<PAGE>
Exhibit 20.3
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined consolidated financial statements
combine the historical statements of operations of Zany and Noodle, referred to
in this section as the combined company, after giving effect to the merger, as
if the merger had occurred on February 2, 1997, and the historical balance
sheet of the combined company as if the merger had occurred on January 29, 2000
and April 29, 2000, in each case using the "pooling of interests" method of
accounting. The following unaudited pro forma information should be read in
conjunction with the historical financial statements of each of Zany and
Noodle.
The pro forma amounts are presented for informational purposes only and are
not necessarily indicative of the results of operations of the combined company
that would have actually occurred had the merger been consummated as of
February 2, 1997 or of the financial condition of the combined company had the
merger been consummated as of January 29, 2000 or April 29, 2000 or of the
future results of operations or financial condition of the combined company.
The pro forma information does not reflect any synergies anticipated as a
result of the merger, in particular the elimination of costs associated with
Noodle's status as a public company and other administrative savings. There can
be no assurances that such synergies will be realized.
Zany and Noodle estimate that they will incur direct transaction costs of
approximately $3.0 million, net of tax, associated with the merger, which will
be charged to operations in the quarter in which the merger is consummated, and
are reflected in the accompanying unaudited pro forma combined consolidated
financial statements. In addition, it is expected that following the merger,
the combined company will incur additional expenses, which are currently
estimated to range from $10.0 to $13.0 million, net of tax, associated with the
merger and integrating the operations of the two companies. These merger and
integration expenses are not reflected in the accompanying unaudited pro forma
combined consolidated financial statements.
1
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED APRIL 29, 2000
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
-------------------------
Zany Noodle Adjustments Combined
------- ------- ----------- --------
<S> <C> <C> <C> <C>
NET SALES......................... $39,363 $24,072 $ $63,435
COST OF GOODS SOLD, including
occupancy costs.................. 31,395 15,178 4,842 (a)(b) 51,415
------- ------- ------- -------
Gross profit.................... 7,968 8,894 (4,842) 12,020
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.......... 16,097 12,695 (4,887)(a) 23,905
------- ------- ------- -------
Operating loss.................. (8,129) (3,801) 45 (11,885)
INTEREST INCOME................... 110 1 111
INTEREST EXPENSE.................. (192) (193) (385)
------- ------- ------- -------
Loss before income tax benefit.. (8,211) (3,993) 45 (12,159)
INCOME TAX BENEFIT................ 3,161 1,517 (17)(c) 4,661
------- ------- ------- -------
LOSS FROM CONTINUING OPERATIONS... $(5,050) $(2,476) $ 28 $(7,498)
======= ======= ======= =======
LOSS FROM CONTINUING OPERATIONS
PER COMMON SHARE:
Basic........................... $ (0.23) $ (0.24)
======= =======
Diluted......................... $ (0.23) $ (0.24)
======= =======
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic........................... 21,679 9,377(d) 31,056
======= ======= =======
Diluted......................... 21,679 9,377(d) 31,056
======= ======= =======
</TABLE>
--------
(a) Includes reclassifications of $4,887 to conform Noodle's presentation of
cost of goods sold, including occupancy costs, to Zany's financial
reporting presentation.
(b) Includes adjustments to conform Noodle's accounting policy for inventory
capitalization to Zany's accounting policy.
(c) Represents tax effect of (b) above.
(d) Represents Noodle's weighted average shares outstanding for the period
adjusted for the exchange ratio of 1.233.
2
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MAY 1, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
-------------------------
Zany Noodle Adjustments Combined
------- ------- ----------- --------
<S> <C> <C> <C> <C>
NET SALES................... $40,577 $22,890 $ $63,467
COST OF GOODS SOLD,
including occupancy costs.. 29,387 13,900 3,304 (a)(b) 46,591
------- ------- ------- -------
Gross profit.............. 11,190 8,990 (3,304) 16,876
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.... 12,986 10,103 (3,789)(a) 19,300
------- ------- ------- -------
Operating (loss).......... (1,796) (1,113) 485 (2,424)
INTEREST INCOME............. 11 80 91
INTEREST EXPENSE............ (438) (21) (459)
------- ------- ------- -------
Loss before income tax
benefit.................. (2,223) (1,054) 485 (2,792)
INCOME TAX BENEFIT.......... 845 -- (184)(c) 661
------- ------- ------- -------
LOSS FROM CONTINUING
OPERATIONS................. $(1,378) $(1,054) $ 301 $(2,131)
======= ======= ======= =======
LOSS FROM CONTINUING
OPERATIONS PER COMMON
SHARE:
Basic..................... $ (0.26)(d) $ (0.14)(d)
======= =======
Diluted................... $ (0.26)(d) $ (0.14)(d)
======= =======
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic..................... 5,384 9,375 (e) 14,759
======= ======= =======
Diluted................... 5,384 9,375 (e) 14,759
======= ======= =======
</TABLE>
--------
(a) Includes reclassifications of $3,789 to conform to Noodle's presentation of
cost of goods sold, including occupancy costs, to Zany's financial
reporting presentation.
(b) Includes adjustments to conform Noodle's accounting policy for inventory
capitalization to Zany's accounting policy.
(c) Represents tax effect of (b) above.
(d) Excludes the conversion of preferred stock into 11,250,273 shares of common
stock and the sale of 4,722,669 shares of common stock in Zany's initial
public offering. Had these transactions been completed at the beginning of
the period presented, Zany's basic and diluted loss per share would have
been $(0.06) and the pro forma combined basic and diluted loss per share
would have been $(0.07).
(e) Represents Noodle's weighted average shares outstanding for the period
adjusted for the exchange ratio of 1.233.
3
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 29, 2000
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
--------------------------
Zany Noodle Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
NET SALES................... $241,194 $135,038 $ $376,232
COST OF GOODS SOLD,
including occupancy costs.. 165,950 82,770 19,132 (a)(b) 267,852
-------- -------- -------- --------
Gross profit.............. 75,244 52,268 (19,132) 108,380
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.... 63,592 49,356 (20,017)(a)(c) 92,931
-------- -------- -------- --------
Operating income.......... 11,652 2,912 885 15,449
INTEREST INCOME............. 520 116 636
INTEREST EXPENSE............ (1,037) (616) (1,653)
-------- -------- -------- --------
Income before income tax
benefit (expense)........ 11,135 2,412 885 14,432
INCOME TAX BENEFIT
(EXPENSE).................. (4,231) 7,271 (336)(d) 2,704
-------- -------- -------- --------
INCOME FROM CONTINUING
OPERATIONS $ 6,904 $ 9,683 $ 549 $ 17,136
======== ======== ======== ========
INCOME FROM CONTINUING
OPERATIONS PER COMMON
SHARE:
Basic..................... $ .44 $ .68(e)
======== ========
Diluted................... $ .33 $ .56(e)
======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic..................... 15,834 9,374 (f) 25,208
======== ======== ========
Diluted................... 21,211 9,569 (f) 30,780
======== ======== ========
</TABLE>
--------
(a) Includes reclassifications of $19,703 to conform Noodle's presentation of
cost of goods sold, including occupancy costs, to Zany's financial
reporting presentation.
(b) Includes adjustments to conform Noodle's accounting policy for inventory
capitalization to Zany's accounting policy.
(c) Includes adjustment to conform Noodle's adoption of an accounting principle
for start-up costs to that of Zany.
(d) Represents tax effect of (b) and (c) above.
(e) Includes a tax benefit recorded by Noodle due to the recognition of their
deferred tax asset representing net income per pro forma basic and diluted
share of $0.29 and $0.24, respectively.
(f) Represents Noodle's weighted average shares outstanding for the period
adjusted for the exchange ratio of 1.233.
4
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 30, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
--------------------------
Zany Noodle Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
NET SALES................... $168,471 $107,886 $ $276,357
COST OF GOODS SOLD,
including occupancy costs.. 118,153 65,405 15,395 (a)(b) 198,953
-------- -------- -------- --------
Gross profit.............. 50,318 42,481 (15,395) 77,404
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.... 46,376 38,804 (15,367)(a)(c) 69,813
-------- -------- -------- --------
Operating income.......... 3,942 3,677 (28) 7,591
INTEREST INCOME............. 81 269 350
INTEREST EXPENSE............ (1,211) (194) (1,405)
-------- -------- -------- --------
Income before income tax
benefit.................. 2,812 3,752 (28) 6,536
INCOME TAX BENEFIT.......... 6,187 -- 10 (d) 6,197
-------- -------- -------- --------
NET INCOME.................. $ 8,999 $ 3,752 $ (18) $ 12,733
======== ======== ======== ========
NET INCOME PER COMMON SHARE:
Basic..................... $ 1.67 $ .86(e)
======== ========
Diluted................... $ .51 $ .47(e)
======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic..................... 5,373 9,356 (f) 14,729
======== ======== ========
Diluted................... 17,770 9,521 (f) 27,291
======== ======== ========
</TABLE>
--------
(a) Includes reclassifications of $15,640 to conform Noodle's presentation of
cost of goods sold, including occupancy costs, to Zany's financial
reporting presentation.
(b) Includes adjustments to conform Noodle's accounting policy for inventory
capitalization to Zany's accounting policy.
(c) Includes adjustment to conform Noodle's adoption of an accounting principle
for start-up costs to that of Zany.
(d) Represents tax effect of (b) and (c) above.
(e) Includes a tax benefit of $7,166 recorded by Zany due to the recognition of
their deferred tax asset representing net income per pro forma basic and
diluted share of $0.49 and $0.26, respectively.
(f) Represents Noodle's weighted average shares outstanding for the period
adjusted for the exchange ratio of 1.233.
5
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
--------------------------
Zany Noodle Adjustments Combined
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
NET SALES...................... $123,345 $81,664 $ $205,009
COST OF GOODS SOLD, including
occupancy costs............... 89,452 50,388 14,073 (a)(b) 153,913
-------- ------- -------- --------
Gross profit................. 33,893 31,276 (14,073) 51,096
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES....... 33,581 33,552 (14,300)(a)(c) 52,833
-------- ------- -------- --------
Operating income (loss)...... 312 (2,276) 227 (1,737)
INTEREST INCOME................ 253 448 701
INTEREST EXPENSE............... (718) (90) (808)
-------- ------- -------- --------
Loss before income tax
benefit..................... (153) (1,918) 227 (1,844)
INCOME TAX BENEFIT............. -- -- -- --
-------- ------- -------- --------
NET LOSS....................... $ (153) $(1,918) $ 227 $ (1,844)
======== ======= ======== ========
NET LOSS PER COMMON SHARE:
Basic........................ $ (.03) $ (.13)
======== ========
Diluted...................... $ (.03) $ (.13)
======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic........................ 5,085 9,346 (d) 14,431
======== ======== ========
Diluted...................... 5,085 9,355 (d) 14,440
======== ======== ========
</TABLE>
--------
(a) Includes reclassifications of $14,064 to conform Noodle's presentation of
cost of goods sold, including occupancy costs, to Zany's financial
reporting presentation.
(b) Includes adjustments to conform Noodle's accounting policy for inventory
capitalization to Zany's accounting policy.
(c) Includes adjustment to conform Noodle's adoption of an accounting principle
for start-up costs to that of Zany.
(d) Represents Noodle's weighted average shares outstanding for the period
adjusted for the exchange ratio of 1.233.
6
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
APRIL 29, 2000
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
-------------------------
Zany Noodle Adjustments Combined
-------- ------- ----------- --------
ASSETS
------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..... $ 177 $ 541 $ $ 718
Receivables, net.............. 1,799 -- 930 (a) 2,729
Inventories, net.............. 71,870 34,470 1,718 (b) 108,058
Deferred tax asset............ 5,097 2,965 1,209 (b)(c) 9,271
Prepaid expenses.............. 1,493 3,093 (930)(a) 3,656
-------- ------- ------- --------
Total current assets........ 80,436 41,069 2,927 124,432
PROPERTY AND EQUIPMENT, net..... 34,246 28,931 63,177
DEFERRED TAX ASSET.............. 1,259 4,992 6,251
INVESTMENT IN JOINT VENTURE..... 11,529 11,529
OTHER ASSETS, net............... 210 163 373
-------- ------- ------- --------
$127,680 $75,155 $ 2,927 $205,762
======== ======= ======= ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS'
EQUITY
-----------------------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term
debt......................... $ 2,437 $ 8,955 $ $11,392
Line of credit................ 7,184 -- 7,184
Accounts payable.............. 8,088 10,403 18,491
Accrued liabilities........... 7,967 8,876 2,398 (c)(d) 19,241
-------- ------- ------- --------
Total current liabilities... 25,676 28,234 2,398 56,308
-------- ------- ------- --------
DEFERRED RENT................... 5,028 -- 2,502 (d) 7,530
-------- ------- ------- --------
LONG TERM DEBT AND CAPITALIZED
LEASE OBLIGATIONS, less current
portion........................ 3,296 684 3,980
-------- ------- ------- --------
SHAREHOLDERS EQUITY:
Common Stock.................. 217 9 85 (e) 311
Additional paid-in capital.... 104,222 43,098 (3,770)(e) 143,550
Retained earnings (deficit)... (10,759) 6,815 (1,973)(b)(c) (5,917)
Less: treasury stock.......... -- (3,685) 3,685 (e) --
-------- ------- ------- --------
Total shareholders' equity.. 93,680 46,237 (1,973) 137,944
-------- ------- ------- --------
$127,680 $75,155 $ 2,927 $205,762
======== ======= ======= ========
</TABLE>
--------
(a) Represents reclassification of receivables for conformity with Zany's
presentation.
(b) Includes adjustment to conform Noodle's accounting policy for inventory
capitalization to Zany's accounting policy, and the related tax effect.
(c) Includes $3.0 million in accrued expenses, net of tax, associated with the
merger representing estimated transaction costs that will be charged to
expense upon consummation of the merger. The accrual excludes other merger
and integration expenses which are currently estimated to be in the range
of $10.0 to $13.0 million, net of tax.
(d) Includes reclassification of $2,502 in deferred rent.
(e) Represents the exchange of Noodle's common stock for Zany's common stock
and the elimination of Noodle's common stock.
7
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
JANUARY 29, 2000
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
-------------------------
Zany Noodle Adjustments Combined
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents...... $ 24,550 $ 491 $ $ 25,041
Receivables, net............... 4,118 -- 761 (a) 4,879
Inventories, net............... 71,020 33,610 1,674 (b) 106,304
Deferred tax asset............. 1,496 1,448 1,226 (b)(c) 4,170
Prepaid expenses............... 1,458 3,244 (761)(a) 3,941
-------- ------- ------- --------
Total current assets......... 102,642 38,793 2,900 144,335
PROPERTY AND EQUIPMENT, net...... 34,602 28,931 63,533
DEFERRED TAX ASSET............... 1,259 4,992 6,251
INVESTMENT IN JOINT VENTURE...... 5,000 -- 5,000
OTHER ASSETS, net................ 223 166 389
-------- ------- ------- --------
$143,726 $72,882 $ 2,900 $219,508
======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
---------------------------------
CURRENT LIABILITIES:
Current portion of long-term
debt.......................... $ 2,578 $ 4,019 $ $ 6,597
Accounts payable............... 19,898 9,498 29,396
Accrued liabilities............ 13,696 9,976 2,569 (c)(d) 26,241
-------- ------- ------- --------
Total current liabilities.... 36,172 23,493 2,569 62,234
-------- ------- ------- --------
DEFERRED RENT.................... 5,002 -- 2,331 (d) 7,333
-------- ------- ------- --------
LONG-TERM DEBT AND CAPITALIZED
LEASE OBLIGATIONS, less current
portion......................... 3,855 689 4,544
-------- ------- ------- --------
SHAREHOLDERS' EQUITY:
Common Stock................... 216 9 86 (e) 311
Additional paid-in capital..... 104,190 43,097 (3,783)(e) 143,504
Retained earnings (deficit).... (5,709) 9,291 (2,000)(b)(c) 1,582
Less: treasury stock........... -- (3,697) 3,697 (e) --
-------- ------- ------- --------
Total shareholders' equity... 98,697 48,700 (2,000) 145,397
-------- ------- ------- --------
$143,726 $72,882 $ 2,900 $219,508
======== ======= ======= ========
</TABLE>
--------
(a) Represents reclassification of receivables for conformity with Zany's
presentation.
(b) Includes adjustment to conform Noodle's accounting policy for inventory
capitalization to Zany's accounting policy, and the related tax effect.
(c) Includes $3.0 million in accrued expenses, net of tax, associated with the
merger representing estimated transaction costs that will be charged to
expense upon consummation of the merger. The accrual excludes other merger
and integration expenses which are currently estimated to be in the range
of $10.0 to $13.0 million, net of tax.
(d) Includes reclassification of $2,331 in deferred rent.
(e) Represents the exchange of Noodle's common stock for Zany's common stock
and the elimination of Noodle's common stock.
8
