Linens 'n Things Reports Second Quarter 2006 Financial Results.CLIFTON Clifton, industrial city (1990 pop. 71,742), Passaic co., NE N.J., on the Passaic River; settled 1685, set off from Passaic and inc. 1917. It has steel, textile equipment, chemical, plastics, clothing, and electronics industries. , N.J. -- Linens Linens are fabric household goods, such as pillowcases and towels. Originally, many, such as bed sheets and tablecloths, were made of linen. Today, the term "linen" has come to be applied to all related products even though most are made of cotton, various synthetic Holding Co. ("LNT LNT Linens N' Things (retail chain) LNT Leave No Trace LNT Alliant Energy Corp. (stock symbol) LNT Levantamento de Necessidades de Treinamento LNT Lean NOx Trap " or the "Company"), a leading home furnishings furnishings the extra type or quantity of hair on the head, tail, ears or legs, specified for a particular breed. For example, the feathers in setters, the beard in Bearded collies, the eyebrows in Schnauzers. specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. retailer known as "Linens 'n Things Linens 'n Things, Inc., headquartered in Clifton, New Jersey, is the second-largest large-format retailers of home textiles, housewares and decorative home accessories in the United States, behind Bed Bath & Beyond. ," today reported its financial results for the second quarter ended July July: see month. 1, 2006. The Company reported total net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $611.6 million for the quarter, a 6.7% increase over the same quarter in 2005. This increase in net sales resulted from the opening of new store locations and a slight increase in comparable net sales for the quarter of 0.2%. For the quarter, the Company generated a loss before interest, income taxes, depreciation and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) of $10.2 million compared to positive EBITDA of $13.7 million in the second quarter of 2005. The decrease in EBITDA was due primarily to markdowns taken to clear nonproductive non·pro·duc·tive adj. 1. Not yielding or producing: nonproductive land. 2. Not engaged in the direct production of goods: nonproductive personnel. n. and aged inventory and the effects of purchase accounting on occupancy costs Occupancy costs are the whole life costs of buildings and their associated land from occupancy until disposal. These costs may be incurred on a regular or irregular basis. Occupancy costs are those costs related to occupying a space including; rent, real estate taxes, personal . Adjusted EBITDA for the second quarter of 2006, which excludes the impact of transaction expenses from the February February: see month. 2006 acquisition of Linens 'n Things, Inc., rent-related adjustments, one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. inventory reserves and other non-recurring or non-cash expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) , was negative $14.6 million compared with positive Adjusted EBITDA of $16.6 million in the second quarter of 2005. The Company generated a net loss for the second quarter of 2006 of $39.1 million compared with a net loss of $5.9 million in the second quarter of 2005. "During this past quarter we began to actively reposition our business. Merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. initiatives, such as "Best Bets" and intensification in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: of our top stores began to build momentum. We also used this time frame to clear nonproductive merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain , which while resulting in increased markdowns, did create open to buy dollars and helped to improve store operations," said Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. DiNicola, Chairman and Chief Executive Officer. "Long term we expect to recapture recapture n. in income tax, the requirement that the taxpayer pay the amount of tax savings from past years due to accelerated depreciation or deferred capital gains upon sale of property. (See: income tax) RECAPTURE, war. market share with improving assortments, better execution at the store level and more impactful marketing," added Mr. DiNicola. For the second quarter, the Company used cash in operating activities of $19.4 million, ending the quarter with a short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. borrowing position net of cash balances of $141.6 million and excess availability under its revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility of $280.3 million. At July 1, 2006, the Company had $652.0 million of total long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. outstanding. For the second quarter of 2006, the Company had capital expenditures of $16.7 million. Net sales for the twenty-six week period ended July 1, 2006 increased 5.3% to $1,204.4 million, as compared with net sales of $1,144.3 million for the same period last year. Comparable net sales for the twenty-six week period ended July 1, 2006 decreased 1.8%. Net loss for the twenty-six week period ended July 1, 2006 was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $104.6 million as compared with a net loss of $10.0 million for the same period last year. During the second quarter of 2006, the Company opened six stores and closed no stores as compared with opening seventeen Seventeen novel of young love. [Am. Lit.: Booth Tarkington Seventeen in Magill I, 882] See : Adolescence stores and closing no stores during the second quarter of 2005. Store square footage increased approximately 6.5% to 18.5 million at July 1, 2006 compared with 17.3 million at July 2, 2005. The Company will host a conference call to report the second quarter 2006 financial results on August 16, 2006 at 12:00 pm ET. To listen to this call, dial: 1-888-694-4702, conference ID 7710453. Following the completion of the call, a replay will be available through September September: see month. 6, 2006 by dialing 1-877-519-4471, passcode 7710453. A webcast of the call will be available on www.lnt.com through September 6, 2006. Linens 'n Things, with 2005 sales of approximately $2.7 billion, is one of the leading, national large format retailers of home textiles textiles, all fabrics made by weaving, felting, knitting, braiding, or netting, from the various textile fibers (see fiber). Types of Textiles , housewares house·wares pl.n. Cooking utensils, dishes, and other small articles used in a household, especially in the kitchen. and home accessories. As of July 1, 2006, Linens 'n Things operated 555 stores in 47 states and six provinces across the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . More information about Linens 'n Things can be found online at www.lnt.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 with respect to our financial condition, results of operations and business that is not historical information. As a general matter, forward-looking statements are those focused upon future or anticipated events or trends and expectations and beliefs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc matters that are not historical in nature. The words "believe," "expect," "plan," "intend," "estimate" or "anticipate" and similar expressions, as well as future or conditional Subject to change; dependent upon or granted based on the occurrence of a future, uncertain event. A conditional payment is the payment of a debt or obligation contingent upon the performance of a certain specified act. verbs such as "will," "should," "would" and "could," often identify forward-looking statements. The Company believes there is a reasonable basis for our expectations and beliefs, but they are inherently uncertain, and we may not realize our expectations and our beliefs may not prove correct. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. The Company's actual results and future financial condition may differ materially from those described or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by any such forward-looking statements as a result of many factors that may be outside the Company's control. Such factors include, without limitation: general economic conditions; changes in the retailing environment and consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. habits; inclement in·clem·ent adj. 1. Stormy: inclement weather. 2. Showing no clemency; unmerciful. in·clem weather and natural disasters; competition from existing and potential competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. ; the amount of merchandise markdowns; loss or retirement of key members of management; increases in the costs of borrowings and unavailability un·a·vail·a·ble adj. Not available, accessible, or at hand. un  a·vail of
additional debt or equity capital; impact our substantial indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421.2. on our operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and our ability to grow; the cost of labor; labor disputes; increased healthcare benefit costs; and other costs and expenses. This list of factors is not intended to be exhaustive.
LINENS HOLDING CO. and SUBSIDIARIES (AND PREDECESSOR)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
Thirteen Weeks Ended
--------------------------
July 1, 2006 July 2, 2005
(Successor (Predecessor
Entity) Entity)
------------ ------------
Net sales $ 611,583 $ 573,317
Cost of sales, including buying and
distribution costs 373,265 336,374
----------- -----------
Gross profit 238,318 236,943
Selling, general and administrative
expenses 280,287 245,702
----------- -----------
Operating loss (41,969) (8,759)
Interest income (33) (129)
Interest expense 21,845 867
----------- -----------
Interest expense, net 21,812 738
----------- -----------
Loss before benefit for income taxes (63,781) (9,497)
Benefit for income taxes (24,654) (3,565)
----------- -----------
Net loss $ (39,127) $ (5,932)
----------- -----------
LINENS HOLDING CO. and SUBSIDIARIES (AND PREDECESSOR)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
February 14 January 1 to Twenty-Six
to July 1, February 13, Weeks Ended
2006 2006 July 2, 2005
(Successor (Predecessor (Predecessor
Entity) Entity) Entity)
------------- ------------- -------------
Net sales $ 919,428 $ 284,971 $ 1,144,263
Cost of sales, including
buying and distribution
costs 562,333 180,675 670,927
------------ ------------ ------------
Gross profit 357,095 104,296 473,336
Selling, general and
administrative expenses 418,048 174,138 487,856
------------ ------------ ------------
Operating loss (60,953) (69,842) (14,520)
Interest income (119) (668) (624)
Interest expense 31,832 -- 2,085
------------ ------------ ------------
Interest expense (income),
net 31,713 (668) 1,461
------------ ------------ ------------
Loss before benefit for
income taxes (92,666) (69,174) (15,981)
Benefit for income taxes (35,967) (21,270) (5,975)
------------ ------------ ------------
Net loss $ (56,699) $ (47,904) $ (10,006)
------------ ------------ ------------
LINENS HOLDING CO. and SUBSIDIARIES (AND PREDECESSOR)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Successor
Entity Predecessor Entity
------------ -------------------------
July 1, December 31, July 2,
2006 2005 2005
Assets
Current assets:
Cash and cash equivalents $ 13,494 $ 158,158 $ 22,193
Accounts receivable 39,695 43,561 34,250
Inventories 854,823 787,283 799,077
Prepaid expenses and other
current assets 74,658 17,425 38,890
Current deferred taxes 5,599 2,033 1,620
----------- ----------- -----------
Total current assets 988,269 1,008,460 896,030
Property and equipment, net of
accumulated depreciation of
$44,147, $464,496 and
$424,928 at July 1, 2006,
December 31, 2005 and July 2,
2005, respectively 590,781 612,247 586,743
Identifiable intangible
assets, net 157,887 1,301 1,391
Goodwill 277,315 18,126 18,126
Deferred financing cost and
other noncurrent assets, net 35,364 10,700 11,621
----------- ----------- -----------
Total assets $ 2,049,616 $ 1,650,834 $ 1,513,911
----------- ----------- -----------
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable $ 235,805 $ 267,582 $ 244,842
Accrued expenses and other
current liabilities 179,492 199,024 137,566
Current deferred taxes -- 4,401 --
Short-term borrowings 155,070 -- --
----------- ----------- -----------
Total current liabilities 570,367 471,007 382,408
Senior secured notes and other
long-term debt, net of
current portion 652,044 2,076 2,108
Deferred income taxes and
other long-term liabilities 231,854 327,888 328,806
----------- ----------- -----------
Total liabilities 1,454,265 800,971 713,322
----------- ----------- -----------
Total shareholders' equity 595,351 849,863 800,589
----------- ----------- -----------
Total liabilities and
shareholders' equity $ 2,049,616 $ 1,650,834 $ 1,513,911
----------- ----------- -----------
LINENS HOLDING CO. and SUBSIDIARIES (AND PREDECESSOR)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Successor
Entity Predecessor Entity
------------- ---------------------------
February 14 January 1 to Twenty-Six
to July 1, February 13, Weeks Ended
2006 2006 July 2, 2005
Cash flows from operating
activities:
Net loss $ (56,699) $ (47,904) $ (10,006)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 46,816 12,642 43,675
Deferred income taxes (22,424) (6,646) (3,105)
Share-based compensation 2,328 12,484 489
Loss on disposal of assets 73 -- 339
Changes in working
capital, net of effect of
acquisition: (122,048) (35,722) (161,642)
------------ ------------ ------------
Net cash used in operating
activities (151,954) (65,146) (130,250)
------------ ------------ ------------
Cash flows from investing
activities:
Acquisition of the Company,
net of cash acquired(1) (1,205,502) -- --
Additions to property and
equipment (25,222) (7,776) (52,841)
------------ ------------ ------------
Net cash used in investing
activities (1,230,724) (7,776) (52,841)
------------ ------------ ------------
Cash flows from financing
activities:
Issuance of common stock to
Linens Investors LLC and
others 650,150 -- --
Issuance of floating rate
notes 650,000 -- --
Financing and direct
acquisition costs (59,254) -- --
Issuance of common stock
under stock incentive
plans -- -- 1,769
Federal tax benefit from
common stock issued under
stock incentive plans -- 4,298 144
Increase in short-term
borrowings 155,070 -- --
Decrease (increase) in
treasury stock -- 674 (97)
------------ ------------ ------------
Net cash provided by
financing activities 1,395,966 4,972 1,816
------------ ------------ ------------
Effect of exchange rate
changes on cash and cash
equivalents 206 125 (541)
Net increase (decrease) in
cash and cash equivalents 13,494 (67,825) (181,816)
Cash and cash equivalents at
beginning of period -- 158,158 204,009
------------ ------------ ------------
Cash and cash equivalents at
end of period $ 13,494 $ 90,333 $ 22,193
------------ ------------ ------------
(1) In connection with the Merger, net cash settlements of
approximately $20.0 million and $4.4 million for stock options and
restricted stock units, respectively, are included in "Acquisition
of the Company, net of cash acquired.
Net loss reconciliation to EBITDA and Adjusted EBITDA LNT defines EBITDA as net income before interest expense (net), income tax expense, depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA adjusted to exclude the additional items described in the table below. We present EBITDA and Adjusted EBITDA because we consider them as useful analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. tools for measuring our ability to service our debt and generate cash for other purposes. EBITDA and Adjusted EBITDA are not measurements of our financial performance under Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) and should not be considered as alternatives to net income, operating income or any other performance measures derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP or an alternative to cash flow from operating activities as a measure of our profitability or liquidity. Adjusted EBITDA is presented as additional information because management uses Adjusted EBITDA to evaluate the operating performance of the company. Management also believes that Adjusted EBITDA is a meaningful measurement that is commonly used by investors, security analysts and others to measure the company's operating performance. EBITDA and Adjusted EBITDA may differ from other similarly titled measures of other companies, limiting its usefulness as a comparative measure. For the three and six months ended July 1, 2006 and July 2, 2005, the following table presents EBITDA reconciled rec·on·cile v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles v.tr. 1. To reestablish a close relationship between. 2. To settle or resolve. 3. to our net loss for such periods and Adjusted EBITDA reconciled to EBITDA for such periods.
LINENS HOLDING CO. (AND PREDECESSOR)
(In thousands)
(Unaudited)
Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
July 1, July 2, July 1, July 2,
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net loss $ (39,127) $ (5,932) $(104,603) $ (10,006)
Benefit for income taxes (24,654) (3,565) (57,237) (5,975)
Interest expense, net 21,812 738 31,045 1,461
Depreciation and
amortization 31,794 22,499 59,458 43,675
--------- --------- --------- ---------
EBITDA (10,175) 13,740 (71,337) 29,155
Non-cash rent expense (a) 3,014 667 5,230 1,905
Non-cash landlord
allowance
amortization (b) (236) (5,211) (3,289) (10,445)
Cash landlord allowances
received (c) 1,021 5,401 3,352 10,891
--------- --------- --------- ---------
EBITDA after rent related
adjustments (6,376) 14,597 (66,044) 31,506
Transaction expenses (d) 424 - 32,154 -
Non-cash stock-based
compensation (e) 1 380 3,180 489
Non-recurring consulting
expenses (f) - 1,600 - 2,200
Write-down of aged
inventory (g) (10,313) - - -
Accelerated payment of
stock option (h) - - 9,305 -
Stock Option Expense (SFAS
123R) (i) 1,622 - 2,328 -
Executive severance (j) - - 1,692 -
--------- --------- --------- ---------
Adjusted EBITDA $ (14,642) $ 16,577 $ (17,385) $ 34,195
========= ========= ========= =========
(a) Represents the straight-line effect of scheduled rent increases
over the expected lease term.
(b) Non-cash landlord allowance amortization represents the
amortization of cash allowances received from landlords at
inception of leases. Non-cash landlord allowance amortization has
the effect of reducing rent expense.
(c) Represents cash allowances received from landlords at inception of
leases.
(d) Transaction costs represent legal and other merger related
expenses.
(e) Represents non-cash compensation expense related to prior
restricted stock grants.
(f) Represents non-recurring consulting costs related to a strategic
corporate profitability project that began in 2004, was completed
in 2005 and was significantly greater in scope and costs than the
Company typically incurs or is expected to incur.
(g) Represents the change in the markdown reserve established in the
first quarter in regards to non- productive and aged inventory.
(h) Represents acceleration of compensation expense related to stock
option grants as a result of the acquisition of the company by
Apollo Management.
(i) Represents stock compensation expense related to stock option
grants under SFAS 123R.
(j) Charges related to severance for departure of Jane Gilmartin.
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