-----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, HTVu+hE1rC4gbRSO3xuVQoEfTyPW0kU+FdbNuGMud9n/EK6gXxFsLSgK1HU9ZmSc zyo1dNOBCguAjrCU43qp2Q== 0000927796-99-000269.txt : 19991117 0000927796-99-000269.hdr.sgml : 19991117 ACCESSION NUMBER: 0000927796-99-000269 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991002 FILED AS OF DATE: 19991115 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: 99756568 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 October 2, 1999 Commission File Number 1-12381 Linens 'n Things, Inc. ---------------------- (Exact name of Registrant as specified in its charter) Delaware 22-3463939 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 6 Brighton Road, Clifton, New Jersey 07015 ------------------------------------ ----- (Address of principal executive offices) (Zip Code) (973) 778-1300 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -- Number of shares outstanding of the issuer's Common Stock: Class Outstanding at November 12, 1999 Common Stock, $0.01 par value 39,450,372
INDEX Part I. Financial Information Page No. -------- Item 1. Financial Statements Consolidated Statements of Operations for the Thirteen and Thirty-Nine Weeks Ended October 2, 1999 and September 26, 1998 3 Consolidated Balance Sheets as of October 2, 1999, December 31, 1998 and September 26, 1998 4 Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended October 2, 1999 and September 26, 1998 5 Notes to Consolidated Financial Statements 6 Independent Auditors' Review Report 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 13 (a) Exhibit Index 13 (b) Reports on Form 8-K 13
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 Thirty-Nine Weeks Ended -------------------------------- -------------------------------- October 2, September 26, October 2, September 26, 1999 1998 1999 1998 ---------- -------------- -------------- ----------------- Net sales $341,122 $ 278,642 $886,290 $718,773 Cost of sales, including buying and warehousing costs 203,886 167,450 531,467 435,375 ---------- -------------- -------------- ----------------- Gross profit 137,236 111,192 354,823 283,398 Selling, general and administrative expenses 113,361 93,168 316,858 258,480 ---------- -------------- -------------- ----------------- Operating profit 23,875 18,024 37,965 24,918 Interest expense (income), net 34 105 (21) 5 ---------- -------------- -------------- ----------------- Income before provision for income taxes 23,841 17,919 37,986 24,913 Provision for income taxes 9,179 6,901 14,626 9,594 ---------- -------------- -------------- ----------------- Net income $ 14,662 $ 11,018 $ 23,360 $ 15,319 ========== ============== ============= ================ Per share of common stock: Basic Net income per share $0.37 $0.28 $0.59 $0.39 Weighted average shares outstanding 39,395 38,955 39,305 38,868 Diluted Net income per share $0.36 $0.27 $0.57 $0.38 Weighted average shares outstanding 40,940 40,508 40,959 40,387
See accompanying notes to consolidated financial statements.
LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) October 2, December 31, September 26, 1999 1998 1998 ------------------ ------------------ ------------------- (Unaudited) (Unaudited) Assets Current assets: Cash and cash equivalents $ 18,408 $ 42,638 $ 15,847 Accounts receivable, net 20,877 22,814 19,810 Inventories 369,255 271,389 294,161 Prepaid expenses and other current assets 21,009 18,567 16,586 ------------------ ------------------ ------------------- Total current assets 429,549 355,408 346,404 Property and equipment, net 215,787 179,439 164,093 Goodwill, net 20,039 20,676 20,889 Deferred charges and other noncurrent assets, net 5,353 5,321 5,477 ------------------ ------------------ ------------------- Total assets $ 670,728 $ 560,844 $ 536,863 ================== ================== =================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 180,898 $ 115,754 $ 136,807 Accrued expenses and other current liabilities 95,006 84,761 66,741 ------------------ ------------------ ------------------- Total current liabilities 275,904 200,515 203,548 Deferred income taxes and other long-term liabilities 41,691 36,753 34,355 Shareholders' equity: Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding -- -- -- Common stock, $0.01 par value; 135,000,000 shares authorized at October 2, 1999 and 60,000,000 shares authorized at December 31, 1998 and September 26, 1998; 39,473,234 shares issued and 39,396,757 outstanding at October 2, 1999; 39,091,281 shares issued and 39,037,948 outstanding at December 31, 1998; and 38,975,698 shares issued and 38,922,365 outstanding at September 26, 1998 395 391 390 Additional paid-in capital 218,615 211,378 209,507 Retained earnings 136,557 113,197 90,453 Treasury stock, at cost, 76,477 shares at October 2, 1999; 53,333 at December 31, 1998 and at September 26, 1998 (2,434) (1,390) (1,390) ------------------ ------------------ ------------------- Total shareholders' equity 353,133 323,576 298,960 ------------------ ------------------ ------------------- Total liabilities and shareholders' equity $ 670,728 $ 560,844 $ 536,863 ================== ================== ===================
See accompanying notes to consolidated financial statements.
LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Thirty-Nine Weeks Ended ----------------------------------------- October 2, September 26, 1999 1998 ------------------- ------------------ (Unaudited) Cash flows from operating activities: Net income $ 23,360 $ 15,319 Adjustments to reconcile net income to net Cash provided by (used in) operating activities: Depreciation and amortization 19,851 15,766 Deferred income taxes 1,784 2,056 Loss on disposal of assets 553 652 Changes in assets and liabilities: Decrease (increase) in accounts receivable 1,937 (6,046) Increase in inventories (97,866) (70,973) Increase in prepaid expenses and other current assets (1,640) (2,889) (Increase) decrease in deferred charges (569) 197 Increase in accounts payable 61,941 22,836 (Decrease) increase in accrued expenses and other liabilities (8,841) 12,565 ------------------- ------------------ Net cash provided by (used in) operating activities 510 (10,517) ------------------- ------------------ Cash flows from investing activities: Additions to property and equipment (55,055) (24,867) ------------------- ------------------ Cash flows from financing activities: Proceeds and Federal tax benefit from common stock exercised under stock incentive plans 7,241 4,997 Purchase of treasury stock (1,044) (1,390) Increase in book overdrafts 24,118 7,742 ------------------- ------------------ Net cash provided by financing activities 30,315 11,349 ------------------- ------------------ Net decrease in cash and cash equivalents (24,230) (24,035) Cash and cash equivalents at beginning of year 42,638 39,882 ------------------- ------------------ Cash and cash equivalents at end of period $ 18,408 $ 15,847 =================== ==================
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 December 31, 1998 consolidated balance sheet, are unaudited. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of October 2, 1999 and September 26, 1998 and the results of operations for the respective thirteen and thirty-nine weeks then ended and cash flows for the thirty-nine weeks then ended. Because of the seasonality of the specialty retailing business, operating results of the Company on a quarterly basis may not be indicative of operating results for the full year. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 1998, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. All significant intercompany accounts and transactions have been eliminated. The December 31, 1998 consolidated balance sheet amounts have been derived from the Company's audited consolidated balance sheet amounts. 2. Short-Term Borrowing Arrangements The Company has available a three-year, $90 million senior revolving credit facility agreement (the "Credit Agreement") with third party institutional lenders expiring March 31, 2001. The amount of borrowings can be increased up to $125 million provided certain terms and conditions contained in the Credit Agreement are met. The Credit Agreement contains certain financial covenants, including those relating to the maintenance of a minimum tangible net worth, a minimum fixed charge coverage ratio, and a maximum leverage ratio, as defined in the Credit Agreement. As of October 2, 1999, the Company was in compliance with the terms and conditions of the Credit Agreement. The Credit Agreement also allows for up to $25 million in borrowings from uncommitted lines of credit outside of the Credit Agreement. As of October 2, 1999, the Company had no borrowings under the Credit Agreement or against the uncommitted lines of credit. 3. Recent Accounting Pronouncement Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which requires a dual presentation of earnings per share--basic and diluted. Basic earnings per share has been computed by dividing net income by the weighted average number of shares outstanding of approximately 39,395,000 and 38,955,000 for the thirteen weeks ended October 2, 1999 and September 26, 1998, respectively, and approximately 39,305,000 and 38,868,000 for the thirty-nine weeks ended October 2, 1999 and September 26, 1998, respectively. Diluted earnings per share has been computed by dividing net income by the weighted-average number of shares outstanding including the dilutive effects of stock options and deferred stock grants. The weighted-average shares outstanding for the diluted earnings per share calculation were approximately 40,940,000 and 40,508,000 for the thirteen weeks ended October 2, 1999 and September 26, 1998, respectively, and approximately 40,959,000 and 40,387,000 for the thirty-nine weeks ended October 2, 1999 and September 26, 1998, respectively. 4. Deferred Compensation Plan The Company has a deferred compensation plan (the "Plan") established to enable key employees of the Company, as designated by the Company, to defer compensation, including stock and stock denominated awards. Participation is voluntary and participants can elect to make contributions to the Plan. Participants are 100% vested in their own deferrals to the Plan at all times. At October 2, 1999, the liability under the Plan, which is reflected in other long-term liabilities, was $5.2 million. Independent Auditors' Review Report The Board of Directors and Shareholders Linens 'n Things, Inc.: We have reviewed the consolidated balance sheets of Linens 'n Things, Inc. and Subsidiaries as of October 2, 1999 and September 26, 1998, and the related consolidated statements of operations for the thirteen and thirty-nine week periods then ended and the related consolidated statements of cash flows for the thirty-nine week periods ended October 2, 1999 and September 26, 1998. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Linens 'n Things, Inc. and Subsidiaries as of December 31, 1998 and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 3, 1999 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1998, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG LLP New York, New York October 20, 1999 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LINENS 'N THINGS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated financial statements of the Company and the notes thereto appearing elsewhere in this document. Results of Operations Thirteen Weeks Ended October 2, 1999 Compared with Thirteen Weeks Ended September 26, 1998 Net sales increased 22.4% to $341.1 million for the thirteen weeks ended October 2, 1999, up from $278.6 million for the same period in 1998, primarily as a result of new store openings since September 26, 1998. Comparable store net sales for the thirteen weeks ended October 2, 1999 increased 5.2% as compared with an increase of 11.2% for the same period last year. Comparable store net sales as a whole continued to remain strong across most major geographic regions. During the thirteen weeks ended October 2, 1999, the Company opened 15 stores and closed two stores, compared with opening six stores and closing one store during the same period last year. At October 2, 1999, the Company operated 217 stores, of which 210 were superstores, compared with 183 stores, of which 169 were superstores, at September 26, 1998. Store square footage increased 24.0% to 7,425,000 at October 2, 1999 compared with 5,990,000 at September 26, 1998. For the thirteen weeks ended October 2, 1999, net sales of "things" merchandise increased approximately 30% over the same period in 1998, while net sales of "linens" merchandise increased approximately 20% over the same period in 1998. This is consistent with the Company's strategy to increase the penetration of "things" merchandise. The increase in net sales of "things" merchandise is the result of the continued maturation of this business as well as the overall expansion of the product categories in new and existing stores. Gross profit for the thirteen weeks ended October 2, 1999 was $137.2 million, or 40.2% of net sales, compared with $111.2 million, or 39.9% of net sales, for the same period last year. The increase in gross profit was due primarily to improvements in the selling mix and better buying. Logistics costs as a percent of sales were lower than last year as the Company continues to leverage its costs through the use of its distribution network. Selling, general and administrative expenses for the thirteen weeks ended October 2, 1999 were $113.4 million, or 33.2% of net sales, compared with $93.2 million, or 33.4% of net sales, for the same period last year. This decrease as a percentage of net sales is primarily a function of increased leverage through strong comparable store net sales. However, these savings were partially offset by costs related to increased store openings as well as continued investment in store payroll in order to improve guest service levels. Management believes the improvement in guest service has contributed to the strong comparable store net sales performance. Operating profit for the thirteen weeks ended October 2, 1999 increased to $23.9 million, or 7.0% of net sales, compared with $18.0 million, or 6.5% of net sales, for the same period last year. The Company incurred net interest expense of approximately $34,000 (including commitment fees in connection with the Company's $90 million credit agreement) for the thirteen weeks ended October 2, 1999, compared with approximately $105,000 for the same period in 1998. The Company's income tax expense for the thirteen weeks ended October 2, 1999 was approximately $9.2 million as compared with $6.9 million for the same period last year. The Company's effective tax rate was 38.5% for the thirteen weeks ending October 2, 1999 and September 26, 1998. LINENS 'N THINGS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net income for the thirteen weeks ended October 2, 1999 increased to $14.7 million, or $0.36 per share, compared with $11.0 million, or $0.27 per share, for the same period last year. Thirty-Nine Weeks Ended October 2, 1999 Compared with Thirty-Nine Weeks Ended September 26, 1998 Net sales increased 23.3% to $886.3 million for the thirty-nine weeks ended October 2, 1999, up from $718.8 million for the same period in 1998, primarily as a result of new store openings since September 26, 1998. Comparable store net sales for the thirty-nine weeks ended October 2, 1999 increased 5.7% as compared with an increase of 8.4% for the same period last year. Comparable store net sales as a whole continued to remain strong across most major geographic regions. During the thirty-nine weeks ended October 2, 1999, the Company opened 29 stores and closed 8 stores, compared with opening 17 stores and closing 10 stores during the same period last year. For the thirty-nine weeks ended October 2, 1999, net sales of "things" merchandise increased approximately 30% over the same period in 1998, while net sales of "linens" merchandise increased approximately 20% over the same period in 1998. This is consistent with the Company's strategy to increase the penetration of "things" merchandise. The increase in net sales of "things" merchandise is the result of the continued maturation of this business as well as the overall expansion of the product categories in new and existing stores. Gross profit for the thirty-nine weeks ended October 2, 1999 was $354.8 million, or 40.0% of net sales, compared with $283.4 million, or 39.4% of net sales, for the same period last year. The increase in gross profit was due primarily to improvements in the selling mix, which included a higher penetration of seasonal merchandise which has a higher markon, as well as better buying. Selling, general and administrative expenses for the thirty-nine weeks ended October 2, 1999 were $316.9 million, or 35.8% of net sales, compared with $258.5 million, or 36.0% of net sales, for the same period last year. This decrease as a percentage of net sales is primarily a function of increased leverage through strong comparable store net sales coupled with fewer store closings than in the same period last year. However, these savings were partially offset by costs related to increased store openings as well as continued investment in store payroll in order to improve guest service levels. Management believes the improvement in guest service has contributed to the strong comparable store net sales performance. Operating profit for the thirty-nine weeks ended October 2, 1999 increased to $38.0 million, or 4.3% of net sales, compared with $24.9 million, or 3.5% of net sales, for the same period last year. The Company earned net interest income of approximately $21,000 (net of commitment fees in connection with the Company's $90 million credit agreement) for the thirty-nine weeks ended October 2, 1999, compared with approximately $5,000 of net interest expense for the same period in 1998. The Company's income tax expense for the thirty-nine weeks ended October 2, 1999 was $14.6 million as compared with $9.6 million for the same period last year. The Company's effective tax rate was 38.5% for the thirty-nine weeks ending October 2, 1999 and September 26, 1998. Net income for the thirty-nine weeks ended October 2, 1999 increased to $23.4 million, or $0.57 per share, compared with $15.3 million, or $0.38 per share, for the same period last year. Liquidity and Capital Resources The Company's capital requirements are primarily investments in new stores, new store inventory purchases and seasonal working capital, as well as a second distribution center that became fully functional in June 1999. These requirements are funded through a combination of internally generated cash from operations, credit extended by suppliers and short-term borrowings. The Company has available a $90 million three-year revolving credit facility expiring March 31, 2001, which can be increased up to $125 million provided certain terms and conditions contained in the credit agreement are met. This agreement allows for up to $25 million in borrowings from uncommitted lines of credit. Management currently believes that the Company's cash flows from operations, credit extended by suppliers, the revolving credit facility and the uncommitted lines of credit will be sufficient to fund anticipated capital expenditures and working capital requirements in the foreseeable future. Net cash provided by operating activities for the thirty-nine weeks ended October 2, 1999 was $0.5 million compared with net cash used in operating activities of $10.5 million for the same period last year. The net cash provided by operating activities was due to a larger increase in accounts payable as compared with last year resulting from increased inventory levels and the timing of vendor payments. The increase in inventory primarily resulted from the increased number of new stores since September 26, 1998. Net cash used in investing activities during the thirty-nine weeks ended October 2, 1999 was $55.1 million compared with $24.9 million for the same period last year. The increase is associated with the timing and number of the Company's new store openings, as well as capital expenditures for the second distribution center in southern New Jersey which became fully functional in June 1999. Also, more of the stores scheduled for remodel were completed earlier in the year as compared with the prior year. Net cash provided by financing activities during the thirty-nine weeks ended October 2, 1999 was $30.3 million compared with $11.3 million for the same period last year. Net cash provided during the thirty-nine weeks ended October 2, 1999 was primarily the result of the timing and settlement of vendor payments as well as the proceeds and Federal tax benefits related to common stock exercised under stock incentive plans. Year 2000 The Company has conducted a comprehensive review of its computer systems to identify material systems that could be affected by the "Year 2000" issue and has developed an implementation plan intended to address this issue. The Company has adopted a five-phase Year 2000 program, the principal components of which are: Phase I: Identification and ranking of those internal Company systems, technology and equipment considered critical or substantially important to the flow of its operations; and communication with certain significant suppliers and vendors to the Company concerning their Year 2000 readiness Phase II: Assessment of items identified in Phase I Phase III: Remediation or replacement of non-compliant identified internal systems and components and determination of solutions for non-compliant suppliers and vendors Phase IV: Testing of systems and components Phase V: Developing a contingency plan to address the most reasonably likely worst case scenarios with respect to Year 2000 LINENS `N THINGS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The identification and assessment phases of the Year 2000 program with respect to the Company's systems and equipment have been substantially completed for the Company's mission critical and other major information technology systems and hardware ("IT Systems") and for the Company's non-information technology equipment known to the Company to have microchips or other embedded technology and considered critical or substantially important to the flow of its operations ("non-IT Company Equipment"). The Company has also substantially completed the remediation phase for its IT Systems and its non-IT Company Equipment and substantially completed testing for its mission critical IT Systems. The Company has completed the testing phase for its IT Systems and non-IT Company Equipment, including installation and testing of Year 2000 versions. The Company will continue periodic testing during fiscal 1999 for new installations, versions or changes. Virtually all the compliance has been performed using internal resources. In addition to Year 2000 implementation for the Company's internal systems and equipment, the Company continues to be in the process of communicating with major business suppliers and vendors in order to endeavor to determine their state of readiness, based on these communications with such third party suppliers and vendors, with respect to Year 2000. Assessment of significant third party Year 2000 readiness has been substantially completed. Failure of suppliers, vendors or other third parties to timely address and remedy Year 2000 problems or to develop and effect appropriate contingency plans could have a material adverse effect on the Company's business and operations. The Company believes that the geographically disbursed nature of its business and its large supplier and vendor base should tend to minimize such potential adverse effects. The Company presently believes that with modifications to existing software and conversions to new software for certain applications, the Year 2000 problem will not cause a significant disruption of its operations. However, the Year 2000 problem is unique and the Company's Year 2000 compliance program is based on various assumptions and expectations that cannot be assured. Potential risks include loss of electric power or certain communication links, failure of one or more of the Company's internal systems which disrupt its normal sales or other operations, failure of suppliers or vendors (or of entities which supply products, services or materials to them) to be Year 2000 ready, other disruptions to its business such as delayed deliveries from suppliers, as well as disruptions to the distribution channels, including ports, transportation services and the Company's own distribution centers. The Company has developed a contingency plan for certain mission critical systems. The Company does not expect the costs associated with this Year 2000 project (including internal personnel costs) to be material to the Company's financial condition or results of operations. Costs incurred to date have been expensed and were budgeted costs funded through operating cash flows. The costs associated with the completion of Year 2000 will be expensed as incurred and are not currently expected to have a material adverse impact on the Company's financial position or results of operations. The Company's cost estimates do not include costs associated with addressing and resolving issues as a result of the failure of third parties to be Year 2000 compliant and or for implementing any contingency plans. LINENS `N THINGS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Inflation The Company does not believe that its operating results have been materially affected by inflation during the preceding three years. There can be no assurance, however, that the Company's operating results will not be affected by inflation in the future. Seasonality The Company's business is subject to substantial seasonal variations. Historically, the Company has realized a significant portion of its net sales and net income for the year during the third and fourth quarters. The Company's quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of new store openings. The Company believes this is the general pattern associated with its segment of the retail industry and expects this pattern will continue in the future. Consequently, comparisons between quarters are not necessarily meaningful and the results for any quarter are not necessarily indicative of future results. Forward-Looking Statements The Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. The statements are made a number of times throughout the document and may be identified by forward-looking terminology as "expect," "believe," "may," "will," "intend" or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties including levels of sales, store traffic, acceptance of product offerings and fashions, competitive pressures from other home furnishings retailers, availability of suitable future store locations and schedule of store expansion plans and any potential disruptions to the Company's operations caused by any Year 2000 failures related to the Company's systems, equipment or third parties. These and other important factors that may cause actual results to differ materially from such forward-looking statements are included in the "Risk Factors" section of the Company's Registration Statement on Form S-1 as filed with the Securities and Exchange Commission on May 29, 1997, and may be contained in subsequent reports filed with the Securities and Exchange Commission. You are urged to consider such factors. The Company assumes no obligation for updating any such forward-looking statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk. Not Applicable. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) EXHIBIT INDEX Exhibit Number Description ------- ----------- 11 Computation of Net Income Per Common Share 15 Letter re unaudited interim financial information 27 Financial Data Schedule (filed electronically with SEC only) (b) Reports on Form 8-K: No Current Reports on Form 8-K were filed by the Company during the thirteen week period ended October 2, 1999. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LINENS 'N THINGS, INC. (Registrant) WILLIAM T. GILES By:----------------------------------- William T. Giles Vice President, Chief Financial Officer (Duly authorized officer and principal financial officer) Date: November 15, 1999 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 Thirty-Nine Weeks Ended October 2, September 26, October 2, September 26, 1999 1998 1999 1998 --------------- ------------------ -------------- ------------- (Unaudited) (Unaudited) Basic Weighted-average number of shares outstanding 39,395 38,955 39,305 38,868 ============== ============== =============== ============ Net income applicable to common shares $14,662 $11,018 $23,360 $15,319 ============== ============== =============== ============ Per share amounts Net income per share $0.37 $0.28 $0.59 $0.39 ============== ============== =============== ============ Diluted Weighted-average number of shares outstanding 40,940 40,508 40,959 40,387 ============== ============== =============== ============ Net income applicable to common shares $14,662 $11,018 $23,360 $15,319 ============== ============== =============== ============ Per share amounts Net income per share $0.36 $0.27 $0.57 $0.38 ============== ============== =============== ============
EX-15 3 EX. 15 - KPMG ACCOUNTANTS' ACKNOWLEDGMENT Accountants' Acknowledgment Linens 'n Things, Inc. Clifton, New Jersey Board of Directors: Re: Registration Statements Numbers 333-26819, 333-26827, 333-55803 and 333-71903 on Form S-8 With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated October 20, 1999 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. KPMG LLP New York, New York November 15, 1999 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) 9-MOS DEC-31-1999 OCT-02-1999 18,408 0 20,877 0 369,255 429,549 299,807 84,020 670,728 275,904 0 0 0 395 352,738 670,728 886,290 886,290 531,467 316,858 0 0 (21) 37,986 14,626 23,360 0 0 0 23,360 0.59 0.57
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