SECURITIES AND
EXCHANGE COMMISSION
|
Linens
n Things, Inc. (Exact name of registrant as specified in charter) |
Delaware
(State or Other Jurisdiction of Incorporation) |
22-3463939
(I.R.S. Employer Identification Number) |
6 Brighton Road, Clifton, New Jersey
(Address of principal executive offices) |
07015
(Zip Code) |
(973) 778-1300 (Registrants 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 issuers
Common Stock: Common Stock, $0.01 par value |
Outstanding at May 6, 2002 40,666,228 |
INDEX |
Part I. Financial Information | Page No. |
Item 1. | Financial Statements |
Consolidated Statements of Operations for the Thirteen Weeks Ended March 30, 2002 and March 31, 2001 |
3 |
Consolidated Balance Sheets as of March 30, 2002, December 29, 2001 and March 31, 2001 |
4 |
Consolidated Statements of Cash Flows for the Thirteen Weeks Ended March 30, 2002 and March 31, 2001 |
5 |
Notes to Consolidated Financial Statements |
6-9 |
Independent Auditors Review Report | 10 |
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
11-13 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 14 |
Part II. Other Information |
Item 6. | Exhibits and Reports on Form 8-K | 15 |
(a) Exhibit Index | 15 |
(b) Reports on Form 8-K | 15 |
PART - I FINANCIAL INFORMATIONItem 1. Financial StatementsLINENS N THINGS, INC. AND SUBSIDIARIES
|
Thirteen Weeks Ended | |||||
---|---|---|---|---|---|
March 30, 2002 |
March 31, 2001 | ||||
Net sales | $ 456,911 | $ 379,245 | |||
Cost of sales, including buying and distribution costs | 275,712 | 228,543 | |||
Gross profit | 181,199 | 150,702 | |||
Selling, general and administrative expenses | 172,204 | 142,535 | |||
Operating profit | 8,995 | 8,167 | |||
Interest income | (4 | ) | (27 | ) | |
Interest expense | 679 | 597 | |||
Interest expense, net | 675 | 570 | |||
Income before income taxes | 8,320 | 7,597 | |||
Provision for income taxes | 3,180 | 2,904 | |||
Net income | $ 5,140 | $ 4,693 | |||
Per share of common stock: | |||||
Basic | |||||
Net income | $ 0.13 | $ 0.12 | |||
Weighted-average shares outstanding | 40,645 | 40,335 | |||
Diluted | |||||
Net income | $ 0.12 | $ 0.11 | |||
Weighted-average shares outstanding | 41,703 | 41,325 |
See accompanying notes to consolidated financial statements.
LINENS N THINGS, INC. AND SUBSIDIARIES
|
March 30, 2002 |
December 29, 2001 |
March 31, 2001 | |||||
---|---|---|---|---|---|---|---|
(Unaudited) | (Audited) | (Unaudited) | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ 10,064 | $ 15,437 | $ 3,502 | ||||
Accounts receivable | 31,115 | 40,835 | 33,214 | ||||
Inventories | 549,700 | 492,307 | 475,465 | ||||
Prepaid expenses and other current assets | 13,366 | 15,691 | 12,824 | ||||
Current deferred taxes | 23,384 | 23,524 | 13,831 | ||||
Total current assets | 627,629 | 587,794 | 538,836 | ||||
Property and equipment, net | 327,813 | 312,403 | 271,531 | ||||
Goodwill, net | 18,126 | 18,126 | 18,764 | ||||
Deferred charges and other noncurrent assets, net | 11,221 | 9,116 | 7,696 | ||||
Total assets | $ 984,789 | $ 927,439 | $ 836,827 | ||||
Liabilities and Shareholders Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ 237,765 | $ 180,840 | $ 190,296 | ||||
Accrued expenses and other current liabilities | 124,959 | 149,201 | 88,413 | ||||
Short-term borrowings | 47,094 | 29,675 | 27,321 | ||||
Total current liabilities | 409,818 | 359,716 | 306,030 | ||||
Deferred income taxes and other long-term liabilities | 70,538 | 69,508 | 58,837 | ||||
Shareholders equity: | |||||||
authorized; none issued and outstanding | -- | -- | -- | ||||
Common stock, $0.01 par value; | |||||||
135,000,000 shares authorized; 40,923,574 shares | |||||||
issued and 40,674,378 shares outstanding at March 30, | |||||||
2002; 40,872,008 shares issued and 40,624,374 shares | |||||||
outstanding at December 29, 2001; and 40,622,506 | |||||||
shares issued and 40,508,191 shares outstanding at | |||||||
March 31, 2001 | 409 | 409 | 406 | ||||
Additional paid-in capital | 246,350 | 245,234 | 240,401 | ||||
Retained earnings | 265,075 | 259,935 | 234,879 | ||||
Accumulated other comprehensive loss | (412 | ) | (417 | ) | (296 | ) | |
Treasury stock, at cost; 249,196 shares at March 30, | |||||||
2002, 247,634 shares at December 29, 2001, and 114,315 | |||||||
shares at March 31, 2001 | (6,989 | ) | (6,946 | ) | (3,430 | ) | |
Total shareholders equity | 504,433 | 498,215 | 471,960 | ||||
Total liabilities and shareholders equity | $ 984,789 | $ 927,439 | $ 836,827 | ||||
See accompanying notes to consolidated financial statements.
LINENS N THINGS, INC. AND SUBSIDIARIES
|
Thirteen Weeks Ended | |||||
---|---|---|---|---|---|
March 30, 2002 |
March 31, 2001 | ||||
Cash flows | |||||
from operating activities: | |||||
Net income | $ 5,140 | $ 4,693 | |||
Adjustments to reconcile net income to net | |||||
cash provided by (used in) operating activities: | |||||
Depreciation and amortization | 10,453 | 9,394 | |||
Deferred income taxes | 3,071 | 1,398 | |||
Loss on disposal of assets | 47 | 3 | |||
Federal tax benefit from common stock issued under | |||||
stock incentive plans | 147 | 3,979 | |||
Changes in assets and liabilities: | |||||
Decrease (increase) in accounts receivable | 9,721 | (1,715 | ) | ||
Increase in inventories | (57,404 | ) | (38,896 | ) | |
Decrease (increase) in prepaid expenses and other | |||||
current assets | 1,735 | (941 | ) | ||
Increase in deferred charges and other | |||||
noncurrent assets | (2,274 | ) | (6 | ) | |
Increase in accounts payable | 56,931 | 6,988 | |||
Decrease in accrued expenses and other liabilities | (25,548 | ) | (29,993 | ) | |
Net cash provided by (used in) operating activities | 2,019 | (45,096 | ) | ||
Cash flows from | |||||
investing activities: | |||||
Additions to property and equipment | (25,742 | ) | (18,588 | ) | |
Cash flows | |||||
from financing activities: | |||||
Proceeds from common stock issued under stock incentive | |||||
plans | 970 | 4,892 | |||
Increase in short-term borrowings | 17,425 | 23,695 | |||
Purchase of treasury stock | (43 | ) | -- | ||
Net cash provided by financing activities | 18,352 | 28,587 | |||
Effect of exchange rate changes on cash and cash | |||||
equivalents | (2 | ) | 75 | ||
Net decrease in cash and cash equivalents | (5,373 | ) | (35,022 | ) | |
Cash and cash equivalents at beginning of period | 15,437 | 38,524 | |||
Cash and cash equivalents at end of period | $ 10,064 | $ 3,502 | |||
See accompanying notes to consolidated financial statements.
LINENS N THINGS, INC. AND SUBSIDIARIES
|
Income | Shares | EPS | |||||
---|---|---|---|---|---|---|---|
Basic | $5,140 | 40,645 | $ 0.13 | ||||
Effect of outstanding stock option and | |||||||
deferred stock grants | -- | 1,058 | -- | ||||
Diluted | $5,140 | 41,703 | $ 0.12 | ||||
Income | Shares | EPS | |||||
---|---|---|---|---|---|---|---|
Basic | $4,693 | 40,335 | $0.12 | ||||
Effect of outstanding stock option and | |||||||
deferred stock grants | -- | 990 | -- | ||||
Diluted | $4,693 | 41,325 | $0.11 | ||||
Options for which the exercise price was greater than the average market price of common shares for the period ended March 30, 2002 and March 31, 2001 were not included in the computation of diluted earnings per share. These consisted of options totaling 1,401,000 shares and 33,250 shares for the thirteen weeks ended March 30, 2002 and March 31, 2001, respectively. Deferred stock grants excluded in the computation of diluted earnings per share due to the application of the LINENS N THINGS, INC. AND SUBSIDIARIES
|
Three Weeks Ended | |||||
---|---|---|---|---|---|
March 30, 2002 | March 31, 2001 | ||||
($ in thousands) (Unaudited) | |||||
Comprehensive Income: | |||||
Net Income | $ 5,140 | $ 4,693 | |||
Other comprehensive income (loss) -- | |||||
Foreign currency translation adjustment | 5 | (585 | ) | ||
Comprehensive income | $ 5,145 | $ 4,108 | |||
5. Restructuring and Asset Impairment Charge During the fourth quarter of fiscal 2001, the Company developed and committed to a strategic initiative designed to improve store performance and profitability. This initiative calls for the closing of 17 under-performing stores which did not meet the Companys profit objectives. In connection with this initiative, the Company recorded a pre-tax restructuring and asset impairment charge of $37.8 million ($23.7 million after-tax) in the fourth quarter of fiscal 2001. A pre-tax reserve of $20.5 million was established for estimated lease commitments for stores to be closed. This reserve is included in accrued expenses. The reserve considers estimated sublease income. Because all of the stores were leased the Company will not be responsible for the disposal of property other than fixtures. A pre-tax reserve of $9.5 million was recorded as a reduction in property and equipment for fixed asset impairments for these stores. The fixed asset impairments represent fixtures and leasehold improvements. A pre-tax reserve of $4.0 million was established for other estimated miscellaneous store closing costs. Additionally, a pre-tax reserve of $3.8 million was recorded in cost of sales for estimated inventory markdowns below cost for the stores to be closed. LINENS N THINGS, INC. AND SUBSIDIARIES
|
Reserve Balance 12/29/01 |
2002 Activity |
Reserve Balance 3/30/02 | |||||
---|---|---|---|---|---|---|---|
Non-cash components: | (Audited) | (Unaudited) | (Unaudited) | ||||
Asset impairment | $ 9.5 | $ (0.7 | ) | $ 8.8 | |||
Inventory markdowns | 3.8 | (0.7 | ) | 3.1 | |||
Sub-total | 13.3 | (1.4 | ) | 11.9 | |||
Cash components: | |||||||
Lease commitments | 20.5 | (0.4 | ) | 20.1 | |||
Other | 4.0 | (0.1 | ) | 3.9 | |||
Sub-total | 24.5 | (0.5 | ) | 24.0 | |||
Total | $ 37.8 | $ (1.9 | ) | $ 35.9 | |||
The 2002 activity primarily consists of markdowns on inventory sold below cost, the write-off of fixed assets and settlements for lease obligations. 6. Goodwill and Other Intangible Assets - Adoption of Statement 142 In fiscal 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). Under SFAS No. 142, goodwill amortization ceases upon adoption of the new standard and intangible assets with indefinite useful lives will no longer be amortized. Had the application of the non-amortization provisions of SFAS No. 142 not been adopted, net income would have been reduced by approximately $131,000 for the quarter ended March 30, 2002. SFAS No. 142 requires an initial goodwill impairment assessment upon adoption and annual impairment tests thereafter. The Company is required to perform and complete the initial impairment test of goodwill by June 29, 2002. Set forth below are the Companys net income and net income per share as reported and as if amortization expense related to goodwill had not been expensed in accordance with the provisions of SFAS No. 142 ($ in thousands, except EPS): |
For the thirteen weeks ended | |||||||||
---|---|---|---|---|---|---|---|---|---|
March 30, 2002 |
March 31, 2001 | ||||||||
(Unaudited) | |||||||||
Reported net income: | $ 5,140 | $ 4,693 | |||||||
Add back: Goodwill amortization | -- | 131 | |||||||
Adjusted net income | $ 5,140 | $ 4,824 | |||||||
Basic earnings per share: | |||||||||
Reported net income | $ 0.13 | $ 0.12 | |||||||
Goodwill amortization | -- | -- | |||||||
Adjusted net income | $ 0.13 | $ 0.12 | |||||||
Diluted earnings per share: | |||||||||
Reported net income | $ 0.12 | $ 0.11 | |||||||
Goodwill amortization* | -- | 0.01 | |||||||
Adjusted net income | $ 0.12 | $ 0.12 | |||||||
* Impact for 2001 is less than $0.01 per share. |
LINENS N THINGS, INC. AND SUBSIDIARIES
|
Independent Auditors Review ReportThe Board of Directors and Shareholders We have reviewed the consolidated balance sheets of Linens n Things, Inc. and Subsidiaries as of March 30, 2002 and March 31, 2001, and the related consolidated statements of operations and cash flows for the thirteen weeks ended March 30, 2002 and March 31, 2001. These consolidated financial statements are the responsibility of the Companys 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 auditing standards generally accepted in the United States of America, 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 accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Linens n Things, Inc. and Subsidiaries as of December 29, 2001 (presented herein) 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 January 30, 2002 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 29, 2001 is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG LLP |
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations LINENS N THINGS, INC. AND SUBSIDIARIES
|
MANAGEMENTS DISCUSSION AND ANALYSIS
|
MANAGEMENTS DISCUSSION AND ANALYSIS
|
PART II - OTHER INFORMATIONItem 6. Exhibits and Reports on Form 8-K (a) EXHIBIT INDEX |
Exhibit Number |
Description |
15 | Letter re unaudited interim financial information |
(b) Reports on Form 8-K: |
The Company filed a Current Report on Form 8-K dated March 27, 2002, concerning the employment agreement with an executive officer and supplemental executive retirement plan and split dollar and collateral assignment between the Company and an executive officer. |
SIGNATUREPursuant 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. |
Dated: May 14, 2002 | LINENS N THINGS, INC. (Registrant) By: WILLIAM T. GILES Name: William T. Giles Title: Senior Vice President, Chief Financial Officer (Duly authorized officer and principal financial officer) |
Exhibit Number |
Description |
15 | Letter re unaudited interim financial information |