-----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, M7FGNwAV87LUH3cnrxO5SncIYy1LPIR/0mb+DrySFwZd1TzIH+QgjRoHevYbH/ar MLizWCW+hKcWc4qp5iz1Hw== 0000927796-97-000112.txt : 19970811 0000927796-97-000112.hdr.sgml : 19970811 ACCESSION NUMBER: 0000927796-97-000112 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970808 SROS: NYSE 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: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12381 FILM NUMBER: 97654499 BUSINESS ADDRESS: STREET 1: 6 BRIGHTON RD CITY: CLIFTON STATE: NJ ZIP: 07015 BUSINESS PHONE: 2017781300 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 June 28, 1997 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 August 5, 1997 ----------------------------- ----------------------------- Common Stock, $0.01 par value 19,308,262 INDEX Part I. - Financial Information Page No. -------- Consolidated Statements of Operations for the Thirteen Weeks and Twenty-Six Weeks Ended June 28, 1997 and June 29, 1996 3 Consolidated Balance Sheets as of June 28, 1997, December 31, 1996 and June 29, 1996 4 Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended June 28, 1997 and June 29, 1996 5 Notes to Consolidated Financial Statements 6-7 Independent Auditors' Review Report 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 Part II. - Other Information 13 LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended ------------------------------- ------------------------------ June 28, June 29, June 28, June 29, 1997 1996 1997 1996 ------------- -------------- ------------ -------------- (Unaudited) (Unaudited) Net sales $185,723 $ 147,649 $ 365,634 $ 285,816 Cost of sales, including buying and warehousing costs 113,204 91,397 224,800 179,066 ------------- -------------- ------------ -------------- Gross profit 72,519 56,252 140,834 106,750 ------------- -------------- ------------ -------------- Selling, general and administrative expenses 70,204 55,226 137,575 106,735 ------------- -------------- ------------ -------------- Operating profit 2,315 1,026 3,259 15 Interest expense, net 609 1,737 945 3,820 ------------- -------------- ------------ -------------- Income (loss) before provision for (benefit from) income taxes 1,706 (711) 2,314 (3,805) Provision for (benefit from) income taxes 716 (301) 972 (1,608) ------------- -------------- ------------ -------------- Net income (loss) $ 990 $ (410) $ 1,342 $ (2,197) ============= ============== ============ ============== Per share of common stock: Net income (loss) $ 0.05 $ (0.02) $ 0.07 $ (0.11) ------------- -------------- ------------ -------------- Weighted average shares outstanding 19,795 19,268 19,756 19,268
See accompanying notes to consolidated financial statements. LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of June 28, 1997, December 31,1996 and June 29, 1996 (in thousands, except share amounts)
June 28, December 31, June 29, 1997 1996 1996 -------- ------------ ---------- (Unaudited) (Unaudited) Assets Current assets: Cash and cash equivalents $ 3,148 $ 26,914 $ 2,811 Accounts receivable, net 12,776 17,384 15,484 Inventories 208,376 202,134 181,425 Prepaid expenses and other current assets 9,064 10,360 10,908 --------- --------- --------- Total current assets 233,364 256,792 210,628 --------- --------- --------- Property and equipment, net 144,211 138,508 118,440 Goodwill, net 21,951 22,376 22,800 Deferred charges and other noncurrent assets, net 5,953 6,281 6,280 --------- --------- --------- Total assets $ 405,479 $ 423,957 $ 358,148 --------- --------- --------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 73,271 $ 92,529 $ 72,440 Accrued expenses and other current liabilities 50,118 53,207 31,324 Short-term debt 840 -- -- Due to related parties -- -- 36,363 --------- ---------- ---------- Total current liabilities 124,229 145,736 140,127 Long-term note 10,000 13,500 -- Deferred income taxes and other long-term liabilities 16,669 14,994 13,530 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; 19,268,458 issued and outstanding at June 28, 1997 and 19,267,758 at December 31, 1996 193 193 -- Additional paid-in capital 203,701 200,189 172,382 Retained earnings 50,687 49,345 32,109 ---------- --------- --------- Total shareholders' equity 254,581 249,727 204,491 ---------- --------- --------- Total liabilities and shareholders' equity $ 405,479 $ 423,957 $ 358,148 ---------- --------- ---------
See accompanying notes to consolidated financial statements. LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Twenty-Six Weeks Ended June 28, June 29, 1997 1996 ------------- -------- (Unaudited) Cash flows from operating activities: Net income (loss) $ 1,342 $ (2,197) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 8,627 7,102 Deferred income taxes 1,452 2,193 Loss on disposal of assets 697 326 Changes in assets and liabilities: Decrease (increase) in accounts receivable 4,608 (1,529) Increase in inventories (6,242) (4,532) Decrease in prepaid expenses and other current assets 1,550 807 Increase in deferred charges and other noncurrent assets -- (24) Decrease in accounts payable (2,605) (12,582) Decrease in accrued expenses and other liabilities (4,560) (2,542) ----------- ----------- Net cash provided by (used in) operating activities 4,869 (12,978) ----------- ----------- Cash flows from investing activities: Additions to property and equipment (14,274) (17,548) ----------- ----------- Cash flows from financing activities: Decrease in due to related parties -- (82,290) Proceeds from issuance of short-term debt 840 -- Capital contributions by CVS -- 130,010 Decrease in book overdrafts (15,201) (18,605) ----------- ---------- Net cash (used in) provided by financing activities (14,361) 29,115 ----------- ---------- Net decrease in cash and cash equivalents (23,766) (1,411) Cash and cash equivalents at beginning of year 26,914 4,222 ---------- ---------- Cash and cash equivalents at end of period $ 3,148 $ 2,811 ========== ==========
See accompanying notes to consolidated financial statements. LINENS 'N THINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business Linens 'n Things, Inc. (formerly Bloomington, MN., L.T., Inc.) and subsidiaries (collectively the "Company") operated 168 stores, including 138 superstores, in 35 states across the United States as of June 28, 1997. The Company's superstores average 35,000 square feet while traditional stores average 10,000 square feet. The Company's stores emphasize a broad assortment of home textiles, housewares and home accessories, carrying both national brand and private label goods. 2. Basis of Presentation The accompanying consolidated financial statements, except for the December 31, 1996 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 June 28, 1997 and June 29, 1996 and the results of operations for the respective thirteen and twenty-six weeks then ended and cash flows for the twenty-six 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, 1996, 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, 1996 consolidated balance sheet amounts have been derived from the Company's audited consolidated balance sheet amounts. 3. Initial Public Offering The Company was a wholly-owned subsidiary of CVS Corporation ("CVS"), 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. Immediately following the IPO, CVS owned approximately 32.5% of the Company's outstanding common stock, having retained 6,267,758 shares. On May 30, 1997, CVS sold 6,267,658 shares of the Company's common stock in a secondary offering, retaining 100 shares of the Company's common stock. 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. 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. LINENS 'N THINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Short-Term Borrowing Arrangements Prior to the IPO, all financing was provided to the Company 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") with third party institutional lenders. 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. Interest on all borrowings is determined based upon several alternative rates as stipulated in the Credit Agreement. As of June 28, 1997, the Company was in compliance with all terms and conditions of the Credit Agreement. On June 28, 1997, the Company had borrowings under the Credit Agreement of $840,000. The Credit Agreement allows for $10 million in borrowings from uncommitted lines outside of the Credit Agreement (see "Subsequent Event" below). As of June 28, 1997, the Company had no borrowings against the uncommitted lines of credit. The average short-term borrowing rate for the second quarter ended June 28, 1997 was 6.5%. 5. 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 consisted of a $10 million tranche ("Tranche A") and a $3.5 million tranche ("Tranche B"). 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 a reduction of principal 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. On May 30, 1997, CVS sold 6,267,658 shares of its remaining shares of Common Stock. As a result of the proceeds from the secondary offering, CVS reduced Tranche B by 100% and therefore the $3.5 million was converted into equity by the Company at the completion of the sale. The average borrowing rate for the Note during the second quarter ended June 28, 1997 was 7.2%. 6. Subsequent Event On July 21, 1997, the Company paid the remaining balance under the Note utilizing cash flows from operations (see "Long-Term Note" above). The Note contained no pre-payment penalties. The Company also, at the same time, re-negotiated its permitted allowance for borrowings from uncommitted lines outside of the Credit Agreement to $20 million (see "Short-Term Borrowing Arrangements" above). 7. Recent Accounting Pronouncement In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128") was issued. SFAS No. 128 simplifies the standards for computing earnings per share, and makes the United States standards for computing earnings per share more comparable to international standards. SFAS No. 128 requires the presentation of "basic" earnings per share (which excludes dilution) and "diluted" earnings per share. The Company does not believe the adoption of SFAS No. 128 in fiscal 1997 will have a significant impact on the Company's reported earnings per share. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997 and requires restatement of prior period earnings per share presented. 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 June 28, 1997 and June 29, 1996, and the related consolidated statements of operations for the thirteen and twenty-six week periods then ended and the related consolidated statements of cash flows for the twenty-six week periods ended June 28, 1997 and June 29, 1996. 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, 1996 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 4, 1997, 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, 1996, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /S/ KPMG Peat Marwick New York, New York July 15, 1997 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 June 28, 1997 Compared to Thirteen Weeks Ended June 29, 1996 During the thirteen weeks ended June 28, 1997, the Company opened seven superstores and closed four stores, as compared to opening eleven superstores and closing four stores in the thirteen weeks ended June 29, 1996. At June 28, 1997, the Company operated 168 stores, of which 138 were superstores, as compared to 155 stores, of which 113 were superstores, at June 29, 1996. Store square footage increased 23% to 4,964,000 at June 28, 1997 compared to 4,034,000 at June 29, 1996. Net sales increased 25.8% to $185.7 million for the thirteen weeks ended June 28, 1997, compared to $147.6 million for the same period last year, primarily as a result of new store openings since June 29, 1996. Comparable store net sales for the thirteen weeks ended June 28, 1997 increased 7.5% at the Company's superstore locations and 6.0% for the Company as a whole. Traditional store net sales were less than 7% of total net sales during the thirteen weeks ended June 28, 1997, and will continue to represent a declining percentage of total net sales throughout the year as more superstores are opened and traditional stores are closed. Comparable store net sales were strong across all major geographic regions. The Company's second quarter sales gain comparison was moderated by a shift in the Easter selling season. Net sales for the thirteen weeks ended March 29, 1997 reflected the entire Easter selling season while in 1996, the final week of the Easter selling season fell in the thirteen weeks ended June 29, 1996. The Company's average net sales per superstore were $5.7 million for the fifty-two weeks ended June 28, 1997, up from $5.2 million for the same period in 1996. For the fifty-two weeks ended June 28, 1997, average superstore net sales per square foot increased to $173 from $171 in the prior fifty-two week period. For the thirteen weeks ended June 28, 1997, net sales of "things" merchandise increased approximately 40% over the same period in 1996, while net sales of "linens" merchandise increased approximately 20% over the same period in 1996. This is consistent with the Company's strategy to increase the penetration of the "things" merchandise. The increase in net sales of "things" merchandise primarily resulted from the growth in the number of superstore locations which carry a larger line of "things" merchandise as well as the overall expansion of the product categories in existing stores. Gross profit for the thirteen weeks ended June 28, 1997 was $72.5 million, or 39.0% of net sales, compared to $56.3 million, or 38.1% of net sales, for the same period in 1996. The increase in gross profit was primarily related to improvements in all components of margin including lower freight costs as a result of increased utilization of the Company's distribution center during the thirteen weeks ended June 28, 1997 compared to the same period in 1996. Gross margin for both "linens" and "things" merchandise increased consistent with the Company's consolidated results. Selling, general and administrative expenses ("SG&A") for the thirteen weeks ended June 28, 1997 were $70.2 million, or 37.8% of net sales, compared to $55.2 million, or 37.4% of net sales, for the same period in 1996. This increase is due to higher occupancy costs as a percent of net sales related to the immaturity of the Company's superstore base which also reflects the eighteen superstores the Company opened in the fourth quarter of 1996. The Company also incurred additional SG&A expenses in connection with the secondary offering of its common stock and operating as a stand alone company, which expenses were not incurred during the same period in 1996, as well as slightly higher opening and closing costs than the same period in 1996. Operating profit for the thirteen weeks ended June 28, 1997 increased to $2.3 million, or 1.2% of net sales, compared to $1.0 million, or 0.7% of net sales, for the same period in 1996. LINENS 'N THINGS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net interest expense (including commitment fees in connection with the $125 million Credit Agreement) for the thirteen weeks ended June 28, 1997 was $609,000 compared to $1.7 million for the same period in 1996. The reduction in net interest expense is due to a reduction in net average borrowings, which were $25.0 million for the thirteen weeks ended June 28, 1997 as compared to $117.1 million for the same period in 1996. The reduction in net average borrowings is a result of the capital contributions from CVS of $158.0 million in 1996 prior to the IPO as well as improved operating performance. See "Liquidity and Capital Resources." The Company's income tax expense for the thirteen weeks ended June 28, 1997 was $716,000 as compared to a benefit of $301,000 for the same period in 1996. Net income for the thirteen weeks ended June 28, 1997 increased to $990,000, or $0.05 per share, compared to a net loss of $410,000, or ($0.02) per share, for the same period in 1996. Twenty-Six Weeks Ended June 28, 1997 Compared to Twenty-Six Weeks Ended June 29, 1996 During the twenty-six weeks ended June 28, 1997, the Company opened eight superstores and closed nine stores, as compared to opening fourteen superstores and closing fourteen stores during the twenty-six weeks ended June 29, 1996. Net sales increased 27.9% to $365.6 million for the twenty-six weeks ended June 28, 1997 as compared to $285.8 million for the same period in 1996, primarily as a result of new store openings since June 29, 1996. Comparable store net sales for the twenty-six weeks ended June 28, 1997 increased 7.7% at the Company's superstore locations and 5.9% for the Company as a whole. Traditional store net sales were less than 9% of total net sales during the twenty-six weeks ended June 28, 1997, and will continue to represent a declining percentage of total net sales throughout the year as more superstores are opened and traditional stores are closed. For the twenty-six weeks ended June 28, 1997, net sales of "things" merchandise increased approximately 40% over the same period in 1996, while net sales of "linens" merchandise increased approximately 20% over the same period in 1996. The increase in net sales of "things" merchandise primarily resulted from the growth in the number of superstore locations which carry a larger line of "things" merchandise as well as the overall expansion of the product categories in existing stores. Gross profit for the twenty-six weeks ended June 28, 1997 was $140.8 million, or 38.5% of net sales, compared to $106.8 million, or 37.3% of net sales, for the same period in 1996. The improvements in gross profit were related to an increase in all components of margin, lower freight costs due to the increased utilization of the Company's distribution center as well as lower clearance markdowns, primarily in the first quarter, as compared to the same period in 1996. Gross margin for both "linens" and "things" merchandise increased consistent with the Company's consolidated results. SG&A expenses for the twenty-six weeks ended June 28, 1997 were $137.6 million, or 37.6% of net sales, compared to $106.8 million, or 37.3% of net sales for the same period in 1996. The increase in SG&A is attributed to higher occupancy costs as a percent of net sales related to the immaturity of the superstore base which also reflects the eighteen superstores the Company opened in the fourth quarter of 1996. In addition, during the twenty-six weeks ended June 29, 1996, the Company recorded a $0.5 million insurance recovery gain associated with damages to one of its stores caused by severe winter conditions. Also, during the twenty-six weeks ended June 28, 1997, the Company incurred SG&A expenses in connection with the secondary offering of its commmon stock and operating as a stand alone company, which expenses were not incurred during the same period in 1996. LINENS 'N THINGS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating profit for the twenty-six weeks ended June 28, 1997 increased to $3.3 million, or 0.9% of net sales, as compared to $15,000 for the same period in 1996. Net interest expense (including commitment fees in connection with the $125 million Credit Agreement) for the twenty-six weeks ended June 28, 1997 was $945,000 compared to $3.8 million during the same period in 1996. The reduction in net interest expense is due to a reduction in net average borrowings, which were $16.6 million for the twenty-six weeks ended June 28, 1997 as compared to $130.6 million for the same period in 1996. The reduction in net average borrowings is a result of the capital contributions from CVS of $158.0 million in 1996 prior to the IPO as well as improved operating performance. See "Liquidity and Capital Resources." The Company's income tax expense for the twenty-six weeks ended June 28, 1997 was $972,000 compared to a benefit of $1.6 million for the same period in 1996. Net income for the twenty-six weeks ended June 28, 1997 was $1.3 million, or $0.07 per share, compared to a net loss of $2.2 million, or ($0.11) per share, for the same period in 1996. Liquidity and Capital Resources The Company's capital requirements are primarily capital 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 $125 million three-year senior revolving credit facility and a $20 million (as re-negotiated in July) uncommitted line of credit. Management currently believes that the Company's cash flows from operations, the revolving credit facility and the uncommitted line of credit will be sufficient to fund anticipated capital expenditures and working capital requirements for at least the next three years.* Net cash provided by operating activities for the twenty-six weeks ended June 28, 1997 was $4.9 million compared to net cash used in operating activities of $13.0 million for the same period in 1996. The increase in net cash provided by operating activities was due primarily to a smaller reduction in current liabilities than last year caused by the timing of vendor payments coupled with a $3.5 million increase in net income. In addition, the decrease in accounts receivable was primarily a result of the collection of 1996 year end tenant allowances due from landlords. This was offset by only a slight increase in inventory due to improved inventory management, as evidenced by the Company's decrease in inventory per square foot by 7% from 1996 ($42 per square foot this year compared with $45 per square foot last year). Net cash used in investing activities during the twenty-six weeks ended June 28, 1997 was $14.3 million compared to $17.5 million for the same period in 1996. The decrease from the twenty-six week period in 1996 is associated with the timing of the Company's new store openings. Net cash used in financing activities during the twenty-six weeks ended June 28, 1997 was $14.4 million compared to net cash provided by financing activities of $29.1 million for the same period in 1996. Net cash used during the twenty-six weeks ended June 28, 1997 was primarily the result of the timing of the settlement of vendor payments. Net cash provided during the twenty-six weeks ended June 28, 1996 was primarily the result of CVS' capital contribution which was used to repay the intercompany debt. 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 substantially all of its net income for the year during the third and fourth quarters, with a majority of net sales and net income for such quarters realized in the fourth quarter. 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 foregoing contains forward-looking information within the meaning of The Private Securities Litigation Reform Act of 1995. The statements are made a number of times and may be identified by use of an asterisk ("*") or by such forward-looking terminology as "expect", "believe", "will" or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties including levels of sales, store competition and acceptance of product offerings and fashions and, in each case, actual results may differ materially from such forward-looking information. Certain additional 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 May 29, 1997 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. PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) EXHIBIT INDEX Exhibit Number Description 11 Computation of Net Income (Loss) 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 three month period ended June 28, 1997. 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) /S/ James M. Tomaszewski ------------------------- James M. Tomaszewski Senior Vice President, Chief Financial Officer Date: August 8, 1997 EX-15 2 LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION EXHIBIT 15 Accountants' Acknowledgment Linens 'n Things, Inc. Clifton, New Jersey Board of Directors: Re: Registration Statements Numbers 333-26819 and 333-26827 on Form S-8 With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated July 15, 1997 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. /S/ KPMG Peat Marwick New York, New York August 8, 1997 EX-11 3 COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE EXHIBIT 11 LINENS 'N THINGS, INC. AND SUBSIDIARIES COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE (in thousands, except per share data)
For the Thirteen Weeks Ended For the Twenty-Six Weeks Ended June 28, June 29, June 28, June 29, 1997 1996 1997 1996 ---------------------------- ------------------------------ (Unaudited) (Unaudited) FINANCIAL STATEMENT PRESENTATION Weighted - average number of shares outstanding 19,795 19,268 19,756 19,268 =============== ============= ============== =============== Net income (loss) applicable to common shares $990 $(410) $1,342 $(2,197) =============== ============= ============== =============== Per-share amounts Net income (loss) per share $0.05 $(0.02) $0.07 $(0.11) =============== ============= ============== =============== PRIMARY Weighted - average number of shares outstanding 19,795 19,268 19,756 19,268 =============== ============= ============== =============== Net income (loss) applicable to common shares $990 $(410) $1,342 $(2,197) =============== ============= ============== =============== Per-share amounts Net income (loss) per share $0.05 $(0.02) $0.07 $(0.11) =============== ============= ============== =============== FULLY DILUTED Weighted - average number of shares outstanding and fully diluted common share equivalents 19,887 19,268 19,887 19,268 =============== ============= ============== =============== Net income (loss) applicable to common shares $990 $(410) $1,342 $(2,197) =============== ============= ============== =============== Per-share amounts Net income (loss) per share $0.05 $(0.02) $0.07 $(0.11) =============== ============= ============== ===============
EX-27 4 EXHIBIT 27 - FDS FILED WITH FORM 10-Q
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) 6-MOS DEC-31-1997 JUN-28-1997 3,148 0 12,776 0 208,376 233,364 144,211 44,338 405,479 124,229 10,000 0 0 193 254,388 405,479 365,634 365,634 224,800 137,575 0 0 945 2,314 972 1,342 0 0 0 1,342 0.07 0.07
-----END PRIVACY-ENHANCED MESSAGE-----