SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1999
Commission File Number 1-12381
Linens 'n Things, Inc.
----------------------
(Exact name of Registrant as specified in its charter)
Delaware 22-3463939
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6 Brighton Road, Clifton, New Jersey 07015
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(973) 778-1300
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--
Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at November 12, 1999
Common Stock, $0.01 par value 39,450,372
<PAGE>
<TABLE>
<CAPTION>
INDEX
Part I. Financial Information Page No.
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<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Operations for the
Thirteen and Thirty-Nine Weeks Ended October 2, 1999
and September 26, 1998 3
Consolidated Balance Sheets as of October 2, 1999,
December 31, 1998 and September 26, 1998 4
Consolidated Statements of Cash Flows for the
Thirty-Nine Weeks Ended October 2, 1999
and September 26, 1998 5
Notes to Consolidated Financial Statements 6
Independent Auditors' Review Report 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
(a) Exhibit Index 13
(b) Reports on Form 8-K 13
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
LINENS 'N THINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
(Unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------------------- --------------------------------
October 2, September 26, October 2, September 26,
1999 1998 1999 1998
---------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Net sales $341,122 $ 278,642 $886,290 $718,773
Cost of sales, including buying and warehousing costs 203,886 167,450 531,467 435,375
---------- -------------- -------------- -----------------
Gross profit 137,236 111,192 354,823 283,398
Selling, general and administrative expenses 113,361 93,168 316,858 258,480
---------- -------------- -------------- -----------------
Operating profit 23,875 18,024 37,965 24,918
Interest expense (income), net 34 105 (21) 5
---------- -------------- -------------- -----------------
Income before provision for income taxes 23,841 17,919 37,986 24,913
Provision for income taxes 9,179 6,901 14,626 9,594
---------- -------------- -------------- -----------------
Net income $ 14,662 $ 11,018 $ 23,360 $ 15,319
========== ============== ============= ================
Per share of common stock:
Basic
Net income per share $0.37 $0.28 $0.59 $0.39
Weighted average shares outstanding 39,395 38,955 39,305 38,868
Diluted
Net income per share $0.36 $0.27 $0.57 $0.38
Weighted average shares outstanding 40,940 40,508 40,959 40,387
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
LINENS 'N THINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
October 2, December 31, September 26,
1999 1998 1998
------------------ ------------------ -------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 18,408 $ 42,638 $ 15,847
Accounts receivable, net 20,877 22,814 19,810
Inventories 369,255 271,389 294,161
Prepaid expenses and other current assets 21,009 18,567 16,586
------------------ ------------------ -------------------
Total current assets 429,549 355,408 346,404
Property and equipment, net 215,787 179,439 164,093
Goodwill, net 20,039 20,676 20,889
Deferred charges and other noncurrent assets, net 5,353 5,321 5,477
------------------ ------------------ -------------------
Total assets $ 670,728 $ 560,844 $ 536,863
================== ================== ===================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 180,898 $ 115,754 $ 136,807
Accrued expenses and other current liabilities 95,006 84,761 66,741
------------------ ------------------ -------------------
Total current liabilities 275,904 200,515 203,548
Deferred income taxes and other long-term liabilities 41,691 36,753 34,355
Shareholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares
authorized; none issued and outstanding -- -- --
Common stock, $0.01 par value;
135,000,000 shares authorized at October 2, 1999
and 60,000,000 shares authorized at December 31, 1998
and September 26, 1998; 39,473,234 shares issued and
39,396,757 outstanding at October 2, 1999; 39,091,281
shares issued and 39,037,948 outstanding at
December 31, 1998; and 38,975,698 shares issued and
38,922,365 outstanding at September 26, 1998 395 391 390
Additional paid-in capital 218,615 211,378 209,507
Retained earnings 136,557 113,197 90,453
Treasury stock, at cost, 76,477 shares at
October 2, 1999; 53,333 at December 31, 1998 and at
September 26, 1998 (2,434) (1,390) (1,390)
------------------ ------------------ -------------------
Total shareholders' equity 353,133 323,576 298,960
------------------ ------------------ -------------------
Total liabilities and shareholders' equity $ 670,728 $ 560,844 $ 536,863
================== ================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
LINENS 'N THINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Thirty-Nine Weeks Ended
-----------------------------------------
October 2, September 26,
1999 1998
------------------- ------------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 23,360 $ 15,319
Adjustments to reconcile net income to net
Cash provided by (used in) operating activities:
Depreciation and amortization 19,851 15,766
Deferred income taxes 1,784 2,056
Loss on disposal of assets 553 652
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 1,937 (6,046)
Increase in inventories (97,866) (70,973)
Increase in prepaid expenses and other
current assets (1,640) (2,889)
(Increase) decrease in deferred charges (569) 197
Increase in accounts payable 61,941 22,836
(Decrease) increase in accrued expenses
and other liabilities (8,841) 12,565
------------------- ------------------
Net cash provided by (used in) operating activities 510 (10,517)
------------------- ------------------
Cash flows from investing activities:
Additions to property and equipment (55,055) (24,867)
------------------- ------------------
Cash flows from financing activities:
Proceeds and Federal tax benefit from common
stock exercised under stock incentive plans 7,241 4,997
Purchase of treasury stock (1,044) (1,390)
Increase in book overdrafts 24,118 7,742
------------------- ------------------
Net cash provided by financing activities 30,315 11,349
------------------- ------------------
Net decrease in cash and cash equivalents (24,230) (24,035)
Cash and cash equivalents at beginning of year 42,638 39,882
------------------- ------------------
Cash and cash equivalents at end of period $ 18,408 $ 15,847
=================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LINENS 'N THINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements, except for the December 31,
1998 consolidated balance sheet, are unaudited. In the opinion of management,
the accompanying consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly the
financial position of the Company as of October 2, 1999 and September 26, 1998
and the results of operations for the respective thirteen and thirty-nine weeks
then ended and cash flows for the thirty-nine weeks then ended. Because of the
seasonality of the specialty retailing business, operating results of the
Company on a quarterly basis may not be indicative of operating results for the
full year.
These consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements for the year ended December
31, 1998, included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission. All significant intercompany accounts and
transactions have been eliminated.
The December 31, 1998 consolidated balance sheet amounts have been derived from
the Company's audited consolidated balance sheet amounts.
2. Short-Term Borrowing Arrangements
The Company has available a three-year, $90 million senior revolving credit
facility agreement (the "Credit Agreement") with third party institutional
lenders expiring March 31, 2001. The amount of borrowings can be increased up to
$125 million provided certain terms and conditions contained in the Credit
Agreement are met. 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 October 2, 1999, the Company was in compliance with
the terms and conditions of the Credit Agreement. The Credit Agreement also
allows for up to $25 million in borrowings from uncommitted lines of credit
outside of the Credit Agreement. As of October 2, 1999, the Company had no
borrowings under the Credit Agreement or against the uncommitted lines of
credit.
3. Recent Accounting Pronouncement
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share", which requires a
dual presentation of earnings per share--basic and diluted. Basic earnings per
share has been computed by dividing net income by the weighted average number of
shares outstanding of approximately 39,395,000 and 38,955,000 for the thirteen
weeks ended October 2, 1999 and September 26, 1998, respectively, and
approximately 39,305,000 and 38,868,000 for the thirty-nine weeks ended October
2, 1999 and September 26, 1998, respectively. Diluted earnings per share has
been computed by dividing net income by the weighted-average number of shares
outstanding including the dilutive effects of stock options and deferred stock
grants. The weighted-average shares outstanding for the diluted earnings per
share calculation were approximately 40,940,000 and 40,508,000 for the thirteen
weeks ended October 2, 1999 and September 26, 1998, respectively, and
approximately 40,959,000 and 40,387,000 for the thirty-nine weeks ended October
2, 1999 and September 26, 1998, respectively.
4. Deferred Compensation Plan
The Company has a deferred compensation plan (the "Plan") established to enable
key employees of the Company, as designated by the Company, to defer
compensation, including stock and stock denominated awards. Participation is
voluntary and participants can elect to make contributions to the Plan.
Participants are 100% vested in their own deferrals to the Plan at all times. At
October 2, 1999, the liability under the Plan, which is reflected in other
long-term liabilities, was $5.2 million.
<PAGE>
Independent Auditors' Review Report
The Board of Directors and Shareholders
Linens 'n Things, Inc.:
We have reviewed the consolidated balance sheets of Linens 'n Things, Inc. and
Subsidiaries as of October 2, 1999 and September 26, 1998, and the related
consolidated statements of operations for the thirteen and thirty-nine week
periods then ended and the related consolidated statements of cash flows for the
thirty-nine week periods ended October 2, 1999 and September 26, 1998. These
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Linens 'n Things, Inc. and
Subsidiaries as of December 31, 1998 and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 3, 1999 we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
December 31, 1998, is fairly presented, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
KPMG LLP
New York, New York
October 20, 1999
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LINENS 'N THINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto appearing
elsewhere in this document.
Results of Operations
Thirteen Weeks Ended October 2, 1999 Compared with Thirteen Weeks Ended
September 26, 1998
Net sales increased 22.4% to $341.1 million for the thirteen weeks ended October
2, 1999, up from $278.6 million for the same period in 1998, primarily as a
result of new store openings since September 26, 1998. Comparable store net
sales for the thirteen weeks ended October 2, 1999 increased 5.2% as compared
with an increase of 11.2% for the same period last year. Comparable store net
sales as a whole continued to remain strong across most major geographic
regions.
During the thirteen weeks ended October 2, 1999, the Company opened 15 stores
and closed two stores, compared with opening six stores and closing one store
during the same period last year. At October 2, 1999, the Company operated 217
stores, of which 210 were superstores, compared with 183 stores, of which 169
were superstores, at September 26, 1998. Store square footage increased 24.0% to
7,425,000 at October 2, 1999 compared with 5,990,000 at September 26, 1998.
For the thirteen weeks ended October 2, 1999, net sales of "things" merchandise
increased approximately 30% over the same period in 1998, while net sales of
"linens" merchandise increased approximately 20% over the same period in 1998.
This is consistent with the Company's strategy to increase the penetration of
"things" merchandise. The increase in net sales of "things" merchandise is the
result of the continued maturation of this business as well as the overall
expansion of the product categories in new and existing stores.
Gross profit for the thirteen weeks ended October 2, 1999 was $137.2 million, or
40.2% of net sales, compared with $111.2 million, or 39.9% of net sales, for the
same period last year. The increase in gross profit was due primarily to
improvements in the selling mix and better buying. Logistics costs as a percent
of sales were lower than last year as the Company continues to leverage its
costs through the use of its distribution network.
Selling, general and administrative expenses for the thirteen weeks ended
October 2, 1999 were $113.4 million, or 33.2% of net sales, compared with $93.2
million, or 33.4% of net sales, for the same period last year. This decrease as
a percentage of net sales is primarily a function of increased leverage through
strong comparable store net sales. However, these savings were partially offset
by costs related to increased store openings as well as continued investment in
store payroll in order to improve guest service levels. Management believes the
improvement in guest service has contributed to the strong comparable store net
sales performance.
Operating profit for the thirteen weeks ended October 2, 1999 increased to $23.9
million, or 7.0% of net sales, compared with $18.0 million, or 6.5% of net
sales, for the same period last year.
The Company incurred net interest expense of approximately $34,000 (including
commitment fees in connection with the Company's $90 million credit agreement)
for the thirteen weeks ended October 2, 1999, compared with approximately
$105,000 for the same period in 1998.
The Company's income tax expense for the thirteen weeks ended October 2, 1999
was approximately $9.2 million as compared with $6.9 million for the same period
last year. The Company's effective tax rate was 38.5% for the thirteen weeks
ending October 2, 1999 and September 26, 1998.
<PAGE>
LINENS 'N THINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income for the thirteen weeks ended October 2, 1999 increased to $14.7
million, or $0.36 per share, compared with $11.0 million, or $0.27 per share,
for the same period last year.
Thirty-Nine Weeks Ended October 2, 1999 Compared with Thirty-Nine Weeks Ended
September 26, 1998
Net sales increased 23.3% to $886.3 million for the thirty-nine weeks ended
October 2, 1999, up from $718.8 million for the same period in 1998, primarily
as a result of new store openings since September 26, 1998. Comparable store net
sales for the thirty-nine weeks ended October 2, 1999 increased 5.7% as compared
with an increase of 8.4% for the same period last year. Comparable store net
sales as a whole continued to remain strong across most major geographic
regions.
During the thirty-nine weeks ended October 2, 1999, the Company opened 29 stores
and closed 8 stores, compared with opening 17 stores and closing 10 stores
during the same period last year.
For the thirty-nine weeks ended October 2, 1999, net sales of "things"
merchandise increased approximately 30% over the same period in 1998, while net
sales of "linens" merchandise increased approximately 20% over the same period
in 1998. This is consistent with the Company's strategy to increase the
penetration of "things" merchandise. The increase in net sales of "things"
merchandise is the result of the continued maturation of this business as well
as the overall expansion of the product categories in new and existing stores.
Gross profit for the thirty-nine weeks ended October 2, 1999 was $354.8 million,
or 40.0% of net sales, compared with $283.4 million, or 39.4% of net sales, for
the same period last year. The increase in gross profit was due primarily to
improvements in the selling mix, which included a higher penetration of seasonal
merchandise which has a higher markon, as well as better buying.
Selling, general and administrative expenses for the thirty-nine weeks ended
October 2, 1999 were $316.9 million, or 35.8% of net sales, compared with $258.5
million, or 36.0% of net sales, for the same period last year. This decrease as
a percentage of net sales is primarily a function of increased leverage through
strong comparable store net sales coupled with fewer store closings than in the
same period last year. However, these savings were partially offset by costs
related to increased store openings as well as continued investment in store
payroll in order to improve guest service levels. Management believes the
improvement in guest service has contributed to the strong comparable store net
sales performance.
Operating profit for the thirty-nine weeks ended October 2, 1999 increased to
$38.0 million, or 4.3% of net sales, compared with $24.9 million, or 3.5% of net
sales, for the same period last year.
The Company earned net interest income of approximately $21,000 (net of
commitment fees in connection with the Company's $90 million credit agreement)
for the thirty-nine weeks ended October 2, 1999, compared with approximately
$5,000 of net interest expense for the same period in 1998.
The Company's income tax expense for the thirty-nine weeks ended October 2, 1999
was $14.6 million as compared with $9.6 million for the same period last year.
The Company's effective tax rate was 38.5% for the thirty-nine weeks ending
October 2, 1999 and September 26, 1998.
Net income for the thirty-nine weeks ended October 2, 1999 increased to $23.4
million, or $0.57 per share, compared with $15.3 million, or $0.38 per share,
for the same period last year.
<PAGE>
Liquidity and Capital Resources
The Company's capital requirements are primarily investments in new stores, new
store inventory purchases and seasonal working capital, as well as a second
distribution center that became fully functional in June 1999. These
requirements are funded through a combination of internally generated cash from
operations, credit extended by suppliers and short-term borrowings.
The Company has available a $90 million three-year revolving credit facility
expiring March 31, 2001, which can be increased up to $125 million provided
certain terms and conditions contained in the credit agreement are met. This
agreement allows for up to $25 million in borrowings from uncommitted lines of
credit. Management currently believes that the Company's cash flows from
operations, credit extended by suppliers, the revolving credit facility and the
uncommitted lines of credit will be sufficient to fund anticipated capital
expenditures and working capital requirements in the foreseeable future.
Net cash provided by operating activities for the thirty-nine weeks ended
October 2, 1999 was $0.5 million compared with net cash used in operating
activities of $10.5 million for the same period last year. The net cash provided
by operating activities was due to a larger increase in accounts payable as
compared with last year resulting from increased inventory levels and the timing
of vendor payments. The increase in inventory primarily resulted from the
increased number of new stores since September 26, 1998.
Net cash used in investing activities during the thirty-nine weeks ended October
2, 1999 was $55.1 million compared with $24.9 million for the same period last
year. The increase is associated with the timing and number of the Company's new
store openings, as well as capital expenditures for the second distribution
center in southern New Jersey which became fully functional in June 1999. Also,
more of the stores scheduled for remodel were completed earlier in the year as
compared with the prior year.
Net cash provided by financing activities during the thirty-nine weeks ended
October 2, 1999 was $30.3 million compared with $11.3 million for the same
period last year. Net cash provided during the thirty-nine weeks ended October
2, 1999 was primarily the result of the timing and settlement of vendor payments
as well as the proceeds and Federal tax benefits related to common stock
exercised under stock incentive plans.
Year 2000
The Company has conducted a comprehensive review of its computer systems to
identify material systems that could be affected by the "Year 2000" issue and
has developed an implementation plan intended to address this issue.
The Company has adopted a five-phase Year 2000 program, the principal components
of which are:
Phase I: Identification and ranking of those internal Company systems,
technology and equipment considered critical or substantially
important to the flow of its operations; and communication with
certain significant suppliers and vendors to the Company concerning
their Year 2000 readiness
Phase II: Assessment of items identified in Phase I
Phase III: Remediation or replacement of non-compliant identified
internal systems and components and determination of solutions
for non-compliant suppliers and vendors
Phase IV: Testing of systems and components
Phase V: Developing a contingency plan to address the most reasonably
likely worst case scenarios with respect to Year 2000
<PAGE>
LINENS `N THINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The identification and assessment phases of the Year 2000 program with respect
to the Company's systems and equipment have been substantially completed for the
Company's mission critical and other major information technology systems and
hardware ("IT Systems") and for the Company's non-information technology
equipment known to the Company to have microchips or other embedded technology
and considered critical or substantially important to the flow of its operations
("non-IT Company Equipment"). The Company has also substantially completed the
remediation phase for its IT Systems and its non-IT Company Equipment and
substantially completed testing for its mission critical IT Systems. The Company
has completed the testing phase for its IT Systems and non-IT Company Equipment,
including installation and testing of Year 2000 versions. The Company will
continue periodic testing during fiscal 1999 for new installations, versions or
changes. Virtually all the compliance has been performed using internal
resources.
In addition to Year 2000 implementation for the Company's internal systems and
equipment, the Company continues to be in the process of communicating with
major business suppliers and vendors in order to endeavor to determine their
state of readiness, based on these communications with such third party
suppliers and vendors, with respect to Year 2000. Assessment of significant
third party Year 2000 readiness has been substantially completed. Failure of
suppliers, vendors or other third parties to timely address and remedy Year 2000
problems or to develop and effect appropriate contingency plans could have a
material adverse effect on the Company's business and operations. The Company
believes that the geographically disbursed nature of its business and its large
supplier and vendor base should tend to minimize such potential adverse effects.
The Company presently believes that with modifications to existing software and
conversions to new software for certain applications, the Year 2000 problem will
not cause a significant disruption of its operations. However, the Year 2000
problem is unique and the Company's Year 2000 compliance program is based on
various assumptions and expectations that cannot be assured. Potential risks
include loss of electric power or certain communication links, failure of one or
more of the Company's internal systems which disrupt its normal sales or other
operations, failure of suppliers or vendors (or of entities which supply
products, services or materials to them) to be Year 2000 ready, other
disruptions to its business such as delayed deliveries from suppliers, as well
as disruptions to the distribution channels, including ports, transportation
services and the Company's own distribution centers. The Company has developed a
contingency plan for certain mission critical systems.
The Company does not expect the costs associated with this Year 2000 project
(including internal personnel costs) to be material to the Company's financial
condition or results of operations. Costs incurred to date have been expensed
and were budgeted costs funded through operating cash flows. The costs
associated with the completion of Year 2000 will be expensed as incurred and are
not currently expected to have a material adverse impact on the Company's
financial position or results of operations. The Company's cost estimates do not
include costs associated with addressing and resolving issues as a result of the
failure of third parties to be Year 2000 compliant and or for implementing any
contingency plans.
<PAGE>
LINENS `N THINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Inflation
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.
Seasonality
The Company's business is subject to substantial seasonal variations.
Historically, the Company has realized a significant portion of its net sales
and 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
The Quarterly Report on Form 10-Q contains forward-looking statements 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
forward-looking terminology as "expect," "believe," "may," "will," "intend" or
similar statements or variations of such terms. Such forward-looking statements
involve certain risks and uncertainties including levels of sales, store
traffic, acceptance of product offerings and fashions, competitive pressures
from other home furnishings retailers, availability of suitable future store
locations and schedule of store expansion plans and any potential disruptions to
the Company's operations caused by any Year 2000 failures related to the
Company's systems, equipment or third parties. These and other important factors
that may cause actual results to differ materially 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 May 29, 1997, and may be contained in subsequent reports filed
with the Securities and Exchange Commission. You are urged to consider such
factors. The Company assumes no obligation for updating any such forward-looking
statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBIT INDEX
Exhibit
Number Description
------- -----------
11 Computation of Net Income Per Common Share
15 Letter re unaudited interim financial information
27 Financial Data Schedule (filed electronically with SEC only)
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed by the Company during the
thirteen week period ended October 2, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LINENS 'N THINGS, INC.
(Registrant)
WILLIAM T. GILES
By:-----------------------------------
William T. Giles
Vice President, Chief
Financial Officer
(Duly authorized officer and
principal financial officer)
Date: November 15, 1999
<TABLE>
<CAPTION>
LINENS 'N THINGS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands, except per share amounts)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 2, September 26, October 2, September 26,
1999 1998 1999 1998
--------------- ------------------ -------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Basic
Weighted-average number of shares
outstanding 39,395 38,955 39,305 38,868
============== ============== =============== ============
Net income applicable to common shares $14,662 $11,018 $23,360 $15,319
============== ============== =============== ============
Per share amounts
Net income per share $0.37 $0.28 $0.59 $0.39
============== ============== =============== ============
Diluted
Weighted-average number of shares
outstanding 40,940 40,508 40,959 40,387
============== ============== =============== ============
Net income applicable to common shares $14,662 $11,018 $23,360 $15,319
============== ============== =============== ============
Per share amounts
Net income per share $0.36 $0.27 $0.57 $0.38
============== ============== =============== ============
</TABLE>
Accountants' Acknowledgment
Linens 'n Things, Inc.
Clifton, New Jersey
Board of Directors:
Re: Registration Statements Numbers 333-26819, 333-26827, 333-55803 and
333-71903 on Form S-8
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated October 20, 1999 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
KPMG LLP
New York, New York
November 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Appendix A to item 601(c) of Regulation S-K
Commercial and Industrial Companies
Article 5 of Regulation S-X
(in thousands, except per share data)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> OCT-02-1999
<CASH> 18,408
<SECURITIES> 0
<RECEIVABLES> 20,877
<ALLOWANCES> 0
<INVENTORY> 369,255
<CURRENT-ASSETS> 429,549
<PP&E> 299,807
<DEPRECIATION> 84,020
<TOTAL-ASSETS> 670,728
<CURRENT-LIABILITIES> 275,904
<BONDS> 0
0
0
<COMMON> 395
<OTHER-SE> 352,738
<TOTAL-LIABILITY-AND-EQUITY> 670,728
<SALES> 886,290
<TOTAL-REVENUES> 886,290
<CGS> 531,467
<TOTAL-COSTS> 316,858
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (21)
<INCOME-PRETAX> 37,986
<INCOME-TAX> 14,626
<INCOME-CONTINUING> 23,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,360
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.57
</TABLE>
