-----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, VtdbQbK8pqA5DFQoFHZPKUobHa4zxgo4OP1WwltWZo0oXUGESkghVVMp1opBrSsj 5tsia9NfXsh5GHFbdsDNJQ== 0000043837-98-000016.txt : 19981215 0000043837-98-000016.hdr.sgml : 19981215 ACCESSION NUMBER: 0000043837-98-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981214 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: 98769082 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 October 31, 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 December 7, 1998, there were 7,594,640 outstanding shares of the issuer's common stock, par value $.001 per share (excluding 912,261 treasury shares). - 1-
TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page Item 1. - Financial Statements (Unaudited) Condensed Consolidated Balance Sheets October 31, 1998, November 1, 1997 and January 31, 1998 3 Condensed Consolidated Statements of Operations Thirteen and Thirty-Nine Weeks Ended October 31, 1998 and November 1, 1997 4 Condensed Consolidated Statements of Cash Flows Thirty-Nine Weeks Ended October 31, 1998 and November 1, 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 12 SIGNATURES 13
-2- PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENT NOODLE KIDOODLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED
October 31, November 1 January 31, 1998 1997 1998 (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents $ 54 $ 259 $11,099 Merchandise inventories 34,054 26,035 16,821 Prepaid expenses and other current assets 3,118 2,754 3,024 Total Current Assets 37,226 29,048 30,944 Property, plant and equipment - net 21,726 18,881 18,514 Other assets 38 89 23 Total Assets $58,990 $48,018 $49,481 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 20 $ 18 $ 20 Revolving credit facility 5,419 - - Trade accounts payable 13,019 10,474 6,048 Accrued expenses and taxes 8,842 7,074 7,726 Net liabilities of discontinued operations 1,259 1,135 1,173 Total Current Liabilities 28,559 18,701 14,967 Long-term debt 719 739 733 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 43,083 43,063 43,063 Accumulated deficit (9,627) (10,702) (5,499) 33,465 32,370 37,573 Less treasury stock, at cost, 914,761, 924,261 and 924,261 shares, respectively 3,753 3,792 3,792 Total Stockholders' Equity 29,712 28,578 33,781 Total Liabilities and Stockholders' Equity $58,990 $48,018 $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 Thirty-Nine Weeks Ended October 31, November 1, October 31, November 1, 1998 1997 1998 1997 (In thousands, except per share data) Net sales $22,670 $15,641 $59,146 $44,830 Costs and expenses: Cost of product sold including buying and warehousing costs 13,816 9,699 35,935 27,902 Selling and administrative expenses 10,336 8,409 27,395 24,331 24,152 18,108 63,330 52,233 Operating loss (1,482) (2,467) (4,184) (7,403) Interest income 12 90 184 350 Interest expense (84) (22) (128) (68) Loss before income tax (1,554) (2,399) (4,128) (7,121) Income taxes (benefit) - - - - Net loss $(1,554) $(2,399) $(4,128) $(7,121) Basic and diluted loss per share $ (0.20) $ (0.32) $ (0.54) $ (0.94) Weighted average shares outstanding 7,592 7,580 7,586 7,580 See accompanying notes to Condensed Consolidated Financial Statements
-4- NOODLE KIDODOLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDTED STATEMENTS OF CASH FLOWS UNAUDITED Thirty-Nine Weeks Ended October 31, November 1, 1998 1997 (In thousands)
Cash flows from operating activities: Net loss from operations $(4,128) $(7,121) Adjustments to reconcile to net cash provided (used): Depreciation 2,086 1,847 Decrease (increase) in non-cash working capital accounts: Merchandise inventories (17,233) (8,717) Prepaid expenses, taxes and other current assets (94) (2) Trade accounts payable, accrued expenses and taxes 8,087 5,407 Net cash (used in) continuing operations (11,282) (8,586) Decrease (increase) in non-cash working capital accounts and other of discontinued operations 86 (1,290) Net cash provided by (used in) discontinued operations 86 (1,290) Net cash (used in)operating activities (11,196) (9,876) Cash flows from investing activities: Property additions (5,298) (1,206) Other (15) 22_ Net cash (used in)investing activities (5,313) (1,184) Cash flows from financing activities: Net increase in revolving credit facility 5,419 - Proceeds from exercise of employee stock options 59 - Reduction of long-term debt (14) (14) Net cash provided by (used in) financing activities 5,464 (14) Net (decrease) in cash and cash equivalents (11,045) (11,074) Cash and cash equivalents - beginning of period 11,099 11,333 Cash and cash equivalents - end of period $ 54 $ 259 Supplemental cash flow information Interest expense $ 128 $ 68 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 losses for the thirteen and thirty-nine week periods ended October 31, 1998 and November 1, 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 earning per share as a result of applying the treasury stock method to outstanding employee stock options were as follows: Thirteen Weeks Ended Thirty-Nine Weeks Ended October 31, November 1, October 31, November 1, 1998 1997 1998 1997 7,660,700 7,585,100 7,676,600 7,583,800 In accordance with FAS 128, as a result of losses from operations for the quarter and nine month period ended October 31, 1998 and November 1, 1997, 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 October 31, 1998 Compared With Thirteen Weeks Ended November 1, 1997 Results of Operations: Net sales increased a total of 45.5% to $22.7 million in the thirteen week period ended October 31, 1998 from $15.6 million in the comparable period in the prior year. Sales in Noodle Kidoodle stores increased 46.5% to $22.7 million in the third quarter from $15.5 million in the comparable period in the prior year, primarily due to increases in comparable store sales of 25% and the addition of two new stores in the third quarter and seven new stores in the first half of fiscal 1999. The Company had 32 comparable stores at October 31, 1998. One Playworld retail store had sales of $111,000 in the thirteen week period ended November 1, 1997. That store was closed on October 31, 1997. The Company operated 39 Noodle Kidoodle stores at October 31, 1998 compared to 32 Noodle Kidoodle stores at November 1, 1997. Gross profit (derived from net sales less the cost of product sold, which includes buying and warehousing costs) increased 50.8% to $8.9 million in the thirteen week period ended October 31, 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 39.1% for the third quarter ended October 31, 1998 from 38.0% in the comparable period in the prior year, primarily due to lower merchandise costs and the additional sales leverage on buying costs partially offset by higher variable warehousing costs. Selling and administrative expenses increased $1.9 million to $10.3 million in the thirteen week period ended October 31, 1998 from $8.4 million in the comparable period in the prior year. This increase resulted from higher direct store expenses (which consist of payroll, occupancy, advertising and other store operating costs), of $1.5 million as a result of changes in the store base and higher sales levels and an increase in home office expenses of $.4 million. Selling and administrative expenses, as a percent of net sales, decreased to 45.6% in the current quarter ended October 31, 1998 from 53.8% in the comparable period in the prior year, primarily as a result of sales leverage against selling and administrative expenses which did not rise commensurately with increased sales levels. Net loss decreased 33.3% to $1.6 million ($0.20 per share) for the thirteen week period ended October 31, 1998 from $2.4 million ($0.32 per share) in the comparable period in the prior year. The net loss for both periods ended October 31, 1998 and November 1, 1997 did not include tax benefits. -8- Thirty-Nine Weeks Ended October 31, 1998 Compared with Thirty-Nine Weeks Ended November 1, 1997 Net sales increased a total of 31.9% to $59.1 million in the thirty-nine week period ended October 31, 1998 from $44.8 million in the comparable period in the prior year. Sales in Noodle Kidoodle stores increased 32.5% to $59.1 million in the current nine month period from $44.6 million in the comparable period in the prior year, primarily due to increases in comparable store sales of 22%, the addition of seven new stores in the current nine month period and one new store in the first quarter of last year. The Company had 32 comparable stores at October 31, 1998. One Playworld retail store had sales of 209,000 in the thirty-nine week period ended October 31, 1997. The store was closed on October 31, 1997. The Company operated 39 Noodle Kidoodle stores at October 31, 1998 compared to 32 Noodle Kidoodle stores at October 31, 1997. Gross profit (derived from net sales less the cost of product sold, which includes buying and warehousing costs) increased 37.3% to $23.2 million in the thirty-nine week period ended October 31, 1998 from $16.9 million in the comparable period in the prior year. Gross profit percentage increased to 39.2% in the current nine-month period from 37.8% in the comparable period in the prior year, primarily due to lower merchandise costs and markdowns and decreased buying costs (including the salaries and related expenses of the Company's buyers), partially offset by higher variable warehousing costs. Selling and administrative expenses increased $3.1 million to $27.4 million in the thirty-nine week period ended October 31, 1998 from $24.3 million in the comparable period in the prior year. These increases resulted from higher direct store expenses (which consists of payroll, occupancy, advertising and other store operating costs), of $2.8 million, as a result of changes in the store base and higher sales levels, higher home-office expenses of $0.4 million, offset by a reduction in pre-opening expenses of $0.1 million. Selling and administrative expenses, as a percent of net sales, decreased to 46.3% in the current nine-month period ended October 31, 1998 from 54.3% in the comparable period in the prior year, primarily as a result of sales leverage against selling and administrative expenses which did not rise commensurately with increases sales levels. Net loss decreased 42.3% to $4.1 million ($0.54 per share) for the thirty-nine week period ended October 31, 1998 from $7.1 million ($0.94 per share) in the comparable period in the prior year. The net loss for both periods ended October 31, 1998 and November 1, 1997 did not include tax benefits. Liquidity and Capital Resources: During the thirty-nine week period ended October 31, 1998 the operating activities of the Company's continuing operations used $11.3 million of cash. This use of cash resulted from -9- the net loss of $4.1 million and an increase in working capital of $9.2 million, offset by non-cash charges of $2.0 million. The increase in working capital resulted primarily from the seasonal build up of inventory in preparation for the upcoming holiday selling season, the addition of seven new stores and inventories needed for the Company's planned store expansions in the remainder of the year, offset by increases in trade accounts payable, accrued expenses and taxes. The net liabilities of discontinued operations increased $.1 million. The Company used cash to fund investing activities of $5.3 million, primarily for the purchase of fixed assets for new stores. Cash provided from financing activities was $5.5 million, primarily from borrowings of $5.4 million under the Company's revolving credit facility. As a result of the foregoing, cash and cash equivalents decreased during the period by $11.0 million. The Company opened seven new stores during the nine months ended October 31, 1998 and expects to open three additional stores in November of fiscal 1999. In addition, the Company plans to continue to make investments in its distribution center, its management information systems, 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 October 31, 1998, the Company had $5.4 million of outstanding borrowings 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. Year 2000 Disclosure: Management has completed its review of year 2000 issues and does not believe that the business impact or cost of these issues is material. The following areas have been reviewed: Corporate Information Systems: All corporate information systems, both those developed by the Company and critical systems developed by third parties, have been developed in an environment and programming language which are not affected by the year 2000 problem, and no software changes are needed. -10- In-Store Systems: All in-store and point of sale (POS) software was developed by an outside software firm which has provided written assurance of the systems' year 2000 compliance. The company has prepared a test plan to verify the vendor's claims, which will be carried out by Noodle Kidoodle staff during the first quarter of calendar 1999. Personal Computers: Some personal computers used to run the company's in-store POS systems are not year 2000 compliant. BIOS upgrades are available for these computers and are being obtained at little or no cost. Embedded Systems: None of the company's critical operations are dependent on embedded systems. Year 2000 compliance of telephone and alarm systems, which may contain embedded date- sensitive circuits, will be verified with their respective vendors by the end of the first quarter of calendar 1999. Risk: Management believes that the risks associated with the year 2000 problem are minimal. The greatest risk to the business is the possibility of an interruption in service from a vendor who is not properly prepared. Any impact to the business in this "worst case" scenario would be minimized by the likelihood that it will occur during the traditionally slower first quarter. 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. -11- 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 September 11, 1998, Noodle Kidoodle, Inc. filed a report on Form 8-K dated August 31, 1998 which reported the following information under Items 5 and 7 of that form. The Board of Directors of the Noodle Kidoodle, Inc. (the "Company") approved an amendment to Article II, Section 3 of the Amended and Restate Bylaws of the Company on August 31, 1998. The amendment provides that a stockholder desiring to nominate one or more candidates for election to the Board of Directors so notify the Company not less than 100 days nor more than 120 days prior to the anniversary date of the previous year's Annual Meeting (the "Anniversary Date"), or if the Annual Meeting is scheduled to be held on a date more than 30 days before the Anniversary Date or more than 60 days after the Anniversary Date, not later that the close of business on the later of: (i) the 100th day prior to the scheduled date of such Annual Meeting; or (ii) the 15th day following the day on which public announcement of the date of such Annual Meeting is first made by the Company. -12- 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: December 14, 1998 /s/ Stanley Greenman Stanley Greenman, Chairman of the Board, Chief Executive Officer, and Treasurer (Principal Executive Officer) Date: December 14, 1998 /s/ Kenneth S. Betuker Kenneth S. Betuker Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) -13- EX-27 2
5 1000 9-MOS JAN-30-1999 FEB-01-1998 OCT-31-1998 54 0 0 0 34,054 37,226 30,118 8,392 58,990 28,559 0 0 0 9 29703 58,990 59,146 59,146 35,935 35,935 27,395 0 128 (4,128) 0 (4,128) 0 0 0 (4,128) (0.54) (0.54)
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