<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended MAY 1, 1999
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ________________ to ________________
Commission file number 000-21250
THE GYMBOREE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2615258
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
700 AIRPORT BOULEVARD, BURLINGAME, CALIFORNIA 94010-1912
(Address of principal executive offices) (Zip code)
(650) 579-0600
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Number of shares of common stock outstanding at May 29, 1999: 24,271,478
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income...................... 3
Condensed Consolidated Balance Sheets............................ 4
Condensed Consolidated Statements of Cash Flows.................. 5
Notes to Condensed Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................ 14
Item 2. Changes in Securities and Use of Proceeds........................ 14
Item 3. Defaults Upon Senior Securities.................................. 14
Item 4. Submission of Matters to a Vote of Security Holders.............. 15
Item 5. Other Information................................................ 15
Item 6. Exhibits......................................................... 15
SIGNATURES ................................................................. 16
EXHIBIT INDEX ................................................................. 17
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AND STORE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
--------------
MAY 1, MAY 2,
1999 1998
--------- ---------
<S> <C> <C>
Net sales $ 125,711 $ 103,106
Cost of goods sold, including
buying and occupancy expenses (76,524) (61,627)
--------- ---------
Gross profit 49,187 41,479
Selling, general and administrative expenses (42,383) (35,787)
Play program income, net 590 392
--------- ---------
Operating income 7,394 6,084
Foreign exchange gains, net 89 271
Net interest income 112 229
--------- ---------
Income before income taxes 7,595 6,584
Income taxes (2,810) (2,436)
--------- ---------
Net income $ 4,785 $ 4,148
========= =========
Income per share:
Basic $ 0.20 $ 0.17
Diluted 0.20 0.17
Weighted average shares outstanding:
Basic 24,258 24,110
Diluted 24,417 24,237
Number of stores at end of period 584 464
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Assets MAY 1, JANUARY 30, MAY 2,
1999 1999 1998
--------- ----------- ---------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 33,148 $ 27,810 $ 12,786
Investments -- -- 17,190
Accounts receivable 8,652 7,811 8,996
Merchandise inventories 60,519 74,396 74,744
Prepaid expenses and other 9,048 8,068 5,387
--------- --------- ---------
Total current assets 111,367 118,085 119,103
--------- --------- ---------
PROPERTY AND EQUIPMENT
Land and buildings 9,943 9,943 9,943
Leasehold improvements 84,665 79,832 66,757
Furniture, fixtures and equipment 98,135 91,551 71,024
--------- --------- ---------
192,743 181,326 147,724
Less accumulated depreciation and amortization (51,927) (46,886) (33,949)
--------- --------- ---------
140,816 134,440 113,775
LEASE RIGHTS AND OTHER ASSETS 4,243 4,180 4,380
--------- --------- ---------
TOTAL ASSETS $ 256,426 $ 256,705 $ 237,258
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long term debt $ 554 $ 540 $ --
Accounts payable 14,370 21,842 27,984
Accrued liabilities 15,337 17,424 16,006
Income taxes payable 4,402 1,965 7,038
--------- --------- ---------
Total current liabilities 34,663 41,771 51,028
--------- --------- ---------
LONG TERM LIABILITIES
Long term debt, net of current portion 11,271 11,460 --
Deferred rent and other liabilities 37,509 35,102 24,160
--------- --------- ---------
Total Liabilities 83,443 88,333 75,188
--------- --------- ---------
STOCKHOLDERS' EQUITY
Common stock, including excess paid-in capital
($.001 par value: 100,000,000 shares authorized
24,265,920, 24,240,763 and 24,145,979 shares
outstanding at May 1, 1999, January 30, 1999
and May 2, 1998, respectively) 27,107 26,855 23,024
Retained earnings 145,876 141,517 139,046
--------- --------- ---------
Total stockholders' equity 172,983 168,372 162,070
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 256,426 $ 256,705 $ 237,258
========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
--------------
MAY 1, MAY 2,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,785 $ 4,148
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,522 4,144
Provision for deferred income taxes 1,398 503
Tax benefit from exercise of stock options -- 237
Loss on disposal of property and equipment 167 618
Change in assets and liabilities:
Accounts receivable (841) (3,812)
Merchandise inventories 13,452 538
Prepaid expenses and other assets (1,043) (1,893)
Accounts payable (7,472) 1,937
Income taxes payable 2,437 (1,001)
Other liabilities 993 2,002
Accrued liabilities (2,071) 221
-------- --------
Net cash provided by operating activities 17,327 7,642
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (12,066) (14,177)
Proceeds from sale of assets -- 12
Proceeds from sale of investments -- 1,424
-------- --------
Net cash used in investing activities (12,066) (12,741)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 252 15
Payments on long term debt (175) --
-------- --------
Net cash provided by financing activities 77 15
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,338 (5,084)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 27,810 17,870
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 33,148 $ 12,786
======== ========
OTHER CASH FLOW INFORMATION:
Cash paid during the year for income taxes $ 20 $ 3,460
Cash paid during the year for interest expense $ 341 $ --
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
THE GYMBOREE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of
The Gymboree Corporation and our wholly-owned subsidiaries as of and for
the periods ended May 1, 1999 and May 2, 1998 have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations,
although we believe that the disclosures are adequate to make the
information presented not misleading. It is recommended that these
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for
the year ended January 30, 1999.
The accompanying interim condensed consolidated financial statements
reflect all adjustments which are, in the opinion of management, necessary
for a fair statement of the results for the interim periods presented and
necessary to present fairly the results of operations, the financial
position and cash flows for the periods presented. All such adjustments are
of a normal and recurring nature. Certain prior year amounts have been
reclassified to conform with the current year presentation.
2. MERCHANDISE INVENTORIES
Merchandise inventories are recorded under the retail method of
accounting and are stated at the lower of cost or market.
3. INCOME TAXES
Our effective tax rate in the first quarters of fiscal 1999 and 1998
was 37%.
4. COMPREHENSIVE INCOME
Comprehensive income and its components are as follows:
<TABLE>
<CAPTION>
(in 000's) 13 WEEKS ENDED
--------------
MAY 1, 1999 MAY 2, 1998
----------- -----------
<S> <C> <C>
Net income $ 4,785 $ 4,148
Other comprehensive income (426) (40)
------- -------
Total comprehensive income $ 4,359 $ 4,108
======= =======
</TABLE>
6
<PAGE> 7
5. FOREIGN CURRENCIES
As of May 1, 1999, we had forward foreign contracts of $14.6 million
and $13.5 million to hedge Canadian dollars and British pound sterling,
respectively. The amounts represent the U.S. dollar equivalent to buy or
sell foreign currencies.
6. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities". SFAS 133 requires
companies to record derivatives on the balance sheet as assets or
liabilities at fair value. It is effective for financial statements for
fiscal years beginning after June 15, 1999. The adoption of this statement
will not have a significant effect on the consolidated financial statements
of Gymboree.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, (i) selected
statement of income data expressed as a percentage of net sales, (ii) the
percentage change from the same period of the prior year in such selected income
statement data and (iii) the number of stores open at the end of each such
period:
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES
----------------------------
THIRTEEN PERCENTAGE CHANGE
WEEKS ENDED IN DOLLAR AMOUNTS
----------- FROM 1998 TO 1999
MAY 1, MAY 2, -----------------
1999 1998 13 WEEKS
------ ------ --------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 22%
Cost of goods sold, including
buying and occupancy expenses (60.9) (59.8) 24%
----- -----
Gross profit 39.1 40.2 19%
Selling, general and administrative
expenses (33.7) (34.7) 18%
Play program income, net 0.5 0.4 51%
----- -----
Operating income 5.9 5.9 22%
Foreign exchange gains, net -- 0.3 -67%
Net interest income 0.1 0.2 -51%
----- -----
Income before income taxes 6.0 6.4 15%
Income taxes (2.2) (2.4) 15%
----- -----
Net income 3.8% 4.0% 15%
===== =====
Number of stores at end of period 584 464
</TABLE>
THIRTEEN WEEKS ENDED MAY 1, 1999 COMPARED TO THIRTEEN WEEKS ENDED MAY 2, 1998
NET SALES
Net sales in the first quarter of fiscal 1999 increased 22% to $125.7
million compared to $103.1 million in the same period last year. Sales for the
20 stores opened in the first quarter of fiscal 1999, in addition to the 10
stores that were relocated or expanded in fiscal 1999, contributed $2.1 million
of the increase in net sales. Stores opened in fiscal 1998, but not qualifying
as comparable stores, in addition to the 25 stores that were relocated or
expanded in fiscal 1998, contributed $19.0 million of the increase in net sales.
Comparable store net sales increased 1.6% or $1.5 million in the first quarter.
GROSS PROFIT
Gross profit for the thirteen weeks ended May 1, 1999 increased 19% to
$49.2 million from $41.5 million in the same period last year. As a percentage
of net sales, gross profit was 39.1% in the first quarter of 1999 compared to
40.2% in the same period last year. The decrease in gross profit as a percentage
of net sales was due to a) the increase in European stores which have a lower
gross profit than the U.S. due to higher occupancy expense; and b) the buying
expense associated with our recently launched Zutopia stores.
8
<PAGE> 9
RESULTS OF OPERATIONS (CONTINUED)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("S, G&A"), which principally
consists of non-occupancy store expenses, corporate overhead and distribution
expenses, decreased to 33.7% of net sales in the first quarter of fiscal 1999,
compared to 34.7% of net sales in the same period last year. The decrease in
total S, G&A expenses, as a percentage of net sales was primarily attributable
to the leverage achieved from sales generated by the 1998 and 1999 store
openings.
PLAY PROGRAMS INCOME
Play programs income increased 51% to $590,000 during the first quarter of
fiscal 1999 from $392,000 in income for the same period last year. The increase
is largely due to new franchise sales, enrollment growth in both franchised and
corporate centers and increased play product sales.
FOREIGN EXCHANGE GAINS
Net foreign exchange gains totaled $89,000 during the first quarter of 1999
compared to $271,000 in the first quarter of 1998. We entered into forward
foreign exchange contracts involving inter-company transactions during the first
quarters of 1999 and 1998 that resulted in a minimal gain.
NET INTEREST INCOME
Interest income increased to $453,000 for the first quarter of 1999 from
$229,000 for the first quarter of 1998. Interest expense of $341,000 was
incurred for 1999 while there was no interest expense for the first quarter of
fiscal 1998. The interest expense relates to long term debt incurred in 1998.
INCOME TAX
Our effective tax rate for the first quarters of fiscal 1999 and 1998 was
37%.
9
<PAGE> 10
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $17.3 million compared to $7.6 in
the prior year. The increase in cash provided by operating activities was
primarily due to a decrease in inventory levels, offset by a decrease in trade
payables.
Cash used in investing activities of $12.1 million related to capital
expenditures primarily for new store openings, as well as the relocation and/or
expansion of certain existing stores.
Cash and cash equivalents were $33.1 million at May 1, 1999, an increase of
$5.3 million from January 30, 1999. Working capital as of May 1, 1999 was $76.7
million compared to $76.3 million at the end of fiscal 1998.
We estimate that capital expenditures during fiscal 1999 will be between
$30.0 and $35.0 million, and will primarily be used to open 40 to 50 new
domestic and international stores and to expand approximately 25 to 30 existing
stores.
At the end of the first quarter of 1999, we had a line of credit with Bank
of America that allowed up to $100 million in unsecured letters of credit, of
which $11 million can be used for standby letters of credit. As of May 1, 1999,
approximately $75.6 million was available pursuant to such lines. The facility
also provided a line of up to $50 million for foreign exchange contracts. On
March 11, 1999, we amended our unsecured credit facility. Reflecting this
agreement, the maturity of the current facility has been extended from May 31,
1999 to June 30, 1999 to allow for the completion of the documentation of the
new facility. The revised terms extend the expiration date to March 31, 2001.
The revised terms also provide for an overall credit line of $100 million that
may be used for issuance of commercial letters of credit, cash advances up to
$25 million and standby letters of credit up to $10 million. Included within
these terms is a continuation of the foreign exchange facility. The interest
rate will be based on the bank's Reference Rate or LIBOR (London Interbank
Offered Rate) plus a pre-determined spread. The credit facility contains
quarterly and annual financial covenants, which requires us to maintain minimum
tangible net worth, meet certain ratios and restricts capital expenditures.
We anticipate that cash generated from operations, together with our
existing cash resources and funds available from our current letters of credit
and line of credit facilities, will be sufficient to satisfy our cash needs
through at least fiscal 1999.
10
<PAGE> 11
OTHER FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
This Form 10-Q contains certain forward-looking statements reflecting our
current expectations, including statements regarding anticipated store openings,
and future comparable store net sales, inventory, expense, earnings and
liquidity levels. There can be no assurance that actual results will not vary
materially from results projected in such forward-looking statements as a result
of a number of factors, including competitive market conditions, levels of
discretionary consumer spending, general economic conditions, the degree of
promotional pricing activity by Gymboree, inventory levels, and our ability to
successfully identify and respond to emerging children's fashion trends, to
effectively monitor and control costs, and to effectively manage anticipated
international and domestic growth. 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.
Other factors that may affect future performance include the following:
COMPETITION
The children's apparel segment of the specialty retail business is highly
competitive. We compete on a national level with GapKids (a division of The Gap,
Inc.) and certain leading department stores as well as certain discount retail
chains such as Kids `R' Us (a division of Toys `R' Us, Inc.). We also compete
with a wide variety of local and regional specialty stores and with certain
other retail chains. Many of these competitors are larger and have substantially
greater financial marketing and other resources than we do. Increased
competition may reduce sales & gross margins, increase operating expenses &
decrease profit margins. We may not be able to compete successfully in the
future.
INVENTORY LEVELS
The inventory level at the end of the first quarter of fiscal 1999 was down
from the prior year. We believe that with tight inventory management we will be
able to mitigate the risk that inventory overages will result in markdown
activity exceeding our plan. However, a substantial decline in our sales or in
business conditions in general could negatively impact our ability to move
merchandise through our stores and result in excess inventory on hand.
EXPANSION IN EUROPE AND CANADA
During the first quarter of fiscal 1999, we expanded our operations by
opening one additional store in Canada, five stores in the United Kingdom, and
four Gymboree stores in the United States. As a result, our business is subject
to the risks generally associated with doing business abroad, such as foreign
governmental regulations, foreign consumer preferences, currency fluctuations,
political unrest, disruptions or delays in shipments and changes in economic
conditions in countries in which we operate our stores. These factors, among
others, could influence our ability to sell our products in these international
markets. If any such factors were to render the conduct of business in a
particular country undesirable or impractical, there could be a material and
adverse effect on our results of operations and financial condition.
ZUTOPIA
During the first quarter of 1999, Gymboree launched a new retail concept,
Zutopia, which introduced certain new products, and is targeted for children
ages 6 to 12 years. Zutopia represents a significant shift in concept, design
and target market demographics from our traditional products. These products may
have shorter life cycles, thereby requiring more frequent product introductions
than Gymboree's traditional product line. Further, these products and the
introduction of more products could dilute Gymboree's image as a leading
supplier of children's apparel in the newborn to 7 years age range and lead to a
reduced demand for our existing products.
11
<PAGE> 12
E-COMMERCE
Gymboree sells products over the Internet, at www.gymboree.com. We devote
management and systems resources to support and expand this business. Our
success depends on our ability to offer desirable products and to fulfill web
orders efficiently. Failure on our part to conduct this business efficiently
could result in missed sales or consumer complaints.
YEAR 2000
Most companies could face a potentially serious information systems problem
because many software applications and operational programs written in the past
were designed to handle date formats with two-digit years and thus may not
properly recognize calendar dates beginning in the Year 2000. This problem could
result in computers either outputting incorrect data or shutting down altogether
when attempting to process a date such as "01/01/00".
Our Year 2000 initiative extends throughout our entire organization and
includes all operating functions. Managing this effort on a regular basis is our
Year 2000 Project Office, which reports to a member of the Executive Committee.
It is through this office that various roles and accountabilities regarding Year
2000 readiness have been established. Each of Gymboree's business units has
been directed to work on Year 2000 projects and assemble teams to identify and
implement plans to help mitigate potential problems.
STATE OF READINESS
All of Gymboree's mission critical information technology and
non-information technology systems have been inventoried, ranked in terms of
risk, and analyzed as to their Year 2000 readiness. We have completed an
Enterprise Master Plan, Enterprise Test Plan, Configuration Management Plan, and
Quality Assurance Plan. A Test Data Center has been constructed and is being
used to remediate and test all mission critical systems. Our business processes
are organized into eighteen groups of applications. The Plans call for
completing the remediation and testing phase for all groups by the end of the
third quarter 1999. We currently expect material Year 2000 problems, if any, to
be corrected prior to December 1999.
COSTS
Based on best estimates, the total cost of the Year 2000 readiness
initiative which covers fiscal years 1998 and 1999 is approximately $2.0 - $3.0
million, of which $1.6 million has been expensed to date. $0.4 million was
expensed for the first quarter ended May 2, 1999. There can be no assurance that
these estimates will not be exceeded. All costs will be paid from Gymboree's
operating funds.
RISKS OF YEAR 2000 ISSUES
The area of greatest risk to our business operations is ensuring the
readiness of our critical trading partners. We have surveyed all of our critical
trading partners to ascertain their Year 2000 readiness. To date, a majority of
our trading partners have responded with a formal plan to be Year 2000
compliant. Failure of Year 2000 compliance by our trading partners could result
in a delay in the receipt of inventory, potential lost sales, and an inability
to operate stores. There can be no assurance that the Year 2000 problem will not
have a material adverse effect on our business, operating results or financial
condition.
CONTINGENCY PLANS
Contingency plans have been developed for each mission critical
application. The contingency plan for trading partners that were not Year 2000
compliant by January 1999 was to obtain alternate suppliers that are Year 2000
compliant. This plan was communicated to our trading partners during the
surveying process. As of the end of the first quarter of fiscal 1999, we have
continued implementation of our contingency plan for trading partners that are
not Year 2000 compliant. However, there can be no assurance that such
contingency plans will remediate all Year 2000 issues which we might ultimately
encounter.
12
<PAGE> 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Gymboree enters into forward foreign exchange contracts to hedge certain
inter-company loans denominated in foreign currencies (principally British
pounds sterling and Canadian dollars). The term of the forward exchange
contracts is generally less than 90 days. The purpose of our foreign currency
hedging activities is to protect us from the risk that the eventual dollar net
cash inflow resulting from the repayment of certain inter-company loans from our
foreign subsidiaries will be adversely affected by changes in exchange rates.
The table below summarizes by major currency the contractual amounts of our
forward exchange contracts in U.S. dollars. Foreign currency amounts are
translated at rates current at the reported date. The amounts represent the U.S.
dollar equivalent of commitments to buy or sell foreign currencies.
<TABLE>
<CAPTION>
(In millions) May 1, 1999
-----------
<S> <C>
British pounds sterling 13.5
Canadian dollars 14.6
-----
Total $28.1
=====
</TABLE>
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Gymboree has been named as a defendant in two lawsuits relating to
sourcing of products from Saipan (Commonwealth of Northern Mariana
Islands). A complaint was filed on January 13, 1999 in California
Superior Court in San Francisco by the Union of Needletrades Industrial
and Textile Employees, AFL-CIO; Global Exchange; Sweatshop Watch; and
Asian Law Caucus against Gymboree and 17 other parties. The plaintiffs
allege violations of California's unlawful, fraudulent and unfair
business practices and untrue and misleading advertising statutes in
connection with labeling of product and labor practices regarding
workers of factories that make product for Gymboree in Saipan. The
plaintiffs seek injunctive relief, restitution, disgorgement of profits
and other damages. On March 29, 1999, Gymboree, along with other
defendants, filed a demurrer in California Superior Court in San
Francisco, seeking dismissal of the complaint.
A second complaint was filed on January 13, 1999 in Federal District
Court, Central District of California, by various unidentified worker
plaintiffs against Gymboree and 25 other parties. Those unidentified
worker plaintiffs seek class-action status and allege, among other
things, that Gymboree (and other defendants) violated the Racketeer
Influenced and Corrupt Organizations Act in connection with the labor
practices and treatment of workers of factories in Saipan that make
product for us. The plaintiffs seek injunctive relief as well as actual
and punitive damages. On March 29, 1999, Gymboree, along with several
other defendants, filed a motion in Federal District Court, Central
District of California, to transfer the venue of the case to the
Commonwealth of the Northern Mariana Islands. Additionally, on April
12, 1999, Gymboree, along with several other defendants, filed a motion
to dismiss the federal complaint.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
14
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 26, 1999 at
which time the stockholders voted on proposals as follows:
<TABLE>
<CAPTION>
Votes Against Abstentions and
Votes for or Withheld Non-Votes
--------- ----------- ---------
<S> <C> <C> <C>
Election of three Class III Directors:
Stuart G. Moldaw 22,126,833 327,555 N/A
William U. Westerfield 22,180,692 273,696 N/A
Deborah A. Sorondo 22,050,318 404,070 N/A
Ratify the appointment of
Deloitte & Touche L.L.P. as
independent auditors for fiscal year
ending January 29, 2000 22,363,454 68,768 22,166
</TABLE>
Stuart G. Moldaw, William U. Westerfield and Deborah A. Sorondo were
elected as Class III directors at the meeting. Continuing Class I
directors are Walter F. Loeb and Carole J. Whitacre. Continuing Class
II directors are Gary White and Barbara L. Rambo.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS
(a) Exhibits
<TABLE>
<S> <C>
10.31 Employee Benefit Plan Registration Statement dated
March 11, 1999(1)
11 Computation of Net Income per Share
27 Financial Data Schedule
</TABLE>
- --------------------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 filed with the Commission on March 11, 1999 (File No. 333-74269)
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GYMBOREE CORPORATION
(Registrant)
June 15, 1999 By: /s/ Gary White
--------------- --------------------------------------------
Date Gary White
Chief Executive Officer
(Principal executive officer of the registrant)
June 15, 1999 By: /s/ Lawrence H. Meyer
--------------- --------------------------------------------
Date Lawrence H. Meyer
Chief Financial Officer
(Principal financial and accounting officer
of the registrant)
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.31 Employee Benefit Plan Registration Statement dated March 11, 1999(1)
11 Computation of Net Income per Share
27 Financial Data Schedule
</TABLE>
- --------------------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 filed with the Commission on March 11, 1999 (File No. 333-74269)
17
<PAGE> 1
EXHIBIT 11
THE GYMBOREE CORPORATION
COMPUTATION OF INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
13 WEEKS ENDED
--------------
MAY 1, MAY 2,
1999 1998
------- -------
<S> <C> <C>
NET INCOME $ 4,785 $ 4,148
======= =======
Weighted average number of shares
outstanding during the period:
Common Stock 24,258 24,110
Add incremental shares from assumed
exercise of stock options 159 127
------- -------
Weighted average common and common
equivalent shares outstanding 24,417 24,237
======= =======
BASIC INCOME PER SHARE $ 0.20 $ 0.17
======= =======
DILUTED INCOME PER SHARE $ 0.20 $ 0.17
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> MAY-01-1999
<CASH> 33,148
<SECURITIES> 0
<RECEIVABLES> 8,652
<ALLOWANCES> 0
<INVENTORY> 60,519
<CURRENT-ASSETS> 111,367
<PP&E> 192,743
<DEPRECIATION> (51,927)
<TOTAL-ASSETS> 256,426
<CURRENT-LIABILITIES> 34,663
<BONDS> 0
0
0
<COMMON> 27,107
<OTHER-SE> 145,876
<TOTAL-LIABILITY-AND-EQUITY> 256,426
<SALES> 125,711
<TOTAL-REVENUES> 125,711
<CGS> 76,524
<TOTAL-COSTS> 118,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,595
<INCOME-TAX> 2,810
<INCOME-CONTINUING> 4,785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,785
<EPS-BASIC> .20
<EPS-DILUTED> .20
</TABLE>
