|SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q


QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934



For the quarterly
period ended June 29, 2002


Commission File Number       1-12381


Linens n Things, Inc.
(Exact name of Registrant as specified in its charter)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Delaware |  | 22-3463939
|-------- |  | ----------

|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|-------------------------------------------------------------- |  | ---------------------------------------

|6 Brighton Road, Clifton, New Jersey | 07015 | 
|------------------------------------ | ----- | 

|(Address of principal executive offices) | (Zip Code) | 
|---------------------------------------- | ---------- | 

|Registrants telephone number, including area code | (973) 778-1300 | 
|-------------------------------------------------- | -------------- | 

|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.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 
| |  | 

Number of shares outstanding of
the issuers Common Stock:

|Class |  | Outstanding at August 6, 2002
|----- |  | -----------------------------

|Common Stock, $0.01 par value |  | 44,046,354
|----------------------------- |  | ----------

---

|INDEX
|-----

|Part I.  |  | Financial Information                                                                 |  | Page No. | 
|-------- |  | ------------------------------------------------------------------------------------- |  | -------- | 
|         |  |                                                                                       | 
|Item 1.  |  | Financial Statements                                                                  |  |          | 
|         |  |                                                                                       | 
|         |  | Condensed Consolidated Statements
of Operations for the                               | 
|         |  | Thirteen and Twenty-Six Weeks Ended June 29, 2002                                     | 
|         |  | and June 30, 2001                                                                     |  | 3        | 
|         |  |                                                                                       | 
|         |  | Condensed Consolidated Balance Sheets as of June 29, 2002,                            | 
|         |  | December 29, 2001 and June 30, 2001                                                   |  | 4        | 
|         |  |                                                                                       | 
|         |  | Condensed Consolidated Statements of Cash Flows for the                               | 
|         |  | Twenty-Six Weeks Ended June 29, 2002                                                  | 
|         |  | and June 30, 2001                                                                     |  | 5        | 
|         |  |                                                                                       | 
|         |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6-9      | 
|         |  |                                                                                       | 
|         |  | Independent Auditors Review Report                                                   |  | 10       | 
|         |  |                                                                                       | 
|Item 2.  |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations |  | 11-14    | 
|         |  |                                                                                       | 
|Item 3.  |  | Quantitative and Qualitative Disclosures
about Market Risk                            |  | 15       | 
|         |  |                                                                                       | 
|Part II. |  | Other Information                                                                     | 
|         |  |                                                                                       | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 16       | 
|         |  |                                                                                       | 
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                      |  | 16       | 
|         |  |                                                                                       | 
|         |  | (a)  Exhibit Index                                                                    |  | 16       | 
|         |  |                                                                                       | 
|         |  | (b)  Reports on Form 8-K                                                              |  | 16       | 

|2
|-

---

|PART I.  FINANCIAL
INFORMATION


Item 1.  Financial
Statements


LINENS N THINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                       | Thirteen Weeks Ended | Twenty-Six Weeks Ended
|------------------------------------------------------ | -------------------- | ----------------------
|                                                       |                      |                       
|
|                                                       |                      |                       
|Net sales                                              |                      | $ 461,918             
|Cost of sales, including buying and distribution costs |                      | 269,052               
|                                                       |                      |                       
|Gross profit                                           |                      | 192,866               
|Selling, general and administrative expenses           |                      | 183,076               
|Litigation charge                                      |                      | --                    
|                                                       |                      |                       
|Operating profit                                       |                      | 9,790                 
|Interest income                                        |                      | (3                    
|Interest expense                                       |                      | 756                   
|                                                       |                      |                       
|Interest expense, net                                  |                      | 753                   
|                                                       |                      |                       
|Income before provision for income taxes               |                      | 9,037                 
|Provision for income taxes                             |                      | 3,451                 
|                                                       |                      |                       
|Net income                                             |                      | $     5,586           
|                                                       |                      |                       
|Basic earnings per share                               |                      | $       0.14          
|                                                       |                      |                       
|Diluted earnings per share                             |                      | $       0.13          
|                                                       |                      |                       

|See accompanying notes to condensed
consolidated financial statements.


3
|--------------------------------------------------------------------------

---

|LINENS N THINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
|----------------------------------------------------------------------------------------------------------------------

|                                                      | June 29,2002 | December 29,2001 | June 30,2001
|----------------------------------------------------- | ------------ | ---------------- | ------------
|                                                      |              |                  |             
|
|Assets                                                |              |                  |             
|Current assets:                                       |             
|Cash and cash equivalents                             |              | $      20,069    |             
|Accounts receivable                                   |              | 32,054           |             
|Inventories                                           |              | 624,431          |             
|Prepaid expenses and other current assets             |              | 11,547           |             
|Current deferred taxes                                |              | 21,268           |             
|                                                      |              |                  |             
|Total current assets                                  |              | 709,369          |             
|                                                      |             
|Property and equipment, net                           |              | 342,318          |             
|Goodwill, net                                         |              | 18,126           |             
|Deferred charges and other noncurrent assets, net     |              | 12,286           |             
|                                                      |              |                  |             
|Total assets                                          |              | $ 1,082,099      |             
|                                                      |              |                  |             
|Liabilities and Shareholders Equity                  |             
|Current liabilities:                                  |             
|Accounts payable                                      |              | $    253,896     |             
|Accrued expenses and other current liabilities        |              | 130,990          |             
|Short-term borrowings                                 |              | 15,884           |             
|                                                      |              |                  |             
|Total current liabilities                             |              | 400,770          |             
|                                                      |             
|Deferred income taxes and other long-term liabilities |              | 71,784           |             
|                                                      |              |                  |             
|Total liabilities                                     |              | 472,554          |             
|Shareholders equity:                                 |             
|Preferred stock, $0.01 par value; 1,000,000 shares    |             
|authorized; none issued and outstanding               |              | --               |             
|Common stock, $0.01 par value;                        |             
|135,000,000 shares authorized; 44,259,708             |             
|shares issued and 44,027,403 shares                   |             
|outstanding at June 29, 2002; 40,872,008              |             
|shares issued and 40,624,374 shares                   |             
|outstanding at December 29, 2001; and                 |             
|40,644,166 shares issued and 40,527,473               |             
|shares outstanding at June 30, 2001                   |              | 442              |             
|Additional paid-in capital                            |              | 345,301          |             
|Retained earnings                                     |              | 270,661          |             
|Accumulated other comprehensive loss                  |              | (181             | )           
|Treasury stock, at cost; 232,305 shares at June 29,   |             
|2002, 247,634 shares at December 29, 2001,            |             
|and 116,693 shares at June 30, 2001                   |              | (6,678           | )           
|                                                      |              |                  |             
|Total shareholders equity                            |              | 609,545          |             
|                                                      |              |                  |             
|Total liabilities and shareholders equity            |              | $ 1,082,099      |             
|                                                      |              |                  |             

|See accompanying notes to condensed
consolidated financial statements.


4
|--------------------------------------------------------------------------

---

|LINENS N THINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
|------------------------------------------------------------------------------------------------------------------

|                                                            | Twenty-Six Weeks Ended
|----------------------------------------------------------- | ----------------------
|                                                            |                       
|
|                                                            |                       
|Cash flows from operating activities:                       |                       
|Net income                                                  |                       
|Adjustments to reconcile net income to net                  |                       
|cash used in operating activities:                          |                       
|Depreciation and amortization                               |                       
|Deferred income taxes                                       |                       
|Loss on disposal of assets                                  |                       
|Federal tax benefit  from common  stock  issued under stock |                       
|incentive plans                                             |                       
|Changes in assets and liabilities:                          |                       
|Decrease in accounts receivable                             |                       
|Increase in inventories                                     |                       
|Decrease (increase)
in prepaid expenses and                 |                       
|other current assets                                        |                       
|Increase in deferred charges and other                      |                       
|noncurrent assets                                           |                       
|Increase in accounts payable                                |                       
|Decrease in accrued expenses and other liabilities          |                       
|                                                            |                       
|Net cash used in operating activities                       |                       
|                                                            |                       
|Cash flows from investing activities:                       |                       
|Additions to property and equipment                         |                       
|                                                            |                       
|Cash flows from financing activities:                       |                       
|Net proceeds from common stock issuance                     |                       
|Proceeds from common stock issued under stock               |                       
|incentive plans                                             |                       
|(Decrease) increase in short-term borrowings                |                       
|Issuance (purchase) of treasury stock                       |                       
|                                                            |                       
|Net cash provided by financing activities                   |                       
|                                                            |                       
|Effect of exchange rate changes on cash and cash            |                       
|equivalents                                                 |                       
|Net increase (decrease) in cash and cash equivalents        |                       
|Cash and cash equivalents at beginning of period            |                       
|                                                            |                       
|Cash and cash equivalents at end of period                  |                       
|                                                            |                       

|See accompanying notes to condensed
consolidated financial statements.


5
|--------------------------------------------------------------------------

---

|LINENS N THINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1.  Basis of Presentation


The accompanying condensed
consolidated financial statements, except for the December 29, 2001 consolidated
balance sheet, are unaudited. In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position of the Company as
of June 29, 2002 and June 30, 2001 and the results of operations for
the respective thirteen and twenty-six weeks then ended and cash flows for the twenty-six
weeks then ended. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that effect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Because of
the seasonality of the specialty retailing business, operating results of the Company on
a quarterly basis may not be indicative of operating results for the full year.


These condensed consolidated
financial statements should be read in conjunction with the Companys audited
consolidated financial statements for the fiscal year ended December 29, 2001,
included in the Companys Annual Report on Form 10-K filed with the Securities and
Exchange Commission. All significant intercompany accounts and transactions have been
eliminated.


2.  Earnings Per Share


The calculation of basic and
diluted earnings per share (EPS) is as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                 | Periods ended June 29, 2002
(in thousands, except EPS)
|---------------------------------------------------------------- | ------------------------------------------------------
|
|                                                                 |                                                       
|
|                                                                 |                                                       
|Basic                                                            |                                                       
|Effect of outstanding stock options
   and deferred stock grants |                                                       
|                                                                 |                                                       
|                                                                 |                                                       
|Diluted                                                          |                                                       
|                                                                 |                                                       

|                                                                 | Periods ended June 30, 2001
(in thousands, except EPS)
|---------------------------------------------------------------- | ------------------------------------------------------
|
|                                                                 |                                                       
|
|                                                                 |                                                       
|Basic                                                            |                                                       
|Effect of outstanding stock options
   and deferred stock grants |                                                       
|                                                                 |                                                       
|                                                                 |                                                       
|Diluted                                                          |                                                       
|                                                                 |                                                       

|Options for which the exercise
price was greater than the average market price of common shares for the period ended
June 29, 2002 and June 30, 2001 were not included in the
computation of diluted earnings per share. These consisted of options totaling 29,900 shares
and 163,864 shares for the thirteen weeks and 700,435 shares and 87,316
shares for the twenty-six weeks ended June 29, 2002 and June 30, 2001, respectively.  Deferred
stock grants excluded in the computation of diluted earnings per share due to the
application of the treasury stock method totaled 401 shares and 17,545 shares
for the thirteen weeks and 252 shares and 13,893 shares for the twenty-six weeks
ended June 29, 2002 and June 30, 2001.



6
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|LINENS N THINGS, INC. AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, contd



3.  Short-Term Borrowing
Arrangements


On June 21, 2002, the Company
amended and extended its $150 million senior revolving credit facility agreement (the
Credit Agreement) with third party institutional lenders to expire April 20,
2005 from the original expiration date of October 20, 2003. The Credit Agreement allows
for up to $40 million of borrowings from additional lines of credit outside of the Credit
Agreement. As of June 29, 2002, the additional lines of credit include committed facilities of
approximately $23 million expiring on June 18, 2003.  Interest on all borrowings is determined based upon several alternative rates
as stipulated in the Credit Agreement, including a fixed margin above the LIBOR rate. The
Credit Agreement contains certain financial covenants, including those relating to the
maintenance of a minimum tangible net worth, a minimum fixed charge coverage ratio, and a
maximum leverage ratio. As of June 29, 2002, the Company was in compliance with the terms
of the Credit Agreement. The Credit Agreement limits, among other things, the amount of
cash dividends the Company may pay. Under the Credit Agreement, the amount of dividends
that the Company may pay may not exceed the sum of $25 million plus 50% of the
consolidated net income for each fiscal quarter, commencing with the fiscal quarter ended
March 30, 2002. The Company has never paid cash dividends and does not anticipate paying
cash dividends in the future. The Company is required under the Credit Agreement to reduce the balance of
outstanding domestic borrowings to zero for thirty consecutive days during each period beginning on December 1 of
any fiscal year and ending on March 15 of the following fiscal year.  At various times throughout 2002 and 2001, the Company
borrowed against its credit facility for seasonal working capital needs. As of June 29,
2002, the Company had $15.9 million in borrowings under the Credit Agreement and the
additional lines of credit at a weighted - average interest rate of 4.2%. The Company
also had $31.4 million of letters of credit outstanding as of June 29, 2002, which were
primarily used for merchandise purchases. The Company is not obligated under any formal
or informal compensating balance requirements.


4.  Comprehensive Income


Comprehensive income for the
thirteen and twenty-six weeks ended June 29, 2002 and June 30, 2001 is as follows (in thousands):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        | Thirteen Weeks Ended | Twenty-Six Weeks Ended
|--------------------------------------- | -------------------- | ----------------------
|                                        |                      |                       
|
|                                        |                      |                       
|Comprehensive Income:                   |                      |                       
|Net Income                              |                      | $5,586                
|Other comprehensive income/(loss) --    |                     
|Foreign currency translation adjustment |                      | 231                   
|                                        |                      |                       
|Comprehensive income                    |                      | $5,817                
|                                        |                      |                       

|5.  Restructuring and Asset
Impairment Charge


During the fourth quarter of fiscal
2001, the Company formulated a strategic initiative designed to improve store performance
and profitability. The initiative called for the closing of 17 stores that did not meet
the Companys performance objectives. In connection with the 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. The
reserve is included in accrued expenses. The reserve considered estimated sublease
income. Because all of the stores were leased the Company will not be responsible for the
disposal of property other than fixtures and leasehold improvements. A pre-tax reserve of
$9.5 million was recorded as a reduction in property and equipment for these fixed asset
impairments. The fixed asset impairments represented 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.


Certain components of the
restructuring and asset impairment charge were based upon estimates and may be subject to
change in future periods. The Company currently expects to close most of these stores by
the end of fiscal 2002 or shortly thereafter and four stores have been closed as of June
29, 2002.



7
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|LINENS N THINGS, INC. AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, contd




The following is a summary of
activity of the reserve for the restructuring and asset impairments charge as of June 29,
2002 ($ in millions):
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     | Reserve BalanceDecember 29, 2001 | 2002Activity | Reserve BalanceJune 29, 2002
|-------------------- | -------------------------------- | ------------ | ----------------------------
|                     |                                  |              |                             
|Non-cash components: | (Audited)                        | (Unaudited)  | (Unaudited)                 
|Asset impairment     |                                  | $     9.5    |                             
|Inventory markdowns  |                                  | 3.8          |                             
|                     |                                  |              |                             
|Sub-total            |                                  | 13.3         |                             
|Cash components:     |                                 
|                     |                                 
|Lease commitments    |                                  | 20.5         |                             
|Other                |                                  | 4.0          |                             
|                     |                                  |              |                             
|Sub-total            |                                  | 24.5         |                             
|                     |                                  |              |                             
|Total                |                                  | $    37.8    |                             
|                     |                                  |              |                             

|The 2002 activity primarily consists
of markdowns on inventory sold below cost, the write-off of fixed assets, the settlements
for lease obligations and other miscellaneous closing costs. The remaining fixed asset
and inventory reserves have been applied to reduce property and equipment and inventory;
however, such assets are not written-off until the respective stores are closed.


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 and $263,000 for thirteen and twenty-six weeks ended
June 29, 2002, respectively. SFAS No. 142 requires an initial goodwill impairment
assessment upon adoption and annual impairment tests thereafter. The Company completed the
initial impairment test of goodwill and has concluded that there is no impairment
of goodwill.


Set forth below are the Companys
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):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 | Thirteen Weeks Ended | Twenty-Six Weeks Ended
|-------------------------------- | -------------------- | ----------------------
|                                 |                      |                       
|
|                                 |                      |                       
|
|Reported net income              |                      | $     5,586           
|Add back:  Goodwill amortization |                      | --                    
|                                 |                      |                       
|Adjusted net income              |                      | $     5,586           
|                                 |                      |                       
|Basic earnings per share:        |                     
|Reported net income              |                      | $       0.14          
|Goodwill amortization            |                      | --                    
|                                 |                      |                       
|Adjusted net income              |                      | $       0.14          
|                                 |                      |                       
|Diluted earnings per share:      |                     
|Reported net income              |                      | $       0.13          
|Goodwill amortization            |                      | --                    
|                                 |                      |                       
|Adjusted net income              |                      | $       0.13          
|                                 |                      |                       

|8
|-

---

|LINENS N THINGS, INC. AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, contd



7.  Recent Accounting Pronouncements



At a 2001 meeting of the Financial
Accounting Standards Board (FASB) Emerging Issues Task Force (EITF),
a consensus was reached with respect to the issue of Accounting for Certain Sales
Incentives, including point of sale coupons, rebates and free merchandise. The
consensus included a conclusion that the value of such sales incentives that result in a
reduction of the price paid by the customer should be netted against sales and not
classified as a sales or marketing expense. In April 2001, the EITF delayed the effective
date for this consensus to 2002. The Company already includes such sales incentives as a
reduction of sales and records free merchandise in cost of goods sold as required by the
new EITF consensus.


In June 2001, the FASB issued SFAS
No. 143, Accounting for Asset Retirement Obligations  (SFAS No. 143).
SFAS No. 143 addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset retirement costs.
This statement requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable estimate
of fair value can be made. This statement is effective for the Company in fiscal 2003.
The Company is currently evaluating SFAS No. 143 but does not anticipate that the impact
of the new pronouncement would have a material impact on the Companys consolidated
financial statements.


In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No.
144). SFAS No. 144 supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of (SFAS No. 121), but retains many of
its fundamental provisions. SFAS No.144 also expands the scope of discontinued operations
to include more disposal transactions, and will impact the presentation of future store
closings, if any. SFAS No. 144 was effective for the Company for the first quarter of
fiscal 2002. The implementation of SFAS No. 144 did not have a significant impact on the
Companys financial statements, as the impairment assessment under SFAS No. 144 is
predominately unchanged from SFAS No. 121 and the stores closed during the twenty-six
weeks ended June 29, 2002 did not meet the requirements to be reported as discontinued
operations.


During April 2002, the FASB issued
SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections (SFAS No. 145). This Statement rescinds
SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt and SFAS No. 44,
Accounting for Intangible Assets of Motor Carriers. As part of this Statement it amends FASB
Statement No. 13, Accounting for Leases (SFAS No. 13), so that certain lease
modifications that have economic effects that are similar to sale-leaseback transactions
are accounted for the same way as sale-leaseback transactions. Additionally SFAS No. 13
is amended so that the original lessee under an operating lease agreement that becomes
secondarily liable shall recognize the fair value of the guarantee obligation. This
Statement also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under changed
conditions. The amendment to SFAS No. 13 is effective for transactions occurring after
May 15, 2002 and the remainder of SFAS 145 is effective for fiscal years beginning after
May 15, 2002. The application of SFAS No. 145 did not have and is not expected to have a
material impact on the Company's consolidated financial statements.


8.  Reclassification


Certain reclassifications were made
to the fiscal 2001 consolidated financial statements in order to conform to the fiscal
2002 presentation.




9
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Independent Auditors Review
Report


The Board of
Directors and Shareholders
Linens n Things, Inc.:


We have reviewed the condensed
consolidated balance sheets of Linens n Things, Inc. and Subsidiaries as of June
29, 2002 and June 30, 2001, and the related condensed consolidated statements of
operations for the thirteen and twenty-six week periods then ended and the related
condensed consolidated statements of cash flows for the twenty-six week periods ended
June 29, 2002 and June 30, 2001. These condensed consolidated financial statements are the
responsibility of the Companys 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 generally accepted auditing standards, 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 condensed 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 condensed 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


New York, New
York
July 17, 2002




10
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Item 2.   Managements Discussion and
Analysis of Financial Condition and Results of Operations


LINENS N THINGS, INC. AND SUBSIDIARIES 
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion and
analysis should be read in conjunction with the consolidated financial statements of the
Company and the notes thereto appearing elsewhere in this document.


Critical Accounting Policies


The preparation of financial
statements in conformity with accounting principles generally accepted in the United
States of America 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 and timing
of revenues and of expenses during the reporting period. The Companys
management believes the following critical accounting policies involve significant
estimates and judgments inherent in the preparation of the consolidated financial
statements.


Valuation of Inventory: Inventories
are valued using the lower of cost or market value, determined by the retail inventory
method (RIM). Under RIM, the valuation of inventories at cost and the
resulting gross margins are calculated by applying a calculated cost-to-retail ratio to
the retail value of inventories. RIM is an averaging method that is used in the retail
industry due to its practicality. Inherent in the RIM calculation are certain significant
management judgments and estimates including, among others, merchandise mark-on, mark-up,
markdowns and shrinkage based on historical experience between the dates of physical
inventories, which significantly impacts the ending inventory valuation at cost.


Sales Returns: The Company estimates
future sales returns and, when material, records a provision in the period that the
related sales are recorded based on historical information. Should actual returns differ
from the Companys estimates, the Company may be required to revise estimated sales
returns.


Impairment of Assets: The Company
periodically evaluates long-lived assets and goodwill for indicators of impairment. The
Companys judgments regarding the existence of impairment indicators are based on
market conditions and operational performance. Future events could cause the Company to
conclude that impairment indicators exist and that the value of long-lived assets and
goodwill is impaired.


Store Closure Costs: The Company
records estimated store closure costs, such as fixed asset write-offs, estimated lease
commitment costs net of estimated sublease income, markdowns for inventory that will be sold below
cost, and other miscellaneous store closing costs, in the period in which management
determines to close a store. Such estimates may be subject to change should actual costs
differ.


Results of Operations


Thirteen Weeks Ended June 29, 2002
Compared with Thirteen Weeks Ended June 30, 2001



Net sales for the thirteen weeks
ended June 29, 2002 increased 19.1% to $461.9 million, up from $387.7 million for the
same period last year. The increase in net sales is primarily the result of new store
openings since June 30, 2001. At June 29, 2002, the Company operated 367 stores,
including 13 stores in Canada, as compared with 304 stores, including seven stores in
Canada, at June 30, 2001. Store square footage increased 20.1% to 12,843,000 at June 29,
2002 compared with 10,696,000 at June 30, 2001. During the thirteen weeks ended June 29,
2002, the Company opened 21 stores and closed two stores as compared with opening 12
stores and closing one store during the same period last year.


Comparable store net sales increased
3.6% for the thirteen weeks ended June 29, 2002 compared with a decline of 3.6% for the
same period last year. The increase in comparable store net sales for the thirteen weeks
ended June 29, 2002 is primarily attributed to an increase in customer traffic. The
Company believes its sales results also reflect the steady progress being made on its
strategic operating initiatives, which include improvements of in-stock inventory
positions, improvements in the Companys textile business and improvements in
customer shopping experience. Sales also benefited from newer business introductions and
consistently good overall performance of the Companys functional housewares
business.


11
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|LINENS N THINGS, INC. AND SUBSIDIARIES 
MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, contd



In addition to the cost of inventory
sold, the Company includes its buying and distribution expenses in its cost of sales.
Buying expenses include all direct and indirect costs to procure merchandise.
Distribution expenses include the cost of operating the Companys distribution
centers and freight expense related to transporting merchandise. Gross profit for the
thirteen weeks ended June 29, 2002 was $192.9 million, or 41.8% of net sales, compared
with $162.2 million, or 41.8% of net sales, for the same period last year. Gross profit
was impacted by an improvement in initial mark-on as a result of product mix and the
leveraging of the Companys buying power, offset by start-up costs related to the
Companys third distribution center which became fully operational by the end of the
second quarter.


The Companys selling, general
and administrative (SG&A) expenses consist of store selling expenses,
occupancy costs, advertising expenses and corporate office expenses. SG&A expenses
for the thirteen weeks ended June 29, 2002 were $183.1 million, or 39.6% of net sales,
compared with $153.6 million, or 39.6% of net sales, for the same period last year. SG&A
expense remained relatively flat as a percent of sales with the same period last year.
While the Company is investing more heavily in store payroll as a result of the Companys
initiative to improve overall guest service levels, the increase was offset by the
leverage of corporate office expenses.


The Company incurred a one-time
pre-tax litigation charge of $4.0 million, or an after-tax charge of $0.06 per share, in
the second quarter of fiscal 2001 in connection with the claims arising in a class action
lawsuit in California regarding overtime pay, as well as a separate claim for accrued
vacation pay on behalf of certain former employees. Payment of this settlement was
completed in early fiscal 2002.


Operating profit for the thirteen
weeks ended June 29, 2002 was $9.8 million, or 2.1% of net sales, compared with $4.6
million, or 1.2% of net sales, for the same period last year.


Net interest expense for the
thirteen weeks ended June 29, 2002 decreased to $753,000 from $1.2 million during the
same period last year. The decrease in interest expense was due mainly to lower interest
rates, offset in part by a higher net average loan balance for the thirteen weeks ended
June 29, 2002 compared with the same period last year, in order to fund the Companys
operations.


The Companys income tax
expense was $3.5 million for the thirteen weeks ended June 29, 2002, compared with $1.3
million for the same period last year. The Companys effective tax rate was 38.2%
for both the thirteen weeks ended June 29, 2002 and June 30, 2001.


As a result of the factors described
above, net income for the thirteen weeks ended June 29, 2002 was $5.6 million, or $0.13
per share on a diluted basis, compared with $2.1 million, or $0.05 per share on a diluted
basis for the same period last year, which included the after-tax litigation charge of
$0.06 per share.


Twenty-Six Weeks Ended June 29, 2002
Compared With Twenty-Six Weeks Ended June 30, 2001



Net sales increased 19.8% to $918.8
million for the twenty-six weeks ended June 29, 2002, up from $767.0 million for the same
period last year, primarily as a result of new store openings since June 30, 2001. During
the twenty-six weeks ended June 29, 2002, the Company opened 28 stores and closed 4
stores, compared with opening 23 stores and closing 2 stores during the same period last
year.


Comparable store net sales for the
twenty-six weeks ended June 29, 2002 increased 3.1% as compared with a decrease of 2.7%
for the same period last year. The increase in comparable store net sales can be
primarily attributed to an increase in customer traffic. The Company believes its sales
results also reflect the steady progress being made on its strategic operating
initiatives, which include improvements of in-stock inventory positions, improvements in
the Companys textile business and improvements in customer shopping experience.
Sales also benefited from consistently good performance of the Companys functional
housewares business


Gross profit for the twenty-six
weeks ended June 29, 2002 was $374.1 million, or 40.7% of net sales, compared with $312.9
million, or 40.8% of net sales, for the same period last year. The decrease in gross
profit as a percent of net sales was primarily due to higher markdowns related to sku
management during the Companys clearance event in January 2002 as well as start-up
costs related to the Companys third distribution center, offsetting the
improvements made in mark-on as a result of product mix.



12
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|LINENS N THINGS, INC. AND SUBSIDIARIES 
MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, contd


SG&A expenses for the twenty-six
weeks ended June 29, 2002 were $355.3 million, or 38.7% of net sales, compared with
$296.1 million, or 38.6% of net sales, for the same period last year. The increase as a
percentage of net sales is attributable to a slight de-leveraging of occupancy costs, and
a greater investment in store payroll as a result of the Companys initiatives to
improve overall guest service levels, partially offset by the leverage of corporate
office expenses.


The Company incurred a one-time
pre-tax litigation charge of $4.0 million, or an after-tax charge of $0.06 per share, in
the second quarter of fiscal 2001 in connection with the claims arising in a class action
lawsuit in California regarding overtime pay, as well as a separate claim for accrued
vacation pay on behalf of certain former employees. Payment of this settlement was
completed in early fiscal 2002.


Operating profit for the twenty-six
weeks ended June 29, 2002 was $18.8 million, or 2.0% of net sales, compared with $12.8
million, or 1.7% of net sales, for the same period last year.


The Company incurred net interest
expense of $1.4 million for the twenty-six weeks ended June 29, 2002, compared with $1.8
million for the same period in 2001. The decrease in interest expense was due mainly to
lower interest rates, offset in part by a higher net average loan balance for the
twenty-six weeks ended June 29, 2002 compared with the same period last year, in order to
fund the Companys operations.


The Companys income tax
expense for the twenty-six weeks ended June 29, 2002 was $6.6 million compared with $4.2
million for the same period last year. The Companys effective tax rate was 38.2%
for both the twenty-six weeks ended June 29, 2002 and June 30, 2001.


Net income for the twenty-six weeks
ended June 29, 2002 was $10.7 million, or $0.26 per share on a diluted basis, compared
with $6.8 million, or $0.16 per share on a diluted basis, for the same period last year,
which included the after-tax litigation charge of $0.06 per share.


Liquidity and Capital Resources


The Companys capital
requirements are primarily for new store expenditures, new store inventory purchases and
seasonal working capital. These requirements have been funded through a combination of
internally generated cash flows from operations, credit extended by suppliers and
short-term borrowings.


On June 21, 2002, the Company
amended and extended its $150 million senior revolving credit facility agreement (the
Credit Agreement) with third party institutional lenders to expire April 20,
2005 from the original expiration date of October 20, 2003. The Credit Agreement allows
for up to $40 million in borrowings from additional lines of credit outside of the Credit
Agreement. As of June 29, 2002, the additional lines of credit include committed facilities of
approximately $23 million expiring on June 18, 2003.  As of June 29, 2002, the Company was in compliance with the terms of the
Credit Agreement. As of June 29, 2002, the Company had $15.9 million in borrowings under
the Credit Agreement and the additional lines of credit at a weighted-average interest
rate of 4.2%. The Company also had $31.4 million of letters of credit outstanding as of
June 29, 2002, which were primarily used for merchandise purchases. The Company is not
obligated under any formal or informal compensating balance requirements. See Note 3 to
Financial Statements.


Net cash used in operating
activities for the twenty-six weeks ended June 29, 2002 was $29.8 million compared with
$45.5 million for the same period last year. The change was primarily attributed to an
improvement in net income and the timing of vendor payments impacted by a slight
improvement in inventory turn.


Net cash used in investing
activities for the twenty-six weeks ended June 29, 2002 was $51.0 million, compared with
$56.7 million for the same period last year. The decrease in net cash used in investing
activities was due primarily to capital expenditures related to the planned new store
openings in fiscal third quarter 2002 versus fiscal third quarter 2001. The Company
currently estimates annual capital expenditures will be approximately $75 million to $80
million in fiscal 2002, primarily for an estimated 50 new stores, store remodels, the
third distribution center and system enhancements.


Net cash provided by financing
activities for the twenty-six weeks ended June 29, 2002 was $85.4 million compared with
$71.3 million for the same period last year. The increase was primarily due to a common
stock offering of 3.3 million shares that raised a net $95.8 million. The proceeds were
used to pay down borrowings under the Credit Agreement.


13
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|LINENS N THINGS, INC. AND SUBSIDIARIES 
MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, contd


Management regularly reviews and
evaluates its liquidity and capital needs. The Company experiences peak periods for its
cash needs during the course of its fiscal year, with such peak periods generally
expected during the second quarter and fourth quarter of the current fiscal year. As the
Companys business continues to grow and its current store expansion plan is
implemented, such peak periods may require increases in the amounts available under its
credit facility from those currently existing and/or other debt or equity funding.
Management currently believes that the Companys cash flows from operations, credit
extended by suppliers, its existing credit facilities and its uncommitted lines of credit
will be sufficient to fund its currently expected capital expenditure, working capital
and non-acquisition business expansion requirements for at least the next 12 to 18
months.


Inflation


The Company does not believe that
its operating results have been materially affected by inflation during the preceding
three years. There can be no assurance, however, that the Companys operating
results will not be affected by inflation in the future.


Seasonality


The Companys business is
subject to substantial seasonal variations. Historically, the Company has realized a
significant portion of its net sales and net income for the year during the third and
fourth quarters. The Companys quarterly results of operations may also fluctuate
significantly as a result of a variety of other factors, including the timing of new
store openings. The Company believes this is the general pattern associated with its
segment of the retail industry and expects this pattern will continue in the future.
Consequently, comparisons between quarters are not necessarily meaningful and the results
for any quarter are not necessarily indicative of future results.


Forward-Looking Statements


The foregoing 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,
will, could, intend, plan, target
and similar statements or variations of such terms. All of our outlook information constitutes
forward-looking information. All such 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, the success of our new business concepts
and seasonal concepts, the success of our new store openings, 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, the impact on consumer
spending as a result of a slowing consumer economy and a highly promotional retail
environment. Actual results may differ materially from such 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 may be contained in
subsequent reports filed with the Securities and Exchange Commission. 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.


14
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Item 3.  Quantitative and Qualitative
Disclosures About Market Risk.


The Company continuously evaluates
the market risk associated with its financial instruments. Market risks relating to the
Companys operations result primarily from changes in interest rates and foreign
exchange rates. The Company does not engage in financial transactions for trading or
speculative purposes.


Interest Rate Risk:


The Companys financial
instruments include cash and cash equivalents and short-term borrowings. The Companys
obligations are short-term in nature and generally have less than a 30-day commitment.
The Company is exposed to interest rate risks primarily through borrowings under the
Credit Agreement. Interest on all borrowings is based upon several alternative rates as
stipulated in the Credit Agreement, including a fixed margin over LIBOR based rate. The
Company believes that its interest rate risk is minimal as a hypothetical 10% increase or
decrease in the associated debts variable rate would not materially affect the
Companys results from operations or cash flows. The Company does not use derivative
financial instruments in its investment portfolio.


Foreign Currency Risk:


The Company enters into some
purchase obligations outside of the United States, which are predominately settled in
U.S. dollars and therefore the Company has only minimal exposure to foreign currency
exchange risks. The Company does not hedge against foreign currency risks and believes
that foreign currency exchange risk is immaterial.


In addition, the Company operated 13
stores in Canada as of June 29, 2002. The Company believes its foreign currency
translation risk is minimal, as a hypothetical 10% strengthening or weakening of the U.S.
dollar relative to the Canadian dollar would not materially affect the Companys
results from operations or cash flow.


Since fiscal year end 2001, there
have been no material changes in market risk exposures.




15
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|PART II OTHER
INFORMATION


Item 4.  Submission of Matters to a
Vote of Security Holders.


On May 9, 2002 the Company held its
Annual Meeting of Shareholders. At the Annual Meeting, Norman Axelrod was re-elected as
director of the Company, with 37,959,330 shares voted for and 2,700,335 shares withheld,
and Morton E. Handel was re-elected as director of the Company, with 37,737,818 shares
voted for and 2,921,847 shares withheld. Directors whose term of office continued
following the meeting were Philip E. Beekman, Harold F. Compton and Stanley P. Goldstein.


Item 6.  Exhibits and Reports on Form
8-K
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) |  | EXHIBIT
INDEX
|--- |  | -------------

| |  | ExhibitNumber |  | 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 June 17, 2002 in connection with its execution of an underwriting
agreement for its June 2002 equity offering.


16
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|SIGNATURE


Pursuant 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.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | LINENS N THINGS, INC.
(Registrant)By: WILLIAM T. GILES
William T. GilesSenior Vice President, Chief
Financial Officer
(Duly authorized officer and
principal financial officer)
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date:  August 12, 2002
|----------------------