1366913--3/27/2007--Linens_Holding

related topics

{debt, indebtedness, cash}

{operation, natural, condition}

{investment, property, distribution}

{product, market, service}

{condition, economic, financial}

{customer, product, revenue}

{regulation, government, change}

{property, intellectual, protect}

{system, service, information}

{control, financial, internal}

{personnel, key, retain}

{acquisition, growth, future}

{cost, regulation, environmental}

Risks Related to the Company s Business The Company s profitability would be adversely affected if its merchandise selections do not match guest preferences. The Company does not have long-term contracts with any of its vendors and if the Company is unable to purchase suitable merchandise in sufficient quantities at competitive prices, it may be unable to offer a merchandise mix that is attractive to its guests and its sales may be harmed. Delays in receipt of merchandise in connection with either the manufacturing or shipment of such merchandise could affect the Company s performance. The Company s future growth and profitability could be adversely affected if its advertising and marketing programs are not effective in generating sufficient levels of customer awareness and traffic. Weak economic conditions may significantly impact discretionary consumer spending and reduce the Company s sales and profitability. Competitive factors could reduce the Company s sales and profitability. Attrition among the Company s buyers or key sales associates could adversely affect its financial performance and its growth. The Company may not be successful in opening and operating new stores profitably or making its recently opened stores profitable. A disruption in the operation of the Company s distribution centers would impact its ability to deliver merchandise to its stores, which could adversely impact its sales and its results of operations. The Company s revenues and cash requirements are affected by the seasonal nature of its business. A problem with the Company s management information systems could impact its flow of product and information and adversely affect its operating productivity and results of operations. The Company s business can be affected by extreme or unseasonable weather conditions. Acts of terrorism could adversely affect the Company s business. The Company is subject to numerous regulations that could affect its operations. If the Company is unable to enforce its intellectual property rights, or if it is accused of infringing on a third party s intellectual property rights, its profitability may be adversely affected If the Company significantly overestimates its sales, its profitability may be adversely affected. Changes in its credit card arrangements, applicable regulations and consumer credit patterns could adversely impact the Company s ability to facilitate the provision of consumer credit to its guests and adversely affect its business. Failure to maintain competitive terms under the Company s loyalty programs could adversely affect its business. If the Company is unable to renew or replace its store leases or enter into leases for new stores on favorable terms, or if any of its current leases are terminated prior to the expiration of their stated term and it cannot find suitable alternate locations, its growth and profitability could be harmed. Restrictions contained in some of the Company s leases relating to change of control of the Company may make any change of control more difficult or impair the Company s ability to retain such leases in the event of a change of control. The Company has identified certain issues relating to its internal controls and procedures, which, if not remedied effectively, could have an adverse effect on its business. The Company is indirectly owned and controlled by the Sponsors, and their interests as equity holders may conflict with creditors. Risks Related to the Company s Substantial Debt The Company s substantial leverage may impair its financial condition and prevent it from fulfilling its obligations under the Notes. Despite current indebtedness levels, the Company and its subsidiaries may still be able to incur substantially more indebtedness. This could further exacerbate the risks associated with its substantial leverage. Covenant restrictions under the Company s indebtedness may limit its ability to operate its business. The Company will require a significant amount of cash, and its ability to generate sufficient cash depends upon many factors, some of which are beyond its control. Variable rate indebtedness subjects the Company to interest rate risk, which could cause its debt service obligations to increase significantly.

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1366913--3/27/2007--Linens_Holding_Co.