EX-99.1 2 a4745369ex991.txt LINENS 'N THINGS, INC. EXHIBIT 99.1 Exhibit 99.1 Linens 'n Things Reports Third Quarter 2004 Results CLIFTON, N.J.--(BUSINESS WIRE)--Oct. 20, 2004--Linens 'n Things, Inc. (NYSE: LIN), one of the leading national large format retailers of home textiles, housewares and home accessories, today announced net sales increased 8.5% to $654.2 million for the third quarter ended October 2, 2004, up from $602.8 million for the same period last year. Comparable net sales for the third quarter of 2004 declined 0.5%. Net income for the third quarter ended October 2, 2004 was $17.2 million or $0.38 per share on a fully diluted basis. Results include the implementation of EITF 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor" (EITF 02-16), which impacted the Company's third quarter 2004 results by $2.3 million, net of tax, or $0.05 per fully diluted share. For the same period last year, which was not impacted by EITF 02-16, the Company had net income of $21.0 million or $0.47 per fully diluted share. EITF 02-16 had no impact on the Company's cash flows. Norman Axelrod, Chairman and Chief Executive Officer, commented, "Although the third quarter began healthy, guest traffic trends declined as the quarter progressed. Looking at the fourth quarter, we have intensified our efforts in both marketing and merchandising in an effort to drive guest traffic." Net sales increased 11.1% to $1,785.7 million for the thirty-nine week period ended October 2, 2004, up from $1,607.0 million for the same period last year. Comparable net sales for the thirty-nine week period ended October 2, 2004 increased 1.3%. Net income for the thirty-nine week period ended October 2, 2004 was $18.1 million or $0.39 per share on a fully diluted basis. Results include the implementation of EITF 02-16, which impacted the Company's results by $11.3 million, net of tax, or $0.25 per fully diluted share for the thirty-nine week period ended October 2, 2004. For the same period last year, which was not impacted by EITF 02-16, the Company had net earnings of $28.8 million or $0.64 per fully diluted share. During the third quarter, the Company opened eight new stores, and closed two stores, as compared with opening twenty-one stores and closing one store during the same period last year. Year to date, the Company opened forty-one stores and closed two stores increasing its total square footage to 16.3 million, as compared with opening fifty-three stores and closing nine stores during the same period last year. The Company currently expects to open approximately twelve new stores in the fourth quarter of 2004, further expanding its presence as a leading retailer of home furnishings. For the 2004 fiscal year, capital expenditures are expected to be approximately $80 to $85 million. 2004 Business Outlook This outlook is based on current expectations and includes "forward looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Company can give no assurances that such expectations will prove correct and assumes no obligation to update such forward-looking information based on actual results during the period or changes in assumptions or estimates or other changes in the period. For the fourth quarter of 2004, comparable net sales are currently targeted to be in the low single digit range. The Company is currently comfortable with the range of analyst estimates of $0.99 to $1.02. Based on the Company's current evaluations, the estimated impact from the implementation of EITF 02-16 is expected to reduce fully diluted earnings per share on a non-cash basis by approximately $0.03 for the fourth quarter of fiscal 2004. Linens 'n Things, with 2003 sales of $2.4 billion, is one of the leading, national large format retailers of home textiles, housewares and home accessories. As of October 2, 2004 the Company was operating 479 stores in 45 states and five provinces across the United States and Canada. More information about Linens 'n Things can be found online at www.lnt.com. This press release contains forward-looking statements 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 such forward-looking terminology as "expect," "believe," "may," "intend," "plan," "target," "outlook," "comfortable with" and similar terms or variations of such terms. All of our information and statements regarding our outlook for the future including future revenues, comparable sales performance, earnings and other future financial condition, impact, results and performance, constitutes forward-looking statements. All our forward-looking statements are based on our current expectations, assumptions, estimates and projections about our Company and involve certain significant risks and uncertainties, including levels of sales, store traffic, the results and success of our holiday selling season, acceptance of product offerings and fashions and our ability to anticipate and successfully respond to changing consumer tastes and preferences, our ability to anticipate and control our operating and selling expenses, the success of our new business concepts, seasonal concepts and new brands, the performance of our new stores, substantial competitive pressures from other home furnishings retailers, the success of the Canadian expansion, availability of suitable future store locations, schedule of store expansion and of planned closings, the impact of the bankruptcies and consolidations in our industry, unusual weather patterns, the impact on consumer spending as a result of the slower consumer economy, a highly promotional retail environment, any significant variations between actual amounts and the amounts estimated for those matters identified as our critical accounting estimates as well as other significant accounting estimates made in the preparation of our financial statements, the actual impact in fiscal 2004 of EITF 02-16 as discussed in this release, and our ability to successfully implement our strategic initiatives. If these or other risks or uncertainties materialize, or if our estimates or underlying assumptions prove inaccurate, actual results could differ materially from any future results, express or implied by our forward-looking statements. These and other important risk factors are included in the "Risk Factors" section of the Company's Registration Statement on Form S-3 as filed with the Securities and Exchange Commission on June 18, 2002 and are contained in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. You are urged to consider all such factors. In light of the substantial uncertainty inherent in such forward-looking statements, you should not consider their inclusion to be a representation that such forward-looking matters will be achieved. The Company assumes no obligation for updating any such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements, even if such results or changes make it clear that any projected results will not be realized. Our outlook and other forward-looking statements are as of the date of this release only. LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Thirteen Weeks Ended -------------------------------------- October 2, 2004 EITF 02-16 October 4, As reported* Impact* 2003 ------------------------- ------------ Net sales $ 654,196 $ -- $ 602,816 Cost of sales, including buying and warehousing costs 386,191 7,634 360,868 ------------ ------------ ------------ Gross profit 268,005 (7,634) 241,948 Selling, general and administrative expenses 240,127 (11,430) 207,764 ------------ ------------ ------------ Operating profit 27,878 3,796 34,184 Interest (income) expense, net (2) -- 236 ------------ ------------ ------------ Income before provision for income taxes 27,880 3,796 33,948 Provision for income taxes 10,650 1,450 12,968 ------------ ------------ ------------ Net income $ 17,230 $ 2,346 $ 20,980 ============ ============ ============ Per share of common stock: Basic ----- Net income per share $ 0.38 $ 0.05 $ 0.47 Weighted average shares outstanding 45,143 45,143 44,208 Fully Diluted ------------- Net income per share $ 0.38 $ 0.05 $ 0.47 Weighted average shares outstanding 45,602 45,602 45,027 * The "As Reported" amounts include the impact of EITF 02-16 "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor" (EITF 02-16). The Company commenced implementation of EITF 02-16 during the first quarter of fiscal 2004. As previously announced, EITF 02-16, is effective for vendor contracts initiated or modified in fiscal 2004 or thereafter. Following the initial implementation impact, subsequent fiscal years will reflect vendor allowances on a consistent basis other than for any net changes in such vendor allowances. The EITF 02-16 pre-tax adjustment of $3.8 million represents those allowances reflected as a reduction of the cost of inventory, which historically would have been treated as a reduction of cost of sales or selling, general and administrative expenses ("SG&A"). Beginning in fiscal 2004, due to the Company's changes to its vendor agreements and the requirements of EITF 02-16, the Company no longer records advertising allowances as a reduction to SG&A. The Company has allocated the EITF 02-16 pre-tax adjustment to SG&A based on the previous year ratio of vendor advertising allowances recorded within SG&A to sales. The remaining portion of the total EITF 02-16 pre-tax adjustment was allocated to cost of sales. The Company provides this information in order to allow investors to have better insight into the Company's comparative period-to-period operating performance, and it is intended to supplement, not replace, GAAP presentation. LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Thirty-Nine Weeks Ended -------------------------------------- October 2, 2004, EITF 02-16 October 4, As reported* Impact* 2003 ------------------------- ------------ Net sales $ 1,785,745 $ -- $ 1,606,959 Cost of sales, including buying and warehousing costs 1,064,787 4,082 958,472 ------------ ------------ ------------ Gross profit 720,958 (4,082) 648,487 Selling, general and administrative expenses 691,406 (22,393) 601,345 ------------ ------------ ------------ Operating profit 29,552 18,311 47,142 Interest expense, net 202 -- 600 ------------ ------------ ------------ Income before provision for income taxes 29,350 18,311 46,542 Provision for income taxes 11,211 6,995 17,780 ------------ ------------ ------------ Net income $ 18,139 $ 11,316 $ 28,762 ============ ============ ============ Per share of common stock: Basic: ------ Net income per share $ 0.40 $ 0.25 $ 0.65 Weighted average shares outstanding 45,057 45,057 44,141 Fully Diluted ------------- Net income per share $ 0.39 $ 0.25 $ 0.64 Weighted average shares outstanding 45,941 45,941 44,699 * The "As Reported" amounts include the impact of EITF 02-16 "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor" (EITF 02-16). The Company commenced implementation of EITF 02-16 during the first quarter of fiscal 2004. As previously announced, EITF 02-16, is effective for vendor contracts initiated or modified in fiscal 2004 or thereafter. Following the initial implementation impact, subsequent fiscal years will reflect vendor allowances on a consistent basis other than for any net changes in such vendor allowances. The EITF 02-16 pre-tax adjustment of $18.3 million represents those allowances reflected as a reduction of the cost of inventory, which historically would have been treated as a reduction of cost of sales or selling, general and administrative expenses ("SG&A"). Beginning in fiscal 2004, due to the Company's changes to its vendor agreements and the requirements of EITF 02-16, the Company no longer records advertising allowances as a reduction to SG&A. The Company has allocated the EITF 02-16 pre-tax adjustment to SG&A based on the previous year ratio of vendor advertising allowances recorded within SG&A to sales. The remaining portion of the total EITF 02-16 pre-tax adjustment was allocated to cost of sales. The Company provides this information in order to allow investors to have better insight into the Company's comparative period-to-period operating performance, and it is intended to supplement, not replace, GAAP presentation. LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) October 2, October 4, 2004 2003 ------------ ------------ Assets (unaudited) Current assets: Cash and cash equivalents $ 54,460 $ 22,731 Inventories 795,873 746,310 Accounts Receivable 26,494 24,725 Prepaid expenses and other 35,331 33,236 Current deferred taxes 472 -- ------------ ------------ Total current assets 912,630 827,002 Property and equipment, net 397,947 380,415 Other non-current assets, net 30,444 28,836 ------------ ------------ Total assets $ 1,341,021 $ 1,236,253 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 279,169 $ 298,221 Accrued expenses and other current liabilities 138,033 130,053 Current deferred taxes 7,138 7,152 Short-term borrowings 560 3,221 ------------ ------------ Total current liabilities 424,900 438,647 Other long-term liabilities 127,606 95,484 ------------ ------------ Total liabilities 552,506 534,131 Shareholders' equity 788,515 702,122 ------------ ------------ Total liabilities and shareholders' equity $ 1,341,021 $ 1,236,253 ============ ============ LINENS 'N THINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (in thousands) Thirty-Nine Weeks Ended ------------------------- October 2, October 4, 2004 2003 ------------ ------------ (unaudited) Cash Flows From Operating Activities Net income $ 18,139 $ 28,762 Depreciation and amortization 45,589 40,421 Change in working capital (86,166) (66,980) ------------ ------------ Net cash (used in) provided by operating activities (22,438) 2,203 ------------ ------------ Cash Flows From Investing Activities Additions to property and equipment (66,542) (70,306) ------------ ------------ Cash Flows From Financing Activities Proceeds from common stock issued under stock incentive plans 6,974 2,651 Increase in short-term borrowings 532 1,070 (Purchase) Issuance of treasury stock (39) 255 ------------ ------------ Net cash provided by financing activities 7,467 3,976 ------------ ------------ Effect of exchange rate changes on cash and cash equivalents (156) 253 Net decrease in cash and cash equivalents (81,669) (63,874) Cash and cash equivalents at beginning of period 136,129 86,605 ------------ ------------ Cash and cash equivalents at end of period $ 54,460 $ 22,731 ============ ============ CONTACT: Linens 'n Things, Inc. Chief Financial Officer William T. Giles, 973-815-2929 Visit our Web Site at www.lnt.com