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 3, 1997
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)
6801 JERICHO TURNPIKE, SYOSSET, NEW YORK 11791
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code (516) 677-0500
105 PRICE PARKWAY, FARMINGDALE, NEW YORK 11735
(Former Address)
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 May 22, 1997.
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Condensed Consolidated Balance Sheets
May 3, 1997, May 4, 1996 and February 1, 1997 3
Condensed Consolidated Statements of Operations
Thirteen Weeks Ended May 3, 1997 and May 4, 1996 4
Condensed Consolidated Statements of Cash Flows
Thirteen Weeks Ended May 3, 1997 and May 4, 1996 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION NONE
SIGNATURES 10
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NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
<CAPTION>
May 3, May 4, February 1,
1997 1996 1997
(In thousands, except share data)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $10,398 $18,637 $11,333
Merchandise inventories 16,410 12,412 17,318
Prepaid expenses and other current assets 2,678 3,100 2,752
Net assets of discontinued operations - 3,292 -
Total current assets 29,486 37,441 31,403
Property, plant and equipment - net 19,351 14,371 19,583
Other assets 74 68 50
Total Assets $48,911 $51,880 $51,036
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 18 $ - $ 18
Trade accounts payable 5,308 5,773 5,049
Accrued expenses and taxes 7,020 5,711 7,092
Net liabilities of discontinued operations 2,120 - 2,425
Total current liabilities 14,466 11,484 14,584
Long-term debt 749 - 753
Commitments and contingencies - - -
Stockholders' equity:
Preferred stock-authorized 1,000,000
shares, par value $.001,(none issued) - - -
Common stock-authorized 15,000,000,
par value $.001, issued 8,503,901,
8,480,401 and 8,503,901 shares,
respectively 9 8 9
Capital in excess of par value 43,063 42,962 43,063
Retained earnings (deficit) (5,584) 1,218 (3,581)
37,488 44,188 39,491
Less treasury stock, at cost, 924,261
shares 3,792 3,792 3,792
Total stockholders' equity 33,696 40,396 35,699
Total Liabilities and Stockholders' Equity $48,911 $51,880 $51,036
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
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NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<CAPTION>
Thirteen Weeks Ended
May 3, May 4,
1997 1996
(In thousands, except per share data)
<S> <C> <C>
Net sales $15,535 $ 9,113
Costs and expenses:
Cost of product sold including
buying and warehousing costs 9,664 5,927
Selling and administrative expenses 7,974 6,100
17,638 12,027
Operating loss (2,103) (2,914)
Interest income 123 231
Interest expense (23) (10)
Loss before income tax (2,003) (2,693)
Income taxes (benefit) - -
Net loss $(2,003) $(2,693)
Net loss per share $ (.26) $ (.37)
Weighted average shares outstanding 7,580 7,239
See accompanying notes to Condensed Consolidated Financial Statements
</TABLE>
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<TABLE>
NOODLE KIDODOLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDTED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
Thirteen Weeks Ended
May 3, May 4,
1997 1996
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss from operations $(2,003) $(2,693)
Adjustments to reconcile to net cash provided
(used):
Depreciation 572 387
Decrease (increase) in non-cash working capital
accounts:
Merchandise inventories 908 (2,084)
Prepaid expenses, taxes and other current assets 74 (57)
Trade accounts payable, accrued expenses and taxes 187 1,288
Net cash (used in) continuing operations (262) (3,159)
Decrease (increase) in non-cash working capital
accounts and other of discontinued operations (305) 292
Net cash provided by (used in) discontinued
operations (305) 292
Net cash (used in)operating activities (567) (2,867)
Cash flows from investing activities:
Property additions (344) (1,834)
Other (20) 57
Net cash (used in)investing activities (364) (1,777)
Cash flows from financing activities:
Proceeds from public offering - 16,009
Reduction of long-term debt (4) -
Net cash provided by (used in) financing
activities (4) 16,009
Net increase (decrease) in cash and cash equivalents (935) 11,365
Cash and cash equivalents - beginning of period 11,333 7,272
Cash and cash equivalents - end of period $10,398 $18,637
See accompanying notes to Condensed Consolidated Financial Statements
</TABLE>
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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 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 1, 1997.
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 for the periods ended
May 3, 1997 and May 4, 1996 provided no tax benefit.
NOTE 4.
Recent Accounting Pronouncements: In February 1997,
the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128"). SFAS 128 changes
the computational guidelines for earnings per share
information. The Company will adopt the provisions
of SFAS 128 in its January 31, 1998 consolidated
financial statements. SFAS 128 will eliminate the
presentation of primary earnings per share and
replace it with basic earnings per share. Basic
earnings per share differs from primary earnings per
share because common stock equivalents are not
considered in computing basic earnings per share.
Fully diluted earnings per share will be replaced
with diluted earnings per share. Diluted earnings
per share is similar to fully diluted earnings per
share, except in determining the number of dilutive
shares outstanding for options and warrants, the
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proceeds that would be received upon the conversion
of all dilutive options and warrants are assumed to
be used to repurchase the Company's common shares at
the average market price of such stock during the
period. For fully diluted earnings per share, the
higher of the average market price or ending market
price is used. The Company expects that the
adoption of SFAS 128 will have no material effect
upon its reported results.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen Weeks Ended May 3, 1997 Compared With
Thirteen Weeks Ended May 4, 1996
Results of Operations
Net sales increased a total of 70.5% to $15.5 million in the
thirteen week period ended May 3, 1997 from $9.1 million in
the comparable period in the prior year. Sales in Noodle
Kidoodle stores increased 89.0% to $15.5 million in the
current first quarter from $8.2 million in the comparable
period in the prior year. The increase resulted
substantially from the addition of 12 new stores, of which 3
opened in the second quarter of last year, 8 opened in the
second half of last year and one opened in the first quarter
of the current year, coupled with an increase in comparable
store sales of 17.5%. The Company had 18 comparable stores
at May 3, 1997. Other retail sales decreased 96.0% to
$36,000 in the thirteen-week period ended May 3, 1997 from
$904,000 in the comparable period in the prior year,
primarily due to the closing of one Playworld store in the
first quarter of last year and two Toy Park stores in the
second quarter of last year. The Company operated 32 Noodle
Kidoodle stores and one Playworld store at May 3, 1997
compared to 20 Noodle Kidoodle stores, one Playworld store
and two Toy Park stores at May 4, 1996.
Gross profit (derived from net sales less the cost of product
sold, which includes buying and warehousing costs) increased
84.3% to $5.9 million in the first quarter ended May 3, 1997
from $3.2 million in the comparable period in the prior year.
Gross profit, as a percentage of net sales ("gross profit
percentage"), increased to 37.8% for the thirteen week period
ended May 3, 1997 from 35.0% in the comparable period in the
prior year. Gross profit percentage at Noodle Kidoodle
stores increased to 37.8% in the current quarter from 35.2%
in the comparable period in the prior year, primarily due to
the leveraging of buying costs (including the salaries and
related expenses of the Company's buyers) and warehousing
costs. The cost of merchandise remained virtually flat.
Gross profit percentage in the other retail stores decreased
to 19.4% in the period ended May 3, 1997 from 32.5% in the
comparable period in the prior year, primarily from the
closing of two Toy Park stores, which carried higher margins
than Playworld stores, in the first half of last year.
Selling and administrative expenses increased $1.9 million to
$8.0 million in the thirteen week period ended May 3, 1997
from $6.1 million in the comparable period in the prior year.
These increases resulted from higher direct store expenses of
$1.8 million as a result of changes in the store base and
higher home office expenses. Selling and administrative
expenses, as a percent of net sales, decreased to 51.3% in
the current quarter ended May 3,1997 from 66.9% in the
comparable period in the prior year. The decrease resulted
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primarily from increased sales due to an increase in store
base.
Net loss decreased 25.6% to $2.0 million ($.26 per share) for
the quarter ended May 3, 1997 from $2.7 million ($.37 per
share) in the comparable period in the prior year. The net
loss for both periods ended May 3, 1997 and May 4, 1996 did
not include tax benefits.
Liquidity and Capital Resources
During the thirteen week period ended May 3, 1997 the
Company's operating activities used $.3 million of cash.
This use of cash resulted from the net loss of $2.0 million
offset by decreases in working capital of $1.1 million and
$.6 million in depreciation. The discontinued operations
utilized $.3 million of cash primarily from reductions in
current liabilities. The Company also used cash to fund
investing activities of $.4 million primarily for the
purchase of fixed assets for new stores. As a result of the
foregoing, cash and cash equivalents decreased during the
period by $.9 million.
The expiration of the Company's $10 million unsecured line of
credit with a bank has been extended until June 30, 1997.
The Company has available net operating loss carryforwards of
approximately $18 million for income tax purposes.
Seasonality
The Company's operations are highly seasonal and a
significant portion of its revenues occur in the fourth
quarter which coincides with the Christmas selling season.
New stores are expected to be opened throughout the year, but
generally before the Christmas selling season, which will
make the Company's fourth quarter revenues an even greater
percentage of total year's revenues. Operations during the
first three quarters are not expected to be profitable for
the foreseeable future.
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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.
NOODLE KIDOODLE, INC.
(Registrant)
Date: June 16, 1997 /s/ STANLEY GREENMAN
Stanley Greenman, Chairman
of the Board, Chief
Executive Officer, and
Treasurer
(Principal Executive
Officer)
Date: June 16, 1997 /s/ KENNETH S. BETUKER
Kenneth S. Betuker
Vice President, Chief
Financial Officer and
Secretary
(Principal Financial and
Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> MAY-03-1997
<CASH> 10,398
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 16,410
<CURRENT-ASSETS> 29,486
<PP&E> 24,005
<DEPRECIATION> 4,654
<TOTAL-ASSETS> 48,911
<CURRENT-LIABILITIES> 14,466
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 33,687
<TOTAL-LIABILITY-AND-EQUITY> 48,911
<SALES> 15,535
<TOTAL-REVENUES> 15,535
<CGS> 9,664
<TOTAL-COSTS> 9,664
<OTHER-EXPENSES> 7,974
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (2,003)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,003)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,003)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
