Exhibit 99.1
Linens 'N Things Announces Second Quarter 2004 Results
CLIFTON, N.J.--(BUSINESS WIRE)--July 21, 2004--Linens 'n Things,
Inc. (NYSE: LIN), one of the leading, national large format retailers
of home textiles, housewares and home accessories, today announced
total net sales increased approximately 10.5% to $578.7 million for
the second quarter ended July 3, 2004, up from $523.7 million for the
same period last year. Comparable net sales for the second quarter of
2004 increased 0.2%.
Net income for the second quarter ended July 3, 2004 was
approximately $879,000 or $0.02 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 second
quarter 2004 results by approximately $4.1 million, net of tax, or
$0.09 per fully diluted share. For the same period last year, which
was not impacted by EITF 02-16, the Company had net income of $5.7
million or $0.13 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 we experienced a slowdown in guest traffic during the
quarter, we remain committed to improving the guest shopping
experience. We are adding new businesses, emphasizing key value items,
and improving our in-store execution to drive our performance for the
second half of the year."
Net sales increased 12.7% to $1,131.5 million for the twenty-six
week period ended July 3, 2004, up from $1,004.1 million for the same
period last year. Comparable net sales for the twenty-six week period
ended July 3, 2004 increased approximately 2.3%.
Net income for the twenty-six week period ended July 3, 2004 was
approximately $909,000 or $0.02 per share on a fully diluted basis.
Results include the implementation of EITF 02-16, which impacted the
Company's results by approximately $9.0 million, net of tax, or $0.19
per fully diluted share for the twenty-six week period ended July 3,
2004. For the same period last year, which was not impacted by EITF
02-16, the Company had net earnings of $7.8 million or $0.17 per fully
diluted share.
During the second quarter of fiscal 2004, the Company opened 12
new stores as compared with opening 16 stores and closing one store
during the same period last year. Year to date, the Company opened 33
stores increasing its total square footage by approximately 12% to
16.1 million square feet, as compared with opening 32 stores and
closing eight stores during the same period last year. The Company
currently expects to open approximately a total of 50 new stores in
2004, further expanding its presence as a leading retailer of home
furnishings. For 2004, 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 changes in other factors.
For the third quarter of 2004, comparable net sales are currently
targeted to be in the low to mid single digit range. Fully diluted
earnings per share including the impact of EITF 02-16 are currently
targeted to be in the range of $0.44 to $0.50. 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 $0.05 for the third quarter of fiscal
2004.
For the full year 2004, sales are currently being targeted to grow
by approximately 11% to 14%. Comparable net sales are targeted to be
in the low to mid single digit range. Fully diluted earnings per share
including the impact of EITF 02-16 are currently targeted to be in the
range of $1.56 to $1.66. 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 $0.27 to $0.28 for the full year 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 July 3, 2004 the Company was operating 473
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, EITF 02-16 impact, 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, acceptance of product offerings and fashions and our ability
to anticipate and successfully respond to changing consumer tastes and
preferences, 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, timing and actual amount of vendor allowances and the
actual impact in fiscal 2004 of EITF 02-16 and our ability to
successfully implement and to achieve the expected productivity from
our strategic and other store 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 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.
LINENS 'N THINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Thirteen Weeks Ended
------------------------------
July 3, July 5,
2004, EITF 2003,
As 02-16 As
reported(a) Impact(a) reported
-------------------- ---------
Net sales $578,749 $-- $523,672
Cost of sales, including buying and
warehousing costs 346,250 (3,411) 309,974
---------- --------- ---------
Gross profit 232,499 3,411 213,698
Selling, general and administrative
expenses 230,889 (3,183) 204,180
---------- --------- ---------
Operating profit 1,610 6,594 9,518
Interest expense, net 188 -- 288
---------- --------- ---------
Income before provision for income taxes 1,422 6,594 9,230
Provision for income taxes 543 2,519 3,526
---------- --------- ---------
Net income $879 $4,075 $5,704
========== ========= =========
Per share of common stock:
Basic
- ----------------------------------------
Net income per share $0.02 $0.09 $0.13
Weighted average shares outstanding 45,108 44,118
Fully Diluted
- ----------------------------------------
Net income per share $0.02 $0.09 $0.13
Weighted average shares outstanding 46,090 44,545
(a) The Company commenced implementation of EITF 02-16 "Accounting by
a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor" (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 $6.6 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. The
"As Reported" amounts include the impact of EITF 02-16.
LINENS 'N THINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Twenty-Six Weeks Ended
---------------------------------
July 3, July 5,
2004, EITF 2003,
As 02-16 As
reported(a) Impact(a) reported
--------------------- -----------
Net sales $1,131,549 $-- $1,004,143
Cost of sales, including buying and
warehousing costs 678,596 (3,552) 597,604
--------------------- -----------
Gross profit 452,953 3,552 406,539
Selling, general and administrative
expenses 451,279 (10,963) 393,581
--------------------- -----------
Operating profit 1,674 14,515 12,958
Interest expense, net 204 -- 364
--------------------- -----------
Income before provision for income
taxes 1,470 14,515 12,594
Provision for income taxes 561 5,544 4,812
--------------------- -----------
Net income $909 $8,971 $7,782
===================== ===========
Per share of common stock:
Basic
- -------------------------------------
Net income per share $0.02 $0.20 $0.18
Weighted average shares outstanding 45,014 44,108
Fully Diluted
- -------------------------------------
Net income per share $0.02 $0.19 $0.17
Weighted average shares outstanding 46,110 44,534
(a) The Company commenced implementation of EITF 02-16 "Accounting by
a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor" (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 $6.6 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. The
"As Reported" amounts include the impact of EITF 02-16.
LINENS 'N THINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
July 3, July 5,
2004 2003(a)
----------- -----------
Assets (unaudited)
Current assets:
Cash and cash equivalents $18,990 $9,446
Inventories 765,667 715,644
Accounts receivable 27,490 28,013
Prepaid expenses and other 33,734 29,940
Current deferred taxes 404 --
----------- -----------
Total current assets 846,285 783,043
Property and equipment, net 390,892 376,006
Other non-current assets, net 30,534 28,891
----------- -----------
Total assets $1,267,711 $1,187,940
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $238,142 $268,593
Accrued expenses and other current
liabilities 121,017 125,303
Short-term borrowings 6,045 16,874
Current deferred taxes 11,282 8,676
----------- -----------
Total current liabilities 376,486 419,446
Other long-term liabilities 120,897 89,144
----------- -----------
Total liabilities 497,383 508,590
Shareholders' equity 770,328 679,350
----------- -----------
Total liabilities and shareholders'
equity $1,267,711 $1,187,940
=========== ===========
(a) Certain prior year vendor accounts receivable balances have been
reclassified and netted against accounts payable to conform with
the current year presentation.
LINENS 'N THINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Twenty-Six Weeks
Ended
------------------
July 3, July 5,
2004 2003
--------- --------
(unaudited)
Cash Flows From Operating Activities
Net income $909 $7,782
Depreciation and amortization 29,526 26,346
Change in working capital (116,158) (75,816)
--------- --------
Net cash used in operating activities (85,723) (41,688)
--------- --------
Cash Flows From Investing Activities
Additions to property and equipment (43,985) (51,965)
--------- --------
Cash Flows From Financing Activities
Proceeds from common stock issued under stock
incentive plans 6,762 1,305
Increase in short-term borrowings 6,011 14,690
(Purchase) issuance of treasury stock (39) 255
--------- --------
Net cash provided by financing activities 12,734 16,250
--------- --------
Effect of exchange rate changes on cash and cash
equivalents (165) 244
Net decrease in cash and cash equivalents (117,139) (77,159)
Cash and cash equivalents at beginning of period 136,129 86,605
--------- --------
Cash and cash equivalents at end of period $18,990 $9,446
========= ========
CONTACT: Linens 'n Things, Inc.
William T. Giles, 973-815-2929
www.lnt.com