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 November 2, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period from __________________ to _________________
Commission file number 1-6083
NOODLE KIDOODLE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 11-1771705
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
Number)
105 PRICE PARKWAY, FARMINGDALE, NEW YORK 11735
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code (516) 293-5300
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed
since Last Report)
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 periods that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirement for the past 90 days. YES X No ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date
7,579,640 shares outstanding as of December 9, 1996.
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Condensed Consolidated Balance Sheets
November 2, 1996, October 28, 1995, and
February 3, 1996 3
Condensed Consolidated Statements of Operations
Thirteen and Thirty-Nine Weeks Ended November 2, 1996 and
October 28, 1995 4
Condensed Consolidated Statements of Cash Flows
Thirty-Nine Weeks Ended November 2, 1996 and
October 28, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION None
SIGNATURES 10
<PAGE>
<TABLE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
<CAPTION>
November 2, October 28, February 3,
1996 1995 1996
(In thousands, except share data)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,803 $ 6,548 $ 7,272
Merchandise inventories 22,190 12,437 10,328
Prepaid expenses and other current assets 3,758 1,888 3,043
Net assets of discontinued operations - 6,327 3,584
Total current assets 35,751 27,200 24,227
Property, plant and equipment - net 17,758 11,622 12,994
Other assets 81 50 55
Total Assets $53,590 $38,872 $37,276
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $10,135 $ 7,191 $ 5,283
Accrued expenses and taxes 5,065 5,237 4,913
Net liabilities of discontinued operations 3,435 - -
Total current liabilities 18,635 12,428 10,196
Commitments and contingencies - - -
Stockholders' equity:
Preferred stock-authorized 1,000,000,
500,000 and 1,000,000 shares, par
value $.001, $1.00 and $.001,
respectively, (none issued) - - -
Common stock-authorized 15,000,000,
10,000,000 and 15,000,000 shares,
par value $.001, $.10 and $.001,
issued 8,503,901, 6,292,701 and
6,300,401 shares, respectively 8 629 6
Capital in excess of par value 43,064 26,294 26,955
Retained earnings (4,325) 3,313 3,911
38,747 30,236 30,872
Less treasury stock, at cost, 924,261
shares 3,792 3,792 3,792
Total stockholders' equity 34,955 26,444 27,080
Total Liabilities and Stockholders' Equity $53,590 $38,872 $37,276
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
-3-
<PAGE>
<TABLE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands except per share amounts)
UNAUDITED
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $11,845 $ 6,288 $30,489 $13,508
Costs and expenses:
Cost of product sold including
buying and warehousing costs 7,241 4,122 19,253 8,784
Selling and administrative expenses 7,296 4,855 20,127 10,563
Provision for restructured operations - 500 - 500
14,537 9,477 39,380 19,847
Operating loss (2,692) (3,189) (8,891) (6,339)
Interest income 233 229 684 501
Interest expense (9) (10) (29) (32)
Loss from continuing operations
before income taxes (2,468) (2,970) (8,236) (5,870)
Income taxes (benefit) - - - -
Net loss from continuing operations (2,468) (2,970) (8,236) (5,870)
Discontinued operations:
Loss from discontinued operations,
net of income tax benefit of $-0-
and $-0- respectively - - - (1,914)
Loss on disposal of discontinued
operations including operating
loss of $8,907 during the
disposal period (including income
taxes of $1,602) - - - (7,145)
Net loss from discontinued operations - - - (9,059)
Net loss $(2,468) $(2,970) $(8,236) $(14,929)
Net loss per share:
Continuing operations $ (.33) $ (.55) $ (1.10) $ (1.11)
Discontinuing operations - - - (1.71)
Net loss per share $ (.33) $ (.55) $ (1.10) $ (2.82)
Average shares outstanding 7,574 5,356 7,457 5,302
See accompanying notes to Condensed Consolidated Financial Statements
</TABLE>
-4-
<PAGE>
<TABLE>
NOODLE KIDODOLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDTED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
Thirty-nine Weeks Ended
November 2, October 28,
1996 1995
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $(8,236) $(5,870)
Adjustments to reconcile to net cash provided
(used):
Depreciation 1,315 648
Restructuring charge non-cash-portion - 500
Decrease (increase) in non-cash working capital
accounts:
Merchandise inventories (11,862) (8,107)
Prepaid expenses, taxes and other current assets (715) 1,092
Trade accounts payable, accrued expenses and other 5,615 4,756
Net cash (used in) continuing operations (13,883) (6,981)
Net loss from discontinued operations - (9,059)
Adjustments to reconcile to net cash provided (used):
Depreciation - 286
Provision for doubtful accounts - 581
Deferred income taxes - 1,602
Decrease (increase) in non-cash working capital
accounts and other assets and liabilities 7,019 15,960
Net cash provided by discontinued operations 7,019 9,370
Net cash provided by (used in)operating
activities (6,864) 2,389
Cash flows from investing activities:
Property additions - continuing operations (6,690) (7,118)
Property additions - discontinued operations - (86)
Other (26) -
Net cash (used in)investing activities (6,716) (7,204)
Cash flow from financing activities:
Proceeds from public offering 16,009 -
Proceeds from exercise of employees stock options 102 503
Reduction in obligations under capital lease - (48)
Net cash provided by financing activities 16,111 455
Net increase (decrease) in cash and cash equivalents 2,531 (4,360)
Cash and cash equivalents - beginning of year 7,272 10,908
Cash and cash equivalents - end of period $ 9,803 $ 6,548
See accompanying notes to Condensed Consolidated Financial Statements
</TABLE>
-5-
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1:
The accompanying unaudited condensed consolidated
financial statements have been prepared in
accordance with the instructions to Form 10-Q and do
not include all the information and footnotes
required by generally accepted accounting principles
for complete financial statements and are subject to
year-end adjustments. However, in the opinion of
management, all known adjustments (which consist
primarily of normal recurring accruals) have been
made to present fairly the consolidated operating
results for the unaudited periods. This financial
information should be read in conjunction with the
financial statements and notes thereto included in
the Registrant's annual report on Form 10-K for the
year ended February 3, 1996.
It should be noted that amounts included in the
financial statements of the prior year have been
reclassified to conform to the current year's
presentation.
Due to the seasonal nature of the Company's
business, results for the interim period are not
necessarily indicative of the results to be expected
for the fiscal year.
NOTE 2:
All highly liquid investments with a maturity date of
three months or less are considered to be cash
equivalents. These investments are stated at cost
which approximates market.
NOTE 3:
Income tax provisions are based on estimated annual
effective tax rates. The loss from continuing
operations for the periods ended November 2, 1996
and October 28, 1995 provided no tax benefit.
NOTE 4:
On August 30, 1995 the Company adopted a formal plan
to discontinue its wholesale business segment
The operations and net assets of the wholesale
business segment are being accounted for as a
discontinued operation, and accordingly, its
operating results and net assets are reported in
this manner in all periods presented in the
accompanying unaudited condensed consolidated
financial statements. Revenues from such operations
were $8.7 million for the thirteen weeks ended
October 28, 1995 and $50.6 million for the
corresponding thirty-nine week period.
-6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen Weeks Ended November 2, 1996 Compared With
Thirteen Weeks Ended October 28, 1995
Continuing Operations
Net sales increased $5.6 million to $11.9 million in the
thirteen week period ended November 2, 1996 from $6.3 million
in the comparable period in the prior year, primarily due to
the addition of 13 new stores, of which three opened in the
fourth quarter of last year and ten opened in the first nine
months of the current year. The Company operated 28 Noodle
Kidoodle stores and one Playworld store at November 2, 1996
compared to fifteen Noodle Kidoodle stores, two Playworld
stores, and two Toy Park stores at October 28, 1995. The
Company closed one Playworld store and two Toy Park stores in
the first half of the current year.
Gross profit (derived from net sales less the cost of product
sold, which includes buying and warehousing costs) increased
$2.4 million to $4.6 million in the thirteen week period
ended November 2, 1996 from $2.2 million in the comparable
period in the prior year. Gross profit, as a percentage of
net sales ("gross profit percentage"), increased to 38.9% in
the third quarter ended November 2, 1996 from 34.4% in the
comparable period in the prior year. This improvement was
primarily due to the leveraging of buying and warehousing
costs and favorable merchandise cost comparisons in the
Playworld division.
Selling and administrative expenses increased $2.4 million to
$7.3 million in the thirteen week period ended November 2,
1996 from $4.9 million in the comparable period in the prior
year. These increases resulted from higher direct store
expenses of $2.2 million as a result of increases in the
store base and from higher home office costs of $.6 million
reflecting the infrastructure that has been put into place
since the end of the second quarter of last year, offset by
lower net advertising expenses. Selling and administrative
expenses, as a percent of net sales, decreased to 61.6% in
the thirteen week period ended November 2, 1996 from 77.2% in
the comparable period in the prior year. The decrease
resulted primarily from the leveraging of direct store
expenses, home office and advertising expenses over a larger
store base in the current quarter.
Net loss from continuing operations decreased $.5 million to
$2.5 million ($.33 per share) in the period ended November 2,
1996 from $3.0 million ($.55 per share) in the comparable
period in the prior year. The prior year's figure includes a
provision for restructured operations of $.5 million. There
are no tax benefits provided in either period.
-7-
<PAGE>
Thirty-Nine Weeks Ended November 2, 1996
Compared with Thirty-Nine Weeks Ended October 28, 1995
Continuing Operations
Net sales increased $17.0 million to $30.5 million in the
thirty-nine week period ended November 2, 1996 from $13.5
million in the comparable period in the prior year, primarily
due to the addition of 13 new stores, of which three opened
in the fourth quarter of last year, and ten opened through
November 2, 1996. The Company operated 28 Noodle Kidoodle
stores and one Playworld store at November 2, 1996, compared
to fifteen Noodle Kidoodle stores, two Playworld stores, and
two Toy Park stores at October 28, 1995. The Company closed
one Playworld store and two Toy Park stores in the first half
of the current fiscal year.
Gross profit (derived from net sales less the cost of product
sold, which includes buying and warehousing costs) increased
$6.5 million to $11.2 million in the thirty-nine week period
ended November 2, 1996 from $4.7 million in the comparable
period in the prior year. Gross profit as a percent of net
sales ("gross profit percentage") increased to 36.9% in the
current nine-month period from 35.0% in the comparable period
in the prior year, primarily due to the leveraging of buying
costs and lower merchandising costs and favorable merchandise
cost comparison in the Playworld division. Warehousing costs
were flat compared to last year. The Noodle Kidoodle stores
were serviced by their own warehouse in the current period,
however, the warehouse was shared with the discontinued
wholesale business in the comparable period in the prior
year.
Selling and administrative expenses increased $9.6 million to
$20.1 million in the thirty-nine week period ended November
2, 1996 from $10.5 million in the comparable period in the
prior year. These increases resulted primarily from higher direct
store expenses of $7.1 million due to increases in the store
base and from higher home office costs of $2.3 million
reflecting the infrastructure that has been put into place
since the end of the second quarter of last year. Selling
and administrative expenses as a percent of net sales
decreased to 66.0% in the thirty-nine week period ended
November 2, 1996 from 78.2% in the comparable period in the
prior year. The decrease resulted primarily from leveraging
of direct store expenses, home office and net advertising
expenses over a larger store base and in the current year.
Net loss from continuing operations increased $2.4 million to
$8.2 million ($1.10 per share) in the nine-month period ended
November 2, 1996 from $5.8 million ($1.11 per share) in the
comparable period in the prior year. The prior year's figure
includes a provision for restructured operations of $.5
million. There are no tax benefits provided in either
period.
-8-
<PAGE>
Net loss from discontinued operations was $9.1 million ($1.71
per share) in the thirty-nine week period ended October 28,
1995. The discontinued operations represents the Company's
wholesale operation which was closed effective August 30,
1995.
Liquidity and Capital Resources
During the thirty-nine week period ended November 2, 1996 the
Company used $13.9 million of cash flows for operating
activities of the continuing operations primarily to fund the
net loss of $8.2 million and an increase in working capital
requirements of $7.0 million due to increases in the store
base and buildup of inventory for the holiday season,
partially offset by depreciation of $1.3 million. The
discontinued operations generated $7.0 million of cash flows
primarily from the sale of the Farmingdale facility. The
Company also used cash to fund investing activities of $6.7
million primarily for the purchase of fixed assets for new
stores. In February 1996, the Company completed a secondary
stock offering of 2.2 million shares of common stock, which
provided $16.0 million in cash. As a result of the foregoing,
cash and cash equivalents increased during the period by $2.5
million.
In February 1996 the Company obtained a line of credit from a
bank which is unsecured, provides for maximum borrowing of
$10.0 million in short-term loans and letters of credit, and
expires on April 30, 1997.
The Company has available net operating loss carryforwards of
approximately $15.0 million for income tax purposes.
Quarterly fluctuation in results and seasonality.
The timing of new store openings and related pre-opening
expenses and the amount of revenue contributed by new stores
have caused, and are expected to cause in the future, the
Company's quarterly results of operations to fluctuate. In
addition, the Company's operations are highly seasonal, a
significant portion of a typical store's revenues is
generated during the Company's fourth fiscal quarter, which
coincides with the Christmas selling season. The Company
does not expect to generate positive operating income during
the first three fiscal quarters for the foreseeable future.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NOODLE KIDOODLE, INC.
(Registrant)
Date: December 16, 1996 STANLEY GREENMAN
Stanley Greenman, Chairman
of the Board, Chief
Executive Officer, and
Treasurer
(Principal Executive
Officer)
Date: December 16, 1996 KENNETH S. BETUKER
Kenneth S. Betuker
Vice President, Chief
Financial Officer
(Principal Financial and
Accounting Officer)
-10-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> NOV-02-1996
<CASH> 9,803
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 22,190
<CURRENT-ASSETS> 35,751
<PP&E> 21,613
<DEPRECIATION> 3,855
<TOTAL-ASSETS> 53,590
<CURRENT-LIABILITIES> 18,635
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 34,947
<TOTAL-LIABILITY-AND-EQUITY> 53,590
<SALES> 30,489
<TOTAL-REVENUES> 30,489
<CGS> 19,253
<TOTAL-COSTS> 19,253
<OTHER-EXPENSES> 20,127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> (8,236)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,236)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,236)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
