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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE):
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _____ to _____
Commission File No. 1-12381
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
LINENS 'N THINGS, INC. 401(k) PLAN
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
LINENS 'N THINGS, INC.
6 Brighton Road
Clifton, New Jersey 07015
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REQUIRED INFORMATION
The following financial statements of the Linens 'n Things, Inc. 401(k) Plan,
prepared in accordance with the financial reporting requirements of the Employee
Retirement Income Securities Act of 1974, as amended, are filed herewith.
LINENS 'N THINGS, INC. 401(k) PLAN
Financial Statements and Schedule
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
LINENS 'N THINGS, INC. 401(k) PLAN
Financial Statements and Schedule
Index
Page
----
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits -
December 31, 1999 and 1998 2
Statements of Changes in Net Assets Available for Plan Benefits -
Years ended December 31, 1999 and 1998 3
Notes to Financial Statements 4
Schedule
1 Line 27(a) - Schedule of Assets Held for Investment Purposes -
December 31, 1999
Exhibits
23 Independent Accountant' Consent
Independent Auditors' Report
The Plan Administrator
Linens 'n Things, Inc. 401(k) Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Linens 'n Things, Inc. 401(k) Plan as of December 31, 1999 and
1998, and the related statements of changes in net assets available for plan
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Linens
'n Things, Inc. 401(k) Plan as of December 31, 1999 and 1998, and the changes in
net assets available for plan benefits for the years then ended in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of December 31, 1999 is presented for the purpose of
additional analysis and is not a required part of the basic 1999 financial
statements but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audit of the basic 1999
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic 1999 financial statements taken as a whole.
KPMG LLP
New York, New York
June 16, 2000
LINENS 'N THINGS, INC. 401(k) PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1999 and 1998
1999 1998
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Assets:
Investments (note 4) $ 18,557,608 $ 318,095
Loans to participants 589,369 465,263
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Total investments 19,146,977 783,358
Cash in-transit to new trustee (note k) -- 14,926,025
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19,146,977 15,709,383
Total receivables - participant contributions 149,000 51,964
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Net assets available for plan benefits $ 19,295,977 $ 15,761,347
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See accompanying notes to financial statements.
LINENS 'N THINGS, INC. 401(k) PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1999 and 1998
1999 1998
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Additions to net assets attributed to:
Investment income:
Interest and dividends $ 340,888 $ 469,352
Net realized and unrealized (depreciation) appreciation
in fair value of investments (note 4) (223,342) 1,234,406
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117,546 1,703,758
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Contributions:
Participants 2,912,514 2,401,927
Company 1,952,360 1,634,165
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4,864,874 4,036,092
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Total additions 4,982,420 5,739,850
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Deductions from net assets attributed to:
Benefits paid to participants (1,389,176) (1,303,091)
Administrative expenses -- (226,560)
Loan defaults (58,614) --
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Total deductions (1,447,790) (1,529,651)
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Net increase in net assets available
for plan benefits 3,534,630 4,210,199
Net assets available for plan benefits:
Beginning of year 15,761,347 11,551,148
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End of year $ 19,295,977 $ 15,761,347
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See accompanying notes to financial statements.
LINENS 'N THINGS, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(1) Plan Description
The following description of the Linens 'n Things, Inc. 401(k) Plan (the
Plan) provides only general information. Participants should refer to the
Plan document for a more complete description of the Plan's provisions.
(a) Background
The Plan is a participant-directed, defined contribution plan
established as of December 1, 1996, the first month subsequent to
the Company's initial public offering (IPO) on November 26, 1996.
It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA), as amended. The general
administration of the Plan and the responsibility for carrying out
the provisions of the Plan are maintained by a committee (the Plan
Committee) appointed by Linens 'n Things, Inc. (the Company or
Plan Sponsor). In accordance with the provisions of the Plan, the
Plan Committee is also the Administrator (the Administrator) and
had appointed The Bank of New York as the Trustee (the Trustee)
upon establishment of the Plan. Effective December 1, 1998, the
Plan Committee appointed Prudential Investments as the Trustee
(the new Trustee). The Administrator maintains participant account
records and instructs the Trustee and new Trustee to execute
transactions such as benefit payments to participants. The Trustee
and new Trustee hold the assets of the Plan and execute
transactions at the direction of the Plan Committee. The Trustee
and new Trustee also report to the Plan's management regarding
investments and changes in these investments.
(b) Eligibility
Eligible employees become participants in the Plan at the
beginning of the first payroll period of the first month following
completion of a year of service with at least 1,000 hours worked
and attaining age 21.
(c) Employee Contributions
Each year participants may contribute up to 15% of pretax annual
compensation, not to exceed $10,000 in both 1999 and 1998.
Participants may also contribute amounts representing
distributions from other qualified defined benefit or contribution
plans.
(d) Employer Contributions
Employer matching contributions are equal to 100% of the first 6%
of the employee contributions. Matching contributions made by the
Company were $1,952,360 and $1,634,165 in 1999 and 1998,
respectively. Contributions are subject to certain limitations as
specified in plan documentation.
(e) Investment Options
Upon enrollment in the Plan or at select intervals thereafter, a
participant may elect to direct contributions or investment
balances within selected investment options for the first 11
months of 1998. During that time, a participant could elect to
participate within six investment options offered by The Bank of
New York - three individual funds and three lifestyle funds.
Lifestyle funds are pre-mixed investment choices that provide
diversification within one fund. The following is a brief
description of each investment option:
International Equity Fund
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American Europacific Fund
This mutual fund invests primarily in stocks and debt
obligations of companies and governments outside the United
States, primarily Europe and the Pacific Basin.
Growth and Income Fund
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Fidelity Growth & Income Fund
This mutual fund's objective is to seek capital appreciation
and current income. The fund invests primarily in stocks of
companies that pay current dividends and offer potential
growth of earnings.
Stable Value Fund
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Retirement Preservation Fund
This fund seeks to preserve capital and to provide current
income at levels that are typically higher than those
provided by money market funds. Its investments consist of
guaranteed investment contracts issued by a diversified
group of banks, insurance companies and financial services
companies. Its portfolio may also include high-quality money
market securities.
Lifestyle Funds
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Aggressive Lifestyle Fund - Maximum Appreciation Fund
This lifestyle fund is a collective fund designed for
individuals with long-term goals. It invests 10% of its
money in bonds, 80% in stock and 10% in stable-value
(low-risk) investments.
Moderate Lifestyle Fund - Intermediate Return Fund
This lifestyle fund is a collective fund designed for
individuals with intermediate-term goals. It invests 20% of
its money in bonds, 40% in stocks and 40% in stable-value
(low risk) investments.
Conservative Lifestyle Fund - Principal Protection Fund
This lifestyle fund is a collective fund designed for
individuals with short-term goals. It invests 10% of its
money in bonds, 20% in stocks and 70% in stable-value (low
risk) investments.
Beginning December 1998, a participant may only elect to participate
within the six investment options offered by Prudential Investments as
follows:
Norwest Stable Value Fund
This mutual fund invests to provide safety of principal,
adequate liquidity and returns superior to shorter maturity
alternatives. The Norwest Stable Fund is an actively
managed, diversified portfolio of assets issued by highly
rated financial institutions and corporations as well as
obligations of the U.S. Government or its agencies.
Kemper-Dreman High Return Equity Fund
This fund invests primarily in stocks issued by large-cap
companies that fund management believes to have established
records of earnings and dividends, low price-earnings
ratios, reasonable returns on equity, and sound finances.
MFS Total Return Fund
This fund tends to focus on conservative stocks and bonds.
It accomplishes this by either balancing their assets
equally among stocks, bonds, convertibles, and cash, or by
adjusting their holdings frequently in response to market
conditions.
Prudential Small Company Value Fund
This small-cap value fund invests in companies that have
market values under $1 billion and that offer lower stock
prices than other small-sized stocks. This fund concentrates
on lower priced stocks that have yet to be discovered by the
other investors.
Prudential World Fund: International Stock Series
This fund can invest in any country outside the United
States. This fund might divide its assets among a dozen or
more developed markets, including Japan, Britain, France and
Germany, while also investing a small portion in emerging
markets, such as Hong Kong, Brazil, Mexico and Thailand.
Linens 'n Things Company Stock Fund
This fund offers participants the opportunity to purchase
Linens 'n Things common stock.
Beginning September 1, 1999, the following two investment options were
added by Prudential Investments as follows:
Prudential Stock Index Fund Z
This fund is for qualified investors and seeks to mirror the
returns of the S&P 500 index. The fund normally invests at
least 80% of its assets in securities included in the S&P
500 index according to each security's weighting in the
index. Management attempts to achieve a performance
correlation with the S&P 500 of 0.95 irrespective of
expenses. The fund may invest in derivatives.
Prudential Jennison Growth Fund A
This fund seeks long-term growth of capital. The fund
normally invests at least 65% of assets in equities issued
by companies with market capitalizations exceeding $1
billion. The fund seeks companies that it believes are
attractively valued and have demonstrated earnings and sales
growth and high returns on equity and assets. It may invest
up to 20% of assets in foreign securities.
(f) Participants' Accounts
Each participant's account is credited with the participant's
contribution and allocations of investment income or loss. The
benefit to which a participant is entitled is the benefit that can
be provided from the participant's vested account.
(g) Vesting
Participants are immediately vested in their contributions plus
actual earnings or losses thereon. Vesting in the Company's
matching contribution portion of their accounts plus actual
earnings or losses thereon is based on years of credited
service. A participant is 50% vested after three years and 100%
vested after five years of credited service.
(h) Payment of Benefits
Upon reaching normal retirement (age 65 or age 55 with 10 years of
vested service, as defined) or upon permanent disability, all
vested amounts credited to a participant's account become
distributable. Distributions will be made as soon as
administratively feasible, following a participant's request, and
will be made in a lump-sum cash payment.
Upon a participant's death, the participant's beneficiary is
entitled to 100% of the participant's vested account balance.
Upon termination of service, other than for normal retirement or
death, the Administrator will direct the Trustee to pay to the
participant his or her benefit in an immediate lump sum or a
deferred lump sum, if certain criteria are met.
(i) Forfeitures
Upon a participant's termination date, and prior to the time the
participant becomes vested in his or her account, the non-vested
portion, if any, shall be forfeited. These accounts will be used
to restore amounts previously forfeited by participants but
required to be reinstated upon resumption of employment, to pay
administrative expenses, or to reduce company contributions.
Forfeitures were netted against the company contributions for the
years ended December 31, 1999 and 1998. Forfeitures were $219,945
and $25,960 for the years ended December 31, 1999 and 1998,
respectively.
(j) Administrative Expenses
All administrative expenses were paid by the Plan for the first 11
months of 1998.
Effective under the new Trustee, all administrative expenses are
paid by the Plan Sponsor.
(k) Cash In-Transit to New Trustee
Upon the appointment of the new Trustee, The Bank of New York
liquidated the investments it held for the Plan and transferred
$14,926,025 to Prudential Investments. The monies were deposited
into an interest-bearing holding account awaiting allocation to
reinvestment in accordance with participant directions. The
reinvestment took place in 1999, thus, at December 31, 1998, the
amount was classified as cash in-transit to new trustee.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements have been prepared on an
accrual basis and present the net assets available for plan
benefits of the Plan and the changes in those net assets in
conformity with generally accepted accounting principles.
(b) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of changes in net assets available for plan
benefits during the reporting period. Actual results could differ
from those estimates.
(c) Risk and Uncertainties
The assets for the Plan are primarily financial instruments which
are monetary in nature. As a result, interest rates have a more
significant impact on the Plan's performance than do the effects
of general levels of inflation. Interest rates do not necessarily
move in the same direction or in the same magnitude as the prices
of goods and services as measured by the consumer price index.
Investments in funds are subject to risk conditions of the
individual fund objectives, stock and bond market fluctuations,
interest rate changes, economic conditions and world affairs.
(d) Investments
Purchases and sales of investments are recorded on a trade-date
basis. Investment income is recorded as earned on an accrual
basis. Dividend income is recorded on the ex-dividend date. Each
investment fund, aside from unallocated cash, which is held in an
interest-bearing money market account, is stated at the fair value
on the last business day of the plan year as reported by the
Trustee or new Trustee, which is based on the market value of the
underlying securities based on quotations from national securities
exchanges.
(e) New Accounting Pronouncement
In September 1999, the American Institute of Certified Public
Accountants issued Statement of Position 99-3, "Accounting for and
Reporting of Certain Defined Contribution Plan Investments and
Other Disclosure Matters" ("SOP 99-3"). SOP 99-3 simplifies the
disclosure for certain investments and is effective for plan years
ending after December 15, 1999, with earlier application
encouraged. The Plan adopted SOP 99-3 during the year ending
December 31, 1999. Accordingly, information previously required to
be disclosed about participant-directed fund investment programs
is not presented in the Plan's 1999 financial statements, and the
1998 financial statements have been reclassified to conform with
SOP 99-3.
(3) Loans to Plan Participants
Under the terms of the Plan, participants may obtain loans from the Plan,
utilizing funds accumulated in their accounts. The minimum amount which
may be borrowed is $1,000. Participants can borrow up to a maximum of 50%
of their vested account balance but not more than $50,000, less their
highest outstanding loan balance during the previous 12 months. The Plan
charged 1% above the prime rate, adjusted quarterly, for the years ended
December 31, 1999 and 1998.
The loans are repaid to the Plan through after-tax payroll deductions.
The loan repayments and interest earned are allocated to each of the
investment funds based upon the participant's contribution election
percentages. The term of the loan is arrived at by mutual agreement
between the Plan Committee and the participant, but may not exceed five
years unless the loan is to be used in conjunction with the purchase of
the principal residence of the participant, in which case the loan may
not exceed 25 years.
(4) Investments
At December 31, 1999 and 1998, the Plan's assets, with the exception of
unallocated cash, were allocated among the investment options as
disclosed in note 1(e). The investment funds are administered by
independent investment managers.
The following investments represent five percent or more of the net
assets available for benefits:
1999 1998
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Cash In-Transit $ -- $ 14,926,025*
Norwest Stable Value Fund 5,530,784 --
Kemper-Dreman High Return Equity Fund 5,447,215 --
MFS Total Return Fund 3,159,637 --
Prudential World Fund: International Stock Series 1,621,603 --
Linens 'n Things Company Stock Fund 1,056,629 --
Prudential Jennison Growth Fund A 1,114,597 --
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* Nonparticipant-directed (see Note 1(k))
During 1999 and 1998, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year)
(depreciated) appreciated in value by $(223,342) and $1,234,406,
respectively, as follows:
1999 1998
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Principal Protection Fund $ -- $ 46,122
Intermediate Return Fund -- 158,594
Maximum Appreciation Fund -- 224,896
Fidelity Growth & Income Fund -- 731,964
American Europacific Fund -- 68,848
Norwest Stable Value Fund 304,097 239
Kemper-Dreman High Return Equity Fund (1,034,069) 1,447
MFS Total Return Fund 13,794 1,246
Prudential Small Company Value Fund (2,408) 53
Prudential World Fund: International Stock Series 373,836 570
Linens 'n Things Company Stock Fund (71,413) 427
Prudential Stock Index Fund Z 37,172 --
Prudential Jennison Growth Fund A 155,649 --
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Net (depreciation) appreciation in fair value of investments $ (223,342) $ 1,234,406
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(5) Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. If the Company
were to terminate the Plan, all participants in the Plan would become
fully vested.
(6) Federal Income Taxes
The Plan obtained its latest determination letter on April 20, 1999, in
which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code (the Code). The Plan has not been amended since
receiving the determination letter. The Plan Administrator and the Plan's
tax counsel believe that the Plan is currently designed and being
operated in compliance with the applicable requirements of the Code.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
Schedule 1
LINENS 'N THINGS, INC. 401(k) PLAN
Line 27(a) - Schedule of Assets Held for Investment Purposes
December 31, 1999
Description of Current
Identity of issue investment value
- -------------------------------------- ----------------- -----------------
Norwest Stable Value Fund Mutual Fund $ 5,530,784
Kemper-Dreman High Return
Equity Return Fund Mutual Fumd 5,447,215
MFS Total Return Fund Mutual Fund 3,159,637
Prudential Small Company
Value Fund Mutual Fund 194,058
Prudential World Fund: International
Stock Series Mutual Fund 1,621,603
Linens 'n Things Company
Stock Fund** Company Stock 1,056,629
Prudential Stock Index Fund Z Mutual Fund 432,877
Prudential Jennison Growth Fund A Mutual Fund 1,114,597
AP Fund Mutual Fund 208
Participant Loans Loan Account* 589,369
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$19,146,977
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* Interest rates charged on outstanding loans during the plan year were between
7% and 10%
** Party-in-interest as defined by ERISA
See accompanying independent aduitors' report
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
LINENS 'N THINGS, INC. 401(k) PLAN
WILLIAM T. GILES
Date: June 28, 2000 By: ______________________________________
William T. Giles
Senior Vice President, Chief Financial Officer
and member of the Plan Committee