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Linens'n Things
-------------------------------
The Home Furnishings Superstore
1996 Annual Report
<PAGE>
Management's Discussion and Analysis
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The following table sets forth the percentage of net sales of certain items
included in the Company's statements of operations for the periods indicated:
<TABLE>
<CAPTION>
December 31 1996 1995 1994
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Percentage of net sales
Net sales .............................................. 100.0% 100.0% 100.0%
Cost of sales, including buying and warehousing costs .. 61.2 62.2 60.4
----- ----- -----
Gross profit ........................................... 38.8 37.8 39.6
Selling, general and administrative expenses ........... 34.4 34.3 32.3
Restructuring and asset impairment charges ............. -- 2.0 --
----- ----- -----
Operating profit ....................................... 4.4 1.5 7.3
Interest expense, net .................................. 0.7 1.3 0.7
----- ----- -----
Income before income taxes and cumulative
effect of change in accounting principle ............... 3.7 0.2 6.6
Provision for income taxes ............................. 1.5 0.2 2.7
----- ----- -----
Income (loss) before cumulative effect
of change in accounting principle ...................... 2.2 (0.0) 3.9
Cumulative effect of change in accounting principle, net -- 0.0 --
----- ----- -----
Net income (loss) ...................................... 2.2% (0.0%) 3.9%
-------------------------------------------------------------------------------------------
</TABLE>
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales for 1996 were $696.1 million, an increase of 25.4% over 1995 sales of
$555.1 million, primarily as a result of new store openings. The Company opened
36 superstores and closed 22 stores in 1996, as compared to opening 28
superstores and closing 18 stores in 1995. At December 31, 1996, the Company
operated 169 stores, of which 132 were superstores, as compared to 155 stores,
of which 101 were superstores at December 31, 1995. Comparable store net sales
in 1996 increased 1.1% compared to a decrease of 1.5% in 1995. During the first
half of 1996, the Company's comparable store net sales decreased below the same
period in 1995 by 2.7% due primarily to increased competitive intrusions at
approximately 40% of the Company's superstores in existing markets. These
competitive intrusions commenced primarily in mid-1995. However, for the second
half of 1996, comparable store net sales increased 4.1% as a result of a strong
back-to-school and holiday selling season, as well as the diminishing effect of
the prior year's competitive intrusions.
The Company's average net sales per superstore increased slightly in 1996 to
$5.5 million from $5.4 million in 1995, while average net sales per traditional
store remained flat at $1.7 million. For the year ended December 31, 1996, net
sales of "linens" merchandise increased approximately 20% over the prior year,
while net sales of "things" merchandise increased approximately 36% for the same
period. The increase in "things" merchandise primarily resulted from the growth
in the number of superstore locations which carry a larger line of "things"
products as well as the overall expansion of the product categories in existing
stores.
Gross profit for 1996 was $269.9 million, or 38.8% of net sales, as compared to
$209.9 million, or 37.8% of net sales, in 1995. Excluding charges related to the
CVS Strategic Program (the Company was a wholly-owned subsidiary of CVS prior to
the initial public offering) discussed in the notes to consolidated financial
statements, gross profit in 1995 would have been $218.1 million or 39.3% of
sales. This decrease as a percentage of net sales resulted from higher clearance
markdowns during the spring associated with the closing of traditional stores
partially offset by reduced freight expenses as a percentage of net sales.
Excluding charges related to the CVS Strategic Program recorded in 1995, the
Company's average superstore gross margin in 1996 was 39.8% as compared to 39.7%
in 1995 and average traditional store gross margin was 34.5% as compared to
37.8% in the prior year.
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The gross margin for "things" merchandise was slightly higher than the gross
margin for "linens" merchandise for each period, accounting for a higher gross
margin in the superstores, which have a higher mix of "things" versus "linens"
as compared to the traditional stores. The decline in gross margin in the
traditional stores was due primarily to higher markdowns associated with closing
stores.
Selling, general and administrative expenses for 1996 were $239.2 million or
34.4% of net sales, as compared to $190.8 million, or 34.3% of net sales in
1995. This increase as a percentage of net sales resulted from a one-time charge
of approximately $1.5 million relating to certain employee benefit costs
associated with the initial public offering.
As a result of the factors described above, operating profit for 1996 increased
to $30.7 million or 4.4% of net sales, from $8.1 million, or 1.5% of net sales,
during 1995. Excluding one-time charges relating to the CVS Strategic Program,
the Company's operating profit in 1995 would have been $31.5 million or 5.7% of
net sales.
Net interest expense in 1996 decreased 33.5% to $4.7 million, or 0.7% of net
sales, from $7.1 million, or 1.3% of net sales, during 1995. This decrease was
due primarily to $158.0 million in capital contributions from CVS in 1996 which
were used to repay the Company's intercompany debt to CVS.
The Company's income tax expense for 1996 was $11.0 million, as compared to $1.1
million during 1995. The Company's effective tax rate in 1996 was 42.1%, as
compared to 103.2% in 1995, primarily due to the effect of the Company's
one-time charges incurred in 1995. Excluding these charges, the Company's
effective tax rate would have been 42.3% in 1995.
Effective January 1, 1995, the Company changed its policy from capitalizing
internally developed software costs to expensing them as incurred. The impact in
1995, as a result of this change exclusive of the cumulative effect of $0.3
million (before income tax effect) was to reduce net income by $0.2 million.
As a result of the factors described above, net income for 1996 was $15.0
million, or 2.2% of net sales, as compared to a net loss of $212,000 in 1995.
Excluding one-time charges relating to the CVS Strategic Program, the Company's
net income would have been $14.1 million, or 2.5% of net sales, in 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net sales for 1995 were $555.1 million, an increase of 26.1% over 1994 sales of
$440.1 million, primarily as a result of new store openings. During 1995, the
Company opened 28 superstores and closed 18 stores, as compared to opening 29
superstores and closing 27 stores in 1994. At the end of 1995, the Company
operated 155 stores, of which 101 were superstores, as compared to 145 stores,
of which 74 were superstores, at the end of 1994. Comparable store net sales in
1995 decreased 1.5% primarily due to new competitive intrusions in existing
markets at approximately 40% of the Company's superstores included in the
comparable store base which previously had limited competition from other
superstores, as well as to a general slowdown in the retail sector during 1995.
In 1995, the Company's average net sales per superstore increased slightly to
$5.4 million from $5.1 million and average net sales per traditional store
decreased slightly to $1.7 million from $1.9 million, in the prior year. In
1995, net sales of "linens" merchandise increased approximately 19% over the
prior year, while net sales of "things" merchandise increased approximately 45%
for the same period. The increase in "things" merchandise resulted from the
growth in the number of superstore locations which carry a larger line of
"things" products as well as the overall expansion of the product categories in
existing stores.
Gross profit in 1995 was $209.9 million, or 37.8% of net sales, as compared to
$174.4 million, or 39.6% of net sales, in 1994. Excluding charges related to the
CVS Strategic Program, the Company's gross profit in 1995 would have been $218.1
12
<PAGE>
million or 39.3% of net sales. The remaining decrease is primarily attributable
to higher freight and handling costs incurred given the less than full usage of
the distribution center during its implementation phase and the Company's
expansion to the Western United States.
In 1995, excluding charges related to the CVS Strategic Program, the Company's
average superstore gross margin was 39.7% as compared to 40.2% in 1994, and
average traditional store gross margin was 37.8% as compared to 38.7% in the
prior year. Gross margin for both "linens" and "things" merchandise declined
consistent with the Company's consolidated results. The gross margin for
"things" merchandise was slightly higher than the gross margin for "linens"
merchandise for each such period accounting for a higher gross margin in the
superstores, which have a higher mix of "things" versus "linens" as compared to
the traditional stores.
Selling, general and administrative expenses in 1995 were $190.8 million, or
34.3% of net sales, as compared to $142.2 million, or 32.3% of net sales, in
1994. This increase as a percentage of net sales was primarily attributable to
higher occupancy costs due to a higher proportion of superstores located in
prime real estate locations as compared to the prior year and lower fixed
expense leverage due to the decrease in comparable store net sales.
As a result of factors described above, operating profit in 1995 decreased to
$8.1 million, or 1.5% of net sales, from $32.2 million, or 7.3% of net sales, in
1994. Excluding charges related to the CVS Strategic Program, operating profit
in 1995 would have been $31.5 million, or 5.7% of net sales.
Net interest expense in 1995 increased 122.7% to $7.1 million, or 1.3% of net
sales, from $3.2 million, or 0.7% of net sales, in 1994. This increase is
attributable to a higher level of inter-company debt due to CVS in 1995 relating
to capital expenditures and working capital increases in support of the
Company's store expansion program and capital expenditures in connection with
the purchase of material handling equipment for the distribution center. In
addition, there was a higher weighted average interest rate of 6.5% in 1995 as
compared to 4.9% in 1994.
The Company's income tax expense in 1995 was $1.1 million, as compared to $11.9
million in 1994. The Company's effective tax rate in 1995 was 103.2%, as
compared to 40.8% in 1994, primarily due to the effect of the Company's one-time
charges incurred in 1995. Excluding these charges, the Company's effective tax
rate would have been 42.3% in 1995. This increase was primarily attributable to
a decrease in earnings before taxes, while book to tax permanent differences
remained constant.
Effective October 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." As a result of this adoption, the Company
incurred a charge of $1.4 million in 1995.
Effective January 1, 1995, the Company changed its policy from capitalizing
internally developed software costs to expensing them as incurred. The impact on
1995 as a result of this change exclusive of the cumulative effect of $0.3
million (before income tax effect) was to reduce net income by $0.2 million.
As a result of factors described above, the Company incurred a net loss of
$212,000 in 1995, as compared to net income of $17.2 million, or 3.9% of net
sales, in 1994. Excluding one-time charges relating to the CVS Strategic
Program, the Company's net income would have been $14.1 million, or 2.5% of net
sales, in 1995.
Liquidity and Capital Resources
The Company's capital requirements have been used primarily for capital
investment in new stores, new store inventory purchases and seasonal working
capital. The capital requirements and working capital needs have been funded
through a combination of internally generated cash from operations, credit
extended by suppliers and capital contributions from CVS prior to the Company's
initial public offering.
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<PAGE>
Net cash provided from operating activities in 1996 was $20.2 million, as
compared to net cash used of $12.1 million in 1995. The operating cash provided
in 1996 was primarily due to improved inventory management which resulted in a
reduction of inventory on a per square foot basis. The improved management of
inventory was the result of efficiencies achieved from the Company's new
distribution center and more conservative inventory purchasing in 1996 as
compared to 1995. This was offset in part by a smaller increase in accounts
payable caused by the timing of vendor payments. The increase in accrued
expenses was due to the timing of advertising and salary and benefit payments.
Net cash used in investing activities in 1996 was $46.4 million, as compared to
$41.3 million in 1995. This increase was primarily due to higher capital
expenditures associated with the Company's store opening program, which was
partially offset by lower capital expenditures associated with the distribution
center in 1996 as compared to 1995.
Net cash provided by financing activities in 1996 was $48.9 million, as compared
to $53.5 million in 1995. Net cash provided by financing activities in 1996 was
primarily the result of capital contributions of $158.0 million from CVS, which
was used to repay the intercompany debt. In addition, in connection with the
initial public offering, CVS also provided the Company with a four-year $13.5
million subordinated note. The decrease was attributable to the effect of the
timing of the settlement of vendor payments offset by the discontinuance of
dividend payments to CVS in 1996.
The Company has entered into a $125 million three-year senior revolving credit
facility. Management believes that the Company's cash flow from operations and
the revolving credit facility will be sufficient to fund anticipated capital
expenditures and working capital requirements for at least the next three years.
Through December 31, 1996, the Company had not borrowed against this facility.
Inflation and Seasonality
The Company does not believe that its operating results have been materially
affected by inflation during the preceding three years. There can be no
assurance, however, that the Company's operating results will not be affected by
inflation in the future.
The Company's business is subject to substantial seasonal variations.
Historically, the Company has realized a significant portion of its net sales
and substantially all of its net income for the year during the third and fourth
quarters. The Company's quarterly results of operations may also fluctuate
significantly as a result of a variety of other factors, including the timing of
new store openings. The Company believes this is the general pattern associated
with its segment of the retail industry and expects this pattern will continue
in the future. Consequently, comparisons between quarters are not necessarily
meaningful and the results for any quarter are not necessarily indicative of
future results.
Forward-Looking Statements
This Annual Report to Shareholders contains forward-looking information within
the meaning of The Private Securities Litigation Reform Act of 1995. The
statements are made a number of times throughout the document and may be
identified by use of forward-looking terminology such as "expect", "believe",
"may", "will" or similar statements or variations of such terms. Such
forward-looking statements involve certain risks and uncertainties including
levels of sales, store traffic and acceptance of product offerings and fashions
and, in each case, actual results may differ materially from such
forward-looking information. Certain factors that may cause actual results to
differ from such forward-looking statements are included in the "Risk Factors"
section of the Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on November 25, 1996 as well as other
periodic reports filed by the Company with the Securities and Exchange
Commission and you are urged to consider such factors. The Company assumes no
obligation for updating any such forward-looking statements.
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Management's Responsibility for Financial Reporting
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The integrity and objectivity of the financial statements and related financial
information in this report are the responsibility of the management of the
Company. The financial statements have been prepared in conformity with
generally accepted accounting principles and include, when necessary, the best
estimates and judgments of management.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance, at appropriate cost, that assets are safeguarded,
transactions are executed in accordance with management's authorization, and the
accounting records provide a reasonable basis for the preparation of the
financial statements. The system of internal accounting controls is continually
reviewed by management and improved and modified as necessary in response to
changing business conditions and recommendations of the Company's independent
auditors.
The Audit Committee of the Board of Directors, currently consisting solely of an
outside director, will continue the practice of the audit committee of the Board
of Directors of CVS which includes meeting periodically with management and the
independent auditors to review matters relating to the Company's financial
reporting, the adequacy of internal accounting controls and the scope and
results of audit work. The independent auditors have free access to the Audit
Committee.
KPMG Peat Marwick LLP, certified public accountants, are engaged to audit the
consolidated financial statements of the Company. Their Independent Auditors'
Report, which is based on an audit made in conformity with generally accepted
auditing standards, expresses an opinion as to the fair presentation of these
financial statements.
/s/ Norman Axelrod
Norman Axelrod
Chairman, Chief Executive Officer and President
/s/ James M. Tomaszewski
James M. Tomaszewski
Senior Vice President, Chief Financial Officer
February 4, 1997
15
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Independent Auditors' Report
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To The Board of Directors and Shareholders
Linens 'n Things, Inc.
We have audited the accompanying consolidated balance sheets of Linens 'n
Things, Inc. and Subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Linens 'n Things,
Inc. and Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
As discussed in the notes to the consolidated financial statements, the Company
has adopted Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," effective October 1, 1995 and changed its policy for accounting for the
costs of internally developed software effective January 1, 1995.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
February 4, 1997
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Five-Year Financial Summary (in thousands,
except per share and selected operating data)
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<TABLE>
<CAPTION>
1996 1995 1 1994 1993 1992 2
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<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net Sales ............................. $ 696,107 $ 555,095 $ 440,118 $ 333,178 $ 270,889
Operating Profit (Loss) ............... 30,683 8,133 32,242 21,736 (210)
Net Income (Loss) ..................... 15,039 (212) 17,198 11,719 (1,201)
Net Income (Loss) Per Share ........... $ 0.78 $ (0.01) $ 0.89 $ 0.61 $ (0.06)
Weighted Average Shares Outstanding 3 . 19,286 19,268 19,268 19,268 19,268
Balance Sheet Data:
Total Assets .......................... $ 423,957 $ 343,522 $ 273,167 $ 196,517 $ 157,639
Working Capital ....................... 111,056 68,332 42,315 35,143 34,606
Total Long-Term Debt .................. 13,500 -- -- -- --
Shareholders' Equity .................. $ 249,727 $ 76,678 $ 85,819 $ 74,340 $ 65,170
Selected Operating Data:
Number of Stores ...................... 169 155 145 143 144
Total Gross Square Footage (000's) .... 4,727 3,691 2,865 2,078 1,633
Increase (Decrease) in Comparable
Store Net Sales ....................... 1.1% (1.5%) 5.4% 5.0% 7.5%
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</TABLE>
1 Reflects certain one-time special charges related to the CVS Strategic
Program (as described in the notes to the consolidated financial
statements). Operating profit in 1995 excluding the effect of these
charges would have been $31.5 million. See "Management's Discussion and
Analysis."
2 Reflects a $13.1 million realignment charge associated with the
anticipated costs of closing 66 traditional stores from 1993 to 1995. This
charge includes the write-down of fixed assets, lease settlement costs,
severance and inventory liquidation costs. Operating profit in 1992
excluding the effect of this charge would have been $12.9 million.
3 1995 and prior reflect the actual shares issued upon the completion of the
Company's initial public offering on November 26, 1996.
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Consolidated Statements of Operations (in thousands, except per share amounts)
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<TABLE>
<CAPTION>
Years ended December 31 1996 1995 1994
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<S> <C> <C> <C>
Net sales .................................................. $ 696,107 $ 555,095 $ 440,118
Cost of sales, including buying and
warehousing costs .......................................... 426,196 345,162 265,721
--------- --------- ---------
Gross profit ............................................... 269,911 209,933 174,397
Selling, general and administrative expenses ............... 239,228 190,826 142,155
Restructuring and asset impairment charges ................. -- 10,974 --
--------- --------- ---------
Operating profit ........................................... 30,683 8,133 32,242
Interest expense, net ...................................... 4,692 7,059 3,170
--------- --------- ---------
Income before income taxes and cumulative
effect of change in accounting principle ................... 25,991 1,074 29,072
Provision for income taxes ................................. 10,952 1,108 11,874
--------- --------- ---------
Income (loss) before cumulative effect
of change in accounting principle .......................... 15,039 (34) 17,198
Cumulative effect of change in accounting principle, net ... -- 178 --
--------- --------- ---------
Net income (loss) .......................................... $ 15,039 $ (212) $ 17,198
--------- --------- ---------
Per share of common stock:
Income (loss) before cumulative effect
of change in accounting principle ........................ $ 0.78 $ (0.00) $ 0.89
Cumulative effect of change in accounting
principle, net ........................................... -- 0.01 --
--------- --------- ---------
Net income (loss) ........................................ $ 0.78 $ (0.01) $ 0.89
--------- --------- ---------
Weighted average shares outstanding ........................ 19,286 19,268 19,268
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</TABLE>
See accompanying notes to consolidated financial statements.
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Consolidated Balance Sheets (in thousands, except share amounts)
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<TABLE>
<CAPTION>
December 31 1996 1995
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ................................... $ 26,914 $ 4,222
Accounts receivable, net .................................... 17,384 13,955
Inventories ................................................. 202,134 176,893
Prepaid expenses and other current assets ................... 10,360 11,076
-------- --------
Total current assets ........................................... 256,792 206,146
Property and equipment, net ................................. 138,508 107,542
Goodwill, net of accumulated amortization of $4,814
in 1996 and $3,965 in 1995 .................................. 22,376 23,225
Deferred charges and other noncurrent assets, net ........... 6,281 6,609
-------- --------
Total assets ................................................... $423,957 $343,522
-------- --------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ............................................ $ 92,529 $ 96,496
Accrued expenses and other current liabilities .............. 53,207 41,318
Due to related parties ...................................... -- 118,652
-------- --------
Total current liabilities ...................................... 145,736 256,466
Long-term note .............................................. 13,500 --
Deferred income taxes and other long-term liabilities ....... 14,994 10,378
Shareholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized;
none issued and outstanding ................................. -- --
Common stock, $.01 par value; 60,000,000 shares authorized;
19,267,758 issued and outstanding in 1996 ................... 193 --
Additional paid-in capital .................................. 200,189 42,372
Retained earnings ........................................... 49,345 34,306
-------- --------
Total shareholders' equity ..................................... 249,727 76,678
-------- --------
Total liabilities and shareholders' equity ....................... $423,957 $343,522
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</TABLE>
See accompanying notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity
(in thousands, except number of shares)
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<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-in Retained
Shares Amount Capital Earnings Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 ........ 100 $ -- $ 42,372 $ 31,968 $ 74,340
Net income .......................... -- -- -- 17,198 17,198
Dividends paid to CVS ............... -- -- -- (5,719) (5,719)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1994 ........ 100 -- 42,372 43,447 85,819
Net loss ............................ -- -- -- (212) (212)
Dividends paid to CVS ............... -- -- -- (8,929) (8,929)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1995 ........ 100 -- 42,372 34,306 76,678
Net income .......................... -- -- -- 15,039 15,039
Capital contributions by CVS, net
of assets and liabilities transferred -- -- 158,010 -- 158,010
Conversion of common stock .......... 19,267,658 193 (193) -- --
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1996 ........ 19,267,758 $ 193 $ 200,189 $ 49,345 $ 249,727
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</TABLE>
See accompanying notes to consolidated financial statements.
19
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Consolidated Statements of Cash Flows (in thousands)
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<TABLE>
<CAPTION>
Years ended December 31 1996 1995 1994
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<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................ $ 15,039 $ (212) $ 17,198
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization .............. 14,569 12,862 9,588
Restructuring and asset impairment charges . -- 10,974 --
Cumulative effect of change in
accounting principle ....................... -- 294 --
Deferred income taxes ...................... 4,342 (3,296) 3,580
Loss on disposal of assets ................. 2,400 3,817 2,928
Changes in assets and liabilities:
Increase in accounts receivable .......... (3,429) (1,933) (6,122)
Increase in inventories .................. (25,241) (46,333) (42,171)
(Increase) decrease in prepaid expenses
and other current assets ................. (957) (1,928) 421
(Increase) decrease in deferred charges
and other noncurrent assets .............. (329) 567 (318)
Increase in accounts payable ............. 9 17,246 24,946
Increase (decrease) in accrued expenses
and other liabilities .................... 13,836 (4,135) 5,625
--------- --------- ---------
Net cash provided by (used in)
operating activities ......................... 20,239 (12,077) 15,675
--------- --------- ---------
Cash flows from investing activities:
Additions to property and equipment .......... (46,429) (41,329) (39,074)
--------- --------- ---------
Cash flows from financing activities:
Capital contributions by CVS ................. 158,010 -- --
(Decrease) increase in due to related parties (118,652) 51,200 22,832
Dividends paid to CVS ........................ -- (8,929) (5,719)
Issuance of long-term note ................... 13,500 -- --
(Decrease) increase in book overdrafts ....... (3,976) 11,251 8,169
--------- --------- ---------
Net cash provided by financing activities .... 48,882 53,522 25,282
--------- --------- ---------
Net increase in cash and cash equivalents .... 22,692 116 1,883
Cash and cash equivalents at beginning of year 4,222 4,106 2,223
--------- --------- ---------
Cash and cash equivalents at end of year ....... $ 26,914 $ 4,222 $ 4,106
--------- --------- ---------
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest (net of amounts capitalized) ........ $ 4,957 $ 7,339 $ 3,360
Income taxes ................................. $ 6,590 $ 7,214 $ 9,014
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</TABLE>
See accompanying notes to consolidated financial statements.
20
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Notes to Consolidated Financial Statements
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1. Business
Linens 'n Things, Inc. (formerly Bloomington, MN., L.T., Inc.) and subsidiaries
(collectively the "Company") operated 169 stores, including 132 superstores, in
34 states across the United States as of December 31, 1996. The Company's stores
emphasize a broad assortment of home textiles, housewares and home accessories,
carrying both national brand and private label goods.
2. Initial Public Offering
The Company was a wholly-owned subsidiary of CVS Corporation ("CVS" or the
"Parent"), formerly Melville Corporation, until November 26, 1996, when CVS
completed an initial public offering ("IPO") of 13,000,000 shares of the
Company's common stock. Subsequent to the IPO, CVS owned approximately 32.5% of
the Company's common stock, having retained 6,267,758 shares.
During 1996, CVS acquired 100 shares of common stock of Linens 'n Things Center,
Inc. ("LNT Center"), a newly formed California corporation, for $130,010,000. In
June, 1996, CVS contributed all outstanding shares of common stock of
Bloomington, MN., L.T., Inc. to LNT Center. In addition, CVS made a capital
contribution of $28,000,000 to LNT Center during October, 1996. Subsequently,
CVS contributed all outstanding shares of common stock of LNT Center to Linens
'n Things, Inc., a newly formed Delaware corporation. The accompanying
consolidated financial statements are presented as if Linens 'n Things, Inc. had
existed and owned LNT Center and Bloomington, MN., L.T., Inc. throughout 1996,
1995 and 1994.
Immediately prior to the consummation of the IPO, the authorized capital stock
of the Company was changed from 100 shares of common stock, par value $.01 per
share, to 60 million shares of common stock, par value $.01 per share, and each
issued and outstanding share of common stock was converted into 192,677.58
shares of common stock.
3. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include those of the Company and its
wholly-owned subsidiaries. All intercompany balances and transactions have
been eliminated.
Accounting Changes
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). As permitted under SFAS No. 123, the Company
elected not to adopt the fair value based method of accounting for its
stock-based compensation plans, but will account for such compensation under
the provisions of Accounting Principles Board Opinion No. 25 ("APB No. 25").
The Company has, however, complied with the disclosure requirements of SFAS
No. 123.
Effective October 1, 1995, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" ("SFAS No. 121").
21
<PAGE>
Effective January 1, 1995, the Company changed its policy from capitalizing
internally developed software costs to expensing them as incurred. The
Company believes that this change results in a better matching of revenues
and expenses. The impact on 1995 as a result of this change, exclusive of the
cumulative effect of $0.3 million (before income tax effect), was to reduce
net income by $0.2 million.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value Of Financial Instruments,"
requires disclosure of the fair value of certain financial instruments. Cash
and cash equivalents, accounts receivable, accounts payable and accrued
expenses are reflected in the consolidated financial statements at carrying
value which approximates fair value due to the short-term nature of these
instruments. The carrying value of the Company's borrowings approximates the
fair value based on the current rates available to the Company for similar
instruments.
Cash and Cash Equivalents
The Company's cash management program utilizes zero balance accounts.
Accordingly, all book overdraft balances have been reclassified to current
liabilities. Cash equivalents are considered, in general, to be those
securities with maturities of three months or less when purchased.
Inventories
Inventories consist of finished goods merchandise purchased from domestic and
foreign vendors and are carried at the lower of cost or market. Inventories
are determined on the retail inventory method valued on a first-in, first-out
(FIFO) basis.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets (generally
40 years for buildings and 10 years for furniture, fixtures and equipment).
Capitalized software costs are amortized on a straight-line basis over their
estimated useful lives (generally 5 years), beginning in the year placed in
service. Leasehold improvements are amortized over the shorter of the related
lease term or the economic lives of the related assets. Fully depreciated
property and equipment is removed from the asset and related accumulated
depreciation accounts.
Maintenance and repairs are charged directly to expense as incurred. Major
renewals or replacements are capitalized after making the necessary
adjustments to the asset and accumulated depreciation accounts of the items
renewed or replaced.
Impairment of Long-Lived Assets
When changes in circumstance warrant measurement, impairment losses for store
fixed assets are calculated by comparing the present value of projected
individual store cash flows over the lease term to the asset carrying values.
Deferred Charges
Deferred charges, principally beneficial leasehold costs, are amortized on a
straight-line basis, generally over the remaining life of the leasehold
acquired.
22
<PAGE>
Goodwill
The excess of acquisition costs over the fair value of net assets acquired is
amortized on a straight-line basis not to exceed 40 years. Impairment is
assessed based on the profitability of the related business relative to
planned levels.
Store Opening and Closing Costs
New store opening costs are charged to expense as incurred. In the event a
store is closed before its lease has expired, the total lease obligation,
less sublease rental income, is provided for in the year of closing.
Advertising Costs
The Company charges production costs of advertising to expense the first time
the advertising takes place.
Income Taxes
The Company and CVS have entered into a Tax Disaffiliation Agreement. Under
the agreement, the Company is generally responsible for any of its tax with
respect to periods prior to the IPO, determined as if on a separate company
basis. For periods subsequent to the IPO, the Company will file its own
federal and state tax returns.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Earnings Per Share
Earnings per share is calculated by dividing net income (loss) by the
weighted average shares outstanding, which includes common stock equivalents.
For the periods prior to the IPO, the weighted average shares assumed are
based on the actual shares outstanding at the time of the IPO.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual results
could differ from those estimates.
23
<PAGE>
4. Strategic Program and Asset Impairment Charge
During the fourth quarter of 1995, CVS announced a comprehensive strategic
program (the "CVS Strategic Program") which resulted, insofar as it relates to
the Company, in the Company recording a pre-tax charge of $23.4 million in the
fourth quarter of 1995. The pre-tax charge of $23.4 million consisted of: (i)
restructuring charges of $9.5 million consisting of estimated tenancy costs
($3.8 million) and asset write-offs ($5.0 million) associated with the closing
of six unprofitable stores and asset write-offs related to management
information systems outsourcing ($0.7 million); (ii) asset write-offs and other
non-cash charges totaling $12.5 million consisting primarily of the write-off of
certain non-productive assets, as well as costs associated with the changeover
to the Company's new distribution network relating to the opening of the
distribution center; and, (iii) a non-cash asset impairment charge of $1.4
million due to the early adoption of SFAS No. 121 relating to store fixtures and
leasehold improvements. The charge resulted from the Company grouping assets at
a lower level than under its previous accounting policy regarding asset
impairment. Factors leading to impairment were a combination of historical
losses, anticipated future losses and inadequate cash flows. The net sales and
operating losses in 1995 of the stores to be closed were approximately $14.3
million and $1.5 million, respectively.
Of the six stores to be closed pursuant to the restructuring, five were closed
in 1996 with the remaining store to be closed in early 1997.
The restructuring reserve balance of $1.9 million as of December 31, 1996
relates primarily to remaining tenancy costs.
5. Accounts Receivable, Net
Accounts receivable, net consisted of the following at December 31
(in thousands): 1996 1995
-----------------------------------------------------------------------------
Credit and charge card receivables ................ $ 3,379 $ 5,353
Due from landlords ................................ 10,536 4,069
Other, net of allowance ........................... 3,469 4,533
-------- --------
$ 17,384 $ 13,955
-----------------------------------------------------------------------------
6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted
of the following at December 31 (in thousands): 1996 1995
-----------------------------------------------------------------------------
Deferred income taxes ............................. $ 6,650 $ 8,323
Other ............................................. 3,710 $ 2,753
------- -------
$10,360 $11,076
-----------------------------------------------------------------------------
7. Property and Equipment
Property and equipment consisted
of the following at December 31 (in thousands): 1996 1995
-----------------------------------------------------------------------------
Land .............................................. $ 430 $ 430
Building .......................................... 4,760 4,760
Furniture, fixtures and equipment ................. 118,072 89,792
Leasehold improvements ............................ 46,454 35,034
Computer software ................................. 6,331 4,404
-------- --------
176,047 134,420
Less accumulated depreciation and amortization .... 37,539 26,878
-------- --------
$138,508 $107,542
-----------------------------------------------------------------------------
24
<PAGE>
8. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted
of the following at December 31 (in thousands): 1996 1995
-----------------------------------------------------------------------------
Income taxes payable .............................. $ 994 $ 2,472
Other taxes payable ............................... 8,678 6,051
Rent .............................................. 5,844 6,082
Salaries and employee benefits .................... 7,347 3,331
Restructuring reserves ............................ 1,878 3,835
Other ............................................. 28,466 19,547
------- -------
$53,207 $41,318
-----------------------------------------------------------------------------
9. Short-Term Borrowing Arrangements
Prior to the IPO, all financing was provided by CVS. Interest rates charged on
borrowings from CVS were based on CVS' commercial paper borrowing rates. In
connection with the IPO, the Company repaid all indebtedness to CVS and entered
into a three-year, $125 million senior revolving credit facility agreement (the
"Credit Agreement"). The Credit Agreement contains certain financial covenants,
including those relating to the maintenance of a minimum tangible net worth, a
minimum fixed charge coverage ratio, and a maximum leverage ratio, as defined in
the Credit Agreement. As of December 31, 1996, the Company was in compliance
with all terms and conditions of the Credit Agreement.
Interest on all borrowings is determined based upon several alternative rates as
stipulated in the Credit Agreement. As of December 31, 1996, there were no
borrowings under the Credit Agreement but $2.3 million of letters of credit were
outstanding under the Credit Agreement. The letters of credit were used to
guarantee certain foreign purchase contracts. The Company is not obligated under
any formal or informal compensating balance requirements.
10. Long-Term Note
In conjunction with the IPO, the Company issued a four-year, $13.5 million
subordinated note (the "Note") to CVS. The Note contains no principal
amortization prior to maturity in December 2000, and requires quarterly interest
payments at the 90-day LIBOR rate plus the applicable spread under the Credit
Agreement described above. The Note also provides for forgiveness by CVS, at
varying amounts, based upon the proceeds from any sales of the Company's common
stock by CVS together with the market value of the common stock which CVS
continues to own at December 31, 1997. The borrowing rate at December 31, 1996
was 6.875%.
11. Deferred Income Taxes and Other Long-Term Liabilities
Deferred income taxes and other long-term liabilities
consisted of the following at December 31 (in thousands): 1996 1995
-----------------------------------------------------------------------------
Deferred income taxes ............................. $10,684 $ 8,015
Other ............................................. 4,310 2,363
------- -------
$14,994 $10,378
-----------------------------------------------------------------------------
25
<PAGE>
12. Leases
The Company has non-cancelable operating leases, primarily for retail stores,
which expire through 2022. The leases generally contain renewal options for
periods ranging from five to fifteen years and require the Company to pay costs
such as real estate taxes and common area maintenance. Contingent rentals are
paid based on a percentage of sales. Net rental expense for all operating leases
for the years ended December 31 was as follows (in thousands):
1996 1995 1994
-----------------------------------------------------------------------------
Minimum rentals ......................... $53,264 $38,788 $28,065
Contingent rentals ...................... 210 201 492
------- ------- -------
53,474 38,989 28,557
Less sublease rentals ................... 151 151 45
------- ------- -------
$53,323 $38,838 $28,512
-----------------------------------------------------------------------------
At December 31, 1996, the future minimum rental payments required under
operating leases and the future minimum sublease rentals excluding lease
obligations for closed stores were as follows (in thousands):
Year
--------------------------------------------------------
1997 .................................... $ 65,067
1998 .................................... 69,564
1999 .................................... 68,686
2000 .................................... 69,456
2001 .................................... 69,863
Thereafter .............................. 747,467
-----------
$ 1,090,103
-----------
Total future minimum sublease rentals $ 322
--------------------------------------------------------
13. Stock Incentive Plans
Concurrent with the IPO, the Company adopted the 1996 Incentive Compensation
Plan (the "Plan"), which provides for the granting of options, deferred stock
grants and other stock-based awards, up to a maximum of 2,312,132 shares of
common stock, to key employees. The Company also adopted the 1996 Non-Employee
Directors Stock Plan (the "Directors' Plan"), which provides for the granting of
options and stock unit grants to non-employee directors ("eligible directors"),
up to a maximum of 200,000 shares. The Company has reserved 2,512,132 shares for
issuance under these plans.
Stock options and grants under the Plan and the Directors' Plan are awarded at
the fair market value of the shares at the date of grant. The right to exercise
options generally commences one to four years after, and expires ten years
after, the grant date, provided the optionee or eligible director continues to
be employed by, or remain in service as director to, the Company.
Under the Directors' Plan, any person who becomes an eligible director receives
an initial option grant to purchase 7,000 shares of common stock, and, at the
date of each annual shareholders meeting thereafter, will receive an option
grant to purchase 700 shares and a stock unit grant for 700 shares.
As of December 31, 1996, 994,330 options and 14,000 options were granted under
the Plan and Directors' Plan, respectively, and none were exercised or
cancelled. No options granted were exercisable as of December 31, 1996.
Additionally, in 1996, 160,666 deferred stock grants were awarded under the
Plan.
26
<PAGE>
The fair value of each stock option granted during 1996 is estimated on the date
of grant using the Black-Scholes option pricing model using the following
assumptions:
------------------------------------------------------------------
Expected life (years) ...................................... 5.0
Expected volatility ........................................ 45%
Risk-free interest rate .................................... 6%
Expected dividend yield .................................... 0%
------------------------------------------------------------------
The following table summarizes information about stock options outstanding at
December 31, 1996:
-----------------------------------------------------------------------------
Outstanding
Exercise Price ........................................... $ 15.50
Number Outstanding ....................................... 994,330
Weighted Average Remaining Contractual Life .............. 5 years
Exercisable
Weighted Average Exercise Price .......................... $ 15.50
Exercisable Number ....................................... --
-----------------------------------------------------------------------------
The Company applies APB No. 25 and related interpretations in accounting for its
stock-based compensation plans. Accordingly, no compensation cost has been
recognized in connection with these plans. Set forth below are the Company's net
income and net income per share presented "as reported" and as if compensation
cost had been recognized in accordance with the provisions of SFAS No. 123:
(in millions, except per share data) 1996
-----------------------------------------------------------------------------
Net income:
As reported ................................................ $ 15.0
Pro-forma .................................................. $ 14.9
Net income per share of common stock:
As reported ................................................ $ 0.78
Pro-forma .................................................. $ 0.77
-----------------------------------------------------------------------------
The effects of applying SFAS No. 123 in this pro-forma disclosure are not
necessarily indicative of future amounts. The Company anticipates granting
additional awards in future years that based on the plans' current design will,
on an annual basis, be less than the initial year's (1996) award.
14. Employee Benefit Plans
Upon completion of the IPO, the Company discontinued participation in CVS'
401(k) profit-sharing plan. On December 1, 1996, the Company adopted a 401(k)
savings plan. All employees who were eligible to participate in the 401(k)
profit sharing plan administered by CVS prior to the IPO were immediately
eligible to participate in the new plan. All other employees become eligible
upon completion of twelve months of service within which 1,000 hours were
worked, provided the employee is at least 21 years of age. Participants may
contribute between 2% and 15% of annual earnings, subject to statutory
limitations. Company contributions for the matching component of both plans
amounted to approximately $0.3 million, $0.6 million and $0.4 million for the
years ended December 31, 1996, 1995 and 1994, respectively.
27
<PAGE>
15. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities at December 31 were as follows
(in thousands):
1996 1995
-----------------------------------------------------------------------------
Deferred tax assets:
Employee benefits .......................... $ 4,011 $ 1,030
Inventories ................................ 4,313 5,156
Other ...................................... 1,297 872
-------- --------
Total deferred tax assets .................... 9,621 7,058
Deferred tax liabilities:
Property and equipment ..................... 13,655 6,750
-------- --------
Net deferred tax (liability) asset ........... $ (4,034) $ 308
-----------------------------------------------------------------------------
Based on the Company's historical and current pretax earnings, management
believes it is more likely than not that the Company will realize the deferred
tax assets.
The provision for income taxes comprised the following for the years ended:
December 31 (in thousands): 1996 1995 1994
-----------------------------------------------------------------------------
Current:
Federal .............. $ 3,030 $ 2,565 $ 6,161
State ................ 1,106 914 1,272
-------- -------- --------
4,136 3,479 7,433
Deferred:
Federal .............. 5,484 (2,143) 3,580
State ................ 1,332 (228) 861
-------- -------- --------
6,816 (2,371) 4,441
-------- -------- --------
$ 10,952 $ 1,108 $ 11,874
-----------------------------------------------------------------------------
The following is a reconciliation between the statutory Federal income tax rate
and the effective rate for the years ended December 31:
1996 1995 1994
-----------------------------------------------------------------------------
Effective tax rate .......................... 42.1% 103.2% 40.8%
State income taxes, net of Federal benefit .. (6.1) (41.5) (4.8)
Goodwill .................................... (1.1) (27.8) (1.0)
Meals and entertainment ..................... (0.3) (5.1) (0.2)
Targeted jobs tax credit .................... -- 5.5 0.2
Other ....................................... 0.4 0.7 --
---- ---- ----
Statutory Federal income tax rate ........... 35.0% 35.0% 35.0%
-----------------------------------------------------------------------------
28
<PAGE>
16. Related Party Transactions
Prior to the IPO, CVS provided financing and cash management for the Company,
allocated certain costs to the Company for services provided, and charged the
Company for costs related to participation in certain employee benefit programs.
Such charges terminated upon the completion of the IPO and have been replaced by
costs of the Company's own programs. Allocations to the Company by CVS were
based on the Company's share of costs paid by the Parent on its behalf for
consolidated programs. Such allocations may not be reflective of the costs which
would have been incurred if the Company operated on a stand-alone basis or which
will be incurred in the future. Management believes that the basis for
allocations was reasonable. If the Company had operated on a stand-alone basis
for the years ended December 31, 1996, 1995 and 1994, it would have incurred a
net increase in expense of an estimated $755,000 pre-tax, in each such years.
The following is a summary of the amounts charged or allocated to the Company:
Administrative Costs
CVS allocated various administrative costs to the Company. Allocations were
based on the Company's ratable share of costs incurred by CVS on behalf of
the Company for the combined programs. The total costs allocated to the
Company for the years ended December 31, 1996, 1995, and 1994 were
approximately $0.9 million, $3.0 million and $3.3 million, respectively.
In addition, CVS guaranteed the leases of certain stores operated by the
Company and charged a fee, prior to the IPO, for that service which amounted
to approximately $0.3 million for each of the years ended December 31, 1996,
1995 and 1994.
Borrowings
The weighted average interest rate on borrowings from CVS and other divisions
for the years ended December 31, 1996, 1995 and 1994 was 6.2%, 6.5% and 4.9%,
respectively. The related interest expense recognized by the Company on such
borrowings was $4.6 million, $7.1 million and $3.2 million, respectively.
Employee Stock Ownership Plan
The Company's employees participated in CVS' Employee Stock Ownership Plan
("ESOP"). The ESOP was a defined contribution plan for all employees meeting
certain eligibility requirements.
CVS charged compensation expense to the Company based upon total payments due
to the ESOP. The charge allocated to the Company was based on the Company's
proportionate share of qualifying compensation expense and did not reflect
the manner in which CVS funded these costs or the related tax benefits
realized by CVS. As a result of the Company's allocation from CVS,
compensation expense of approximately $1.5 million, $1.0 million and $0.7
million was recognized for the years ended December 31, 1996, 1995 and 1994,
respectively.
These costs, with the exception of interest expense, are included in selling,
general and administrative expenses on the Consolidated Statements of
Operations.
17. Commitments and Contingencies
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
29
<PAGE>
18. Summary of Quarterly Results (unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
(in thousands, except per share data) Quarter Quarter Quarter Quarter Year
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales
1996 ................................... $ 138,167 $ 147,649 $ 180,438 $ 229,853 $ 696,107
1995 ................................... 115,298 124,290 138,050 177,457 555,095
Gross profit
1996 ................................... 50,498 56,252 69,159 94,002 269,911
1995 ................................... 42,787 47,896 54,666 64,584 1 209,933 2
Income (loss) before cumulative effect
of change in accounting principle, net
1996 ................................... (1,786) (411) 4,966 12,270 15,039
1995 ................................... 860 1,644 2,599 (5,137) (34)
Net income (loss)
1996 ................................... (1,786) (411) 4,966 12,270 15,039
1995 ................................... 682 1,644 2,599 (5,137) 1 (212) 2
Net income (loss) per share
1996 ................................... (.09) (.02) .26 .63 0.78
1995 ................................... .04 .09 .13 (.27) 1 (0.01) 2
--------------------------------------------------------------------------------------------------
</TABLE>
1 Excluding the CVS Strategic Program, gross profit and net income in the
fourth quarter of 1995 would have been $72.8 million and $9.0 million,
respectively, and earnings per share would have been $.47.
2 Excluding the CVS Strategic Program, gross profit and net income for the
year ended 1995 would have been $218.1 million and $13.9 million,
respectively, and earnings per share would have been $.72.
19. Market Information
The Company's common stock is listed on the New York Stock Exchange. Its trading
symbol is LIN. The Company has not paid a dividend on its common stock. The high
and low trading price of the Company's stock, beginning November 26, 1996, the
date of the IPO, through December 31, 1996 is as follows:
High Low
Fourth Quarter (from November 26, 1996) ....... 19 3/4 15 1/8
At December 31, 1996, there were approximately 2,000 shareholders of record.
30
<PAGE>
Shareholder Information
Corporate Headquarters
6 Brighton Road
Clifton, NJ 07015
(201) 778-1300
Legal Counsel
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, NJ 07932
Independent Auditors
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
Transfer Agent and Registrar
Bank of Boston
Investor Relations Department
P.O. Box 644
Mail Stop 45-02-09
Boston, MA 02102
(617) 575-3120
Form 10-K
The Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission is available without charge upon written request. Requests should be
mailed to: Linens 'n Things Corporate Headquarters, attention: Investor
Relations.
Annual Meeting
The Company's Annual Meeting of Shareholders will be held at the Linens 'n
Things Corporate Headquarters, 6 Brighton Road, Clifton, NJ 07015 at 10:00 AM,
on May 6, 1997.
Directors
Norman Axelrod
Chairman, Chief Executive Officer and President
of the Company
Philip E. Beekman
President of Owl Hollow Enterprises, Inc.,
a consulting and investment company
Charles C. Conaway
Executive Vice President and Chief Financial Officer of
CVS Corporation, a prescription drugs, health and beauty
care retailer
Stanley P. Goldstein
Chairman, President and Chief Executive Officer
of CVS Corporation, a prescription drugs, health
and beauty care retailer
Executive Officers
Norman Axelrod
Chairman, Chief Executive Officer and President
of the Company
Hugh J. Scullin
Senior Vice President, Store Operations
Steven B. Silverstein
Senior Vice President, General Merchandise Manager
James M. Tomaszewski
Senior Vice President, Chief Financial Officer
Other Officers
William T. Giles
Vice President, Finance, Controller
Brian D. Silva
Vice President, Human Resources
Corporate Secretary
<PAGE>
Linens'n Things
-------------------------------
The Home Furnishings Superstore
6 Brighton Road o Clifton, New Jersey 07015
