ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 31-1029810 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
Three Limited Parkway, P.O. Box 16000, Columbus, Ohio | 43216 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ý | Accelerated filer | o |
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | o |
Common Stock, $.50 Par Value | Outstanding at May 25, 2012 | |
291,118,738 Shares |
Page No. | |
Item 1. Financial Statements * | |
Item 4. Controls and Procedures | |
Item 1. Legal Proceedings | |
Item 1A. Risk Factors | |
Item 3. Defaults Upon Senior Securities | |
Item 4. Mine Safety Disclosures | |
Item 5. Other Information | |
Item 6. Exhibits | |
* | The Company’s fiscal year ends on the Saturday nearest to January 31. As used herein, “first quarter of 2012” and “first quarter of 2011” refer to the thirteen week periods ending April 28, 2012 and April 30, 2011, respectively. |
Item 1. | FINANCIAL STATEMENTS |
First Quarter | |||||||
2012 | 2011 | ||||||
Net Sales | $ | 2,154 | $ | 2,217 | |||
Costs of Goods Sold, Buying and Occupancy | (1,252 | ) | (1,375 | ) | |||
Gross Profit | 902 | 842 | |||||
General, Administrative and Store Operating Expenses | (609 | ) | (625 | ) | |||
Operating Income | 293 | 217 | |||||
Interest Expense | (78 | ) | (55 | ) | |||
Other Income (Loss) | (2 | ) | 87 | ||||
Income Before Income Taxes | 213 | 249 | |||||
Provision for Income Taxes | 88 | 84 | |||||
Net Income | $ | 125 | $ | 165 | |||
Net Income Per Basic Share | $ | 0.43 | $ | 0.52 | |||
Net Income Per Diluted Share | $ | 0.41 | $ | 0.50 | |||
Dividends Per Share | $ | 0.25 | $ | 0.20 |
First Quarter | |||||||
2012 | 2011 | ||||||
Net Income | $ | 125 | $ | 165 | |||
Other Comprehensive Income (Loss), Net of Tax | |||||||
Reclassification of Cash Flow Hedges to Earnings | 12 | 29 | |||||
Foreign Currency Translation | (4 | ) | (2 | ) | |||
Unrealized Loss on Cash Flow Hedges | (3 | ) | (28 | ) | |||
Unrealized Gain on Available-for-sale Investment | — | 89 | |||||
Total Other Comprehensive Income (Loss), Net of Tax | 5 | 88 | |||||
Total Comprehensive Income | $ | 130 | $ | 253 |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(Unaudited) | (Unaudited) | ||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and Cash Equivalents | $ | 1,286 | $ | 935 | $ | 1,557 | |||||
Accounts Receivable, Net | 158 | 218 | 205 | ||||||||
Inventories | 1,100 | 997 | 1,075 | ||||||||
Deferred Income Taxes | 50 | 51 | — | ||||||||
Other | 222 | 167 | 327 | ||||||||
Total Current Assets | 2,816 | 2,368 | 3,164 | ||||||||
Property and Equipment, Net | 1,689 | 1,644 | 1,598 | ||||||||
Goodwill | 1,330 | 1,330 | 1,458 | ||||||||
Trade Names and Other Intangible Assets, Net | 495 | 495 | 601 | ||||||||
Other Assets | 286 | 271 | 194 | ||||||||
Total Assets | $ | 6,616 | $ | 6,108 | $ | 7,015 | |||||
LIABILITIES AND EQUITY (DEFICIT) | |||||||||||
Current Liabilities: | |||||||||||
Accounts Payable | $ | 536 | $ | 540 | $ | 640 | |||||
Accrued Expenses and Other | 691 | 770 | 689 | ||||||||
Current Portion of Long-term Debt | 57 | 57 | — | ||||||||
Income Taxes | 6 | 159 | 60 | ||||||||
Total Current Liabilities | 1,290 | 1,526 | 1,389 | ||||||||
Deferred Income Taxes | 191 | 183 | 218 | ||||||||
Long-term Debt | 4,480 | 3,481 | 3,510 | ||||||||
Other Long-term Liabilities | 786 | 780 | 771 | ||||||||
Shareholders’ Equity (Deficit): | |||||||||||
Preferred Stock - $1.00 par value; 10 shares authorized; none issued | — | — | — | ||||||||
Common Stock - $0.50 par value; 1,000 shares authorized; 302, 296 and 333 shares issued; 292, 295 and 308 shares outstanding, respectively | 151 | 148 | 166 | ||||||||
Paid-in Capital | 78 | 25 | 213 | ||||||||
Accumulated Other Comprehensive Income | 5 | — | 89 | ||||||||
Retained Earnings | 75 | 24 | 1,456 | ||||||||
Less: Treasury Stock, at Average Cost; 10, 1 and 25 shares, respectively | (440 | ) | (60 | ) | (797 | ) | |||||
Total Limited Brands, Inc. Shareholders’ Equity (Deficit) | (131 | ) | 137 | 1,127 | |||||||
Noncontrolling Interest | — | 1 | — | ||||||||
Total Equity (Deficit) | (131 | ) | 138 | 1,127 | |||||||
Total Liabilities and Equity (Deficit) | $ | 6,616 | $ | 6,108 | $ | 7,015 |
First Quarter | |||||||
2012 | 2011 | ||||||
Operating Activities: | |||||||
Net Income | $ | 125 | $ | 165 | |||
Adjustments to Reconcile Net Income to Net Cash Provided by (Used for) Operating Activities: | |||||||
Depreciation and Amortization of Long-lived Assets | 95 | 98 | |||||
Amortization of Landlord Allowances | (9 | ) | (8 | ) | |||
Deferred Income Taxes | 7 | 13 | |||||
Share-based Compensation Expense | 16 | 12 | |||||
Excess Tax Benefits from Share-based Compensation | (87 | ) | (19 | ) | |||
Gain on Sale of Express Common Stock | — | (86 | ) | ||||
Changes in Assets and Liabilities: | |||||||
Accounts Receivable | 47 | 32 | |||||
Inventories | (102 | ) | (39 | ) | |||
Accounts Payable, Accrued Expenses and Other | (168 | ) | (45 | ) | |||
Income Taxes Payable | (66 | ) | (128 | ) | |||
Other Assets and Liabilities | (41 | ) | (13 | ) | |||
Net Cash Used for Operating Activities | (183 | ) | (18 | ) | |||
Investing Activities: | |||||||
Capital Expenditures | (136 | ) | (77 | ) | |||
Proceeds from Sale of Express Common Stock | — | 99 | |||||
Other Investing Activities | 12 | — | |||||
Net Cash Provided by (Used for) Investing Activities | (124 | ) | 22 | ||||
Financing Activities: | |||||||
Proceeds from Long-term Debt, Net of Issuance Costs | 985 | 981 | |||||
Repurchase of Common Stock | (376 | ) | (556 | ) | |||
Dividends Paid | (73 | ) | (64 | ) | |||
Excess Tax Benefits from Share-based Compensation | 87 | 19 | |||||
Proceeds from Exercise of Stock Options and Other | 33 | 40 | |||||
Net Cash Provided by Financing Activities | 656 | 420 | |||||
Effects of Exchange Rate Changes on Cash | 2 | 3 | |||||
Net Increase in Cash and Cash Equivalents | 351 | 427 | |||||
Cash and Cash Equivalents, Beginning of Period | 935 | 1,130 | |||||
Cash and Cash Equivalents, End of Period | $ | 1,286 | $ | 1,557 |
• | Victoria’s Secret |
• | Victoria’s Secret Pink |
• | Bath & Body Works |
• | La Senza |
• | Henri Bendel |
First Quarter | |||||
2012 | 2011 | ||||
(in millions) | |||||
Weighted-average Common Shares: | |||||
Issued Shares | 299 | 330 | |||
Treasury Shares | (7 | ) | (13 | ) | |
Basic Shares | 292 | 317 | |||
Effect of Dilutive Options and Restricted Stock | 9 | 11 | |||
Diluted Shares | 301 | 328 | |||
Anti-dilutive Options and Awards (a) | 1 | 2 |
(a) | These options and awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. |
Amount Authorized | Shares Repurchased | Amount Repurchased | Average Stock Price of Shares Repurchased within Program | ||||||||||||||||||
Repurchase Program | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||
(in millions) | (in thousands) | (in millions) | |||||||||||||||||||
February 2012 (a) | $ | 500 | 4,594 | NA | $ | 217 | NA | $ | 47.13 | ||||||||||||
November 2011 | 250 | 3,657 | NA | 164 | NA | 44.90 | |||||||||||||||
March 2011 | 500 | NA | 13,241 | NA | $ | 481 | 36.33 | ||||||||||||||
November 2010 (b) | 200 | NA | 3,431 | NA | 109 | 31.65 | |||||||||||||||
Total | 8,251 | 16,672 | $ | 381 | $ | 590 |
(a) | The February 2012 repurchase program had $283 million remaining as of April 28, 2012. |
(b) | The November 2010 repurchase program had $31 million remaining at the time it was cancelled in conjunction with the approval of the March 2011 repurchase program. |
NA | Not applicable |
Ordinary Dividends | Special Dividends | Total Dividends | Total Paid | |||||||||||||
(per share) | (in millions) | |||||||||||||||
2012 | ||||||||||||||||
First Quarter | $ | 0.25 | $ | — | $ | 0.25 | $ | 73 | ||||||||
2011 | ||||||||||||||||
First Quarter | $ | 0.20 | $ | — | $ | 0.20 | $ | 64 |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(in millions) | |||||||||||
Finished Goods Merchandise | $ | 1,029 | $ | 926 | $ | 1,000 | |||||
Raw Materials and Merchandise Components | 71 | 71 | 75 | ||||||||
Total Inventories | $ | 1,100 | $ | 997 | $ | 1,075 |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(in millions) | |||||||||||
Property and Equipment, at Cost | $ | 4,470 | $ | 4,387 | $ | 4,225 | |||||
Accumulated Depreciation and Amortization | (2,781 | ) | (2,743 | ) | (2,627 | ) | |||||
Property and Equipment, Net | $ | 1,689 | $ | 1,644 | $ | 1,598 |
Victoria’s Secret | Bath & Body Works | Other (a) | Total | ||||||||||||
(in millions) | |||||||||||||||
Balance as of January 28, 2012 | $ | 690 | $ | 628 | $ | 12 | $ | 1,330 | |||||||
Foreign Currency Translation | — | — | — | — | |||||||||||
Balance as of April 28, 2012 | $ | 690 | $ | 628 | $ | 12 | $ | 1,330 |
(a) | Balance is presented net of a $189 million and $119 million La Senza impairment recognized in the fourth quarter of 2008 and the fourth quarter of 2011, respectively. |
Victoria’s Secret | Bath & Body Works | Other (a) | Total | ||||||||||||
(in millions) | |||||||||||||||
Balance as of January 29, 2011 | $ | 690 | $ | 628 | $ | 133 | $ | 1,451 | |||||||
Foreign Currency Translation | — | — | 7 | 7 | |||||||||||
Balance as of April 30, 2011 | $ | 690 | $ | 628 | $ | 140 | $ | 1,458 |
(a) | Balance is presented net of a $189 million La Senza impairment recognized in the fourth quarter of 2008. |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(in millions) | |||||||||||
Senior Unsecured Debt with Subsidiary Guarantee | |||||||||||
$1 billion, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”) | $ | 1,000 | $ | — | $ | — | |||||
$1 billion, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”) | 1,000 | 1,000 | 1,000 | ||||||||
$500 million, 8.50% Fixed Interest Rate Notes due June 2019, Less Unamortized Discount (“2019 Notes”) | 488 | 488 | 487 | ||||||||
$400 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”) | 400 | 400 | 400 | ||||||||
Total Senior Unsecured Debt with Subsidiary Guarantee | $ | 2,888 | $ | 1,888 | $ | 1,887 | |||||
Senior Unsecured Debt | |||||||||||
$700 million, 6.90% Fixed Interest Rate Notes due July 2017, Less Unamortized Discount (“2017 Notes”)(a) | $ | 723 | $ | 724 | $ | 700 | |||||
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033, Less Unamortized Discount (“2033 Notes”) | 350 | 350 | 350 | ||||||||
$300 million, 7.60% Fixed Interest Rate Notes due July 2037, Less Unamortized Discount (“2037 Notes”) | 299 | 299 | 299 | ||||||||
5.25% Fixed Interest Rate Notes due November 2014, Less Unamortized Discount (“2014 Notes”)(b) | 220 | 220 | 216 | ||||||||
6.125% Fixed Interest Rate Notes due December 2012, Less Unamortized Discount (“2012 Notes”)(c) | 57 | 57 | 58 | ||||||||
Total Senior Unsecured Debt | $ | 1,649 | $ | 1,650 | $ | 1,623 | |||||
Total | $ | 4,537 | $ | 3,538 | $ | 3,510 | |||||
Current Portion of Long-term Debt | (57 | ) | (57 | ) | — | ||||||
Total Long-term Debt, Net of Current Portion | $ | 4,480 | $ | 3,481 | $ | 3,510 |
(a) | The balances include a fair value interest rate hedge adjustment which increased the debt balance by $24 million as of April 28, 2012, $25 million as of January 28, 2012 and $1 million as of April 30, 2011. |
(b) | The principal balance outstanding was $213 million as of April 28, 2012, January 28, 2012 and April 30, 2011. The balances include a fair value interest rate hedge adjustment which increased the debt balance by $7 million as of April 28, 2012 and January 28, 2012 and $3 million as of April 30, 2011. |
(c) | The principal balance outstanding was $57 million as of April 28, 2012, January 28, 2012 and April 30, 2011. The April 30, 2011 balance includes a fair value interest rate hedge adjustment which increased the debt balance by $1 million. |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(in millions) | |||||||||||
Other Long-term Liabilities | $ | 63 | $ | 60 | $ | 85 |
First Quarter | |||||||||
Location | 2012 | 2011 | |||||||
(in millions) | |||||||||
Gain (Loss) Recognized in Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) | $ | (3 | ) | $ | (28 | ) | ||
(Gain) Loss Reclassified from Accumulated Other Comprehensive Income into Other Income (Loss) (a) | Other Income (Loss) | 12 | 28 |
(a) | Represents reclassification of amounts from accumulated other comprehensive income to earnings to completely offset foreign currency transaction gains and losses recognized on the intercompany loans. No ineffectiveness was associated with these foreign exchange cash flow hedges. |
Notional Amount | ||||||||||||
April 28, 2012 | January 28, 2012 | April 30, 2011 | ||||||||||
(in millions) | ||||||||||||
2012 Notes | $ | — | $ | — | $ | 57 | ||||||
2014 Notes | — | — | 213 | |||||||||
2017 Notes | 175 | 175 | 325 | |||||||||
Total | $ | 175 | $ | 175 | $ | 595 |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(in millions) | |||||||||||
Other Assets | $ | 13 | $ | 14 | $ | 5 |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(in millions) | |||||||||||
Carrying Value | $ | 4,537 | $ | 3,538 | $ | 3,510 | |||||
Fair Value (a) | 4,836 | 3,849 | 3,721 |
(a) | The estimated fair value of the Company’s publicly traded debt is based on reported transaction prices which are considered Level 2 inputs in accordance with ASC Topic 820, Fair Value Measurements and Disclosure. The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange. |
• | Level 1 – Quoted market prices in active markets for identical assets or liabilities. |
• | Level 2 – Observable inputs other than quoted market prices included in Level 1, such as quoted prices of similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
• | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
(in millions) | |||||||||||||||
As of April 28, 2012 | |||||||||||||||
Assets: | |||||||||||||||
Cash and Cash Equivalents | $ | 1,286 | $ | — | $ | — | $ | 1,286 | |||||||
Interest Rate Designated Fair Value Hedges | — | 13 | — | 13 | |||||||||||
Liabilities: | |||||||||||||||
Cross-currency Cash Flow Hedges | — | 63 | — | 63 | |||||||||||
Lease Guarantees | — | — | 4 | 4 | |||||||||||
As of January 28, 2012 | |||||||||||||||
Assets: | |||||||||||||||
Cash and Cash Equivalents | $ | 935 | $ | — | $ | — | $ | 935 | |||||||
Interest Rate Designated Fair Value Hedges | — | 14 | — | 14 | |||||||||||
Liabilities: | |||||||||||||||
Cross-currency Cash Flow Hedges | — | 60 | — | 60 | |||||||||||
Lease Guarantees | — | — | 4 | 4 | |||||||||||
As of April 30, 2011 | |||||||||||||||
Assets: | |||||||||||||||
Cash and Cash Equivalents | $ | 1,557 | $ | — | $ | — | $ | 1,557 | |||||||
Available-for-sale Investment | 156 | — | — | 156 | |||||||||||
Interest Rate Designated Fair Value Hedges | — | 5 | — | 5 | |||||||||||
Liabilities: | |||||||||||||||
Cross-currency Cash Flow Hedges | — | 85 | — | 85 | |||||||||||
Lease Guarantees | — | — | 6 | 6 |
First Quarter | |||||||
2012 | 2011 | ||||||
(in millions) | |||||||
Beginning Balance | $ | 4 | $ | 6 | |||
Change in Estimated Fair Value Reported in Earnings | — | — | |||||
Ending Balance | $ | 4 | $ | 6 |
Foreign Currency Translation | Cash Flow Hedges | Accumulated Other Comprehensive Income | |||||||||
(in millions) | |||||||||||
Balance as of January 28, 2012 | $ | (8 | ) | $ | 8 | $ | — | ||||
Current-period Other Comprehensive Income | (4 | ) | 9 | 5 | |||||||
Balance as of April 28, 2012 | $ | (12 | ) | $ | 17 | $ | 5 |
Foreign Currency Translation | Cash Flow Hedges | Available-for-sale Investment | Accumulated Other Comprehensive Income | ||||||||||||
(in millions) | |||||||||||||||
Balance as of January 29, 2011 | $ | (7 | ) | $ | 8 | $ | — | $ | 1 | ||||||
Current-period Other Comprehensive Income | (2 | ) | 1 | 89 | 88 | ||||||||||
Balance as of April 30, 2011 | $ | (9 | ) | $ | 9 | $ | 89 | $ | 89 |
• | Mast Global, a merchandise sourcing and production function serving the Company and its international partners; |
• | International retail, franchise, license and wholesale operations, which include the company-owned La Senza, Bath & Body Works and Victoria’s Secret stores in Canada; |
• | Henri Bendel, a chain of specialty stores which feature accessories and personal care products; and |
• | Corporate functions including non-core real estate, equity investments and other governance functions such as treasury and tax. |
Victoria’s Secret | Bath & Body Works | Other | Total | ||||||||||||
(in millions) | |||||||||||||||
2012 | |||||||||||||||
First Quarter: | |||||||||||||||
Net Sales | $ | 1,470 | $ | 505 | $ | 179 | $ | 2,154 | |||||||
Operating Income (Loss) | 278 | 60 | (45 | ) | 293 | ||||||||||
2011 | |||||||||||||||
First Quarter: | |||||||||||||||
Net Sales | $ | 1,356 | $ | 480 | $ | 381 | $ | 2,217 | |||||||
Operating Income (Loss) | 245 | 54 | (82 | ) | 217 |
April 28, 2012 | |||||||||||||||||||
Limited Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated Limited Brands, Inc. | |||||||||||||||
ASSETS | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and Cash Equivalents | $ | — | $ | 736 | $ | 550 | $ | — | $ | 1,286 | |||||||||
Accounts Receivable, Net | 1 | 95 | 62 | — | 158 | ||||||||||||||
Inventories | — | 911 | 189 | — | 1,100 | ||||||||||||||
Deferred Income Taxes | — | 33 | 17 | — | 50 | ||||||||||||||
Other | — | 137 | 85 | — | 222 | ||||||||||||||
Total Current Assets | 1 | 1,912 | 903 | — | 2,816 | ||||||||||||||
Property and Equipment, Net | — | 917 | 772 | — | 1,689 | ||||||||||||||
Goodwill | — | 1,318 | 12 | — | 1,330 | ||||||||||||||
Trade Names and Other Intangible Assets, Net | — | 410 | 85 | — | 495 | ||||||||||||||
Net Investments in and Advances to/from Consolidated Affiliates | 4,278 | 13,641 | 544 | (18,463 | ) | — | |||||||||||||
Other Assets | 211 | 43 | 680 | (648 | ) | 286 | |||||||||||||
Total Assets | $ | 4,490 | $ | 18,241 | $ | 2,996 | $ | (19,111 | ) | $ | 6,616 | ||||||||
LIABILITIES AND EQUITY (DEFICIT) | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Accounts Payable | $ | 9 | $ | 307 | $ | 220 | $ | — | $ | 536 | |||||||||
Accrued Expenses and Other | 80 | 343 | 268 | — | 691 | ||||||||||||||
Current Portion of Long-term Debt | 57 | — | — | — | 57 | ||||||||||||||
Income Taxes | — | — | 6 | — | 6 | ||||||||||||||
Total Current Liabilities | 146 | 650 | 494 | — | 1,290 | ||||||||||||||
Deferred Income Taxes | (6 | ) | 16 | 181 | — | 191 | |||||||||||||
Long-term Debt | 4,480 | 597 | 36 | (633 | ) | 4,480 | |||||||||||||
Other Long-term Liabilities | 6 | 582 | 212 | (14 | ) | 786 | |||||||||||||
Total Equity (Deficit) | (136 | ) | 16,396 | 2,073 | (18,464 | ) | (131 | ) | |||||||||||
Total Liabilities and Equity (Deficit) | $ | 4,490 | $ | 18,241 | $ | 2,996 | $ | (19,111 | ) | $ | 6,616 |
January 28, 2012 | |||||||||||||||||||
Limited Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated Limited Brands, Inc. | |||||||||||||||
ASSETS | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and Cash Equivalents | $ | — | $ | 371 | $ | 564 | $ | — | $ | 935 | |||||||||
Accounts Receivable, Net | — | 142 | 76 | — | 218 | ||||||||||||||
Inventories | 822 | 175 | — | 997 | |||||||||||||||
Deferred Income Taxes | — | 33 | 18 | — | 51 | ||||||||||||||
Other | — | 109 | 58 | — | 167 | ||||||||||||||
Total Current Assets | — | 1,477 | 891 | — | 2,368 | ||||||||||||||
Property and Equipment, Net | — | 911 | 733 | — | 1,644 | ||||||||||||||
Goodwill | — | 1,318 | 12 | — | 1,330 | ||||||||||||||
Trade Names and Other Intangible Assets, Net | — | 410 | 85 | — | 495 | ||||||||||||||
Net Investments in and Advances to/from Consolidated Affiliates | 3,531 | 13,928 | 518 | (17,977 | ) | — | |||||||||||||
Other Assets | 199 | 43 | 677 | (648 | ) | 271 | |||||||||||||
Total Assets | $ | 3,730 | $ | 18,087 | $ | 2,916 | $ | (18,625 | ) | $ | 6,108 | ||||||||
LIABILITIES AND EQUITY | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Accounts Payable | $ | 4 | $ | 312 | $ | 224 | $ | — | $ | 540 | |||||||||
Accrued Expenses and Other | 51 | 412 | 307 | — | 770 | ||||||||||||||
Current Portion of Long-term Debt | 57 | — | — | — | 57 | ||||||||||||||
Income Taxes | 1 | 150 | 8 | — | 159 | ||||||||||||||
Total Current Liabilities | 113 | 874 | 539 | — | 1,526 | ||||||||||||||
Deferred Income Taxes | (6 | ) | 10 | 179 | — | 183 | |||||||||||||
Long-term Debt | 3,481 | 597 | 36 | (633 | ) | 3,481 | |||||||||||||
Other Long-term Liabilities | 6 | 582 | 207 | (15 | ) | 780 | |||||||||||||
Total Equity | 136 | 16,024 | 1,955 | (17,977 | ) | 138 | |||||||||||||
Total Liabilities and Equity | $ | 3,730 | $ | 18,087 | $ | 2,916 | $ | (18,625 | ) | $ | 6,108 |
April 30, 2011 | |||||||||||||||||||
Limited Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated Limited Brands, Inc. | |||||||||||||||
ASSETS | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and Cash Equivalents | $ | — | $ | 1,126 | $ | 431 | $ | — | $ | 1,557 | |||||||||
Accounts Receivable, Net | 5 | 165 | 35 | — | 205 | ||||||||||||||
Inventories | — | 867 | 208 | — | 1,075 | ||||||||||||||
Deferred Income Taxes | — | — | — | — | — | ||||||||||||||
Other | — | 123 | 205 | (1 | ) | 327 | |||||||||||||
Total Current Assets | 5 | 2,281 | 879 | (1 | ) | 3,164 | |||||||||||||
Property and Equipment, Net | — | 916 | 682 | — | 1,598 | ||||||||||||||
Goodwill | — | 1,318 | 140 | — | 1,458 | ||||||||||||||
Trade Names and Other Intangible Assets, Net | — | 411 | 190 | — | 601 | ||||||||||||||
Net Investments in and Advances to/from Consolidated Affiliates | 4,548 | 17,639 | 5,005 | (27,192 | ) | — | |||||||||||||
Other Assets | 193 | 45 | 603 | (647 | ) | 194 | |||||||||||||
Total Assets | $ | 4,746 | $ | 22,610 | $ | 7,499 | $ | (27,840 | ) | $ | 7,015 | ||||||||
LIABILITIES AND EQUITY | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Accounts Payable | $ | 35 | $ | 336 | $ | 269 | $ | — | $ | 640 | |||||||||
Accrued Expenses and Other | 70 | 345 | 274 | — | 689 | ||||||||||||||
Income Taxes | (1 | ) | 41 | 20 | — | 60 | |||||||||||||
Total Current Liabilities | 104 | 722 | 563 | — | 1,389 | ||||||||||||||
Deferred Income Taxes | (6 | ) | 35 | 189 | — | 218 | |||||||||||||
Long-term Debt | 3,510 | 597 | 35 | (632 | ) | 3,510 | |||||||||||||
Other Long-term Liabilities | 11 | 565 | 209 | (14 | ) | 771 | |||||||||||||
Total Equity | 1,127 | 20,691 | 6,503 | (27,194 | ) | 1,127 | |||||||||||||
Total Liabilities and Equity | $ | 4,746 | $ | 22,610 | $ | 7,499 | $ | (27,840 | ) | $ | 7,015 |
First Quarter 2012 | |||||||||||||||||||
Limited Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated Limited Brands, Inc. | |||||||||||||||
Net Sales | $ | — | $ | 1,994 | $ | 629 | $ | (469 | ) | $ | 2,154 | ||||||||
Costs of Goods Sold, Buying and Occupancy | — | (1,169 | ) | (526 | ) | 443 | (1,252 | ) | |||||||||||
Gross Profit | — | 825 | 103 | (26 | ) | 902 | |||||||||||||
General, Administrative and Store Operating Expenses | (2 | ) | (544 | ) | (87 | ) | 24 | (609 | ) | ||||||||||
Operating Income (Loss) | (2 | ) | 281 | 16 | (2 | ) | 293 | ||||||||||||
Interest Expense | (78 | ) | (7 | ) | (2 | ) | 9 | (78 | ) | ||||||||||
Other Income (Expense) | 1 | 2 | (2 | ) | (3 | ) | (2 | ) | |||||||||||
Income (Loss) Before Income Taxes | (79 | ) | 276 | 12 | 4 | 213 | |||||||||||||
Provision (Benefit) for Income Taxes | — | 66 | 22 | — | 88 | ||||||||||||||
Equity in Earnings, Net of Tax | 204 | (70 | ) | 91 | (225 | ) | — | ||||||||||||
Net Income (Loss) | $ | 125 | $ | 140 | $ | 81 | $ | (221 | ) | $ | 125 | ||||||||
First Quarter 2012 | |||||||||||||||||||
Limited Brands, Inc. | Guarantor Subsidiaries | Non-guarantor Subsidiaries | Eliminations | Consolidated Limited Brands, Inc. | |||||||||||||||
Net Income | $ | 125 | $ | 140 | $ | 81 | $ | (221 | ) | $ | 125 | ||||||||
Other Comprehensive Income (Loss), Net of Tax | |||||||||||||||||||
Reclassification of Cash Flow Hedges to Earnings | 1 | — | 11 | — | 12 | ||||||||||||||
Foreign Currency Translation | — | — | (4 | ) | — | (4 | ) | ||||||||||||
Unrealized Loss on Cash Flow Hedges | — | — | (3 | ) | — | (3 | ) | ||||||||||||
Unrealized Gain on Available-for-sale Investment | — | — | — | — | — | ||||||||||||||
Total Other Comprehensive Income (Loss), Net of Tax | 1 | — | 4 | — | 5 | ||||||||||||||
Total Comprehensive Income | $ | 126 | $ | 140 | $ | 85 | $ | (221 | ) | $ | 130 |
First Quarter 2011 | |||||||||||||||||||
Limited Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated Limited Brands, Inc. | |||||||||||||||
Net Sales | $ | — | $ | 2,061 | $ | 725 | $ | (569 | ) | $ | 2,217 | ||||||||
Costs of Goods Sold, Buying and Occupancy | — | (1,285 | ) | (626 | ) | 536 | (1,375 | ) | |||||||||||
Gross Profit | — | 776 | 99 | (33 | ) | 842 | |||||||||||||
General, Administrative and Store Operating Expenses | (2 | ) | (578 | ) | (76 | ) | 31 | (625 | ) | ||||||||||
Operating Income (Loss) | (2 | ) | 198 | 23 | (2 | ) | 217 | ||||||||||||
Interest Expense | (54 | ) | (9 | ) | (3 | ) | 11 | (55 | ) | ||||||||||
Other Income (Expense) | — | 4 | 85 | (2 | ) | 87 | |||||||||||||
Income (Loss) Before Income Taxes | (56 | ) | 193 | 105 | 7 | 249 | |||||||||||||
Provision (Benefit) for Income Taxes | — | 39 | 45 | — | 84 | ||||||||||||||
Equity in Earnings, Net of Tax | 221 | 314 | 306 | (841 | ) | — | |||||||||||||
Net Income (Loss) | $ | 165 | $ | 468 | $ | 366 | $ | (834 | ) | $ | 165 |
First Quarter 2011 | |||||||||||||||||||
Limited Brands, Inc. | Guarantor Subsidiaries | Non-guarantor Subsidiaries | Eliminations | Consolidated Limited Brands, Inc. | |||||||||||||||
Net Income | $ | 165 | $ | 468 | $ | 366 | $ | (834 | ) | $ | 165 | ||||||||
Other Comprehensive Income (Loss), Net of Tax | |||||||||||||||||||
Reclassification of Cash Flow Hedges to Earnings | 1 | — | 28 | — | 29 | ||||||||||||||
Foreign Currency Translation | — | — | (2 | ) | — | (2 | ) | ||||||||||||
Unrealized Loss on Cash Flow Hedges | — | — | (28 | ) | — | (28 | ) | ||||||||||||
Unrealized Gain on Available-for-sale Investment | — | — | 89 | — | 89 | ||||||||||||||
Total Other Comprehensive Income (Loss), Net of Tax | 1 | — | 87 | — | 88 | ||||||||||||||
Total Comprehensive Income | $ | 166 | $ | 468 | $ | 453 | $ | (834 | ) | $ | 253 |
First Quarter 2012 | |||||||||||||||||||
Limited Brands, Inc. | Guarantor Subsidiaries | Non-guarantor Subsidiaries | Eliminations | Consolidated Limited Brands, Inc. | |||||||||||||||
Net Cash Provided by (Used for) Operating Activities | $ | (116 | ) | $ | (84 | ) | $ | 17 | $ | — | $ | (183 | ) | ||||||
Investing Activities: | |||||||||||||||||||
Capital Expenditures | — | (66 | ) | (70 | ) | — | (136 | ) | |||||||||||
Proceeds from Sale of Express Common Stock | — | — | — | — | — | ||||||||||||||
Other Investing Activities | — | 8 | 4 | — | 12 | ||||||||||||||
Net Cash Provided by (Used for) Investing Activities | — | (58 | ) | (66 | ) | — | (124 | ) | |||||||||||
Financing Activities: | |||||||||||||||||||
Proceeds from Issuance of Long-term Debt, Net of Issuance Costs | 985 | — | — | — | 985 | ||||||||||||||
Financing Costs | — | — | — | — | — | ||||||||||||||
Repurchase of Common Stock | (376 | ) | — | — | — | (376 | ) | ||||||||||||
Dividends Paid | (73 | ) | — | — | — | (73 | ) | ||||||||||||
Excess Tax Benefits from Share-based Compensation | — | 70 | 17 | — | 87 | ||||||||||||||
Net Financing Activities and Advances to/from Consolidated Affiliates | (453 | ) | 437 | 16 | — | — | |||||||||||||
Proceeds from Exercise of Stock Options and Other | 33 | — | — | — | 33 | ||||||||||||||
Net Cash Provided by (Used for) Financing Activities | 116 | 507 | 33 | — | 656 | ||||||||||||||
Effects of Exchange Rate Changes on Cash and Cash Equivalents | — | — | 2 | — | 2 | ||||||||||||||
Net Decrease in Cash and Cash Equivalents | — | 365 | (14 | ) | — | 351 | |||||||||||||
Cash and Cash Equivalents, Beginning of Period | — | 371 | 564 | — | 935 | ||||||||||||||
Cash and Cash Equivalents, End of Period | $ | — | $ | 736 | $ | 550 | $ | — | $ | 1,286 |
First Quarter 2011 | |||||||||||||||||||
Limited Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated Limited Brands, Inc. | |||||||||||||||
Net Cash Provided by (Used for) Operating Activities | $ | 1 | $ | 29 | $ | (48 | ) | $ | — | $ | (18 | ) | |||||||
Investing Activities: | |||||||||||||||||||
Capital Expenditures | — | (40 | ) | (37 | ) | — | (77 | ) | |||||||||||
Proceeds from Sale of Express Common Stock | — | — | 99 | — | 99 | ||||||||||||||
Net Cash Provided by (Used for) Investing Activities | — | (40 | ) | 62 | — | 22 | |||||||||||||
Financing Activities: | |||||||||||||||||||
Proceeds from Issuance of Long-term Debt, Net of Issuance Costs | 981 | — | — | — | 981 | ||||||||||||||
Repurchase of Common Stock | (556 | ) | — | — | — | (556 | ) | ||||||||||||
Dividends Paid | (64 | ) | — | — | — | (64 | ) | ||||||||||||
Excess Tax Benefits from Share-based Compensation | — | 15 | 4 | — | 19 | ||||||||||||||
Net Financing Activities and Advances to/from Consolidated Affiliates | (402 | ) | 421 | (19 | ) | — | — | ||||||||||||
Proceeds from Exercise of Stock Options and Other | 40 | — | — | — | 40 | ||||||||||||||
Net Cash Provided by (Used for) Financing Activities | (1 | ) | 436 | (15 | ) | — | 420 | ||||||||||||
Effects of Exchange Rate Changes on Cash and Cash Equivalents | — | — | 3 | — | 3 | ||||||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | — | 425 | 2 | — | 427 | ||||||||||||||
Cash and Cash Equivalents, Beginning of Period | — | 701 | 429 | — | 1,130 | ||||||||||||||
Cash and Cash Equivalents, End of Period | $ | — | $ | 1,126 | $ | 431 | $ | — | $ | 1,557 |
• | general economic conditions, consumer confidence, consumer spending patterns and market disruptions including severe weather conditions, natural disasters, health hazards, terrorist activities, financial crises, political crises or other major events, or the prospect of these events; |
• | the seasonality of our business; |
• | the dependence on a high volume of mall traffic and the possible lack of availability of suitable store locations on appropriate terms; |
• | our ability to grow through new store openings and existing store remodels and expansions; |
• | our ability to successfully expand into international markets and related risks; |
• | our independent licensees and franchisees; |
• | our direct channel business; |
• | our failure to protect our reputation and our brand images; |
• | our failure to protect our trade names, trademarks and patents; |
• | the highly competitive nature of the retail industry generally and the segments in which we operate particularly; |
• | consumer acceptance of our products and our ability to keep up with fashion trends, develop new merchandise and launch new product lines successfully; |
• | our reliance on foreign sources of production, including risks related to: |
• | political instability; |
• | duties, taxes, other charges on imports; |
• | legal and regulatory matters; |
• | volatility in currency exchange rates; |
• | local business practices and political issues; |
• | potential delays or disruptions in shipping and related pricing impacts; |
• | the disruption of imports by labor disputes; and |
• | changing expectations regarding product safety due to new legislation; |
• | stock price volatility; |
• | our failure to maintain our credit rating; |
• | our ability to service our debt; |
• | our ability to retain key personnel; |
• | our ability to attract, develop and retain qualified employees and manage labor costs; |
• | the inability of our manufacturers to deliver products in a timely manner and meet quality standards; |
• | fluctuations in product input costs; |
• | fluctuations in energy costs; |
• | increases in the costs of mailing, paper and printing; |
• | claims arising from our self-insurance; |
• | our ability to implement and maintain information technology systems; |
• | our failure to comply with regulatory requirements; |
• | tax matters; and |
• | legal and compliance matters. |
Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
2012 | 2011 | % Change | |||||||||
Sales per Average Selling Square Foot | |||||||||||
Victoria’s Secret Stores (a) | $ | 181 | $ | 163 | 11 | % | |||||
Bath & Body Works (a) | 125 | 118 | 6 | % | |||||||
La Senza (b) | 86 | 83 | 4 | % | |||||||
Sales per Average Store (in thousands) | |||||||||||
Victoria’s Secret Stores (a) | $ | 1,073 | $ | 963 | 11 | % | |||||
Bath & Body Works (a) | 298 | 279 | 7 | % | |||||||
La Senza (b) | 286 | 275 | 4 | % | |||||||
Average Store Size (selling square feet) | |||||||||||
Victoria’s Secret Stores (a) | 5,950 | 5,907 | 1 | % | |||||||
Bath & Body Works (a) | 2,374 | 2,372 | — | % | |||||||
La Senza | 3,318 | 3,319 | — | % | |||||||
Total Selling Square Feet (in thousands) | |||||||||||
Victoria’s Secret Stores (a) | 6,009 | 6,031 | — | % | |||||||
Bath & Body Works (a) | 3,758 | 3,802 | (1 | )% | |||||||
La Senza (c) | 660 | 830 | (20 | )% |
(a) | Metric relates to company-owned stores in the U.S. |
(b) | Metric is presented in Canadian dollars to eliminate the impact of foreign currency fluctuations. |
(c) | During the fourth quarter of 2011, we initiated a restructuring program designed to resize a portion of La Senza's store fleet. Under this program, we closed 38 underperforming stores. Of these stores, 12 were closed as of January 28, 2012. The remainder were closed during the first quarter of 2012. For additional information, see Note 4 to the Consolidated Financial Statements included in Item 1. Financial Statements. |
Number of Stores (a) | 2012 | 2011 | ||||
Victoria’s Secret U.S. | ||||||
Beginning of Period | 1,017 | 1,028 | ||||
Opened | — | 1 | ||||
Closed | (7 | ) | (8 | ) | ||
End of Period | 1,010 | 1,021 | ||||
Bath & Body Works U.S. | ||||||
Beginning of Period | 1,587 | 1,606 | ||||
Opened | 2 | — | ||||
Closed | (6 | ) | (3 | ) | ||
End of Period | 1,583 | 1,603 | ||||
La Senza | ||||||
Beginning of Period | 230 | 252 | ||||
Opened | — | — | ||||
Closed (b) | (31 | ) | (2 | ) | ||
End of Period | 199 | 250 | ||||
Bath & Body Works Canada | ||||||
Beginning of Period | 69 | 59 | ||||
Opened | — | — | ||||
Closed | (1 | ) | — | |||
End of Period | 68 | 59 | ||||
Victoria’s Secret Canada | ||||||
Beginning of Period | 19 | 12 | ||||
Opened | 1 | — | ||||
Closed | — | — | ||||
End of Period | 20 | 12 | ||||
Henri Bendel | ||||||
Beginning of Period | 19 | 11 | ||||
Opened | — | — | ||||
Closed | — | — | ||||
End of Period | 19 | 11 | ||||
Total | ||||||
Beginning of Period | 2,941 | 2,968 | ||||
Opened | 3 | 1 | ||||
Closed | (45 | ) | (13 | ) | ||
End of Period | 2,899 | 2,956 |
(a) | Number of stores excludes independently owned La Senza, Bath & Body Works and Victoria’s Secret stores operated by licensees and franchisees. |
(b) | During the fourth quarter of 2011, we initiated a restructuring program designed to resize a portion of La Senza's store fleet. Under this program, we closed 38 underperforming stores. Of these stores, 12 were closed as of January 28, 2012. The remainder were closed during the first quarter of 2012. For additional information, see Note 4 to the Consolidated Financial Statements included in Item 1. Financial Statements. |
Operating Income Rate | |||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||
First Quarter | (in millions) | ||||||||||||
Victoria’s Secret | $ | 278 | $ | 245 | 18.9 | % | 18.1 | % | |||||
Bath & Body Works | 60 | 54 | 11.9 | % | 11.3 | % | |||||||
Other (a) (b) | (45 | ) | (82 | ) | (25.0 | )% | (21.5 | )% | |||||
Total Operating Income | $ | 293 | $ | 217 | 13.6 | % | 9.8 | % |
(a) | Includes Corporate, Mast Global, Henri Bendel and our international operations including La Senza. In the fourth quarter of 2011, we divested 51% of our third-party apparel sourcing business. As such, results of this business are included in the first quarter of 2011 but not the first quarter of 2012. For additional information, see Note 8 to the Consolidated Financial Statements included in Item 1. Financial Statements. |
(b) | 2011 includes a $50 million expense associated with a pledge to our charitable foundation to fund our charitable activities on a multi-year basis. |
2012 | 2011 | % Change | ||||||||
First Quarter | (in millions) | |||||||||
Victoria’s Secret Stores | $ | 1,088 | $ | 987 | 10 | % | ||||
Victoria’s Secret Direct | 382 | 369 | 4 | % | ||||||
Total Victoria’s Secret | 1,470 | 1,356 | 8 | % | ||||||
Bath & Body Works | 505 | 480 | 5 | % | ||||||
Other (a) | 179 | 381 | (53 | )% | ||||||
Total Net Sales | $ | 2,154 | $ | 2,217 | (3 | )% |
(a) | Includes Corporate, Mast Global, Henri Bendel and our international operations including La Senza. In the fourth quarter of 2011, we divested 51% of our third-party apparel sourcing business. First quarter 2011 sales included $214 million attributable to the third-party apparel sourcing business. For additional information, see Note 8 to the Consolidated Financial Statements included in Item 1. Financial Statements. |
Victoria’s Secret | Bath & Body Works | Other | Total | ||||||||||||
First Quarter | (in millions) | ||||||||||||||
2011 Net Sales | $ | 1,356 | $ | 480 | $ | 381 | $ | 2,217 | |||||||
Comparable Store Sales | 87 | 24 | (2 | ) | 109 | ||||||||||
Sales Associated with New, Closed, and Non-comparable Remodeled Stores, Net | 14 | — | 9 | 23 | |||||||||||
Foreign Currency Translation | — | — | (2 | ) | (2 | ) | |||||||||
Direct Channels | 13 | 1 | — | 14 | |||||||||||
Mast Global and Other | — | — | 7 | 7 | |||||||||||
Divestiture of Third-party Apparel Sourcing Business | — | — | (214 | ) | (214 | ) | |||||||||
2012 Net Sales | $ | 1,470 | $ | 505 | $ | 179 | $ | 2,154 |
First Quarter | 2012 | 2011 | |||
Victoria’s Secret Stores | 9 | % | 19 | % | |
Bath & Body Works | 6 | % | 11 | % | |
Total Comparable Store Sales (a) | 7 | % | 15 | % |
(a) | Includes La Senza, Bath & Body Works Canada, Victoria’s Secret Canada and Henri Bendel. |
• | At Victoria's Secret Stores, net sales increased across most categories including core lingerie, Pink and beauty, driven by a compelling merchandise assortment that incorporated newness, innovation and fashion as well as in-store execution; and |
• | At Victoria's Secret Direct, net sales increased 4% related to increases in Pink, swimwear and knit clothing. |
• | At Victoria's Secret Stores, gross profit increased due to higher merchandise margin dollars as a result of the increase in net sales. The increase in merchandise margin dollars was partially offset by higher buying and occupancy expenses due to an increase in occupancy expense driven by higher net sales and store related activity; and |
• | At Victoria's Secret Direct, gross profit increased primarily due to higher merchandise margin dollars as a result of the increase in net sales. |
• | An increase in store selling expenses related to higher sales and other investments to improve the customer experience, including investments in training and technology; |
• | An increase in expenses resulting from increased international expansion; and |
• | An increase in severance expense. |
First Quarter | 2012 | 2011 | |||||
Average daily borrowings (in millions) | $ | 4,454 | $ | 2,954 | |||
Average borrowing rate (in percentages) | 6.63 | % | 6.98 | % |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(in millions) | |||||||||||
Senior Unsecured Debt with Subsidiary Guarantee | |||||||||||
$1 billion, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”) | $ | 1,000 | $ | — | $ | — | |||||
$1 billion, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”) | 1,000 | 1,000 | 1,000 | ||||||||
$500 million, 8.50% Fixed Interest Rate Notes due June 2019, Less Unamortized Discount (“2019 Notes”) | 488 | 488 | 487 | ||||||||
$400 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”) | 400 | 400 | 400 | ||||||||
Total Senior Unsecured Debt with Subsidiary Guarantee | $ | 2,888 | $ | 1,888 | $ | 1,887 | |||||
Senior Unsecured Debt | |||||||||||
$700 million, 6.90% Fixed Interest Rate Notes due July 2017, Less Unamortized Discount (“2017 Notes”)(a) | $ | 723 | $ | 724 | $ | 700 | |||||
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033, Less Unamortized Discount (“2033 Notes”) | 350 | 350 | 350 | ||||||||
$300 million, 7.60% Fixed Interest Rate Notes due July 2037, Less Unamortized Discount (“2037 Notes”) | 299 | 299 | 299 | ||||||||
5.25% Fixed Interest Rate Notes due November 2014, Less Unamortized Discount (“2014 Notes”)(b) | 220 | 220 | 216 | ||||||||
6.125% Fixed Interest Rate Notes due December 2012, Less Unamortized Discount (“2012 Notes”)(c) | 57 | 57 | 58 | ||||||||
Total Senior Unsecured Debt | $ | 1,649 | $ | 1,650 | $ | 1,623 | |||||
Total | $ | 4,537 | $ | 3,538 | $ | 3,510 | |||||
Current Portion of Long-term Debt | (57 | ) | (57 | ) | — | ||||||
Total Long-term Debt | $ | 4,480 | $ | 3,481 | $ | 3,510 |
(a) | The balances include a fair value interest rate hedge adjustment which increased the debt balance by $24 million as of April 28, 2012, $25 million as of January 28, 2012 and $1 million as of April 30, 2011. |
(b) | The principal balance outstanding was $213 million as of April 28, 2012, January 28, 2012 and April 30, 2011. The balances include a fair value interest rate hedge adjustment which increased the debt balance by $7 million as of April 28, 2012 and January 28, 2012 and $3 million as of April 30, 2011. |
(c) | The principal balance outstanding was $57 million as of April 28, 2012, January 28, 2012 and April 30, 2011. The April 30, 2011 balance includes a fair value interest rate hedge adjustment which increased the debt balance by $1 million. |
Notional Amount | ||||||||||||
April 28, 2012 | January 28, 2012 | April 30, 2011 | ||||||||||
(in millions) | ||||||||||||
2012 Notes | $ | — | $ | — | $ | 57 | ||||||
2014 Notes | — | — | 213 | |||||||||
2017 Notes | 175 | 175 | 325 | |||||||||
Total | $ | 175 | $ | 175 | $ | 595 |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(in millions) | |||||||||||
Cash Provided by (Used for) Operating Activities (a) | $ | (183 | ) | $ | 1,266 | $ | (18 | ) | |||
Capital Expenditures (a) | 136 | 426 | 77 | ||||||||
Working Capital | 1,526 | 842 | 1,775 | ||||||||
Capitalization: | |||||||||||
Long-term Debt | 4,480 | 3,481 | 3,510 | ||||||||
Shareholders’ Equity (Deficit) | (131 | ) | 137 | 1,127 | |||||||
Total Capitalization | 4,349 | 3,618 | 4,637 | ||||||||
Remaining Amounts Available Under Credit Agreements (b) | 991 | 987 | 773 |
(a) | The January 28, 2012 amounts represent a twelve-month period and the April 28, 2012 and April 30, 2011 amounts represent three-month periods. |
(b) | Letters of credit issued reduce our remaining availability under the Revolving Facility. We have outstanding letters of credit that reduce our remaining availability under the Revolving Facility of $9 million as of April 28, 2012, $13 million as of January 28, 2012 and $27 million as of April 30, 2011. |
Moody’s | S&P | Fitch | |||
Corporate | Ba1 | BB+ | BB+ | ||
Senior Unsecured Debt with Subsidiary Guarantee | Ba1 | BB+ | BB+ | ||
Senior Unsecured Debt | Ba2 | BB- | BB | ||
Outlook | Stable | Stable | Stable |
Amount Authorized | Shares Repurchased | Amount Repurchased | |||||||||||||||
Repurchase Program | 2012 | 2011 | 2012 | 2011 | |||||||||||||
(in millions) | (in thousands) | (in millions) | |||||||||||||||
February 2012 (a) | $ | 500 | 4,594 | NA | $ | 217 | NA | ||||||||||
November 2011 | 250 | 3,657 | NA | 164 | NA | ||||||||||||
March 2011 | 500 | NA | 13,241 | NA | $ | 481 | |||||||||||
November 2010 (b) | 200 | NA | 3,431 | NA | 109 | ||||||||||||
Total | 8,251 | 16,672 | $ | 381 | $ | 590 |
(a) | The February 2012 repurchase program had $283 million remaining as of April 28, 2012. |
(b) | The November 2010 repurchase program had $31 million remaining at the time it was cancelled in conjunction with the approval of the March 2011 repurchase program. |
NA | Not applicable |
Ordinary Dividends | Special Dividends | Total Dividends | Total Paid | |||||||||||||
(per share) | (in millions) | |||||||||||||||
2012 | ||||||||||||||||
First Quarter | $ | 0.25 | $ | — | $ | 0.25 | $ | 73 | ||||||||
2011 | ||||||||||||||||
First Quarter | $ | 0.20 | $ | — | $ | 0.20 | $ | 64 |
First Quarter | |||||||
2012 | 2011 | ||||||
(in millions) | |||||||
Cash and Cash Equivalents, Beginning of Period | $ | 935 | $ | 1,130 | |||
Net Cash Flows Used for Operating Activities | (183 | ) | (18 | ) | |||
Net Cash Flows Provided by (Used for) Investing Activities | (124 | ) | 22 | ||||
Net Cash Flows Provided by Financing Activities | 656 | 420 | |||||
Effect of Exchange Rate Changes on Cash | 2 | 3 | |||||
Net Increase in Cash and Cash Equivalents | 351 | 427 | |||||
Cash and Cash Equivalents, End of Period | $ | 1,286 | $ | 1,557 |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
April 28, 2012 | January 28, 2012 | April 30, 2011 | |||||||||
(in millions) | |||||||||||
Long-term Debt: (a) | |||||||||||
Carrying Value | $ | 4,537 | $ | 3,538 | $ | 3,510 | |||||
Fair Value, Estimated (b) | 4,836 | 3,849 | 3,721 | ||||||||
Cross-currency Swap Arrangements (c) | 63 | 60 | 85 | ||||||||
Fixed-to-Floating Interest Rate Swap Arrangements (c) | (13 | ) | (14 | ) | (5 | ) | |||||
Available-for-sale Investment (b) (d) | — | — | 156 |
(a) | The increase in long-term debt is related to the issuance of the February 2022 Notes. |
(b) | The estimated fair value is based on quoted market prices. The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange. |
(c) | Swap arrangements are in an (asset) liability position. |
(d) | Represents the market value of our remaining common stock shares of Express. |
Item 4. | CONTROLS AND PROCEDURES |
Item 1. | LEGAL PROCEEDINGS |
Item 1A. | RISK FACTORS |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period | Total Number of Shares Purchased (a) | Average Price Paid Per Share (b) | Total Number of Shares Purchased as Part of Publicly Announced Programs (c) | Maximum Number of Shares (or Approximate Dollar Value) that May Yet be Purchased Under the Programs (c) | |||||||||
(in thousands) | (in thousands) | ||||||||||||
February 2012 | 4,055 | $ | 45.02 | 4,049 | $ | 481,995 | |||||||
March 2012 | 4,639 | 47.20 | 2,999 | 341,744 | |||||||||
April 2012 | 1,232 | 48.46 | 1,203 | 283,434 | |||||||||
Total | 9,926 | 46.47 | 8,251 | 283,434 |
(a) | The total number of shares repurchased includes shares repurchased as part of publicly announced programs, with the remainder relating to shares repurchased in connection with tax payments due upon vesting of employee restricted stock awards and the use of our stock to pay the exercise price on employee stock options. |
(b) | The average price paid per share includes any broker commissions. |
(c) | For additional share repurchase program information, see Note 3 to the Consolidated Financial Statements included in Item 1. Financial Statements. |
Item 3. | DEFAULTS UPON SENIOR SECURITIES |
Item 4. | MINE SAFETY DISCLOSURES |
Item 6. | EXHIBITS |
Exhibits | ||
4.1 | Sixth Supplemental Indenture dated as of February 7, 2012 among Limited Brands, Inc., the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A. | |
15 | Letter re: Unaudited Interim Financial Information re: Incorporation of Report of Independent Registered Public Accounting Firm. | |
31.1 | Section 302 Certification of CEO. | |
31.2 | Section 302 Certification of CFO. | |
32 | Section 906 Certification (by CEO and CFO). | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
LIMITED BRANDS, INC. | ||
(Registrant) | ||
By: | /s/ STUART B. BURGDOERFER | |
Stuart B. Burgdoerfer Executive Vice President and Chief Financial Officer * |
* | Mr. Burgdoerfer is the principal financial officer and the principal accounting officer and has been duly authorized to sign on behalf of the Registrant. |
SECTION 1.1. | Definitions.................................................................................................................5 |
SECTION 2.1. | Creation of the Notes; Designations.........................................................................10 |
SECTION 2.2. | Forms Generally....................................................................................................... 10 |
SECTION 3.1. | Title and Terms of Notes...........................................................................................11 |
SECTION 4.1. | Optional Redemption................................................................................................12 |
SECTION 4.2. | Optional Redemption Procedures.............................................................................12 |
SECTION 5.1. | Limitations on Mergers and Sales of Assets.............................................................13 |
SECTION 5.2. | Successor Person Substituted....................................................................................13 |
SECTION 5.3. | Reports.......................................................................................................................13 |
SECTION 5.4. | Additional Subsidiary Guarantees.............................................................................13 |
SECTION 5.5. | Change of Control......................................................................................................14 |
SECTION 6.1. | Guarantee...................................................................................................................15 |
SECTION 6.2. | Execution and Delivery of Notation of Guarantee.....................................................15 |
SECTION 6.3. | Limitation of Guarantee.............................................................................................16 |
SECTION 6.4. | Release of Guarantor..................................................................................................16 |
SECTION 6.5. | Waiver of Subrogation. .................................................................................................................16 |
SECTION 7.1. | Satisfaction and Discharge........................................................................................17 |
SECTION 8.1. | Without Consent of Holders, Company and Trustee May Enter Into Supplemental Indentures for Specified Purposes.............................................................................21 |
SECTION 9.1. | Effect of Sixth Supplemental Indenture....................................................................22 |
SECTION 9.2. | Effect of Headings.....................................................................................................22 |
SECTION 9.3. | Successors and Assigns.............................................................................................22 |
SECTION 9.4. | Severability Clause....................................................................................................22 |
SECTION 9.5. | Benefits of Sixth Supplemental Indenture.................................................................22 |
SECTION 9.6. | Conflict......................................................................................................................22 |
SECTION 9.7. | Governing Law..........................................................................................................22 |
SECTION 9.8. | Trustee.......................................................................................................................23 |
LIMITED BRANDS, INC. | |
By: | /s/ TIMOTHY J. FABER |
Name: Timothy J. Faber | |
Title: Senior Vice President of Treasury - Mergers and Acquisitions and Treasurer |
By: | /s/ TIMOTHY J. FABER |
Name: Timothy J. Faber | |
Title: Senior Vice President of Treasury - Mergers and Acquisitions and Treasurer |
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee | |
By: | /s/ LINDA GARCIA |
Name: Linda Garcia | |
Title: Vice President |
Date of Exchange | Amount of decrease in Principal Amount of this Global Security | Amount of increase in Principal Amount of this Global Security | Principal Amount of this Global Security following such decrease or increase | Signature of authorized signatory of Trustee or Debt Securities Custodian |
1. | I have reviewed this report on Form 10-Q of Limited Brands, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ LESLIE H. WEXNER | |
Leslie H. Wexner | |
Chairman and Chief Executive Officer |
1. | I have reviewed this report on Form 10-Q of Limited Brands, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ STUART B. BURGDOERFER | |
Stuart B. Burgdoerfer | |
Executive Vice President and Chief Financial Officer |
(i) | the Quarterly Report of the Company on Form 10-Q dated June 1, 2012 for the period ending April 28, 2012 (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(ii) | the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ LESLIE H. WEXNER | |
Leslie H. Wexner | |
Chairman and Chief Executive Officer | |
/s/ STUART B. BURGDOERFER | |
Stuart B. Burgdoerfer | |
Executive Vice President and Chief Financial Officer |
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