-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TiDK+qOMZFzvC2pHqBKilLhU8TFr46jYEQmW6ePzdz0y7s3M17LifrJDa4UMpWpv 5CIVXRLIiR6Pb10xOkucag== 0000927796-00-000085.txt : 20000517 0000927796-00-000085.hdr.sgml : 20000517 ACCESSION NUMBER: 0000927796-00-000085 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000401 FILED AS OF DATE: 20000516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINENS N THINGS INC CENTRAL INDEX KEY: 0001023052 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES [5700] IRS NUMBER: 223463939 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12381 FILM NUMBER: 638016 BUSINESS ADDRESS: STREET 1: 6 BRIGHTON RD CITY: CLIFTON STATE: NJ ZIP: 07015 BUSINESS PHONE: 9737781300 MAIL ADDRESS: STREET 1: 6 BRIGHTON RD CITY: CLIFTON STATE: NJ ZIP: 07015 10-Q 1 QUARTERLY REPORT 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 April 1, 2000 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 May 5, 2000 ----- ---------------------------- Common Stock, $0.01 par value 39,722,093
INDEX Part I. Financial Information Page No. -------- Item 1. Financial Statements Consolidated Statements of Operations for the Thirteen Weeks Ended April 1, 2000 and April 3, 1999 3 Consolidated Balance Sheets as of April 1, 2000, January 1, 2000 and April 3, 1999 4 Consolidated Statements of Cash Flows for the Thirteen Weeks Ended April 1, 2000 and April 3, 1999 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 8-10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 10 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 11 (a) Exhibit Index 11 (b) Reports on Form 8-K 11
PART I - FINANCIAL INFORMATION Item 1. Financial Statements
LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share amounts) (Unaudited) Thirteen Weeks Ended -------------------------------- April 1, April 3, 2000 1999 ------------- -------------- Net sales $326,976 $ 273,540 Cost of sales, including buying and warehousing costs 198,675 166,848 ------------- -------------- Gross profit 128,301 106,692 Selling, general and administrative expenses 120,227 101,043 ------------- -------------- Operating profit 8,074 5,649 Interest income, net 106 198 ------------- -------------- Income before provision for income taxes 8,180 5,847 Provision for income taxes 3,125 2,252 ------------- -------------- Net income $ 5,055 $ 3,595 ============= ============== Per share of common stock: Basic - ----- Net income per share $0.13 $0.09 Weighted average shares outstanding 39,482 39,156 Diluted - ------- Net income per share $0.13 $0.09 Weighted average shares outstanding 40,418 40,862
See accompanying notes to consolidated financial statements.
LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) April 1, January 1, April 3, 2000 2000 1999 ------------------- ------------------ ------------------- (Unaudited) (Unaudited) Assets Current assets: Cash and cash equivalents $ 13,938 $ 45,751 $ 22,047 Accounts receivable, net 19,599 20,836 24,164 Inventories 377,896 342,681 288,317 Prepaid expenses and other current assets 23,214 21,410 18,301 ------------------- ------------------ ------------------- Total current assets 434,647 430,678 352,829 Property and equipment, net 231,399 223,725 187,276 Goodwill, net 19,614 19,826 20,464 Deferred charges and other noncurrent assets, net 6,139 5,687 5,144 ------------------- ------------------ ------------------- Total assets $ 691,799 $ 679,916 $ 565,713 =================== ================== =================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 172,204 $ 144,884 $ 130,345 Accrued expenses and other current liabilities 80,812 104,414 63,208 ------------------- ------------------ ------------------- Total current liabilities 253,016 249,298 193,553 Deferred income taxes and other long-term liabilities 49,579 46,656 39,396 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 April 1, 2000 and January 1, 2000 and 60,000,000 shares authorized at April 3, 1999; 39,561,938 shares issued and 39,485,461 outstanding at April 1, 2000; 39,555,259 shares issued and 39,478,782 outstanding at January 1, 2000; and 39,379,985 shares issued and 39,326,652 outstanding at April 3, 1999 396 396 394 Additional paid-in capital 220,938 220,751 216,968 Retained earnings 170,304 165,249 116,792 Treasury stock, at cost, 76,477 shares at April 1, 2000 and January 1, 2000; and 53,333 at April 3, 1999 (2,434) (2,434) (1,390) ------------------- ------------------ ------------------- Total shareholders' equity 389,204 383,962 332,764 ------------------- ------------------ ------------------- Total liabilities and shareholders' equity $ 691,799 $ 679,916 $ 565,713 =================== ================== ===================
See accompanying notes to consolidated financial statements.
LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Thirteen Weeks Ended ----------------------------------------- April 1, April 3, 2000 1999 ------------------- ------------------ (Unaudited) Cash flows from operating activities: Net income $ 5,055 $ 3,595 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 7,621 6,260 Deferred income taxes 820 1,096 Loss on disposal of assets -- 83 Changes in assets and liabilities: Decrease (increase) in accounts receivable 1,237 (1,350) Increase in inventories (35,215) (16,928) (Increase) decrease in prepaid expenses and other current assets (1,000) 692 Increase in deferred charges and other noncurrent assets (604) -- Increase in accounts payable 7,724 16,124 Decrease in accrued expenses and other liabilities (6,140) (18,176) ------------------- ------------------ Net cash used in operating activities (20,502) (8,604) ------------------- ------------------ Cash flows from investing activities: Additions to property and equipment (14,931) (13,519) ------------------- ------------------ Cash flows from financing activities: Proceeds and Federal tax benefit from common stock exercised under stock incentive plans 187 5,593 Increase (decrease) in book overdrafts 3,433 (4,061) ------------------- ------------------ Net cash provided by financing activities 3,620 1,532 ------------------- ------------------ Net decrease in cash and cash equivalents (31,813) (20,591) Cash and cash equivalents at beginning of year 45,751 42,638 ------------------- ------------------ Cash and cash equivalents at end of period $ 13,938 $ 22,047 =================== ==================
See accompanying notes to consolidated financial statements. LINENS 'N THINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying consolidated financial statements, except for the January 1, 2000 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 April 1, 2000 and April 3, 1999 and the results of operations and cash flows for the respective thirteen 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 fiscal year ended January 1, 2000, 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 January 1, 2000 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 April 1, 2000, 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 April 1, 2000, the Company had no borrowings under the Credit Agreement or against the uncommitted lines of credit. 3. Recent Accounting Pronouncement The Company is required to adopt Statement of Financial Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133") effective July 1, 2000, and has not yet determined the effect SFAS No. 133 will have on its results of operations and financial position. This statement is not required to be applied retroactively to financial statements of prior periods. Financial Accounting Standards Board ("FASB") Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation" ("FIN No. 44") provides guidance for applying Accounting Pronouncements Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". With certain exceptions, FIN No. 44 applies prospectively to new awards, exchanges of awards in a business combination, modifications to outstanding awards and changes in grantee status on or after July 1, 2000. The Company does not believe that the implementation of FIN No. 44 will have a significant effect on its results of operations. 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 April 1, 2000, the liability under the Plan, which is reflected in other long-term liabilities, was $7.1 million. 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 April 1, 2000 and April 3, 1999, and the related consolidated statements of operations and cash flows for the 13 weeks ended April 1, 2000 and April 3, 1999. 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 January 1, 2000 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 2, 2000 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 January 1, 2000, 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 April 19, 2000 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 April 1, 2000 Compared with Thirteen Weeks Ended April 3, 1999 Net sales increased 19.5% to $327.0 million for the thirteen weeks ended April 1, 2000, up from $273.5 million for the same period in 1999, primarily as a result of new store openings since April 3, 1999. The first quarter ended April 1, 2000 had two fewer selling days compared with the first quarter ended April 3, 1999. Comparable store net sales for the thirteen weeks ended April 1, 2000 increased 3.3% as compared with an increase of 6.3% for the same period last year. The Easter selling season shifted to the second quarter of 2000 as compared to the first quarter of 1999, which had the impact of moderating comparable store net sales. During the thirteen weeks ended April 1, 2000, the Company opened 12 stores and closed two stores, compared with opening three stores and closing three stores during the same period last year. Of the 12 stores opened this quarter, 3 are located in Western Canada which marked our entry into the Canadian market. At April 1, 2000, the Company operated 240 stores, compared with 196 stores at April 3, 1999. Store square footage increased 26.6% to 8,282,000 at April 1, 2000 compared with 6,543,000 at April 3, 1999. Gross profit for the thirteen weeks ended April 1, 2000 was $128.3 million, or 39.2% of net sales, compared with $106.7 million, or 39.0% of net sales, for the same period last year. The increase in gross profit was due primarily to a lower markdown rate in addition to a higher penetration of better margin merchandise (e.g. seasonal product) and leveraging of freight costs. Selling, general and administrative expenses for the thirteen weeks ended April 1, 2000 were $120.2 million, or 36.8% of net sales, compared with $101.0 million, or 36.9% of net sales, for the same period last year. This decrease as a percentage of net sales is due to lower advertising costs in conjunction with the shift in the Easter selling season to the second quarter in 2000 as compared with the first quarter in 1999. However, this was partially offset by costs related to increased store openings as well as continued investment in store payroll in order to improve guest service levels. Operating profit for the thirteen weeks ended April 1, 2000 increased to $8.1 million, or 2.5% of net sales, compared with $5.6 million, or 2.1% of net sales, for the same period last year. The Company earned net interest income of approximately $106,000 (net of commitment fees in connection with the Company's $90 million credit agreement) for the thirteen weeks ended April 1, 2000, compared with approximately $198,000 for the same period in 1999. The Company's income tax expense for the thirteen weeks ended April 1, 2000 was approximately $3.1 million as compared with $2.3 million for the same period last year. The Company's effective tax rate was 38.2% for the thirteen weeks ended April 1, 2000 as compared with 38.5% for the thirteen weeks ended April 3, 1999. Net income for the thirteen weeks ended April 1, 2000 increased to $5.1 million, or $0.13 per share, compared with $3.6 million, or $0.09 per share, for the same period last year. LINENS 'N THINGS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources - ------------------------------- The Company's capital requirements are primarily investments in new stores, new store inventory purchases and seasonal working capital. 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 used in operating activities for the thirteen weeks ended April 1, 2000 was $20.5 million compared with $8.6 million for the same period last year. This increase was primarily due to an increase in inventory resulting from new store openings since April 3, 1999. In addition, there was a build up of inventory for the Easter selling season that had shifted from the first quarter of 1999 to the second quarter 2000. Net cash used in investing activities during the thirteen weeks ended April 1, 2000 was $14.9 million compared with $13.5 million for the same period last year. The slight increase in net cash used in investing activities was due to 12 store openings this year as compared with the first quarter of last year which included capital for three store openings and the second distribution center. Net cash provided by financing activities during the thirteen weeks ended April 1, 2000 was $3.6 million compared with $1.5 million for the same period last year. This increase was primarily the result of the timing and settlement of vendor payments, which was offset by a reduction in proceeds and Federal tax benefits related to common stock exercised under stock incentive plans. Year 2000 - --------- To date, the Company has not experienced any material disruptions to its business in connection with Year 2000 matters. The Company will continue to monitor its critical systems but does not currently anticipate any significant impact due to Year 2000 exposures from its internal systems or from the activities of its suppliers. 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. LINENS `N THINGS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 - -------------------------- This 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. 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. 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: The Company filed a Current Report on Form 8-K dated March 27, 2000, concerning the Company's adoption of a Supplemental Executive Retirement Plan and documents related thereto. 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 Senior Vice President, Chief Financial Officer (Duly authorized officer and principal financial officer) Date: May 16, 2000 EX-11 2 EX. 11 - COMPUTATION OF PER SHARE EARNINGS
LINENS 'N THINGS, INC. AND SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON SHARE (in thousands, except per share amounts) Thirteen Weeks Ended April 1, 2000 April 3, 1999 -------------- -------------- (Unaudited) Basic - ----- Weighted-average number of shares outstanding 39,482 39,156 ============== ============== Net income applicable to common shares $5,055 $3,595 ============== ============== Per share amounts Net income per share $0.13 $0.09 ============== ============== Diluted - ------- Basic weighted-average number of shares outstanding 39,482 39,156 Effect of outstanding stock options and deferred stock grants 936 1,706 -------------- -------------- Diluted weighted-average number of shares outstanding 40,418 40,862 ============== ============== Net income applicable to common shares $5,055 $3,595 ============== ============== Per share amounts Net income per share $0.13 $0.09 ============== ==============
EX-15 3 EX. 15 - ACCOUNTANTS' ACKNOWLEDGMENT Accountants' Acknowledgment Linens 'n Things, Inc. Clifton, New Jersey Board of Directors: Re: Registration Statement Numbers 333-26818, 333-26827, 333-55803 and 33-71903 on Form S-8 With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated April 19, 2000 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 May 16, 2000 EX-27 4 EX. 27 - FINANCIAL DATA SCHEDULE -- ARTICLE 5
5 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) 3-MOS DEC-30-2000 APR-01-2000 13,938 0 19,599 0 377,896 434,647 329,080 97,681 691,799 253,016 0 0 0 396 388,808 691,799 326,976 326,976 198,675 120,227 0 0 (106) 8,180 3,125 5,055 0 0 0 5,055 0.13 0.13
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