<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 30, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20035
NATURAL WONDERS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0141610
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4209 TECHNOLOGY DRIVE, FREMONT, CALIFORNIA 94538
(Address of principal executive offices)
(Zip code)
510-252-9600
(Registrant's telephone number, including area code)
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 period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------
Common stock outstanding as of December 13, 1999: 7,865,103 shares of
common stock.
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<PAGE>
NATURAL WONDERS, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Statements of Operations 3
Quarters ended October 30, 1999 and October 31, 1998
Condensed Balance Sheets 4
October 30, 1999, January 30, 1999 and October 31, 1998
Condensed Statements of Cash Flows 5
Nine months ended October 30, 1999 and October 31, 1998
Notes to Condensed Financial Statements for the 6
period ended October 30, 1999
ITEM 2. Management's Discussion and Analysis of 7-10
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 11
ITEM 1. Legal Proceedings - None
ITEM 2. Changes in Securities - None
ITEM 3. Defaults Upon Senior Securities - None
ITEM 4. Submission of Matters to a Vote of Security Holders - None
ITEM 5. Other Information - None
ITEM 6. Exhibits and Reports on Form 8-K - None
SIGNATURE 12
</TABLE>
2 of 12
<PAGE>
NATURAL WONDERS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
------------------------ -----------------------
OCTOBER 30, OCTOBER 31, OCTOBER 30, OCTOBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 23,332 $ 24,464 $ 70,299 $ 75,173
Cost of goods sold and
store occupancy expenses 17,599 18,786 57,380 58,184
----------- ----------- ----------- -----------
Gross margin 5,733 5,678 12,919 16,989
Selling, general & administrative expenses 11,635 10,426 32,081 31,417
----------- ----------- ----------- -----------
Operating loss (5,902) (4,748) (19,162) (14,428)
Interest expense and other, net 263 8 205 83
----------- ----------- ----------- -----------
Loss before taxes (6,165) (4,756) (19,367) (14,511)
Income tax benefit 2,281 1,760 7,166 5,369
----------- ----------- ----------- -----------
Net loss $ (3,884) $ (2,996) $(12,201) $ (9,142)
=========== =========== =========== ===========
Net loss per common share
basic and diluted: $ (0.49) $ (0.38) $ (1.54) $ (1.14)
Weighted average common shares outstanding
basic and diluted: 7,865 7,978 7,915 8,037
Stores open at end of period 203 194 203 194
</TABLE>
See notes to financial statements
3 of 12
<PAGE>
NATURAL WONDERS, INC.
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
OCTOBER 30, JANUARY 30, OCTOBER 31,
1999 1999 1998
----------- ----------- -----------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 802 $ 4,841 $ 14
Short-term investments 0 7,380 0
Merchandise inventories 53,805 22,707 38,693
Prepaid income taxes 7,313 1,403 5,423
Prepaid expenses and other current assets 4,926 4,318 6,048
----------- ----------- -----------
Total current assets 66,846 40,649 50,178
Property and Equipment:
Leasehold improvements 30,479 30,077 30,173
Property and equipment under capital lease 0 0 4,189
Furniture, fixtures and equipment 31,572 34,106 28,925
----------- ----------- -----------
62,051 64,183 63,287
Less accumulated depreciation and amortization (36,041) (37,510) (35,662)
----------- ----------- -----------
26,010 26,673 27,625
Other Assets 3,310 3,526 2,226
----------- ----------- -----------
Total Assets $ 96,166 $ 70,848 $ 80,029
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 25,535 $ 8,500 $ 12,216
Accrued compensation and related costs 1,736 2,300 1,467
Accrued liabilities 2,408 3,037 2,133
Short-term borrowings 22,331 0 14,500
----------- ----------- -----------
Total current liabilities 52,010 13,837 30,316
Deferred Rents 3,244 3,561 3,630
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $.0001; authorized
17,000,000 shares; issued and outstanding
7,865,103; 7,951,392; 7,942,289 shares 1 1 1
Capital in excess of par value 33,736 34,073 33,951
Retained earnings 7,175 19,376 12,131
----------- ----------- -----------
Total stockholders' equity 40,912 53,450 46,083
----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 96,166 $ 70,848 $ 80,029
=========== =========== ===========
</TABLE>
See notes to financial statements
4 of 12
<PAGE>
NATURAL WONDERS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------
OCTOBER 30, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (12,201) $ (9,142)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 5,660 5,411
Loss on disposition of asset 106 978
Change in operating assets and liabilities:
Merchandise inventories (31,098) (15,509)
Prepaid expenses and other assets (6,302) (6,139)
Trade accounts payable 17,035 4,219
Accrued compensation and related costs (564) (1,358)
Accrued liabilities (629) (1,503)
Income tax payable 0 (1,857)
Deferred rent (317) (175)
---------------- ----------------
Net cash used in operating activities (28,310) (25,075)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments 0 (6,900)
Sales of short-term investments 7,380 20,300
Purchases of property and equipment (5,103) (5,170)
---------------- ----------------
Net cash provided by investing activities 2,277 8,230
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations 0 (1,327)
Principal payments on long-term debt 0 (2,088)
Net borrowing on line of credit 22,331 14,500
Purchase of treasury stock (366) (896)
Issuance of common stock under employee stock purchase program 29 37
Exercise of stock options and warrants 0 282
---------------- ----------------
Net cash provided by financing activities 21,994 10,508
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,039) (6,337)
CASH AND CASH EQUIVALENTS:
Beginning of period 4,841 6,351
---------------- ----------------
End of period $ 802 14
================ ================
CASH PAID DURING PERIOD:
Interest $ 289 285
Income taxes $ 97 1,857
</TABLE>
See notes to financial statements
5 of 12
<PAGE>
NATURAL WONDERS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS AS OF OCTOBER 30, 1999 AND OCTOBER
31, 1998 AND FOR THE THREE AND NINE MONTH PERIODS ENDED OCTOBER 30, 1999 AND
OCTOBER 31, 1998
1. The financial statements are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which, in the opinion of
management, are necessary for a fair presentation of the financial
position, results of operations, and cash flows. The results of operations
for the interim periods presented are not necessarily indicative of the
results to be expected for any full fiscal year.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's 1998
Annual Report to Stockholders and Form 10-K for the fiscal year ended
January 30, 1999 as filed with the Securities and Exchange Commission.
2. New Accounting Pronouncements: SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as delayed by SFAS No. 137, will be
effective for the Company in June 2000. SFAS No. 133 established
accounting and reporting standards for derivative instruments embedded in
other contracts, and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. The
Company has not yet evaluated the potential impact of SFAS No. 133 on its
financial statements.
3. The Company entered into an amended and restated credit facility agreement
with a commercial bank effective June 15, 1999 for the purpose of
financing seasonal working capital needs. This line of credit is for a
term of three years, with a maximum credit line of $30,000,000, and is
provided by the same bank as the Company's previous credit facility
agreement, together with an additional lender acting as administrative
agent. The line provides for revolving advances up to the lesser of 60% of
the value of eligible inventory, 80% of the net retail liquidation value
of eligible inventory, or the maximum credit line. As of October 30, 1999,
total availability under the line was $25,920,000, of which $22,331,000
was outstanding. The line includes up to $5,000,000 for the issuance of
commercial and standby letters of credit. The line of credit must be fully
repaid for a 30-day consecutive period between January 1 and February 15
each year. The Company has the option of choosing interest payable at a
rate based on LIBOR plus 2.25% or a rate equal to the bank's prime rate.
The agreement contains restrictive covenants, which include maintaining
certain minimum tangible net worth levels and requiring bank consent for
the payment of dividends. As of October 30, 1999, the Company was in
compliance with these covenants. The agreement also includes certain
prepayment penalties.
The Company's previous credit facility agreement allowed for total
borrowings on the line of credit and the letters of credit up to
$23,000,000 during the increase period or $12,000,000 during the remainder
of the term. The Company was out of compliance with the bank covenants as
of May 1, 1999 and received a waiver valid through June 15, 1999, at which
time the Company entered into the amended and restated credit facility
agreement.
6 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
GENERAL
As of October 30, 1999, Natural Wonders operated 203 stores in 39
states compared to 194 stores in 36 states as of October 31, 1998. In the first
nine months of 1999, six new permanent stores were opened, five stores were
closed (three holiday stores from 1998 and two permanent stores) and 22
temporary holiday stores were opened, as compared to nine permanent stores
opened, three permanent stores closed and 17 temporary holiday stores opened in
the first nine months of fiscal 1998.
SALES
During the third quarter of 1999, sales decreased 4.6% over the same
period in 1998. The decrease was primarily due to decreased comparable store
sales. Comparable store sales decreased 6.0% in the third quarter of 1999, as
compared to the same period in 1998. The decrease in the comparable store sales
in the third quarter was primarily due to continued weakness in the Discovery,
Apparel and Media merchandising areas. In the first nine months of 1999, sales
decreased 6.5% over the same period in 1998 due to decreased comparable store
sales of 8.0%.
COST OF GOODS SOLD AND STORE OCCUPANCY EXPENSES
Cost of goods sold and store occupancy expenses include distribution
center costs and other expenses associated with acquiring inventory. As a
percentage of sales, these costs decreased to 75.4% in the third quarter of 1999
from 76.8% in the third quarter of 1998 and increased to 81.6% in the first nine
months of 1999 from 77.4 % in the first nine months of 1998. The decrease in the
third quarter cost of goods sold as a percentage of sales was due to the effect
of inventory processing and handling costs capitalization associated with an
increasing inventory balance, partially offset by fixed store occupancy costs
for more stores with lower sales per store, while product costs remained flat.
The increase in the first nine months of 1999, compared to 1998 was due to fixed
store occupancy costs for more stores with lower sales per store and a slightly
higher product cost, partially offset by The decrease in the third quarter cost
of goods sold as a percentage of sales was due to the effect of inventory
processing and handling costs capitalization associated with an increasing
inventory balance.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses, (SG&A), are primarily
non-occupancy store expenses and corporate overhead. As a percentage of sales,
these costs increased to 49.9% in the third quarter of 1999 from 42.6 % in the
third quarter of 1998, due to lower sales per store. Excluding timing variances
and one time adjustments in the third quarter of 1998, selling, general and
7 of 12
<PAGE>
administrative expenses declined slightly from year to year on an absolute
dollar basis. In the first nine months of 1999 these costs increased from 41.8%
in 1998 to 45.6% in 1999, due to lower sales per store. Excluding timing
variances and one-time adjustments in 1998, selling, general and administrative
expenses declined from year to year on an absolute dollar basis.
OPERATING INCOME
As a result of the foregoing, the operating loss was $5,902,000 or
25.3% of sales in the third quarter of 1999 versus $4,748,000 or 19.4% of sales
in the third quarter of 1998. For the first nine months of 1999, the operating
loss was $19,162,000 or 27.3% of sales compared to an operating loss of
$14,428,000 or 19.2% of sales in the first nine months of 1998.
INTEREST EXPENSE AND OTHER, NET
Interest Expense and Other, Net was 1.1% of sales in the third quarter
of 1999 compared to 0.0% in the third quarter of 1998 and 0.3% of sales for the
first nine months of 1999 compared to 0.1% of sales in the first nine months of
1998.
NET LOSS
As a result of the foregoing, the net loss increased to $3,884,000 or
16.6% of sales in the third quarter of 1999 from $2,996,000 or 12.2% of sales in
the third quarter of 1998. For the first nine months of 1999, the net loss
increased from $12,201,000 or 17.4% of sales compared to $9,142,000 or 12.2% of
sales in the first nine months of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of capital in recent years have been net
cash flow from operations. Seasonal working capital requirements have been met
through short-term bank borrowings.
During the first nine months of fiscal 1999, cash and investments
decreased $11,419,000. This was primarily due to seasonal operating losses,
historically incurred in the first three fiscal quarters and construction and
fixtures for new stores. Increased pre-holiday inventory was paid for with
short- term borrowings and increased accounts payable. In fiscal 1997 the Board
of Directors of the Company authorized the repurchase of up to $2,000,000 of the
Company's outstanding common stock. Beginning in February 1998, the Company
began repurchasing stock and as of the end of the third quarter of 1999 has
purchased 338,257 shares for a total of $1,273,000.
Compared to the third quarter in the prior year, cash and investments
remained flat. The increase in short-term borrowings, accounts payable and
merchandise inventories was offset by higher operating losses, construction and
fixture purchases for new and remodeled stores, and the repurchase of stock.
During the remainder of 1999, the Company plans to open 3 new stores
and, during the holiday season, approximately 4 temporary store locations. The
Company anticipates that cash for the remainder of 1999 will primarily be used
for capital expenditures and merchandise inventory for new and temporary
locations, and to purchase inventory for the Company's existing stores,
particularly prior to and during the peak holiday selling season.
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<PAGE>
The Company has conducted a review of its computer systems to identify
those areas that could be affected by the Year 2000 issue. The Company presently
believes, with the new merchandise and financial information system placed in
service in February 1998, the Year 2000 will not pose significant operational
problems. The Company also believes that customers are not likely to be
significantly affected by the Year 2000 issue. However, there can be no
guarantee that the systems of other companies on which the Company's systems
rely will be converted on a timely basis and would not have an adverse effect on
the Company. The Company will utilize both internal and external resources to
reprogram or replace, and test the software for the Year 2000 modifications.
During 1998, the Company rolled out a new operating system along with related
merchandising, distribution and accounting software, and upgraded the payroll
system. In early 1999 the Company also upgraded the existing human resources
information system to be Year 2000 compliant, and implemented a new system in
the third quarter, that is also Year 2000 compliant, and is currently running in
parallel with the old system. All systems that need to be reviewed have been
identified and the Company continues to review questionnaires sent out to the
vendors and testing systems for compliance. The Company does not expect
expenditures related to the Year 2000 issue to be material and as such, costs
associated with Year 2000 have not and are not expected to have a significant
impact on the Company's results of operations, liquidity, or capital resources.
To date, the Company has not accelerated any system replacements or incurred any
costs for upgrades or additional personnel in order to make any systems Year
2000 compliant. It is the opinion of management that the reasonably likely worst
case scenario would arise from external causes such as utility or banking
industry problems, rather than internal system or operational issues. The
Company has developed Year 2000 contingency plans.
The Company had a credit facility agreement with a commercial bank for
the purpose of financing seasonal working capital needs. The total borrowings on
the line of credit and the letters of credit could not exceed $23,000,000 during
the increase period or $12,000,000 during the remainder of the term. The Company
was out of compliance with the bank covenants as of May 1, 1999 and received a
waiver valid through June 15, 1999. The Company entered into an amended and
restated line effective June 15, 1999. The new line is for a term of three
years, with a maximum credit line of $30,000,000, and is provided by the same
commercial bank, together with an additional lender acting as administrative
agent. The line provides for revolving advances up to the lesser of 60% of the
value of eligible inventory, 80% of the net retail liquidation value of eligible
inventory, or the maximum credit line. As of October 30 1999, total availability
under the line was $25,920,000. The line includes up to $5,000,000 for the
issuance of commercial and standby letters of credit. The line of credit must be
fully repaid for a 30-day consecutive period between January 1 and February 15.
The Company has the option of choosing interest payable at a rate based on LIBOR
plus 2.25% or a rate equal to the bank's prime rate. The agreement contains
restrictive covenants, which include maintaining certain minimum tangible net
worth levels and requiring bank consent for the payment of dividends. As of
October 30, 1999, the Company was in compliance with these covenants. The
agreement also includes certain prepayment penalties.
The Company believes that current cash and short-term investments
together with its cash flow from operations, and funds available under its
credit facility agreement will be sufficient to fund the Company's operations
for the next 12 months.
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<PAGE>
INFLATION AND SEASONALITY
The Company does not believe that its operations have been materially
affected by inflation during the three recent fiscal years or in 1999 to date.
However, there is no assurance that its business will not be affected by
inflation in the future.
The Company's business is subject to substantial seasonal variations in
demand. Historically, a significant portion of the Company's sales and
substantially all its net earnings have been realized during the fourth quarter
(which includes the November/December holiday season), and levels of sales and
net earnings have been significantly lower in the first three quarters, usually
resulting in losses in these quarters. If for any reason the Company's sales
were substantially below seasonal norms during the months of November and
December, as was the case in 1998, the Company's annual results would be
adversely affected. The Company's quarterly results of operations may fluctuate
significantly as a result of comparable store sales levels, the timing of new
store openings and the amount of revenue contributed by new stores.
ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as delayed by SFAS No. 137, will be effective for the Company in
June 2000. SFAS No. 133 established accounting and reporting standards for
derivative instruments embedded in other contracts, and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company has not yet evaluated the potential impact of SFAS
No. 133 on its financial statements.
FUTURE RESULTS
This report contains forward-looking statements regarding, among other
matters, the Company's future strategy, store opening plans, merchandising
strategy and growth. The forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements address matters, which are subject to a number of
risks and uncertainties. In addition to the general risks associated with the
operation of specialty retail stores in a highly competitive environment, the
success of the Company will depend on a variety of factors. The success of the
Company's operations depends upon a number of factors relating to consumer
spending, including economic conditions affecting disposable consumer income
such as employment, business conditions, interest rates and taxation. The
Company's continued growth also depends upon the demand for its products, which
in turn is dependent upon various factors, such as the introduction and
acceptance of new products and the continued popularity of existing products, as
well as the timely supply of all merchandise. Reference is made to the Company's
filings with the Securities and Exchange Commission for further discussion of
risks and uncertainties regarding the Company's business.
10 of 12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
Exhibit 10.28.5: Amendment Number One to Amended and Restated Loan
and Security Agreement entered into on June 15, 1999 among the Company,
Wells Fargo Bank, National Association and Foothill Capital
Corporation.
Exhibit 11.1: Computation of Per Share Loss
Exhibit 27: Financial Data Schedule
b. REPORTS ON FORM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the third quarter of fiscal 1999.
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SIGNATURE
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.
Dated: December 14, 1999
NATURAL WONDERS, INC.
(Registrant)
/s/ Peter G. Hanelt
--------------------------------------
Peter G. Hanelt,
Chief Executive Officer, President and
Chief Financial Officer
(Signing on behalf of the registrant and
as Principal Accounting and Financial Officer)
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<PAGE>
AMENDMENT NUMBER ONE TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Amendment Number One to Amended and Restated Loan and Security
Agreement ("Amendment") is entered into as of November 10, 1999, by and among
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a lender and as Agent ("Wells
Fargo"), FOOTHILL CAPITAL CORPORATION, a California corporation, as a lender and
as Administrative Agent ("Foothill"), and NATURAL WONDERS, INC., corporation
("Borrower"), in light of the following:
A. Borrower, Wells Fargo and Foothill have previously entered into
that certain Amended and Restated Loan and Security Agreement, dated as of
June 15, 1999 (the "Agreement"). Wells Fargo and Foothill shall jointly be
referred to as Lenders.
B. Borrower and Lenders desire to amend the Agreement as provided for
and on the conditions herein.
NOW, THEREFORE, Borrower and Lenders hereby amend and supplement the
Agreement as follows:
1. DEFINITIONS. All initially capitalized terms used in this
Amendment shall have the meanings given to them in the Agreement unless
specifically defined herein.
2. AMENDMENTS.
(a) Section 7.20 of the Agreement is hereby amended to read as
follows:
7.20 FINANCIAL COVENANT. Fail to maintain Tangible Net Worth
of at least the following amounts, measured on a fiscal quarter-end
basis:
<TABLE>
<CAPTION>
QUARTER ENDING EACH YEAR ON OR ABOUT MINIMUM TANGIBLE NET WORTH
------------------------------------ --------------------------
<S> <C>
July 31 $40,103,000
October 31 $37,402,000
January 31 $49,026,000
April 30 $42,107,000
</TABLE>
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to
Lenders that all of Borrower's representations and warranties set forth in
the Agreement are true, complete and accurate in all respects as of the date
hereof.
4. NO DEFAULTS. Borrower hereby affirms to Lenders that no Event
of Default has occurred and is continuing as of the date hereof.
1
<PAGE>
5. CONDITION PRECEDENT. The effectiveness of this Amendment is
expressly conditioned upon receipt by Lenders of an executed copy of this
Amendment.
6. COSTS AND EXPENSES. Borrower shall pay to Foothill all of
Foothill's out-of-pocket costs and expenses (including, without limitation,
the fees and expenses of its counsel, which counsel may include any local
counsel deemed necessary, search fees, filing and recording fees,
documentation fees, appraisal fees, travel expenses, and other fees) arising
in connection with the preparation, execution, and delivery of this Amendment
and all related documents.
7. LIMITED EFFECT. In the event of a conflict between the terms
and provisions of this Amendment and the terms and provisions of the
Agreement, the terms and provisions of this Amendment shall govern. In all
other respects, the Agreement, as amended and supplemented hereby, shall
remain in full force and effect.
8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which when so executed and delivered shall be deemed to be an
original. All such counterparts, taken together, shall constitute but one and
the same Amendment. This Amendment shall become effective upon the execution
of a counterpart of this Amendment by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first set forth above.
WELLS FARGO BANK, NATIONAL ASSOCCIATION,
as Agent and as a Lender
By: /s/ Karen Barone
Title: Vice President
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Administrative
Agent and as a Lender
By: /s/ Robert Castine
Title: Vice President
NATURAL WONDERS, INC.,
a Delaware corporation
By: /s/ Peter G. Hanelt
Title: Chief Executive Officer
2
<PAGE>
The undersigned has executed a Continuing Guaranty in favor of the
above described Lenders respecting the obligations of Natural Wonders, Inc.
("Borrower") owing to Lenders. The undersigned acknowledges the terms of the
above Amendment and reaffirms and agrees that: its Continuing Guaranty remains
in full force and effect; nothing in such Continuing Guaranty obligates Lenders
to notify the undersigned of any changes in the financial accommodations made
available to Borrower or to seek reaffirmations of the Continuing Guaranty; and
no requirement to so notify the undersigned or to seek reaffirmations in the
future shall be implied by the execution of this reaffirmation.
NW CAPITAL MANAGEMENT, INC.,
a California corporation
By: /s/ Peter G. Hanelt
Name: Peter G. Hanelt
Title: Chief Executive Officer
Due to system issues, Form 10-Q was not completed and reviewed within the
prescribed time period.
3
<PAGE>
EXHIBIT 11.1
NATURAL WONDERS, INC.
COMPUTATION OF PER SHARE NET LOSS
(Shares in thousands)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
---------------------- -----------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss $ (3,884) $ (2,996) $(12,201) $ (9,142)
=========== =========== =========== ===========
Weighted average common
shares outstanding,
basic and diluted 7,865 7,978 7,915 8,037
Per share net loss,
basic and diluted $ (0.49) $ (0.38) $ (1.54) $ (1.14)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-30-1999
<CASH> 802
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 53,805
<CURRENT-ASSETS> 66,846
<PP&E> 62,051
<DEPRECIATION> 36,041
<TOTAL-ASSETS> 96,166
<CURRENT-LIABILITIES> 52,010
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 40,911
<TOTAL-LIABILITY-AND-EQUITY> 96,166
<SALES> 23,332
<TOTAL-REVENUES> 23,332
<CGS> 17,599
<TOTAL-COSTS> 17,599
<OTHER-EXPENSES> 11,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 263
<INCOME-PRETAX> (6,165)
<INCOME-TAX> (2,281)
<INCOME-CONTINUING> (3,884)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,884)
<EPS-BASIC> (0.49)
<EPS-DILUTED> (0.49)
</TABLE>
