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) | (IRS Employer Identification No.) | |
Three Limited Parkway, P.O. Box 16000, Columbus, Ohio | 43216 | |
(Address of principal executive offices) | (Zip Code) | |
(614) 415-7000 | ||
(Registrant's Telephone Number, Including Area Code) | ||
Limited Brands, Inc. | ||
(Former Name or Former Address, if Changed Since Last Report) |
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 31, 2013 | |
289,383,693 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 2013” and “first quarter of 2012” refer to the thirteen week periods ending May 4, 2013 and April 28, 2012, respectively. |
Item 1. | FINANCIAL STATEMENTS |
First Quarter | |||||||
2013 | 2012 | ||||||
Net Sales | $ | 2,268 | $ | 2,154 | |||
Costs of Goods Sold, Buying and Occupancy | (1,327 | ) | (1,252 | ) | |||
Gross Profit | 941 | 902 | |||||
General, Administrative and Store Operating Expenses | (630 | ) | (609 | ) | |||
Operating Income | 311 | 293 | |||||
Interest Expense | (79 | ) | (78 | ) | |||
Other Income (Loss) | 3 | (2 | ) | ||||
Income Before Income Taxes | 235 | 213 | |||||
Provision for Income Taxes | 92 | 88 | |||||
Net Income | $ | 143 | $ | 125 | |||
Net Income Per Basic Share | $ | 0.49 | $ | 0.43 | |||
Net Income Per Diluted Share | $ | 0.48 | $ | 0.41 | |||
Dividends Per Share | $ | 0.30 | $ | 0.25 |
First Quarter | |||||||
2013 | 2012 | ||||||
Net Income | $ | 143 | $ | 125 | |||
Other Comprehensive Income (Loss), Net of Tax: | |||||||
Reclassification of Cash Flow Hedges to Earnings | (6 | ) | 12 | ||||
Foreign Currency Translation | 4 | (4 | ) | ||||
Unrealized Gain (Loss) on Cash Flow Hedges | 1 | (3 | ) | ||||
Total Other Comprehensive Income (Loss), Net of Tax | (1 | ) | 5 | ||||
Total Comprehensive Income | $ | 142 | $ | 130 |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(Unaudited) | (Unaudited) | ||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and Cash Equivalents | $ | 382 | $ | 773 | $ | 1,286 | |||||
Accounts Receivable, Net | 175 | 203 | 158 | ||||||||
Inventories | 1,115 | 1,004 | 1,100 | ||||||||
Deferred Income Taxes | 28 | 29 | 50 | ||||||||
Other | 204 | 196 | 222 | ||||||||
Total Current Assets | 1,904 | 2,205 | 2,816 | ||||||||
Property and Equipment, Net | 1,850 | 1,803 | 1,689 | ||||||||
Goodwill | 1,318 | 1,318 | 1,330 | ||||||||
Trade Names and Other Intangible Assets, Net | 412 | 412 | 495 | ||||||||
Other Assets | 292 | 281 | 286 | ||||||||
Total Assets | $ | 5,776 | $ | 6,019 | $ | 6,616 | |||||
LIABILITIES AND EQUITY (DEFICIT) | |||||||||||
Current Liabilities: | |||||||||||
Accounts Payable | $ | 561 | $ | 541 | $ | 536 | |||||
Accrued Expenses and Other | 653 | 807 | 691 | ||||||||
Current Portion of Long-term Debt | — | — | 57 | ||||||||
Income Taxes | 56 | 190 | 6 | ||||||||
Total Current Liabilities | 1,270 | 1,538 | 1,290 | ||||||||
Deferred Income Taxes | 206 | 200 | 191 | ||||||||
Long-term Debt | 4,475 | 4,477 | 4,480 | ||||||||
Other Long-term Liabilities | 819 | 818 | 786 | ||||||||
Shareholders’ Equity (Deficit): | |||||||||||
Preferred Stock - $1.00 par value; 10 shares authorized; none issued | — | — | — | ||||||||
Common Stock - $0.50 par value; 1,000 shares authorized; 305, 304 and 302 shares issued; 289, 289 and 292 shares outstanding, respectively | 153 | 152 | 151 | ||||||||
Paid-in Capital | 206 | 186 | 78 | ||||||||
Accumulated Other Comprehensive Income | 3 | 4 | 5 | ||||||||
Retained Earnings (Accumulated Deficit) | (616 | ) | (672 | ) | 75 | ||||||
Less: Treasury Stock, at Average Cost; 16, 15 and 10 shares, respectively | (740 | ) | (685 | ) | (440 | ) | |||||
Total Shareholders’ Equity (Deficit) | (994 | ) | (1,015 | ) | (131 | ) | |||||
Noncontrolling Interest | — | 1 | — | ||||||||
Total Equity (Deficit) | (994 | ) | (1,014 | ) | (131 | ) | |||||
Total Liabilities and Equity (Deficit) | $ | 5,776 | $ | 6,019 | $ | 6,616 |
Year-to-Date | |||||||
2013 | 2012 | ||||||
Operating Activities: | |||||||
Net Income | $ | 143 | $ | 125 | |||
Adjustments to Reconcile Net Income to Net Cash Provided by (Used for) Operating Activities: | |||||||
Depreciation and Amortization of Long-lived Assets | 100 | 95 | |||||
Amortization of Landlord Allowances | (9 | ) | (9 | ) | |||
Deferred Income Taxes | 6 | 7 | |||||
Share-based Compensation Expense | 20 | 16 | |||||
Excess Tax Benefits from Share-based Compensation | (20 | ) | (87 | ) | |||
Changes in Assets and Liabilities: | |||||||
Accounts Receivable | 27 | 47 | |||||
Inventories | (112 | ) | (102 | ) | |||
Accounts Payable, Accrued Expenses and Other | (165 | ) | (168 | ) | |||
Income Taxes Payable | (116 | ) | (66 | ) | |||
Other Assets and Liabilities | 6 | (41 | ) | ||||
Net Cash Used for Operating Activities | (120 | ) | (183 | ) | |||
Investing Activities: | |||||||
Capital Expenditures | (149 | ) | (136 | ) | |||
Other Investing Activities | (9 | ) | 12 | ||||
Net Cash Used for Investing Activities | (158 | ) | (124 | ) | |||
Financing Activities: | |||||||
Proceeds from Long-term Debt, Net of Issuance Costs | — | 985 | |||||
Repurchase of Common Stock | (55 | ) | (376 | ) | |||
Dividends Paid | (87 | ) | (73 | ) | |||
Excess Tax Benefits from Share-based Compensation | 20 | 87 | |||||
Proceeds from Exercise of Stock Options and Other | 10 | 33 | |||||
Net Cash Provided by (Used for) Financing Activities | (112 | ) | 656 | ||||
Effects of Exchange Rate Changes on Cash and Cash Equivalents | (1 | ) | 2 | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | (391 | ) | 351 | ||||
Cash and Cash Equivalents, Beginning of Period | 773 | 935 | |||||
Cash and Cash Equivalents, End of Period | $ | 382 | $ | 1,286 |
• | Victoria’s Secret |
• | PINK |
• | Bath & Body Works |
• | La Senza |
• | Henri Bendel |
First Quarter | |||||
2013 | 2012 | ||||
(in millions) | |||||
Weighted-average Common Shares: | |||||
Issued Shares | 305 | 299 | |||
Treasury Shares | (16 | ) | (7 | ) | |
Basic Shares | 289 | 292 | |||
Effect of Dilutive Options and Restricted Stock | 6 | 9 | |||
Diluted Shares | 295 | 301 | |||
Anti-dilutive Options and Awards (a) | 2 | 1 |
(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 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
(in millions) | (in thousands) | (in millions) | |||||||||||||||||||
November 2012 (a) | $ | 250 | 1,217 | NA | $ | 55 | NA | $ | 44.91 | ||||||||||||
February 2012 (b) | 500 | NA | 4,594 | NA | $ | 217 | 47.13 | ||||||||||||||
November 2011 | 250 | NA | 3,657 | NA | 164 | 44.90 | |||||||||||||||
Total | 1,217 | 8,251 | $ | 55 | $ | 381 |
(a) | The November 2012 repurchase program had $184 million remaining as of May 4, 2013. |
(b) | The February 2012 repurchase program had $50 million remaining at the time it was cancelled in conjunction with the approval of the November 2012 repurchase program. |
NA | Not applicable |
Ordinary Dividends | Special Dividends | Total Dividends | Total Paid | |||||||||||||
(per share) | (in millions) | |||||||||||||||
2013 | ||||||||||||||||
First Quarter | $ | 0.30 | $ | — | $ | 0.30 | $ | 87 | ||||||||
2012 | ||||||||||||||||
First Quarter | $ | 0.25 | $ | — | $ | 0.25 | $ | 73 |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(in millions) | |||||||||||
Finished Goods Merchandise | $ | 1,038 | $ | 916 | $ | 1,029 | |||||
Raw Materials and Merchandise Components | 77 | 88 | 71 | ||||||||
Total Inventories | $ | 1,115 | $ | 1,004 | $ | 1,100 |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(in millions) | |||||||||||
Property and Equipment, at Cost | $ | 4,805 | $ | 4,722 | $ | 4,470 | |||||
Accumulated Depreciation and Amortization | (2,955 | ) | (2,919 | ) | (2,781 | ) | |||||
Property and Equipment, Net | $ | 1,850 | $ | 1,803 | $ | 1,689 |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(in millions) | |||||||||||
Senior Unsecured Debt with Subsidiary Guarantee | |||||||||||
$1 billion, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”) | $ | 1,000 | $ | 1,000 | $ | 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”) | 490 | 489 | 488 | ||||||||
$400 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”) | 400 | 400 | 400 | ||||||||
Total Senior Unsecured Debt with Subsidiary Guarantee | $ | 2,890 | $ | 2,889 | $ | 2,888 | |||||
Senior Unsecured Debt | |||||||||||
$700 million, 6.90% Fixed Interest Rate Notes due July 2017, Less Unamortized Discount (“2017 Notes”)(a) | $ | 719 | $ | 721 | $ | 723 | |||||
$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) | 217 | 218 | 220 | ||||||||
6.125% Fixed Interest Rate Notes due December 2012, Less Unamortized Discount (“2012 Notes”) | — | — | 57 | ||||||||
Total Senior Unsecured Debt | $ | 1,585 | $ | 1,588 | $ | 1,649 | |||||
Total | $ | 4,475 | $ | 4,477 | $ | 4,537 | |||||
Current Portion of Long-term Debt | — | — | (57 | ) | |||||||
Total Long-term Debt, Net of Current Portion | $ | 4,475 | $ | 4,477 | $ | 4,480 |
(a) | The balances include a fair value interest rate hedge adjustment which increased the debt balance by $20 million as of May 4, 2013, $22 million as of February 2, 2013 and $24 million as of April 28, 2012. |
(b) | The principal balance outstanding was $213 million as of May 4, 2013, February 2, 2013 and April 28, 2012. The balances include a fair value interest rate hedge adjustment which increased the debt balance by $4 million as of May 4, 2013, $5 million as of February 2, 2013 and $7 million as of April 28, 2012. |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(in millions) | |||||||||||
Other Long-term Liabilities | $ | 58 | $ | 59 | $ | 63 |
First Quarter | |||||||||
Location | 2013 | 2012 | |||||||
(in millions) | |||||||||
Gain (Loss) Recognized in Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) | $ | 1 | $ | (3 | ) | |||
(Gain) Loss Reclassified from Accumulated Other Comprehensive Income into Other Income (a) | Other Income (Loss) | (6 | ) | 12 |
(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. |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(in millions) | |||||||||||
Other Assets | $ | — | $ | — | $ | 13 |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(in millions) | |||||||||||
Carrying Value | $ | 4,475 | $ | 4,477 | $ | 4,537 | |||||
Fair Value (a) | 5,071 | 5,023 | 4,836 |
(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 May 4, 2013 | |||||||||||||||
Assets: | |||||||||||||||
Cash and Cash Equivalents | $ | 382 | $ | — | $ | — | $ | 382 | |||||||
Liabilities: | |||||||||||||||
Cross-currency Cash Flow Hedges | — | 58 | — | 58 | |||||||||||
Lease Guarantees | — | — | 2 | 2 | |||||||||||
As of February 2, 2013 | |||||||||||||||
Assets: | |||||||||||||||
Cash and Cash Equivalents | $ | 773 | $ | — | $ | — | $ | 773 | |||||||
Liabilities: | |||||||||||||||
Cross-currency Cash Flow Hedges | — | 59 | — | 59 | |||||||||||
Lease Guarantees | — | — | 2 | 2 | |||||||||||
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 |
First Quarter | |||||||
2013 | 2012 | ||||||
(in millions) | |||||||
Beginning Balance | $ | 2 | $ | 4 | |||
Change in Estimated Fair Value Reported in Earnings | — | — | |||||
Ending Balance | $ | 2 | $ | 4 |
Foreign Currency Translation | Cash Flow Hedges | Accumulated Other Comprehensive Income | |||||||||
(in millions) | |||||||||||
Balance as of February 2, 2013 | $ | (10 | ) | $ | 14 | $ | 4 | ||||
Other Comprehensive Income Before Reclassifications | 4 | 1 | 5 | ||||||||
Amounts Reclassified from Accumulated Other Comprehensive Income | — | (6 | ) | (6 | ) | ||||||
Current-period Other Comprehensive Income (Loss) | 4 | (5 | ) | (1 | ) | ||||||
Balance as of May 4, 2013 | $ | (6 | ) | $ | 9 | $ | 3 |
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 (Loss) | (4 | ) | 9 | 5 | |||||||
Balance as of April 28, 2012 | $ | (12 | ) | $ | 17 | $ | 5 |
Details About Accumulated Other Comprehensive Income Components | Amount Reclassified from Accumulated Other Comprehensive Income | Location on Consolidated Statements of Income | ||||
Cash Flow Hedges | $ | (6 | ) | Other Income (Loss) | ||
— | Provision for Income Taxes | |||||
$ | (6 | ) | Net Income |
• | International retail, franchise, license and wholesale operations, which include the company-owned La Senza and Bath & Body Works stores in Canada and Victoria’s Secret stores in Canada and the United Kingdom; |
• | Mast Global, a merchandise sourcing and production function serving the Company and its international partners; |
• | 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) | |||||||||||||||
2013 | |||||||||||||||
First Quarter: | |||||||||||||||
Net Sales | $ | 1,505 | $ | 530 | $ | 233 | $ | 2,268 | |||||||
Operating Income (Loss) | 260 | 72 | (21 | ) | 311 | ||||||||||
2012 | |||||||||||||||
First Quarter: | |||||||||||||||
Net Sales | $ | 1,470 | $ | 505 | $ | 179 | $ | 2,154 | |||||||
Operating Income (Loss) | 278 | 60 | (45 | ) | 293 |
May 4, 2013 | |||||||||||||||||||
L Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated L Brands, Inc. | |||||||||||||||
ASSETS | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and Cash Equivalents | $ | — | $ | 166 | $ | 216 | $ | — | $ | 382 | |||||||||
Accounts Receivable, Net | — | 120 | 55 | — | 175 | ||||||||||||||
Inventories | — | 961 | 154 | — | 1,115 | ||||||||||||||
Deferred Income Taxes | — | 38 | (10 | ) | — | 28 | |||||||||||||
Other | 2 | 127 | 75 | — | 204 | ||||||||||||||
Total Current Assets | 2 | 1,412 | 490 | — | 1,904 | ||||||||||||||
Property and Equipment, Net | — | 1,033 | 817 | — | 1,850 | ||||||||||||||
Goodwill | — | 1,318 | — | — | 1,318 | ||||||||||||||
Trade Names and Other Intangible Assets, Net | — | 411 | 1 | — | 412 | ||||||||||||||
Net Investments in and Advances to/from Consolidated Affiliates | 3,352 | 13,765 | 323 | (17,440 | ) | — | |||||||||||||
Other Assets | 186 | 8 | 710 | (612 | ) | 292 | |||||||||||||
Total Assets | $ | 3,540 | $ | 17,947 | $ | 2,341 | $ | (18,052 | ) | $ | 5,776 | ||||||||
LIABILITIES AND EQUITY (DEFICIT) | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Accounts Payable | $ | — | $ | 296 | $ | 265 | $ | — | $ | 561 | |||||||||
Accrued Expenses and Other | 62 | 342 | 249 | — | 653 | ||||||||||||||
Income Taxes | — | 32 | 24 | — | 56 | ||||||||||||||
Total Current Liabilities | 62 | 670 | 538 | — | 1,270 | ||||||||||||||
Deferred Income Taxes | (4 | ) | (4 | ) | 214 | — | 206 | ||||||||||||
Long-term Debt | 4,475 | 597 | — | (597 | ) | 4,475 | |||||||||||||
Other Long-term Liabilities | 4 | 630 | 200 | (15 | ) | 819 | |||||||||||||
Total Equity (Deficit) | (997 | ) | 16,054 | 1,389 | (17,440 | ) | (994 | ) | |||||||||||
Total Liabilities and Equity (Deficit) | $ | 3,540 | $ | 17,947 | $ | 2,341 | $ | (18,052 | ) | $ | 5,776 |
February 2, 2013 | |||||||||||||||||||
L Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated L Brands, Inc. | |||||||||||||||
ASSETS | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and Cash Equivalents | $ | — | $ | 417 | $ | 356 | $ | — | $ | 773 | |||||||||
Accounts Receivable, Net | — | 140 | 63 | — | 203 | ||||||||||||||
Inventories | 847 | 157 | — | 1,004 | |||||||||||||||
Deferred Income Taxes | — | 39 | (10 | ) | — | 29 | |||||||||||||
Other | 2 | 117 | 77 | — | 196 | ||||||||||||||
Total Current Assets | 2 | 1,560 | 643 | — | 2,205 | ||||||||||||||
Property and Equipment, Net | — | 1,001 | 802 | — | 1,803 | ||||||||||||||
Goodwill | — | 1,318 | — | — | 1,318 | ||||||||||||||
Trade Names and Other Intangible Assets, Net | — | 411 | 1 | — | 412 | ||||||||||||||
Net Investments in and Advances to/from Consolidated Affiliates | 3,348 | 13,968 | 624 | (17,940 | ) | — | |||||||||||||
Other Assets | 188 | 8 | 696 | (611 | ) | 281 | |||||||||||||
Total Assets | $ | 3,538 | $ | 18,266 | $ | 2,766 | $ | (18,551 | ) | $ | 6,019 | ||||||||
LIABILITIES AND EQUITY (DEFICIT) | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Accounts Payable | $ | — | $ | 291 | $ | 250 | $ | — | $ | 541 | |||||||||
Accrued Expenses and Other | 78 | 425 | 304 | — | 807 | ||||||||||||||
Income Taxes | 1 | 134 | 55 | — | 190 | ||||||||||||||
Total Current Liabilities | 79 | 850 | 609 | — | 1,538 | ||||||||||||||
Deferred Income Taxes | (4 | ) | (9 | ) | 213 | — | 200 | ||||||||||||
Long-term Debt | 4,477 | 597 | — | (597 | ) | 4,477 | |||||||||||||
Other Long-term Liabilities | 4 | 625 | 204 | (15 | ) | 818 | |||||||||||||
Total Equity (Deficit) | (1,018 | ) | 16,203 | 1,740 | (17,939 | ) | (1,014 | ) | |||||||||||
Total Liabilities and Equity (Deficit) | $ | 3,538 | $ | 18,266 | $ | 2,766 | $ | (18,551 | ) | $ | 6,019 |
April 28, 2012 | |||||||||||||||||||
L Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated L 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 |
First Quarter 2013 | |||||||||||||||||||
L Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated L Brands, Inc. | |||||||||||||||
Net Sales | $ | — | $ | 2,073 | $ | 748 | $ | (553 | ) | $ | 2,268 | ||||||||
Costs of Goods Sold, Buying and Occupancy | — | (1,246 | ) | (610 | ) | 529 | (1,327 | ) | |||||||||||
Gross Profit | — | 827 | 138 | (24 | ) | 941 | |||||||||||||
General, Administrative and Store Operating Expenses | (2 | ) | (552 | ) | (100 | ) | 24 | (630 | ) | ||||||||||
Operating Income (Loss) | (2 | ) | 275 | 38 | — | 311 | |||||||||||||
Interest Expense | (79 | ) | (6 | ) | (3 | ) | 9 | (79 | ) | ||||||||||
Other Income (Loss) | — | 2 | 3 | (2 | ) | 3 | |||||||||||||
Income (Loss) Before Income Taxes | (81 | ) | 271 | 38 | 7 | 235 | |||||||||||||
Provision for Income Taxes | — | 64 | 28 | — | 92 | ||||||||||||||
Equity in Earnings (Loss), Net of Tax | 224 | 51 | 37 | (312 | ) | — | |||||||||||||
Net Income (Loss) | $ | 143 | $ | 258 | $ | 47 | $ | (305 | ) | $ | 143 | ||||||||
First Quarter 2013 | |||||||||||||||||||
L Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated L Brands, Inc. | |||||||||||||||
Net Income (Loss) | $ | 143 | $ | 258 | $ | 47 | $ | (305 | ) | $ | 143 | ||||||||
Other Comprehensive Income (Loss), Net of Tax: | |||||||||||||||||||
Reclassification of Cash Flow Hedges to Earnings | — | — | (6 | ) | — | (6 | ) | ||||||||||||
Foreign Currency Translation | — | — | 4 | — | 4 | ||||||||||||||
Unrealized Gain (Loss) on Cash Flow Hedges | — | — | 1 | — | 1 | ||||||||||||||
Total Other Comprehensive Income (Loss), Net of Tax | — | — | (1 | ) | — | (1 | ) | ||||||||||||
Total Comprehensive Income | $ | 143 | $ | 258 | $ | 46 | $ | (305 | ) | $ | 142 |
First Quarter 2012 | |||||||||||||||||||
L Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated L 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 (Loss) | 1 | 2 | (2 | ) | (3 | ) | (2 | ) | |||||||||||
Income (Loss) Before Income Taxes | (79 | ) | 276 | 12 | 4 | 213 | |||||||||||||
Provision for Income Taxes | — | 66 | 22 | — | 88 | ||||||||||||||
Equity in Earnings (Loss), Net of Tax | 204 | (70 | ) | 91 | (225 | ) | — | ||||||||||||
Net Income (Loss) | $ | 125 | $ | 140 | $ | 81 | $ | (221 | ) | $ | 125 |
First Quarter 2012 | |||||||||||||||||||
L Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated L Brands, Inc. | |||||||||||||||
Net Income (Loss) | $ | 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 Gain (Loss) on Cash Flow Hedges | — | — | (3 | ) | — | (3 | ) | ||||||||||||
Total Other Comprehensive Income (Loss), Net of Tax | 1 | — | 4 | — | 5 | ||||||||||||||
Total Comprehensive Income | $ | 126 | $ | 140 | $ | 85 | $ | (221 | ) | $ | 130 |
First Quarter 2013 | |||||||||||||||||||
L Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated L Brands, Inc. | |||||||||||||||
Net Cash Used for Operating Activities | $ | (96 | ) | $ | (9 | ) | $ | (15 | ) | $ | — | $ | (120 | ) | |||||
Investing Activities: | |||||||||||||||||||
Capital Expenditures | — | (97 | ) | (52 | ) | — | (149 | ) | |||||||||||
Net Investments in Consolidated Affiliates | — | — | (112 | ) | 112 | — | |||||||||||||
Other Investing Activities | — | — | (9 | ) | — | (9 | ) | ||||||||||||
Net Cash Provided by (Used for) Investing Activities | — | (97 | ) | (173 | ) | 112 | (158 | ) | |||||||||||
Financing Activities: | |||||||||||||||||||
Repurchase of Common Stock | (55 | ) | — | — | — | (55 | ) | ||||||||||||
Dividends Paid | (87 | ) | — | — | — | (87 | ) | ||||||||||||
Excess Tax Benefits from Share-based Compensation | — | 16 | 4 | — | 20 | ||||||||||||||
Net Financing Activities and Advances to/from Consolidated Affiliates | 228 | (161 | ) | 45 | (112 | ) | — | ||||||||||||
Proceeds from Exercise of Stock Options and Other | 10 | — | — | — | 10 | ||||||||||||||
Net Cash Provided by (Used for) Financing Activities | 96 | (145 | ) | 49 | (112 | ) | (112 | ) | |||||||||||
Effects of Exchange Rate Changes on Cash and Cash Equivalents | — | — | (1 | ) | — | (1 | ) | ||||||||||||
Net Decrease in Cash and Cash Equivalents | — | (251 | ) | (140 | ) | — | (391 | ) | |||||||||||
Cash and Cash Equivalents, Beginning of Period | — | 417 | 356 | — | 773 | ||||||||||||||
Cash and Cash Equivalents, End of Period | $ | — | $ | 166 | $ | 216 | $ | — | $ | 382 |
First Quarter 2012 | |||||||||||||||||||
L Brands, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated L Brands, Inc. | |||||||||||||||
Net Cash Provided by (Used for) Operating Activities | $ | (116 | ) | $ | (84 | ) | $ | 17 | $ | — | $ | (183 | ) | ||||||
Investing Activities: | |||||||||||||||||||
Capital Expenditures | — | (66 | ) | (70 | ) | — | (136 | ) | |||||||||||
Other Investing Activities | — | 8 | 4 | — | 12 | ||||||||||||||
Net Cash Used for Investing Activities | — | (58 | ) | (66 | ) | — | (124 | ) | |||||||||||
Financing Activities: | |||||||||||||||||||
Proceeds from Long-term Debt, Net of Issuance Costs | 985 | — | — | — | 985 | ||||||||||||||
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 Financing Activities | 116 | 507 | 33 | — | 656 | ||||||||||||||
Effects of Exchange Rate Changes on Cash and Cash Equivalents | — | — | 2 | — | 2 | ||||||||||||||
Net Increase (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 |
• | 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 global markets and related risks; |
• | our relationships with independent licensees and franchisees; |
• | our direct channel businesses; |
• | 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 ability to source, distribute and sell goods and materials on a global basis, including risks related to: |
• | political instability; |
• | duties, taxes and other charges; |
• | legal and regulatory matters; |
• | volatility in currency exchange rates; |
• | local business practices and political issues; |
• | potential delays or disruptions in shipping and transportation and related pricing impacts; |
• | the disruption of production or distribution 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 or refinance 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 and to protect associated data; |
• | 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 |
First Quarter | |||||||||||
2013 | 2012 | % Change | |||||||||
Sales per Average Selling Square Foot | |||||||||||
Victoria’s Secret Stores (a) | $ | 186 | $ | 181 | 3 | % | |||||
Bath & Body Works (a) | 131 | 125 | 5 | % | |||||||
La Senza (b) | 111 | 86 | 29 | % | |||||||
Sales per Average Store (in thousands) | |||||||||||
Victoria’s Secret Stores (a) | $ | 1,124 | $ | 1,073 | 5 | % | |||||
Bath & Body Works (a) | 310 | 298 | 4 | % | |||||||
La Senza (b) | 357 | 286 | 25 | % | |||||||
Average Store Size (selling square feet) | |||||||||||
Victoria’s Secret Stores (a) | 6,035 | 5,950 | 1 | % | |||||||
Bath & Body Works (a) | 2,363 | 2,374 | — | % | |||||||
La Senza | 3,212 | 3,318 | (3 | )% | |||||||
Total Selling Square Feet (in thousands) | |||||||||||
Victoria’s Secret Stores (a) | 6,149 | 6,009 | 2 | % | |||||||
Bath & Body Works (a) | 3,706 | 3,758 | (1 | )% | |||||||
La Senza (c) | 504 | 660 | (24 | )% |
(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) | In the fourth quarter of 2011 and second quarter of 2012, we initiated restructuring programs designed to resize a portion of La Senza's store fleet. Under these programs, we closed 79 underperforming stores through the first quarter of 2013. For additional information, see Note 4 to the Consolidated Financial Statements included in Item 1. Financial Statements. |
First Quarter | ||||||
Number of Stores (a) | 2013 | 2012 | ||||
Victoria’s Secret U.S. | ||||||
Beginning of Period | 1,019 | 1,017 | ||||
Opened | 4 | — | ||||
Closed | (4 | ) | (7 | ) | ||
End of Period | 1,019 | 1,010 | ||||
Bath & Body Works U.S. | ||||||
Beginning of Period | 1,571 | 1,587 | ||||
Opened | — | 2 | ||||
Closed | (3 | ) | (6 | ) | ||
End of Period | 1,568 | 1,583 | ||||
La Senza | ||||||
Beginning of Period | 158 | 230 | ||||
Opened | — | — | ||||
Closed (b) | (1 | ) | (31 | ) | ||
End of Period | 157 | 199 | ||||
Bath & Body Works Canada | ||||||
Beginning of Period | 71 | 69 | ||||
Opened | 1 | — | ||||
Closed | — | (1 | ) | |||
End of Period | 72 | 68 | ||||
Victoria’s Secret Canada | ||||||
Beginning of Period | 26 | 19 | ||||
Opened | — | 1 | ||||
Closed | — | — | ||||
End of Period | 26 | 20 | ||||
Henri Bendel | ||||||
Beginning of Period | 29 | 19 | ||||
Opened | — | — | ||||
Closed | — | — | ||||
End of Period | 29 | 19 | ||||
Victoria’s Secret U.K. | ||||||
Beginning of Period | 2 | — | ||||
Opened | — | — | ||||
Closed | — | — | ||||
End of Period | 2 | — | ||||
Total | ||||||
Beginning of Period | 2,876 | 2,941 | ||||
Opened | 5 | 3 | ||||
Closed | (8 | ) | (45 | ) | ||
End of Period | 2,873 | 2,899 |
(a) | Number of stores excludes independently owned La Senza, Bath & Body Works and Victoria’s Secret stores operated by licensees and franchisees. |
(b) | In the fourth quarter of 2011 and second quarter of 2012, we initiated restructuring programs designed to resize a portion of La Senza's store fleet. Under these programs, we closed 79 underperforming stores through the first quarter of 2013. For additional information, see Note 4 to the Consolidated Financial Statements included in Item 1. Financial Statements. |
Operating Income Rate | |||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
First Quarter | (in millions) | ||||||||||||
Victoria’s Secret | $ | 260 | $ | 278 | 17.2 | % | 18.9 | % | |||||
Bath & Body Works | 72 | 60 | 13.7 | % | 11.9 | % | |||||||
Other (a) | (21 | ) | (45 | ) | (9.0 | )% | (25.0 | )% | |||||
Total Operating Income | $ | 311 | $ | 293 | 13.7 | % | 13.6 | % |
(a) | Includes our international operations, Mast Global, Henri Bendel and Corporate. |
2013 | 2012 | % Change | ||||||||
First Quarter | (in millions) | |||||||||
Victoria’s Secret Stores | $ | 1,146 | $ | 1,088 | 5 | % | ||||
Victoria’s Secret Direct | 359 | 382 | (6 | )% | ||||||
Total Victoria’s Secret | 1,505 | 1,470 | 2 | % | ||||||
Bath & Body Works Stores | 486 | 472 | 3 | % | ||||||
Bath & Body Works Direct | 44 | 33 | 33 | % | ||||||
Total Bath & Body Works | 530 | 505 | 5 | % | ||||||
Other (a) | 233 | 179 | 30 | % | ||||||
Total Net Sales | $ | 2,268 | $ | 2,154 | 5 | % |
(a) | Includes our international operations, Mast Global, Henri Bendel and Corporate. |
Victoria’s Secret | Bath & Body Works | Other | Total | ||||||||||||
First Quarter | (in millions) | ||||||||||||||
2012 Net Sales | $ | 1,470 | $ | 505 | $ | 179 | $ | 2,154 | |||||||
Comparable Store Sales | 29 | 12 | 2 | 43 | |||||||||||
Sales Associated with New, Closed, and Non-comparable Remodeled Stores, Net | 29 | 2 | 27 | 58 | |||||||||||
Foreign Currency Translation | — | — | (3 | ) | (3 | ) | |||||||||
Direct Channels | (23 | ) | 11 | — | (12 | ) | |||||||||
Mast Global Third-party Sales and Other | — | — | 28 | 28 | |||||||||||
2013 Net Sales | $ | 1,505 | $ | 530 | $ | 233 | $ | 2,268 |
First Quarter | 2013 | 2012 | |||
Victoria’s Secret Stores (a) | 3 | % | 9 | % | |
Bath & Body Works (a) | 3 | % | 6 | % | |
Total Comparable Store Sales (a) (b) | 3 | % | 7 | % |
(a) | The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. A store is typically included in the calculation of comparable store sales when it has been open or owned 12 months or more and it has not had a change in selling square footage of 20% or more. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. |
(b) | Includes Victoria's Secret, Bath & Body Works, La Senza, Bath & Body Works Canada, Victoria’s Secret Canada and Henri Bendel. |
• | At Victoria's Secret Stores, net sales increased 5% related to increases across most categories including PINK, beauty and sport, driven by a compelling merchandise assortment that incorporated newness, innovation and fashion as well as in-store execution. |
• | At Victoria's Secret Direct, net sales decreased 6% related to a decrease in apparel partially offset by increases in core lingerie, sport, PINK and sleepwear. We are shifting our focus to the core categories of the brand including lingerie, PINK and beauty. As a result, net sales in the apparel category are declining as we reduce style counts and related inventory. |
• | 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, investments in real estate and store related activity. |
• | At Victoria's Secret Direct, gross profit decreased primarily due to lower merchandise margin dollars as a result of the decrease in net sales. The decrease in merchandise margin dollars was partially offset by lower buying and occupancy expenses primarily driven by lower catalogue and related costs. |
• | At Bath & Body Works Stores, gross profit increased due to higher merchandise margin dollars related to the increase in net sales. The increase in merchandise margin dollars was partially offset by higher buying and occupancy expenses primarily driven by higher occupancy costs related to the increase in net sales and store related activity. |
• | At Bath & Body Works Direct, 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 higher fulfillment costs associated with 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; and |
• | An increase in expenses resulting from increased international expansion. |
First Quarter | 2013 | 2012 | |||||
Average daily borrowings (in millions) | $ | 4,463 | $ | 4,422 | |||
Average borrowing rate (in percentages) | 6.96 | % | 7.04 | % |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(in millions) | |||||||||||
Senior Unsecured Debt with Subsidiary Guarantee | |||||||||||
$1 billion, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”) | $ | 1,000 | $ | 1,000 | $ | 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”) | 490 | 489 | 488 | ||||||||
$400 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”) | 400 | 400 | 400 | ||||||||
Total Senior Unsecured Debt with Subsidiary Guarantee | $ | 2,890 | $ | 2,889 | $ | 2,888 | |||||
Senior Unsecured Debt | |||||||||||
$700 million, 6.90% Fixed Interest Rate Notes due July 2017, Less Unamortized Discount (“2017 Notes”)(a) | $ | 719 | $ | 721 | $ | 723 | |||||
$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) | 217 | 218 | 220 | ||||||||
6.125% Fixed Interest Rate Notes due December 2012, Less Unamortized Discount (“2012 Notes”) | — | — | 57 | ||||||||
Total Senior Unsecured Debt | $ | 1,585 | $ | 1,588 | $ | 1,649 | |||||
Total | $ | 4,475 | $ | 4,477 | $ | 4,537 | |||||
Current Portion of Long-term Debt | — | — | (57 | ) | |||||||
Total Long-term Debt | $ | 4,475 | $ | 4,477 | $ | 4,480 |
(a) | The balances include a fair value interest rate hedge adjustment which increased the debt balance by $20 million as of May 4, 2013, $22 million as of February 2, 2013 and $24 million as of April 28, 2012. |
(b) | The principal balance outstanding was $213 million as of May 4, 2013, February 2, 2013 and April 28, 2012. The balances include a fair value interest rate hedge adjustment which increased the debt balance by $4 million as of May 4, 2013, $5 million as of February 2, 2013 and $7 million as of April 28, 2012. |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(in millions) | |||||||||||
Cash Provided by (Used for) Operating Activities (a) | $ | (120 | ) | $ | 1,351 | $ | (183 | ) | |||
Capital Expenditures (a) | 149 | 588 | 136 | ||||||||
Working Capital | 634 | 667 | 1,526 | ||||||||
Capitalization: | |||||||||||
Long-term Debt | 4,475 | 4,477 | 4,480 | ||||||||
Shareholders’ Equity (Deficit) | (994 | ) | (1,015 | ) | (131 | ) | |||||
Total Capitalization | 3,481 | 3,462 | 4,349 | ||||||||
Remaining Amounts Available Under Credit Agreements (b) | 988 | 988 | 991 |
(a) | The February 2, 2013 amounts represent a twelve-month period and the May 4, 2013 and April 28, 2012 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 $12 million as of May 4, 2013 and February 2, 2013 and $9 million as of April 28, 2012. |
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 | Average Stock Price of Shares Repurchased within Program | ||||||||||||||||||
Repurchase Program | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
(in millions) | (in thousands) | (in millions) | |||||||||||||||||||
November 2012 (a) | $ | 250 | 1,217 | NA | $ | 55 | NA | $ | 44.91 | ||||||||||||
February 2012 (b) | 500 | NA | 4,594 | NA | $ | 217 | 47.13 | ||||||||||||||
November 2011 | 250 | NA | 3,657 | NA | 164 | 44.90 | |||||||||||||||
Total | 1,217 | 8,251 | $ | 55 | $ | 381 |
(a) | The November 2012 repurchase program had $184 million remaining as of May 4, 2013. |
(b) | The February 2012 repurchase program had $50 million remaining at the time it was cancelled in conjunction with the approval of the November 2012 repurchase program. |
NA | Not applicable |
Ordinary Dividends | Special Dividends | Total Dividends | Total Paid | |||||||||||||
(per share) | (in millions) | |||||||||||||||
2013 | ||||||||||||||||
First Quarter | $ | 0.30 | $ | — | $ | 0.30 | $ | 87 | ||||||||
2012 | ||||||||||||||||
First Quarter | $ | 0.25 | $ | — | $ | 0.25 | $ | 73 |
First Quarter | |||||||
2013 | 2012 | ||||||
(in millions) | |||||||
Cash and Cash Equivalents, Beginning of Period | $ | 773 | $ | 935 | |||
Net Cash Flows Used for Operating Activities | (120 | ) | (183 | ) | |||
Net Cash Flows Used for Investing Activities | (158 | ) | (124 | ) | |||
Net Cash Flows Provided by (Used for) Financing Activities | (112 | ) | 656 | ||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | (1 | ) | 2 | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | (391 | ) | 351 | ||||
Cash and Cash Equivalents, End of Period | $ | 382 | $ | 1,286 |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
May 4, 2013 | February 2, 2013 | April 28, 2012 | |||||||||
(in millions) | |||||||||||
Long-term Debt: | |||||||||||
Carrying Value | $ | 4,475 | $ | 4,477 | $ | 4,537 | |||||
Fair Value, Estimated (a) | 5,071 | 5,023 | 4,836 | ||||||||
Cross-currency Swap Arrangements (b) | 58 | 59 | 63 | ||||||||
Fixed-to-Floating Interest Rate Swap Arrangements (b) | — | — | (13 | ) |
(a) | The estimated fair value is based on reported transaction prices. The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange. |
(b) | Swap arrangements are in an (asset) liability position. |
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 2013 | 332 | $ | 44.46 | 322 | $ | 224,581 | |||||||
March 2013 | 1,458 | 46.74 | 778 | 189,688 | |||||||||
April 2013 | 133 | 47.33 | 117 | 184,201 | |||||||||
Total | 1,923 | 1,217 |
(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 5. | OTHER INFORMATION |
Item 6. | EXHIBITS |
Exhibits | ||
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 |
L 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. |
1. | I have reviewed this report on Form 10-Q of L 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 L 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 7, 2013 for the period ending May 4, 2013 (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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