gymboree lbo model com

8/8/2019 Gymboree LBO Model com

1/7

One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com) All Rights Reserved 10/11/2010

LBO analysis

Circularity On Exit year 5.0Transaction date 30-Jan-11 Exit EV / LTM EBITDA 8.0xOffer price $65.40 Entry TV / LTM EBITDA 8.3xDebt capacity (Debt / EBITDA) 6.0xRefinance leases No

Payout special dividend No IRR 23%

Return senstivity

23% 6.0x 6.5x 7.0x 7.5x 8.0x 8.5x 9.0x 9.5x 10.0x3.0x 8.5% 10.1% 11.6% 13.0% 14.4% 15.7% 17.0% 18.2% 19.3%4.0x 8.9% 10.9% 12.8% 14.5% 16.1% 17.6% 19.1% 20.5% 21.8%5.0x 9.6% 12.1% 14.5% 16.6% 18.6% 20.5% 22.3% 23.9% 25.5%6.0x 10.8% 14.4% 17.6% 20.5% 23.1% 25.5% 27.8% 29.9% 31.8%

7.0x 14.3% 20.5% 25.6% 30.0% 33.8% 37.3% 40.4% 43.3% 46.0%

Transaction details

Equity price 1,805.7 New debt 1,298.4Refinanced leases Acquired cash 132.4Fees 44.5 Equity 419.4Total uses 1,850.2 Total sources 1,850.2

Income statement

LTM 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Revenue 1,044.2 1,045.3 1,076.7 1,109.0 1,142.3 1,176.5 1,211.8 1,248.2 1,285.6 1,324.2 1,363.9

% growth 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%

COGS 540.0 543.6 559.9 576.7 594.0 611.8 630.2 649.1 668.5 688.6 709.2% of sales 52% 52% 52% 52% 52% 52% 52% 52% 52% 52%

Gross profit 504.2 501.8 516.8 532.3 548.3 564.7 581.7 599.1 617.1 635.6 654.7

% margin 48% 48% 48% 48% 48% 48% 48% 48% 48% 48%

SG&A 326.5 334.5 344.5 354.9 365.5 376.5 387.8 399.4 411.4 423.7 436.5

% of sales 32% 32% 32% 32% 32% 32% 32% 32% 32% 32%

EBIT 177.7 167.3 172.3 177.4 182.8 188.2 193.9 199.7 205.7 211.9 218.2D&A 38.7 41.8 43.1 44.4 45.7 47.1 48.5 49.9 51.4 53.0 54.6

% of sales 4% 4% 4% 4% 4% 4% 4% 4% 4% 4%

EBITDA 216.4 209.1 215.3 221.8 228.5 235.3 242.4 249.6 257.1 264.8 272.8

% margin 20% 20% 20% 20% 20% 20% 20% 20% 20% 20%

Interest expense 91.2 83.8 75.7 66.5 56.4 45.1 32.7 19.1 8.4Profit before taxes 209.1 124.2 138.0 152.8 168.8 186.0 204.5 224.4 245.8 264.4Income taxes 20.9 12.4 13.8 15.3 16.9 18.6 20.4 22.4 24.6 26.4

Effective tax rate 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%

Net income 188.2 111.8 124.2 137.5 151.9 167.4 184.0 202.0 221.2 238.0

One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com) All Rights Reserved by Roland Sudhof 10/11/2010

Projected results for year ending Jan. 20,

Exit EV / LTM EBITDA

Debt

capacity

(Debt/LTM

EBITDA)


2/7

Cash flow statement

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Net income 188.2 111.8 124.2 137.5 151.9 167.4 184.0 202.0 221.2 238.0

D&A 41.8 43.1 44.4 45.7 47.1 48.5 49.9 51.4 53.0 54.6Change in OWC (0.9) (1.0) (1.0) (1.0) (1.1) (1.1) (1.1) (1.2) (1.2)

OWC % of sales 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%

Operating cash flow 153.9 167.6 182.2 197.9 214.8 232.9 252.3 273.0 291.3

Capex (52.3) (53.8) (55.5) (57.1) (58.8) (60.6) (62.4) (64.3) (66.2) (68.2)% of sales 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%

Investing cash flow (53.8) (55.5) (57.1) (58.8) (60.6) (62.4) (64.3) (66.2) (68.2)

Dividends

Payout ratio 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Cash flow available to paydown debt 100.1 112.1 125.1 139.1 154.2 170.5 188.0 206.8 223.2

Debt schedule

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Leases 73.2 75.4 77.6 80.0 82.4 84.8 87.4 90.0 92.7 95.5% of sales 7% 7% 7% 7% 7% 7% 7% 7% 7% 7%

Lease interest 3.7 3.8 3.9 4.0 4.1 4.2 4.4 4.5 4.6 4.8

% rate 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%

Cash flow to paydown debt 100.1 112.1 125.1 139.1 154.2 170.5 188.0 206.8 223.2

Beginning balance 1,298.4 1,198.3 1,086.2 961.1 822.0 667.8 497.4 309.4 102.6Debt repayment 100.1 112.1 125.1 139.1 154.2 170.5 188.0 206.8 102.6Ending balance 1,298.4 1,198.3 1,086.2 961.1 822.0 667.8 497.4 309.4 102.6 Interest on LBO debt 87.4 80.0 71.7 62.4 52.1 40.8 28.2 14.4 3.6

% rate 7% 7% 7% 7% 7% 7% 7% 7% 7% 7%

Total interest expense 91.2 83.8 75.7 66.5 56.4 45.1 32.7 19.1 8.4

Cash balance 0 120.6

Return analysis

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Equity investment (419.4)

Dividends Exit EV 1,938.9 Exit debt 752.6 Cash flow to sponsor (419.4) 1,186.3

Exit equity value 449.0 610.5 786.6 978.1 1,186.3 1,412.4 1,657.7 1,923.5 2,086.8

Cash return 1.1x 1.5x 1.9x 2.3x 2.8x 3.4x 4.0x 4.6x 5.0x

One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com) All Rights Reserved 10/11/2010


3/7

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LTM 5 yr average / CAGRIncome statement

Revenue growth 13% 8% 6% 3% 14% 17% 16% 9% 1% 3% 11%EBIT growth (123%) 331% 13% (60%) 228% 99% 23% 14% 10% 9% 75%EBITDA growth (366%) 92% 9% (35%) 88% 63% 20% 14% 10% 8% 39%Net income growth (112%) 374% 18% (67%) 292% 79% 33% 16% 9% 7% 86%

Operating leverage (9.7x) 40.4x 2.3x (21.0x) 16.1x 5.9x 1.4x 1.6x 7.3x 3.0x 6.5xGross margin 33% 36% 42% 41% 39% 43% 49% 48% 48% 47% 45%EBITDA margin (3%) 6% 11% 12% 7% 12% 17% 18% 18% 20% 14%COGS % of revenue 67% 64% 58% 59% 61% 57% 51% 52% 52% 53% 55%SG&A % of revenue 41% 35% 35% 34% 36% 35% 35% 34% 33% 31% 35%Effective tax rate (5%) 1% 3% 3% (0%) 3% 5% 6% 6% 6% 4%

Balance sheet

Operating working assets 95.6 85.6 80.9 90.1 125.9 125.5 137.1 155.9 153.4 150.8 204.8 4%

Operating working liabilities -67.6 -44.7 -64.8 -68.4 -88.2 -101.2 -132.1 -131.2 -113.8 -121.2 -117.5 4%Net operating working capital 28 40.9 16.1 21.7 37.7 24.3 5 24.7 39.6 29.6 87.3 4%

OWC % of sales 6% 8% 3% 4% 6% 4% 1% 3% 4% 3% 8% 3%Leases % of sales 6% 5% 4% 5% 8% 7% 6% 6% 7% 8% 8% 7%

Cash flow statement

Capex 11.8 18.7 25.9 34 68.4 29.6 38.7 68.8 56.2 39.6 46.9 6%Capex % of sales 3% 4% 5% 6% 12% 4% 5% 7% 6% 4% 4% 5%Depreciation % of sales 5% 5% 5% 5% 5% 4% 4% 3% 3% 4% 4% 4%

Credit statistics

Debt / EBITDA (4.9x) 1.0x 0.3x 0.4x 1.0x 0.6x 0.3x 0.4x 0.4x 0.4x 0.4x 0.4x

Year ending January 30,


4/7

Back-up calculations

Share dilution at offer price

No. of options Exercise price Dilutive effect3,279.0 3.1 3,123.6

10,000.0 5.8 9,120.89,100.0 8.1 7,975.7

187,405.0 12.3 152,130.5121,697.0 16.5 91,012.2

7,259.0 23.9 4,605.1Cumulative effect (mm) 0.3No. of shares outstanding 27.3Total dilutive shares outstanding (mm) 27.6

Transaction fee calculation

Debt issued 1,298.4Debt fee 2%

Debt issuance fees 26.0Transaction value 1,850.2M&A fee (%) 1%

M&A fees 18.5

Total fees 44.5


5/7

Gymboree Corporation(GYMB)10-Yr Balance Sheet

Assets $Mil2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 latest Qtr

Cash and Equiv 5.3 8.4 60.6 89.6 30.6 32 27.5 33.3 140.5 257.7 132.4Short-Term Investments 0 0 0 0 30 115 129.3 0 0 0 0Accts Rec 7.7 7.7 7.5 11.5 20.1 12 13 12.6 18.7 9.9 19.1Inventory 78.1 63.6 62.6 73 97.2 100.5 104.3 119.5 115 121.1 145.5Other Current Assets 9.8 14.3 10.8 5.6 8.6 13 19.8 23.8 19.7 19.8 40.2Total Current Assets 100.9 94 141.5 179.7 186.5 272.5 293.9 189.2 293.9 408.5 337.2Net PP&E 117.7 108.1 106.5 112.7 150.8 146.1 150.3 185.4 204.2 205.5 217.8Intangibles 0 0 0 0 0 0 1.4 1.6 1.2 1.4 0Other Long-Term Assets 25.8 17.6 7.2 6.4 14.4 6.2 8.7 21 21.3 20.8 21.5Total Assets 244.4 219.7 255.2 298.8 351.7 424.8 454.3 397.2 520.6 636.2 576.5

Liabilities and Stockholders' Equity $Mil2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 latest Qtr

Accts Payable 31.2 20.3 27.2 33.4 39.2 45.2 55.9 52.9 44.4 46.5 43.4

Short-Term Debt 16.9 0.7 0 0 0 0 0 0 0 0 0Taxes Payable 0 0 0 0 0 0 0 0 0.1 5.4 0Accrued Liabilities 19.5 23.7 37.6 35 41.8 55.3 66.3 70.3 69.3 69.3 74.1Other Short-Term Liabilities 0 0 7.2 0.7 9.9 8 0 0Total Current Liabilities 67.6 44.7 64.8 68.4 88.2 101.2 132.1 131.2 113.8 121.2 117.5Long-Term Debt 16.4 8.8 0 0 0 0 0 0 0 0 0Other Long-Term Liabilities (leases) 26.3 23.7 21 26.6 46.1 48.5 46.3 57.7 72.5 76.2 78.9Total Liabilities 110.3 77.2 85.8 95 134.3 149.7 178.4 188.9 186.3 197.4 196.4Total Equity 134.1 142.4 169.4 203.8 217.4 275.1 275.7 208.3 334.3 438.8 380.2Total Liabilities & Equity 244.4 219.6 255.2 298.8 351.7 424.8 454.1 397.2 520.6 636.2 576.6


6/7

Gymboree Corporation(GYMB)10-Yr Cash Flows

Cash Flows From Operating Activities $Mil2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LTM

Net Income -36.9 4.6 21.8 25.7 8.6 33.7 60.3 80.3 93.5 101.9 109.4Depr & Amort 24.1 24.1 26.3 27.2 27.8 29.4 28.8 31.2 34.9 37.3 38.7Deferred Taxes -17.8 3.7 12.6 1.1 -8.7 6.7 -9.6 -9.8 0 2.7 0Other -26 6.9 24.2 3.9 6.9 27.5 42.2 6.2 26.7 34.7 5.2Cash from Operations -56.6 39.3 84.9 57.9 34.6 97.3 121.7 107.9 155 176.6 153.2

Cash Flows From Investing Activities $Mil2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LTM

Cap Ex -11.8 -18.7 -25.9 -34 -68.4 -29.6 -38.7 -68.8 -56.2 -39.6 -46.9Purchase of Business 0 0 0 0 0 0 0 0 0 0 0Other 0 3.2 0.1 0.7 38.2 -84.9 -14.1 129.3 0.1 0 93.7Cash from Investing -11.8 -15.5 -25.8 -33.4 -30.2 -114.5 -52.9 60.5 -56.1 -39.6 -46.9

Cash Flows From Financing Activities $Mil2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LTM

Net Issuance of Stock 11.6 3.2 3.7 5.7 5 18.8 -81.7 -167.7 3.7 -25.3 -144.9Net Issuance of Debt 0 0 0 0 0 0 0 0 0 0 0Dividends 0 0 0 0 0 0 0 0 0 0 0Other 21.8 -23.8 -9.5 0 0 0 8.5 3.3 6 3.8 -5.3Cash from Financing 33.4 -20.6 -5.8 5.7 5 18.8 -73.2 -164.4 9.7 -21.5 -139.7Currency Adj 0 0 -1 -1.3 -0.3 -0.2 -0.2 1.8 -1.5 1.7 1Change in Cash -35 3.1 52.2 28.9 9.1 1.4 -4.5 5.8 108.6 115.5 -34.1

Free Cash Flow $Mil2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LTM

Cash from Operations -56.6 39.3 84.9 57.9 34.6 97.3 121.7 107.9 155 176.6 153.2Cap Ex -11.8 -18.7 -25.9 -34 -68.4 -29.6 -38.7 -68.8 -56.2 -39.6 -46.9Free Cash Flow -68.4 20.6 58.9 23.9 -33.8 67.7 83 39.1 98.8 137 106.4


7/7

Gymboree Corporation(GYMB)10-Yr Income Statement

Revenue (from 2001 to 2010) $Mil2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LTM

Revenue 448.6 505.4 546.8 578 594.5 678.5 791.6 920.8 1,000.70 1,014.90 1,044.20COGS 299.9 322.5 316.9 343.2 362.4 386.1 407.2 478 524.5 535 540Gross Profit 148.7 182.9 229.9 234.8 232.1 292.4 384.4 442.8 476.2 479.9 504.2

Operating Expenses $Mil2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LTM

SG&A 185 174.6 194.1 194.2 215.8 239 278.3 312.6 327.9 316.3 326.5Other 22 -2.8 0 0 0 0 0 0 0 0

Operating Income -58.3 11.1 35.8 40.6 16.3 53.4 106.1 130.2 148.3 163.6 177.7EBIT -36.3 8.3 35.8 40.6 16.3 53.4 106.1 130.2 148.3 163.6 177.7EBITDA -12.2 32.4 62.1 67.8 44.1 82.8 134.9 161.4 183.2 200.9 216.4

Other Income and Expense $Mil2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LTM

Net Int Inc & Other 0.4 -0.8 -0.3 0.5 0.6 1.8 6.6 3.2 -0.4 1.1 0.2Earnings Before Taxes -60 7.5 35.5 41.1 16.9 55.2 112.8 133.4 149.6 164.7 178.4Income Taxes -23.1 2.9 13.7 15.4 -0.1 22.3 41.7 53.1 56.2 62.8 69Earnings After Taxes -36.9 4.6 21.8 25.7 17.1 32.9 71.2 80.3 93.5 101.9 109.4Acctg Changes 0 0 0 0 1.2 0 0 0 0 0 0Disc Operations 0 0 0 0 -9.6 0.8 -10.9 0 0 0 0Ext Items 0 0 0 0 0 0 0 0 0 0 0Net Income -36.9 4.6 21.8 25.7 8.6 33.7 60.3 80.3 93.5 101.9 109.4

Diluted EPS, Cont Ops$ -1.38 0.16 0.71 0.83 0.54 1.02 2.15 2.67 3.21 3.41 3.7Diluted EPS$ -1.38 0.16 0.71 0.83 0.27 1.04 1.82 2.67 3.21 3.41 3.7Shares 27 29 31 31 31 32 33 30 29 30 29

gymboree lbo model com

Documents