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  • 1. the limited inc annual report 2000
  • 2. 2 Dear Partner: In the past 12 months we have made For the first 43 weeks of the year, you normally be shopping the malls, were substantial progress toward our stated could clearly feel the progress, and see consumed with chads, butterflies and goal of sustained growth of shareholder it in the results. The brand work was who would be their next president. It value through a portfolio of powerful paying off. Same store sales and profit was the worst Christmas environment fashion brands. were up. Inventories were controlled. in memory, and it took its toll, not only Top stores were winning. Brands were on us, but virtually every significant We made progress in our ongoing more tightly defined. Everything we’ve r e tailer from Wa l - Ma rt to Ne i m a n commitment to talent. Progress in been talking about. Marcus to Home Depot. defining and evolving our brands. Progress across disciplines, and indi- Then came Christmas. It dramatically affected our overall vidual functions. Major progress at results, and I was very dissatisfied with Express, Bath & Body Works and the The N AS DAQ crashed. Consumer con- our final numbers. Victoria’s Secret megabrand. fidence fell. And customers, who would
  • 3. 3 So, on the basis of all that, what are we customer with fashion choices. But, time, we were recognized with the planning to do? not a fit to our strategic platform. Horace Mann Award for our contri- Express, on the other hand, made butions to public education, through Actually, we’re going to stick with our superb brand progress in the past two the ColumbusReads program, a small strategy. years. They understand their customer part of a very large, broad-based very well and offer forward fashion to philanthropic effort that thousands Creating brands. Building value. Best them on a continuing basis. Structure, of our associates participate in. talent. Best processes. Fewer, more or I should now say Express Men’s, can dominant brands that understa n d benefit from Express’s merchandising Good business, good citizenship. The their “best-at” and deliver it with con- vision, their speed to market, the focus right thing to do. sistency. Brands that, simply, know they put on the customer and their how to win. We’ll concentrate on top brand and business disciplines. Is there We go into 2001 healthier than we’ve stores, disciplined inventories and a “there there” in the men’s business? been in some time. And I’m opti- tightly controlled expenses. We’ll stay Absolutely. It’s white space that is not mistic that our fashion is more the course. being served by anyone. And the correct, more forward, with inventor- momentum created by this dual-gender ies well-controlled. And they will stay Why? Because it’s working. And it will brand should be very exciting and com- well-controlled. I’m demanding that continue to work. pelling, with the potential for billions of we carefully manage expenses and dollars in sales. make cuts where appropriate in any Are brands still as important? No, and all parts of the business. they’re more so. Whether it’s Ralph In short, a win-win . . . and we are work- Lauren or Express, Tiffany or Victoria’s ing to make it happen. Which leads me to the format for this Secret, customers prefer brands. annual report. Normally, you’d see a Period. Even as we’ve made that decision, I glossier, slicker, more expensive book. want you to know that I’ve instructed But I really couldn’t justify the expense. So we will continue to build a portfolio our brands to plan very conserv- Why spend that kind of money on of powe rful, cut-through bra n d s . atively for the next nine months. I’ve information that, on the day it’s pro- Brands that not only win, but lead instructed the CEOs, the merchants duced, is at least three months old and their respective categories. And we and the marketers to nail the funda- gets older from there? You can access will distort all of our efforts against mentals and stay on them. Clear, up-to-the-minute financial information those brands. Because they have the consistent fashion and visuals that from our Web site (www.Limited.com) ability to achieve greater results maintain and enhance their individual on a daily basis. The traditional annual faster, and with consistency. Which is b rand images. No freelancing. No report is probably obsolete. It was time why, recently, we announced two sig- divergence. Good business practices. to move to next. nificant decisions: first, our plan to Well-executed. sell Lane Bryant. And second, to inte- The very definition of a fashion brand. grate the Structure men’s business I also believe, by the way, that good into Express, creating a dual-gender businesspeople should be good citi- b ra n d , under the leadership of zens. Two interesting facts: we were Express CEO Michael Weiss. recently ranked second among spe- cialty retailers in terms of overall To anyone who follows our business, reputational quality in the Fortune what’s going on here is very clear. And magazine annual survey. That means Sincerely, completely consistent with our stated our message and our strategy are objectives. Lane Bryant is an excel- penetrating the broader community Leslie H. Wexner lent retailer, providing the plus-size in a meaningful way. At the same Chairman and Chief Executive Officer
  • 4. 4 contents 0 2 L E TTER FR OM T HE C HAIRM AN 05 FI NANC IAL RES ULTS 0 6 FI NANCIA L SUMM AR Y AND M A N AG E M E N T’S DIS CUSS ION A ND AN ALYS I S 11 C O N S O L I DAT ED S TAT E M E N TS O F I NCOME AN D C O N S O L I DATED STAT E M E N TS OF SHAR EHO LD ERS ’ E Q U I TY 12 C O N S O L I DAT ED B AL A NCE SHEE TS AN D C O N S O L I DATED S TAT E M E N TS O F C ASH FL OW S 12 N OTE S T O CO NS OLIDATED F INAN CIAL S TAT E M E N TS 16 MARK ET PR ICE AND DIVI DE ND INF O R M AT I O N 17 R E P O RT OF IN DE PEND EN T AC C O U N TA N TS 17 P H I LA N T H R O PY 2 0 OU R B RA NDS 2 2 E X P R E SS 24 LE R NER NEW YO R K 2 6 THE LI MITED 2 8 LA NE B RYA N T 3 0 HE NR I BEND EL 3 2 I N T I M AT E B RAN DS 3 8 C O M PAN Y INF O R M AT I O N
  • 5. express 5 O P E R ATING RES U LTS EXPRESS 2000 1999 1998 Sales (millions) $1,594 $1,367 $1,322 2000 1999 1998 Comparable Store Sales 15% 5% 16% Comparable store sales increase From every angle, Express is a fashion leader. Sales per Average Selling Square Foot $366 $306 $286 6% 6% 5% Apparel businesses International, innovative, sexy, strong. A modern brand 4% 12% 5% Intimate Brands Number of Stores 667 688 702 that delivers runway style, virtually as it heads down 5% 9% 6% Total Limited, Inc. the runway. Great design. Well priced. That’s Expre ss . Net sales (millions) $4,949 $4,709 $4,589 Apparel businesses 5,117 4,632 3,989 Intimate Brands 39 425 787 Other $10,105 $9,766 $9,365 lerner new york Total Limited, Inc. LERNER NEW YORK 2000 1999 1998 Adjusted operating income (millions) A Sales (millions) $1,025 $1,001 $929 $123 $132 $(45) Apparel businesses Comparable Store Sales 4% 12% 5% 754 794 671 Intimate Brands Lerner New York is redefining competitively priced Sales per Average Selling Square Foot $234 $209 $174 (1) (26) 17 Other fashion with its New York & Company brand. Modern, Number of Stores 560 594 643 $876 $900 $643 Total Limited, Inc. city hip, energetic, New York & Company is fashion $0.97 $0.97 $0.68 Adjusted net income per share A with an attitude. Number of stores 2,738 2,912 3,158 Apparel businesses 2,390 2,110 1,890 Intimate Brands 1 1 334 Other lane bryant 5,129 5,023 5,382 Total Limited, Inc. LANE BRYANT 2000 1999 1998 Sales (millions) $930 $922 $922 Selling square feet (thousands) Comparable Store Sales 2% 5% 5% 15,943 17,091 18,517 Apparel businesses Hot fashion, star power, sizzling brands. Lane Bryant’s Sales per Average Selling Square Foot $286 $269 $254 7,246 6,466 5,794 Intimate Brands sportswear line, Venezia Jeans Clothing Co., and sexy 35 35 2,005 Other Number of Stores 653 688 730 new intimates line, Cacique, set the standard in hip 23,224 23,592 26,316 Total Limited, Inc. fashion for women size 14+. Sales per average selling square foot $290 $258 $234 Apparel businesses $601 $596 $552 Intimate Brands the limited YEAR-END POSITION THE LIMITED 2000 1999 1998 Sales (millions) $673 $704 $746 (Millionsexcept financial ratios) 2000 1999 % Change Comparable Store Sales 5% 5% 1% The Limited brand designs sophisticated sportswear for $4,088 $4,126 (1%) Total assets Sales per Average Selling Square Foot $259 $230 $208 $1,068 $1,049 2% Working capital the Modern American Woman, who wants accessible Number of Stores 389 443 551 2.1 1.8 Current ratio feminine fashion at a great value. $400 $400 – Long-term debt 17% 19% Debt-to-equity ratio $2,316 $2,147 8% Shareholders’ equity 19% 21% Adjusted return on average shareholders’ equity A 11% 10% Adjusted return on average assets A structure STRUCTURE 2000 1999 1998 Sales (millions) $569 $607 $599 Comparable Store Sales (4%) 4% (8%) On February 28, 2001, The Limited, Inc. Sales per Average Selling Square Foot $295 $296 $281 announced the integration of Structure into Number of Stores 469 499 532 Express as Express Men’s. Structure will be reunited with its original brand — it was founded in 1987 as a division of Expre ss . intimate brands INTIMATE BRANDS 2000 1999 1998 Sales (millions) $5,117 $4,632 $3,989 Comparable Store Sales 4% 12% 5% The Limited, Inc. owns approximately 84% of Intimate Sales per Average Selling Square Foot $601 $596 $552 Brands, Inc. (NYSE: IBI). IBI is the leading specialty Number of Stores 2,390 2,110 1,890 retailer of intimate apparel, personal care and beauty products, sold through the Victoria’s Secret, Bath & Body Works and White Barn Candle Company brands. Q UA RT E R LY RES U LTS (Millions) Apparel Businesses Intimate Brands Total Limited, Inc. 2000 1999 % Change 2000 1999 % Change 2000 1999 % Change Sales $1,071 $1,046 2% $1,044 $908 15% $2,125 $2,117 – First Quarter 1,090 1,063 3% 1,191 1,054 13% 2,289 2,289 – Second Quarter 1,214 1,152 5% 944 832 13% 2,169 2,064 5% Third Quarter 1,574 1,448 9% 1,938 1,838 5% 3,522 3,296 7% Fourth Quarter $4,949 $4,709 5% $5,117 $4,632 10% $10,105 $9,766 3% Total Year Adjusted operating income A $12 $1 nm $116 $95 22% $127 $89 43% First Quarter (13) (11) (18%) 171 156 10% 157 139 13% Second Quarter 23 23 – 80 72 11% 105 90 17% Third Quarter 101 119 (15%) 387 471 (18%) 487 582 (16%) Fourth Quarter $123 $132 (7%) $754 $794 (5%) $876 $900 (3%) Total Year Adjusted amounts exclude special items and reflect the Limited Too spin-off and Abercrombie & Fitch split-off as if they had occurred on February 1, 1998. See the “Other Data” section on pages 8 and 9 for a discussion of these items. A nm not meaningful
  • 6. 6 FINANCIAL SUMMARY (Millions except per share amounts, ratios and store and associate data) Summary of Operations 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 F A A ABF A B Net sales $10,105 $9,766 $9,365 $9,200 $8,652 $7,893 $7,321 $7,245 $6,944 $6,149 $5,254 Gross income $3,437 $3,323 $2,940 $2,736 $2,424 $2,033 $2,108 $1,959 $1,991 $1,794 $1,630 Operating income C $866 C $931 C $2,424 C $469 C $636 C $612 $796 C $702 $789 $713 $698 Operating income as a percentage of sales 8.6% 9.5% 25.9% 5.1% 7.4% 7.8% 10.9% 9.7% 11.4% 11.6% 13.3% C C C C C C C Net income $428 $461 $2,046 $212 $434 $961 $447 $391 $455 $403 $398 D D D D D D D D Net income as a percentage of sales D 4.2% D 4.7% D 21.9% D 2.3% D 5.0% D 12.2% 6.1% D 5.4% D 6.6% 6.6% 7.6% Per Share Results Basic net income $1.00 $1.05 $4.25 $0.39 $0.78 $1.35 $0.63 $0.55 $0.63 $0.56 $0.56 D D D D D D D D Diluted net income D $0.96 D $1.00 D $4.15 D $0.39 D $0.77 D $1.34 $0.63 D $0.54 D $0.63 $0.56 $0.55 Dividends $0.30 $0.30 $0.26 $0.24 $0.20 $0.20 $0.18 $0.18 $0.14 $0.14 $0.12 Book value $5.44 $5.00 $4.78 $3.64 $3.45 $4.43 $3.78 $3.41 $3.13 $2.60 $2.17 Weighted average diluted shares outstanding 443 456 493 549 564 717 717 726 727 727 724 Other Financial Information Total assets $4,088 $4,126 $4,550 $4,301 $4,120 $5,267 $4,570 $4,135 $3,846 $3,419 $2,872 Return on average assets D 10% D 11% D 46% D 5% D 9% D 20% 10% D 10% D 13% 13% 15% Working capital $1,068 $1,049 $1,127 $1,001 $712 $1,962 $1,694 $1,513 $1,063 $1,084 $884 Current ratio 2.1 1.8 2.0 2.0 1.9 3.3 3.0 3.1 2.5 3.1 2.8 Capital expenditures $446 $375 $347 $363 $361 $374 $320 $296 $430 $523 $429 Long-term debt $400 $400 $550 $650 $650 $650 $650 $650 $542 $714 $540 Debt-to-equity ratio 17% 19% 25% 33% 35% 21% 24% 27% 24% 38% 35% Shareholders’ equity $2,316 $2,147 $2,167 $1,986 $1,869 $3,148 $2,705 $2,441 $2,268 $1,877 $1,560 Return on average shareholders’ equity D 19% D 21% D 99% D 11% D 17% D 33% 17% D 17% D 22% 23% 28% Comparable store sales increase (decrease) 5% 9% 6% 0% 3% (2%) (3%) (1%) 2% 3% 3% Stores and Associates at End of Year Total number of stores open 5,129 5,023 5,382 5,640 5,633 5,298 4,867 4,623 4,425 4,194 3,760 Selling square feet 23,224 23,592 26,316 28,400 28,405 27,403 25,627 24,426 22,863 20,355 17,008 Number of associates 123,700 114,600 126,800 131,000 123,100 106,900 105,600 97,500 100,700 83,800 72,500 Fifty-three-week fiscal year. F Includes the results of the following companies disposed of up to their separation date: 1) Galyan’s Trading Co. (“Galyan’s”) effective August 31, 1999; 2)Limited Too (“TOO”) effective August 23, 1999; 3) Abercrombie & Fitch (“A&F”) effective May 19, 1998; 4) Alliance Data Systems effective January 31, 1996; A and 5) Brylane, Inc. effective August 31, 1993. B Includes the results of Galyan’s and Gryphon subsequent to their acquisitions on July 2, 1995 and June 1, 1991. C Operating income includes the net effect of special and nonrecurring items of ($9.9) million in 2000, $23.5 million in 1999 and $1.740 billion in 1998 (see Note 2 to the Consolidated Financial Statements), ($213.2) million in 1997, ($12.0) million in 1996, $1.3 million in 1995 and $2.6 million in 1993. Inventory liquidation charges of ($13.0) million related to Henri Bendel store closings are also included in 1997. D In addition to the items discussed in C above, net income includes the effect of the following gains: 1) $11.0 million related to Galyan’s in 1999; 2) $8.6 million related to Brylane, Inc. in 1997; 3) $118.2 million related to A&F in 1996; 4) $649.5 million related to Intimate Brands, Inc. in 1995; and 5) $9.1 million related to United Retail Group in 1992. Note: Amounts for fiscal years 1995–1999 reflect the reclassification of catalog shipping and handling revenues and costs and associate discounts (see Note 1 to the Consolidated Financial Statements). M A N AG E M E N T’S DISCUSSION AND ANALYS I S The following summarized financial data compares reported 2000 results to the comparable periods for 1999 and 1998 (millions): % Change Results of Operations Net Sales 2000 1999 1998 2000–1999 1999–1998 A $1,594 $1,367 $1,322 17% 3% Express Net sales for the fourteen-week fourth quarter of 2000 were 1,025 1,001 929 2% 8% Lerner New York $3.522 billion, a 7% increase from $3.296 billion for the 930 922 922 1% – Lane Bryant thirteen-week fourth quarter of 1999. Comparable store sales 673 704 746 (4%) (6%) Limited Stores increased 2% for the quarter. Gross income decreased 1% to 569 607 599 (6%) 1% Structure $1.277 billion in the fourth quarter of 2000 from $1.291 billion 158 108 71 46% 52% Other (principally Mast) in 1999 and operating income decreased 23% to $477.5 million $4,949 $4,709 $4,589 5% 3% Total apparel businesses from $619.1 million in 1999. Net income was $238.1 million 2,339 2,122 1,816 10% 17% Victoria’s Secret Stores in the fourth quarter of 2000 versus $316.5 million in 1999, 1,785 1,530 1,254 17% 22% Bath & Body Works and earnings per share were $0.54 versus $0.70 in 1999. 962 956 894 1% 7% Victoria’s Secret Direct Net sales for the fifty-three-week year ended February 3, 31 24 25 29% (4%) Other $5,117 $4,632 $3,989 10% 16% 2001 were $10.105 billion, a 3% increase from $9.766 bil- Total Intimate Brands 39 38 39 3% (3%) Henri Bendel lion for the fifty-two-week year ended January 29, 2000. – 165 220 nm nm Galyan’s (through August 31,1999) Gross income increased 3% to $3.437 billion in 2000 from – 222 375 nm nm TOO (through August 23, 1999) $3.323 billion in 1999 and operating income was $866.1 mil- – – 153 nm nm A&F (through May 19, 1998) lion in 2000 versus $930.8 million in 1999. Net income for $10,105 $9,766 $9,365 3% 4% Total net sales 2000 was $427.9 million, or $0.96 per share, compared to $460.8 million, or $1.00 per share, last year. Operating Income There were a number of items in 2000 and 1999 that $123 $132 $(45) (7%) 393% Apparel businesses impacted the comparability of the Company’s reported finan- 754 794 671 (5%) 18% Intimate Brands cial results. See the “Special and Nonrecurring Items” and (1) (19) 58 nm nm Other “Other Data” sections herein for a discussion of these items. 876 907 684 (3%) 33% Subtotal (10) 24 1,740 Special and nonrecurring items F $866 $931 $2,424 Total operating income Fifty-three-week fiscal year. A Special and nonrecurring items— F 2000: a $9.9 million charge for Intimate Brands to close Bath & Body Works’ nine stores in the United Kingdom. 1999: 1) a $13.1 million charge for transaction costs related to the TOO spin-off; and 2) the reversal of a $36.6 million liability related to downsizing costs for Henri Bendel. These special items relate to the “Other” category. 1998: 1) a $1.651 billion tax-free gain on the split-off of A&F; 2) a $93.7 million gain from the sale of the Company’s remaining interest in Brylane; and 3) a $5.1 million charge for severance and other asso- ciate termination costs related to the closing of Henri Bendel stores. These special items relate to the “Other” category. nm not meaningful
  • 7. to a small extent, the inclusion of sales for the fifty-third 7 The following summarized financial data compares reported 2000 results to the comparable periods for 1999 and 1998: week. These gains were partially offset by the loss of sales from Galyan’s and TOO. Comparable Store Sales 2000 1999 1998 15% 5% 16% In 2000, IBI sales increased 10% to $5.117 billion from Express 4% 12% 5% Lerner New York $4.632 billion in 1999. The increase was primarily due to the 2% 5% 5% Lane Bryant net addition of 280 new stores and a 4% increase in compa- 5% 5% 1% Limited Stores rable store sales. Bath & Body Works led IBI with sales (4%) 4% (8%) Structure increasing 17% to $1.785 billion from $1.530 billion in 6% 6% 5% Total apparel businesses 1999, primarily due to the net addition of 218 new stores 5% 12% 4% Victoria’s Secret Stores (549,000 selling square feet). Victoria’s Secret Stores’ sales 1% 11% 7% Bath & Body Works increased 10% to $2.339 billion from $2.122 billion in 1999. 4% 12% 5% Total Intimate Brands The sales increase was primarily due to a 5% increase in com- (1%) 7% (12%) Henri Bendel parable store sales and the net addition of 62 new stores – 9% 5% Galyan’s (through August 31, 1999) (231,000 selling square feet). Sales at Victoria’s Secret Direct – 9% 15% TOO (through August 23, 1999) increased 1% to $962.4 million from $956.0 million in 1999. – – 48% A&F (through May 19, 1998) The apparel businesses reported a retail sales increase of 5% 9% 6% Total comparable store sales 4% to $4.791 billion from $4.601 billion in 1999. The sales increase was primarily due to a 6% comparable store % Change sales increase, partially offset by the net closure of 174 Store Data 2000 1999 1998 2000-1999 1999-1998 stores (1.1 million selling square feet). Retail sales increase (decrease) Net sales for the year were $9.766 billion in 1999 com- due to net new (closed) pared to $9.365 billion in 1998. The increase was due to a and remodeled stores 9% comparable store sales increase that was partially offset (4%) (3%) Apparel businesses (4%) by the net closure of stores in the apparel segment and the 7% 7% 7% Intimate Brands loss of sales from Galyan’s, TOO and Abercrombie & Fitch Retail sales per average (“A&F”) subsequent to its May 19, 1998 split-off. selling square foot In 1999, IBI sales increased 16% to $4.632 billion from $290 $258 $234 12% 10% Apparel businesses $601 $596 $552 1% 8% Intimate Brands $3.989 billion in 1998, due to a 12% increase in comparable Retail sales per average store sales, the net addition of 220 new stores and a 7% store (thousands) increase in sales at Victoria’s Secret Direct. Bath & Body $1,696 $ 1,516 $1,368 12% 11% Apparel businesses Works led IBI with a 22% sales increase to $1.530 billion. $1,833 $1,826 $1,705 – 7% Intimate Brands The sales increase was primarily due to the net addition of Average store size at end 153 new stores (398,000 selling square feet), as well as an of year (selling square feet) 11% increase in comparable store sales. Victoria’s Secret 5,823 5,869 5,864 (1%) – Apparel businesses Stores’ sales increased 17% to $2.122 billion. The sales 3,032 3,064 3,066 (1%) – Intimate Brands increase was primarily due to a 12% increase in comparable Selling square feet at store sales and the net addition of 67 new stores (274,000 end of year (thousands) selling square feet). Sales at Victoria’s Secret Direct increased 15,943 17,091 18,517 (7%) (8%) Apparel businesses 7% to $956.0 million in 1999. The sales increase was due to 7,246 6,466 5,794 12% 12% Intimate Brands an increased response rate, higher sales per catalog page and Apparel and Other Businesses Intimate Brands increased e-commerce sales through www.VictoriasSecret.com. Number of Stores 2000 1999 1998 2000 1999 1998 In 1999, the apparel businesses reported a retail sales 2,913 3,492 3,930 2,110 1,890 1,710 Beginning of year increase of 2% to $4.601 billion from $4.517 billion in 1998. 25 54 50 305 241 201 Opened The sales increase was primarily due to a 6% comparable (199) (280) (329) (25) (21) (21) Closed store sales increase. All apparel businesses reported compara- Businesses disposed of ble store sales increases, led by Lerner New York, which – (18) – – – – Galyan’s reported an increase of 12%. The effect of these increases on – (335) – – – – TOO total sales was partially offset by the net closure of 246 – – (159) – – – A&F apparel stores (1.4 million selling square feet). 2,739 2,913 3,492 2,390 2,110 1,890 End of year Gross Income Fourth Quarter Net Sales Net sales of $3.296 billion for the fourth quarter of 1999 For the fourth quarter of 2000, the gross income rate Fourth Quarter increased 1% over 1998. A comparable store sales increase of (expressed as a percentage of sales) decreased to 36.3% from Net sales for the fourteen-week fourth quarter of 2000 5% was partially offset by the loss of sales from Galyan’s 39.2% for the same period in 1999. The rate decrease was increased 7% to $3.522 billion from $3.296 billion for the Trading Co. (“Galyan’s”) following the third party purchase primarily due to a decrease in the merchandise margin rate as thirteen-week fourth quarter of 1999. The increase was due of a 60% majority interest effective August 31, 1999, and a result of higher markdowns to clear slower selling invento- to the net addition of 106 stores in fiscal year 2000, the inclu- from the loss of Limited Too (“TOO”) sales after its August 23, ry assortments during and after a highly promotional holiday sion of sales for the fourteenth week and a comparable store 1999 spin-off. season. Additionally, a slight increase in the buying and occu- sales increase of 2%. At IBI, net sales for the fourth quarter of 1999 increased pancy expense rate resulted from an increase at IBI that was At Intimate Brands (“IBI”), net sales for the fourth quarter 18% to $1.838 billion from $1.558 billion in 1998. The partially offset by the positive impact of closing underper- of 2000 increased 5% to $1.938 billion from $1.838 billion increase was due to an 11% increase in comparable store forming stores at the apparel businesses. in 1999. The increase was due to the net addition of 280 new sales, the net addition of 220 new stores in fiscal year 1999 For the fourth quarter of 1999, the gross income rate stores in fiscal year 2000 and the inclusion of sales for the and a 14% increase in sales at Victoria’s Secret Direct. At the increased to 39.2% from 35.3% for the same period in 1998. fourteenth week. These factors were partially offset by a 3% apparel retail businesses, net sales for the fourth quarter of The rate increase was principally due to an increase in the decrease in comparable store sales and a 9% decrease in sales 1999 decreased 3% to $1.407 billion from $1.454 billion in merchandise margin rate and a slight decrease in the buying at Victoria’s Secret Direct. These declines were the result of a 1998. The decrease was due to the net closure of 246 stores and occupancy expense rate. The increase in the merchandise difficult holiday season and a promotional retail environment. in fiscal year 1999, partially offset by a 1% increase in com- margin rate was primarily due to improved inventory man- At the apparel retail businesses, net sales for the fourth quarter parable store sales. agement and merchandising strategies. The buying and occu- of 2000 increased 8% to $1.524 billion from $1.407 billion in Full Year pancy expense rate decrease was a result of sales leverage at 1999. The increase was due to a 7% increase in comparable Net sales for the fifty-three-week fiscal year 2000 were store sales and the inclusion of sales for the fourteenth $10.105 billion compared to $9.766 billion for the fifty-two- IBI and the positive impact of closing underperforming stores week, partially offset by the net closure of 174 stores in fis- week fiscal year 1999. Sales increased due to a 5% comparable at the apparel businesses. cal year 2000. store sales increase, the net addition of 106 new stores and,
  • 8. 8 1999, which prevented the completion of the original plan. As $40.9 million in 1999. The decrease was due equally to a Full Year decline in interest income because of lower average invested a result, the Company reversed the $36.6 million liability In 2000, the gross income rate was 34.0%, unchanged from cash balances and an increase in the equity in losses of through the special and nonrecurring items classification. 1999, as a decrease in the merchandise margin rate was offset investees. The decrease in average invested cash balances was a On May 19, 1998, the Company completed a tax-free by an improvement in the buying and occupancy expense rate. result of various financing activities in 2000 and 1999 (see exchange offer to establish A&F as an independent company. The decrease in the merchandise margin rate was primarily “Liquidity and Capital Resources” section on page 9). A total of 94.2 million shares of The Limited’s common stock due to higher markdowns, principally in the fourth quarter. were exchanged at a ratio of 0.86 of a share of A&F common The overall buying and occupancy expense rate improvement Gain on Sale of Subsidiary Stock stock for each Limited share tendered. In connection with the was a result of the benefit from store closings at the apparel As discussed in Note 1 to the Consolidated Financial exchange, the Company recorded a $1.651 billion tax-free businesses, which more than offset a slight increase in the buy- Statements, effective August 31, 1999, a third party pur- gain. This gain was measured based on the $21.81 per share ing and occupancy expense rate at IBI. chased a 60% majority interest in Galyan’s. As a result, the market value of the A&F common stock at the expiration In 1999, the gross income rate increased to 34.0% from Company recorded a pretax gain on sale of subsidiary stock date of the exchange offer. The remaining 6.2 million A&F 31.4% in 1998. The rate increase was due to an increase in of $11 million, offset by a $6 million provision for taxes. In shares were distributed through a pro rata spin-off to Limited the merchandise margin rate and a decrease in the buying and addition, the revised tax basis of the Company’s remaining shareholders. occupancy expense rate. The increase in the merchandise investment in Galyan’s resulted in an additional $7 million Also during 1998, the Company recognized a gain of $93.7 mil- margin rate was primarily due to improved inventory man- deferred tax expense. lion from the sale of its remaining interest in Brylane. This agement and merchandising strategies at the apparel busi- gain was partially offset by a $5.1 million charge for sever- nesses. The buying and occupancy expense rate decrease was Other Data ance and other associate termination costs related to the clos- a result of sales leverage at IBI and the benefit from store clos- The following adjusted income information gives effect to the ing of five of six Henri Bendel stores. The severance charge ings at the apparel businesses. significant transactions and events in 2000, 1999 and 1998 was paid in 1998. that impacted the comparability of the Company’s results. General, Administrative and Store Operating Expenses Operating Income These items are more fully described in the “Special and Fourth Quarter Fourth Quarter Nonrecurring Items” section included herein and in Note 2 to For the fourth quarter of 2000, the general, administrative the Consolidated Financial Statements. The operating income rate in the fourth quarter of 2000 and store operating expense rate (expressed as a percentage Management believes this presentation provides a reason- (expressed as a percentage of sales) decreased to 13.6% from of sales) increased to 22.5% from 21.5% in 1999. The able basis on which to present the adjusted income informa- 18.8% in 1999. Excluding special and nonrecurring items in increase was primarily due to a rate increase at IBI from tion. Although the adjusted income information should not 2000 and 1999, the fourth quarter operating income rate increased investments in store selling at Bath & Body Works be construed as an alternative to the reported results deter- decreased to 13.8% in 2000 from 17.7% in 1999. The rate and Victoria’s Secret Stores in anticipation of the normal hol- mined in accordance with generally accepted accounting prin- decrease was due to a 2.9% decline in the gross income rate iday sales peak. These investments were not fully leveraged ciples, it is provided to assist in investors’ understanding of and a 1.0% increase in the general, administrative and store due to a 3% decrease in comparable store sales. The IBI rate the Company’s results of operations. operating expense rate. increase was offset by sales leverage at the apparel businesses The operating income rate in the fourth quarter of 1999 from a 7% comparable store sales increase. increased to 18.8% from 13.6% in 1998. Excluding the spe- For the fourth quarter of 1999, the general, administrative cial and nonrecurring item in 1999, the fourth quarter oper- and store operating expense rate of 21.5% was essentially flat ating income rate increased to 17.7% in 1999 from 13.6% in compared to 1998. Improved expense leverage at IBI was off- 1998. The rate increase was due to a 3.9% improvement in set by a lack of sales leverage and investments in brand build- the gross margin rate, primarily driven by improvement at the ing activities at the apparel businesses. apparel businesses. Full Year Full Year In 2000, the general, administrative and store operating In 2000, the operating income rate was 8.6% versus 9.5% in expense rate increased to 25.3% from 24.7% in 1999. The 1999. Excluding special and nonrecurring items in both increase was primarily due to a rate increase at IBI due to years, the operating income rate was 8.7% in 2000 versus increased investments in store selling at Bath & Body Works 9.3% in 1999. The rate decrease was driven by a 0.6% and Victoria’s Secret Stores. These investments were not fully increase in the general, administrative and store operating leveraged in large part due to the difficult fourth quarter that expense rate. resulted in a full year comparable store sales increase of only In 1999, the operating income rate was 9.5% versus 4%. Additionally, Bath & Body Works has continued to 25.9% in 1998. Excluding special and nonrecurring items in expand into highly profitable non-mall locations, which typ- both years, the operating income rate was 9.3% in 1999 ver - ically have higher payroll costs as a percentage of sales. sus 7.3% in 1998. The rate improvement was driven by a In 1999, the general, administrative and store operating 2.6% increase in the gross income rate, which more than off- expense rate increased to 24.7% from 24.1% in 1998. The set a 0.6% increase in the general, administrative and store increase was primarily due to a rate increase at IBI due to: operating expense rate. 1) investments in national advertising for Victoria’s Secret, additional store staffing for product extensions, and new ini- Interest Expense tiatives at Victoria’s Secret Stores; and 2) a lack of sales lever- In 2000, the Company incurred $16.7 million and $58.2 mil- age and investments in brand building activities at the apparel lion in interest expense for the fourth quarter and year, com- businesses. pared to $20.9 million and $78.3 million in 1999 for the same periods. These decreases were primarily the result of Special and Nonrecurring Items lower average borrowings during 2000, due to the maturity During the fourth quarter of 2000, the Company recorded a of $100 million in term debt in August 1999 and the $9.9 million special and nonrecurring charge to close Bath & Company’s redemption of $300 million in floating rate notes Body Works’ United Kingdom stores. All nine stores are between November 1999 and February 2000. scheduled to close during the first quarter of 2001. The charge consisted of store and other asset write-offs of Fourth Quarter Year $4.9 million and accruals for lease termination and other 2000 1999 2000 1999 1998 costs of $5.0 million. Average daily In 1999, the Company recognized a $13.1 million charge $778 $969 $717 $970 $808 borrowings (millions) for transaction costs related to the TOO spin-off and a rever- Average effective sal of a $36.6 million liability related to downsizing costs for 7.6% 8.7% 7.9% 8.1% 8.5% interest rate Henri Bendel, initially recognized as a special and nonrecur- Other Income, Net ring charge to operating income in 1997. The execution of the plan to downsize the remaining Henri Bendel store in New For the fourth quarter of 2000, other income (expense), net, York was primarily based on negotiations with the original was ($5.0) million versus $3.4 million in 1999. The decrease landlord. However, a change in landlords ultimately resulted primarily relates to equity in losses of investees in 2000. For fis- in the termination of negotiations during the fourth quarter of cal year 2000, other income was $20.4 million compared to
  • 9. 9 Adjusted Income Information (Millions except per share amounts) 2000 1999 1998 Reported Adjustments Adjusted Reported Adjustments Adjusted Reported Adjustments Adjusted $10,105 – $10,105 $9,766 $(222) $9,544 $9,365 $(528) $8,837 Net sales 3,437 – 3,437 3,323 (74) 3,249 2,940 (177) 2,763 Gross income General, administrative and (2,561) – (2,561) (2,416) 67 (2,349) (2,256) 136 (2,120) store operating expenses (10) $10 – 24 (24) – 1,740 (1,740) – Special and nonrecurring items, net 866 10 876 931 (31) 900 2,424 (1,781) 643 Operating income (58) – (58) (78) – (78) (69) – (69) Interest expense 20 – 20 41 – 41 60 – 60 Other income, net (69) (1) (70) (73) – (73) (64) 2 (62) Minority interest – – – 11 (11) – – – – Gain on sale of subsidiary stock 759 9 768 832 (42) 790 2,351 (1,779) 572 Income before income taxes 331 4 335 371 (26) 345 305 (51) 254 Provision for income taxes $428 $5 $433 $461 $(16) $445 $2,046 $(1,728) $318 Net income $0.96 $0.97 $1.00 $0.97 $4.15 $0.68 Net income per share 443 443 456 456 493 465 Weighted average shares outstanding Notes to Adjusted Income Information A) Excluded businesses TOO and A&F results were excluded in determining adjusted results for 1999 and 1998 as a result of their spin-off on August 23, 1999 (TOO) and split-off on May 19, 1998 (A&F). B) Special items The following special items were excluded in determining adjusted results: • In 2000, a $9.9 million charge to close Bath & Body Works’ nine stores in the United Kingdom. • In 1999, a $36.6 million reversal of a liability related to downsizing costs for Henri Bendel, an $11.0 million gain from the purchase by a third party of a 60% majority interest in Galyan’s and a $13.1 million charge for transaction costs related to the TOO spin-off. • In 1998, a $1.651 billion tax-free gain on the split-off of A&F, a $93.7 million gain from the sale of the Company’s remaining interest in Brylane and a $5.1 million charge for severance and other associate termination costs at Henri Bendel. C) Provision for income taxes The tax effect of the adjustments for e xcluded businesses and special items was calculated using the Company’s overall effective rate of 40%. Additionally, in 1999 the Company’s $11.0 million pretax gain from the Galyan’s transaction described above resulted in a $6.0 million provision for taxes, and the revised tax basis of the Company’s remaining investment in Galyan’s resulted in an additional $7.0 million deferred tax expense. D) Weighted average shares outstanding Total weighted average shares outstanding were reduced as of the beginning of 1998 by the 94.2 million Limited shares tendered in the A&F split-off transaction. FINANCIAL CONDITION The Company’s operations are seasonal in nature and consist In 1998, major investing activities included $347 million in of two principal selling seasons: spring (the first and second capital expenditures, $131 million in proceeds from the sale quarters) and fall (the third and fourth quarters). The fourth of the Company’s remaining investment in Brylane, Inc. and Liquidity and Capital Resources quarter, including the holiday season, has accounted for $31 million in net proceeds associated with the Easton project. Cash provided by operating activities and funds available from 35%, 34% and 35% of net sales in 2000, 1999 and 1998. commercial paper backed by bank credit agreements provide Financing Activities Accordingly, cash requirements are highest in the third quar- the resources to support current operations, projected growth, ter as the Company’s inventory builds in anticipation of the Financing activities in 2000 included repayment of $150 million seasonal funding requirements and capital expenditures. holiday season, which generates a substantial portion of the of term debt, redemption of the $100 million Series C float- Company’s operating cash flow for the year. ing rate notes and quarterly dividend payments of $0.075 per A summary of the Company’s working capital position and capitalization follows share or $128 million for the year. In addition, the Company Operating Activities (millions): repurchased 8.7 million shares of its common stock for $200 2000 1999 1998 Net cash provided by operating activities, the Company’s pri- million. Finally, in 2000, IBI repurchased 8.8 million shares Cash provided by mary source of liquidity, was $769 million in 2000, $599 mil- of its common stock for $198 million, of which 7.4 million $769 $599 $577 operating activities lion in 1999 and $577 million in 1998. shares were repurchased on a proportionate basis from The $1,068 $1,049 $1,127 Working capital The primary differences in cash provided by operating activ- Limited for $167 million. The repurchase had no net cash Capitalization ities between 2000 and 1999 were due to changes in invento- flow impact to The Limited and did not change The Limited’s $400 $400 $550 Long-term debt ries, accounts payable, accrued expenses and income taxes. The 84% ownership interest in IBI. 2,316 2,147 2,167 Shareholders’ equity cash used for inventories was higher in 2000 than 1999 because Noncash financing activities in 2000 included a two-for- $2,716 $2,547 $2,717 Total capitalization of relatively higher inventories at the apparel businesses at one stock split in the form of a stock dividend distributed on Additional amounts February 3, 2001. The net increase in accounts payable and May 30, 2000 to shareholders of record on May 12, 2000. available under long-term accrued expenses versus 1999 related to higher inventories Shareholders’ equity reflects the reclassification of an amount $1,000 $1,000 $1,000 credit agreements and timing of payments. The reduction in the change in equal to the par value of the increase in issued common The Company considers the following to be relevant measures of liquidity and capital income tax accruals primarily related to a 1999 payment of shares ($108 million) from paid-in capital to common stock. resources: $112 million for taxes and interest related to an Internal Also, in conjunction with the stock split, the Company retired 2000 1999 1998 Revenue Service assessment for previous year’s taxes (see Note 163.7 million treasury shares, representing $4.3 billion at 17% 19% 25% Debt-to-equity ratio 6 to the Consolidated Financial Statements). cost. A noncash charge was made against retained earnings (Long-term debt divided The primary differences in cash provided by operating for the excess cost of treasury stock over its par value. by shareholders’ equity) activities between 1999 and 1998 were due to significant Financing activities in 1999 included proceeds of $300 million 15% 16% 20% Debt-to-capitalization ratio improvement in net income excluding special and nonrecur- from floating rate notes, $200 million of which was repaid dur- (Long-term debt divided ring items and changes in inventories and income taxes. ing the year, repayment of $100 million of term debt and quar- by total capitalization) terly dividend payments of $0.075 per share or $130 million for 19x 15x 14x Interest coverage ratio Investing Activities the year. The cash from the rescission of the Contingent (Income, excluding special and In 2000, major investing activities included $446 million in Stock Redemption Agreement and other available funds nonrecurring items and gain on capital expenditures (see “Capital Expenditures” section on were used to repurchase shares under a self-tender, which sale of subsidiary stock, before page 10), and $22 million in net expenditures associated with was funded June 14, 1999. A total of 30 million shares of the interest expense, income taxes, depreciation and amortization the Easton project (see “Easton Real Estate Investment” sec- Company’s common stock were repurchased at $25 per divided by interest expense) tion on page 10). share, resulting in a cash outflow of $750 million plus trans- 172% 159% 166% Cash flow to capital investment In 1999, investing activities included the following: action costs. Additionally, IBI completed a $500 million stock (Net cash provided by operating 1) $352 million decrease in restricted cash related to the repurchase program that began in 1998 through the repurchase of activities divided by capital expenditures) rescission of the Contingent Stock Redemption Agreement; 20.4 million shares of its common stock for $404 million, of 2) $182 million in proceeds from the third party purchase of which 17.2 million shares were repurchased on a proportionate a 60% majority interest in Galyan’s and the sale of related prop- basis from The Limited for $342 million. Financing activities erty; 3) $375 million in capital expenditures; and 4) $11 million also included a $50 million dividend and a $12 million repay- in net proceeds associated with the Easton project. ment of advances to TOO in connection with its spin-off.
  • 10. 10 Financing activities in 1998 included three stock repurchases: for $81 million. Finally, under a repurchase program com- The Company has available $1 billion under its long-term one by the Company and two by IBI. First, to reduce the pleted in August 1998, IBI repurchased 9.4 million shares of its credit agreement, none of which was used as of February 3, impact of dilution from the exercise of stock options, the common stock from its public shareholders for $106 million. 2001. Borrowings under the agreement, if any, are due Company used $43 million of proceeds from stock option These repurchased shares were specifically reserved to cover September 28, 2002. The Company also has the ability to exercises to repurchase 3.8 million shares of its common stock. shares needed for employee benefit plans. Other financing activ- offer up to $250 million of additional debt securities under its Second, in January 1999, IBI initiated the $500 million stock ities in 1998 included quarterly dividend payments of $0.065 per shelf registration statement. repurchase program and repurchased 5.5 million shares of its share or $124 million for the year, and the payment of $48 mil- common stock for $96 million, of which 4.6 million shares lion to settle the A&F intercompany balance at May 19, 1998, were repurchased on a proportionate basis from The Limited the date of its split-off. STO R ES AND SELLING SQUARE FEET A summary of stores and selling square feet by business follows: End of Year Change From Plan 2001 2000 1999 2001–2000 2000–1999 Express 653 667 688 (14) (21) Stores 4,172,000 4,288,000 4,429,000 (116,000) (141,000) Selling square feet Lerner New York 515 560 594 (45) (34) Stores 3,761,000 4,163,000 4,592,000 (402,000) (429,000) Selling square feet Lane Bryant 652 653 688 (1) (35) Stores 3,135,000 3,162,000 3,343,000 (27,000) (181,000) Selling square feet Limited Stores 374 389 443 (15) (54) Stores 2,326,000 2,445,000 2,749,000 (119,000) (304,000) Selling square feet Structure 446 469 499 (23) (30) Stores 1,782,000 1,885,000 1,978,000 (103,000) (93,000) Selling square feet Total apparel businesses 2,640 2,738 2,912 (98) (174) Stores 15,176,000 15,943,000 17,091,000 (767,000) (1,148,000) Selling square feet Victoria’s Secret Stores 1,019 958 896 61 62 Stores 4,610,000 4,207,000 3,976,000 403,000 231,000 Selling square feet Bath & Body Works 1,635 1,432 1,214 203 218 Stores 3,544,000 3,039,000 2,490,000 505,000 549,000 Selling square feet Total Intimate Brands 2,654 2,390 2,110 264 280 Stores 8,154,000 7,246,000 6,466,000 908,000 780,000 Selling square feet Henri Bendel 1 1 1 – – Stores 35,000 35,000 35,000 – – Selling square feet Total retail businesses 5,295 5,129 5,023 166 106 Stores 23,365,000 23,224,000 23,592,000 141,000 (368,000) Selling square feet The Company’s investments in partnerships, land and infra- Capital Expenditures Recently Issued Accounting Pronouncements structure within the Easton property were $74 million at Capital expenditures amounted to $446 million, $375 million Statement of Financial Accounting Standards (“SFAS”) No. February 3, 2001 and $54 million at January 29, 2000. and $347 million for 2000, 1999 and 1998, of which $324 mil- 133, “Accounting for Derivative Instruments and Hedging Included in these investments is a non-controlling interest lion, $277 million and $237 million were for new stores and Activities,” subsequently amended and clarified by SFAS No. in a partnership that owns and is developing the Easton for the remodeling of and improvements to existing stores. 138, is effective for the Company’s 2001 fiscal year. It Town Center, a commercial entertainment and shopping cen- Remaining capital expenditures are primarily related to infor- requires that derivative instruments be recorded at fair value ter. During 2000, the Company and its partners modified mation technology, distribution centers and investments in and that changes in their fair value be recognized in current their agreement and the partnership borrowings in order to intellectual property assets. earnings unless specific hedging criteria are met. The develop the “Fashion District” in the Easton Town Center. The Company anticipates spending $470 to $500 million Company’s use of derivatives is limited, and the adoption of The partnership’s principal funding source is a $189 million for capital expenditures in 2001, of which $330 to $360 mil- SFAS No. 133 will not have a material impact on its consol- secured loan, $126 million of which was outstanding at lion will be for new stores and for the remodeling of and idated financial statements. February 3, 2001. The Company and one of its partners improvements to existing stores. Remaining capital expendi- Emerging Issues Task Force (“EITF”) Issue No. 00-14, have guaranteed the first $75 million of this loan. The tures are primarily related to information technology and dis- “Accounting for Certain Sales Incentives,” will be effective Company does not anticipate that it will be required to tribution centers. The Company expects that 2001 capital in the second quarter of 2001 and addresses the account- advance funds to the Easton Town Center partnership in expenditures will be funded principally by net cash provided ing and classification of various sales incentives. The order for the partnership to meet its debt service costs on by operating activities. Company has determined that adopting the provisions of these loans. The Company and one of its partners have also The Company expects to increase selling square footage the EITF Issue will not have a material impact on its con- guaranteed the completion of the Fashion District and by approximately 140,000 square feet in 2001. It is antici- solidated financial statements. indemnified the lender against any environmental matters pated that the increase will result from the addition of related to the Easton Town Center. approximately 300 to 340 stores (primarily within IBI), off- Market Risk In 2000, Company cash expenditures for the Easton set by the closing of approximately 150 stores (primarily Management believes the Company’s exposure to interest development totaled $30 million, including a loan to the within the apparel businesses). rate and market risk associated with financial instruments partnership of $18 million, and the Company received net (such as investments and borrowings) is not material. Easton Real Estate Investment sales and other proceeds totaling $8 million. In 1999 and 1998, the Company received net sales and other proceeds of The Company’s real estate investments include Easton, a $32 million and $65 million, which exceeded its cash expen- 1,200-acre planned community in Columbus, Ohio, that inte- ditures of $21 million and $34 million. grates office, hotel, retail, residential and recreational space.
  • 11. competition and pricing, changes in weather patterns, political 1 1 of the Company involve risks and uncertainties and are subject Impact of Inflation to change based on various important factors, many of which stability, currency and exchange risks and changes in existing The Company’s results of operations and financial condition may be beyond the Company’s control. Accordingly, the or potential duties, tariffs or quotas, postal rate increases and are presented based on historical cost. While it is difficult to Company’s future performance and financial results may differ charges, paper and printing costs, the availability of suitable accurately measure the impact of inflation due to the impre- materially from those expressed or implied in any such for- store locations at appropriate terms, the ability to develop new cise nature of the estimates required, the Company believes ward-looking statements. The following factors, among oth- merchandise and the ability to hire and train associates. The the effects of inflation, if any, on the results of operations and ers, in some cases have affected and in the future could affect Company does not undertake to publicly update or revise its financial condition have been minor. the Company’s financial performance and actual results and forward-looking statements even if experience or future Safe Harbor Statement under the Private Securities could cause actual results for 2001 and beyond to differ mate- changes make it clear that any projected results expressed or Litigation Reform Act of 1995 rially from those expressed or implied in any forward-looking implied therein will not be realized. The Company cautions that any forward-looking statements (as statements included in this Report or otherwise made by man- such term is defined in the Private Securities Litigation Reform agement: changes in consumer spending patterns, consumer Act of 1995) contained in this Report or made by management preferences and overall economic conditions, the impact of C O N S O L I DATED STAT E M E N TS OF INCOME (Thousands except per share amounts) 2000 1999 1998 $10,104,606 $9,766,220 $9,364,750 Net sales (6,667,389) (6,443,063) (6,424,725) Costs of goods sold, buying and occupancy 3,437,217 3,323,157 2,940,025 Gross income (2,561,201) (2,415,849) (2,256,332) General, administrative and store operating expenses (9,900) 23,501 1,740,030 Special and nonrecurring items, net 866,116 930,809 2,423,723 Operating income (58,244) (78,297) (68,528) Interest expense 20,378 40,868 59,915 Other income, net (69,345) (72,623) (63,616) Minority interest – 11,002 – Gain on sale of subsidiary stock 758,905 831,759 2,351,494 Income before income taxes 331,000 371,000 305,000 Provision for income taxes $427,905 $460,759 $2,046,494 Net income Net income per share: $1.00 $1.05 $4.25 Basic $0.96 $1.00 $4.15 Diluted The accompanying Notes are an integral part of these Consolidated Financial Statements. C O N S O L I DATED STAT E M E N TS OF SHAREHOLDERS’ EQ U I TY (Thousands) Common Stock Treasury Total Shares Retained Stock, at Shareholders’ Outstanding Par Value Paid-In Capital Earnings Average Cost Equity 545,600 $180,352 $148,018 $3,553,982 $(1,896,587) $1,985,765 Balance, January 31, 1998 – – – 2,046,494 – 2,046,494 Net income – – – (124,203) – (124,203) Cash dividends (3,780) – – – (43,095) (43,095) Repurchase of common stock (94,150) – – (5,584) (1,766,138) (1,771,722) Split-off of Abercrombie & Fitch 5,474 – 9,196 – 64,524 73,720 Exercise of stock options and other 453,144 $180,352 $157,214 $5,470,689 $(3,641,296) $2,166,959 Balance, January 30, 1999 – – – 460,759 – 460,759 Net income – – – (130,449) – (130,449) Cash dividends Repurchase of common stock, (30,000) – – – (752,612) (752,612) including transaction costs – – – (24,675) – (24,675) Spin-off of Limited Too Rescission of contingent stock – 9,375 7,639 334,586 – 351,600 redemption agreement 6,784 – 13,521 (1,539) 63,513 75,495 Exercise of stock options and other 429,928 $189,727 $178,374 $6,109,371 $(4,330,395) $2,147,077 Balance, January 29, 2000 – – – 427,905 – 427,905 Net income – – – (127,549) – (127,549) Cash dividends Repurchase of common stock, (8,746) – – – (199,985) (199,985) including transaction costs – (81,869) – (4,241,052) 4,322,921 – Retirement of treasury stock – 107,858 (107,858) – – – Two-for-one stock split 4,761 380 12,987 (806) 56,446 69,007 Exercise of stock options and other 425,943 $216,096 $83,503 $2,167,869 $(151,013) $2,316,455 Balance, February 3, 2001 The accompanying Notes are an integral part of these Consolidated Financial Statements.
  • 12. 12 C O N S O L I DATED BALANCE SHEETS N OT ES TO CONSOLIDATED FINANCIAL STAT E M E N TS (Thousands) 1. Summary of Significant Accounting Policies Assets February 3, 2001 January 29, 2000 Principles of Consolidation Current assets The Limited, Inc. (the “Company”) sells women’s and men’s $563,547 $817,268 Cash and equivalents apparel, women’s intimate apparel and personal care products 93,745 108,794 Accounts receivable under various trade names through its specialty retail stores 1,157,140 1,050,913 Inventories and direct response (catalog and e-commerce) businesses. 253,366 307,780 Other The consolidated financial statements include the accounts 2,067,798 2,284,755 Total current assets of the Company and its subsidiaries, including Intimate 1,394,619 1,229,612 Property and equipment, net Brands, Inc. (“IBI”), an 84%-owned subsidiary. All significant 132,028 125,145 Deferred income taxes intercompany balances and transactions have been eliminated 493,677 486,655 Other assets in consolidation. The consolidated financial statements $4,088,122 $4,126,167 Total assets Liabilities and Shareholders’ Equity include the results of Galyan’s Trading Co. (“Galyan’s”) Current liabilities through August 31, 1999, when a third party purchased a $273,021 $256,306 Accounts payable majority interest; Limited Too (“TOO”) through August 23, – 250,000 Current portion of long-term debt 1999, when it was established as an independent company; 581,584 538,310 Accrued expenses and Abercrombie & Fitch (“A&F”) through May 19, 1998, 145,580 190,936 Income taxes when it was established as an independent company. 1,000,185 1,235,552 Total current liabilities Investments in unconsolidated affiliates over which the 400,000 400,000 Long-term debt Company exercises significant influence but does not have 228,397 224,530 Other long-term liabilities control, including Galyan’s for periods after August 31, 1999, 143,085 119,008 Minority interest are accounted for using the equity method. The Company’s Shareholders’ equity share of the net income or loss of those unconsolidated affil- 216,096 189,727 Common stock iates is included in other income (expense). 83,503 178,374 Paid-in capital 2,167,869 6,109,371 Retained earnings Fiscal Year 2,467,468 6,477,472 (151,013) (4,330,395) Less: treasury stock, at average cost The Company’s fiscal year ends on the Saturday closest to 2,316,455 2,147,077 Total shareholders’ equity January 31. Fiscal years are designated in the financial state- $4,088,122 $4,126,167 Total liabilities and shareholders’ equity ments and notes by the calendar year in which the fiscal year commences. The results for fiscal year 2000 represent the The accompanying Notes are an integral part of these Consolidated Financial Statements. fifty-three-week period ended February 3, 2001 and results for fiscal years 1999 and 1998 represent the fifty-two-week periods ended January 29, 2000 and January 30, 1999. C O N S O L I DATED STAT E M E N TS OF CASH FLOW S (Thousands) Cash and Equivalents Cash and equivalents include amounts on deposit with finan- Operating Activities 2000 1999 1998 cial institutions and money market investments with original $427,905 $460,759 $2,046,494 Net income maturities of less than 90 days. Adjustments to reconcile net income to net cash provided by (used for) operating activities: Inventories 271,146 272,443 286,000 Depreciation and amortization 5,900 (13,501) (1,705,030) Inventories are principally valued at the lower of average Special and nonrecurring items, net of income taxes 47,046 50,517 40,838 Minority interest, net of dividends paid cost or market, on a first-in first-out basis, using the retail – 2,198 – Loss on sale of subsidiary stock, net of income taxes method. Change in Assets and Liabilities 15,049 (36,775) 4,704 Accounts receivable Store Supplies (106,227) (54,270) (153,667) Inventories The initial shipment of selling-related supplies (including, but 52,989 (20,201) 45,580 Accounts payable and accrued expenses not limited to, hangers, signage, security tags and packaging) (9,761) (83,637) 25,895 Income taxes is capitalized at the store opening date. In lieu of amortizing 65,048 21,208 (13,439) Other assets and liabilities the initial balance, subsequent shipments are expensed, 769,095 598,741 577,375 Net cash provided by operating activities except for new merchandise presentation programs, which Investing Activities are capitalized. Store supplies are periodically adjusted as (446,176) (375,405) (347,356) Capital expenditures appropriate for changes in actual quantities or costs. Net proceeds (expenditures) related to (22,485) 10,635 31,073 Easton real estate investment Direct Response Advertising – 182,000 131,262 Net proceeds from sale of partial interest in subsidiary and investee – 351,600 – Decrease in restricted cash Direct response advertising relates primarily to the production (468,661) 168,830 (185,021) Net cash provided by (used for) investing activities and distribution of the Company’s catalogs and is amortized Financing Activities over the expected future revenue stream, which is principally (250,000) (300,000) – Repayment of long-term debt three months from the date catalogs are mailed. All other – 300,000 – Proceeds from issuance of long-term debt advertising costs are expensed at the time the promotion first (199,985) (752,612) (43,095) Repurchase of common stock, including transaction costs appears in media or in the store. Catalog and advertising (31,391) (62,639) (120,844) Repurchase of Intimate Brands, Inc. common stock costs amounted to $359 million, $324 million and $303 mil- (127,549) (130,449) (124,203) Dividends paid lion in 2000, 1999 and 1998. – 50,000 – Dividend received from Limited Too Settlement of Limited Too (1999) and Abercrombie & Fitch (1998) Long-lived Assets – 12,000 (47,649) intercompany accounts Depreciation and amortization of property and equipment 54,770 63,080 67,359 Proceeds from exercise of stock options and other (554,155) (820,620) (268,432) are computed for financial reporting purposes on a straight- Net cash used for financing activities (253,721) (53,049) 123,922 Net increase (decrease) in cash and equivalents line basis, using service lives ranging principally from 10 to 817,268 870,317 746,395 Cash and equivalents, beginning of year 15 years for building and leasehold improvements, and 3 to $563,547 $817,268 $870,317 Cash and equivalents, end of year 10 years for other property and equipment. The cost of assets sold or retired and the related accumulated depreciation or The accompanying Notes are an integral part of these Consolidated Financial Statements. amortization are removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs
  • 13. recorded in general, administrative and store operating 1 3 are charged to expense as incurred. Major renewals and bet- Earnings Per Share terments that extend service lives are capitalized. expenses. These and certain other prior year amounts have Net income per share is computed in accordance with Statement Goodwill is amortized on a straight-line basis over 30 years. been reclassified to conform to the current year presentation. of Financial Accounting Standards (“SFAS”) No. 128, Additionally, goodwill related to a 1998 buyback of IBI stock “Earnings Per Share.” Earnings per basic share is computed 2. Special and Nonrecurring Items reverses as the shares are reissued to cover shares needed for based on the weighted average number of outstanding com- employee benefit plans. The cost of intellectual property assets During the fourth quarter of 2000, the Company recorded a mon shares. Earnings per diluted share includes the weighted is amortized based on the sell-through of the related products, $9.9 million special and nonrecurring charge to close Bath & average effect of dilutive options and restricted stock on the over the shorter of the term of the license agreement or the Body Works’ United Kingdom stores. All nine stores are sched- weighted average shares outstanding. Additionally, earnings estimated useful life of the asset, not to exceed 10 years. uled to close during the first quarter of 2001. The charge con- per diluted share includes the impact of the dilutive options and Long-lived assets are reviewed for impairment whenever sisted of store and other asset write-offs of $4.9 million and restricted stock at IBI as a reduction to earnings. This resulted events or changes in circumstances indicate that full recover- accruals for lease termination and other costs of $5.0 million. in a $0.01 reduction to 2000 and 1999 earnings per diluted ability is questionable. Factors used in the valuation include, During the fourth quarter of 1999, the Company recog- share and no impact to 1998 earnings per diluted share. but are not limited to, management’s plans for future opera- nized the reversal of a $36.6 million liability related to down- tions, brand initiatives, recent operating results and projected sizing costs for Henri Bendel, initially recognized as a special (Thousands) cash flows. and nonrecurring charge to operating income in 1997. The Weighted Average Common execution of the plan to downsize the remaining Henri Bendel Income Taxes Shares Outstanding 2000 1999 1998 store in New York was primarily based on negotiations with 427,604 439,164 481,814 Basic shares The Company accounts for income taxes using the asset and the original landlord. However, a change in landlords ulti- Effect of dilutive options liability method. Under this method, deferred tax assets and mately resulted in the termination of negotiations during the 15,444 16,400 10,824 and restricted stock liabilities are recognized based on the difference between the fourth quarter of 1999, which prevented the completion of 443,048 455,564 492,638 Diluted shares financial statement carrying amounts of existing assets and the original plan. As a result, the Company reversed the liabilities and their respective tax bases. Deferred tax assets $36.6 million liability through the special and nonrecurring The computation of earnings per diluted share excludes and liabilities are measured using enacted tax rates in effect items classification. options to purchase 1.1 million, 0.6 million and 4.4 million in the years when those temporary differences are expected to On July 15, 1999, the Company’s Board of Directors shares of common stock in 2000, 1999 and 1998, because the reverse. The effect on deferred taxes of a change in tax rates approved a formal plan to spin-off Limited Too. The record options’ exercise price was greater than the average market is recognized in income in the period that includes the enact- date for the spin-off was August 11, 1999, with Limited price of the common shares during the year. In addition, ment date. shareholders receiving one share of Too, Inc. (the successor shares that were previously subject to the Contingent Stock company to Limited Too) common stock for every seven Redemption Agreement (see Note 8) were excluded from the Shareholders’ Equity shares of Limited common stock held on that date. The spin- dilution calculation in 1998 because their redemption would At February 3, 2001, 500 million shares of $0.50 par value off was completed on August 23, 1999. The Company not have had a dilutive effect on earnings per share. common stock were authorized and 432.2 million shares recorded the spin-off as a $25 million dividend, which repre- were issued. At February 3, 2001 and January 29, 2000, sented the carrying value of the net assets underlying the Gains on Sale of Subsidiary Stock 425.9 million shares and 429.9 million shares were outstand- common stock distributed. As part of the transaction, the Gains in connection with the sale of subsidiary stock are rec- ing. Ten million shares of $1.00 par value preferred stock Company received total proceeds of $62 million that included ognized in the period the transaction is closed. were authorized, none of which were issued. a $50 million dividend from TOO and a $12 million repay- Effective August 31, 1999, an affiliate of Freeman, Spogli On May 2, 2000, the Company declared a two-for-one ment of advances to TOO. During the second quarter of & Co. (together with Galyan’s management) purchased a stock split (“stock split”) in the form of a stock dividend dis- 1999, the Company recognized a $13.1 million charge for 60% majority interest in Galyan’s, and the Company retained tributed on May 30, 2000 to shareholders of record on May transaction costs related to the spin-off. a 40% interest. In addition, the Company sold certain prop- 12, 2000. Shareholders’ equity reflects the reclassification of On May 19, 1998, the Company completed a tax-free erty for $71 million to a third party, which then leased the an amount equal to the par value of the increase in issued exchange offer to establish A&F as an independent company. property to Galyan’s under operating leases. The Company common shares ($107.9 million) from paid-in capital to com- A total of 94.2 million shares of the Company’s common received total cash proceeds from these transactions of mon stock. In conjunction with the stock split, the Company stock were exchanged at a ratio of 0.86 of a share of A&F approximately $182 million, as well as subordinated debt retired 163.7 million treasury shares with a cost of $4.3 bil- common stock for each Limited share tendered. In connection and warrants of $20 million from Galyan’s. During the first lion. A noncash charge was made against retained earnings with the exchange, the Company recorded a $1.651 billion five years, interest (at 12% to 13%) on the subordinated debt for the excess cost of treasury stock over its par value. All tax-free gain. This gain was measured based on the $21.81 may be paid in kind rather than in cash. The transactions share and per share data throughout this report has been per share market value of the A&F common stock at the resulted in a third quarter pretax gain on sale of subsidiary restated to reflect the stock split. expiration date of the exchange offer. In addition, on June 1, stock of $11 million, offset by a $6 million provision for Also in 2000, the Company repurchased 8.7 million shares 1998, a $5.6 million dividend was effected through a pro rata taxes. In addition, the revised tax basis of the Company’s of its common stock for $200 million. spin-off to shareholders of the Company’s remaining 6.2 mil- remaining investment in Galyan’s resulted in an additional On June 3, 1999, the Company completed an issuer tender lion A&F shares. Limited shareholders of record as of the $7 million deferred tax expense. offer by purchasing 30 million shares of its common stock at close of trading on May 29, 1998 received .013673 of a share Use of Estimates in the Preparation of Financial Statements $25 per share and on May 19, 1998, the Company acquired of A&F for each Limited share owned at that time. 94.2 million shares of its common stock via a tax-free During the first quarter of 1998, the Company recognized The preparation of financial statements in conformity with exchange offer to establish A&F as an independent company a gain of $93.7 million from the sale of 2.57 million shares of generally accepted accounting principles requires manage- (see Note 2). Brylane at $51 per share, representing its remaining interest ment to make estimates and assumptions that affect the in Brylane. This gain was partially offset by a $5.1 million reported amounts of assets and liabilities at the date of the Revenue Recognition financial statements and the reported amounts of revenues charge for severance and other associate termination costs The Company recognizes sales upon customer receipt of the and expenses during the reporting period. Because actual related to the closing of five of six Henri Bendel stores. The merchandise. Shipping and handling revenues are included in results may differ from those estimates, the Company revises severance charge was paid in 1998. net sales and the related costs are included in costs of goods its estimates and assumptions as new information becomes sold, buying and occupancy. Revenue for gift certificate sales available. and store credits is recognized at redemption. A reserve is Reclassifications provided for projected merchandise returns based on prior experience. In the fourth quarter of 2000, the Company adopted The Company’s revenue recognition policy is consistent Emerging Issues Task Force (“EITF”) Issue No. 00-10, with the guidance contained in the Securities and Exchange “Accounting for Shipping and Handling Fees and Costs.” Commission’s Staff Accounting Bulletin No. 101, “Revenue As a result, the Company reclassified shipping and handling Recognition in Financial Statements,” the adoption of which revenues from general, administrative and store operating did not have a material effect on the consolidated financial expenses to net sales. The related shipping costs were reclassi- statements. fied from general, administrative and store operating expenses to costs of goods sold, buying and occupancy. Additionally, the Company has classified discounts on sales to associates as a reduction to net sales. Such discounts were previously
  • 14. 14 3. Property and Equipment, Net 6. Income Taxes 7. Long-term Debt (Thousands) (Thousands) (Thousands) Provision for Income Taxes 2000 1999 1998 Unsecured Long-term Debt 2000 1999 Property and Equipment, at Cost 2000 1999 $250,000 $250,000 7 1⁄2 % Debentures due March 2023 Currently payable $362,997 $390,121 Land, buildings and improvements $251,700 $389,000 $194,100 150,000 150,000 7 4⁄5 % Notes due May 2002 Federal 2,079,567 2,020,651 Furniture, fixtures and equipment 27,700 58,000 38,800 – 150,000 9 1⁄8 % Notes due February 2001 State 655,736 498,232 Leaseholds and improvements 6,000 2,100 4,500 – 100,000 Foreign Floating rate notes 46,748 35,823 Construction in progress 285,400 449,100 237,400 400,000 650,000 Total 3,145,048 2,944,827 Total – 250,000 Deferred Less: current portion of long-term debt 1,750,429 1,715,215 Less: accumulated depreciation and amortization 16,500 (82,100) 53,100 $400,000 $400,000 Federal Total $1,394,619 $1,229,612 Property and equipment, net 29,100 4,000 14,500 State 45,600 (78,100) 67,600 4. Leased Facilities, Commitments and Contingencies Total The 7 1⁄2% debentures may be redeemed at the option of the $331,000 $371,000 $305,000 Total provision Company, in whole or in part, at any time on or after March Annual store rent consists of a fixed minimum amount and/or 15, 2003, at declining premiums. contingent rent based on a percentage of sales exceeding a The foreign component of pretax income, arising principally The Company maintains a $1 billion unsecured revolving stipulated amount. Store lease terms generally require addi- from overseas sourcing operations, was $69.7 million, $41.5 mil- credit agreement (the “Agreement”), established on tional payments covering taxes, common area costs and cer- lion and $65.5 million in 2000, 1999 and 1998. September 29, 1997. Borrowings outstanding under the tain other expenses. Agreement, if any, are due September 28, 2002. However, the For leases that contain predetermined fixed escalations of Reconciliation Between the Statutory Federal revolving term of the Agreement may be extended an addi- the minimum rentals and/or rent abatements, the Company Income Tax Rate and the Effective Tax Rate 2000 1999 1998 tional two years upon notification by the Company on recognizes the related rental expense on a straight-line basis 35.0% 35.0% 35.0% Federal income tax rate September 29, 2001, subject to the approval of the lending and records the difference between the recognized rental State income taxes, net of banks. The Agreement has several borrowing options, includ- expense and amounts payable under the leases as deferred 4.5% 4.5% 4.5% Federal income tax effect lease credits, which are included in other long-term liabilities. ing interest rates that are based on either the lender’s “base 0.5% 0.5% 0.4% Other items, net At February 3, 2001 and January 29, 2000, this liability rate,” as defined, LIBOR, CD-based options or at a rate sub- 40.0% 40.0% 39.9% Total amounted to $106.9 million and $124.5 million. mitted under a bidding process. Facilities fees payable under the Agreement are based on the Company’s long-term credit The reconciliation between the statutory Federal income tax (Thousands) ratings, and currently approximate 0.1% of the committed rate and the effective income tax rate on pretax earnings amount per annum. excludes minority interest and, in 1998, the nontaxable gain Rent Expense 2000 1999 1998 The Agreement supports the Company’s commercial paper from the split-off of A&F. Store rent program, which is used from time to time to fund working Income taxes payable included net current deferred tax lia- $624,769 $635,543 $666,729 Fixed minimum capital and other general corporate requirements. No com- bilities of $14.1 million at February 3, 2001. Other current 57,300 53,371 39,642 Contingent mercial paper or amounts under the Agreement were out- assets included net current deferred tax assets of $38.5 million 682,069 688,914 706,371 Total store rent standing at February 3, 2001 and January 29, 2000. The at January 29, 2000. Income tax payments were $315.5 million, 29,051 32,201 22,511 Equipment and other Agreement contains covenants relating to the Company’s $408.8 million and $241.7 million for 2000, 1999 and 1998. $711,120 $721,115 $728,882 Total rent expense working capital, debt and net worth. The Internal Revenue Service has assessed the Company The Company has a shelf registration statement, under for additional taxes and interest for the years 1992 to 1996 At February 3, 2001, the Company was committed to non- which up to $250 million of debt securities and warrants to relating to the undistributed earnings of foreign affiliates for cancelable leases with remaining terms generally from one to purchase debt securities may be issued. which the Company has provided deferred taxes. On twenty years. A substantial portion of these commitments Interest paid was $65.8 million, $81.3 million and $68.6 mil- September 7, 1999, the United States Tax Court sustained the consists of store leases with initial terms ranging from ten to lion in 2000, 1999 and 1998. position of the IRS with respect to the 1992 year. In connec- twenty years, with options to renew at varying terms. tion with an appeal of the Tax Court judgment, in 1999 the 8. Contingent Stock Redemption Agreement and Company made a $112 million payment of taxes and interest (Thousands) Restricted Cash for the years 1992 to 1998 that reduced deferred tax liabili- Minimum Rent Commitments Under Noncancelable Leases ties. Management believes the ultimate resolution of this mat- On May 3, 1999, the Company, Leslie H. Wexner, Chairman $644,469 2001 ter will not have a material adverse effect on the Company’s and CEO of the Company, and The Wexner Children’s Trust 611,467 2002 results of operations or financial condition. (the “Trust”) entered into an agreement (the “Rescission 562,669 2003 507,577 2004 441,874 2005 (Thousands) 959,268 Thereafter Effect of Temporary The Company has a non-controlling interest in a partnership Differences That Give Rise 2000 1999 that owns and is developing the Easton Town Center, a com- to Deferred Income Taxes Assets Liabilities Total Assets Liabilities Total mercial entertainment and shopping center in Columbus, Ohio. Tax under book The partnership’s principal funding source is a $189 million $3,400 – $3,400 $14,800 – $14,800 depreciation secured loan, $126 million of which was outstanding at Undistributed earnings of February 3, 2001. The Company and one of its partners have – $(34,700) (34,700) – $(28,100) (28,100) foreign affiliates guaranteed the first $75 million of this loan and completion of Special and the “Fashion District” within the Easton Town Center. The 30,100 – 30,100 37,100 – 37,100 nonrecurring items Company and one of its partners have also indemnified the 24,400 – 24,400 54,900 – 54,900 Rent lender against any environmental matters related to the 25,200 – 25,200 46,300 – 46,300 Inventory Easton Town Center. Investments in unconsolidated 5,500 – 5,500 – (3,800) (3,800) affiliates 5. Accrued Expenses State income 41,200 – 41,200 34,000 – 34,000 taxes (Thousands) 22,900 – 22,900 55,200 (46,800) 8,400 Other, net $152,700 $(34,700) $118,000 $242,300 $(78,700) $163,600 Total deferred income taxes Accrued Expenses 2000 1999 $84,885 $110,803 Compensation, payroll taxes and benefits 130,729 125,500 Deferred revenue 56,782 46,878 Taxes, other than income 10,504 18,053 Interest 298,684 237,076 Other $581,584 $538,310 Total
  • 15. plan. Participation in the qualified plan is available to all asso- 1 5 Agreement”) rescinding the Contingent Stock Redemption been a reduction of approximately $22.3 million or $0.05 per share in 2000, $18.7 million or $0.04 per share in 1999 and ciates who have completed 1,000 or more hours of service Agreement dated as of January 26, 1996, as amended, among $13.9 million or $0.03 per share in 1998. with the Company during certain 12-month periods and the Company, Mr. Wexner and the Trust. Pursuant to the The weighted average per share fair value of options granted attained the age of 21. Participation in the nonqualified plan Rescission Agreement, the rights and obligations of the ($5.19, $5.64 and $4.16 during 2000, 1999 and 1998) was is subject to service and compensation requirements. Company, Mr. Wexner and the Trust under the Contingent Stock used to calculate the pro forma compensation expense. The fair Company contributions to these plans are based on a percent- Redemption Agreement were terminated, and the Company value was estimated using the Black-Scholes option-pricing age of associates’ eligible annual compensation. The cost of used the $351.6 million of restricted cash to purchase shares in model with the following weighted average assumptions for these plans was $57.9 million in 2000, $53.7 million in 1999 the Company’s tender offer, which expired on June 1, 1999. 2000, 1999 and 1998: dividend yields of 2.3%, 2.1% and and $52.5 million in 1998. The liability for the nonqualified The Company earned interest of $4.1 million and $17.9 mil- 2.2%; volatility of 36%, 32% and 29%; risk-free interest rates plan at February 3, 2001 and January 29, 2000 amounted to lion in 1999 and 1998 on the restricted cash. of 5%, 7% and 5%; assumed forfeiture rates of 20%, 20% and $107.0 million and $87.1 million and is included in other 9. Stock Options and Restricted Stock 20%; and expected lives of 4.3 years, 5.2 years and 6.3 years. long-term liabilities. Under the Company’s stock plans, associates may be granted Restricted Shares 11. Derivatives, Fair Value of Financial Instruments and up to a total of 62.9 million restricted shares and options to Concentration of Credit Risk Approximately 41,000, 1,040,000 and 1,716,000 restricted purchase the Company’s common stock at the market price Limited shares were granted in 2000, 1999 and 1998, with The Company uses forward contracts on a limited basis, in on the date of grant. Options generally vest 25% per year market values at date of grant of $0.7 million, $18.5 million order to reduce market risk exposure associated with fluctua- over the first four years of the grant. Of the options granted, and $27.4 million. Restricted shares generally vest either on a tions in foreign currency rates on a small volume of its mer- 0.6 million in 2000, 5.0 million in 1999 and 4.6 million in graduated scale over four years or 100% at the end of a fixed chandise purchases. These financial instruments are designated 1998 had graduated vesting schedules of six or more years. vesting period, principally five years. In 1999, 100,000 restrict- at inception as hedges, and are monitored to determine their Options have a maximum term of ten years. ed shares were granted with a graduated vesting schedule over effectiveness as hedges. The Company does not hold or issue Under separate IBI stock plans, IBI associates may be grant- six years. Approximately 314,000 restricted shares granted in financial instruments for trading purposes. ed up to a total of 36.8 million restricted shares and options 1999 include performance requirements, all of which were met. At January 29, 2000, the Company had an interest rate swap to purchase IBI’s common stock at the market price on the Additionally, the expense recognized from the issuance of that effectively changed the Company’s interest rate exposure date of grant. As of February 3, 2001, options to purchase IBI restricted stock grants impacted the Company’s consoli- on $100 million of variable rate debt to a fixed rate of 8.09% 14.5 million IBI shares were outstanding, of which 4.6 million dated results. IBI granted 59,000, 340,000 and 850,000 through July 2000. There were no interest rate swaps out- options were exercisable. Under these plans, options general- restricted shares in 2000, 1999 and 1998. Vesting terms for standing at February 3, 2001. ly vest over periods from four to six years. the IBI restricted shares are similar to those of The Limited. The Company measures compensation expense under APB Fair Value The market value of restricted shares is being amortized as Opinion No. 25, “Accounting for Stock Issued to compensation expense over the vesting period, generally four The carrying value of cash equivalents, accounts receivable, Employees,” and no compensation expense has been recog- to six years. Compensation expense related to restricted stock accounts payable, current portion of long-term debt, and nized for its stock option plans. In accordance with SFAS No. awards, including expense related to awards granted at IBI, accrued expenses approximates fair value because of their short 123, “Accounting for Stock-Based Compensation,” the fair amounted to $15.0 million in 2000, $28.8 million in 1999 maturity. The fair value of long-term debt is estimated based on value of each option grant is estimated on the date of grant and $31.3 million in 1998. the quoted market prices for the same or similar issues or on the using the Black-Scholes option-pricing model discussed current rates offered to the Company for debt of the same below. If compensation expense had been determined using 10. Retirement Benefits remaining maturities. The estimated fair value of the Company’s the estimated fair value of options under SFAS No. 123, the The Company sponsors a qualified defined contribution long-term debt at February 3, 2001 and January 29, 2000 was pro forma effects on net income and earnings per share, retirement plan and a nonqualified supplemental retirement $396.4 million and $371.8 million compared to the carrying including the impact of options issued by IBI, would have value of $400.0 million in 2000 and 1999. Stock Options Outstanding at February 3, 2001 Concentration of Credit Risk The Company is subject to concentration of credit risk relat- Options Outstanding Options Exercisable ing to cash and equivalents. The Company maintains cash Weighted and equivalents with various major financial institutions, as Average Weighted Weighted well as corporate commercial paper. The Company monitors Range of Remaining Average Average the relative credit standing of these financial institutions and Exercise Number Contractual Exercise Number Exercise other entities and limits the amount of credit exposure with Prices Outstanding Life Price Exercisable Price $7–$ 1 0 8,649,000 5.8 $9 3,889,000 $9 any one entity. The Company also monitors the creditworthi- $11–$15 10,732,000 6.3 $12 4,232,000 $12 ness of the entities to which it grants credit terms in the nor- $16–$20 8,990,000 8.4 $16 2,193,000 $16 mal course of business. $21–$27 1,836,000 9.0 $22 160,000 $22 $7–$27 30,207,000 6.9 $13 10,474,000 $12 12. Segment Information The Company identifies operating segments based on a busi- Weighted Average ness’s operating characteristics. Reportable segments were Number of Option Price determined based on similar economic characteristics, the Stock Option Activity Shares Per Share nature of products and services and the method of distribu- 1998 tion. The apparel segment derives its revenues from sales of 28,140,000 $9.85 Outstanding at beginning of year women’s and men’s apparel. The Intimate Brands segment 7,770,000 13.16 Granted derives its revenues from sales of women’s intimate and other (4,878,000) 9.31 Exercised apparel, and personal care products and accessories. Sales (1,186,000) 12.13 Canceled outside the United States were not significant. 29,846,000 $10.71 Outstanding at end of year The Company and IBI have entered into intercompany agree- 8,908,000 $9.79 Options exercisable at end of year ments for services that include merchandise purchases, capital 1999 expenditures, real estate management and leasing, inbound and 29,846,000 $10.71 Outstanding at beginning of year outbound transportation and corporate services. These agree- 10,014,000 17.31 Granted (5,348,000) 9.20 ments specify that identifiable costs be passed through to IBI Exercised (1,938,000) 11.95 Canceled and that other service-related costs be allocated based on vari- 32,574,000 $12.03 Outstanding at end of year ous methods. Costs are passed through and allocated to the 8,114,000 $9.68 Options exercisable at end of year apparel businesses in a similar manner. Management believes 2000 that the methods of allocation are reasonable. 32,574,000 $12.03 Outstanding at beginning of year As a result of its spin-off, the operating results of TOO are 4,075,000 17.39 Granted included in the “Other” category for all periods presented. (4,157,000) 10.22 Exercised The operating results of Galyan’s (which were consolidated (2,285,000) 14.03 Canceled through August 31, 1999 and accounted for using the equity 30,207,000 $12.86 Outstanding at end of year method thereafter) are also included in the “Other” category. 10,474,000 $11.53 Options exercisable at end of year
  • 16. 1 6 (Thousands) Apparel Intimate Reconciling Segment Information Businesses Brands Other Items Total A 2000 $4,948,829 $5,117,199 $38,578 – $10,104,606 Net sales 628,766 – – $(628,766) – Intersegment sales B Depreciation and 99,109 122,172 49,865 – 271,146 amortization **(9,900) 123,477 754,356 (1,817) 866,116 Operating income (loss) 1,160,758 1,457,348 1,356,953 113,063 4,088,122 Total assets D 115,879 245,127 85,170 – 446,176 Capital expenditures 1999 $4,708,681 $4,632,029 $425,510 – $9,766,220 Net sales 570,659 – – $(570,659) – Intersegment sales B Depreciation and 107,810 104,625 60,008 – 272,443 amortization 131,728 793,516 (17,936) 23,501 930,809 Operating income (loss) C 1,106,072 1,384,432 1,611,922 D 23,741 4,126,167 Total assets 118,710 205,516 51,179 – 375,405 Capital expenditures 1998 $4,588,887 $3,988,594 $787,269 – $9,364,750 Net sales 457,204 – – B $(457,204) – Intersegment sales Depreciation and 126,438 101,221 58,341 – 286,000 amortization (45,353) 670,849 58,197 1,740,030 2,423,723 Operating income (loss) F 1,186,243 1,448,077 1,909,528 D 5,860 4,549,708 Total assets 68,695 121,543 157,118 – 347,356 Capital expenditures Included in the “Other” category are Henri Bendel, Galyan’s (through August 31, 1999), TOO (through August 23, 1999), A&F (through May 19, 1998), non-core real estate, equity investments and corporate. None of the businesses included in “Other” are significant operating segments. A Represents intersegment sales elimination. B D Represents intersegment receivable/payable elimination. Special and nonrecurring items— ** 2000: a $9.9 million charge for Intimate Brands to close Bath & Body Works’ nine stores in the United Kingdom. C 1999: 1) a $13.1 million charge for transaction costs related to the TOO spin-off; and 2) the reversal of a $36.6 million liability related to downsizing costs for Henri Bendel. These special items relate to the “Other” category. F 1998: 1) a $1.651 billion tax-free gain on the split-off of A&F; 2) a $93.7 million gain from the sale of the Company’s remaining interest in Brylane; and 3) a $5.1 million charge for severance and other associate termination costs related to the closing of Henri Bendel stores. These special items relate to the “Other” category. 13. Quarterly Financial Data (Unaudited) Summarized quarterly financial results for 2000 and 1999 follow (thousands except per share amounts): 2000 Quarters First Second Third Fourth A $2,124,986 $2,289,317 $2,168,375 $3,521,928 Net sales 698,047 742,418 719,555 1,277,197 Gross income 62,950 77,573 49,231 238,151 Net income Net income per share: $0.15 $0.18 $0.12 $0.56 Basic 0.14 0.17 0.11 0.54 Diluted 1999 Quarters A $2,117,068 $2,289,250 $2,064,068 $3,295,834 Net sales 647,036 727,930 656,992 1,291,199 Gross income 45,451 57,482 41,362 316,464 Net income Net income per share: $0.10 $0.13 $0.10 $0.74 Basic 0.10 0.12 0.09 0.70 Diluted Net sales and gross income for 1999 and the first three quarters of 2000 reflect the reclassification of shipping and handling revenues and costs and associate discounts (see Note 1). A 2000: Special and nonrecurring items included a $9.9 million charge in the fourth quarter to close Bath & Body Works’ nine stores in the United Kingdom. 1999: Special and nonrecurring items included a $13.1 million charge in the second quarter for transaction costs related to the TOO spin-off and the reversal of a $36.6 million liability in the fourth quarter related to downsizing costs for Henri Bendel. MARKET PRICE AND DIVIDEND INFORMAT I O N Market Price Cash Dividend Fiscal Year 2000 High Low Per Share The Company’s common stock is traded on the New York $27.78 $14.44 $0.075 4th quarter Stock Exchange (“LTD”) and the London Stock Exchange. 24.92 18.18 0.075 3rd quarter On February 3, 2001, there were approximately 77,000 25.58 20.79 0.075 2nd quarter shareholders of record. However, when including active asso- 25.61 14.23 0.075 1st quarter ciates who participate in the Company’s stock purchase plan, associates who own shares through Company-sponsored Fiscal Year 1999 retirement plans and others holding shares in broker $21.91 $15.25 $0.075 4th quarter accounts under street names, the Company estimates the 22.97 18.22 0.075 3rd quarter A shareholder base to be approximately 190,000. 25.06 22.09 0.075 2nd quarter 22.00 17.13 0.075 1st quarter Limited Too was spun off to The Limited shareholders in the form of a dividend valued at A approximately $1.18 per share on the date of the spin-off (August 23, 1999).
  • 17. on a test basis, evidence supporting the amounts and disclo- 1 7 each of the three years in the period ended February 3, 2001 R E P O RT OF INDEPENDENT AC C O U N TA N TS (on pages 11–16) in conformity with accounting principles sures in the financial statements, assessing the accounting generally accepted in the United States of America. These principles used and significant estimates made by manage- To the Board of Directors and financial statements are the responsibility of the Company’s ment, and evaluating the overall financial statement presen- Shareholders of The Limited, Inc.: management; our responsibility is to express an opinion on tation. We believe that our audits provide a reasonable basis these financial statements based on our audits. We conducted for our opinion. In our opinion, the accompanying consolidated balance our audits of these statements in accordance with auditing sheets and the related consolidated statements of income, standards generally accepted in the United States of America, shareholders’ equity and cash flows present fairly, in all mate- which require that we plan and perform the audit to obtain Columbus, Ohio rial respects, the financial position of The Limited, Inc. and reasonable assurance about whether the financial statements March 1, 2001 its subsidiaries at February 3, 2001 and January 29, 2000, are free of material misstatement. An audit includes examining, and the results of their operations and their cash flows for Philanthropy two years, for instance, our associates The YWCA is also a powerful force for A poet once wrote, “Where there is a have devoted more than 50,000 hours, change, giving shelter and hope to home- woman there is magic.” She could have on company time, to tutoring inner-city less women and children. For 11 years, been reading our minds. We at The kindergartners. From our C EOs to our we have cosponsored its Women of Limited, Inc. owe most of what we’ve associates, every level of the organiza- Achievement Luncheon, which last year built to women. Today, 85% of our tion has committed to helping raise our brought together 2,500 mothers, daugh- a ss o c i ates, more than 80% of our children’s reading levels. First through ters, grandmothers and others to honor supervisors and managers, and more our ColumbusReads program, and now the women who have set the bar high for than 90% of our customers are women. through similar programs in New York our children. In doing so, the event raised City and Kettering, Ohio, we’ve impacted $250,000 — and more than $3 million Our responsibility to our associates and 750 children. over 11 years — for the YWCA. customers includes a shared value — to be a source of good in the communities W h at makes programs like these We ’ ve been drawn to many more in which we live and work, and to exceptional, beyond a dedication to groups that share our belief in preserv- translate our shared set of values and doing good, is their ability to create ing the family and nurturing women’s respect into real actions, with mean- change. When ColumbusReads began, growth: to the Children’s Defense Fund, ingful results. Sullivant Elementary School ra n ke d where we sponsored efforts that raised third from the bottom in regional read- $4 million over nine years for child This is the reason we focus our philan- ing levels, with only 28% of its students care, health care and Headstart pro- thropic work on issues that impact passing the kindergarten assessment. grams; to the Coalition Against Family women and children. Whether through Last April, that same school rose to Violence, founded by our board mem- better education, safe and healthy envi- fourth among the city’s 94 elementary ber Abigail Wexner, where our efforts ronments or positive role models, we do schools, with 97% of its students mas- have brought in more than $3 million to our best to return some of that magic. tering the reading test. help eliminate violence in the home and the community; and to the American And we’re proud of what we’ve achieved And we hold the same standard — a Foundation for A I D S Research (amfAR), so far. In 2000 alone, our businesses for which our Victoria’s Secret Cannes commitment to systemic change — to and individual associates contributed 2000 Fashion Show helped raise more the orga n i z ations we partner with. or raised $21 million to causes serving than $2.7 million for A I D S research. With the United Way, for instance, we women, children and education. Over e s tablished a Community Leaders the past five years, we’ve raised more As always, the results are an inspira- Giving Guide, a means to recognize than $70 million for those organiza- tion to us and, we hope, to you. More and celebrate personal contributions, tions closest to our associates’ and our than $70 million raised. Co u n t l e ss regardless of the amount people were customers’ hearts. hours given. Unlimited poss i b i l i t i e s . able to give. As a result, contributions in More than dollars, we’ve given time, That’s some powerful magic. the region grew to a record $52 million and given of ourselves. Over the last in 2000.
  • 18. 18
  • 19. 19
  • 20. 20 our brands:WE ARE DE TERMIN ED TO CREATE SU STAINED GROWT H OF SH AREHO LDE R VA LU E TH ROUGH A FA M I LY OF THE WO R L D’S BEST FASHION BRANDS. BR ANDS TH AT CUT THRO UGH AT RETA I L, AND CAN SUSTA I N S U P E R I O R, PR EDI CTABLE LE VELS OF PR OFI TA B I L I TY. WE A RE IN THE PRO CESS OF T IG HTLY D EF INING, ED ITING A ND R EF INI NG OU R PORT FO L I O. YOU CA N GET A MO RE D E TA ILE D VIEW OF O UR BRA ND P ORT F OLI O AS IT CUR RE NTLY STANDS OVE R THE NE XT SE VERAL PAG E S.
  • 21. 21
  • 22. 22 ex p re ss F RO M E VER Y A NGLE, I S A FASH ION LEA DER. IN TE RNAT I O N A L, INNOVATIVE, SEXY, STRO NG . A MODE RN BRAND THAT DELIVERS R UN WAY ST YL E, VIRT UA L LY AS IT HE AD S DO WN THE RUN WAY. G RE AT DE SIGN. WELL P RICED. T H AT ’S E XPR ESS. E X P R E SS C ON TINUE S TO BE O UR MOST P R OFI TABLE A PPARE L BR AN D. OP ER AT ING INCOM E IN CR EASED SI GN IF ICANTLY OVER 199 9. COM PARA BLE STOR E SALE S INCR EA SED 15% IN F IS CAL 20 00 OV ER A 5% GA IN IN 19 99. E X P R E SS ME N’S 2001 WI LL BRING A N E XCI TING GRO WTH OPPOR T U N I TY TO E XPRESS W IT H T HE I NTE G R AT IO N OF STRUCT URE I NTO E X P R E SS AS EXPRESS ME N’S. STR UC TUR E WILL BE R EU NI TED W IT H ITS ORIGIN AL BRAND AND LE ADER , MIC HAEL W EI SS. STR UCT UR E WAS FOUNDE D IN 1987 AS A DIVI SI ON O F EXP RE SS. TH E AD DITI ON OF A MEN ’S BUSINESS WI LL ALLO W E X P R E SS TO BE CO MPETITI VE WI TH OTHER SUCC ESS F U L , MO DERN, DUA L-G EN DER B RA NDS. B E ST-AT AN D WI N-AT MERCHAN DI SE CAT EG O R I E S E X P R E SS HA S D ISTO RTED T I ME, TAL EN T AND IN VEN TO RY C APITA L TO I TS B E ST- AT ME RC HA NDI SE C AT EG O RY OF KN IT TOP S A ND SW EAT E R S , A ND I TS W IN -AT M ERC HA ND ISE CAT EG O RY O F DE NI M. T HE GO AL I S F OR E X PR ESS TO BEC O M E TH E D ES T I N ATIO N FOR S T YL E, C OLOR AN D FIT — TH E TO P OF MIN D CH OIC E FOR T HE FA S H I O N -CON S CIOU S WO M A N . E X P R E S S CA N MEE T AL L HE R NE ED S B Y OF FERI NG A G OOD, B E TT E R , B ES T P RICI NG ST R UCTU R E; A B ASI C, FASHI ON A ND FAS H I O N – FO RWA RD S T YL E P YRA MI D; AN D WO R K , W EEKE ND A ND SO CI AL OC CA SION M ER CH AND IS E. A SI GNIF IC A NT P O RTI ON O F EXP RE SS ’S TA RGE TED R EVE NU E G RO WT H W ILL CO M E FR OM B ES T-AT A ND W I N-AT C AT EG O R I ES — S I N C E D ENI M WAS ID ENT I FIE D AS W IN -AT, SA LES H AVE INC REA SED AT A 28 % CO MPOU ND ED ANNU AL GR OWT H RAT E . LINGERIE LI NGE RIE , “TH E FI RST L AY ER OF FASHIO N,” IS A NE W MERCHAND ISE CAT EG O RY FOR E XPR ESS THAT WAS LA UNC HED I N THE FAL L O F 19 99, A ND IS NOW IN ALL S TO R E S. IT GREW TO A $50 MILL ION BUS IN ESS IN VO LUME IN I TS FI RST YE AR . I T I S AN IN CREMENTA L BU SI NE SS T HAT REPRES EN TS ANO TH ER G ROWTH OPPORT U N I T Y FOR EXP RESS. M U ST WIN STORE P RO GR AM THE MUST WIN STORE P ROGR AM I S A LIMITED, INC. COM PANYWIDE INITIATIVE THAT WAS INITIALLY D EVELOPED AT E X P R E SS. EXPR ESS ’S TIME, TAL EN T AND CAPITA L IS DISTO RTED TO I TS 162 MUST WIN STO R E S, WHICH ARE IN LO C AT I O N S WHERE SIGNIFICANT OPPORTUNITI ES FO R IMPROV E M E N TS I N SALES PRODUCTIVITY EXIST. IN 2000, COMPAR ABLE STO R E SALE S IN MUST WIN STO RE S EXCEE DED TH E BALANCE O F THE CHAIN BY 7%. E XPRES S ’S GOAL IS TO DO UBLE THE VO LU M E IN ITS MUST WIN STORES BY 2003 .
  • 23. 23
  • 24. 24 lerner new york I S R ED EFI NI NG CO MPETITI VELY P RI CED FASHI ON WITH ITS NE W YORK & COM PANY BR AN D. MODER N, CIT Y HIP, E NER GETIC, NE W YOR K & C OMPA NY IS FASH ION WI TH A N ATT I T U D E . AFTE R A DIFF IC ULT SP RING 2 00 0 CAUSE D BY FA SH ION MISSTEPS (C O M PAR AB LE STO RE SALES DE CLINED 1%) , LERNER N EW YORK REC OVE RED SOME MO MEN TUM A ND DELI VERE D A FALL COMPA RA BLE S TORE SALE S INCRE ASE OF 9% AND A SLIGHT IMPR OV EME NT OVE R LAST YE AR IN FO U R TH QUA RTE R OP ERATI NG INCO ME. OPERATI NG INCO ME FO R THE YEAR 2000 D EC LINED FRO M 199 9. NEW YORK & CO MPA NY IN 2000 , LE RNER NEW YORK REMODELE D AN D CO NVE RTED 7 9 STO RE S IN THE NE W YO R K, PHILA DE LPHIA A ND CHI CAG O M A R K E TS TO N EW YOR K & COMPA N Y. TH E IN ITIAL RESULTS OF TH IS TE ST H AVE BEEN E NC OU RAG IN G, A ND W ILL B E E VA LUATED I N 20 01. O NE O F T HE TOP PR IOR ITI ES IN 2001 WILL BE CON TINUI NG TO BUIL D THE NE W YORK & COM PA N Y BR AN D THRO UGH FASHI ON AND MA RKETI NG TH AT CO NV EY EN ER GY AND EXC I T E M E N T. CRITICAL FE W INITI AT I V E S LERN ER NEW YO R K ’S RE SOURCES WI LL CO NT IN UE TO BE FOCUSED O N ITS BEST-AT ME RC HAND ISE CAT EG O RY OF B OTTO MS AND TH E MUST WIN S TO R E S. TWO N EW “CR IT ICA L FEW I NITI ATIVES ” F OR 2 00 1 AR E IM PR OVING SU PPLY CH AIN EFFIC IE NCY AND LE VE RAG ING MERCHA NDI SE PROCE SS R ED ESIG N TE AMS FO R PROFITA B I L I T Y.
  • 25. 25
  • 26. 26 the limited B RA ND DESIGNS SOPHIST I C ATE D SP ORTSWEA R FOR T HE MODE RN AMERICA N WOMAN, WH O WA N TS AC C E SSIBLE FE MININE FASH ION AT A GRE AT VA LU E . 2000 WAS A DISA PP OINTIN G Y EA R FO R THE LI MITE D. ALT HOU GH COM PARAB LE STORE SALES INCR EA SE D 5% ON TOP OF L AS T YEAR’S 5% GA IN , O PE RATIN G IN COME D EC LINED SIG NIF IC ANTLY, P RI MARILY DUE TO MAR KDOWN S THAT WE RE TAK EN TO CLEAR THR OUGH A POOR KN IT TO P ASS O RT M E N T. THE LI MIT ED EN DED T H E YE AR WI TH 3 89 STO R E S, ON E- H ALF ITS H IGH OF 7 78 STOR ES IN 19 90. THE C LO SUR E O F UN DERPER FO RMI NG STO RES AT THE LIMITE D HA S R ESULT E D IN SIG NIF IC AN T IMPROV E M E N TS IN T HE BUYING AN D OCC UPA NCY EX PE NS E RAT E . B E ST-AT VIRT UAL ST R E TC H TH E V IRT UA L S T R E TCH SYSTEM IS A C OLLE CTION O F RE LATE D SEPA R AT ES F OR THE M ODE RN AME RIC AN WO M A N , I N C LUDI NG JAC K E TS, SKI RTS , PA N TS A ND TOPS IN A VA R I E T Y OF I NNOVATIVE FA B R I C S. IT IS THE LI MIT ED’S B EST-AT MERCHA NDI SE CAT EG O RY AND IS TAR GETED TO REPR ES EN T M ORE TH AN 35% OF SALES IN 20 01, IM PR ESSI VE FOR A C AT EG O R Y THAT WAS NO NEXIST EN T I N 19 98. M U ST WIN STORE PRO GRAM THE MU ST WI N STORE PR OG RA M CO NTINU ES TO BE ONE O F T HE LI MIT ED’S CR IT IC AL F EW INITIAT IV ES IN 20 01 . T IM E, TALENT A ND CAPI TA L ARE DISTO RTED TO THES E 150 STO RE S WITH T HE GOAL OF SI GN IF ICANT LY IM PROVING P RO DUC- T I V I T Y. IN 200 0, THESE STO RES ACH IEVED A DOUB LE- DIG IT COMPARABL E STORE SALE S INCRE ASE O VER T HE BA L A N C E OF TH E CHAI N, ON TOP OF A D OUBLE-DI GI T GAIN F ROM LAST Y EA R. TA L E N T SUP ER IOR PE RF ORM ANCE REQ UI RE S EXCEPTIONAL TA L E N T. RE CRU IT ING A ND RETAIN ING HIGH -Q UA L I TY TALE NT I S O NE OF THE L IMI TE D’S TO P PRI ORI TIES.
  • 27. 27
  • 28. 28 lane bryant’S H OT FASH ION , STA R P OW E R , SIZZLI NG B RA NDS. SP OR TSW EAR L INE, V ENEZ IA JEA NS CLOTHI NG CO. , AND SE XY NEW I NTIM ATES LI NE, CACI QUE, S ET THE STA N DAR D IN H IP FASH ION F OR W OM EN SI ZE 14+. LA NE B RYA N T ’S COMPAR AB LE STOR E SALES IN CR EA SED 2% IN 2 000, BUT SOME “ TOP 15” ITEMS DID NOT PERFOR M, AND AS A RESU LT GROSS MAR GIN AND OPE RATI NG IN CO ME WERE DO WN TO L AST YE AR . O N THE P OS IT IVE SI DE , VENE ZIA JEANS GR EW 36 % I N 2 00 0 AND P ER FOR MANCE IN INTI MAT E AP PA REL CO NT IN UES TO BE ST RON G, W ITH A 22 % I NCR EA SE IN COM PA RA BLE STORE SA L E S. BR AN D INIT IAT I V E S TH E YE AR 2000 PR OV IDED SO ME VA LUA BLE LE SSO NS W ITH THE S UCCE SS O F VENEZIA JEANS AN D C ACIQUE I NTI MAT E S. I N 20 01, L AN E BRYANT W ILL FOCU S ON FOUR KE Y THEM ES: ST R AT EGI C PLAN NI NG, MER CHANDISE PROCESS RE DESIGN, I N V E N TO RY MA NAGE MENT AND STOR E E XEC UTION. T H ESE I NITI AT IV ES A RE ALL ABO UT NAIL ING THE F UNDA M E N TA LS — THEY CUT AC R O SS ALL FU NC TIONS OF THE COM PA N Y. F UTUR E DIREC T I O N S ON FEBRUA RY 2 8, 200 1, AS PA RT OF ITS MULT I P L E-YEAR ST R AT EGY TO CREATE SUSTAI NE D GR OWTH OF SHARE HOL DER VA LUE , T HE LIMI TED, INC . A NN OUNCE D ITS I NTE NT TO PURSU E A ST R AT EGI C OR FINAN CIAL B UYER F OR L ANE BRYA N T.
  • 29. 29
  • 30. 30 henri bendel’ ON E OF MAN HATTA N ’S MOST BEAUTIF UL AND FASH IONABLE SH OPPI NG ENVIRO NMENTS, S LA N D M A R K FI FTH AVENUE STORE IS A MECCA FOR MOD ERN, SOPHIST I C AT E D, HIGHER- INCO ME WOME N FROM ALL OVER THE WO R L D. MERCHANDISING H EN RI BEN DE L CO NTINU ED TO REDI RECT AND S TRE NGTHEN ITS ME RCH AND IS IN G ST R AT EGY TO RE FLECT I TS TA R G E T C U STO M E R . HEN RI BENDEL AL SO F OCUSED O N YO UN G A ND EMER GING DE SIG NE R TAL ENT TO SEPA R AT E I TSE LF F ROM TH E COMPETI TI ON. A DV E RT I S I N G HENRI BEND EL I NCREASED THE VISI BI LITY O F THE STORE THRO UG H R EG IO NAL BUY S IN TAR GE TED HIG H-P RO FILE A DV E R TI SIN G VEH ICLE S, I NCLU DIN G I N S T Y L E, HARPE R' S BA ZAAR, AND V O G U E , AND A LSO INC RE ASE D ITS P RESE NC E IN NE W YORK MA GA ZINE. W I N D OW S HENRI BENDEL’S WINDOWS FEATURED UNIQUE, ENTICING DISPL AYS, INCLUDING INTERACTIVE AND LIVE-ACTION WINDO W S, AN D G U E S T W I N D OW D E S I G N E RS . W EE KLY C O S M E T I C S A ND D E S IG N E R W I N D O W S H I G H L I G H T ED B E ND E L’ S U N I Q U E MERCHA ND ISE AND P RO MOTIONAL AC T I V I T I E S. E V E N TS HEN RI BE NDE L ALSO I NCREASED THE V ISI BILIT Y O F THE S TOR E THROU GH H IGH-PR OFI LE ON -S ITE EV EN TS, I NC LU D I N G I N S T Y L E B E AU T Y ISSU E PA RTIES; CHAR LI E’ S A NG ELS FIL M PR EMI ER E; NEW C REATO RS YO UN G DESI GN ER L AU N C H PA RTY; GIRLS’ NI TE S WO R KSHOP SE RIES; CHARIT Y E VEN TS; A ND BENDE L’S SIGN AT URE O PE N SEE , A DESIGNE R C AS T I N G CA LL HEL D IN NE W YORK AND LO S ANGE LES. IN A DDI TION TO ENTI CI NG TARGET ED POTE NT IA L CU STOME RS TO THE STOR E, THE SE EV ENTS GE NE RATED P RE SS COV E R AG E AND CR EATED POSITI VE ENER GY AN D “BUZZ. ”
  • 31. 31
  • 32. 32 intimate brands, inc. T HE LI MI T ED, IN C. O WN S A PPR OX I M AT E LY 8 4 % OF ( N YS E: IB I) . I BI IS TH E L EA D IN G S P EC I A LT Y RE TA I L E R OF I N TI MAT E A PPA R E L , P ER S ON A L C A RE AND B EAU T Y P RO D U C TS, S O L D TH R O UG H T HE VI C TO R I A’ S S EC R E T, B AT H & BOD Y WO R KS AN D W HI TE B AR N C A N DL E C OM PAN Y B R AN D S. I B I I S AL SO TH E PA R EN T C O MPA NY O F I NT I M AT E BE AU T Y C O R PO R AT I O N , W HIC H H O US ES TH E V I C TO R I A’S S EC R ET BE AU T Y B U SI N ES S. victoria’s secret S E X Y. GLA M O U R O U S. INNOVAT I V E . IS WITH HIGH- Q UA L I TY, INNOVATIVE PRODUCTS AND E XPAND ED DIST R I- THE LEADING SPEC I A LT Y RETA ILE R OF LINGER IE A ND BEAU TY PROD- BUT IO N, WE EX PEC T T O NE ARLY QUAD R UPLE VO LUME I N CO LO R U C TS, DOMINATING ITS WORL D WI TH M ODERN, FAS H I O N - I N S P I R E D COSM ET ICS — TO A LMOST 10% OF OU R TOTAL BE AU T Y BUSINESS — C O L L EC T I O N S, PR EST IGE FRAGRA NCES A ND COSM ET ICS, CEL EBR AT E D OVER THE NEXT FE W YEA RS. CU RR ENTLY, THE COLOR LINE IS IN 2 10 S U P E R M O D E LS A ND WO R L D- FAMO US RUN WAY SHOW S. VI CTO R I A’S B E AU TY STO R E S, W IT H A GOAL O F 410 STORES BY Y EAR -END 2001, S E C R ET L I N G E RI E AN D B E AU T Y S TO R E S , T HE C ATA L OG U E A N D TH ROUGH THE ADDIT ION OF 25 STORES WITH O UR COLO R LINE A ND W W W. V I C TO R I ASS EC R E T.C O M A L LO W C US T O M E R S T O S H O P T H E 175 STORES W ITH OUR LIP PRO DUCTS. BRAND ANYWHERE, ANY TIME, FROM ANY P LACE . IN EARLY 200 1, WE LAU NCHE D OUR FI RST P ER FORMA NCE BODY CA RE UNIQUE PR ODUCTS C O L L ECT ION UNDER TH E BODY BY VICTO RIA NA ME, TO CAPITALIZE ON TH E TREMEND OU S SUCCESS O F TH E LINGERIE LINE. INS PIRE D BY THE LINGERIE H I G H -T ECH, SEA MLESS LINGERIE CO LLECTION, B ODY BY VICTO R I A OUR “BE ST-AT BRAS” INI TIATIVE, FUELE D BY CONTINUOUS INNOVA- B O DY CARE OFFERS THE ULT I M ATE IN S EX Y SKIN P ER FO RMA NCE. T I O N , A N EX PA NDI NG ASS O RT M E N T, A ND SUB -BR AND DEVELO P M E N T, H AS CREAT ED A BR A BUSIN ESS O F N EAR LY $ 1 B ILL ION AC R O SS T HE OUR COLLECTION OF HIGH-Q UA L I T Y, FEMININE COSMET IC AND TRAV E L B R A N D. EV ER Y PR O DU C T IN TR O D UC TI ON OFF E RS B O T H FAS H I O N B AG S, IN OU R S I GNATUR E PI NK- O N- PIN K STR IP ED PAT T ER N, HA S LEA D ERSH IP AN D A UNIQ UE SE LLING PR OPOS ITIO N, AS WE DRIV E TO P R OVEN TO BE AN EXCE LLE NT S ELLER. A SIGNATURE LAU N D RY CO L- I N C R E A SE OUR M AR KET S HARE I N BOTH S PECIA L O CCA SIO N AND L ECTI ON F OR FINE WAS H A B L E S, WITH A DE LI CIOU SLY FR ESH SCENT, E V E RY DAY LI NGER IE. I S ALSO VERY SUCCESS F U L . WE ALSO O FFER M ANY GIFT I TEM S W HICH HELP MAKE VI CTO R I A’S SE CRE T A FREQUENT SHO PPING DE ST I N AT I O N . S E A M L E SS AND MODERN, BODY BY VICTO R I A, OUR MOST SUCCESS F U L NEW LINE EVER, HAS PROVEN ITS STAYING POW E R. THE COLLEC T I O N 360 ° AC C E SS: ATTAI NA BLE GLA M O U R GREW TO $350 MILLION IN SALES IN 2000, WITH FURT H E R G R OWT H A HE AD A S T HE S U B - B R AN D A SS O RT M E N T D EV E LO P S A N D AL S O OUR STO R E S E X PANDS INTO PE RFOR MAN CE BODY CARE. THE O RI GIN AL BO DY BY A NEW, M ORE UP SCAL E, M ODERN A ND SOPH IST I C ATED DESIGN FO R V I C TORIA ST R E TCH PAD SHA PING DE MI BRA I S OU R NUMBER ONE B OTH OUR LINGE RIE AND BEAU T Y STORES IS TAKING TH E STORES TO SELLI NG BRA, A LO NE GENERATING $150 M IL LION IN SA LE S — M ORE A NEW AS P I R AT IO NAL LE VEL . WE PLAN TO OPEN 50-TO-55 LI NG ERIE THA N 4. 5 M IL LI ON UN ITS — IN 20 00. STORES AND 15-TO-20 FREESTANDING BEAU TY STORES AND EXPA N D AND/OR REMODEL 5 5 -TO- 60 MO RE IN TH IS NEW IMAGE I N 20 01. B O DYF L E X, A NEW UNDERWIRE BRA TEC H N O LO GY, FEATURES A TITA N I- UM WIRE THAT AC T UA L LY FLEXES TO THE SHAPE OF THE BODY. THE STORE E XPANSION WILL ALSO YI ELD INCRE MENTA L SA L E S. RIG HT N ATURAL MIRACLE BRA USES AN INNOVATIVE LIQUID PAD TO PROV I D E N OW, M A N Y O F O U R S T O R E S I N T O P M A R K E T S A R E S P A C E- F U L L E R, MORE FLUID NATURAL CURV E S. AND BODY BARE, THE SIMPLE, C O N ST R A I N E D. WE SEE MANY OPPORTUNITIES TO DOU BLE O R EVEN SEXY COLLE CTION TARGE TING OUR YO U N G E ST CLIENT SEG M E N TS, HAS TRI PLE SQUA RE FEE T IN OUR BEST MARKETS. I N TOTA L, WE’LL BE BEEN TRACKING ANNUA L LY TO BE A MORE THAN $80 MILLI ON SUB- I N V E STING OVER $55 MILLION IN REMODELS AND EXPANSIONS IN 2001. BRAND SINCE ITS LAUNCH IN 1999. FOR TH E NEXT FEW Y EARS, TOTAL SELLI NG SQU AR E FE ET GROWT H LINGE RIE FOR LEG S FRO M NEW STOR ES AND EXPANSIONS SHO ULD BE ABOUT 9-TO- 1 0 % L EG W EA R IS A L OGI CA L B R AN D E X TE N SI ON F OR V I CTO R I A’S SE C R E T. PE R YEA R, COMPA RED WITH 7% IN 199 9 A ND 6 % IN 2 000. OU R 2 0 01 I NI T I ATI VE S IN C LU D E T H E R E- L A UN C H O F T HE H OS IE RY C AT EG O R Y, F EAT UR I NG T H RE E N E W C O L L EC T I O N S , AN D T HE C O N - V I C TO R I A’S SECRET D IR EC T TIN U ED L E V ER AG E O F O U R M AR K ET L EA DE RS HI P I N G LA M O U R O U S, V I C TO R I A’S SECRET D IRE C T, OU R CATA LOGUE AND E- COMMERCE BUSI - S EX Y S H E ER S . N E SS, EFFEC T I V E LY LEVERAGES OUR STRONG BRAND R EC O G N I T I O N AND OUR CATA LOGUE INFRASTRUCTURE. FOR YEARS, THE CATA LO G U E B E AU TY H AS SERVED AS BOTH A WONDERFUL DIST RIBUTION CHANNEL AND OU R GR OW I NG L I NE O F P RE ST I G E B EAU T Y PR O DU C TS G EN E R AT E D BRAND A DV E RTISING A ND MARKETING VEHICLE. 1 6% OF TO TAL V I C TO R I A’S SE C RE T SA L E S IN 2 0 0 0, SE LL IN G IN 48 0 B E AU T Y ST O R E S, I N 45 0 N IC H E LO C ATI ON S I N L I N GE R IE S TO R E S W W W. V I C TO R I ASS EC R E T. COM USES NO T ON LY EXIST ING CATA LO GUE A N D T HR O U GH V IC TO R I A’S S EC R E T D I R EC T. O U R G OA L , OV E R T H E P H OTO G R A P H Y, BU T ALSO THE EXIST ING SA LES AN D SE RVI CE CEN TER N E XT S E VE R AL Y E A RS , I S TO M A KE VI C TO R I A’S S E CR E T B EAU T Y A AND A DISTRIBUTI ON CE NTE R THAT SHIPS THOUSA NDS OF PAC KAG E S $1 B I LL IO N BU S I NE S S. W E W I LL F OC U S ON F OU R MA JO R C AT E - A DAY. BRAN D-WIDE PR ODUCT LAU N C H E S, INCLUDI NG CATA LO GU E GO R IE S: P RE S TI G E F R AGR A N C E, C OLO R CO S ME TIC S , S K IN A N D H AI R C OV ER S A N D LAYO U TS, W EB E XP OS U RE S, A N D O UT B OU ND E- M A I L , C A RE , A N D L IF ES T YL E P R O DU C TS . ARE ALL TIGHTLY ALIGNED WITH ADV E RTISING AND IN-STORE MARKETING. THE HA L L MA R K OF OU R FRAGR ANCE CAT EG O R Y IS DREAM AN GELS, WI TH WWW. V I C TO R I ASS EC R E T.COM COMPLETING O UR 36 0° BRAND, WHICH LAUNCH ED IN LAT E 1999. BY Y EAR -EN D 2 000, THE CO LLEC- WE NE ARLY DOUBLED THE PERCE NTAGE OF CLIE NTS THAT SHOP BOT H T I O N ’S SALE S RE ACHED $ 150 MILLION — MAKING I T THE NU MBE R ONE THE INT ERNET AND CATA LOGUE IN 2000. INTERNET SALES A LO N E P R E ST IGE FRAGRANCE IN THE COUNTRY. WE EXPECT EXC E P T I O N A L TRIPLED I N 2000 TO REPRESENT ABOU T 4% OF BRAND SA L E S. AND G R OWTH IN FRAGRANCE AGAIN IN 2 001 , AS “PINK,” A U NIQU E, MODERN E V E RY ORD ER PLACED ON WWW. V I C TO R I ASS EC R E T.COM CONTRIBUTES S C E N T, IS AD DE D TO THE ASS O RT M E N T. A HIGHER PROFIT MARGIN, AS ORD ER PROCESSING IS ST R E A M L I N E D.
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  • 36. 36 bath & body works IS RE DE FIN IN G H OW P EO PLE TH IN K ST R AT EGIC REAL ESTAT E G ROWT H A BOU T PE RS O NAL C A RE . WE H AVE BU ILT A BR AND WI TH I NC R ED IBLE T H E R EA L E S TAT E F O C U S F O R B ATH & B O D Y WO R KS WI LL B E STAY ING POW E R , A MI X O F N ATU RA L BUT LU XU RIO US BODY AN D TWO FO LD OVER THE NEXT SE VERAL YEARS. FIRST, GR OWTH O UTS I D E H AI R C A RE P RO DU CTS , GRO UN D ED IN WO R L D - C LA SS F RAG R A N C E OF T HE TRAD ITI ONAL MALL W IL L BECOME MORE IM PORTA N T. WE D E V E LO P M E N T. E X P ECT STO RES IN THE SP EC I A LT Y, CO MMUNIT Y AN D P OWE R CEN- TE RS AND THE LIKE TO ACCO UN T FOR OVER 50 % OF AL L NEW S TO R E S REDEFI NING P ER SONA L CARE OVER THE NE XT 3-TO-4 YE ARS. TH ESE LO C ATI ONS O FFER SI GNIFICANT LA R G E LY BEC AUSE OF BATH & BODY WO R KS, PERSONAL CA RE HAS SA L E S, P ROF IT AND R ET URN ON IN VEST ME NT OPP ORT U N I T I E S. BEEN TR ANSFORMED FR OM A BASIC ROU TINE TO A HEAD -TO-TOE PA M- PER ING LIFEST YLE . PEOPLE HAVE GONE FROM WASHING WITH SOAP TO S EC O N D, THERE IS TERR IFIC OP PORT U N I TY TO AD D INCREMENTA L CLEANSING WITH A SCENTED REFRE SHING SHOWER GE L. WOMEN HAV E SALES IN M ANY O F O UR EXISTING LO C AT IONS THROUGH E XPA N S I O N S M OVE D FROM USING MOISTURIZER SIMPLY AS A HEALING AGENT FO R AND R EM ODELS. O UR M OST PR ODUCTIVE MALL STO RES TO DAY T END D RY SKIN TO HYDRATING WITH A FRAG R A N T, LUXURIOUS LOTION. T H I S TO BE UNDERS IZ ED. WE HAVE OUTG R OW N T HEM; MA NY AR E ST IL L THE REDEFINITION OF PERSONAL CARE HAS BUILT B ATH & BODY WO R KS I N TO SAME VERY S MAL L STOR ES WE BEGA N OUR BUSINESS WITH 10 YE AR S A $1.8 BILLION FORCE IN THE PERSONAL CARE INDUST RY. AG O. B E TW E E N N EW S T OR E S A N D E X PA N S I O N S , W E E X P EC T TO I N C R E ASE OUR SELLING SQUAR E FEET OVER THE NEXT 3 -TO- 4 YEARS THE UNIQUE BATH & BO DY WO R KS EXP ER IENCE BY A BOUT 12-TO-15% PER YEAR. OU R CO RE ST R E N G T HS — U N PA R ALL EL ED I NN OVAT IO N, S UPE R IO R white barn candle companyWAS PRODUCT PERFORMANCE, WO R L D-C LASS FRAGRANCE DEVELO P M E N T DELIVERED IN AN INTIMATE, ENTERTAINING SHOPPING EX PERIENCE — FOUNDE D IN MAKE FOR UNIQUE ADVA N TAGES AG A I N ST THE COMPETITION. AND, 1999 A ND M E E TS A GROWING DEMAND F OR INNOVATIVE HOME FRA- WITH ONLY A 6% SHARE OF THE $28 BILLION PERSONAL CARE MARKET, GRANCES AND DÉC O R . THE OPPORT U N I TY FOR CONTINUED STRONG GROWTH IS SUBSTA N T I A L . LA UNCH ED AS A SEPA R ATE BRA ND IN NOVEM BER 1999, TH E WHITE U N PARALLELED INNOVATION: BIÓ BAR N CANDLE COMPANY BR AND R EC ORDED TOTAL HOME FRAG R A N C E OUR YEAR 2000 PERFORMANCE HAIR AND FACE CARE LINE INTRODUC- SALES OF $23 7 MILLION IN 20 00. TION, BIÓ, GREW OUT OF BATH & BODY WO R KS’ COMMITMENT TO INNO- VATION. TO DAY’S $4 BILLION U. S. HAI R CARE MARKET* LO O KS MUCH WITH BATH & BODY WO R KS OFFE RING A SEL ECTION O F I TS PR ODU CTS, LIKE THE PERSONAL CARE INDUST RY WHEN BATH & BODY WO R KS WAS AWA R E N E SS AN D TRIAL O F T HE WHITE BAR N BRAND IS BUI LDING F I R ST INTRODUCED. MANY OF THE CAT EG O RY ’S TOP BRANDS HAV E R A P I D LY. W E A LS O H AV E 96 SI DE- BY-SI DE AN D 3 1 S TA N D-A LO N E TAKEN DECADES TO BUILD THEIR FRANCHISES, BUT WE IDENTIFIED WHIT E B ARN STO RES T HAT OFFER THE ENTIRE H OME FRAGR ANCE A ND WHITE SPACE IN BOTH POSITIONING AND PRODUCT PERFO R M A N C E , D ÉCOR CO LLEC T I O N . LEADING TO BIÓ’S DEVELO P M E N T. WE EXPECT BIÓ SALES OF $65 MILLION IN THE FIRST YEAR ALONE. HOM E FRAGRANCE IN NOVAT I O N W E ’ VE SET THRE E PRIORIT IES AT WHITE BA RN: FIRST, TO BE BEST-AT U N M ATCHE D FRAGRANCE DEVELO P M E N T C A N D L ES — TO OFFER T HE HIGHEST Q UA L I TY CANDLES WITH THE BEST W E ’VE CREAT ED FR AGRA NC E FO R M U L AT IO NS IN D IFFER ENT P RODUC T F R AG R A N C E S , AND BECOME OUR CUSTOMERS’ FIRST CHOICE FOR A FO R M S, S UCH AS MO IST U R E-RI CH BODY LOT ION AND R EFR ESH ING SUPERIOR PRODU CT. SEC O N D, TO APPROACH SEASONAL COLLEC T I O N S S H OW ER GEL , A ND AD DED EXCEL LEN T FR AGRA NCE CH A RAC T E R , LI F T WITH AN OVERALL ST R AT EGY OF “DE C O R ATING YOU R HOME W ITH FRA- A ND DU RAT ION , F ILLIN G A GAP IN TH E MAR KETP LAC E. WI TH TH RE E G RANCE” — AN APPROACH IN SYNC WIT H TO DAY’S LIFESTY L E S. T HIRD, OF B ATH & BODY WO R KS’ FRAGRANC ES PL ACING IN T HE TO P FIVE TO CONT INUE TO DRIVE VO LUME GROWTH THROUGH INNOVAT ION IN A MONG AL L U. S . FRA GRANC E LI NES IN 2 0 00, T H E SUC CESS I S EVI- F R AGRANCE AND DELIVERY SYST E M S. D E N T. W E A LS O E XPANDED OUR FR AGR A NCE SEG M E N TS IN 20 00 . A LONG SID E O UR T RA D ITIONA L FR UIT A ND FLO RAL SEG M E N TS, WE *according to AC N i e l s e n A DDED F RESH B OTA N I C A LS AN D WARM CO MFO RTS.
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  • 38. 38 E X ECUTIVE OFFICERS Barry D. Kaufman, President E. Gordon Gee Independent Public Accountants Property Services Chancellor, Vanderbilt University A PricewaterhouseCoopers LLP Leslie H. Wexner Nashville, Tennessee Columbus, Ohio Chairman and Chief Executive Officer Nicholas LaHowchic, President Logistics Services David T. Kollat Overseas Offices V. Ann Hailey Chairman, 22, Inc. Antananarivo, Cairo, Guatemala City, Hong Kong, Executive Vice President and Chief Financial Officer Edward G. Razek, Chief Marketing Officer and Westerville, Ohio Jakarta, London, Mexico City, Milan, Port Louis, Porto, President Seoul, Shanghai, Taipei, Tokyo Leonard A. Schlesinger Brand and Creative Services Donald B. Shackelford Executive Vice President and Chief Operating Officer Chairman of the Board, 10-K Report and Information Requests Jon J. Ricker, Chief Information Officer and Fifth Third Bank, Central Ohio A copy of form 10-K is available without charge through BAD B U S I N ESS UNIT LEADERS President Columbus, Ohio our Web site, www.Limited.com, or upon written request to: Technology Services The Limited, Inc., P.O. Box 28963, Columbus, Ohio 43228. Robert E. Bernard, President and Alex Shumate For information please call 614.415.6400. Chief Executive Officer Gene Torchia, President Managing Partner, Squire, Sanders & Dempsey, LLP B The Limited Store Design and Construction Columbus, Ohio Stock Transfer Agent, Registrar, and Dividend Agent First Chicago Trust Company of New York, a division of Robin Burns, President and Allan R. Tessler EquiServe Chief Executive Officer Stuart Burgdoerfer, Vice President Chairman and Chief Executive Officer, P.O. Box 2500, Jersey City, New Jersey 07303-2500 Intimate Beauty Corporation Controller J. Net Enterprises, Inc. B D C 800.317.4445 New York, New York www.EquiServe.com Ed Burstell, Vice President and Timothy J. Faber, Vice President General Manager Treasury, Mergers and Acquisitions Abigail S. Wexner The Limited, Inc. Henri Bendel Attorney at Law D Founded 1963 Daniel P. Finkelman, Senior Vice President Columbus, Ohio As of February 3, 2001: Richard P. Crystal, President and Brand and Business Planning Number of associates—123,700 Chief Executive Officer Bella Wexner Approximate shareholder base—190,000 ©2001 The Limited, Inc. Lerner New York Samuel P. Fried, Senior Vice President Director Emeritus General Counsel and Secretary Jill Brown Dean, President Raymond Zimmerman A N T I C I PATED MONTHLY SA L ES AND QUA R T E R LY Lane Bryant Peter L. Gartman, Senior Vice President Chairman of the Board, EARNINGS DAT ES FOR 2001: Chief Sourcing Officer 99¢ Stuff.com B D Kenneth B. Gilman, Chief Executive Officer Boca Raton, Florida February Sales 3/8/01 Lane Bryant Bethmara Kessler, Vice President March Sales 4/12/01 Internal Audit B = Member of the Audit Committee April Sales 5/10/01 Grace A. Nichols, President and A = Member of the Compensation Committee May Sales 6/7/01 Chief Executive Officer Timothy B. Lyons, Senior Vice President D = Member of the Finance Committee June Sales 7/12/01 Victoria’s Secret Stores Taxes C = Member of the Nominating Committee July Sales 8/9/01 August Sales 9/6/01 Beth M. Pritchard, President and Bruce A. Soll, Senior Vice President and Counsel C O M PANY INFORMAT I O N September Sales 10/11/01 Chief Executive Officer Company Affairs October Sales 11/8/01 Bath & Body Works Headquarters November Sales 12/6/01 B OARD OF DIREC TO R S The Limited, Inc. December Sales 1/10/02 Martin Trust, President and Three Limited Parkway January Sales 2/7/02 Chief Executive Officer Leslie H. Wexner Columbus, Ohio 43230 Mast Industries Chairman and Chief Executive Officer 614.415.7000 1st Quarter Earnings 5/21/01 C www.Limited.com 2nd Quarter Earnings 8/23/01 Sharen J. Turney, President and V. Ann Hailey 3rd Quarter Earnings 11/20/01 Chief Executive Officer Executive Vice President and Chief Financial Officer Annual Meeting 4th Quarter Earnings 2/28/02 Victoria’s Secret Direct The Annual Meeting of Shareholders is scheduled for: Leonard A. Schlesinger 9:00 A.M., Monday, May 21, 2001 Live audio of the quarterly earnings conference calls can Michael A. Weiss, President and Executive Vice President and Chief Operating Officer Three Limited Parkway be accessed through our Web site, www.Limited.com. Chief Executive Officer Columbus, Ohio 43230 Express and Express Men’s Martin Trust Audio replays of both monthly sales and quarterly earnings President, Mast Industries, Inc. Stock Exchange Listings conference calls can be accessed through our Web site, CENTER FUNCTIONS Andover, Massachusetts New York Stock Exchange (Trading Symbol “LTD”) www.Limited.com, or by dialing 800.337.6551 followed by London Stock Exchange the conference call passcode, LTD (or 583). Marie Holman-Rao, President Eugene M. Freedman Commonly listed in newspapers as “Limitd” Design Services Senior Advisor and Director, Monitor Clipper Partners, Inc. D Cambridge, Massachusetts
  • 39. 39 M O D E LS : Mini Anden, Gisele Bundchen, Laetitia Casta, Aurelie Claudel, Rhea Durham, Bridget Hall, Heidi Klum, Lauren Krol, Noemie Lanois, Anna Nicole Smith, J e ssica White P H OTO G R A P H E R S : Walter Chin, Philip Dixon, Dominique Isserman, Kit Latham, Peter Lindbergh, Wayne Ma s e r, Michael Thompson, Max Va d u k u l I L LU ST R ATO R: I z a k D E S I G N : VIA Inc., New York P R I N T I N G : He r i tage Pr e ss, Da l l a s

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