The assets of the VIEs cannot be used by us. Working capital as of July 28, 2012 was $176.2 million compared to $169.9 million as of January 28, 2012.

Net cash provided by operating activities for the 26 weeks ended July 28, 2012 was $10.4 million. Cash used in operating activities for the 26 weeks ended July 30, 2011 was $3.3 million. The change in cash provided by operating activities was primarily due to slower growth in inventories and related accruals for the 26 week period ending July 28, 2012 compared to the same period last year. On a per square foot basis, retail inventories are down approximately 6% compared to the same period last year.

Net cash used in investing activities for the 26 weeks ended July 28, 2012 was $18.7 million compared to $18.3 million in the same period last year, and consisted primarily of capital expenditures related to the opening of new stores, information technology improvements, and investments in our distribution center.

Net cash used in financing activities for the 26 weeks ended July 28, 2012 was $15.1 million, compared to net cash provided by financing activities of $44.1 million in the same period last year. Net cash used in financing activities for the 26 weeks ended July 28, 2012, is primarily due to the prepayment of $15.6 million of the Term Loan, quarterly principal payment of $2.1 million on our Term Loan and costs paid to refinance our ABL, partially offset by a capital contribution from an affiliate of our indirect parent company, Giraffe Holding, Inc. (“Parent”). Net cash provided by financing activities during the 26 weeks ended July 30, 2011 was primarily related to a $40.0 million draw on our ABL facility and capital contributions made by Parent to us of $14.9 million partially offset by $6.7 million in costs paid in connection with the February

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2011 refinancing of our Term Loan and $4.1 million in quarterly principal payments on our Term Loan.

We have an $820 million Term Loan and a $225 million ABL Facility. As of July 28, 2012, $794.1 million was outstanding under the Term Loan and no amounts were outstanding under the ABL Facility. There was approximately $176.7 million of undrawn availability under the ABL at July 28, 2012. Amounts available under the ABL are subject to customary borrowing base limitations and are reduced by letter of credit utilization. The Term Loan and ABL also allow an aggregate of $200 million in uncommitted incremental facilities, the availability of which is subject to our meeting certain conditions. No incremental facilities are currently in effect. The Term Loan and ABL contain covenants that, among other things, restrict our ability to incur additional indebtedness and pay dividends. The ABL also contains financial covenants. As of July 28, 2012, the Company was in compliance with these covenants.

We anticipate that cash generated by operations, the remaining funds available under our Term Loan and ABL, and existing cash and cash equivalents will be sufficient to meet working capital requirements, service our debt and finance capital expenditures over the next twelve months. We cannot assure you, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in amounts sufficient to enable us to repay or refinance our indebtedness, including the Term Loan, the ABL and our 9.125% senior notes due in December 2018 (the “Notes”), or to fund other liquidity needs. See “Item 1A. Risk Factors—Risks Related to Our Indebtedness and Certain Other Obligations,” in our Fiscal 2011 Annual Report.

We and our subsidiaries, affiliates or significant stockholders may from time to time seek to retire or purchase our outstanding debt (including the Notes) through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

There have been no material changes outside the ordinary course of business to our contractual obligations since January 28, 2012, as disclosed in our Fiscal 2011 Annual Report.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates affecting the application of those policies since our Fiscal 2011 Annual Report.

Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) (Non-GAAP Measure)

In the table below, we present Adjusted EBITDA (which is defined as net income (loss) before interest expense, interest income, income tax expense/benefit, and depreciation and amortization (EBITDA) adjusted for the other items described below), which is considered a non-GAAP financial measure. We present Adjusted EBITDA in this quarterly report because we

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consider it an important supplemental measure of performance used by management and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the retail industry. 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. We believe that the inclusion of supplementary adjustments applied to EBITDA in presenting Adjusted EBITDA is appropriate to provide additional information to investors about certain non-cash items and unusual or non-recurring items that we do not expect to continue in the future and to provide additional information with respect to our ability to meet our future debt service and to comply with various covenants in documents governing our indebtedness. However, Adjusted EBITDA is not a presentation made in accordance with GAAP, and our computation of Adjusted EBITDA may vary from others in the retail 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 our results as reported under GAAP. For example, Adjusted EBITDA:

• does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

• does not reflect changes in, or cash requirements for, our working capital needs;

• does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

• excludes income tax payments that represent a reduction in cash available to us; and

• does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of ongoing operations.

The following table is a reconciliation of net loss to Adjusted EBITDA for the periods indicated:

	13 Weeks Ended						26 Weeks Ended
	July 28, 2012			July 30, 2011			July 28, 2012			July 30, 2011
	(In thousands)
Net loss attributable to
The Gymboree Corporation	$	(13,268	)	$	(6,931	)	$	(8,272	)	$	(17,372	)
Reconciling items (a):
Interest expense		21,193			21,927			42,851			45,930
Interest income		(36	)		(34	)		(84	)		(87	)
Income tax benefit		(13,229	)		(11,891	)		(10,275	)		(18,640	)
Depreciation and amortization (b)		14,578			14,372			28,740			28,617
Non-cash share-based compensation expense		1,510			1,469			2,917			2,872
Loss on disposal/impairment on assets		1,202			1,492			1,264			2,260
Loss on extinguishment of debt		—			—			1,237			19,563
Acquisition-related adjustments (c)		4,481			5,085			8,879			21,691
Adjusted EBITDA	$	16,431		$	25,489		$	67,257		$	84,834

(a) Exclude amounts related to noncontrolling interest, which are already excluded from net loss attributable to The Gymboree Corporation

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(b) Includes the following (in thousands):

Amortization of intangible assets (impacts SG&A)	$	4,340		$	4,145		$	8,680		$	8,289
Amortization of below and above market leases (impacts COGS)		(487	)		(508	)		(1,035	)		(1,021	)
	$	3,853		$	3,637		$	7,645		$	7,268

(c) Includes the following (in thousands):

Adjustment to cost of goods sold from an increase in the net book value of inventory as a result of purchase accounting (impacts COGS)	$	—	$	—	$	—	$	10,731
Additional rent expense recognized due to the elimination of deferred rent and construction allowances in purchase accounting (impacts COGS)		2,308		2,415		4,632		4,837
Legal, accounting and sponsor fees, as well as other costs incurred as a result of the Merger (impacts SG&A)		976		1,194		1,848		3,160
Decrease in net sales due to the elimination of deferred revenue related to the Company’s co-branded credit card program in purchase accounting (impacts net sales)		1,197		1,476		2,399		2,963
	$	4,481	$	5,085	$	8,879	$	21,691

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

We enter into forward foreign exchange contracts with respect to certain purchases in United States dollars of inventory to be sold in our retail stores in Canada. The purpose of these contracts is to protect our margins on the eventual sale of the inventory from fluctuations in the exchange rate for Canadian and United States dollars. The term of the forward exchange contracts is generally less than one year. We also enter into forward foreign exchange contracts with respect to short-term intercompany balances between U.S. and Canadian entities. The purpose of these contracts is to protect us from fluctuations in the exchange rate for Canadian and United States dollars upon the settlement of such balances.

The table below summarizes the notional amounts and fair values of our forward foreign exchange contracts in U.S. dollars.

	Notional Amount		Fair Value Loss			Weighted- Average Rate
	(in thousands, except weighted-average rate data)
July 28, 2012	$	7,684	$	(14	)	$	0.99
January 28, 2012	$	14,154	$	(13	)	$	0.99
July 30, 2011	$	8,250	$	(91	)	$	1.04

Interest Rate Risk

We are subject to interest rate risk in connection with our long-term debt. Our principal interest rate risk relates to the outstanding Term Loan. We had $794.1 million outstanding under our Term Loan as of July 28, 2012, bearing interest at variable rates. A 0.125% increase in the floating rates applicable to the indebtedness outstanding under the Term Loan would have increased annual interest expense by approximately $1.0 million. The Term Loan and the ABL also allow an aggregate of $200 million in uncommitted incremental facilities, bearing interest at variable rates. No incremental facilities are currently in effect.

In December 2010, we purchased four interest rate caps to hedge against rising interest rates associated with our Term Loan above the 5% strike rate of the caps through December 23, 2016, the maturity date of the caps. The notional amount of these caps is $700 million. As of July 28, 2012, January 28, 2012, and July 30, 2011 accumulated other comprehensive loss included approximately $10.8 million, $10.7 million, and $5.4 million respectively, in unrealized losses related to the interest rate caps.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Principal Financial

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Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on the Company’s evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. In addition, the Company’s Chief Executive Officer and Principal Financial Officer concluded as of the end of the period covered by this report that the Company’s disclosure controls and procedures are also effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the second quarter of the Company’s fiscal 2012, there was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The Company is subject to various legal proceedings and claims arising in the ordinary course of business. Our management does not expect that the results of any of these legal proceedings, either individually or in the aggregate, would have a material effect on our financial position, results of operations or cash flows.

Item 5. OTHER INFORMATION

As reported on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 31, 2012, Marina Armstrong, the Company’s Senior Vice President, General Manager and Secretary has resigned, effective September 7, 2012. In connection with her resignation, on September 7, 2012, Ms. Armstrong entered into a letter agreement with the Company setting out the terms of her separation from the Company. The agreement provides, among other things, for continuation of Ms. Armstrong’s base salary through December 31, 2013 and Ms. Armstrong’s two-year obligation not to compete with the Company. The foregoing description is qualified in its entirety by reference to the full text of the

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letter agreement, which is filed as Exhibit 10.1 to this report and is incorporated herein by reference.

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Item 6. EXHIBITS

10.1	Letter agreement dated September 7, 2012 between The Gymboree Corporation and Marina Armstrong.
31.1	Certification of Matthew K. McCauley Pursuant to §302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Lynda G. Gustafson Pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Matthew K. McCauley Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Lynda G. Gustafson Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from The Gymboree Corporation’s Quarterly Report on Form 10-Q for the quarter ended July 28, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss (iv) Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements.

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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)
September 10, 2012	By:    /s/ Matthew K. McCauley
Date	Matthew K. McCauley
	Chief Executive Officer

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Exhibit Index

Exhibit Number	Description
10.1	Letter agreement dated September 7, 2012 between The Gymboree Corporation and Marina Armstrong.
31.1	Certification of Matthew K. McCauley Pursuant to §302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Lynda G. Gustafson Pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Matthew K. McCauley Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Lynda G. Gustafson Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from The Gymboree Corporation’s Quarterly Report on Form 10-Q for the quarter ended July 28, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss (iv) Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements.

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