Exhibit 99.1
THE GYMBOREE CORPORATION REPORTS PRELIMINARY FOURTH QUARTER AND
FY 2004 RESULTS
SAN FRANCISCO, March 9 /PRNewswire-FirstCall/ -- The Gymboree Corporation
(Nasdaq: GYMB) today reported preliminary consolidated financial results for the
fourth quarter and fiscal year ended January 29, 2005.
Like many other retailers, the Company is reviewing its accounting practices
related to leasing transactions and all results presented in this press release
are preliminary and exclude the results of such review.
Fourth Quarter Ended January 29, 2005
-- For the quarter, net sales from continuing operations were $172.7
million, an increase of 5% compared to $164.0 million in net sales from
continuing operations reported for the same period last year.
-- Comparable store sales for the quarter were flat compared to sales
reported during the fourth fiscal quarter last year.
-- Net income from continuing operations for the quarter was $7.8 million or
$0.25 per diluted share, excluding the non-cash lease termination charges
from the Company's move to its new San Francisco headquarters discussed
below. These results include a tax benefit of approximately $2.0 million
from the resolution of certain tax matters for the quarter.
-- Net loss for the quarter was $2.1 million or $0.07 per diluted share,
compared to net income of $11.2 million or $0.36 per diluted share for
the fourth fiscal quarter ended January 31, 2004.
- The net loss for the quarter includes a non-cash charge of $4.4
million, before income taxes, related to lease termination charges for
the Company's Burlingame headquarters. This amount will amortized as a
reduction of rent expense over the life of the Company's new lease in
San Francisco.
- The loss from discontinued operations for the quarter, including
ongoing operating costs incurred during the wind down process was $6.6
million, or $0.21 per diluted share, net of income tax.
Fiscal Year 2004 Ended January 29, 2005
-- Net sales from continuing retail operations for the 52 weeks ended
January 29, 2005 (fiscal 2004) were $583.2 million, an increase of 8%
compared to net sales from continuing retail operations of $537.6 million
for the same period last year.
-- Comparable store sales from continuing retail operations for fiscal 2004
increased 2% over net sales reported for the same period last year.
-- Net income was $9.9 million or $0.32 per diluted share, compared to net
income of $25.7 million or $0.83 per diluted share for the 2003 fiscal
year ended January 31, 2004.
- The loss from discontinued operations for fiscal 2004 was $10.0
million, or $0.32 per diluted share, net of income tax.
Accounting for Lease Transactions
As previously announced, the Company has made a preliminary determination
that its current method of accounting for rent holidays, landlord allowances and
incentives under operating leases is not consistent with the views expressed by
the Office of the Chief Accountant of the Securities and Exchange Commission in
a letter dated February 7, 2005. In that letter, the SEC provided clarification
on long-standing, generally accepted accounting principles related to operating
leases. The SEC's interpretation has led numerous retailers to announce
adjustments and restatements related to operating lease accounting.
The Company expects to record non-cash adjustments affecting results from
continuing operations and net income to conform to the interpretation provided
by the SEC. These adjustments do not impact the timing or amount of lease
payments, as they relate solely to accounting treatment. These adjustments,
which will include amounts, related to the Company's new corporate headquarters,
retail stores and other operating leases have not been finalized. However, the
Company has concluded that it will restate quarterly information filed in fiscal
2004 and is likely to restate prior periods.
-- Impact related to retail stores and other operating leases: The Company
is currently calculating the impact related to its retail stores and other
operating leases. Based on its preliminary assessment, the Company estimates
that it will record a charge totaling approximately $3.5 million, net of income
taxes, related to its retail stores and other operating leases. This charge
primarily affects years prior to fiscal 2000. The impact on other years is not
material.
-- Impact related to corporate headquarters relocation in fiscal 2004: Based
on its preliminary assessment, the Company estimates that it will record an
additional non-cash charge in fiscal 2004 of approximately $0.06 to $0.07 per
diluted share relating to the Company's new corporate headquarters. This
restatement is expected to reduce income from continuing operations and net
income for the first, second, third and fourth quarters of fiscal 2004 by
approximately $0.01, $0.02, $0.02, $0.01 per diluted share, respectively.
The Company, in conjunction with its independent auditors, is in the process
of completing its review of the above changes and will publish revised financial
results upon the completion of that review.
Financial Statements Reflecting Discontinued Operations
As previously disclosed in our press release dated August 17, 2004, we have
ceased store level operations at our stores in the United Kingdom and Ireland.
Accordingly, the results for our UK and Ireland retail operations for the three
and twelve-month periods ended January 29, 2005 and January 31, 2004 are
classified as discontinued operations in the accompanying Preliminary
Consolidated Statements of Operations.
Business Outlook
The Company also reaffirmed earnings guidance from continuing operations for
the full fiscal year 2005 of $0.40 to $0.50 per diluted share. For the first
quarter of fiscal 2005, the Company continues to expect comparable store sales
to be roughly flat to the prior year. Earnings from continuing operations for
the first quarter are anticipated to be in the range of $0.11 to $0.14 per
diluted share. A loss of $0.23 to $0.26 per diluted share is anticipated for the
second quarter.
Note that earnings guidance for 2005 does not include the effect of new
accounting rules requiring the expensing of stock options. The Financial
Accounting Standards Board (FASB) has recently issued FASB Statement No. 123R
"Share-Based Payment," which covers a wide range of share-based compensation
arrangements, including stock options. The Company plans to initiate the
expensing of stock options effective on the first day of the Company's third
fiscal quarter of 2005, in accordance with the requirements of FASB Statement
No. 123R and will provide the estimated impact of this change in accounting
treatment on earnings guidance by Gymboree's Second Quarter 2005 earnings
conference call.
Management Presentation
A live broadcast of the discussion of the Company's financial results for
fourth quarter and fiscal year 2004 will be available to interested parties at
1:30 p.m. PST (4:30 p.m. EST) on Wednesday, March 9, 2005. To listen to the live
broadcast over the Internet, please log on to gymboree.com, click on "Our
Company" at the bottom of the page, go to "Investor and Media Relations" and
then "Conference Calls & Web casts." A replay of the call will be available
shortly after the broadcast through midnight Eastern Time, March 16, 2005, at
800-642-1687, pass code 4523322, as well as archived on our Web site at the same
location as the live Web cast.
About The Gymboree Corporation
The Gymboree Corporation's specialty retail brands offer unique, high-
quality products delivered with personalized customer service. As of February
26, 2005, the Company operated a total of 646 stores: 577 Gymboree(R) retail
stores (549 in the United States and 28 in Canada), 55 Janie and Jack(R) retail
shops and 14 Janeville(TM) stores in the United States. The Company also
operates online stores at gymboree.com and janieandjack.com, and offers directed
parent-child developmental play programs at 526 franchised and company-operated
centers in the United States and 24 countries.
Forward-Looking Statements
The foregoing sales and earnings figures for the fourth quarter and fiscal
year 2004 are un-audited and subject to quarter-end and year-end adjustment, and
could differ materially from those indicated. The foregoing paragraphs contain
forward-looking statements relating to The Gymboree Corporation's anticipated
sales growth and future financial performance. These are forward looking
statements for purposes of the safe harbor provisions under the Private
Securities Litigation Reform Act of 1995. Actual results could differ
materially as a result of a number of factors, including customer reactions to
new merchandise, service levels and new concepts, success in meeting our
delivery targets, the effect of new accounting rules requiring the expensing of
stock options, the level of our promotional activity, unanticipated costs
actually incurred in connection with the management restructuring and severance,
the wind down of our UK and Ireland operations, our gross margin achievement,
our ability to appropriately manage inventory, changes in our effective income
tax rate, general economic conditions, and competitive market conditions. Other
factors that may cause actual results to differ materially include those set
forth in the reports that we file from time to time with the Securities and
Exchange Commission, including our annual report on Form 10-K for the year ended
January 31, 2004. These forward-looking statements reflect The Gymboree
Corporation's expectations as of March 9, 2005. The Gymboree Corporation
undertakes no obligation to update the information provided herein.
NOTE: Gymboree and Janie and Jack are registered trademarks of The
Gymboree Corporation. Janeville is a trademark of The Gymboree Corporation.
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and store data)
(Unaudited)
13 Weeks Ended Year Ended
---------------------------- ----------------------------
Jan. 29, Jan. 31, Jan. 29, Jan. 31,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales:
Retail $ 172,712 $ 163,990 $ 583,178 $ 537,625
Play & Music and Other 3,059 2,646 11,300 11,647
Total net sales 175,771 166,636 594,478 549,272
Cost of goods sold, including
buying and occupancy expenses (108,600) (97,500) (358,987) (323,308)
Gross profit 67,171 69,136 235,491 225,964
Selling, general and
administrative expenses (59,376) (52,335) (211,359) (185,516)
Operating income 7,795 16,801 24,132 40,448
Lease termination charges (4,408) -- (4,408) --
Other income, net 126 23 576 378
Income from continuing
operations before income taxes 3,513 16,824 20,300 40,826
Income tax benefit (expense) 1,039 (6,189) (1,622) (15,310)
Income from continuing operations,
net of income tax 4,552 10,635 18,678 25,516
Income (loss) from discontinued
operations, net of income tax (6,619) 554 (9,969) 190
Income (loss) before cumulative
effect of change in accounting
principle (2,067) 11,189 8,709 25,706
Cumulative effect of change in
accounting principle, net of
income tax (21) -- 1,206 --
Net income (loss) $ (2,088) $ 11,189 $ 9,915 $ 25,706
Basic per share amounts:
Income from continuing operations,
net of income tax $ 0.15 $ 0.35 $ 0.61 $ 0.86
Income (loss) from discontinued
operations, net of income tax (0.21) 0.02 (0.32) 0.01
Cumulative effect of change in
accounting principle, net of
income tax -- -- 0.04 --
Net income (loss) $ (0.07) $ 0.37 $ 0.32 $ 0.87
Diluted per share amounts:
Income from continuing operations,
net of income tax $ 0.14 $ 0.34 $ 0.60 $ 0.83
Income (loss) from discontinued
operations, net of income tax (0.21) 0.02 (0.32) 0.01
Cumulative effect of change in
accounting principle, net of
income tax -- -- 0.04 --
Net income (loss) $ (0.07) $ 0.36 $ 0.32 $ 0.83
Weighted average shares
outstanding:
Basic 31,019 30,069 30,747 29,656
Diluted 31,435 31,149 31,391 30,853
Number of stores at end of period 648 619 648 619
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
January 29, January 31,
2005 2004
------------ ------------
Current Assets
Cash and cash equivalents $ 30,599 $ 21,553
Short-term investments 30,000 68,000
Accounts receivable 19,809 11,168
Merchandise inventories 97,237 70,674
Prepaid expenses and deferred taxes 6,734 4,009
Current assets of discontinued operations 1,794 8,549
Total current assets 186,173 183,953
Property and Equipment, net 150,745 108,898
Lease Rights, Deferred Taxes and Other Assets 10,948 5,860
Total Assets $ 347,866 $ 298,711
Current Liabilities
Accounts payable $ 39,240 $ 33,318
Accrued liabilities 41,803 33,632
Current liabilities of discontinued
operations 7,144 1,696
Total current liabilities 88,187 68,646
Long Term Liabilities
Deferred rent and other liabilities 37,395 26,317
Stockholders' Equity 222,284 203,748
Total Liabilities and Stockholders'
Equity $ 347,866 $ 298,711
SOURCE Gymboree Corporation
-0- 03/09/2005
/CONTACT: investors, Charles Bracher, +1-415-278-7137, or
investor_relations@gymboree.com, or media, Jaclyn Schatzow, +1-415-278-7472,
or media_relations@gymboree.com, both of Gymboree Corporation/
/Web site: http://www.gymboree.com /