-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hf/ESej4ClzlrTkyWPtu3BLatpbYakcj/qOmjACal5ZH1D8QUiz1jOqGs9Pnt5c9 K8M8CymXwRr80igSmo3e6g== 0000043837-98-000009.txt : 19980612 0000043837-98-000009.hdr.sgml : 19980612 ACCESSION NUMBER: 0000043837-98-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980502 FILED AS OF DATE: 19980611 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOODLE KIDOODLE INC CENTRAL INDEX KEY: 0000043837 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISC DURABLE GOODS [5090] IRS NUMBER: 111771705 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06083 FILM NUMBER: 98646546 BUSINESS ADDRESS: STREET 1: 6801 JERICHO TURNPIKE STE 100 CITY: SYOSSET STATE: NY ZIP: 11791-4427 BUSINESS PHONE: 5166770500 MAIL ADDRESS: STREET 1: 105 PRICE PARKWAY STREET 2: 105 PRICE PARKWAY CITY: FARMINGDALE STATE: NY ZIP: 11735 FORMER COMPANY: FORMER CONFORMED NAME: GREENMAN BROTHERS INC DATE OF NAME CHANGE: 19920703 10-Q 1 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 2, 1998 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 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 ___ As of May 29, 1998, there were 7,582,640 outstanding shares of the issuer's common stock, par value $.001 per share (excluding 924,261 treasury shares). -1- TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page Item 1. - Financial Statements (Unaudited) Condensed Consolidated Balance Sheets May 2, 1998, May 3, 1997 and January 31, 1998 3 Condensed Consolidated Statements of Operations Thirteen Weeks Ended May 2, 1998 and May 3, 1997 4 Condensed Consolidated Statements of Cash Flows Thirteen Weeks Ended May 2, 1998 and May 3, 1997 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION Item 6. - Exhibits and Reports on Form 8K 10 SIGNATURES 11 -2- PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENT NOODLE KIDOODLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED
May 2, May 3, January 31, 1998 1997 1998 (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents $ 5,836 $10,398 $11,099 Merchandise inventories 21,279 16,410 16,821 Prepaid expenses and other current assets 3,272 2,678 3,024 Total current assets 30,387 29,486 30,944 Property, plant and equipment - net 19,102 19,351 18,514 Other assets 30 74 23 Total Assets $49,519 $48,911 $49,481 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 20 $ 18 $ 20 Trade accounts payable 8,280 5,308 6,048 Accrued expenses and taxes 6,493 7,020 7,726 Net liabilities of discontinued operations 1,252 2,120 1,173 Total current liabilities 16,045 14,466 14,967 Long-term debt 729 749 733 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 8,506,901, 8,503,901 and 8,503,901 shares, respectively 9 9 9 Capital in excess of par value 43,076 43,063 43,063 Accumulated deficit (6,548) ( 5,584) (5,499) 36,537 37,488 37,573 Less treasury stock, at cost, 924,261 shares 3,792 3,792 3,792 Total stockholders' equity 32,745 33,696 33,781 Total Liabilities and Stockholders' Equity $49,519 $48,911 $49,481 See accompanying notes to Condensed Consolidated Financial Statements. -3-
NOODLE KIDOODLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
Thirteen Weeks Ended May 2, May 3, 1998 1997 (In thousands, except per share data) Net sales $18,045 $15,535 Costs and expenses: Cost of product sold including buying and warehousing costs 11,030 9,664 Selling and administrative expenses 8,150 7,974 19,180 17,638 Operating loss (1,135) (2,103) Interest income 109 123 Interest expense (23) (23) Loss before income tax (1,049) (2,003) Income taxes (benefit) - - Net loss $(1,049) $(2,003) Basic and diluted loss per share $ (.14) $ (.26) Weighted average shares outstanding 7,580 7,580 See accompanying notes to Condensed Consolidated Financial Statements
-4- NOODLE KIDODOLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDTED STATEMENTS OF CASH FLOWS UNAUDITED
Thirteen Weeks Ended May 2 May 3 1998 1997 (In thousands) Cash flows from operating activities: Net loss from operations $(1,049) $(2,003) Adjustments to reconcile to net cash provided (used): Depreciation 647 572 Decrease (increase) in non-cash working capital accounts: Merchandise inventories (4,458) 908 Prepaid expenses, taxes and other current assets (248) 74 Trade accounts payable, accrued expenses and taxes 999 187 Net cash (used in) continuing operations (4,109) (262) Decrease (increase) in non-cash working capital accounts and other of discontinued operations 79 (305) Net cash provided by (used in) discontinued operations 79 (305) Net cash (used in)operating activities (4,030) (567) Cash flows from investing activities: Property additions (1,235) (344) Other (7) (20) Net cash (used in)investing activities (1,242) (364) Cash flows from financing activities: Proceeds from exercise of employee stock options 13 - Reduction of long-term debt (4) (4) Net cash provided by (used in) financing activities 9 (4) Net increase (decrease) in cash and cash equivalents (5,263) (935) Cash and cash equivalents - beginning of period 11,099 11,333 Cash and cash equivalents - end of period $ 5,836 $10,398 Supplemental cash flow information Interest expense $ 23 $ 23 Income taxes, net - - See accompanying notes to Condensed Consolidated Financial Statements
-5- NOODLE KIDOODLE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED NOTE 1. Basis of presentation. The accompanying interim unaudited consolidated financial statements include the accounts of Noodle Kidoodle, Inc. and subsidiaries (the "Company"). All intercompany accounts and transactions are eliminated in consolidation. These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, such interim statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and the results of operations and cash flows for the interim periods presented. Due to the seasonal nature of the Company's business, results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's annual Report on Form 10-K for the year ended January 31, 1998. NOTE 2. Cash and cash equivalents. 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 taxes. Income tax provisions are based on estimated annual effective tax rates. The loss for the periods ended May 2, 1998 and May 3, 1997 provided no tax benefit. NOTE 4. Earnings per share. For the fiscal year ended January 31, 1998, the Company adopted Statement of Accounting Standards No. 128 ("FAS 128") which requires the presentation of basic and diluted earnings per share, which replaces primary and fully diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effect of employee stock options. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. Earnings per share have been restated for all periods presented to reflect the adoption of FAS 128. -6- Average common and common equivalent shares used in computing diluted earnings per share were 7,670,000 and 7,580,000 shares for the quarters ended May 2, 1998 and May 3, 1997, respectively, as a result of applying the treasury stock method to outstanding employee stock options. In accordance with FAS 128, as a result of losses from operations, the inclusion of employee stock options were antidilutive and, therefore, were not utilized in the computation of diluted earnings per share. -7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Thirteen Weeks Ended May 2, 1998 Compared With Thirteen Weeks Ended May 3, 1997 Results of Operations Net sales increased a total of 16.1% to $18.0 million in the thirteen week period ended May 2, 1998 from $15.5 million in the comparable period in the prior year. Sales in Noodle Kidoodle stores increased 16.1% to $18.0 million in the current first quarter from $15.5 million in the comparable period in the prior year, primarily due to increases in comparable store sales of 16%, the addition of one store in the current quarter and the addition of one store early in the first quarter of last year. The Company had 31 comparable stores at May 2, 1998. One Playworld retail store had sales of $36,000 in the thirteen week period ended May 3, 1997. That store was closed on October 31, 1997. The Company operated 33 Noodle Kidoodle stores at May 2, 1998 compared to 32 Noodle Kidoodle stores and one Playworld store at May 3, 1997. Gross profit (derived from net sales less the cost of product sold, which includes buying and warehousing costs) increased 18.6% to $7.0 million in the first quarter ended May 2, 1998 from $5.9 million in the comparable period in the prior year. Gross profit, as a percentage of net sales ("gross profit percentage") increased to 38.9% for the thirteen week period ended May 2, 1998 from 37.8% in the comparable period in the prior year, primarily due to lower merchandise costs of 1.3%, decreased buying costs (including the salaries and related expenses of the Company's buyers) offset by higher variable warehousing costs. Selling and administrative expenses increased $.2 million to $8.2 million in the thirteen week period ended May 2, 1998 from $8.0 million in the comparable period in the prior year. This increase resulted from higher direct store expenses of $.2 million, which consist of payroll, advertising and other store operating costs, as a result of changes in store base and higher sales levels, and increases in home office expenses of $.1 million offset by reductions in pre-opening expenses of $.1 million. Selling and administrative expenses, as a percent of net sales, decreased to 45.2% in the current quarter ended May 2, 1998 from 51.3% in the comparable period in the prior year, primarily as a result of leveraging selling and administrative expenses which did not rise commensurately with increased sales levels. Net loss decreased 50.0% to $1.0 million ($.14 per share) for the quarter ended May 2, 1998 from $2.0 million ($.26 per share) in the comparable period in the prior year. The net loss for both periods ended May 2, 1998 and May 3, 1997 did not include tax benefits. -8- Liquidity and Capital Resources. During the thirteen week period ended May 2, 1998 the Company's operating activities of its continuing operations used $4.1 million of cash. This use of cash resulted from the net loss of $1.0 million, and an increase in working capital of $3.7 million offset by non-cash charges of $.6 million. The increase in working capital resulted primarily from increased inventory levels of $4.5 million needed for the Company's planned store expansions in the second quarter. The net liabilities of discontinued operations increased $.1 million. The Company also used cash to fund investing activities of $1.2 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 $5.3 million. The Company opened one store during the three months ended May 2, 1998 and expects to open five additional stores in the next two quarters of fiscal 1999. In addition, the Company plans to continue to make investments in its distribution center and for store remodels to improve operational efficiencies and customer service. The Company expects to meet these cash requirements through a combination of available cash and borrowings from its existing revolving line of credit. In June 1997 the Company entered into a $15.0 million, three- year revolving credit facility with The CIT Group/Business Credit, Inc. This facility may be used for direct borrowings and letters of credit and is secured by the Company's inventory, receivables and certain other assets. As of May 2, 1998, no borrowings were outstanding under the revolving credit facility. The Company expects that its current cash and cash equivalents and funds available under its revolving credit facility will be sufficient to fund its planned store openings and other recurring operational cash needs for the near future. The Company is continually evaluating financing possibilities for its long-term expansion, and it may seek to raise additional funds through any one or a combination of public or private debt or equity-related offerings, dependent upon market conditions, or from borrowings under future credit facilities. The Company has available net operating loss carryfowards of approximately $21.4 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. -9- PART II - OTHER INFORMATION Item 6. - Exhibits and Reports on Form 8-K (a) The following exhibit is filed as part of this report: Exhibit 27 - Financial Data Schedule (SEC/EDGAR only) (b) Reports on Form 8-K. On May 15, 1998, Noodle Kidoodle, Inc. filed report on Form 8-K dated March 11, 1998 which reported the following information under Items 5 and 7 of that form. The Board of Directors of Noodle Kidoodle, Inc. (the "Company") authorized the issuance of one preferred share purchase right (a "Right") for each outstanding share of common stock, par value $.001 per share, of the Company. The description and terms of the Rights are set forth in the Rights Agreement, dated as of May 1, 1998 between Noodle Kidoodle, Inc. and Chase Mellon Shareholders' Services, L.L.C. as Rights Agent, together with Exhibits A and B attached thereto. The Board of Directors of the Company approved an amendment to Article I, Section 3 of the Amended and Restated Bylaws of the Company on May 13, 1998. -10- 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 12, 1998 /s/ Stanley Greenman Stanley Greenman, Chairman of the Board, Chief Executive Officer, and Treasurer (Principal Executive Officer) Date: June 12, 1998 /s/ Kenneth S. Betuker Kenneth S. Betuker Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) -11- EX-27 2 ARTICAL 5 FIN. DATA SCHEDULE FOR 1ST QTR 10-Q
5 1000 3-MOS JAN-30-1999 FEB-01-1998 MAY-02-1998 5,836 0 0 0 21,279 30,387 26,055 6,953 49,519 16,045 0 0 0 9 32,736 49,519 18,045 18,045 11,030 11,030 8,150 0 23 (1,049) 0 (1,049) 0 0 0 (1,049) (0.14) (0.14)
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