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