-----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, I+MieodtQFVp7VqEHf1nz2cVuKwmFvIqAt6gQ24fbaJcd7jR4NprDK4tZWoq2Dax zXMAx9x8irPQQwFTUgPVCw== 0000927796-97-000132.txt : 19971114 0000927796-97-000132.hdr.sgml : 19971114 ACCESSION NUMBER: 0000927796-97-000132 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 001-12381 FILM NUMBER: 97713427 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 September 27, 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 October 30, 1997 ----------------------------- ------------------------------- Common Stock, $0.01 par value 19,308,637 INDEX Part I. - Financial Information Page No. -------- Consolidated Statements of Operations for the Thirteen Weeks and Thirty-Nine Weeks Ended September 27, 1997 and September 28, 1996 3 Consolidated Balance Sheets as of September 27, 1997, December 31, 1996 and September 28, 1996 4 Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended September 27, 1997 and September 28, 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 Item 4 - Submission of Matters to a Vote of Security Holders 13 Item 6 - Exhibits and Reports on Form 8-K 13 Exhibit Index 13 LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Thirteen Weeks Ended Thirty-Nine Weeks Ended -------------------------- ----------------------------- September 27, September 28, September 27, September 28, 1997 1996 1997 1996 ------------ ------------ ------------ ------------- (Unaudited) (Unaudited) Net sales $225,239 $180,438 $590,873 $ 466,254 Cost of sales, including buying and warehousing costs 135,993 111,280 360,792 290,345 ----------- ----------- ----------- ------------ Gross profit 89,246 69,158 230,081 175,909 Selling, general and administrative expenses 76,229 59,879 213,808 166,615 ----------- ----------- ----------- ------------ Operating profit 13,017 9,279 16,273 9,294 Interest expense, net 26 644 972 4,464 ----------- ----------- ----------- ------------ Income before provision for income taxes 12,991 8,635 15,301 4,830 Provision for income taxes 5,459 3,669 6,429 2,061 ----------- ----------- ----------- ------------ Net income $ 7,532 $ 4,966 $ 8,872 $ 2,769 =========== =========== =========== ============ Per share of common stock: Net income $0.38 $0.26 $0.45 $0.14 ----------- ----------- ----------- ------------ Weighted average shares outstanding 19,913 19,268 19,792 19,268
See accompanying notes to consolidated financial statements. LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of September 27, 1997, December 31, 1996 and September 28, 1996 (in thousands, except share amounts)
September 27, December 31, September 28, 1997 1996 1996 ------------ ----------- ------------ (Unaudited) (Unaudited) Assets Current assets: Cash and cash equivalents $ 15,719 $ 26,914 $ 2,899 Accounts receivable, net 16,737 17,384 13,991 Inventories 225,716 202,134 206,764 Prepaid expenses and other current assets 9,174 10,360 10,119 ---------- --------- --------- Total current assets 267,346 256,792 233,773 Property and equipment, net 149,771 138,508 137,262 Goodwill, net 21,738 22,376 22,588 Deferred charges and other noncurrent assets, net 5,789 6,281 6,178 ---------- --------- --------- Total assets $ 444,644 $ 423,957 $ 399,801 ========== ========= ========= Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 98,605 $ 92,529 $ 80,774 Accrued expenses and other current liabilities 65,754 53,207 34,896 Due to related parties -- -- 61,498 ---------- --------------- ---------- Total current liabilities 164,359 145,736 177,168 Long-term note -- 13,500 -- Deferred income taxes and other long-term liabilities 17,528 14,994 13,176 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; 19,308,262 issued and outstanding at September 27, 1997 and 19,267,758 at December 31, 1996 193 193 -- Additional paid-in capital 204,347 200,189 172,382 Retained earnings 58,217 49,345 37,075 ----------- ----------- ---------- Total shareholders' equity 262,757 249,727 209,457 ----------- ----------- ---------- Total liabilities and shareholders' equity $ 444,644 $ 423,957 $ 399,801 =========== =========== ========== See accompanying notes to consolidated financial statements.
LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Thirty-Nine Weeks Ended September 27, September 28, 1997 1996 ------------------- ------------ (Unaudited) Cash flows from operating activities: Net income $ 8,872 $ 2,769 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 13,058 10,760 Deferred income taxes 2,495 2,595 Loss on disposal of assets 1,342 602 Changes in assets and liabilities: Decrease (increase) in accounts receivable 647 (36) Increase in inventories (23,582) (29,871) Decrease in prepaid expenses and other current assets 1,440 1,032 Increase in deferred charges and other noncurrent assets -- (100) Increase in accounts payable 17,925 295 Increase (decrease) in accrued expenses and other liabilities 19,686 (5,663) ----------- ------------ Net cash provided by (used in) operating activities 41,883 (17,617) ------------ ----------- Cash flows from investing activities: Additions to property and equipment (24,534) (39,915) ------------ ----------- Cash flows from financing activities: Decrease in due to related parties (10,000) (57,154) Capital contributions by CVS -- 130,010 Decrease in book overdrafts (18,544) (16,647) ----------- ------------- Net cash (used in) provided by financing activities (28,544) 56,209 ----------- ------------ Net decrease in cash and cash equivalents (11,195) (1,323) Cash and cash equivalents at beginning of year 26,914 4,222 ---------- ------------ Cash and cash equivalents at end of period $ 15,719 $ 2,899 ========== ===========
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 170 stores, including 146 superstores, in 36 states across the United States as of September 27, 1997. The Company's superstores average approximately 35,000 square feet while traditional stores average approximately 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 September 27, 1997 and September 28, 1996 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, 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 short-term 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 September 27, 1997, the Company was in compliance with all terms and conditions of the Credit Agreement. The Credit Agreement allows for $20 million in borrowings from uncommitted lines of credit outside of the Credit Agreement. As of September 27, 1997, the Company had no borrowings under the Credit Agreement or against the uncommitted lines of credit. The average short-term borrowing rate for the thirty-nine week period ended September 27, 1997 was 6.4%. 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 contained no principal amortization prior to maturity in December 2000, and required quarterly interest payments at the 90-day LIBOR rate plus the applicable spread under the Credit Agreement described above. The Note also provided 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 that CVS continued 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. On July 21, 1997, the Company pre-paid Tranche A utilizing cash flows from operations. The Note contained no pre-payment penalties. The average borrowing rate for the Note for the thirty-nine week period ended September 27, 1997 was 7.2%. 6. 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. 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. 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. 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 September 27, 1997 and September 28, 1996, 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 September 27, 1997 and September 28, 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 LLP New York, New York October 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 September 27, 1997 Compared with Thirteen Weeks Ended September 28, 1996 Net sales increased 24.8% to $225.2 million for the thirteen weeks ended September 27, 1997, compared with $180.4 million for the same period last year, primarily as a result of new store openings since September 28, 1996. Comparable store net sales for the thirteen weeks ended September 27, 1997 increased 8.0% at the Company's superstore locations and 6.7% for the Company as a whole. Traditional store net sales were less than 7% of total net sales during the thirteen weeks ended September 27, 1997, and will continue to represent a declining percentage of total net sales as more superstores are opened and traditional stores are closed. Comparable store net sales were strong across all major geographic regions. The Company's average net sales per superstore were $5.8 million for the fifty-two weeks ended September 27, 1997, up from $5.4 million for the same period in 1996. The Company's average superstore net sales per square foot were $175 for the fifty-two weeks ended September 27, 1997, up from $170 for the fifty-two week period ending September 28, 1996. During the thirteen weeks ended September 27, 1997, the Company opened eight superstores and closed six stores, as compared with opening four superstores and closing three stores during the thirteen weeks ended September 28, 1996. At September 27, 1997, the Company operated 170 stores, of which 146 were superstores, as compared with 156 stores, of which 117 were superstores, at September 28, 1996. Store square footage increased 25% to 5,201,000 at September 27, 1997 compared with 4,147,000 at September 28, 1996. For the thirteen weeks ended September 27, 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 "things" merchandise. The increase in net sales of "things" merchandise resulted primarily 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 September 27, 1997 was $89.2 million, or 39.6% of net sales, compared with $69.2 million, or 38.3% of net sales, for the same period in 1996. The increase in gross profit was related to increased penetration of "things" business, which has higher margins than "linens" business, reduced freight costs from the leveraging of the Company's distribution center and overall improved selling mix. 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 September 27, 1997 were $76.2 million, or 33.8% of net sales, compared with $59.9 million, or 33.2% of net sales, for the same period in 1996. This increase is primarily a function of the number of store openings and closings. The increase is also due to immature stores having higher occupancy costs as a percent of net sales, reflecting 36 stores opened in 1996 and 16 stores opened through September 27, 1997. Operating profit for the thirteen weeks ended September 27, 1997 increased to $13.0 million, or 5.8% of net sales, compared with $9.3 million, or 5.1% 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 September 27, 1997 was $26,000 compared with $644,000 for the same period in 1996. The Company was in a net average investment position of $10.6 million (in cash equivalents) for the thirteen weeks ended September 27, 1997 as compared with net average borrowings of $30.2 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 September 27, 1997 was $5.5 million as compared with $3.7 million for the same period in 1996. Net income for the thirteen weeks ended September 27, 1997 increased to $7.5 million or $0.38 per share, compared with $5.0 million or $0.26 per share, for the same period in 1996. Thirty-Nine Weeks Ended September 27, 1997 Compared with Thirty-Nine Weeks Ended September 28, 1996 Net sales increased 26.7% to $590.9 million for the thirty-nine weeks ended September 27, 1997 compared with $466.3 million for the same period in 1996, primarily as a result of new store openings since September 28, 1996. Comparable store net sales for the thirty-nine weeks ended September 27, 1997 increased 7.8% at the Company's superstore locations and 6.2% for the Company as a whole. Traditional store net sales were less than 7% of total net sales during the thirty-nine weeks ended September 27, 1997, and will continue to represent a declining percentage of total net sales as more superstores are opened and traditional stores are closed. During the thirty-nine weeks ended September 27, 1997, the Company opened sixteen superstores and closed fifteen stores, as compared with opening eighteen superstores and closing seventeen stores during the thirty-nine weeks ended September 28, 1996. For the thirty-nine weeks ended September 27, 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 "things" merchandise. The increase in net sales of "things" merchandise resulted primarily 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 thirty-nine weeks ended September 27, 1997 was $230.1 million, or 38.9% of net sales, compared with $175.9 million, or 37.7% of net sales, for the same period in 1996. The improvement in gross profit was related to an increase in all components of margin which included lower freight costs from the leveraging of the Company's distribution center, and lower clearance markdowns. Gross margin for both "linens" and "things" merchandise increased consistent with the Company's consolidated results. SG&A expenses for the thirty-nine weeks ended September 27, 1997 were $213.8 million, or 36.2% of net sales, compared with $166.6 million, or 35.7% of net sales for the same period in 1996. The increase in SG&A is attributed to the number of store openings and closings. The increase is also due to immature stores having higher occupancy costs as a percent of net sales, reflecting 36 stores opened in 1996 and 16 stores opened through September 27, 1997. In addition, during the thirty-nine weeks ended September 28, 1996, the Company recorded a $0.5 million insurance recovery gain associated with damage to one of its stores caused by severe winter conditions. The Company also incurred additional expenses operating as a stand alone company that 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 thirty-nine weeks ended September 27, 1997 increased to $16.3 million, or 2.8% of net sales, compared with $9.3 million or 2.0% of net sales for the same period in 1996. Net interest expense (including commitment fees in connection with the $125 million Credit Agreement) for the thirty-nine weeks ended September 27, 1997 was $1.0 million compared with $4.5 million during the same period in 1996. The reduction in net interest expense is due to a reduction in net average borrowings, which were $7.5 million for the thirty-nine weeks ended September 27, 1997 as compared with $97.0 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 thirty-nine weeks ended September 27, 1997 was $6.4 million compared with $2.1 million for the same period in 1996. Net income for the thirty-nine weeks ended September 27, 1997 was $8.9 million, or $0.45 per share, compared with $2.8 million, or $0.14 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 uncommitted line of credit. Management currently believes that the Company's cash flows from operations, 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 September 27, 1997 was $41.9 million compared with net cash used in operating activities of $17.6 million for the same period in 1996. The increase in net cash provided by operating activities was due to improved inventory management and an increase in net income. The Company has reduced inventory per square foot by 13% compared to last year resulting in an overall increase in inventory of 9% compared to a sales increase of 26.7%. In addition accounts payable increased over last year due to increased inventory levels and timing of vendor payments. Net cash used in investing activities during the thirty-nine weeks ended September 27, 1997 was $24.5 million compared with $39.9 million for the same period in 1996. The decrease from the thirty-nine week period in 1996 is associated with the timing and number of the Company's new store openings. Net cash used in financing activities during the thirty-nine weeks ended September 27, 1997 was $28.5 million compared with net cash provided by financing activities of $56.2 million for the same period in 1996. Net cash used during the thirty-nine weeks ended September 27, 1997 was the result primarily of the timing of the settlement of vendor payments as well as the prepayment of the $10 million CVS Note. Net cash provided during the thirty-nine weeks ended September 28, 1996 was the result primarily 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 statements within the meaning of The Private Securities Litigation Reform Act of 1995. The statements may be identified by such forward-looking terminology such as "expect", "believe", "may", "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, 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. PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders On May 6, 1997, the Company held its Annual Meeting of Shareholders. At the Annual Meeting, Philip E. Beekman was elected as a director, with 14,861,496 shares voted for and 1,013,155 shares for which a vote was withheld. Directors whose term of office continued following the meeting were: Norman Axelrod, Charles C. Conaway and Stanley P. Goldstein. Also at the Annual Meeting, on a proposal to approve the adoption of the Company's 1996 Incentive Compensation Plan for purposes of Section 162(m) of the Internal Revenue Code, 9,750,093 votes were cast in favor of such proposal, 4,946,361 votes were cast against and 5,395 votes abstained. 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 September 27, 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) By:--------------------------------------------- James M. Tomaszewski Senior Vice President, Chief Financial Officer Date: November 12, 1997 EX-11 2 COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
EXHIBIT 11 LINENS 'N THINGS, INC. AND SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON SHARE (in thousands, except per share data) For the Thirteen Weeks Ended For the Thirty-Nine Weeks Ended ------------------------------------ -------------------------------------- September 27, September 28, September 27, September 28, 1997 1996 1997 1996 ------------------ ----------------- ------------------- ------------------ (Unaudited) (Unaudited) FINANCIAL STATEMENT PRESENTATION Weighted average number of shares outstanding 19,913 19,268 19,792 19,268 ================== ================= =================== ================== Net income applicable to common shares $7,532 $4,966 $8,872 $2,769 ================== ================= =================== ================== Per share amounts Net income per share $0.38 $0.26 $0.45 $0.14 ================== ================= =================== ================== PRIMARY Weighted average number of shares outstanding 19,913 19,268 19,792 19,268 ================== ================= =================== ================== Net income applicable to common shares $7,532 $4,966 $8,872 $2,769 ================== ================= =================== ================== Per share amounts Net income per share $0.38 $0.26 $0.45 $0.14 ================== ================= =================== ================== FULLY DILUTED Weighted average number of shares outstanding and fully diluted common share equivalents 19,984 19,268 19,957 19,268 ================== ================= =================== ================== Net income applicable to common shares $7,532 $4,966 $8,872 $2,769 ================== ================= =================== ================== Per share amounts Net income per share $0.38 $0.26 $0.45 $0.14 ================== ================= =================== ==================
EX-15 3 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 October 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. KPMG PEAT MARWICK LLP New York, New York November 12, 1997 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) 9-MOS DEC-31-1997 SEP-27-1997 15,719 0 16,737 0 225,716 267,346 197,096 47,325 444,644 164,359 0 0 0 193 262,564 444,644 590,873 590,873 360,792 213,808 0 0 972 15,301 6,429 8,872 0 0 0 8,872 0.45 0.45 -----END PRIVACY-ENHANCED MESSAGE-----