-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qUF6vqr18IAC0ABGFbxFkThd9NrT8EBI95vexVVV8jIrTtTaPJnIvQjbGkJ+7kRQ xtYB0fZj/2CZBB1TPnD0fg== 0000950152-95-000769.txt : 19950428 0000950152-95-000769.hdr.sgml : 19950428 ACCESSION NUMBER: 0000950152-95-000769 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19950128 FILED AS OF DATE: 19950427 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIMITED INC CENTRAL INDEX KEY: 0000701985 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 311029810 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08344 FILM NUMBER: 95531804 BUSINESS ADDRESS: STREET 1: TWO LIMITED PKWY STREET 2: P O BOX 16000 CITY: COLUMBUS STATE: OH ZIP: 43230 BUSINESS PHONE: 6144797000 MAIL ADDRESS: STREET 1: TWO LIMITED PARKWAY STREET 2: P.O. BOX 16000 CITY: COLUMBUS STATE: OH ZIP: 43230 10-K 1 THE LIMITED, INC. 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ----------- FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended January 28, 1995 ---------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to -------------- -------------- Commission file number 1-8344 ------ THE LIMITED, INC. ----------------- (Exact name of registrant as specified in its charter) 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)
Registrant's telephone number, including area code (614) 479-7000 --------------- Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, $.50 Par Value The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to the filing requirements for the past 90 days. Yes X No -- -- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- Aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant as of March 24, 1995: $6,965,448,984. Number of shares outstanding of the registrant's Common Stock as of March 24,1995: 357,202,512. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's annual report to shareholders for the fiscal year ended January 28, 1995 are incorporated by reference into Part I and Part II, and portions of the registrant's proxy statement for the Annual Meeting of Shareholders scheduled for May 15, 1995 are incorporated by reference into Part III. 2 PART I ITEM 1. BUSINESS. GENERAL. The Limited, Inc., a Delaware corporation (the "Company"), is principally engaged in the purchase, distribution and sale of women's apparel, lingerie, men's apparel, personal care products and children's apparel. The Company operates an integrated distribution system which supports the Company's retail activities. These activities are conducted under various trade names through the retail stores and catalogue divisions of the Company. Merchandise is targeted to appeal to customers in specialty markets who have distinctive consumer characteristics. The Company's women's apparel divisions offer regular and special-sized fashion apparel at various price levels, including shirts, blouses, sweaters, pants, skirts, coats and dresses. In addition, the Company offers lingerie and accessories, men's apparel, fragrances, bed, bath, personal care products, specialty gift items and children's apparel. The Company's wholly-owned credit card bank, World Financial Network National Bank, provides credit services to customers of the retail and catalogue divisions of the Company, as well as other affiliates of the Company. DESCRIPTION OF OPERATIONS. General. As of January 28, 1995, the Company operated the following divisions: (1) five women's apparel retail divisions, (2) three lingerie divisions including two retail divisions and one catalogue division (Victoria's Secret Catalogue), (3) two men's apparel divisions, and (4) two personal care divisions and one children's apparel division. The following chart reflects the retail divisions and the number of stores in operation in each division at January 28, 1995 and January 29, 1994.
RETAIL DIVISIONS NUMBER OF STORES ---------------- ---------------- January 28, 1995 January 29, 1994 ---------------- ---------------- Women's Express 716 673 Lerner 846 877 Lane Bryant 812 817 The Limited 709 746 Henri Bendel 4 4 Lingerie Victoria's Secret Stores 601 570 Cacique 114 108 Men's Structure 466 394 Abercrombie & Fitch Co. 67 49 Personal Care & Children's Bath & Body Works 318 194 Penhaligon's 4 7 The Limited Too 210 184 --- --- Total 4,867 4,623 ===== =====
2 3 The following table shows the changes in the number of retail stores operated by the Company for the past five fiscal years:
Fiscal Beginning Year of Year Acquired Opened Closed End of Year ---- ------- -------- ------ ------ ----------- 1990 3,344 7 456 (47) 3,760 1991 3,760 - 484 (50) 4,194 1992 4,194 - 323 (92) 4,425 1993 4,425 - 322 (124) 4,623 1994 4,623 - 358 (114) 4,867
The Company also operates Mast Industries, Inc., a contract manufacturer and apparel importer, and Gryphon Development, Inc. ("Gryphon"). Gryphon creates, develops and contract manufactures most of the bath and personal care products sold by the Company. During fiscal year 1994, the Company purchased merchandise from approximately 4,000 suppliers and factories located throughout the world. Approximately 55% of the Company's merchandise is purchased in foreign markets and a portion of merchandise purchased in the domestic market is manufactured overseas. Company records, however, do not allocate between foreign and domestic sources for merchandise purchased domestically. No more than 5% of goods purchased originated from any single manufacturer. Most of the merchandise and related materials for the Company's stores is shipped to the Company's distribution centers in the Columbus, Ohio area, where the merchandise is received and inspected. The Company uses common and contract carriers to distribute merchandise and related materials to its stores. The Company's divisions generally have independent distribution capabilities and no division receives priority over any other division. There are no distribution channels between the divisions. The Company's policy is to maintain sufficient quantities of inventory on hand in its retail stores and distribution centers so that it can offer customers a full selection of current merchandise. The Company emphasizes rapid turnover and takes markdowns where required to keep merchandise fresh and current with fashion trends. The Company views the retail apparel market as having two principal selling seasons, Spring and Fall. As is generally the case in the apparel industry, the Company experiences its peak sales activity during the Fall season. This seasonal sales pattern results in increased inventory and accounts receivable during the Fall and Christmas selling periods. During fiscal year 1994, the highest inventory level approximated $1.226 billion at the November 1994 month-end and the lowest inventory level approximated $750 million at the June 1994 month-end. 3 4 Merchandise sales are paid for in cash, personal check or by credit cards issued by the Company's wholly-owned credit card bank, World Financial Network National Bank ("WFNNB"), for customers of Express, Lerner New York, Lane Bryant, The Limited, Henri Bendel, Victoria's Secret Stores, Victoria's Secret Catalogue, Structure and Abercrombie & Fitch Co., as well as credit cards issued by third party banks and other financial institutions. Further information related to WFNNB's loan balances and allowance for uncollectible accounts is contained in Note 3 of the Notes To Consolidated Financial Statements included in The Limited, Inc. 1994 Annual Report to Shareholders, portions of which are annexed hereto as Exhibit 13 (the "1994 Annual Report") and is incorporated herein by reference. The Company offers its customers a liberal return policy stated as "No Sale is Ever Final." The Company believes that certain of its competitors offer similar credit card and service policies. The following is a brief description of each of the Company's operating divisions, including their respective target markets. Women's EXPRESS - Express brings international women's sportswear and accessories with a distinctive European point of view to fashion-forward women in a spirited continental store environment. LERNER NEW YORK - Lerner New York is a moderate-priced specialty retailer of conventional women's sportswear, ready-to-wear and coats. LANE BRYANT - Lane Bryant focuses on sportswear, ready-to-wear, coats and intimate apparel for the fashion-conscious large size woman. THE LIMITED - The Limited offers a full range of fashion-forward private label sportswear, ready-to-wear and accessories for women. HENRI BENDEL - Henri Bendel offers glamorous and sophisticated women's fashions in an exclusive shopping environment. Lingerie VICTORIA'S SECRET STORES - Victoria's Secret Stores offers lingerie, beautiful fragrances and romantic gifts in an atmosphere of "pure indulgence." CACIQUE - Cacique offers fashion lingerie and gifts in an European shopping environment. VICTORIA'S SECRET CATALOGUE - Victoria's Secret Catalogue sells women's lingerie, sportswear and ready-to-wear via catalogue. 4 5 Men's STRUCTURE - Structure offers a men's sportswear collection with a distinct international flavor. The store environment mixes classic Palladian and modern architectural styles to appeal to men with a good sense of fine design. ABERCROMBIE & FITCH CO. - Abercrombie & Fitch provides spirited traditional sportswear for young-thinking men and women. Personal Care & Children's BATH & BODY WORKS - Bath & Body Works provides personal care products for women and men. PENHALIGON'S - Penhaligon's designs, distributes, wholesales and retails a variety of perfumes, toiletries, grooming accessories and antique silver gifts. THE LIMITED TOO - The Limited Too offers fashionable casual sportswear for girls. Additional information about the Company's business, including its revenues and profits for the last three years, plus selling square footage and other information about each of the Company's operating divisions, is set forth under the caption "Management's Discussion and Analysis" of the 1994 Annual Report and is incorporated herein by reference. COMPETITION. The sale of apparel and personal care products through retail stores is a highly competitive business with numerous competitors, including individual and chain fashion specialty stores and department stores. Design, price and quality are the principal competitive factors in retail store sales. The Company's catalogue division competes with numerous national and regional catalogue merchandisers in catalogue sales. Design, price, quality and catalogue presentation are the principal competitive factors in catalogue sales. The Company is unable to estimate the number of competitors or its relative competitive position due to the large number of companies selling apparel and personal care products at retail, both through stores and catalogues. ASSOCIATE RELATIONS. On January 28, 1995, the Company employed approximately 105,600 associates, 72,400 of whom were part-time. In addition, temporary associates are hired during peak periods, such as the Christmas season. 5 6 RECENT DEVELOPMENT. On March 28, 1995, the Company announced that the Board of Directors has authorized management to explore and refine the following plan over the next few months: - - First, the Company intends to create, out of its existing operations, two new entities. The Company expects that each will be 85-90% owned by The Limited, Inc., with the balance owned by public shareholders. These entities would initially be grouped based on complementary operations and opportunity. The first one is likely to contain the lingerie and personal care businesses: Victoria's Secret Stores, Cacique, Victoria's Secret Catalogue, Bath & Body Works, Penhaligon's and Gryphon. The other new entity is likely to contain the major women's apparel businesses: Express, Lerner New York, Lane Bryant and The Limited. - - Second, to allow the Company's credit card bank, WFNNB, to supplement its capabilities, enhance its operations and aggressively pursue new opportunities for growth, the Company intends to seek strategic financial and marketing partners. This may involve selling a majority interest to these partners. - - Third, the Company's intention is to distribute the cash made available as a result of these transactions to its shareholders. The size of this special distribution will depend upon the outcome of these transactions. - - Finally, new ventures and the Company's other businesses -- Structure, Abercrombie & Fitch Co., The Limited Too, Henri Bendel and Mast Industries -- would continue to be wholly owned by The Limited, Inc. ITEM 2. PROPERTIES. The Company's business is principally conducted from office, distribution and shipping facilities located in the Columbus, Ohio area. Additional facilities are located in New York City, Andover, Massachusetts and Kettering, Ohio. The distribution and shipping facilities owned by the Company consist of seven buildings located in Columbus, Ohio, comprising approximately 5.2 million square feet. The operations of WFNNB are located in three leased facilities in the Columbus area, which, in the aggregate, cover approximately 260,000 square feet. Substantially all of the retail stores operated by the Company are located in leased facilities, primarily in shopping centers throughout the continental United States. The leases expire at various dates principally between 1995 and 2015 and generally do not have renewal options. 6 7 Typically, when space is leased for a retail store in a shopping center, all improvements, including interior walls, floors, ceilings, fixtures and decorations, are supplied by the tenant. In certain cases, the landlord of the property may provide a construction allowance to defray a portion of the cost of improvements. The cost of improvements varies widely, depending on the size and location of the store. Rental terms for new locations usually include a fixed minimum rent plus a percentage of sales in excess of a specified amount. Certain operating costs such as common area maintenance, utilities, insurance, and taxes are typically paid by tenants. ITEM 3. LEGAL PROCEEDINGS. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT. Set forth below is certain information regarding the executive officers of the Company as of January 28, 1995. Leslie H. Wexner, 57, has been Chairman of the Board of Directors of the Company for more than five years and its President and Chief Executive Officer since he founded the Company in 1963. Kenneth B. Gilman, 48, has been Vice Chairman and Chief Financial Officer of the Company since June 1993. Mr. Gilman was the Executive Vice President and Chief Financial Officer of the Company for more than five years prior thereto. Michael Weiss, 53, has been Vice Chairman of the Company since June 1993. Mr. Weiss was the Chief Executive Officer of the Company's Express division for more than five years prior thereto. Bella Wexner, over 65 years of age, has been the Secretary of the Company for more than five years. Martin Trust, 60, has been President of Mast Industries, Inc., a wholly-owned subsidiary of the Company, for more than five years. Arnold F. Kanarick, 54, has been Executive Vice President and Director of Human Resources since October 1992. Mr. Kanarick was Vice President, Human Resources of Analog Devices, a manufacturer of semiconductors, from 1985 to 1992. 7 8 Wade H. Buff, 60, has been Vice President, Internal Audit of the Company for more than five years. Alfred S. Dietzel, 63, has been Vice President, Financial and Public Relations of the Company for more than five years. Barry Erdos, 50, has been Vice President and Corporate Controller of the Company since August 1993. Mr. Erdos was Executive Vice President and Chief Financial Officer of the Company's Henri Bendel division for more than five years prior thereto. Samuel P. Fried, 43, has been Vice President and General Counsel of the Company since November 1991. Mr. Fried was Vice President and General Counsel of Exide Corporation, a manufacturer of automotive and industrial batteries, from February 1987 to October 1991. William K. Gerber, 40, has been Vice President, Finance of the Company since August 1993. Mr. Gerber was Vice President and Corporate Controller of the Company for more than five years prior thereto. Patrick C. Hectorne, 42, has been Treasurer of the Company since August 1993. Mr. Hectorne was Assistant Treasurer of the Company for more than five years prior thereto. Charles W. Hinson, 58, has been President, Store Planning of the Company for more than five years. Jack Listanowsky, 47, has been Vice President and Chief Sourcing and Production Officer of the Company since March 1995. Mr. Listanowsky was Executive Vice President, Manufacturing and Operations for Liz Claiborne, Inc. for more than five years prior thereto. Timothy B. Lyons, 48, has been Vice President, Taxes of the Company for more than five years. Edward G. Razek, 46, has been Vice President and Director of Marketing of the Company since November 1993. Mr. Razek was the Executive Vice President of Marketing for Limited Stores for more than five years prior thereto. Bruce A. Soll, 37, has been Vice President of the Company since October 1991. Mr. Soll was Counselor/Director of Policy Planning for the U.S. Department of Commerce from February 1989 to September 1991. All of the above officers serve at the pleasure of the Board of Directors of the Company. 8 9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Information regarding markets in which the Company's common stock was traded during fiscal years 1994 and 1993, approximate number of holders of common stock, and quarterly cash dividend per share information of the Company's common stock for the fiscal years 1994 and 1993 is set forth under the caption "Market Price and Dividend Information" of the 1994 Annual Report and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. Selected financial data is set forth under the caption "Financial Summary" of the 1994 Annual Report and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's discussion and analysis of financial condition and results of operations is set forth under the caption "Management's Discussion and Analysis" of the 1994 Annual Report and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Consolidated Financial Statements of the Company and subsidiaries, the Notes to Consolidated Financial Statements and the Report of Independent Accountants are set forth in the 1994 Annual Report and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding directors of the Company is set forth under the captions "ELECTION OF DIRECTORS - Nominees and Directors", "- Business Experience" and "- Information Concerning the Board of Directors" on pages 1 through 4 of the Company's proxy statement for the Annual Meeting of Shareholders to be held May 15, 1995 (the "Proxy Statement") and is incorporated herein by reference. Information regarding executive officers is set forth herein under the caption "SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I. Information regarding family relationships is set forth under the caption "PRINCIPAL HOLDERS OF VOTING SECURITIES" on pages 13 and 14 of the Proxy Statement and is incorporated herein by reference. 9 10 ITEM 11. EXECUTIVE COMPENSATION. Information regarding executive compensation is set forth under the caption "EXECUTIVE COMPENSATION" on pages 6 through 8 of the Proxy Statement and is incorporated herein by reference. Such incorporation by reference shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information regarding the security ownership of certain beneficial owners and management is set forth under the caption "ELECTION OF DIRECTORS - Security Ownership of Directors and Management" on pages 4 and 5 of the Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information regarding certain relationships and related transactions is set forth under the caption "ELECTION OF DIRECTORS - Business Experience" on pages 2 and 3 of the Proxy Statement and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)(1) List of Financial Statements. The following consolidated financial statements of The Limited, Inc. and subsidiaries and the related notes are filed as a part of this report pursuant to ITEM 8: Consolidated Statements of Income for the fiscal years ended January 28, 1995, January 29, 1994 and January 30, 1993. Consolidated Balance Sheets as of January 28, 1995 and January 29, 1994. Consolidated Statements of Shareholders' Equity for the fiscal years ended January 28, 1995, January 29, 1994 and January 30, 1993. Consolidated Statements of Cash Flows for the fiscal years ended January 28, 1995, January 29, 1994 and January 30, 1993. Notes to Consolidated Financial Statements. Report of Independent Accountants. 10 11 (a)(2) List of Financial Statement Schedules. The following consolidated financial statement schedule of The Limited, Inc. and subsidiaries is filed as part of this report pursuant to ITEM 14(d): II. Valuation and Qualifying Accounts. All other schedules are omitted because the required information is either presented in the financial statements or notes thereto, or is not applicable, required or material. Columns omitted from schedules have been omitted because the information is not applicable. (a)(3) List of Exhibits 3. Articles of Incorporation and Bylaws. 3.1 Certificate of Incorporation of the Company incorporated by reference to Exhibit 3.4 to the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 1988. 3.2 Restated Bylaws of the Company incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 1991 (the "1990 Form 10-K").
4. Instruments Defining the Rights of Security Holders. 4.1 Copy of the form of Global Security representing the Company's 7 1/2% Debentures due 2023, incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated March 4, 1993. 4.2 $900,000,000 Credit Agreement dated as of August 30, 1990 (the "Credit Agreement") among the Company, Morgan Guaranty Trust Company of New York and certain other banks (collectively, the "Banks"), incorporated by reference to Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 4, 1990, as amended by Amendment No. 1 dated as of December 4, 1992, (reducing the aggregate amount to $560,000,000) incorporated by reference to Exhibit 4.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 1992. 4.3 $280,000,000 Credit Agreement dated as of December 4, 1992 (the "WFNNB Credit Agreement") among the World Financial Network National Bank, the Company, the Banks and Morgan Guaranty Trust Company of New York, incorporated by reference to Exhibit 4.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 1992.
11 12 4.4 Conformed copy of the Indenture dated as of March 15, 1988 between the Company and The Bank of New York, incorporated by reference to Exhibit 4.1(a) to the Company's Current Report on Form 8-K dated March 21, 1989. 4.5 Copy of the form of Global Security representing the Company's 8 7/8% Notes due August 15, 1999, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated August 14, 1989. 4.6 Copy of the form of Global Security representing the Company's 9 1/8% Notes due February 1, 2001, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated February 6, 1991. 4.7 Proposed form of Debt Warrant Agreement for Warrants attached to Debt Securities, with proposed form of Debt Warrant Certificate incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (File no. 33-53366) originally filed with the Securities and Exchange Commission (the "Commission") on October 16, 1992, as amended by Amendment No. 1 thereto, filed with the Commission on February 23, 1993 (the "1993 Form S-3"). 4.8 Proposed form of Debt Warrant Agreement for Warrants not attached to Debt Securities, with proposed form of Debt Warrant Certificate incorporated by reference to Exhibit 4.3 to the 1993 Form S-3. 4.9 Amendment No. 2 dated as of April 28, 1994 to the Credit Agreement among the Company, Morgan Guaranty Trust Company of New York and the Banks, incorporated by reference to Exhibit 4.9 to the Company's Quarterly report on Form 10-Q for the quarter ended April 30, 1994. 4.10 Amendment No. 1 dated as of April 28, 1994 to the WFNNB Credit Agreement among the Company, Morgan Guaranty Trust Company of New York and the Banks, incorporated by reference to Exhibit 4.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1994.
10. Material Contracts. 10.1 The Restated 1981 Stock Option Plan of The Limited, Inc., incorporated by reference to Exhibit 28(b) to the Company's Registration Statement on Form S-8 (File No. 33-18533) (the "Form S-8"). 10.2 The 1987 Stock Option Plan of The Limited, Inc., incorporated by reference to Exhibit 28(a) to the Form S-8. 10.3 Officers' Benefits Plan incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 1989 (the "1988 Form 10-K").
12 13 10.4 The Limited Deferred Compensation Plan incorporated by reference to Exhibit 10.4 to the 1990 Form 10-K. 10.5 Form of Indemnification Agreement between the Company and the directors and officers of the Company, incorporated by reference to Exhibit A to the Company's definitive proxy statement dated April 18, 1988 for the Company's 1988 Annual Meeting of Shareholders held May 23, 1988. 10.6 Schedule of directors and officers who became parties to Indemnification Agreements effective May 23, 1988, incorporated by reference to Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 29, 1988. 10.7 Supplemental schedule of officer who became a party to an Indemnification Agreement effective May 23, 1988 incorporated by reference to Exhibit 10.7 to the 1988 Form 10-K. 10.8 Supplemental schedule of directors and officers who became parties to Indemnification Agreements incorporated by reference to Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 1, 1992. 10.9 Supplemental schedule of officer who became party to an Indemnification Agreement effective November 16, 1992 incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended January 30, 1993. 10.10 Supplemental schedule of officer who became party to an Indemnification Agreement effective June 3, 1993, incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1993. 10.11 The 1993 Stock Option and Performance Incentive Plan of the Company, incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-8 (File No. 33-49871). 10.12 Supplemental schedule of director who became party to an Indemnification Agreement effective January 27, 1995. 10.13 Supplemental schedule of officer who became party to an Indemnification Agreement effective March 20, 1995.
13 14 11 Statement re Computation of Per Share Earnings. 12 Statement re Computation of Ratio of Earnings to Fixed Charges. 13 Excerpts from the 1994 Annual Report to Shareholders. 21 Subsidiaries of the Registrant. 23 Consent of Independent Accountants. 24 Powers of Attorney. 99 Annual Report of The Limited, Inc. Savings and Retirement Plan. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the fourth quarter of fiscal year 1994. (c) Exhibits. The exhibits to this report are listed in section (a)(3) of Item 14 above. (d) Financial Statement Schedules The financial statement schedule filed with this report is listed in section (a)(2) of Item 14 above.
14 15 SIGNATURES Pursuant to the requirements of Section 13 or l5(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 25, 1995 THE LIMITED, INC. (registrant) By /s/ KENNETH B. GILMAN ---------------------------- Kenneth B. Gilman, Vice Chairman and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 25, 1995:
Signature Title --------- ----- /s/ LESLIE H. WEXNER* Chairman of the Board of Directors, - ----------------------------- President and Chief Executive Officer Leslie H. Wexner /s/ KENNETH B. GILMAN Director, Vice Chairman, - ----------------------------- Chief Financial Officer and Kenneth B. Gilman Principal Accounting Officer /s/ MICHAEL A. WEISS * Director and Vice Chairman - ----------------------------- Michael A. Weiss Director - ----------------------------- Bella Wexner /s/ MARTIN TRUST* Director - ----------------------------- Martin Trust /s/ EUGENE M. FREEDMAN* Director - ----------------------------- Eugene M. Freedman
15 16 /s/ E. GORDON GEE* Director - ----------------------------- E. Gordon Gee /s/ THOMAS G. HOPKINS* Director - ----------------------------- Thomas G. Hopkins /s/ DAVID T. KOLLAT* Director - ----------------------------- David T. Kollat /s/ CLAUDINE MALONE* Director - ----------------------------- Claudine Malone /s/ DONALD B. SHACKELFORD* Director - ----------------------------- Donald B. Shackelford /s/ ALLAN R. TESSLER* Director - ----------------------------- Allan R. Tessler /s/ RAYMOND ZIMMERMAN* Director - ----------------------------- Raymond Zimmerman
*The undersigned, by signing his name hereto, does hereby sign this report on behalf of each of the above-indicated directors of the registrant pursuant to powers of attorney executed by such directors. By /s/ KENNETH B. GILMAN --------------------------- Kenneth B. Gilman Attorney-in-fact 16 17 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- THE LIMITED, INC. (exact name of registrant as specified in its charter) ---------------- FINANCIAL STATEMENT SCHEDULES ---------------- ================================================================================ 18 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of The Limited, Inc. We have audited the consolidated financial statements of The Limited, Inc. and Subsidiaries as of January 28, 1995, and January 29, 1994, and for each of the three fiscal years in the period ended January 28, 1995, which financial statements are included on pages 66 through 77 of the 1994 Annual Report to Shareholders of the Limited, Inc. and incorporated by reference herein. We have also audited the financial statement schedule for each of the three fiscal years in the period ended January 28, 1995, listed in Item 14(a)(2) of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Limited, Inc. and Subsidiaries as of January 28, 1995 and January 29, 1994, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended January 28, 1995 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule for each of the three fiscal years in the period ended January 28, 1995 referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Columbus, Ohio February 13, 1995 19 Schedule II THE LIMITED, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE FISCAL YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 AND JANUARY 30, 1993
(THOUSANDS) Balance at Charged to Charged to Balance at Beginning of Costs and Other End of Fiscal Year Expenses Accounts Deductions Fiscal Year ------------ ---------- ---------- ---------- ----------- ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS Fiscal year ended January 28, 1995 $34,897 72,725 - 62,676(A) $44,946 ======= ====== == ========== ======== Fiscal year ended January 29, 1994 $24,973 50,803 - 40,879(A) $34,897 ======= ====== == ========== ======== Fiscal year ended January 30, 1993 $24,678 40,026 - 39,731(A) $24,973 ======= ====== == ========== ========
(A) - Write-offs, net of recoveries 20 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 -------- THE LIMITED, INC. (exact name of Registrant as specified in its charter) -------- EXHIBITS -------- ================================================================================ 21 EXHIBIT INDEX
Exhibit No. Document - ----------- -------------------------------- 10.12 Supplemental Schedule of Director who Became Part to an Indemnification Agreement. 10.13 Supplemental Schedule of Officer who Became Party to an Indemnification Agreement. 11 Statement re Computation of Per Share Earnings. 12 Statement re Computation of Ratio of Earnings to Fixed Charges. 13 Excerpts from the 1994 Annual Report to Shareholders. 21 Subsidiaries of the Registrant. 23 Consent of Independent Accountants. 24 Powers of Attorney. 27 Financial Data Schedule. 99 Annual Report of The Limited, Inc. Savings and Retirement Plan.
EX-10.12 2 EXHIBIT 10.12 1 EXHIBIT 10.12 SUPPLEMENTAL SCHEDULE OF DIRECTOR WHO BECAME A PARTY TO AN INDEMNIFICATION AGREEMENT EFFECTIVE JANUARY 27, 1995
Signatory Capacity - --------- -------- Eugene M. Freedman Director
EX-10.13 3 EXHIBIT 10.13 1 EXHIBIT 10.13 SUPPLEMENTAL SCHEDULE OF OFFICER WHO BECAME A PARTY TO AN INDEMNIFICATION AGREEMENT EFFECTIVE MARCH 20, 1995
Signatory Capacity - --------- -------- Jack Listanowsky Officer
EX-11 4 EXHIBIT 11 1 EXHIBIT 11 THE LIMITED, INC. AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS (Thousands except per share amounts)
Quarter Ended ------------------------------------- January 28, 1995 January 29, 1994 ---------------- ---------------- Net Income $ 256,745 $ 196,327 ========= ========= Common Shares outstanding: Weighted average 379,454 379,454 Dilutive effect of stock options 640 617 Weighted average treasury shares (21,769) (18,920) --------- --------- Weighted average used to calculate net income per share 358,325 361,151 ========= ========= Net Income per share $ 0.72 $ 0.54 ========= =========
Year Ended ------------------------------------- January 28, 1995 January 29, 1994 ---------------- ---------------- Net Income $ 448,343 $ 390,999 ========= ========= Common Shares outstanding: Weighted average 379,454 379,454 Dilutive effect of stock options 649 957 Weighted average treasury shares (21,502) (17,177) --------- --------- Weighted average used to calculate net income per share 358,601 363,234 ========= ========= Net Income per share $ 1.25 $ 1.08 ========== =========
EX-12 5 EXHIBIT 12 1 EXHIBIT 12 THE LIMITED, INC. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES (Thousands)
Year Ended ------------------------------------------------------------------------------------------ January 28, 1995 January 29, 1994 January 30, 1993 February 1, 1992 February 2, 1991 ---------------- ---------------- ---------------- ---------------- ---------------- Adjusted Earnings Pretax earnings $ 744,343 $644,999 $745,497 $660,302 $653,438 Portion of minimum rent ($614,147 in 204,716 190,759 170,181 139,675 111,102 1994, $572,278 in 1993, $510,544 in 1992, $419,025 in 1991, and $333,306 in 1990) representative of interest Interest on indebtedness 65,381 63,865 62,398 63,927 56,609 ---------- -------- -------- -------- -------- Total Earnings as Adjusted $1,014,440 $899,623 $978,076 $863,904 $821,149 ========== ======== ======== ======== ======== Fixed Charges Portion of minimum rent representative of interest $ 204,716 $190,759 $170,181 $139,675 $111,102 Interest on indebtedness 65,381 63,865 62,398 63,927 56,609 ---------- -------- -------- -------- -------- Total Fixed Charges $ 270,097 $254,624 $232,579 $203,602 $167,711 ========== ======== ======== ======== ======== Ratio of Earnings to Fixed Charges 3.76x 3.53x 4.21x 4.24x 4.90x ========== ======== ======== ======== ========
EX-13 6 EXHIBIT 13 1 EXHIBIT 13 pause
women's> % OF TOTAL SALES ($ in Millions) 1994 $4,318 59% 1993 4,655 64% 1992 4,683 67% % OF TOTAL OPERATING INCOME ($ in Millions) 1994 $298 37% 1993 305 44% 1992 502 64% SALES % TOTAL (Millions) SALES Express 1994 $1,387 19% 1993 1,421 20% 1992 1,312 19% Lerner 1994 $1,019 14% New York 1993 1,141 16% 1992 1,175 17% Lane Bryant 1994 $ 959 13% 1993 928 13% 1992 918 13% The Limited 1994 $ 869 12% 1993 1,084 15% 1992 1,205 17% Henri Bendel 1994 $ 84 01% 1993 81 01% 1992 73 01%
22 2 pause
lingerie> % OF TOTAL SALES ($ in Millions) 1994 $1,842 25% 1993 1,514 21% 1992 1,263 18% % OF TOTAL OPERATING INCOME ($ in Millions) 1994 $ 297 37% 1993 235 33% 1992 171 22% men's> % OF TOTAL SALES ($ in Millions) 1994 $ 721 10% 1993 561 8% 1992 403 6% % OF TOTAL OPERATING INCOME ($ in Millions) 1994 $ 75 9% 1993 52 7% 1992 29 4% SALES % TOTAL (Millions) SALES VICTORIA'S 1994 $1,181 16% SECRET 1993 992 14% STORES 1992 840 12% VICTORIA'S 1994 $ 569 8% SECRET 1993 436 6% CATALOGUE 1992 367 5% CACIQUE 1994 $ 92 1% 1993 86 1% 1992 56 1% STRUCTURE 1994 $ 556 8% 1993 450 6% 1992 318 5% ABERCROMBIE 1994 $ 165 2% & FITCH CO. 1993 111 2% 1992 85 1%
34 3 pause personal care & children's>
% OF TOTAL SALES ($ in Millions) 1994 $ 439 6% 1993 264 4% 1992 170 3% % OF TOTAL OPERATING INCOME ($ in Millions) 1994 $ 66 8% 1993 23 3% 1992 (11) -1% SALES % TOTAL (Millions) SALES BATH & 1994 $260 4% BODY WORKS 1993 112 2% 1992 57 1% PENHALIGON'S 1994 $ 5 0% 1993 5 0% 1992 5 0% THE LIMITED 1994 $174 2% TOO 1993 147 2% 1992 108 2%
42 4 Our Operating Results (Thousands except per share amounts)
1994 1993 % Change Net Sales $7,320,792 $7,245,088 1% Operating Income $ 798,989 701,556 14% Net Income $ 448,343 $ 390,999 15% Net Income as a Percentage of Sales 6.1% 5.4% Net Income Per Share $ 1.25 $ 1.08 16% Dividends Per Share $ .36 $ 36
Our Year-End Position (Thousands except per share amounts)
1994 1993 % Change Total Assets $4,570,077 $4,135,105 11% Working Capital $1,750,111 $1,513,181 16% Current Ratio 3.2 3.1 Long-Term Debt $ 650,000 $ 650,000 -- Debt to Equity Ratio 24% 27% Shareholders' Equity $2,760,956 $2,441,293 13% Return on Average Shareholders' Equity 17% 17%
Stores Open at End of Year
1994 1993 Express 716 673 Lerner New York 846 877 Lane Bryant 812 817 The Limited 709 746 Henri Bendel 4 4 Victoria's Secret Stores 601 570 Cacique 114 108 Structure 466 394 Abercrombie & Fitch Co. 67 49 Bath & Body Works 318 194 Penhaligon's 4 7 The Limited Too 210 184 Total Number of Stores 4,867 4,623 Selling Square Feet 25,627,000 24,426,000 Number of Associates 105,600
57 5 FINANCIAL SUMMARY - ------------------------------------------------------------------------------------------------------------------- (Thousands except per share amounts, ratios and store and associate data)
- ------------------------------------------------------------------------------------------------------------------- FISCAL YEAR 1994 1993(1) 1992 1991(2) 1990(2) - ------------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Net Sales $ 7,320,792 $ 7,245,088 $ 6,944,296 $ 6,149,218 $ 5,253,509 Gross Income 2,114,363 1,958,835 1,990,740 1,793,543 1,630,439 Operating Income 798,989 701,556 788,698 712,700 697,537 Income Before Income Taxes 744,343 644,999 745,497 660,302 653,438 Net Income $ 448,343 $ 390,999 $ 455,497 $ 403,302 $ 398,438 Net Income as a Percentage of Sales 6.1% 5.4% 6.6% 6.6% 7.6% - ------------------------------------------------------------------------------------------------------------------- PER SHARE RESULTS Net Income $ 1.25 $ 1.08 $ 1.25 $ 1.11 $ 1.10 Dividends $ .36 $ .36 $ .28 $ .28 $ .24 Book Value $ 7.72 $ 6.82 $ 6.25 $ 5.19 $ 4.33 Weighted Average Shares Outstanding 358,601 363,234 363,738 363,594 362,044 - ------------------------------------------------------------------------------------------------------------------- OTHER FINANCIAL INFORMATION Total Assets $ 4,570,077 $ 4,135,105 $ 3,846,450 $ 3,418,856 $ 2,871,878 Working Capital $ 1,750,111 $ 1,513,181 $ 1,063,352 $ 1,084,205 $ 884,004 Current Ratio 3.2 3.1 2.5 3.1 2.8 Long-Term Debt $ 650,000 $ 650,000 $ 541,639 $ 713,758 $ 540,446 Debt-to-Equity Ratio 24% 27% 24% 38% 35 Shareholders' Equity $ 2,760,956 $ 2,441,293 $ 2,267,617 $ 1,876,792 $ 1,560,052 Return on Average Shareholders' Equity 17% 17% 22% 23% 28% - ------------------------------------------------------------------------------------------------------------------- STORES AND ASSOCIATES AT END OF YEAR Total Number of Stores Open 4,867 4,623 4,425 4,194 3,760 Selling Square Feet 25,627,000 24,426,000 22,863,000 20,355,000 17,008,000 Number of Associates 105,600 97,500 100,700 83,800 72,500 - ------------------------------------------------------------------------------------------------------------------- (1) Includes the results of companies disposed of up to the disposition date. (2) Includes the results of companies acquired subsequent to the date of acquisition. (3) Fifty-three week fiscal year.
Year Number of Stores ---- ---------------- 74 48 79 309 84 1,412 89 3,344 94 4,867
58 6 FINANCIAL SUMMARY - ------------------------------------------------------------------------------------------------------------------------------------ (Thousands except per share amounts, ratios and store and associate data)
- ------------------------------------------------------------------------------------------------------------------------------------ FISCAL YEAR 1989(3)(1) 1988(2) 1987 1986 1985(2) 1984(3) - ------------------------------------------------------------------------------------------------------------------------------------ SUMMARY OF OPERATIONS Net Sales $ 4,647,916 $ 4,070,777 $ 3,527,941 $ 3,142,696 $ 2,387,110 $ 1,343,134 Gross Income 1,446,635 1,214,703 992,775 961,827 718,843 404,321 Operating Income 625,254 467,418 408,872 438,229 276,212 173,102 Income Before Income Taxes 573,926 396,136 378,188 394,780 239,317 157,495 Net Income $ 346,926 $ 245,136 $ 235,188 $ 227,780 $ 145,317 $ 92,495 Net Income as a Percentage of Sales 7.5% 6.0% 6.7% 7.2% 6.1% 6.9% - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE RESULTS Net Income $ .96 $ .68 $ .62 $ .60 $ .40 $ .26 Dividends $ .16 $ .12 $ .12 $ .08 $ .05 $ .04 Book Value $ 3.45 $ 2.64 $ 2.04 $ 2.07 $ 1.13 $ .77 Weighted Average Shares Outstanding 361,288 360,186 376,626 376,860 365,638 361,262 - ------------------------------------------------------------------------------------------------------------------------------------ OTHER FINANCIAL INFORMATION Total Assets $ 2,418,486 $ 2,145,506 $ 1,929,477 $ 1,726,544 $ 1,494,313 $ 657,242 Working Capital $ 685,524 $ 567,639 $ 629,783 $ 586,827 $ 419,706 $ 180,960 Current Ratio 2.4 2.2 2.9 2.7 2.2 2.0 Long-Term Debt $ 445,674 $ 517,952 $ 681,000 $ 417,420 $ 670,744 $ 150,139 Debt-to-Equity Ratio 36% 55% 93% 53% 166% 55% Shareholders' Equity $ 1,240,454 $ 946,207 $ 729,171 $ 781,542 $ 404,075 $ 275,403 Return on Average Shareholders' Equity 32% 29% 31% 38% 43% 40% - ------------------------------------------------------------------------------------------------------------------------------------ STORES AND ASSOCIATES AT END OF YEAR Total Number of Stores Open 3,344 3,497 3,115 2,682 2,353 1,412 Selling Square Feet 14,374,000 14,296,000 12,795,000 11,320,000 10,460,000 5,166,000 Number of Associates 63,000 56,700 50,200 43,200 33,600 17,700 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Includes the results of companies disposed of up to the disposition date. (2) Includes the results of companies acquired subsequent to the date of acquisition. (3) Fifty-three week fiscal year.
59 7 MANAGEMENT'S DISCUSSION AND ANALYSIS - ------------------------------------------------------------------------------- RESULTS OF OPERATIONS Net sales for the fourth quarter grew to $2.539 billion, an increase of 5% from $2.421 billion a year ago. Net income was $257 million, compared to $196 million last year, and earnings per share were $0.72 versus $0.54 in 1993. Net sales for the 52-week fiscal year ended January 28, 1995 of $7.321 billion increased $318 million from sales of $7.003 billion last year (excluding Brylane's 1993 sales). Net income was $448 million compared to $391 million a year ago. Earnings per share were $1.25 compared to $1.08 last year. In 1994, the Company delivered solid results and made significant progress on the two principal objectives for the year. First, the Company achieved the goal of restoring merchandise margin integrity at the women's fashion apparel businesses despite negative comparable store sales, and thereby increased their operating income contribution as a percentage of sales. Merchandise margin is the key indicator by which the Company is measuring its progress in its effort to return these businesses to their historic levels of productivity and profitability. Second, the Company continued to profitably grow its lingerie, men's, personal care and children's businesses. These divisions increased their total sales by 28%, contributed 41% of total sales and 55% of operating income. Divisional highlights include the following: - Express delivered a significant increase in merchandise margin rate during the fourth quarter and one of the best Fall seasons in their history in terms of operating income. - Lane Bryant also had a solid year, producing a moderate increase in sales with improved margins. - Although Lerner New York and Limited Stores experienced negative comparable store sales, merchandise margins for the year were up to last year. - Victoria's Secret Stores set new fourth quarter and full year records in operating income dollars, on an increase in sales of almost $200 million for the year. - Abercrombie & Fitch Co. set new records for merchandise margin rate and profitability for the fourth quarter and year, increasing their earnings contribution over last year. - Structure produced a 20% increase in earnings for the year in spite of a disappointing fourth quarter. - Bath & Body Works produced another stellar year, more than doubling their sales while setting new records for the fourth quarter and year for merchandise margin and operating profit rate. The global potential for the brand was demonstrated by the successful opening of five stores in the United Kingdom in partnership with Next plc. For further information about the Company's divisions including sales and operating income, see pages 22, 23, 34, 35, 42 and 43 of this Annual Report. 60 8 FINANCIAL SUMMARY - ---------------------------------------------------------------------------------------------------------------
The following summarized financial data compares 1994 to the comparable periods for 1993 and 1992: - --------------------------------------------------------------------------------------------------------------- % CHANGE ----------------------- 1994 1993 1992 1994-93 1993-92 - --------------------------------------------------------------------------------------------------------------- Retail Sales (millions) $ 6,752 $ 6,567 $ 6,153 3% 7% Catalogue Sales (millions) 569 678 791 (16%) (14%) --------------------------------------- Total Net Sales (millions) $ 7,321 $ 7,245 $ 6,944 1% 4% Increase (Decrease) in Comparable Store Sales (3%) (1%) 2% Retail Sales Increase Attributable to New and Remodeled Stores 6% 8% 12% Retail Sales per Average Selling Square Foot $ 270 $ 278 $ 285 (3%) (2%) Retail Sales per Average Store (thousands) $ 1,423 $ 1,452 $ 1,428 (2%) 2% Average Store Size at End of Year (square feet) 5,265 5,284 5,167 - 2% Retail Selling Square Feet (thousands) 25,627 24,426 22,863 5% 7% Number of Stores: Beginning of Year 4,623 4,425 4,194 Opened 358 322 323 Closed (114) (124) (92) --------------------------------------- End of Year 4,867 4,623 4,425 - ---------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- NET SALES - -------------------------------------------------------------------------------- Fourth quarter 1994 sales as compared to 1993 increased 5% to $2.539 billion due to a 9% increase in sales attributable to new and remodeled stores. Fourth quarter 1993 sales of $2.421 billion were flat to 1992 due to the sale of a 60% interest in the Brylane division on August 30, 1993. Excluding Brylane sales from 1992, fourth quarter sales in 1993 would have increased 4% due to an 8% increase in sales attributable to new and remodeled stores. The 1994 retail sales increase is attributable to the net addition of new and remodeled stores, which was partially offset by a 3% decline in comparable store sales. The Company added 358 new stores in 1994, remodeled 226 stores and closed 114 stores for a net addition of 244 stores and in excess of 1.2 million square feet of new retail selling space. Consistent with the comparable store sales decline, average sales productivity declined slightly to $270 per square foot. Catalogue sales decreased 16% in 1994 as compared to 1993 due to Brylane sales being included in the first and second quarters of 1993 prior to its sale in August 1993. Had last year's catalogue sales excluded Brylane, catalogue sales would have increased 30%, due to a significant increase in the number of books mailed, although the average sales demand per book decreased slightly. Retail sales increased 7% during 1993, reflecting the additional volume from new and remodeled stores. The Company added 322 new stores in 1993, remodeled 239 stores and closed 124 stores for a net addition of 198 stores and in excess of 1.5 million square feet of new retail selling space. However, average sales productivity declined slightly to $278 per square foot. Catalogue sales decreased 14% in 1993, due to Brylane sales being included in the third and fourth quarters of 1992. Had 1992's catalogue sales excluded Brylane, catalogue sales would have increased 19% during 1993 as the number of books mailed during the year increased while the average sales demand per book decreased slightly. - -------------------------------------------------------------------------------- GROSS INCOME - -------------------------------------------------------------------------------- Gross income increased as a percentage of sales to 32.8% for the fourth quarter of 1994 from 29.1% for the same period in 1993. Merchandise margins, expressed as a percentage of sales, increased 4.4%, as the Company continued to be less price promotional than a year earlier. However, the merchandise margin increase was partially offset by increased buying and occupancy costs, which rose .7% as a percentage of sales, primarily due to the lower sales productivity associated with an 11% decrease in women's apparel comparable store sales. 61 9 Gross income decreased as a percentage of sales to 29.1% for the fourth quarter of 1993 from 32.2% for the same period in 1992. Merchandise margins, expressed as a percentage of sales, decreased 1.4% reflecting a higher level of promotional activity (particularly in the women's apparel businesses) to liquidate seasonal inventories. In addition, buying and occupancy costs, expressed as a percentage of sales, increased 1.6% primarily as a result of lower sales productivity associated with several of the Company's women's apparel businesses. The 1994 gross income rate of 28.9% was 1.9% above the rate for 1993. Merchandise margins, expressed as a percentage of sales, increased 3.0%, due to the Company's less promotional pricing strategy. However, the merchandise margin increase was partially offset by increased buying and occupancy costs, which rose 1.2% as a percentage of sales, primarily due to the lower sales productivity associated with a 9% decrease in women's apparel comparable store sales. The 1993 gross income rate of 27.0% was 1.7% below the rate for 1992. Merchandise margins, expressed as a percentage of sales, decreased .4% reflecting higher promotional activity, notably in the fourth quarter. Buying and occupancy costs were not sufficiently leveraged (particularly at the Company's women's apparel businesses) and as a result, these costs increased approximately 1.2%, expressed as a percentage of sales. - -------------------------------------------------------------------------------- GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES - -------------------------------------------------------------------------------- General, administrative and store operating expenses, expressed as a percentage of sales, increased to 15.4% in the fourth quarter of 1994 from 15.1% in the same period of 1993, principally due to lower sales productivity. Sales productivity, which is initially lower in new and remodeled stores, was also lower in existing stores. The Company continued to maintain its high level of customer service despite negative comparable store sales, particularly at the women's apparel businesses where comparable store sales were down 11%. These costs, expressed as a percentage of sales, were 18.0%, 17.4% and 17.3% for fiscal years 1994, 1993 and 1992. The increases in 1994 and 1993 were due to the lower sales productivity at both existing stores and new and remodeled stores. The Company expects to continue its policy of maintaining a high level of customer service. - -------------------------------------------------------------------------------- SPECIAL AND NONRECURRING ITEMS - -------------------------------------------------------------------------------- As more fully described in Note 2 to the Consolidated Financial Statements, the Company announced during 1993 the sale of a 60% interest in its Brylane division for $285 million in cash. This transaction was part of a program aimed at accelerating the growth of the retail businesses, which included the acceleration of the store remodeling, downsizing and closing program at the Limited Stores and Lerner divisions, and the refocusing of the merchandising strategy at the Henri Bendel division. The net pre-tax gain from these special and nonrecurring items was $2.6 million. The impact of these items on future operating results is anticipated to be immaterial. In the near term, the Company's reduced share of Brylane's operating income is expected to be offset by improved sales productivity and reduced depreciation and amortization costs. The Company also announced a program to repurchase up to $500 million of the Company's common stock over time as market conditions warrant. As of the end of fiscal year 1994, the Company had repurchased 5.9 million shares at a cost of $104.7 million. Market conditions will dictate any future purchases. - -------------------------------------------------------------------------------- INTEREST EXPENSE - ------------------------------------------------------------------------------- FOURTH QUARTER YEAR-TO-DATE ----------------------------------------------- 1994 1993 1994 1993 1992 - ------------------------------------------------------------------------------- Average Daily Borrowings (in millions) $996.7 $848.2 $785.0 $822.5 $1,046.3 Average Effective Interest Rate 7.84% 7.62% 8.33% 7.76% 5.96% - -------------------------------------------------------------------------------
Interest expense increased in the fourth quarter and for all 1994 as compared to the comparable periods in 1993. Higher interest rates increased costs approximately $.6 million and $4.4 million during the fourth quarter and for all of 1994. Higher borrowing levels during the fourth quarter increased costs by $2.8 million. For the year, lower borrowing levels resulted in lower interest costs of approximately $2.9 million as compared to 1993, which partially offset the effective interest rate increase. 62 10 - -------------------------------------------------------------------------------- OPERATING INCOME - -------------------------------------------------------------------------------- Operating income, as a percentage of sales, was 10.9%, 9.6% and 11.4% for fiscal years 1994, 1993 and 1992. The increase in operating income in 1994 was primarily due to higher merchandise margins, partially offset by higher buying and occupancy costs and higher general, administrative and store operating expenses. - -------------------------------------------------------------------------------- GAIN ON ISSUANCE OF UNITED RETAIL GROUP, INC. STOCK - -------------------------------------------------------------------------------- The 1992 results include a $9 million pre-tax gain which resulted from the March 1992 initial public offering of United Retail Group, Inc. (URGI), a specialty retailer of large-size woman's apparel. URGI sold approximately 3.7 million shares of common stock at $15 per share and received total consideration of approximately $55.6 million. Prior to the initial public offering, the Company owned approximately a 33% equity interest; subsequent to the initial public offering, the Company's ownership was diluted to approximately 20%. See Note 1 to the Consolidated Financial Statements for further discussion of this matter. - -------------------------------------------------------------------------------- ACQUISITIONS - -------------------------------------------------------------------------------- Gryphon Development, L.P. (Gryphon) creates, develops and manufactures most of the bath and personal care products sold by the Company. Prior to April 10, 1992, the Company owned approximately 65% of Gryphon. Effective April 10, 1992, the Company acquired the remaining 35% of Gryphon for approximately $60 million and separately entered into a non-compete agreement with certain of the former Gryphon partners in return for warrants to purchase 1.5 million shares of the Company's common stock. - -------------------------------------------------------------------------------- FINANCIAL CONDITION - -------------------------------------------------------------------------------- The Company's balance sheet at January 28, 1995 provides continuing evidence of financial strength and flexibility. The Company's debt-to-equity ratio declined to only 23.5% at the end of 1994, the current ratio reached a record 3.2 and working capital was in excess of $1.75 billion. A more detailed discussion of liquidity, capital resources and capital requirements follows: - -------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES - -------------------------------------------------------------------------------- Cash provided from operating activities, commercial paper backed by funds available under committed long-term credit agreements, and the Company's capital structure continue to provide the resources to support operations, including projected growth, seasonal requirements and capital expenditures. A summary of the Company's working capital position and capitalization follows (thousands):
- ------------------------------------------------------------------------------------------ 1994 1993 1992 - ------------------------------------------------------------------------------------------ Cash Provided by Operating Activities $ 361,078 $ 448,139 $ 754,128 Working Capital $1,750,111 $1,513,181 $1,063,352 Capitalization: Long-Term Debt $ 650,000 $ 650,000 $ 541,639 Deferred Income Taxes 306,139 275,101 274,844 Shareholders' Equity 2,760,956 2,441,293 2,267,617 - ------------------------------------------------------------------------------------------ TOTAL CAPITALIZATION $3,717,095 $3,366,394 $3,084,100 Additional Amounts Available Under Long-Term Credit Agreements $ 840,000 $ 840,000 $ 811,000 - ------------------------------------------------------------------------------------------
The Company considers the following to be several measures of liquidity and capital resources:
- ------------------------------------------------------------------------------------------ 1994 1993 1992 - ------------------------------------------------------------------------------------------ Debt-to-Equity Ratio (Long-Term Debt Divided by Shareholders' Equity) 24% 27% 24% Debt-to-Capitalization Ratio (Long-Term Debt Divided by Total Capitalization) 17% 19% 18% Interest Coverage Ratio (Income Before Interest Expense, Depreciation, Amortization and Income Taxes Divided by Interest Expense) 16x 15x 17x Cash Flow to Capital Investment (Net Cash Provided by Operating Activities Divided by Capital Expenditures) 113% 151% 176% - ------------------------------------------------------------------------------------------
63 11 Net cash provided by operating activities totaled $361.1 million, $448.1 million and $754.1 million for 1994, 1993 and 1992 and continued to serve as the Company's primary source of liquidity. Cash requirements for accounts receivable increased $235 million in 1994 and $220 million in 1993 due to the continued growth in the number of proprietary credit card holders at the Company's various divisions. Cash requirements for inventories and accounts payable and accrued expenses have tended to fluctuate during the three-year period based on sales volumes and inventory management practices. An increase in income taxes payable in 1994 resulted in an additional $30 million in cash as compared to 1993 due to the timing of tax payments associated with the fourth quarter earnings increase. Cash requirements for other assets and liabilities related primarily to a deposit made to the Internal Revenue Service in 1994 in connection with an assessment for additional taxes and interest for 1989 and 1990 which is discussed further in Note 7 to the Consolidated Financial Statements. Investing activities included capital expenditures, primarily for new and remodeled stores, the 1993 sale of 60% of the Company's interest in Brylane, and the 1992 acquisition of Gryphon. Financing activities included the repurchase of $11.4 million and $93.3 million of the Company's common stock in 1994 and 1993, which represented approximately .6 million and 5.3 million shares. Cash dividends paid in 1993 increased 25% from 1992. Cash dividends paid in 1994 remained consistent with 1993 at $.36 per share. At January 28, 1995, the Company had available $840 million under its long-term credit agreements. In addition, the Company has the ability to offer up to $250 million of additional debt securities and warrants to purchase debt securities under its shelf registration statement authorization. - -------------------------------------------------------------------------------- CAPITAL EXPENDITURES - -------------------------------------------------------------------------------- Capital expenditures amounted to $319.7 million, $295.8 million and $429.5 million in 1994, 1993 and 1992, respectively, of which $201.2 million, $198.1 million and $258.2 million was for new stores and remodeling and expanding existing stores. The Company expended $10.7 million in 1994 for a catalogue telemarketing center in Kettering, Ohio to expand Victoria's Secret Catalogue operations. Approximately $29 million was expended in 1992 for the completion of Victoria's Secret Catalogue's fulfillment center and office facility in Columbus, Ohio. In addition, office facilities previously committed under a long-term lease were acquired in 1992 for approximately $101 million. The Company anticipates spending $325-$375 million for capital expenditures in 1995, of which $230-$270 million will be for new stores, the remodeling of existing stores and related improvements for the retail businesses. The Company expects that substantially all 1995 capital expenditures will be funded by net cash provided by operating activities. The Company has announced its intention to add approximately 1.6 million selling square feet in 1995 which will represent a 6% increase over year-end 1994. It is anticipated the increase will result from the net addition of approximately 465 new stores and the remodeling of approximately 225 stores. A summary of stores and selling square feet by division for 1993 and 1994 and goals for 1995 follow:
YEAR SELLING SQUARE FEET - ---- ------------------- 79 $ 1,082,000 84 5,166,000 89 14,374,000 94 25,627,000
64 12
CHANGE FROM --------------------- GOAL-1995 1994 1993 1995-94 1994-93 - ---------------------------------------------------------------------------------------------------- EXPRESS Stores 745 716 673 29 43 Selling Sq. Ft. 4,613,000 4,357,000 3,902,000 256,000 455,000 - ---------------------------------------------------------------------------------------------------- LERNER NEW YORK Stores 838 846 877 (8) (31) Selling Sq. Ft. 6,396,000 6,580,000 6,802,000 (184,000) (222,000) - ---------------------------------------------------------------------------------------------------- LANE BRYANT Stores 826 812 817 14 (5) Selling Sq. Ft. 3,936,000 3,859,000 3,852,000 77,000 7,000 - ---------------------------------------------------------------------------------------------------- THE LIMITED Stores 708 709 746 (1) (37) Selling Sq. Ft. 4,284,000 4,358,000 4,482,000 (74,000) (124,000) - ---------------------------------------------------------------------------------------------------- HENRI BENDEL Stores 4 4 4 0 0 Selling Sq. Ft. 88,000 93,000 93,000 (5,000) 0 - ---------------------------------------------------------------------------------------------------- VICTORIA'S SECRET STORES Stores 667 601 570 66 31 Selling Sq. Ft. 2,966,000 2,586,000 2,346,000 380,000 240,000 - ---------------------------------------------------------------------------------------------------- CACIQUE Stores 120 114 108 6 6 Selling Sq. Ft. 364,000 342,000 318,000 22,000 24,000 - ---------------------------------------------------------------------------------------------------- STRUCTURE Stores 514 466 394 48 72 Selling Sq. Ft. 1,985,000 1,755,000 1,409,000 230,000 346,000 - ---------------------------------------------------------------------------------------------------- ABERCROMBIE & FITCH CO. Stores 102 67 49 35 18 Selling Sq. Ft. 808,000 541,000 405,000 267,000 136,000 - ---------------------------------------------------------------------------------------------------- BATH & BODY WORKS Stores 518 318 194 200 124 Selling Sq. Ft. 881,000 489,000 248,000 392,000 241,000 - ---------------------------------------------------------------------------------------------------- PENHALIGON'S Stores 4 4 7 0 (3) Selling Sq. Ft. 2,000 2,000 3,000 0 (1,000) - ---------------------------------------------------------------------------------------------------- THE LIMITED TOO Stores 288 210 184 78 26 Selling Sq. Ft. 907,000 665,000 566,000 242,000 99,000 - ---------------------------------------------------------------------------------------------------- TOTAL RETAIL DIVISIONS Stores 5,334 4,867 4,623 467 244 Selling Sq. Ft. 27,230,000 25,627,000 24,426,000 1,603,000 1,201,000 - ----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- IMPACT OF INFLATION - -------------------------------------------------------------------------------- The Company's results of operations and financial condition are presented based upon historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, the Company believes that the effects of inflation, if any, on the results of operations and financial condition have been minor. 65 13 CONSOLIDATED STATEMENTS OF INCOME - ------------------------------------------------------------------------------- (Thousands except per share amounts) - ----------------------------------------------------------------------------- 1994 1993 1992 - ----------------------------------------------------------------------------- NET SALES $ 7,320,792 $ 7,245,088 $ 6,944,296 Costs of Goods Sold, Occupancy and Buying Costs (5,206,429) (5,286,253) (4,953,556) - ----------------------------------------------------------------------------- GROSS INCOME 2,114,363 1,958,835 1,990,740 General, Administrative and Store Operating Expenses (1,315,374) (1,259,896) (1,202,042) Special and Nonrecurring Items, Net - 2,617 - - ----------------------------------------------------------------------------- OPERATING INCOME 798,989 701,556 788,698 Interest Expense (65,381) (63,865) (62,398) Other Income, Net 10,735 7,308 10,080 Gain on Issuance of United Retail Group Stock - - 9,117 - ----------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 744,343 644,999 745,497 Provision for Income Taxes 296,000 254,000 290,000 - ----------------------------------------------------------------------------- NET INCOME $ 448,343 $ 390,999 $ 455,497 - ----------------------------------------------------------------------------- NET INCOME PER SHARE $ 1.25 $ 1.08 $ 1.25 - -----------------------------------------------------------------------------
The accompanying Notes are an integral part of these Consolidated Financial Statements.
NET INCOME (Millions) CAGR 17% (Compound Annual Growth Rate, last ten years) 84 $ 92 85 145 86 228 87 235 88 245 89 347 90 398 91 403 92 455 93 391 94 448
NET SALES (Millions) CAGR 18% 84 $1,343 85 2,387 86 3,143 87 3,528 88 4,071 89 4,648 90 5,254 91 6,149 92 6,944 93 7,245 94 7,321
66 14 CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------- (Thousands)
- -------------------------------------------------------------------------- ASSETS JAN. 28, 1995 JAN. 29, 1994 - -------------------------------------------------------------------------- CURRENT ASSETS Cash and Equivalents $ 242,780 $ 320,558 Accounts Receivable 1,292,399 1,056,911 Inventories 870,440 733,700 Other 142,047 109,456 - -------------------------------------------------------------------------- TOTAL CURRENT ASSETS 2,547,666 2,220,625 - -------------------------------------------------------------------------- PROPERTY AND EQUIPMENT, NET 1,692,145 1,666,588 - -------------------------------------------------------------------------- OTHER ASSETS 330,266 247,892 - -------------------------------------------------------------------------- TOTAL ASSETS $4,570,077 $4,135,105 - -------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------- CURRENT LIABILITIES Accounts Payable $ 275,303 $ 250,363 Accrued Expenses 372,676 347,892 Certificates of Deposit 25,200 15,700 Income Taxes 124,376 93,489 - -------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 797,555 707,444 - -------------------------------------------------------------------------- LONG-TERM DEBT 650,000 650,000 - -------------------------------------------------------------------------- DEFERRED INCOME TAXES 306,139 275,101 - -------------------------------------------------------------------------- OTHER LONG-TERM LIABILITIES 55,427 61,267 - -------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Common Stock 189,727 189,727 Paid-In Capital 132,938 128,906 Retained Earnings 2,716,516 2,397,112 - -------------------------------------------------------------------------- 3,039,181 2,715,745 Less: Treasury Stock, at Cost (278,225) (274,452) - -------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 2,760,956 2,441,293 - -------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,570,077 $4,135,105 - --------------------------------------------------------------------------
The accompanying Notes are an integral part of these Consolidated Financial Statements.
EQUITY AND DEBT (Billions) 84 85 86 87 88 89 90 91 92 93 94 -------- -------- -------- -------- -------- ---------- ---------- ---------- ---------- ---------- ---------- EQUITY $.275 $.404 $.781 $.729 $.946 $1,240 $1,560 $1,877 $2,268 $2,441 $2,761 DEBT $.150 $.671 $.417 $.681 $.518 $ .446 $ .540 $ .714 $ .542 $ .650 $ .650
67 15 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - ------------------------------------------------------------------ (Thousands)
COMMON STOCK ------------------ SHARES PAR OUTSTANDING VALUE - ------------------------------------------------------------------ BALANCE, FEBRUARY 1, 1992 361,786 $189,727 - ------------------------------------------------------------------ Net Income -- -- Cash Dividends -- -- Exercise of Stock Options and Other 862 -- Warrants Issued for Acquisition -- -- - ------------------------------------------------------------------ BALANCE, JANUARY 30, 1993 362,648 $189,727 - ------------------------------------------------------------------ Net Income -- -- Cash Dividends -- -- Purchase of Treasury Stock (5,288) -- Exercise of Stock Options and Other 441 -- - ------------------------------------------------------------------ BALANCE, JANUARY 29, 1994 357,801 $189,727 - ------------------------------------------------------------------ Net Income -- -- Cash Dividends -- -- Purchase of Treasury Stock (629) -- Exercise of Stock Options and Other 432 -- - ------------------------------------------------------------------ BALANCE, JANUARY 28, 1995 357,604 $189,727 - ------------------------------------------------------------------
The accompanying Notes are an integral part of these Consolidated Financial Statements.
SHAREHOLDERS' EQUITY (Millions) CAGR 26% 84 85 86 87 88 89 90 91 92 93 94 -------- -------- -------- -------- -------- ---------- ---------- ---------- ---------- ---------- ---------- $.275 $.404 $.781 $.729 $.946 $1,240 $1,560 $1,877 $2,268 $2,441 $2,761
NET INCOME PER SHARE CAGR 17% 84 85 86 87 88 89 90 91 92 93 94 ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------- $ .26 $ .40 $ .60 $ .62 $ .68 $ .96 $1.10 $1.11 $1.25 $1.08 $1.25
16 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - --------------------------------------------------------------------------------------------------------- (Thousands)
TOTAL PAID-IN RETAINED TREASURY STOCK, SHAREHOLDERS' CAPITAL EARNINGS AT COST EQUITY - --------------------------------------------------------------------------------------------------------- BALANCE, FEBRUARY 1, 1992 $100,929 $1,783,027 $(196,891) $1,876,792 - --------------------------------------------------------------------------------------------------------- Net Income -- 455,497 -- 455,497 Cash Dividends -- (101,730) -- (101,730) Exercise of Stock Options and Other 6,598 -- 10,211 16,809 Warrants Issued for Acquisition 20,249 -- -- 20,249 - --------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 30, 1993 $127,776 $2,136,794 $(186,680) $2,267,617 - --------------------------------------------------------------------------------------------------------- Net Income -- 390,999 -- 390,999 Cash Dividends -- (130,681) -- (130,681) Purchase of Treasury Stock -- -- (93,328) (93,328) Exercise of Stock Options and Other 1,130 -- 5,556 6,686 - --------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 29, 1994 $128,906 $2,397,112 $(274,452) $2,441,293 - --------------------------------------------------------------------------------------------------------- Net Income -- 448,343 -- 448,343 Cash Dividends -- (128,939) -- (128,939) Purchase of Treasury Stock -- -- (11,382) (11,382) Exercise of Stock Options and Other 4,032 -- 7,609 11,641 - --------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 28, 1995 $132,938 $2,716,516 $(278,225) $2,760,956 - ---------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of these Consolidated Financial Statements.
WORKING CAPITAL (Millions) 84 85 86 87 88 89 90 91 92 93 94 -------- -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- ---------- $.181 $.420 $.587 $.630 $.568 $.686 $.884 $1,084 $1,063 $1,513 $1,750
69 17 CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------------- (Thousands)
1994 1993 1992 - --------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 448,343 $ 390,999 $ 455,497 - --------------------------------------------------------------------------------------- IMPACT OF OTHER OPERATING ACTIVITIES ON CASH FLOWS Depreciation and Amortization 267,888 271,353 246,977 Special and Nonrecurring Items -- (2,617) -- - --------------------------------------------------------------------------------------- CHANGE IN ASSETS AND LIABILITIES Accounts Receivable (235,488) (219,534) (101,545) Inventories (136,740) 70,006 (73,657) Accounts Payable and Accrued Expenses 49,724 14,943 118,289 Income Taxes 30,887 20,773 82,369 Other Assets and Liabilities (63,536) (97,784) 26,198 - --------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 361,078 448,139 754,128 - --------------------------------------------------------------------------------------- INVESTING ACTIVITIES Capital Expenditures (319,676) (295,804) (429,545) Businesses Acquired -- -- (60,043) Proceeds from Sale of Business -- 285,000 -- Tax Effect of Gain on Sale of Business -- (64,750) -- - --------------------------------------------------------------------------------------- CASH USED FOR INVESTING ACTIVITIES (319,676) (75,554) (489,588) - --------------------------------------------------------------------------------------- FINANCING ACTIVITIES Net Proceeds (Repayments) of Commercial Paper Borrowings and Certificates of Deposit 9,500 (25,939) (322,119) Repayments of Long-Term Debt -- (100,000) -- Proceeds from Issuance of Unsecured Notes -- 250,000 150,000 Dividends Paid (128,939) (130,681) (101,730) Purchase of Treasury Stock (11,382) (93,328) -- Stock Options and Other 11,641 6,686 16,809 - --------------------------------------------------------------------------------------- NET CASH USED FOR FINANCING ACTIVITIES (119,180) (93,262) (257,040) - --------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (77,778) 279,323 7,500 Cash and Equivalents, Beginning of Year 320,558 41,235 33,735 - --------------------------------------------------------------------------------------- CASH AND EQUIVALENTS, END OF YEAR $ 242,780 $ 320,558 $ 41,235 - --------------------------------------------------------------------------------------- The accompanying Notes are an integral part of these Consolidated Financial Statements.
70 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - - PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements include the accounts of The Limited, Inc. (the Company) and all significant subsidiaries which are more than 50% owned and controlled. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in other entities (including joint ventures) which are more than 20% owned are accounted for on the equity method. - - FISCAL YEAR The Company's fiscal year ends on the Saturday closest to January 31. Fiscal years are designated in the financial statements and notes by the calendar year in which the fiscal year commences. The results for fiscal years 1994, 1993 and 1992 represent the 52-week periods ended January 28, 1995, January 29, 1994 and January 30, 1993. - - CASH AND EQUIVALENTS Cash and equivalents include amounts on deposit with financial institutions and money market investments with maturities of less than 90 days. - - INVENTORIES Inventories are principally valued at the lower of average cost or market, on a first-in first-out basis, utilizing the retail method. - - PROPERTY AND EQUIPMENT Depreciation and amortization of property and equipment are computed for financial reporting purposes on a straight-line basis, using service lives ranging principally from 10-30 years for buildings and improvements and 3-10 years for other property and equipment. The cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments which extend service lives are capitalized. - - GOODWILL AMORTIZATION Goodwill represents the excess of the purchase price over the fair value of the net assets of acquired companies and is amortized on a straight-line basis principally over 30 years. - - INTEREST RATE SWAP AGREEMENTS The difference between the amount of interest to be paid and the amount of interest to be received under interest rate swap agreements due to changing interest rates is charged or credited to interest expense over the life of the swap agreement. Gains and losses from the disposition of swap agreements are deferred and amortized over the term of the related agreements. - - INCOME TAXES Effective January 31, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) 109, "Accounting for Income Taxes." SFAS 109 requires a change from the deferred method of accounting for income taxes to the liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse. Under SFAS 109, the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Under the deferred method, which was applied in 1992 and prior years, deferred income taxes are recognized for income and expense items that are reported in different years for financial reporting purposes and income tax purposes using the tax rate applicable for the year of calculation. Under the deferred method, deferred taxes are not adjusted for subsequent changes in tax rates. 71 19 - - SHAREHOLDERS' EQUITY Five hundred million shares of $.50 par value common stock are authorized, of which 357.6 million and 357.8 million were outstanding, net of 21.8 million shares and 21.7 million shares held in treasury at January 28, 1995 and January 29, 1994. Ten million shares of $1.00 par value preferred stock are authorized, none of which have been issued. - - NET INCOME PER SHARE Net income per share is computed based upon the weighted average number of outstanding common shares, including the effect of stock options. There were 358.6 million, 363.2 million and 363.7 million weighted average outstanding shares for 1994, 1993 and 1992. - - ISSUANCE OF SUBSIDIARY STOCK Gains or losses resulting from stock issued by a subsidiary of the Company are recognized in current year's income. In 1992, the Company recognized a $9 million pre-tax gain which resulted from the March 1992 initial public offering of the United Retail Group, Inc. A more detailed discussion of this matter is included under the heading "Gain on Issuance of United Retail Group, Inc. Stock" in Management's Discussion and Analysis on page 63 of this Annual Report. 2 SPECIAL AND NONRECURRING ITEMS During the third quarter of 1993, the Company approved a plan which includes the following components: the sale of a 60% interest in the Brylane mail order business; the acceleration of the store remodeling, downsizing and closing program at the Limited Stores and Lerner divisions; and the refocusing of the merchandise strategy at the Henri Bendel division. The net pre-tax gain from these special and nonrecurring items was $2.6 million. The remodeling, downsizing and closing program includes approximately 360 Limited and Lerner stores and is expected to be completed by the end of 1995. The Company had closed approximately 80 of these stores and remodeled approximately 200 of these stores as of January 28, 1995. The charge for these actions totaled approximately $200 million. Costs remaining to be incurred related to this program are approximately $14 million at January 28, 1995. The net impact of the plan is anticipated to be immaterial. A further discussion of this matter is included under the heading "Special and Non-recurring Items" in Management's Discussion and Analysis on page 62 of this Annual Report. 3 ACCOUNTS RECEIVABLE Accounts receivable consisted of (Thousands):
- ---------------------------------------------------------------------- 1994 1993 - ---------------------------------------------------------------------- Deferred Payment Accounts $1,250,636 $1,013,276 Trade and Other 86,709 78,532 Allowance for Uncollectible Accounts (44,946) (34,897) ---------- ---------- $1,292,399 $1,056,911 - ----------------------------------------------------------------------
Finance charge revenue on the deferred payment accounts amounted to $223.9 million, $174.5 million and $141.8 million in 1994, 1993 and 1992, and the provision for uncollectible accounts amounted to $72.7 million, $50.8 million and $40.0 million in 1994, 1993 and 1992. These amounts are classified as components of the cost to administer the deferred payment program and are included in general, administrative and store operating expenses. 72 20 4 PROPERTY AND EQUIPMENT Property and equipment, at cost, consisted of (Thousands):
- --------------------------------------------------------------------------- 1994 1993 - --------------------------------------------------------------------------- Land, Buildings and Improvements $ 510,563 $ 510,998 Furniture, Fixtures and Equipment 1,714,587 1,571,568 Leaseholds and Improvements 515,226 506,258 Construction in Progress 58,039 49,373 ---------- ---------- 2,798,415 2,638,197 Less: Accumulated Depreciation and Amortization 1,106,270 971,609 ---------- ---------- Property and Equipment, Net $1,692,145 $1,666,588 - ---------------------------------------------------------------------------
5 LEASED FACILITIES AND COMMITMENTS Annual store rent is comprised of a fixed minimum amount, plus contingent rent based upon a percentage of sales exceeding a stipulated amount. Store lease terms generally require additional payments covering taxes, common area costs and certain other expenses. A summary of rent expense for 1994, 1993 and 1992 follows (Thousands):
- --------------------------------------------------------------------------- STORE RENT: 1994 1993 1992 - --------------------------------------------------------------------------- Fixed Minimum $586,437 $540,381 $498,607 Contingent 17,522 19,727 19,043 -------- -------- -------- Total Store Rent 603,959 560,108 517,650 Equipment and Other 27,710 31,897 37,228 -------- -------- -------- Total Rent Expense $631,669 $592,005 $554,878 - ---------------------------------------------------------------------------
At January 28, 1995, the Company was committed to noncancelable leases with remaining terms of one to forty years. A substantial portion of these commitments are store leases with initial terms ranging from ten to twenty years. Accrued rent expense was $116.5 million and $99.1 million at January 28, 1995 and January 29, 1994. A summary of minimum rent commitments under noncancelable leases follows (Thousands): 1995 $ 617,645 1996 606,120 1997 587,825 1998 565,999 1999 539,742 Thereafter $2,802,487
6 LONG-TERM DEBT Long-term debt consisted of (Thousands):
- --------------------------------------------------------- 1994 1993 - --------------------------------------------------------- 7 1/2% Debentures Due March 2023 $250,000 $250,000 7 4/5% Notes Due May 2002 150,000 150,000 9 1/8% Notes Due February 2001 150,000 150,000 8 7/8% Notes Due August 1999 100,000 100,000 -------- -------- $650,000 $650,000 - --------------------------------------------------------
73 21 The Company maintains two revolving credit agreements (the "Agreements") totaling $840 million. One Agreement provides the Company available borrowings of up to $490 million. The other Agreement provides World Financial Network National Bank, a wholly-owned consolidated subsidiary, available borrowings of up to $350 million. Borrowings outstanding under the Agreements are due December 4, 1999. However, the revolving terms of each of the Agreements may be extended an additional two years upon notification by the Company at least 60 days prior to December 4, 1996, subject to the approval of the lending banks. Both Agreements have similar borrowing options, including interest rates which are based on either the lender's "Base Rate," as defined, LIBOR, CD based options or at a rate submitted under a bidding process. Aggregate commitment and facility fees for the Agreements approximate 0.11% of the total commitment. Both Agreements place restrictions on the amount of the Company's working capital, debt and net worth. No amounts were outstanding under the Agreements at January 28, 1995. The Agreements support the Company's commercial paper program which is used from time to time to fund working capital and other general corporate requirements. No commercial paper was outstanding at January 28, 1995. Up to $250 million of debt securities and warrants to purchase debt securities may be issued under the Company's shelf registration statement. All long-term debt outstanding at January 28, 1995 and January 29, 1994 is unsecured. The Company periodically enters into interest rate swap agreements with the intent to manage interest rate exposure. At January 28, 1995, the Company had three interest rate swap positions outstanding, each having a $100 million notional principal amount. One contract effectively changed the Company's interest rate exposure on $100 million of variable rate debt to a fixed rate of 8.09% through July 2000. The counterparty to the swap contract has an option to cancel the remaining term of the contract in July 1995. The remaining two contracts effectively change the interest rate on $200 million of fixed rate debt to a variable rate. These contracts expire in November 1995 and February 1996. No long-term debt matures in years 1995-1998; $100 million matures in 1999. Interest paid approximated $64.7 million, $57.4 million and $60.0 million in 1994, 1993 and 1992. 7 INCOME TAXES The Company adopted SFAS No. 109 effective January 31, 1993. No cumulative effect adjustment was required for the adoption as the difference in deferred income taxes under SFAS 109 and APB Opinion 11 was immaterial. The impact on the year of adoption was also immaterial. The provision for income taxes consisted of (Thousands): - ------------------------------------------------------------------------------ CURRENTLY PAYABLE: 1994 1993 1992 - ------------------------------------------------------------------------------ Federal $231,000 $249,400 $174,900 State 32,000 35,100 28,700 Foreign 4,100 6,400 6,400 -------- -------- -------- 267,100 290,900 210,000 - ------------------------------------------------------------------------------ DEFERRED: Federal 12,900 (41,800) 62,700 State 16,000 4,900 17,300 -------- -------- -------- 28,900 (36,900) 80,000 -------- -------- -------- Total Provision $296,000 $254,000 $290,000 - ------------------------------------------------------------------------------
The foreign component of pre-tax income, arising principally from overseas sourcing operations, was $40.9 million, $54.8 million and $58.7 million in 1994, 1993 and 1992. A reconciliation between the statutory Federal income tax rate and the effective income tax rate follows: 74 22
- ------------------------------------------------------------------------------- 1994 1993 1992 - ------------------------------------------------------------------------------- Federal Income Tax Rate 35.0% 35.0% 34.0% State Income Tax, Net of Federal Income Tax Effect 4.2 4.0 4.0 Other Items, Net .6 .4 .9 ---- ---- ---- 39.8% 39.4% 38.9% - -------------------------------------------------------------------------------
Income taxes payable included current deferred tax assets of $44.5 million and $41.1 million at January 28, 1995 and January 29, 1994. The effect of temporary differences which give rise to deferred income tax balances was as follows (Thousands): - -------------------------------------------------------------------------------------------------------
1994 1993 ------------------------------------ ----------------------------------- ASSETS LIABILITIES TOTAL ASSETS LIABILITIES TOTAL - ------------------------------------------------------------------------------------------------------- Excess of Tax Over Book Depreciation -- $(156,208) $(156,208) -- $(123,539) $(123,539) Undistributed Earnings of Foreign Affiliate -- (109,350) (109,350) -- (103,485) (103,485) Investment in Affiliate -- (28,056) (28,056) -- (39,171) (39,171) State Income Taxes $12,595 -- 12,595 $ 8,681 -- 8,681 Bad Debt Reserve 18,678 -- 18,678 11,022 -- 11,022 Special and Nonrecurring 18,912 -- 18,912 25,092 -- 25,092 Other 30,170 (48,385) (18,215) 23,163 (35,735) (12,572) ------- --------- --------- ------- --------- --------- Total Deferred Income Taxes $80,355 $(341,999) $(261,644) $67,958 $(301,930) $(233,972) - -------------------------------------------------------------------------------------------------------
For the year 1992, deferred income tax expense resulted from timing differences in the recognition of income and expense. The components of the deferred tax provision follow (Thousands):
- --------------------------------------------------------------------------- 1992 - --------------------------------------------------------------------------- Excess of Tax Over Book Depreciation $45,400 Other Items, Net 34,600 ------- $80,000 - ---------------------------------------------------------------------------
Income tax payments approximated $230.9 million, $291.3 million and $199.8 million for 1994, 1993 and 1992. The Internal Revenue Service has assessed the Company for additional taxes and interest for 1989 and 1990. The assessment was based primarily on the treatment of transactions involving the Company's foreign operations and construction allowances. The Company strongly disagrees with the assessment and is vigorously contesting the matter. Management believes resolution of this matter will not have a material adverse effect on the Company's results of operations or financial condition. 8 STOCK OPTIONS AND RESTRICTED STOCK Stock options are granted to officers and key employees based upon fair market value at the date of grant. Option activity for 1992, 1993 and 1994 follows:
- --------------------------------------------------------------------------------------------- Number of Weighted Average Shares Option Price Per Share - --------------------------------------------------------------------------------------------- OUTSTANDING OPTIONS, FEBRUARY 1, 1992 5,122,000 $16.49 Activity During 1992: Granted 1,476,000 23.91 Exercised (772,000) 12.73 Canceled (312,000) 22.99 - --------------------------------------------------------------------------------------------- OUTSTANDING OPTIONS, JANUARY 30, 1993 5,514,000 $18.57 Activity During 1993: Granted 2,457,000 21.74 Exercised (431,000) 12.22 Canceled (357,000) 22.32 - --------------------------------------------------------------------------------------------- OUTSTANDING OPTIONS, JANUARY 29, 1994 7,183,000 $19.87 Activity During 1994: Granted 2,122,000 17.19 Exercised (393,000) 11.44 Canceled (498,000) 21.49 - --------------------------------------------------------------------------------------------- OUTSTANDING OPTIONS, JANUARY 28, 1995 8,414,000 $19.56 - ---------------------------------------------------------------------------------------------
75 23 The Company had approximately 2.2 million shares available for grant at January 28, 1995 as compared to 5.3 million shares available at January 29, 1994 and 7.4 million shares available at January 30, 1993. Approximately 8.4 million shares of the Company's common stock were reserved for outstanding options, of which 4.1 million were exercisable as of January 28, 1995. In 1994 and 1993, approximately 848,000 and 590,000 restricted shares of the Company's common stock were granted to certain officers and key associates. The market value of the shares at the date of grant amounted to $16.7 million in 1994 and $12.7 million in 1993 and is recorded within treasury stock in the accompanying Consolidated Financial Statements. The market value is being amortized as compensation expense over the vesting period which ranges from four to ten years. Compensation expense of $7.3 million and $1.3 million was recorded in 1994 and 1993. 9 RETIREMENT BENEFITS The Company sponsors a defined contribution retirement plan. Participation in this plan is available to all associates who have completed 1,000 or more hours of service with the Company during certain 12 month periods and attained the age of 21. Company contributions#to this plan are based on a percentage of the associates# annual compensation. The cost of this plan was $26.7 million in 1994, $25.9 million in 1993 and $20.1 million in 1992. 10 FINANCE SUBSIDIARY World Financial Network National Bank, a wholly-owned consolidated finance subsidiary, provides private label credit card lines to the customers of certain retail affiliates. Condensed financial information of the finance subsidiary follows (Thousands): - ----------------------------------------------------------------------------------
ASSETS JAN. 28, 1995 JAN. 29, 1994 - ---------------------------------------------------------------------------------- Credit Card Receivables, Net of Allowance for Uncollectible Accounts $1,206,000 $0,978,500 Other Assets, Net 48,900 40,300 ---------- ---------- $1,254,900 $1,018,800 - ---------------------------------------------------------------------------------- LIABILITIES AND INVESTMENT Certificates of Deposit $ 25,200 $ 15,700 Payable to Wholly-Owned Subsidiaries and Affiliates of The Limited, Inc. 37,400 18,200 - ---------------------------------------------------------------------------------- INVESTMENT OF THE LIMITED, INC.: Subordinated Debt 1,095,900 902,700 Equity Investment 96,400 82,200 ---------- ---------- $1,254,900 $1,018,800 - ----------------------------------------------------------------------------------
Holders of credit cards issued by the finance subsidiary are located throughout the United States, and have various available lines of credit which are subject to change by the finance subsidiary. The credit cards are used to purchase merchandise offered for sale by affiliates. 11 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: / / CURRENT ASSETS AND CURRENT LIABILITIES The carrying value of cash equivalents, short-term borrowings, accounts payable and accrued expenses approximates fair value because of their short maturity. The carrying amount of the credit card receivables approximates fair value due to the short maturity and because the average interest rate approximates current market origination rates. / / LONG-TERM DEBT The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. / / INTEREST RATE SWAP AGREEMENTS The fair value of interest rate swaps is the estimated amount that the Company would receive or pay to terminate the swap agreements at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties. 76 24 The estimated fair values of the Company's financial instruments are as follows (Thousands): - --------------------------------------------------------------------------------------
1994 1993 ------------------------- ------------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE - -------------------------------------------------------------------------------------- Long-Term Debt $(650,000) $(620,540) $(650,000) $(712,078) Interest Rate Swaps $ (886) $ (5,970) $ (13) $ (13,289) - --------------------------------------------------------------------------------------
12 QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial results for 1994 and 1993 follow (Thousands except per share amounts): - ---------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH - --------------------------------------------------------------------------------- 1994 QUARTER Net Sales $1,481,628 $1,585,392 $1,715,176 $2,538,596 Gross Income 384,931 402,666 495,295 831,471 Net Income 47,276 53,832 90,490 256,745 Net Income Per Share $0.13 $0.15 $0.25 $0.72 - --------------------------------------------------------------------------------- 1993 QUARTER Net Sales $1,518,561 $1,689,055 $1,616,667 $2,420,805 Gross Income 380,727 427,710 447,048 703,350 Net Income 44,225 68,232 82,215 196,327 Net Income Per Share $0.12 $0.19 $0.23 $0.54 - ---------------------------------------------------------------------------------
MARKET PRICE AND DIVIDEND INFORMATION - --------------------------------------------------------------------------
CASH DIVIDEND MARKET PRICE PER SHARE - --------------------------------------------------------------------------- FISCAL YEAR 1994 HIGH LOW 4th Quarter $21-3/8 $16-7/8 $.09 3rd Quarter 21-5/8 17-1/4 .09 2nd Quarter 20 16-7/8 .09 1st Quarter $22-1/4 $16-3/4 $.09 - -------------------------------------------------------------------------- FISCAL YEAR 1993 4th Quarter $23-1/4 $16-5/8 $.09 3rd Quarter 24 20 .09 2nd Quarter 24-7/8 19-3/4 .09 1st Quarter $30 $21-1/4 $.09 - --------------------------------------------------------------------------
The Company's common stock is traded on the New York Stock Exchange ("LTD") and the London Stock Exchange. On January 28, 1995, there were 74,321 shareholders of record. However, when including active associates who participate in the Company's stock purchase plan, associates who own shares through Company sponsored retirement plans and others holding shares in broker accounts under street name, the Company estimates the shareholder base at approximately 140,000. 77 EX-21 7 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
Jurisdiction Subsidiaries(a) of Incorporation ------------ ---------------- Express, Inc.(b) Delaware Lerner New York, Inc.(c) Delaware Lane Bryant, Inc.(d) Delaware The Limited London-Paris-New York, Inc.(e) Delaware Henri Bendel, Inc.(f) Delaware Victoria's Secret Stores, Inc.(g) Delaware Cacique, Inc.(h) Delaware Victoria's Secret Catalogue, Inc.(i) Delaware Structure, Inc.(j) Delaware Abercrombie & Fitch, Inc.(k) Delaware Bath & Body Works, Inc.(l) Delaware Penhaligon's Limited(m) United Kingdom Limited Too, Inc.(n) Delaware Mast Industries, Inc.(o) Delaware Mast Industries (Far East) Limited(p) Hong Kong Gryphon Development, Inc.(q) Delaware World Financial Network National Bank(r) United States Limited Distribution Services, Inc.(s) Delaware Limited Service Corporation(t) Delaware
- ----------------- (a) The names of certain subsidiaries are omitted since such unnamed subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of January 28, 1995. (b) Express, Inc. is a wholly-owned subsidiary of Express Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (c) Lerner New York, Inc. is a wholly-owned subsidiary of Lerner Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (d) Lane Bryant, Inc. is a wholly-owned subsidiary of Lane Bryant Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (e) The Limited London-Paris-New York, Inc. is a wholly-owned subsidiary of LIM Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (f) Henri Bendel, Inc. is a wholly-owned subsidiary of Henri Bendel Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (g) Victoria's Secret Stores, Inc. is a wholly-owned subsidiary of Victoria's Secret Stores Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (h) Cacique, Inc. is a wholly-owned subsidiary of Cacique Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. 2 (i) Victoria's Secret Catalogue, Inc. is a wholly-owned subsidiary of Victoria's Secret Catalogue Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (j) Structure, Inc. is a wholly-owned subsidiary of Structure Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (k) Abercrombie & Fitch, Inc. is a wholly-owned subsidiary of Abercrombie & Fitch Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (l) Bath & Body Works, Inc. is a wholly-owned subsidiary of Bath and Body Works Holding Corporation, Inc., a Delaware corporation and a wholly-owned subsidiary of the registrant. (m) Penhaligon's Limited is a wholly-owned subsidiary of PENHAL Investments, Inc., a Delaware corporation and a wholly-owned subsidiary of the registrant. (n) Limited Too, Inc. is a wholly-owned subsidiary of Limited Too Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (o) Mast Industries, Inc. is a wholly-owned subsidiary of Mast Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (p) Mast Industries (Far East) Limited is a wholly-owned subsidiary of Mast Industries, Inc. (q) Gryphon Development, Inc. is a wholly-owned subsidiary of the Gryphon Holding Corporation, a Delaware corporation and a wholly-owned subsidiary of the registrant. (r) World Financial Network National Bank is a wholly-owned subsidiary of the registrant. (s) Limited Distribution Services, Inc. is a wholly-owned subsidiary of LTDSP, Inc., a Delaware corporation and a wholly-owned subsidiary of the registrant. (t) Limited Service Corporation is a wholly-owned subsidiary of the registrant. EX-23 8 EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of The Limited, Inc. on Form S-8, Registration Nos. 33-18533, 33-25005, 2-92277, 33-24829, 33-24507, 33-24828, 2-95788, 2-88919, 33-24518, 33-6965, 33-14049, 33-22844, 33-44041, 33-49871 and the registration statements on Form S-3, Registration Nos. 33-20788, 33-31540, 33-43832 and 33-53366 of our report dated February 13, 1995, on our audits of the consolidated financial statements and financial statement schedule of The Limited, Inc. and Subsidiaries as of January 28, 1995, and January 29, 1994, and for the fiscal years ended January 28, 1995, January 29, 1994, and January 30, 1993, which report is included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Columbus, Ohio April 24, 1995 EX-24 9 EXHIBIT 24 1 EXHIBIT 24 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ Leslie H. Wexner ----------------------------------- Leslie H. Wexner 2 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ Michael A. Weiss ----------------------------------- Michael A. Weiss 3 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ Martin Trust ----------------------------------- Martin Trust 4 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ Eugene M. Freedman ----------------------------------- Eugene M. Freedman 5 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ E. Gordon Gee ----------------------------------- E. Gordon Gee 6 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ Thomas G. Hopkins ----------------------------------- Thomas G. Hopkins 7 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ David T. Kollat ----------------------------------- David T. Kollat 8 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ Claudine B. Malone ----------------------------------- Claudine B. Malone 9 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ Donald B. Shackelford ----------------------------------- Donald B. Shackelford 10 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ Allan R. Tessler ----------------------------------- Allan R. Tessler 11 POWER OF ATTORNEY OFFICERS AND DIRECTORS OF THE LIMITED, INC. The undersigned officer and/or director of The Limited, Inc., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its fiscal year ended January 28, 1995 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 27th day of January, 1995. /s/ Raymond Zimmerman ----------------------------------- Raymond Zimmerman EX-27 10 EXHIBIT 27
5 1,000 YEAR JAN-28-1995 JAN-30-1995 JAN-28-1995 242,780 0 1,337,345 44,946 870,440 2,547,666 2,798,415 1,106,270 4,570,077 797,555 650,000 189,727 0 0 2,849,454 4,570,077 7,320,792 7,320,792 5,206,429 5,206,429 1,315,374 0 65,381 744,343 296,000 448,343 0 0 0 448,343 1.25 1.25
EX-99 11 EXHIBIT 99 1 EXHIBIT 99 [ARY, EARMAN and ROEPCKE LETTERHEAD] REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Plan Administrator of The Limited, Inc. Savings and Retirement Plan: We have audited the accompanying statements of net assets available for benefits of The Limited, Inc. Savings and Retirement Plan as of December 31, 1994 and 1993, and the related statements of changes in net assets available for benefits for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1994 and 1993, and the changes in net assets available for benefits for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. /s/ ARY, EARMAN and ROEPCKE ------------------------------- Columbus, Ohio March 29, 1995. 2 THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1994
Limited Fixed TOTAL Stock Fund Income Fund Indexed Fund World Fund ------------ ------------ ------------ ------------ ------------ ASSETS Investments, at Fair Value: Determined by Quoted Market Price Common Stock of The Limited, Inc. (Cost $31,473,031) $ 74,213,936 $ 74,213,936 $ - $ - $ - Vanguard Indexed Mutual Fund (Cost $21,363,025) 22,393,334 - - 22,393,334 - Vanguard World Mutual Fund (Cost $16,934,527) 17,568,066 - - - 17,568,066 Determined By Contract Value: Guaranteed Investment Contracts: Vanguard Investment Contract Trust 54,831,553 - 54,831,553 - - Metropolitan Life Insurance 12,983,134 - 12,983,134 - - Temporary Investments (Cost Approximates Fair Value) 38,054 10,693 21,013 3,000 3,348 ------------ ------------ ------------ ------------ ------------ Total Investments 182,028,077 74,224,629 67,835,700 22,396,334 17,571,414 Contribution Receivable from Employers 16,899,542 2,706,921 8,659,768 3,198,332 2,334,521 Receivable from Employers for Withheld Participants' Contributions 936,072 147,762 351,168 264,962 172,180 Due from Brokers 1,406,791 1,406,791 - - - Interfund Transfers - (916,433) 408,641 456,929 50,863 Accrued Interest and Dividends 2,622 1,287 771 291 273 Other Assets 412 - - - 412 ------------ ------------ ------------ ------------ ------------ Total Assets 201,273,516 77,570,957 77,256,048 26,316,848 20,129,663 LIABILITIES Administrative Fees Payable 372,240 161,033 134,051 43,429 33,727 ------------ ------------ ------------ ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS $200,901,276 $ 77,409,924 $ 77,121,997 $ 26,273,419 $ 20,095,936 ============ ============ ============ ============ ============
The accompanying notes are an integral part of this financial statement. F-1 3 THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1993
Limited Fixed TOTAL Stock Fund Income Fund Indexed Fund World Fund ------------ ------------ ------------ ------------ ------------ ASSETS Investments, at Fair Value: Determined by Quoted Market Price Common Stock of The Limited, Inc. (Cost $28,548,294) $ 76,924,612 $ 76,924,612 $ - $ - $ - Vanguard Indexed Mutual Fund (Cost $15,690,019) 17,288,449 - - 17,288,449 - Vanguard World Mutual Fund (Cost $13,532,146) 13,799,287 - - - 13,799,287 Determined By Contract Value: Guaranteed Investment Contracts: Vanguard Investment Contract Trust 46,129,637 - 46,129,637 - - Metropolitan Life Insurance 11,929,738 - 11,929,738 - - John Hancock Life Insurance 1,693,809 - 1,693,809 - - Temporary Investments (Cost Approximates Fair Value) 351,056 2,390 312,905 17,880 17,881 ------------ ------------ ------------ ------------ ------------ Total Investments 168,116,588 76,927,002 60,066,089 17,306,329 13,817,168 Contribution Receivable from Employers 16,654,367 2,961,061 8,853,901 2,637,242 2,202,163 Receivable from Employers for Withheld Participants' Contributions 884,649 111,468 381,942 227,114 164,125 Due from Brokers 531,601 531,601 - - - Interfund Transfers - (856,847) 373,730 340,564 142,553 Accrued Interest and Dividends 1,373 621 358 143 251 Other Assets 780 - 368 - 412 ------------ ------------ ------------ ------------ ------------ Total Assets 186,189,358 79,674,906 69,676,388 20,511,392 16,326,672 ------------ ------------ ------------ ------------ ------------ LIABILITIES Other Liabilities 1,218 1,218 - - - Administrative Fees Payable 699,365 320,641 249,463 71,876 57,385 ------------ ------------ ------------ ------------ ------------ Total Liabilities 700,583 321,859 249,463 71,876 57,385 ------------ ------------ ------------ ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS $185,488,775 $ 79,353,047 $ 69,426,925 $ 20,439,516 $ 16,269,287 ============ ============ ============ ============ ============
The accompanying notes are an integral part of this financial statement. F-2 4 THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1994
Limited Fixed Total Stock Fund Income Fund Indexed Fund World Fund ------------ ------------ ------------ ------------ ------------ Investment Income: Increase (Decrease) in Net Unrealized Appreciation $ 1,716,786 $ 1,918,510 $ - $ (568,121) $ 366,397 Realized Gain on Sale of Securities 3,033,768 2,781,458 - 206,695 45,615 Interest 4,123,855 9,181 4,110,632 2,223 1,819 Dividends 1,575,897 1,575,897 - - - Mutual Funds' Earnings 864,642 - - 661,477 203,165 ------------ ------------ ------------ ------------ ------------ Total Investment Income 11,314,948 6,285,046 4,110,632 302,274 616,996 ------------ ------------ ------------ ------------ ------------ Contributions: Employers 23,236,673 4,220,346 11,221,074 4,509,396 3,285,857 Participants 10,745,605 2,466,228 3,919,556 2,532,832 1,826,989 ------------ ------------ ------------ ------------ ------------ Total Contributions 33,982,278 6,686,574 15,140,630 7,042,228 5,112,846 ------------ ------------ ------------ ------------ ------------ Transfer of Participants' Account Balances to Former Affiliate's Plan (37,482) (14) (37,468) - - ------------ ------------ ------------ ------------ ------------ Interfund Transfers - (1,149,559) 231,825 879,225 38,509 ------------ ------------ ------------ ------------ ------------ Administrative Expense (755,565) (335,032) (270,359) (84,273) (65,901) ------------ ------------ ------------ ------------ ------------ Benefits to Participants (29,091,678) (13,430,138) (11,480,188) (2,305,551) (1,875,801) ------------ ------------ ------------ ------------ ------------ Increase (Decrease) in Net Assets Available for Benefits 15,412,501 (1,943,123) 7,695,072 5,833,903 3,826,649 Beginning Net Assets Available for Benefits 185,488,775 79,353,047 69,426,925 20,439,516 16,269,287 ------------ ------------ ------------ ------------ ------------ Ending Net Assets Available for Benefits $200,901,276 $ 77,409,924 $ 77,121,997 $ 26,273,419 $ 20,095,936 ============ ============ ============ ============ ============
The accompanying notes are an integral part of this financial statement. F-3 5 THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1993
Limited Fixed Total Stock Fund Income Fund Indexed Fund World Fund ------------ ------------ ------------ ------------ ------------ Investment Income: Increase (Decrease) in Net Unrealized Appreciation $(51,165,802) $(51,222,621) $ - $ 537,811 $ (480,992) Realized Gain on Sale of Securities 4,073,977 3,367,169 - 636,926 69,882 Interest 4,439,846 6,689 4,429,569 1,880 1,708 Dividends 1,783,025 1,783,025 - - - Mutual Funds' Earnings 657,135 - - 464,994 192,141 ------------ ------------ ------------ ------------ ------------ Total Investment Income (Loss) (40,211,819) (46,065,738) 4,429,569 1,641,611 (217,261) ------------ ------------ ------------ ------------ ------------ Contributions: Employers 23,371,564 5,561,152 11,270,178 3,496,942 3,043,292 Participants 10,428,961 3,098,271 3,790,368 1,934,509 1,605,813 ------------ ------------ ------------ ------------ ------------ Total Contributions 33,800,525 8,659,423 15,060,546 5,431,451 4,649,105 ------------ ------------ ------------ ------------ ------------ Transfer of Participants' Account Balances from Affiliated Plans 1,140,371 - 514,198 422,367 203,806 ------------ ------------ ------------ ------------ ------------ Transfer of Participants' Account Balances to Former Affiliate's Plan (20,815,838) (5,390,244) (10,483,032) (3,227,343) (1,715,219) ------------ ------------ ------------ ------------ ------------ Interfund Transfers - (4,461,978) 1,028,778 3,401,455 31,745 ------------ ------------ ------------ ------------ ------------ Administrative Expense (752,234) (354,091) (261,967) (75,921) (60,255) ------------ ------------ ------------ ------------ ------------ Benefits to Participants (39,043,060) (20,796,573) (13,029,735) (2,847,422) (2,369,330) ------------ ------------ ------------ ------------ ------------ Increase (Decrease) in Net Assets Available for Benefits (65,882,055) (68,409,201) (2,741,643) 4,746,198 522,591 Beginning Net Assets Available for Benefits 251,370,830 147,762,248 72,168,568 15,693,318 15,746,696 ------------ ------------ ------------ ------------ ------------ Ending Net Assets Available for Benefits $185,488,775 $ 79,353,047 $ 69,426,925 $ 20,439,516 $ 16,269,287 ============ ============ ============ ============ ============
The accompanying notes are an integral part of this financial statement. F-4 6 THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1992
Limited Fixed Balanced Total Stock Fund Income Fund Indexed Fund World Fund Fund ------------ ------------ ------------ ------------ ------------ ------------ Investment Income: Increase (Decrease) in Net Unrealized Appreciation $(35,113,811) $(30,558,791) $ - $ 1,040,860 $ 740,430 $ (6,336,310) Realized Gain on Sale of Securities 14,724,409 14,621,430 - 76,279 26,700 - Master Trusts' Earnings 5,079,699 - 410,088 - - 4,669,611 Interest 3,339,282 20,979 3,317,745 273 285 - Dividends 1,656,283 1,656,283 - - - - Mutual Funds' Earnings 569,200 - - 336,311 232,889 - ------------ ------------ ------------ ------------ ------------ ------------ Total Investment Income (Loss) (9,744,938) (14,260,099) 3,727,833 1,453,723 1,000,304 (1,666,699) ------------ ------------ ------------ ------------ ------------ ------------ Contributions: Employers: Cash 21,629,777 6,331,664 10,291,305 2,211,975 2,391,300 403,533 The Limited, Inc. Common Stock 2,252,884 2,252,884 - - - - Participants 9,745,785 3,664,723 3,776,604 846,944 877,007 580,507 ------------ ------------ ------------ ------------ ------------ ------------ Total Contributions 33,628,446 12,249,271 14,067,909 3,058,919 3,268,307 984,040 ------------ ------------ ------------ ------------ ------------ ------------ Transfer of Participants' Account Balances from Affiliated Plans 121,306,985 61,642,002 12,602,071 - - 47,062,912 ------------ ------------ ------------ ------------ ------------ ------------ Interfund Transfers - (4,110,765) 46,737,477 12,081,798 12,305,257 (67,013,767) ------------ ------------ ------------ ------------ ------------ ------------ Administrative Expense (386,007) (225,205) (113,686) (23,692) (23,424) - ------------ ------------ ------------ ------------ ------------ ------------ Benefits to Participants (43,518,434) (29,018,749) (12,495,636) (877,430) (803,748) (322,871) ------------ ------------ ------------ ------------ ------------ ------------ Increase (Decrease) in Net Assets Available for Benefits 101,286,052 26,276,455 64,525,968 15,693,318 15,746,696 (20,956,385) Beginning Net Assets Available for Benefits 150,084,778 121,485,793 7,642,600 - - 20,956,385 ------------ ------------ ------------ ------------ ------------ ------------ Ending Net Assets Available for Benefits $251,370,830 $147,762,248 $ 72,168,568 $ 15,693,318 $ 15,746,696 $ - ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of this financial statement. F-5 7 THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS (1) DESCRIPTION OF THE PLAN General The Limited, Inc. Savings and Retirement Plan (the "Plan"), formerly The Limited Stores Savings and Retirement Plan, is a defined contribution plan covering certain employees of The Limited, Inc. and its affiliates (the "Employers") who are at least 21 years of age and have completed 1,000 or more hours of service during their first consecutive twelve months of employment or any calendar year beginning in or after their first consecutive twelve months of employment. Certain employees of the Employers, who are covered by a collective bargaining agreement, are not eligible to participate in the Plan. At December 31, 1994, there were 20,891 participants in the Plan. Effective January 1, 1992, the plans of affiliates, except Fulcrum Management Group Savings and Retirement Plan, were merged and all assets and liabilities of the affiliate plans were pooled into the Plan. Effective January 1, 1993, the Fulcrum Management Group Savings and Retirement Plan was merged into the Plan. On August 31, 1993, The Limited, Inc. sold 60% of its interest in Brylane, Inc. and transferred the assets and liabilities allocated to the employees of Brylane, Inc. and its affiliates to the Brylane L.P. Savings and Retirement Plan. The following description of the Plan provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) as amended. Amendments Effective January 1, 1992, the Plan was amended and restated to, among other things, (1) change the sponsorship of the Plan to the Limited Service Corporation from The Limited, Inc., (2) rename the Plan to The Limited, Inc. Savings and Retirement Plan from The Limited Stores Savings and Retirement Plan and (3) change the Employers' retirement contributions as noted under "Employer Contributions" below. Effective April 1, 1992, the Plan was amended and restated to, among other things, (1) allow participants to change investment directions quarterly and in 1% increments from semi-annually and 10%, (2) allow participants to direct the investment of the Employers' retirement contribution and (3) allow the payment of benefits as noted under "Payment of Benefits" below. Contributions Employer Contributions: The Employers may provide a non-service related retirement contribution of 4% of annual compensation up to the Social Security wage base and 7% of annual compensation after that and a service related retirement contribution of 1% of annual compensation for participants who have completed five or more years of vesting service as of the last day of the Plan year. Participants who complete 500 hours of service during the Plan year and are participants on the last day of the Plan year are eligible. The annual compensation of each participant taken into account under the Plan is limited to the maximum amount permitted under Section 401(a)(17) of the Internal Revenue Code. The annual compensation limit for the Plan year ended December 31, 1994, was $150,000. Prior to the amendments effective January 1, 1992 there was no service related retirement contribution. The Employers may provide a matching contribution of 100% of the participant's voluntary contributions up to 3% of the participant's total annual compensation. F-6 8 Participant Voluntary Contributions: A participant may elect to make a voluntary tax-deferred contribution of 1% to 6% of his or her annual compensation up to the maximum permitted under Section 402(g) of the Internal Revenue Code adjusted annually ($9,240 at December 31, 1994). This voluntary tax-deferred contribution may be limited by Section 401(k) of the Internal Revenue Code. A participant earning annually more than $66,000, $64,245 and $62,345, for the years ended December 31, 1994, 1993 and 1992, respectively, may be limited to voluntary contributions to the Plan of less than 6% due to requirements of Section 401(k) of the Internal Revenue Code based on the current levels of participant voluntary contributions. Vesting A participant is fully and immediately vested for voluntary and rollover contributions. A summary of vesting percentages in the Employers' contributions follows:
Years of Vested Service Percentage - ----------------------- ---------- Less than 3 years 0% 3 years 20 4 years 40 5 years 60 6 years 80 7 years 100
Payment Of Benefits The full value of participants' accounts becomes payable upon retirement, disability, or death. Upon termination of employment for any other reason participants' accounts, to the extent vested, become payable. Those participants with vested account balances greater than $3,500 have the option of leaving their accounts invested in the Plan until age 65. All benefits will be paid as a lump-sum distribution. Those participants holding greater than 100 shares of Employer Securities will be distributed the shares. Prior to the amendment effective April 1, 1992, participants had the option of receiving cash in lieu of shares. Effective January 1, 1993, participants have the option of having their benefit paid directly to an eligible retirement plan specified by the participant. A participant who is fully vested in his or her account and who has participated in the Plan for at least five years may obtain an in-service withdrawal from their account based on the percentage amounts designated by the Plan. A participant may also request a hardship distribution due to an immediate and heavy financial need based on the terms of the Plan. Amounts Allocated Participants Withdrawn from the Plan The vested portion of net assets available for benefits allocated to participants withdrawn from the plan as of December 31, 1994 and 1993, is set forth below:
Fixed Limited Income Indexed World Total Stock Fund Fund Fund Fund ---------- ---------- ---------- ---------- ----------- December 31, 1994 $3,894,855 $1,796,254 $1,321,029 $ 452,849 $ 324,723 December 31, 1993 $2,746,868 $ 964,773 $1,332,112 $ 280,308 $ 169,675
Forfeitures Forfeitures are used to reduce the Employers' required contributions. In 1994, 1993 and 1992, forfeitures utilized amounted to $3,851,243, $2,362,621 and $2,937,347, respectively. F-7 9 Expenses and Unallocated Earnings Administrative expenses of the Plan may be paid from the Plan unless the Employers elect to pay such expenses. Prior to July 1, 1992, expenses of the Plan were paid by the Employers. Since July 1, 1992, the Plan has been paying these expenses from earnings not allocated to participants' accounts. Unallocated earnings being held as of December 31, 1994 and 1993 are set forth below:
Limited Fixed Stock Income Indexed World Total Fund Fund Fund Fund -------- -------- -------- -------- --------- December 31, 1994 $354,505 $ 93,066 $146,831 $ 52,607 $ 62,001 December 31, 1993 $974,367 $402,278 $289,298 $149,361 $133,430
Tax Determination The Plan obtained its latest determination letter on January 30, 1995, in which the Internal Revenue Service stated that the Plan, as amended and restated January 11, 1992 and April 1, 1992, was in compliance with the applicable requirements of the Internal Revenue Code. Accordingly, the following Federal income tax rules will apply to the Plan: Voluntary tax-deferred contributions made under the Plan by a participant and contributions made by the Employers to participant accounts are generally not taxable until such amounts are distributed. The participants are not subject to Federal income tax on interest, dividends, or gains in their particular accounts until distributed. The foregoing is only a brief summary of certain tax implications and applies only to Federal tax regulations currently in effect. (2) SUMMARY OF ACCOUNTING POLICIES The Plan's financial statements are prepared on the accrual basis of accounting. Assets of the Plan are valued at fair value. If available, quoted market prices are used to value investments. The amounts for investments that have no quoted market price are shown at their estimated fair value, which is determined based on yields equivalent for such securities or for securities of comparable maturity, quality, and type as obtained from market makers. Guaranteed investment contracts issued by insurance companies are valued at contract value. Contract value represents contributions made under the contract, and interest at the contract rate, less Plan withdrawals and administration expenses charged by the insurance companies. Realized gains or losses on the distribution or sale of securities represent the difference between the average cost of such securities held and the fair value on the date of distribution or sale. INVESTMENTS Net unrealized appreciation, equal to the difference between cost and fair value of all investments held at the applicable valuation dates, is recognized in determining the value of each fund. The unrealized appreciation as of December 31, 1994, 1993 and 1992 follows:
Limited Fixed Indexed Total Stock Fund Income Fund Fund World Fund ------------ ------------ ----------- ----------- ------------ December 31, 1994 $ 44,404,753 $ 42,740,905 $ - $ 1,030,309 $ 633,539 December 31, 1993 $ 50,241,889 $ 48,376,318 $ - $ 1,598,430 $ 267,141 December 31, 1992 $119,696,266 $117,914,976 $ - $ 1,040,860 $ 740,430
F-8 10 The Following is a summary of the net gain on securities sold during the periods ended December 31, 1994, 1993 and 1992:
Limited Fixed Indexed Total Stock Fund Income Fund Fund World Fund ----------- ----------- ----------- ----------- ----------- Period Ended December 31, 1994 Proceeds $26,357,549 $ 4,926,530 $14,779,530 $ 3,511,736 $ 3,139,753 Cost 23,323,781 2,145,072 14,779,530 3,305,041 3,094,138 ----------- ----------- ----------- ----------- ----------- Net Realized Gain $ 3,033,768 $ 2,781,458 $ - $ 206,695 $ 45,615 =========== =========== =========== =========== =========== Period Ended December 31, 1993 Proceeds $47,420,114 $ 4,627,603 $29,287,560 $ 7,187,529 $ 6,317,422 Cost 43,346,137 1,260,434 29,287,560 6,550,603 6,247,540 ----------- ----------- ----------- ----------- ----------- Net Realized Gain $ 4,073,977 $ 3,367,169 $ - $ 636,926 $ 69,882 =========== =========== =========== =========== =========== Period Ended December 31, 1992 Proceeds $33,651,152 $17,863,464 $13,045,550 $ 1,662,911 $ 1,079,227 Cost 18,926,743 3,242,034 13,045,550 1,586,632 1,052,527 ----------- ----------- ----------- ----------- ----------- Net Realized Gain $14,724,409 $14,621,430 $ - $ 76,279 $ 26,700 =========== =========== =========== =========== ===========
Contributions under the Plan are invested in one of four investment funds: (1) The Limited Stock Fund, consisting of common stock of The Limited, Inc., a Delaware corporation (the "Issuer") and parent company of the Employers, (2) the Fixed Income Fund, which is invested in the Vanguard Investment Contract Trust and other guaranteed investment contracts issued by insurance companies, (3) the Indexed Fund, which is invested in the Vanguard Indexed Fund, and (4) the World Fund, which is invested in the Vanguard World Fund. Prior to April 1, 1992, the Fixed Fund was invested through a master trust consisting of guaranteed investment contracts issued by insurance companies and the Plan provided for a Balanced Fund, which was invested through a master trust consisting of stocks, bonds, notes, investment contracts, cash and cash equivalents. Effective April 1, 1992, the Balanced Fund was eliminated as an investment election when the Indexed and World Funds were offered. Participants' voluntary and Employers' contributions may be invested in any one or more of the funds, at the election of the participant. There are 5,968 participants in the Limited Stock Fund, 14,570 in the Fixed Income Fund, 4,657 in the Indexed Fund, and 3,886 in the World Fund at December 31, 1994. The Balanced Fund was held in The Limited, Inc. Balanced Fund Master Trust (the "Balanced Fund Trust") along with other balanced funds of other employee benefit plans of the Employers' affiliates. Effective April 1, 1992, the Balanced Fund Trust was terminated with the assets being sold and cash distributed to the participating plans. The Plan's participation in the Balanced Fund Trust assets was based on fair value and monthly earnings in the Balanced Fund Trust were allocated based on the respective Plan's investment as of the 15th of the month. The Fixed Income Fund was held in The Limited Fixed Income Fund Master Trust (the "Fixed Income Fund Trust") along with other fixed income funds of other employee benefit plans of the Employers' affiliates. Effective April l, 1992, the Fixed Income Fund Trust was terminated and the assets distributed to the respective participating plans. The Plan's participation in the Fixed Income Fund Trust assets was based on fair value and monthly earnings in the Fixed Income Fund Trust were allocated based on the respective Plan's investment as of the 15th of the month in each of the investment pools within the Fixed Income Fund Trust. (4) PLAN ADMINISTRATION The Plan is administered by a Committee, the members of which are appointed by the Board of Directors of the Employers. (5) PLAN TERMINATION Although the Employers have not expressed any intent, the Employers have the right under the Plan to discontinue their contributions at any time. The Limited, Inc. has the right any time, by action of its Board of Directors, to terminate the Plan subject to provisions of ERISA. Upon Plan termination or partial termination, participants will become fully vested in their accounts. F-9 -----END PRIVACY-ENHANCED MESSAGE-----