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 4, 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 Identification
Incorporation or Organization) Number)
105 PRICE PARKWAY, FARMINGDALE, NEW YORK 11735
(Address of Principal Executive Office) (Zip Code)
Registrants 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 issuers classes of
common stock, as of the latest practicable date 7,556,140 shares outstanding
as of May 22, 1996.
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Condensed Consolidated Balance Sheets
May 4, 1996, April 29, 1995, and February 3, 1996 3
Condensed Consolidate Statements of Operations
Thirteen Weeks Ended May 4, 1996 and April 29, 1995 4
Condensed Consolidated Statements of Cash Flows
Thirteen Weeks Ended May 4, 1996 and April 29, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Managements Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION NONE
SIGNATURES 9
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<CAPTION>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
May 4, April 29, February 3,
1996 1995 1996
(in thousands except share date)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $18,637 $10,314 $ 7,272
Merchandise inventories 12,412 5,401 10,328
Prepaid expenses and other current assets 3,100 2,582 3,043
Net assets of discontinued operations 3,292 20,995 3,584
Total current assets 37,441 39,292 24,227
Property, plant and equipment - net 14,371 5,913 12,994
Other assets 68 45 55
Total Assets $51,880 $45,250 $37,276
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Trade accounts payable $ 5,773 $ 2,804 $ 5,283
Accrued expenses and taxes 5,711 3,633 4,913
Total current liabilities 11,484 6,437 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
8,480,401, 6,187,551 and 6,300,401 shares,
respectively 8 619 6
Capital in excess of par value 42,962 25,810 26,955
Retained earnings 1,218 16,176 3,911
44,188 42,605 30,872
Less treasury stock, at cost, 924,261 shares 3,792 3,792 3,792
Total stockholders equity 40,396 38,813 27,080
Total Liabilities and Stockholders Equity $51,880 $45,250 $37,276
See accompanying notes to Condensed Consolidated Financial Statements.
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<TABLE>
<CAPTION>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Thirteen Weeks Ended
May 4, April 29,
1996 1995
(in thousands, except per share data)
<S> <C> <C>
Net Sales $ 9,113 $ 3,281
Costs and expenses:
Cost of products sold including buying and
warehousing costs 5,927 2,119
Selling and administrative expenses 6,100 2,512
12,027 4,631
Operating loss (2,914) (1,350)
Interest income 231 135
Interest expense (10) (11)
Loss from continuing operations before income taxes (2,693) (1,226)
Income taxes (benefit) - -
Net loss from continuing operations (2,693) (1,226)
Net loss from discontinued operations - (840)
Net loss $(2,693) $(2,066)
Net loss per share:
Continuing operations $(.37) $(.23)
Discontinued operations - (.16)
Net loss per share $(.37) $(.39)
Weighted average shares outstanding 7,239 5,263
See accompanying notes to Condensed Consolidated Financial Statements.
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<TABLE>
<CAPTION>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Thirteen Weeks Ended
May 4, April 29,
1996 1995
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $(2,693) $(1,226)
Adjustments to reconcile to net cash provided (used):
Depreciation 387 166
Decrease (increase) in non-cash working capital accounts:
Merchandise inventories (2,084) (1,071)
Prepaid expenses and other current assets (57) 398
Trade accounts payable, accrued expenses and taxes 1,288 (602)
Income taxes - (133)
Net cash (used in) continuing operations (3,159) (2,468)
Net loss from discontinued operations - (840)
Adjustments to reconcile to net cash provided (used):
Depreciation and other non-cash changes - 211
Decrease (increase) in non-cash working capital
accounts and other 292 3,462
Net cash provided by discontinued operations 292 2,833
Net cash provided by (used in) operating activities (2,867) 365
Cash flows from investing activities:
Property additions:
Continuing operations (1,834) (916)
Discontinued operations - (47)
Other 57 (5)
Net cash (used in) investing activities (1,777) (968)
Cash flows from financing activities:
Proceeds from public offering 16,009 -
Proceeds from exercise of employee options - 9
Net cash provided by financing activities 16,009 9
Net increase (decrease) in cash and cash equivalents 11,365 (594)
Cash and cash equivalents - beginning of period 7,272 10,908
Cash and cash equivalents - end of period $18,637 $10,314
See accompanying notes to Condensed Consolidated Financial Statements.
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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. In the opinion of management, all
adjustments are of a normal recurring nature. This financial
information should be read in conjunction with the financial
statements and notes thereto included in the Registrants 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 years 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 and discontinued operations for the
periods ended May 4, 1996 and April 29, 1995 provided no tax
benefit.
NOTE 4. On August 30, 1995 the Company adopted a formal plan to
discontinue its wholesale business segment. The plan provides for
the sale of two of the Companys distribution centers and the
disposition through sales or liquidation of substantially all of the
operating assets.
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 consolidated
financial statements. Revenues from such operations were $21.2
million for the thirteen weeks ended April 29, 1995.
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<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen Weeks Ended May 4, 1996 Compared With
Thirteen Weeks Ended April 29, 1995
Continuing Operations
Net sales increased $5.8 million to $9.1 million in the thirteen week period
ended May 4, 1996 from $3.3 in the comparable period in the prior year.
Noodle Kidoodle sales increased $5.8 million to $8.2 in the first quarter from
$2.4 million in the comparable period in the prior year, primarily due to the
addition of 15 new stores, of which four opened in the second quarter of last
year, nine opened in the second half of last year, and two opened in the first
quarter of the current year. Other retail sales remained virtually flat in the
thirteen week period ended May 4, 1996 compared to the comparable period in
the prior year. The Company closed one Playworld store in the first quarter
ended May 4, 1996. The Company operated 20 Noodle Kidoodle stores, one
Playworld store and two Toy Park stores at May 4, 1996, compared to five
Noodle Kidoodle stores, two Playworld stores, and two Toy Park stores at April
29, 1995.
Gross profit (derived from net sales less the cost of product sold, which
includes buying and warehousing costs) increased $2.1 million to $3.2 million
in the thirteen week period ended May 4, 1996 from $1.2 million in the
comparable period in the prior year. Gross profit, as a percentage of net sales
(gross profit percentage), decreased to 35.0% in the first quarter ended May
4, 1996 from 35.4% in the comparable period in the prior year. Gross profit
percentage at Noodle Kidoodle stores decreased to 35.2% in the current
quarter from 35.6% in the comparable period in the prior year, primarily due
to higher warehousing costs resulting from operating its own warehouse in the
current period. The Noodle Kidoodle stores shared a warehouse with the
discontinued wholesale business in the comparable period in the prior year.
The increase in warehousing costs was partially offset by decreases in buying
and the cost of merchandise. Gross profit percentage in the other retail stores
decreased to 32.5% in the period ended May 4, 1996 from 35.0% in the
comparable period in the prior year, primarily from markdowns taken in
closing one of the Playworld stores in the first quarter ended May 4, 1996.
Selling and administrative expenses increased $3.6 million to $6.1 million in
the period ended May 4, 1996 from $2.5 million in the comparable period in
the prior year, primarily as a result of changes in the store base. Selling and
administrative expenses at Noodle Kidoodle increased to $5.7 million in the
first quarter ended May 4, 1996 from $2.1 million in the comparable period in
the prior year, primarily as a result of higher direct store expenses, which
increased by $2.6 million, higher home office expenses, which increased by $.7
million and higher advertising expenses. Selling and administrative expenses
at the other retail stores remained virtually flat. Selling and administrative
expenses, as a percent of net sales, decreased to 66.9% in the thirteen week
period ended May 4, 1996 from 76.6% in the comparable period in the prior
year. The decrease resulted primarily from the leveraging of home office
expenses over a larger store base.
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Net loss from continuing operations increased $1.5 million to $2.7 million($.37
per share) in the period ended May 4, 1996 from $1.2 million ($.23 per share)
in the comparable period in the prior year.
Net loss from discontinued operations was $.8 million ($.16 per share) in the
period ended April 29, 1996. The discontinued operations represent the
Companys wholesale operation which was closed effective August 30, 1995.
Liquidity and Capital Resources
During the thirteen week period ended May 4, 1996 the Company used $3.2
million of cash flows from operating activities of the continuing operations
primarily to fund the net loss of $2.7 million and an increase in working
capital of $.9 million partially offset by depreciation of $.4 million. The
discontinued operations generated $.3 million of cash flows primarily from
decreases in working capital. The Company also used cash to fund investing
activities of $1.8 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 resulted in $16.0 million in cash
flows from financing activities. As a result of the foregoing, cash and cash
equivalents increased during the period by $11.4million.The Company has entered
into a contract to sell its Farmingdale facility. This sale is expected to
close by mid-July and provide approximately $6.0 million of cash.
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 Companys quarterly results of operations to fluctuate.
In addition, the Companys operations are highly seasonal, a significant
portion of a typical stores revenues is generated during the Companys 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.
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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: June 13, 1996 STANLEY GREENMAN
Stanley Greenman, Chairman of the
Board, Chief Executive Officer,
and Treasurer
(Principal Executive Officer)
Date: June 13, 1996 WILLIAM A. JOHNSON, JR.
William A. Johnson, Jr., Vice
President, Chief Financial Officer
and Secretary
(Principal Financial and Accounting
Officer)
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 18,637
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 12,412
<CURRENT-ASSETS> 37,441
<PP&E> 18,245
<DEPRECIATION> 3,874
<TOTAL-ASSETS> 51,880
<CURRENT-LIABILITIES> 11,484
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 40,388
<TOTAL-LIABILITY-AND-EQUITY> 51,880
<SALES> 9,113
<TOTAL-REVENUES> 9,113
<CGS> 5,927
<TOTAL-COSTS> 5,927
<OTHER-EXPENSES> 6,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> (2,693)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,693)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,693)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
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