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The following is a summary of certain unaudited quarterly results of operations data for each of the last two fiscal years. 

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(1) Retail gross margin represents net retail sales less cost of retail merchandise sold. 

(2) The fourth quarter of 2012 included a $4.7 million charge related to the recording of a valuation allowance on deferred tax assets. 

As a toy retailer, our sales are highest in our fourth quarter, followed by the first quarter. The timing of holidays and school vacations can impact our quarterly results. Our European-based stores have historically been more heavily weighted in the fourth quarter as compared to our North American stores. We cannot ensure that this will continue to be the case. 

Our operating results for one period may not be indicative of results for other periods, and may fluctuate significantly because of a variety of factors, including those discussed under “Risk Factors — Risks Related to Owning Our Common Stock - Fluctuations in our quarterly results of operations could cause the price of our common stock to substantially decline.” 

The timing of permanent store closures and temporary closures for remodels and relocations may result in fluctuations in quarterly results due to the revenues and expenses associated with each store location. We incur costs to close stores, typically in the three to six months prior to the closure. We typically incur most preopening costs for a store in the three months immediately preceding the store’s opening or reopening. 

For accounting purposes, the quarters of each fiscal year consist of 13 weeks, although we will have a 14-week quarter approximately once every six years. The fiscal 2014 fourth quarter will be a 14- week quarter. Quarterly fluctuations and seasonality may cause our operating results to fall below the expectations of securities analysts and investors, which could cause our stock price to fall. 

## Liquidity and Capital Resources 

Our cash requirements are primarily for the opening of new stores, installation and upgrades of information systems and working 

capital. Over the past several years, we have met these requirements through capital generated from cash flow provided by operations. We have access to additional cash through a revolving line of credit that has been in place since 2000. 

Operating Activities. Cash flows provided by operating activities were $19.1 million in fiscal 2013, $16.5 million in fiscal 2012 and $17.2 million in fiscal 2011. Cash flows from operating activities increased in fiscal 2013 as compared to 2012 primarily due to increased store contribution partially offset by the timing of inventory receipts and payments and the increase in receivables. Cash flows from operating activities decreased in fiscal 2012 as compared to 2011, primarily due to decreased store contribution. 

Investing Activities. Cash flows used in investing activities were $19.4 million in fiscal 2013, $15.1 million in fiscal 2012 and $13.3 million in fiscal 2011. Cash used in investing activities in 2013 related primarily to the continued installation and upgrades of central office information technology systems, the remodeling or relocation of 20 stores and the opening of nine new locations. Cash used in investing activities in 2012 related primarily to the continued installation and upgrades of central office information technology systems, the opening of five new stores, the remodeling or relocation of 14 stores, offset by the maturity of short-term investments. Cash used in investing activities in 2011 related primarily to the continued installation and upgrades of central office information technology systems, the opening of eight new stores, the relocation of four stores and the purchase of short-term investments, offset by the maturity of those investments. 

Financing Activities.  Financing activities provided cash of $0.1 million in 2013 and used cash of $2.9 million and $15.8 million 2012 and 2011, respectively. Purchases of our stock in fiscal 2013, 2012 

