<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 29, 1994
----------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ______________
Commission file number 1-8344
------
THE LIMITED, INC.
---------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1029810
- - ---------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
Three Limited Parkway, P.O. Box 16000, Columbus, Ohio 43230
- - ----------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 479-7000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
-------------------------- -----------------------------------------
Common Stock, $.50 Par Value The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to the filing requirements for
the past 90 days. Yes X No
--------- ---------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
---
Aggregate market value of the registrant's Common Stock held by non-affiliates
of the registrant as of March 25, 1994: $5,877,912,414.
Number of shares outstanding of the registrant's Common Stock as of March 25,
1994: 357,869,632.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's annual report to shareholders for the fiscal year
ended January 29, 1994 are incorporated by reference into Part I and Part II,
and portions of the registrant's proxy statement for the Annual Meeting of
Shareholders scheduled for May 23, 1994 are incorporated by reference into Part
III.
<PAGE>
PART I
ITEM 1. BUSINESS.
General.
The Limited, Inc., a Delaware corporation (the "Company"), is
principally engaged in the purchase, distribution and sale of women's apparel.
The Company operates an integrated distribution system which supports the
Company's retail activities. These activities are conducted under various trade
names through the retail stores and catalogue divisions of the Company.
Merchandise is targeted to appeal to customers in specialty markets who have
distinctive consumer characteristics, and includes regular and special-sized
fashion apparel available at various price levels. The Company's merchandise
includes shirts, blouses, sweaters, pants, skirts, coats, dresses, lingerie and
accessories and, to a lesser degree, men's apparel, children's apparel,
fragrances, bed, bath, personal care products and specialty gift items. The
Company's wholly-owned credit card bank, World Financial Network National Bank,
provides credit services to customers of the retail and catalogue divisions of
the Company.
Description of Operations.
General.
-------
As of January 29, 1994, the Company operated twelve retail divisions
and one catalogue division (Victoria's Secret Catalogue). The following chart
reflects the retail divisions and the number of stores in operation in each
division at January 29, 1994 and January 30, 1993.
<TABLE>
<CAPTION>
NUMBER OF STORES
------------------------
January 29, January 30,
RETAIL DIVISION 1994 1993
--------------- ---- ----
<S> <C> <C>
Express 673 640
Lerner New York 877 915
The Limited 746 759
Victoria's Secret Stores 570 545
Lane Bryant 817 809
Structure 394 330
The Limited Too 184 185
Bath & Body Works 194 121
Abercrombie & Fitch 49 40
Henri Bendel 4 4
Cacique 108 71
Penhaligon's 7 6
----- -----
Total 4,623 4,425
===== =====
</TABLE>
1
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The following table shows the changes in the number of retail stores
operated by the Company for the past five fiscal years:
<TABLE>
<CAPTION>
Fiscal Beginning
Year of Year Acquired Opened Closed Sold End of Year
- - ------ --------- -------- ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
1989 3,497 - 296 (65) (384)/1/ 3,344
1990 3,344 7 456 (47) - 3,760
1991 3,760 - 484 (50) - 4,194
1992 4,194 - 323 (92) - 4,425
1993 4,425 - 322 (124) - 4,623
</TABLE>
- - ------------------
/1/ This figure represents the sale of the Lerner Woman stores
effective April 30, 1989.
The Company also operates Mast Industries, Inc., a contract
manufacturer and apparel importer, and Gryphon Development, Inc. ("Gryphon").
Gryphon creates, develops and contract manufactures most of the bath and
personal care products sold by the Company.
During fiscal year 1993, the Company purchased merchandise from
approximately 4,000 suppliers and factories located throughout the world.
Approximately 57% of the Company's merchandise is purchased in foreign markets
and a portion of merchandise purchased in the domestic market is manufactured
overseas. Company records, however, do not allocate between foreign and
domestic sources for merchandise purchased domestically. No more than 5% of
goods purchased originated from any single manufacturer.
Most of the merchandise and related materials for the Company's stores
is shipped to the Company's distribution centers in the Columbus, Ohio area,
where the merchandise is received and inspected. The Company uses common and
contract carriers to distribute merchandise and related materials to its stores.
The Company's divisions generally have independent distribution capabilities and
no division receives priority over any other division. There are no
distribution channels between the divisions.
The Company's policy is to maintain sufficient quantities of inventory
on hand in its retail stores and distribution centers so that it can offer
customers a full selection of current merchandise. The Company emphasizes rapid
turnover and takes markdowns where required to keep merchandise fresh and
current with fashion trends.
The Company views the retail apparel market as having two principal
selling seasons, Spring and Fall. As is generally the case in the apparel
industry, the Company experiences its peak sales activity during the Fall
season. This seasonal sales pattern results in increased inventory and accounts
receivable during the Fall and Christmas selling periods. During fiscal year
1993, the highest inventory level approximated $1.167 billion at the November,
1993 month-end and the lowest inventory level approximated $760 million at the
January, 1994 month-end.
Merchandise sales are paid for in cash, personal check or by credit
cards issued by the Company's wholly-owned credit card bank, World Financial
Network National Bank ("WFNNB"), for customers of Express, Lerner New York,
Limited Stores, Lane Bryant, Structure, Victoria's Secret Catalogue and Henri
Bendel, as well as credit cards issued by third party banks and other financial
institutions. Further information related to WFNNB's loan balances and
allowance for uncollectible accounts is contained in Note 3 of the Notes To
Consolidated Financial Statements included in The Limited, Inc. 1993 Annual
Report to Shareholders, portions of which are annexed hereto as Exhibit 13 (the
"1993 Annual Report") and Financial Statement Schedule VIII to this Form 10-K,
and is incorporated herein by reference.
2
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The Company offers its customers a liberal return policy stated as "No
Sale is Ever Final." The Company believes that certain of its competitors offer
similar credit card and service policies.
The following is a brief description of each of the Company's
operating divisions, including their respective target markets.
Express
Express brings international women's sportswear and accessories with a
distinctive European point of view to fashion forward women in a spirited
continental store environment.
Lerner New York
Lerner New York is a moderate-priced specialty retailer of
conventional women's sportswear, ready-to-wear and coats.
The Limited
The Limited offers a full range of fashion forward private label
sportswear, ready-to-wear and accessories for women.
Victoria's Secret Stores
Victoria's Secret Stores offers lingerie, beautiful fragrances and
romantic gifts in an atmosphere of "pure indulgence".
Lane Bryant
Lane Bryant focuses on sportswear, ready-to-wear, coats and intimate
apparel for the fashion-conscious large size woman.
Victoria's Secret Catalogue
Victoria's Secret Catalogue sells women's lingerie, sportswear and
ready-to-wear via catalogue.
3
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Structure
Structure offers a men's sportswear collection with a distinct
international flavor. The store environment mixes classic Palladian and modern
architectural styles to appeal to men with a good sense of fine design.
The Limited Too
The Limited Too offers fashionable casual sportswear for girls
wearing sizes 6 to 14.
Bath & Body Works
Bath & Body Works provides personal care products for women and men.
Abercrombie & Fitch Co.
Abercrombie & Fitch provides spirited traditional sportswear for
young-thinking men and women.
Henri Bendel
Henri Bendel offers glamorous and sophisticated women's fashions in
an exclusive shopping environment.
Cacique
Cacique offers fashion lingerie and gifts in an European shopping
environment.
Penhaligon's
Penhaligon's designs, distributes, wholesales and retails a variety of
perfumes, toiletries, grooming accessories and antique silver gifts.
Additional information about the Company's business, including its
revenues and profits for the last three years and the selling square footage and
other information about each of the Company's operating divisions, is set forth
under the caption "Management's Discussion and Analysis" of the 1993 Annual
Report and is incorporated herein by reference.
Competition.
The sale of apparel and personal care products through retail stores
is a highly competitive business with numerous competitors, including individual
and chain fashion specialty stores and department stores. Design, price and
quality are the principal competitive factors in retail store sales. The
Company's catalogue divisions compete with numerous national and regional
catalogue merchandisers in catalogue sales. Design, price, quality and
catalogue presentation are the principal competitive factors in catalogue sales.
4
<PAGE>
The Company is unable to estimate the number of competitors or its
relative competitive position due to the large number of companies selling
apparel and personal care products at retail, both through stores and
catalogues.
ASSOCIATE RELATIONS.
On January 29, 1994, the Company employed approximately 97,500
associates, 70,800 of whom were part-time. In addition, temporary associates
are hired during peak periods, such as the Christmas season.
ITEM 2. PROPERTIES.
The Company's business is principally conducted from office,
distribution and shipping facilities located in the Columbus, Ohio area.
Additional facilities are located in New York City and Andover, Massachusetts.
The distribution and shipping facilities owned by the Company consist
of seven buildings located in Columbus, Ohio, comprising approximately 5.2
million square feet. The operations of WFNNB are located in two leased
facilities in the Columbus area, which, in the aggregate, cover approximately
200,000 square feet.
Substantially all of the retail stores operated by the Company are
located in leased facilities, primarily in shopping centers throughout the
continental United States. The leases expire at various dates between 1994 and
2014 and generally do not have renewal options.
Typically, when space is leased for a retail store in a shopping
center, all improvements, including interior walls, floors, ceilings, fixtures
and decorations, are supplied by the tenant. In certain cases, the landlord of
the property may provide a construction allowance to defray a portion of the
cost of improvements. The cost of improvements varies widely, depending on the
size and location of the store. Rental terms for new locations usually include
a fixed minimum rent plus a percentage of sales in excess of a specified amount.
Certain operating costs such as common area maintenance, utilities, insurance,
and taxes are typically paid by tenants.
ITEM 3. LEGAL PROCEEDINGS.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
5
<PAGE>
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information regarding the executive
officers of the Company as of January 29, 1994.
Leslie H. Wexner, 56, has been Chairman of the Board of Directors of
the Company for more than five years and its President and Chief Executive
Officer since he founded the Company in 1963.
Kenneth B. Gilman, 47, was promoted to Vice Chairman and Chief
Financial Officer of the Company in June 1993. Mr. Gilman was the Executive
Vice President and Chief Financial Officer of the Company for more than five
years prior thereto.
Michael Weiss, 52, was promoted to Vice Chairman of the Company in
June 1993. Mr. Weiss was the Chief Executive Officer of the Company's Express
division for more than five years prior thereto.
Bella Wexner, over 65 years of age, has been the Secretary of the
Company for more than five years.
Martin Trust, 59, has been President of Mast Industries, Inc., a
wholly-owned subsidiary of the Company, for more than five years.
Arnold F. Kanarick, 51, has been Executive Vice President and Director
of Human Resources since October 1992. Mr. Kanarick was Vice President, Human
Resources of Analog Devices, a manufacturer of semiconductors, from 1985 to
1992.
Wade H. Buff, 59, has been Vice President-Internal Audit for more
than five years.
Alfred S. Dietzel, 62, has been Vice President-Financial and Public
Relations of the Company for more than five years.
Barry Erdos, 50, was promoted to Vice President and Corporate
Controller of the Company in August 1993. Mr. Erdos was Executive Vice
President and Chief Financial Officer of the Company's Henri Bendel division for
more than five years prior thereto.
Samuel Fried, 42, has been Vice President and General Counsel of the
Company since November 1991. Mr. Fried was Vice President and General Counsel
of Exide Corporation, a manufacturer of automotive and industrial batteries,
from February 1987 to October 1991.
William K. Gerber, 40, was promoted to Vice President of Finance of
the Company in August 1993. Mr. Gerber was Vice President and Corporate
Controller of the Company for more than five years prior thereto.
Patrick C. Hectorne, 41, was promoted to Treasurer of the Company in
August 1993. Mr. Hectorne was Assistant Treasurer of the Company for more than
five years prior thereto.
6
<PAGE>
Charles W. Hinson, 57, has been President-Store Planning of the
Company for more than five years.
Timothy B. Lyons, 48, has been Vice President of Taxes of the
Company for more than five years.
Edward Razek, 45, was promoted to Vice President and Director of
Marketing of the Company in November 1993. Mr. Razek was the Executive Vice
President of Marketing for Limited Stores for more than five years prior
thereto.
George R. Sappenfield, III, 43, was promoted to President-Real Estate
of the Company in July 1993. Mr. Sappenfield was Vice President-Real Estate
for more than five years prior thereto.
Bruce A. Soll, 36, has been Vice President of the Company since
October 1991. Mr. Soll was Counselor/Director of Policy Planning for the U.S.
Department of Commerce from February 1989 to September 1991, Counselor for the
Bush-Quayle campaign and Presidential Inaugural Committee from 1988 to 1989
and Director of Finance of President Reagan's Foundation and Library from 1985
to 1988.
All of the above officers serve at the pleasure of the Board of
Directors of the Company.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information regarding markets in which the Company's common stock was
traded during fiscal years 1993 and 1992, approximate number of holders of
common stock, and quarterly cash dividend per share information of the Company's
common stock for the fiscal years 1993 and 1992 is set forth under the caption
"Market Price and Dividend Information" of the 1993 Annual Report and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data is set forth under the caption "Financial
Summary" of the 1993 Annual Report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and
results of operations is set forth under the caption "Management's Discussion
and Analysis" of the 1993 Annual Report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
7
<PAGE>
The Consolidated Financial Statements of the Company and subsidiaries,
the Notes to Consolidated Financial Statements and the Report of Independent
Accountants are set forth in the 1993 Annual Report and are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
8
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of the Company is set forth under the
captions "ELECTION OF DIRECTORS - Nominees and Directors", "- Business
Experience" and "- Information Concerning the Board of Directors" on pages 1
through 4 of the Company's proxy statement for the Annual Meeting of
Shareholders to be held May 23, 1994 (the "Proxy Statement")and is incorporated
herein by reference. Information regarding executive officers is set forth
herein under the caption "SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE
REGISTRANT" in part I. Information regarding family relationships is set forth
under the caption "PRINCIPAL HOLDERS OF VOTING SECURITIES" on page 13 of the
Proxy Statement and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation is set forth under the
caption "EXECUTIVE COMPENSATION" on pages 6 through 8 of the Proxy Statement and
is incorporated herein by reference. Such incorporation by reference shall not
be deemed to specifically incorporate by reference the information referred to
in Item 402(a)(8) of Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding the security ownership of certain beneficial
owners and management is set forth under the caption "ELECTION OF DIRECTORS -
Security Ownership of Directors and Management" on pages 4 and 5 of the Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions
is set forth under the caption "ELECTION OF DIRECTORS - Business Experience" on
pages 2 and 3 of the Proxy Statement and is incorporated herein by reference.
9
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) List of Financial Statements.
----------------------------
The following consolidated financial statements of The Limited, Inc.
and subsidiaries and the related notes are filed as a part of this report
pursuant to ITEM 8:
Consolidated Statements of Income for the fiscal
years ended January 29, 1994, January 30, 1993 and February 1, 1992.
Consolidated Balance Sheets as of January 29, 1994
and January 30, 1993.
Consolidated Statements of Shareholders' Equity
for the fiscal years ended January 29, 1994, January 30, 1993 and
February 1, 1992.
Consolidated Statements of Cash Flows for the
fiscal years ended January 29, 1994, January 30, 1993 and February
1, 1992.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
(a)(2) List of Financial Statement Schedules.
-------------------------------------
The following consolidated financial statement schedules of The
Limited, Inc. and subsidiaries are filed as part of this report pursuant to ITEM
14(d):
V. Property, Plant and Equipment.
VI. Accumulated Depreciation and Amortization of Property, Plant and
Equipment.
VIII. Valuation and Qualifying Accounts.
IX. Short-term Borrowings.
All other schedules are omitted because the required information is
either presented in the financial statements or notes thereto, or is not
applicable, required or material. Columns omitted from schedules filed have
been omitted because the information is not applicable.
10
<PAGE>
(a)(3) List of Exhibits.
----------------
3. Articles of Incorporation and Bylaws.
3.1. Certificate of Incorporation of the Company incorporated by
reference to Exhibit 3.4 to the Company's Annual Report on Form
10-K for the fiscal year ended January 30, 1988.
3.2. Restated Bylaws of the Company incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
fiscal year ended February 2, 1991 (the "1990 Form 10-K").
4. Instruments Defining the Rights of Security Holders.
4.1. Copy of the form of Global Security representing the Company's 7
1/2% Debentures due 2023, incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K dated March 4, 1993.
4.2. $900,000,000 Credit Agreement dated as of August 30, 1990 (the
"Credit Agreement") among the Company, Morgan Guaranty Trust
Company of New York and certain other banks (collectively, the
"Banks"), incorporated by reference to Exhibit 4.7 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
August 4, 1990, as amended by Amendment No. 1 dated as of
December 4, 1992, incorporated by reference to Exhibit 4.8 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1992.
4.3. $280,000,000 Credit Agreement dated as of December 4, 1992 among
the World Financial Network National Bank, the Company, the Banks
and Morgan Guaranty Trust Company of New York, incorporated by
reference to Exhibit 4.9 to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1992.
4.4. Conformed copy of the Indenture dated as of March 15, 1988
between the Company and The Bank of New York, incorporated by
reference to Exhibit 4.1(a) to the Company's Current Report on
Form 8-K dated March 21, 1989.
4.5. Copy of the form of Global Security representing the Company's 8
7/8% Notes due August 15, 1999, incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
August 14, 1989.
4.6. Copy of the form of Global Security representing the Company's 9
1/8% Notes due February 1, 2001, incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
February 6, 1991.
4.7. Proposed form of Debt Warrant Agreement for Warrants attached to
Debt Securities, with proposed form of Debt Warrant Certificate
incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-3
11
<PAGE>
(File no. 33-53366) originally filed with the Securities and
Exchange Commission (the "Commission") on October 16, 1992, as
amended by Amendment No. 1 thereto, filed with the Commission on
February 23, 1993 (the "1993 Form S-3").
4.8. Proposed form of Debt Warrant Agreement for Warrants not attached
to Debt Securities, with proposed form of Debt Warrant
Certificate incorporated by reference to Exhibit 4.3 to the 1993
Form S-3.
The Company undertakes to furnish to the Commission, upon request, a
copy of each instrument defining the rights of holders of certain
privately placed long-term debt securities aggregating $100,000,000 of
the Company not filed herewith. The total amount of debt securities
issued under such instruments does not exceed 10% of the total
consolidated assets of the Company.
10. Material Contracts.
10.1. The Restated 1981 Stock Option Plan of The Limited, Inc.,
incorporated by reference to Exhibit 28(b) to the Company's
Registration Statement on Form S-8 (File No. 33-18533) (the "Form
S-8").
10.2. The 1987 Stock Option Plan of The Limited, Inc., incorporated by
reference to Exhibit 28(a) to the Form S-8.
10.3. Officers' Benefits Plan incorporated by reference to Exhibit 10.4
to the Company's Annual Report on Form 10-K for the fiscal year
ended January 28, 1989 (the "1988 Form 10-K").
10.4. The Limited Deferred Compensation Plan incorporated by reference
to Exhibit 10.4 to the 1990 Form 10-K.
10.5. Form of Indemnification Agreement between the Company and the
directors and officers of the Company, incorporated by reference
to Exhibit A to the Company's definitive proxy statement dated
April 18, 1988 for the Company's 1988 Annual Meeting of
Shareholders held May 23, 1988.
10.6. Schedule of directors and officers who became parties to
Indemnification Agreements effective May 23, 1988, incorporated
by reference to Exhibit 19.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 29, 1988.
10.7. Supplemental schedule of officer who became a party to an
Indemnification Agreement effective May 23, 1988 incorporated by
reference to Exhibit 10.7 to the 1988 Form 10-K.
10.8. Supplemental schedule of directors and officers who became
parties to Indemnification Agreements incorporated by reference
to Exhibit 19.1 to the
12
<PAGE>
Company's Quarterly Report on Form 10-Q for the quarter ended
August 1, 1992.
10.9. Supplemental schedule of officer who became party to an
Indemnification Agreement effective November 16, 1992.
10.10 Supplemental schedule of officer who became party to an
Indemnification Agreement effective June 3, 1993, incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 31, 1993.
10.11 The 1993 Stock Option and Performance Incentive Plan of the
Company, incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-8 (File No. 33-49871).
11. Statement re Computation of Per Share Earnings.
12. Statement re Computation of Ratio of Earnings to Fixed Charges.
13. Excerpts from the 1993 Annual Report to Shareholders.
22. Subsidiaries of the Registrant.
23. Consent of Independent Accountants.
24. Powers of Attorney.
99. Annual Report of The Limited, Inc. Savings and Retirement Plan.
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed during the fourth quarter of fiscal
year 1993.
(c) Exhibits.
--------
The exhibits to this report are listed in section (a)(3) of Item 14
above.
(d) Financial Statement Schedules.
-----------------------------
The financial statement schedules filed with this report are listed in
section (a)(2) of Item 14 above.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or l5(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April __, 1994
THE LIMITED, INC.
(registrant)
By /s/ KENNETH B. GILMAN
-------------------------------
Kenneth B. Gilman,
Vice Chairman and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on April __, 1994:
Signature Title
--------- -----
/s/ LESLIE H. WEXNER* Chairman of the Board of Directors,
- - ----------------------------
Leslie H. Wexner President and Chief Executive Officer
/s/ KENNETH B. GILMAN Director, Vice Chairman,
- - ----------------------------
Kenneth B. Gilman Chief Financial Officer and
Principal Accounting Officer
/s/ MICHAEL A. WEISS * Director and Vice Chairman
- - -----------------------------
Michael A. Weiss
/s/BELLA WEXNER* Director
- - -----------------------------
Bella Wexner
/s/ MARTIN TRUST* Director
- - -----------------------------
Martin Trust
/s/ E. GORDON GEE* Director
- - -----------------------------
E. Gordon Gee
/s/ THOMAS G. HOPKINS* Director
- - -----------------------------
Thomas G. Hopkins
14
<PAGE>
/s/ DAVID T. KOLLAT* Director
- - -----------------------------
David T. Kollat
/s/ CLAUDINE MALONE* Director
- - -----------------------------
Claudine Malone
/s/ JOHN K. PFAHL* Director
- - -----------------------------
John K. Pfahl
/s/ DONALD B. SHACKELFORD* Director
- - -----------------------------
Donald B. Shackelford
/s/ ALLAN R. TESSLER* Director
- - -----------------------------
Allan R. Tessler
/s/ RAYMOND ZIMMERMAN* Director
- - -----------------------------
Raymond Zimmerman
*The undersigned, by signing his name hereto, does hereby sign this report on
behalf of each of the above-indicated directors of the registrant pursuant to
powers of attorney executed by such directors.
By /s/ KENNETH B. GILMAN
---------------------------
Kenneth B. Gilman
Attorney-in-fact
15
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
----------------
THE LIMITED, INC.
(exact name of registrant as specified in its charter)
----------------
FINANCIAL STATEMENT SCHEDULES
----------------
================================================================================
<PAGE>
(LOGO OF COOPERS & LYBRAND
APPEARS HERE)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
The Limited, Inc.
We have audited the consolidated financial statements of The Limited, Inc. and
Subsidiaries as of January 29, 1994, and January 30, 1993, and for each of the
three fiscal years in the period ended January 29, 1994, which financial
statements are included on pages 72 through 84 of the 1993 Annual Report to
Shareholders of The Limited, Inc. and incorporated by reference herein. We have
also audited the financial statement schedules for each of the three fiscal
years in the period ended January 29, 1994, listed in Item 14(a)(2) of this Form
10-K. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Limited, Inc.
and Subsidiaries as of January 29, 1994 and January 30, 1993, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended January 29, 1994 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules for each of the three fiscal years in the period
ended January 29, 1994 referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
/s/ Coopers & Lybrand
COOPERS & LYBRAND
Columbus, Ohio
February 14, 1994
<PAGE>
Schedule V
----------
THE LIMITED, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
FOR THE FISCAL YEARS ENDED JANUARY 29, 1994,
JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Balance at
Beginning of Additions Retirements end of
Fiscal year at Cost and Sales Fiscal Year
------------ --------- ----------- -----------
<S> <C> <C> <C> <C>
Fiscal year ended January 29, 1994
Land, buildings and improvements $ 512,283 $ 23,705 $ 24,990 $ 510,998
Furniture, fixtures and equipment 1,476,081 230,536 135,049 1,571,568
Leaseholds and improvements 677,115 33,902 204,759 506,258
Construction in progress 55,491 7,660 13,778 49,373
---------- -------- --------- ----------
$2,720,970 $295,803 $ 378,576 $2,638,197
========== ======== ========= ==========
Fiscal year ended January 30, 1993
Land, buildings and improvements $ 358,501 $153,795 $ 13 $ 512,283
Furniture, fixtures and equipment 1,225,293 314,110 63,322 1,476,081
Leaseholds and improvements 716,974 60,200 100,059 677,115
Construction in progress 154,966 (98,560) 915 55,491
---------- -------- -------- ---------
$2,455,734 $429,545 $ 164,309 $2,720,970
========== ======== ======== ==========
Fiscal year ended February 1, 1992
Land, buildings and improvements $ 237,466 $121,158 $ 123 $ 358,501
Furniture, fixtures and equipment 982,397 314,190 71,294 1,225,293
Leaseholds and improvements 643,177 116,658 42,861 716,974
Construction in progress 185,019 (28,924) 1,129 154,966
---------- -------- -------- ---------
$2,048,059 $523,082 $115,407 $2,455,734
========== ======== ======== ==========
</TABLE>
<PAGE>
Schedule VI
-----------
THE LIMITED, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
FOR THE FISCAL YEARS ENDED JANUARY 29 1994,
JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Balance at
Beginning of Additions Retirements end of
Fiscal year at Cost and Sales Fiscal Year
------------ --------- ----------- -----------
<S> <C> <C> <C> <C>
Fiscal year ended January 29, 1994
Land, buildings and improvements $ 62,811 $ 19,219 $ 7,692 $ 74,338
Furniture, fixtures and equipment 541,520 178,121 66,036 653,605
Leaseholds and improvements 302,691 60,444 119,469 243,666
------------ --------- ----------- -----------
$907,022 $257,784 $193,197 $971,609
============ ========= =========== ===========
Fiscal year ended January 30, 1993
Land, buildings and improvements $ 47,617 $ 15,205 $ 11 $ 62,811
Furniture, fixtures and equipment 458,079 141,215 57,774 541,520
Leaseholds and improvements 292,954 80,480 70,743 302,691
------------ --------- ----------- -----------
$798,650 $236,900 $128,528 $907,022
============ ========= =========== ===========
Fiscal year ended February 1, 1992
Land, buildings and improvements $ 35,302 $ 12,315 $ - $ 47,617
Furniture, fixtures and equipment 363,189 137,897 43,007 458,079
Leaseholds and improvements 254,495 70,252 31,793 292,954
------------ --------- ----------- ------------
$652,986 $220,464 $ 74,800 $798,650
============ ========= =========== ============
</TABLE>
<PAGE>
Schedule VIII
-------------
THE LIMITED, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED JANUARY 29, 1994,
JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Fiscal Year Expenses Accounts Deductions Fiscal Year
---------------- ----------- ----------- ----------- -------------
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
<S> <C> <C> <C> <C> <C>
Fiscal year ended January 29, 1994 $24,973 50,803 - 40,879(A) 34,897
================ =========== =========== =========== =============
Fiscal year ended January 30, 1993 $24,678 40,026 - 39,731(A) 24,973
================ =========== =========== ============ =============
Fiscal year ended February 1, 1992 $24,167 50,609 (11) 50,087(A) 24,678
================ =========== =========== ============ =============
</TABLE>
(A) - Write-offs, net of recoveries
<PAGE>
Schedule IX
-----------
THE LIMITED, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
FOR THE FISCAL YEARS ENDED JANUARY 29, 1994,
JANUARY 30, 1993 AND FEBRUARY 1, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest rate
Category of Aggregate at End of Interest During the During the During the
Short-term Borrowings Period Rate Period Period(1) Period (2)
- - ---------------------------------- ----------- -------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended January 29, 199
Commercial paper - - $294,300 $102,192 3.18%
Certificates of deposit $ 15,700 3.44% $ 19,100 $ 12,745 3.51%
Fiscal year ended January 30, 1993
Commercial paper $ 29,439 3.11% $851,031 $592,210 3.64%
Certificates of deposit $ 12,200 3.65% $ 14,100 $ 1,513 4.19%
Fiscal year ended February 1, 1992
Commercial paper $363,758 4.05% $794,035 $486,170 5.77%
</TABLE>
(1) The average amount outstanding during the period was computed by dividing
the sum of the daily principal balances by the number of days outstanding.
(2) The weighted average interest rate during the period was computed by
dividing the actual interest expense by the related average short-term
borrowings outstanding.
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Document
- - ----------- ------------------------------------------------
11 Statement re Computation of
Per Share Earnings.
12 Statement re Computation of Ratio of
Earnings to Fixed Charges.
13 Excerpts from the 1993 Annual Report to Shareholders.
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants.
24 Powers of Attorney.
99 Annual Report of The Limited, Inc. Savings and
Retirement Plan.
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
----------------
THE LIMITED, INC.
(exact name of Registrant as specified in its charter)
----------------
EXHIBITS
----------------
================================================================================
<PAGE>
EXHIBIT 11
THE LIMITED, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
---------------------------
January 29, January 30,
1994 1993
------------ -------------
<S> <C> <C>
Net Income $196,327 $243,904
=========== =============
Common Shares outstanding:
Weighted average 379,454 379,454
Dilutive effect of stock options 617 1,762
Weighted average treasury shares (18,920) (16,921)
------------ -------------
Weighted average used to calculate
net income per share 361,151 364,295
============ =============
Net Income per share $ 0.54 $ 0.67
============ =============
<CAPTION>
Year Ended
---------------------------
January 29, January 30,
1994 1993
------------ -------------
<S> <C> <C>
Net Income $390,999 $455,497
============ =============
Common Shares outstanding:
Weighted average 379,454 379,454
Dilutive effect of stock options 957 1,503
Weighted average treasury shares (17,177) (17,219)
------------ -------------
Weighted average used to calculate
net income per share 363,234 363,738
============ =============
Net Income per share $ 1.08 $ 1.25
============ =============
</TABLE>
<PAGE>
EXHIBIT 12
THE LIMITED, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------------------------------------------
January 29, 1994 January 30, 1993 February 1, 1992 February 2, 1991 February 3, 1990
---------------- ---------------- ---------------- ---------------- ----------------
Adjusted Earnings
- - -----------------
<S> <C> <C> <C> <C> <C>
Pretax earnings $644,999 $745,497 $660,302 $653,438 $573,926
Portion of minimum rent ($572,278 190,759 170,181 139,675 111,102 91,705
in 1993, $510,544 in 1992, $419,025
in 1991, $333,306 in 1990 and
$275,116 in 1989) representative
of interest
Interest on indebtedness 63,865 62,398 63,927 56,609 58,059
Amortization of debt - - - - 2,523
expense ---------------- ---------------- ---------------- ---------------- ----------------
Total Earnings as Adjusted $899,623 $978,076 $863,904 $821,149 $726,213
================ ================ ================ ================ ================
<CAPTION>
Fixed Charges
- - -------------
<S> <C> <C> <C> <C> <C>
Portion of minimum rent
representative of
interest $190,759 $170,181 $139,675 $111,102 $91,705
Interest on indebtedness 63,865 62,398 63,927 56,609 58,059
Amortization of debt expense - - - - 2,523
---------------- ---------------- ---------------- ---------------- ----------------
Total Fixed Charges $254,624 $232,579 $203,602 $167,711 $152,287
================ ================ ================ ================ ================
Ratio of Earnings to Fixed Charges 3.53x 4.21x 4.24x 4.90x 4.77x
================ ================ ================ ================ ================
</TABLE>
<PAGE>
EXHIBIT 13
EXCERPTS FROM THE 1993 ANNUAL REPORT TO SHAREHOLDERS
FINANCIAL SUMMARY
================================================================================
(thousands except per share amounts, ratios and store and associate data)
<TABLE>
<CAPTION>
================================================================================
Fiscal Year 1993** 1992 1991* 1990*
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
- - --------------------------------------------------------------------------------
Net Sales $7,245,088 $6,944,296 $6,149,218 $5,253,509
- - --------------------------------------------------------------------------------
Gross Income 1,958,835 1,990,740 1,793,543 1,630,439
- - --------------------------------------------------------------------------------
Operating Income 701,556 788,698 712,700 697,537
- - --------------------------------------------------------------------------------
Income Before Income Taxes 644,999 745,497 660,302 653,438
- - --------------------------------------------------------------------------------
Net Income $390,999 $455,497 $403,302 $398,438
- - --------------------------------------------------------------------------------
Net Income as a Percentage
of Sales 5.4% 6.6% 6.6% 7.6%
- - --------------------------------------------------------------------------------
PER SHARE RESULTS
- - --------------------------------------------------------------------------------
Net Income $1.08 $1.25 $1.11 $1.10
- - --------------------------------------------------------------------------------
Dividends $.36 $.28 $.28 $.24
- - --------------------------------------------------------------------------------
Book Value $6.82 $6.25 $5.19 $4.33
- - --------------------------------------------------------------------------------
Weighted Average Shares
Outstanding 363,234 363,738 363,594 362,044
- - --------------------------------------------------------------------------------
OTHER FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
Total Assets $4,135,105 $3,846,450 $3,418,856 $2,871,878
- - --------------------------------------------------------------------------------
Working Capital $1,513,181 $1,063,352 $1,084,205 $884,004
- - --------------------------------------------------------------------------------
Current Ratio 3.1 2.5 3.1 2.8
- - --------------------------------------------------------------------------------
Long-Term Debt $650,000 $541,639 $713,758 $540,446
- - --------------------------------------------------------------------------------
Debt-to-Equity Ratio 27% 24% 38% 35%
- - --------------------------------------------------------------------------------
Shareholders' Equity $2,441,293 $2,267,617 $1,876,792 $1,560,052
- - --------------------------------------------------------------------------------
Return on Average
Shareholders' Equity 17% 22% 23% 28%
- - --------------------------------------------------------------------------------
STORES AND ASSOCIATES
AT END OF YEAR
- - --------------------------------------------------------------------------------
Total Number of Stores Open 4,623 4,425 4,194 3,760
- - --------------------------------------------------------------------------------
Selling Square Feet 24,426,000 22,863,000 20,355,000 17,008,000
- - --------------------------------------------------------------------------------
Number of Associates 97,500 100,700 83,800 72,500
================================================================================
</TABLE>
+ Fifty-three week fiscal year.
* Includes the results of companies acquired subsequent to the date of
acquisition.
** Includes the results of companies disposed of up to the disposition date.
[GRAPH APPEARS HERE]
See Appendix A attached hereto
for a description of graphic material.
64
CONTROLLED INVENTORIES AND EXPENSES, IS A MUST.
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================================
Fiscal Year 1989+** 1988* 1987 1986 1985* 1984+ 1983
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
- - -----------------------------------------------------------------------------------------------------------------------
Net Sales $4,647,916 $4,070,777 $3,527,941 $3,142,696 $2,387,110 $1,343,134 $1,085,890
- - -----------------------------------------------------------------------------------------------------------------------
Gross Income 1,446,635 1,214,703 992,775 961,827 718,843 404,321 327,616
- - -----------------------------------------------------------------------------------------------------------------------
Operating Income 625,254 467,418 408,872 438,229 276,212 173,102 135,377
- - -----------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 573,926 396,136 378,188 394,780 239,317 157,495 134,939
- - -----------------------------------------------------------------------------------------------------------------------
Net Income $346,926 $245,136 $235,188 $227,780 $145,317 $92,495 $70,939
- - -----------------------------------------------------------------------------------------------------------------------
Net Income as a Percentage
of Sales 7.5% 6.0% 6.7% 7.2% 6.1% 6.9% 6.5%
- - -----------------------------------------------------------------------------------------------------------------------
PER SHARE RESULTS
- - -----------------------------------------------------------------------------------------------------------------------
Net Income $.96 $.68 $.62 $.60 $.40 $.26 $.20
- - -----------------------------------------------------------------------------------------------------------------------
Dividends $.16 $.12 $.12 $.08 $.05 $.04 $.02
- - -----------------------------------------------------------------------------------------------------------------------
Book Value $3.45 $2.64 $2.04 $2.07 $1.13 $.77 $.54
- - -----------------------------------------------------------------------------------------------------------------------
Weighted Average Shares
Outstanding 361,288 360,186 376,626 376,860 365,638 361,262 360,372
- - -----------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL INFORMATION
- - -----------------------------------------------------------------------------------------------------------------------
Total Assets $2,418,486 $2,145,506 $1,929,477 $1,726,544 $1,494,313 $657,242 $425,240
- - -----------------------------------------------------------------------------------------------------------------------
Working Capital $685,524 $567,639 $629,783 $586,827 $419,706 $180,960 $101,665
- - -----------------------------------------------------------------------------------------------------------------------
Current Ratio 2.4 2.2 2.9 2.7 2.2 2.0 1.8
- - -----------------------------------------------------------------------------------------------------------------------
Long-Term Debt $445,674 $517,952 $681,000 $417,420 $670,744 $150,139 $68,763
- - -----------------------------------------------------------------------------------------------------------------------
Debt-to-Equity Ratio 36% 55% 93% 53% 166% 55% 36%
- - -----------------------------------------------------------------------------------------------------------------------
Shareholders' Equity $1,240,454 $946,207 $729,171 $781,542 $404,075 $275,403 $192,576
- - -----------------------------------------------------------------------------------------------------------------------
Return on Average
Shareholders' Equity 32% 29% 31% 38% 43% 40% 45%
- - -----------------------------------------------------------------------------------------------------------------------
STORES AND ASSOCIATES
AT END OF YEAR
- - -----------------------------------------------------------------------------------------------------------------------
Total Number of Stores Open 3,344 3,497 3,115 2,682 2,353 1,412 937
- - -----------------------------------------------------------------------------------------------------------------------
Selling Square Feet 14,374,000 14,296,000 12,795,000 11,320,000 10,460,000 5,166,000 3,667,000
- - -----------------------------------------------------------------------------------------------------------------------
Number of Associates 63,000 56,700 50,200 43,200 33,600 17,700 15,300
=======================================================================================================================
</TABLE>
[GRAPH APPEARS HERE]
See Appendix A attached hereto
for a description of graphic material.
65
<PAGE>
Management's Discussion and Analysis
- - ------------------------------------
RESULTS OF OPERATIONS
Net sales for the fourth quarter grew to $2.421 billion, an increase of 4%
from $2.319 billion a year ago (excluding Brylane sales in each period). Net
income was $196 million, compared to $244 million last year, and earnings per
share were $0.54 versus $0.67 in 1992.
Net sales for the 52-week fiscal year ended January 29, 1994 were $7.245
billion, an increase in excess of $500 million from sales of $6.733 billion
last year (excluding Brylane sales in each comparable period). Net income
was $391 million compared to $455 million a year ago. Earnings per share were
$1.08 compared to $1.25 last year.
The women's apparel businesses (Express, Limited Stores, Lerner, Lane
Bryant and Henri Bendel) had a disappointing year, as their total sales were
flat for the year, comparable store sales declined 5% and operating income
declined in the fourth quarter and full year (with the exception of Henri
Bendel for the full year).
In contrast, for the Company's non-women's apparel businesses (Victoria's
Secret Stores, Victoria's Secret Catalogue, Structure, The Limited Too,
Abercrombie & Fitch Co., Bath & Body Works, Cacique and Penhaligon's), 1993
was a particularly successful year as they increased their total sales by 27%
and contributed in excess of 40% of the Company's pre-tax earnings.
Divisional highlights include the following:
. Victoria's Secret Stores delivered the highest operating income
dollars in the Company and the best in their history.
. Victoria's Secret Catalogue produced the best fourth quarter and full
year operating income in their history.
. Bath & Body Works had record profitability in the fourth quarter, and
the year's largest increase in comparable store sales and operating
income rate of the Company's businesses.
. The Limited Too more than doubled their profitability and had record
comparable store sales in the fourth quarter, and delivered record
comparable store sales and their first ever profit for the full year.
. Abercrombie & Fitch Co. more than doubled their profitability in the
fourth quarter, and also delivered their first ever profit for the
full year.
- - -------------------------------------------------------------------------------
FINANCIAL SUMMARY
The following summarized financial data compares 1993 to the comparable
periods for 1992 and 1991:
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% Change
----------------
(Sales in millions) 1993 1992 1991 1993-92 1992-91
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Retail Sales $6,567 $6,153 $5,388 7% 14%
- - --------------------------------------------------------------------------------
Catalogue Sales 678 791 761 (14%) 4%
- - --------------------------------------------------------------------------------
Total Net Sales $7,245 $6,944 $6,149 4% 13%
- - --------------------------------------------------------------------------------
Increase (Decrease) in
Comparable Store Sales (1%) 2% 3%
- - --------------------------------------------------------------------------------
Retail Sales Increase
Attributable to New and
Remodeled Stores 8% 12% 14%
- - --------------------------------------------------------------------------------
Retail Sales per Average
Selling Square Foot $278 $285 $288 (2%) (1%)
- - -------------------------------------------------------------------------------
Retail Sales per Average
Store (thousands) $1,452 $1,428 $1,355 2% 5%
- - -------------------------------------------------------------------------------
Average Store Size at
End of Year (square
feet) 5,284 5,167 4,853 2% 6%
- - -------------------------------------------------------------------------------
Retail Selling Square
Feet (thousands) 24,426 22,863 20,355 7% 12%
- - --------------------------------------------------------------------------------
Number of Stores:
Beginning of Year 4,425 4,194 3,760
Opened 322 323 484
Closed (124) (92) (50)
- - --------------------------------------------------------------------------------
End of Year 4,623 4,425 4,194
- - --------------------------------------------------------------------------------
</TABLE>
66
>OUR NON-WOMEN'S APPAREL BUSINESSES HAVE THE POTENTIAL TO BE MORE PROFITABLE
THAN THE WOMEN'S DIVISIONS.
<PAGE>
NET SALES
Fourth quarter 1993 sales of $2.421 billion were flat to last year due primarily
to the sale of a 60% interest in the Brylane division on August 30,
1993. Excluding Brylane sales from last year, fourth quarter sales would have
increased 4% due to an 8% increase in sales attributable to new and remodeled
stores. Fourth quarter 1992 sales increased 18% primarily due to the
productivity of comparable stores which increased 8%, combined with the 9%
increase in sales attributed to new and remodeled stores.
The 1993 retail sales increase is attributable to the net addition of new
and remodeled stores. The Company added 322 new stores in 1993, remodeled 239
stores and closed 124 stores for a net addition of 198 stores and in excess of
1.5 million square feet of new retail selling space. However, average sales
productivity declined slightly to $278 per square foot.
Catalogue sales decreased 14% in 1993, reflecting the sale of Brylane and
the resulting elimination of their sales in the third and fourth quarters. Had
last year's catalogue sales excluded Brylane, catalogue sales would have
increased 19% as the number of books mailed during the year increased while the
average demand per book decreased slightly.
In 1992, retail sales increased as a result of the 2% increase in
comparable store sales combined with the net addition of 231 stores and
approximately 2.5 million selling square feet. Average store size in 1992
increased 6% to 5,167 square feet, while sales per average store increased 5%,
resulting in a slight decline in average sales productivity to $285 per square
foot.
Catalogue sales increased 4% in 1992, reflecting a 3% increase in the
number of books mailed, and a slight increase in customer demand per book.
- - --------------------------------------------------------------------------------
GROSS INCOME
Gross income decreased as a percentage of sales to 29.1% for the fourth quarter
of 1993 from 32.2% for the same period in 1992. Merchandise margins, expressed
as a percentage of sales, decreased 1.4% reflecting a higher level of
promotional activity (particularly in the women's apparel businesses) to
liquidate seasonal inventories. In addition, buying and occupancy costs as a
percentage of sales, increased 1.6% primarily as a result of lower sales
productivity associated with several of the Company's women's apparel
businesses.
The fourth quarter 1992 gross income rate of 32.2% was flat when compared
to 1991. Buying and occupancy costs, expressed as a percentage of sales,
declined 1.0%, reflecting the favorable leveraging of these largely fixed costs
by the 8% gain in comparable store sales. Merchandise margins, expressed as
a percentage of sales, decreased by approximately the same amount, reflecting a
generally higher level of promotional activity.
The 1993 gross income rate of 27.0% was 1.7% below the rate for 1992.
Merchandise margins, expressed as a percentage of sales, decreased .4%
reflecting higher promotional activity, notably in the fourth quarter. Buying
and occupancy costs were not sufficiently leveraged (particularly at the
Company's women's apparel businesses) and as a result, these costs increased
approximately 1.2%, expressed as a percentage of sales.
The 1992 gross income rate of 28.7% was 0.5% below the rate for 1991.
Buying and occupancy costs, as a percentage of sales, increased 0.5% during
the year principally as a result of lower sales productivity associated with
new and remodeled stores. Selling productivity, expressed in terms of sales
per average selling square foot, is typically lower in new and remodeled
stores during the initial years of operation because these stores are
typically larger than average existing stores. Merchandise margins were about
flat compared to the prior year.
- - --------------------------------------------------------------------------------
GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES
General, administrative and store operating expenses, expressed as a percentage
of sales, were 15.1% in both the fourth quarter of 1993 and 1992. Management
continues to emphasize selling payroll management and expense control.
These costs, expressed as a percentage of sales, were 17.4%, 17.3% and
17.6% for fiscal years 1993, 1992 and 1991. The major component of these costs
is store payroll which for the last three years has increased at a comparable or
lower rate than sales for the respective period. The Company anticipates this
trend will continue in fiscal year 1994.
- - --------------------------------------------------------------------------------
SPECIAL AND NONRECURRING ITEMS
During 1993, management approved a restructuring plan which focused on the
enhancement of core retail operations and the utilization of underperforming
retail assets of the businesses. The specifics of the plan, as described more
fully in Note 2 to the consolidated financial statements,
67
<PAGE>
included the following: the sale of a 60% interest in the Brylane mail order
business; the acceleration of the store remodeling, downsizing and closing
program at the Limited Stores and Lerner divisions; and the refocusing of the
merchandise strategy at the Henri Bendel division.
The 60% sale of Brylane allows management to increase their focus on
growing core retail operations as well as to improve the operations at
underperforming divisions. In an effort to improve the performance of the
Company's Limited Stores and Lerner divisions, management developed an action
plan that focused on underperforming store assets, with the objective of
properly sizing these stores and remodeling them in an up-to-date format by
the end of 1995. In addition, the plan also included the closing of
approximately 100 underperforming stores (primarily in the Lerner and Limited
Stores retail businesses) and a writedown of underperforming assets to net
realizable value.
The net impact of the restructuring plan, including the sale of the
Company's interest in Brylane, is anticipated to be immaterial to future
operations. The Company's reduced share of Brylane's operating income is
expected to be offset by improved sales productivity and reduced depreciation
and amortization costs resulting from the restructuring.
The Company also announced a program to repurchase up to $500 million of
the Company's common stock over time as market conditions warrant. As of the
end of the year, the Company had repurchased 5,287,600 shares at a cost of
$93.3 million. Market conditions will dictate any future purchases.
- - -------------------------------------------------------------------------------
INTEREST EXPENSE
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Fourth Quarter Year-to-Date
----------------------------------------------------
1993 1992 1993 1992 1991
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Daily Borrowings
(in millions) $848.2 $993.7 $822.5 $1,046.3 $877.4
- - -------------------------------------------------------------------------------
Average Effective
Interest Rate 7.62% 6.07% 7.76% 5.96% 7.29%
- - -------------------------------------------------------------------------------
</TABLE>
Interest expense increased slightly in the fourth quarter and for all 1993 as
compared to the comparable periods in 1992. Higher interest rates increased
costs approximately $3.3 million and $14.8 million respectively during the
fourth quarter and all of 1993. The average effective interest rate increased
primarily due to the Company's decision to capitalize on favorable long-term
interest rates by issuing $250 million principal amount of 7 1/2% Debentures
on March 15, 1993. The effective interest rate increase was offset by lower
borrowing levels during the fourth quarter and all of 1993 which resulted in
lower interest costs of approximately $2.2 million and $13.3 million,
respectively.
- - --------------------------------------------------------------------------------
OPERATING INCOME
Operating income, as a percentage of sales, was 9.6%, 11.4% and 11.6% for
fiscal years 1993, 1992 and 1991. The decrease in 1993 was principally due to
the 1.7% decline in gross income rate as discussed in more detail above.
- - --------------------------------------------------------------------------------
GAIN ON ISSUANCE OF UNITED RETAIL GROUP, INC. STOCK
The 1992 results include a $9 million pre-tax gain which resulted from the
March, 1992 initial public offering of United Retail Group, Inc. (URGI), a
specialty retailer of large-size woman's apparel. URGI sold approximately 3.7
million shares of common stock at $15 per share and received total
consideration of approximately $55.6 million. Prior to the initial public
offering, the Company owned approximately a 33% equity interest; subsequent to
the initial public offering, the Company's ownership was diluted to
approximately 20%. See Note 1 to the consolidated financial statements for
further discussion of this matter.
- - --------------------------------------------------------------------------------
ACQUISITIONS
Gryphon Development, L.P. (Gryphon) creates, develops and manufactures most of
the bath and personal care products sold by the Company. Prior to June 1,
1991, the Company owned approximately 50% of Gryphon and accounted for such
investment using the equity method. Effective June 1, 1991, the Company
acquired an additional 15% of Gryphon for $18.75 million and began including
Gryphon in its consolidated financial statements.
Effective April 10, 1992, the Company acquired the remaining 35% of
Gryphon for approximately $60 million and separately entered into a
non-compete agreement with certain of the former Gryphon partners in return
for warrants to purchase 1.5 million shares of the Company's common stock.
This acquisition had no material effect on the Company's results of operations
or financial condition.
68
>EARNING 10% AFTER-TAXES WILL BE ACHIEVED BY GROWING ALL OF OUR BUSINESSES TO
THEIR POTENTIAL.
<PAGE>
Management's Discussion and Analysis
==============================================================================
Financial Condition
The Company's balance sheet at January 29, 1994 provides continuing evidence
of financial strength and flexibility. The Company's debt-to-equity ratio was
only 27% at the end of 1993 and the current ratio exceeded 3.1. A more
detailed discussion of liquidity, capital resources and capital expenditures
follows:
- - ------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities, commercial paper backed by funds
available under committed long-term credit agreements and the Company's
capital structure continue to provide the resources to support operations,
including projected growth, seasonal requirements and capital expenditures. A
summary of the Company's working capital position and capitalization follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
(thousands) 1993 1992 1991
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by operating activities $448,139 $754,128 $475,637
- - -------------------------------------------------------------------------------
Working capital $1,513,181 $1,063,352 $1,084,205
- - -------------------------------------------------------------------------------
Capitalization:
Long-term debt $650,000 $541,639 $713,758
Deferred income taxes 275,101 274,844 267,315
Shareholders' equity 2,441,293 2,267,617 1,876,792
- - -------------------------------------------------------------------------------
Total capitalization $3,366,394 $3,084,100 $2,857,865
- - -------------------------------------------------------------------------------
Additional amounts available
under long-term credit agreements $840,000 $811,000 $536,000
- - -------------------------------------------------------------------------------
</TABLE>
The Company considers the following to be several measures of liquidity and
capital resources:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
1993 1992 1991
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt-to-equity ratio (long-term debt
divided by shareholders' equity) 27% 24% 38%
- - -------------------------------------------------------------------------------
Debt-to-capitalization ratio (long-term
debt divided by total capitalization) 19% 18% 25%
- - -------------------------------------------------------------------------------
Interest coverage ratio (income before interest
expense, depreciation, amortization and
income taxes divided by interest expense) 15x 17x 15x
- - -------------------------------------------------------------------------------
Cash flow to capital investment (net cash
provided by operating activities
divided by capital expenditures) 151% 176% 91%
- - -------------------------------------------------------------------------------
</TABLE>
Net cash provided by operating activities totalled $448.1 million, $754.1
million and $475.6 million for 1993, 1992 and 1991 and continues to serve as
the Company's primary source of liquidity. During 1993 and 1992, cash provided
by operating activities and the proceeds from the sale of a 60% interest in
the Brylane division exceeded cash requirements for capital additions,
business acquisitions and dividend payments.
Depreciation and amortization have increased as a result of the Company's
continued investment in new and remodeled stores. Cash requirements for
accounts receivable grew from the introduction of proprietary credit cards at
the Limited Stores, Structure and Victoria's Secret Catalogue divisions during
1993. Cash requirements for inventories and accounts payable and accrued
expenses have varied during the three year period based on sales volumes.
Investing activities included capital expenditures, primarily new and
remodeled stores, the sale of 60% of the Company's interest in Brylane,
reduced by income taxes on the gain on sale, and the two-step acquisition of
Gryphon.
Financing activities included $93.3 million of common stock the Company
repurchased in the fourth quarter, representing approximately 5.3 million
shares. Cash dividends paid by the Company in 1993 increased 29% over cash
dividends paid in both 1992 and 1991.
At January 29, 1994, the Company had available $840 million under their
long-term credit agreements. In addition, the Company currently has the
ability to offer up to $250 million of debt securities and warrants to
purchase debt securities under a shelf registration
69
<PAGE>
statement after giving effect to the sale by the Company, in March 1993, of
$250 million 7 1/2% Debentures due 2023.
- - --------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Capital expenditures amounted to $295.8 million, $429.5 million and $523.1
million for 1993, 1992 and 1991, respectively, of which $198.1 million, $258.2
million and $311.6 million were for new stores and remodeling and expanding
existing stores. Approximately $29 million was expended in 1992 for the
completion of the fulfillment center and office facility in Columbus, Ohio for
Victoria's Secret Catalogue. In addition, office facilities previously
committed under a long-term lease were acquired in 1992 for approximately $101
million.
The Company anticipates spending $375-$400 million for capital
expenditures in 1994, of which $275-$300 million will be for new stores, the
remodeling of existing stores and related improvements for the retail
businesses. The Company expects that substantially all 1994 capital
expenditures will be funded by net cash provided by operating activities.
The Company has announced its intention to add approximately 2.1 million
selling square feet in 1994 which will result in a 9% increase over year-end
1993. It is anticipated the increase will result from the net addition of
approximately 380 new stores and the remodeling of approximately 250 stores.
A summary of stores and selling square feet by division for 1992 and 1993, and
goals for 1994, follows:
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Change From
-----------------------
Goal-1994 1993 1992 1994-1993 1993-1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXPRESS
Stores 751 673 640 78 33
Selling Sq. Ft. 4,746,000 3,902,000 3,470,000 844,000 432,000
- - --------------------------------------------------------------------------------
LERNER NEW YORK
Stores 848 877 915 (29) (38)
Selling Sq. Ft. 6,542,000 6,802,000 6,963,000 (260,000) (161,000)
- - --------------------------------------------------------------------------------
THE LIMITED
Stores 716 746 759 (30) (13)
Selling Sq. Ft. 4,402,000 4,482,000 4,257,000 (80,000) 225,000
- - --------------------------------------------------------------------------------
VICTORIA'S SECRET
STORES
Stores 610 570 545 40 25
Selling Sq. Ft. 2,676,000 2,346,000 2,029,000 330,000 317,000
- - --------------------------------------------------------------------------------
LANE BRYANT
Stores 827 817 809 10 8
Selling Sq. Ft. 3,954,000 3,852,000 3,755,000 102,000 97,000
- - --------------------------------------------------------------------------------
STRUCTURE
Stores 499 394 330 105 64
Selling Sq. Ft. 1,942,000 1,409,000 1,076,000 533,000 333,000
- - --------------------------------------------------------------------------------
THE LIMITED TOO
Stores 234 184 185 50 (1)
Selling Sq. Ft. 747,000 566,000 567,000 181,000 (1,000)
- - --------------------------------------------------------------------------------
BATH & BODY WORKS
Stores 319 194 121 125 73
Selling Sq. Ft. 496,000 248,000 132,000 248,000 116,000
- - --------------------------------------------------------------------------------
ABERCROMBIE & FITCH
CO.
Stores 72 49 40 23 9
Selling Sq. Ft. 581,000 405,000 332,000 176,000 73,000
- - --------------------------------------------------------------------------------
HENRI BENDEL
Stores 4 4 4 0 0
Selling Sq. Ft. 93,000 93,000 93,000 0 0
- - --------------------------------------------------------------------------------
CACIQUE
Stores 115 108 71 7 37
Selling Sq. Ft. 344,000 318,000 186,000 26,000 132,000
- - --------------------------------------------------------------------------------
PENHALIGON'S
Stores 7 7 6 0 1
Selling Sq. Ft. 3,000 3,000 3,000 0 0
- - --------------------------------------------------------------------------------
TOTAL RETAIL
DIVISIONS
Stores 5,002 4,623 4,425 379 198
Selling Sq. Ft. 26,526,000 24,426,000 22,863,000 2,100,000 1,563,000
- - --------------------------------------------------------------------------------
</TABLE>
70
>WE WILL MAINTAIN THE FINANCIAL STRENGTH NECESSARY TO EMBRACE CHANGE AND GROW
THE BUSINESS.
<PAGE>
IMPACT OF INFLATION
The Company's results of operations and financial condition are presented
based upon historical cost. While it is difficult to accurately measure the
impact of inflation due to the imprecise nature of the estimates required, the
Company believes that the effects of inflation, if any, on the results of
operations and financial condition have been minor.
- - --------------------------------------------------------------------------------
ACCOUNTING FOR INCOME TAXES
Effective January 31, 1993, the Company adopted Statement of Financial
Accounting Standard (SFAS) 109, "Accounting for Income Taxes." No cumulative
effect adjustment was required as the difference in deferred income taxes
under SFAS 109 and APB Opinion 11 was immaterial. The impact of adoption on
the current year was also immaterial.
On August 10, 1993, the Federal income tax rate was retroactively
increased 1% to 35% for 1993. As a result, it is estimated that the Company's
effective tax rate will increase to 40% from 39% in future periods. There was
no material impact from adjusting tax liabilities as a result of this
retroactive increase. The Company believes this increase will not have a
significant impact on future earnings.
- - --------------------------------------------------------------------------------
ADOPTION OF ACCOUNTING STANDARDS
SFAS 112, "Employer's Accounting for Postemployment Benefits," was issued by
the Financial Accounting Standards Board (FASB) in January, 1993. The
Statement essentially requires, beginning in 1994, use of the accrual method
of accounting for postemployment benefits such as salary continuation,
severance pay, supplemental unemployment and disability related benefits if
certain conditions are met. The Company believes that this pronouncement will
have no material impact on the Company's financial statements under its
current benefit structure.
[PICTURE OF GRAPH APPEARS HERE]
See Appendix A attached hereto
for a description of graphic material.
71
<PAGE>
Consolidated Statements of Income
- - --------------------------------------------------------------------------------
(thousands except per share amounts)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $7,245,088 $6,944,296 $6,149,218
- - --------------------------------------------------------------------------------
Costs of Goods Sold,
Occupancy and Buying Costs (5,286,253) (4,953,556) (4,355,675)
- - --------------------------------------------------------------------------------
GROSS INCOME 1,958,835 1,990,740 1,793,543
- - --------------------------------------------------------------------------------
General, Administrative
and Store Operating Expenses (1,259,896) (1,202,042) (1,080,843)
- - --------------------------------------------------------------------------------
Special and Nonrecurring Items, net 2,617 - -
- - --------------------------------------------------------------------------------
OPERATING INCOME 701,556 788,698 712,700
- - --------------------------------------------------------------------------------
Interest Expense (63,865) (62,398) (63,927)
- - --------------------------------------------------------------------------------
Other Income, net 7,308 10,080 11,529
- - --------------------------------------------------------------------------------
Gain on Issuance of United
Retail Group Stock - 9,117 -
- - --------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 644,999 745,497 660,302
- - --------------------------------------------------------------------------------
Provision for Income Taxes 254,000 290,000 257,000
- - --------------------------------------------------------------------------------
NET INCOME $390,999 $455,497 $403,302
- - --------------------------------------------------------------------------------
NET INCOME PER SHARE $1.08 $1.25 $1.11
- - --------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
[PICTURES OF GRAPHS APPEAR HERE]
See Appendix A attached hereto for a
description of graphic material.
72
>OUR CUSTOMERS HELP TAKE OUR BUSINESSES IN NEW DIRECTIONS-TO NEW AVENUES OF
DELIVERING MERCHANDISE AND SERVICE.
<PAGE>
Consolidated Balance Sheets
===============================================================================
(thousands)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
ASSETS JAN. 29,1994 JAN. 30, 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
- - -------------------------------------------------------------------------------
Cash and Equivalents $320,558 $41,235
- - -------------------------------------------------------------------------------
Accounts Receivable 1,056,911 837,377
- - -------------------------------------------------------------------------------
Inventories 733,700 803,707
- - -------------------------------------------------------------------------------
Other 109,456 101,811
- - -------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,220,625 1,784,130
- - -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET 1,666,588 1,813,948
- - -------------------------------------------------------------------------------
OTHER ASSETS 247,892 248,372
- - -------------------------------------------------------------------------------
TOTAL ASSETS $4,135,105 $3,846,450
- - -------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- - -------------------------------------------------------------------------------
CURRENT LIABILITIES
- - -------------------------------------------------------------------------------
Accounts Payable $250,363 $309,092
- - -------------------------------------------------------------------------------
Accrued Expenses 347,892 274,220
- - -------------------------------------------------------------------------------
Certificates of Deposit 15,700 -
- - -------------------------------------------------------------------------------
Income Taxes 93,489 137,466
- - -------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 707,444 720,778
- - -------------------------------------------------------------------------------
LONG-TERM DEBT 650,000 541,639
- - -------------------------------------------------------------------------------
DEFERRED INCOME TAXES 275,101 274,844
- - -------------------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES 61,267 41,572
- - -------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- - -------------------------------------------------------------------------------
Common Stock 189,727 189,727
- - -------------------------------------------------------------------------------
Paid-in Capital 128,906 127,776
- - -------------------------------------------------------------------------------
Retained Earnings 2,397,112 2,136,794
- - -------------------------------------------------------------------------------
2,715,745 2,454,297
- - -------------------------------------------------------------------------------
Less: Treasury Stock, at cost (274,452) (186,680)
- - -------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 2,441,293 2,267,617
- - -------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,135,105 $3,846,450
- - -------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
(PICTURE OF GRAPH APPEARS HERE)
See Appendix A attached hereto for a
description of graphic material.
73
<PAGE>
Consolidated Statements of Shareholders' Equity
- - --------------------------------------------------------------------------------
(thousands)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Common Stock
-----------------------------------------
Shares Par
Outstanding Value
-----------------------------------------
<S> <C> <C>
BALANCE, FEBRUARY 2, 1991 360,598 $189,727
- - --------------------------------------------------------------------------------
Net Income - -
- - --------------------------------------------------------------------------------
Cash Dividends - -
- - --------------------------------------------------------------------------------
Exercise of Stock Options & Other 1,188 -
- - --------------------------------------------------------------------------------
BALANCE, FEBRUARY 1, 1992 361,786 189,727
- - --------------------------------------------------------------------------------
Net Income - -
- - --------------------------------------------------------------------------------
Cash Dividends - -
- - --------------------------------------------------------------------------------
Exercise of Stock Options & Other 862 -
- - --------------------------------------------------------------------------------
Warrants Issued for Acquisition - -
- - --------------------------------------------------------------------------------
BALANCE, JANUARY 30, 1993 362,648 189,727
- - --------------------------------------------------------------------------------
Net Income - -
- - --------------------------------------------------------------------------------
Cash Dividends - -
- - --------------------------------------------------------------------------------
Purchase of Treasury Stock (5,288) -
- - --------------------------------------------------------------------------------
Exercise of Stock Options & Other 441 -
- - --------------------------------------------------------------------------------
BALANCE, JANUARY 29, 1994 357,801 $189,727
- - --------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
(PICTURES OF GRAPHS APPEAR HERE)
See Appendix A attached hereto for a
description of graphic material.
74
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------
Total
Paid-in Retained Treasury Stock, Shareholders'
Capital Earnings at Cost Equity
- - -------------------------------------------------------------------
<S> <C> <C> <C>
$99,237 $1,480,866 $(209,778) $1,560,052
- - -------------------------------------------------------------------
- 403,302 - 403,302
- - -------------------------------------------------------------------
- (101,141) - (101,141)
- - -------------------------------------------------------------------
1,692 - 12,887 14,579
- - -------------------------------------------------------------------
100,929 1,783,027 (196,891) 1,876,792
- - -------------------------------------------------------------------
- 455,497 - 455,497
- - -------------------------------------------------------------------
- (101,730) - (101,730)
- - -------------------------------------------------------------------
6,598 - 10,211 16,809
- - -------------------------------------------------------------------
20,249 - - 20,249
- - -------------------------------------------------------------------
127,776 2,136,794 (186,680) 2,267,617
- - -------------------------------------------------------------------
- 390,999 - 390,999
- - -------------------------------------------------------------------
- (130,681) - (130,681)
- - -------------------------------------------------------------------
- - (93,328) (93,328)
- - -------------------------------------------------------------------
1,130 - 5,556 6,686
- - -------------------------------------------------------------------
$128,906 $2,397,112 $(274,452) $2,441,293
- - -------------------------------------------------------------------
</TABLE>
[GRAPH OF WORKING CAPITAL APPEARS HERE]
See Appendix A attached hereto for a description
of graphic material.
75
>WE'VE CLEARLY LEARNED THAT TEAMWORK IS KEY TO RESPONDING TO THE MARKETPLACE.
<PAGE>
Consolidated Statements of Cash Flows
- - --------------------------------------------------------------------------------
(thousands)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- - --------------------------------------------------------------------------------
Net Income $390,999 $455,497 $403,302
- - --------------------------------------------------------------------------------
IMPACT OF OTHER OPERATING
ACTIVITIES ON CASH FLOWS
- - --------------------------------------------------------------------------------
Depreciation and Amortization 271,353 246,977 222,695
- - --------------------------------------------------------------------------------
Special and Nonrecurring Items (2,617) - -
- - --------------------------------------------------------------------------------
CHANGE IN ASSETS AND LIABILITIES
- - --------------------------------------------------------------------------------
Accounts Receivable (219,534) (101,545) (65,536)
- - --------------------------------------------------------------------------------
Inventories 70,006 (73,657) (144,884)
- - --------------------------------------------------------------------------------
Accounts Payable and Accrued Expenses 14,943 118,289 8,792
- - --------------------------------------------------------------------------------
Income Taxes 20,773 82,369 30,371
- - --------------------------------------------------------------------------------
Other Assets and Liabilities (97,784) 26,198 20,897
- - --------------------------------------------------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 448,139 754,128 475,637
- - --------------------------------------------------------------------------------
INVESTING ACTIVITIES
- - --------------------------------------------------------------------------------
Capital Expenditures (295,804) (429,545) (523,082)
- - --------------------------------------------------------------------------------
Businesses Acquired - (60,043) (18,750)
- - --------------------------------------------------------------------------------
Proceeds from Sale of Business 285,000 - -
- - --------------------------------------------------------------------------------
Tax Effect of Gain on Sale of Business (64,750) - -
- - --------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (75,554) (489,588) (541,832)
- - --------------------------------------------------------------------------------
FINANCING ACTIVITIES
- - --------------------------------------------------------------------------------
Net (Repayments) Proceeds of
Commercial Paper Borrowings
and Certificates of Deposit (25,939) (322,119) 223,312
- - --------------------------------------------------------------------------------
Repayments of Long-Term Debt (100,000) - (50,000)
- - --------------------------------------------------------------------------------
Proceeds from Issuance
of Unsecured Notes 250,000 150,000 -
- - --------------------------------------------------------------------------------
Dividends Paid (130,681) (101,730) (101,141)
- - --------------------------------------------------------------------------------
Purchase of Treasury Stock (93,328) - -
- - --------------------------------------------------------------------------------
Stock Options and Other 6,686 16,809 14,579
- - --------------------------------------------------------------------------------
NET CASH (USED) PROVIDED
BY FINANCING ACTIVITIES (93,262) (257,040) 86,750
- - --------------------------------------------------------------------------------
NET INCREASE IN CASH AND EQUIVALENTS 279,323 7,500 20,555
- - --------------------------------------------------------------------------------
Cash and Equivalents, Beginning of Year 41,235 33,735 13,180
- - --------------------------------------------------------------------------------
CASH AND EQUIVALENTS, END OF YEAR $320,558 $41,235 $33,735
- - --------------------------------------------------------------------------------
</TABLE>
*The accompanying Notes are an integral part of these Consolidated Financial
Statements.
76
<PAGE>
Notes to Consolidated Financial Statements
- - --------------------------------------------------------------------------------
(thousands except per share amounts)
- - --------------------------------------------------------------------------------
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - --------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of The Limited,
Inc. (the Company) and all significant subsidiaries which are more than 50
percent owned and controlled. All significant intercompany balances and
transactions have been eliminated in consolidation.
Investments in other entities (including joint ventures), which are more
than 20 percent owned, are accounted for on the equity method.
- - --------------------------------------------------------------------------------
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to January 31. Fiscal
years are designated in the financial statements and notes by the calendar
year in which the fiscal year commences. The results for fiscal year 1993,
1992 and 1991 represent the 52-week periods ended January 29, 1994, January
30, 1993 and February 1, 1992.
- - --------------------------------------------------------------------------------
CASH AND EQUIVALENTS
Cash and equivalents include amounts on deposit with financial institutions
and money market investments with original maturities of less than 90 days.
- - --------------------------------------------------------------------------------
INVENTORIES
Inventories are principally valued at the lower of average cost or market, on
a first-in first-out basis, utilizing the retail method.
- - --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Depreciation and amortization of property and equipment are computed for
financial reporting purposes on a straight-line basis, using service lives
ranging principally from 10-30 years for buildings and improvements and 3-10
years for other property and equipment. The cost of assets sold or retired and
the related accumulated depreciation or amortization are removed from the
accounts with any resulting gain or loss included in net income. Maintenance
and repairs are charged to expense as incurred. Major renewals and betterments
which extend service lives are capitalized.
- - --------------------------------------------------------------------------------
GOODWILL AMORTIZATION
Goodwill represents the excess of the purchase price over the fair value of
the net assets of acquired companies and is amortized on a straight-line basis
principally over 30 years.
- - --------------------------------------------------------------------------------
INTEREST RATE SWAP AGREEMENTS
The difference between the amount of interest to be paid and the amount of
interest to be received under interest rate swap agreements due to changing
interest rates is charged or credited to interest expense over the life of the
swap agreement. Gains and losses from the disposition of swap agreements are
deferred and amortized over the term of the related agreements.
- - --------------------------------------------------------------------------------
INCOME TAXES
Effective January 31, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) 109, "Accounting for Income Taxes." SFAS 109
requires a change from the deferred method of accounting for income taxes to
the liability method. Under this method, deferred tax assets and liabilities
are recognized based on the difference between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates in effect in the years in which those temporary differences are expected
to reverse. Under SFAS 109, the effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the enactment date.
Under the deferred method, which was applied in 1992 and prior years, deferred
income taxes are recognized for income and expense items that are reported in
different years for financial reporting purposes and income tax purposes using
the tax rate applicable for the year of calculation. Under the deferred
method, deferred taxes are not adjusted for subsequent changes in tax rates.
- - --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Five hundred million shares of $.50 par value common stock are authorized, of
which 357.8 million and 362.6 million were outstanding, net of 21.7 million
shares and 16.8 million
77
>FINANCIAL STRENGTH AND STABILITY GIVE US FREEDOM TO IMPLEMENT WHAT WE'VE
LEARNED IN RESPONSE TO OUR CUSTOMERS.
<PAGE>
shares held in treasury at January 29, 1994 and January 30, 1993. Ten million
shares of $1.00 par value preferred stock are authorized, none of which has
been issued.
- - --------------------------------------------------------------------------------
NET INCOME PER SHARE
Net income per share is computed based upon the weighted average number of
outstanding common shares, including the effect of stock options. There were
363.2 million, 363.7 million and 363.6 million weighted average outstanding
shares for 1993, 1992 and 1991.
- - --------------------------------------------------------------------------------
ISSUANCE OF SUBSIDIARY STOCK
Gains or losses resulting from stock issued by a subsidiary of the Company are
recognized in current year's income. In 1992, the Company recognized a $9
million pre-tax gain which resulted from the March, 1992 initial public
offering of the United Retail Group, Inc. A more detailed discussion of this
matter is included under the heading "Gain on Issuance of United Retail Group,
Inc. Stock" in Management's Discussion and Analysis on page 68 of this Annual
Report.
- - -------------------------------------------------------------------------------
2 SPECIAL AND NONRECURRING ITEMS
During 1993, the Company approved a restructuring plan which includes the
following components: the sale of a 60% interest in the Brylane mail order
business; the acceleration of store remodeling, downsizing and closing program
at the Limited Stores and Lerner divisions; and the refocusing of the
merchandise strategy at the Henri Bendel division.
On August 31, 1993, the Company sold 60% of its interest in the Brylane
mail order business, receiving $285 million in cash proceeds. The transaction
resulted in a pre-tax gain of approximately $203 million. Brylane distributes
apparel through Lane Bryant Direct, Roaman's and Lerner Direct Catalogs.
To improve the underperforming divisions and expedite their turnaround,
the Company decided to remodel and downsize a number of Limited and Lerner
stores. The store remodels include both the expansion of store size and
relocation of stores to other locations within the same mall. In either case,
a remodel involves the destruction of certain existing assets. The downsizing
of stores reduces the size of stores with substandard productivity and profit
performance. The provision for remodels and downsizing aggregates
approximately $35 million and includes the net book value of fixed asset
writeoffs and lease termination payments.
In addition, the Company decided to close underperforming stores,
primarily in the Lerner and Limited Stores retail businesses. These closings
have been identified based on the profit performance of the store and an
assessment of the quality of the real estate. The provision for store closings
aggregates approximately $22 million and includes the operating losses through
the date of closing, the net book value of abandoned fixed assets and lease
termination payments.
This program includes the remodeling, downsizing and closing of
approximately 360 Limited and Lerner stores by the end of 1995. The Company
has closed approximately 60 of these stores and remodeled approximately 50
stores as of year-end.
The Company also estimated that, based on expected future cash flows,
there was no expectation of realizing through future operations the existing
carrying value of certain fixed and intangible assets at Lerner, Limited
Stores and Henri Bendel, and other assets, and accordingly recorded a charge
of approximately $143 million to reduce their net book value to an amount
considered realizable in future periods.
The charges for these actions totalled approximately $200 million, of
which approximately $173 million relates to non-cash charges for asset
impairments, remodels and store closings.
A further discussion of this matter is included under the heading
"Special and Non-recurring Items" in Management's Discussion and Analysis on
page 67 of this Annual Report.
- - -------------------------------------------------------------------------------
3 ACCOUNTS RECEIVABLE
Accounts receivable consisted of:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
1993 1992
- - -------------------------------------------------------------------------------
<S> <C> <C>
Deferred payment accounts $1,013,276 $755,822
- - -------------------------------------------------------------------------------
Trade and other 78,532 106,528
- - -------------------------------------------------------------------------------
Allowance for uncollectible accounts (34,897) (24,973)
- - -------------------------------------------------------------------------------
$1,056,911 $837,377
- - -------------------------------------------------------------------------------
</TABLE>
78
<PAGE>
Finance charge revenue on the deferred payment accounts amounted to $174.5
million, $141.8 million and $131.5 million in 1993, 1992 and 1991, and the
provision for uncollectible accounts amounted to $50.8 million, $40.0 million
and $50.6 million in 1993, 1992 and 1991. These amounts are classified as
components of the cost to administer the deferred payment program and are
included in general, administrative and store operating expenses.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
4 PROPERTY AND EQUIPMENT
Property and equipment, at cost, consisted of:
- - --------------------------------------------------------------------------------
1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C>
Land, buildings and improvements $510,998 $512,283
- - --------------------------------------------------------------------------------
Furniture, fixtures and equipment 1,571,568 1,476,081
- - --------------------------------------------------------------------------------
Leaseholds and improvements 506,258 677,115
- - --------------------------------------------------------------------------------
Construction in progress 49,373 55,491
- - --------------------------------------------------------------------------------
2,638,197 2,720,970
- - --------------------------------------------------------------------------------
Less: Accumulated depreciation and amortization 971,609 907,022
- - --------------------------------------------------------------------------------
Property and equipment, net $1,666,588 $1,813,948
- - --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
5 LEASED FACILITIES AND COMMITMENTS
Annual store rent is comprised of a fixed minimum amount, plus contingent
rent based upon a percentage of sales exceeding a stipulated amount. Store
lease terms generally require additional payments covering taxes, common area
costs and certain other expenses.
A summary of rent expense for 1993, 1992 and 1991 follows:
- - --------------------------------------------------------------------------------
Store Rent: 1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed minimum $540,381 $498,607 $380,291
Contingent 19,727 19,043 22,555
- - --------------------------------------------------------------------------------
Total store rent 560,108 517,650 402,846
- - --------------------------------------------------------------------------------
Equipment and other 31,897 37,228 38,734
- - --------------------------------------------------------------------------------
Total rent expense $592,005 $554,878 $441,580
- - --------------------------------------------------------------------------------
</TABLE>
At January 29, 1994, the Company was committed to noncancelable leases with
remaining terms of one to forty years. A substantial portion of these
commitments are store leases with initial terms ranging from ten to twenty
years. Accrued rent expense was $99.1 million and $67.7 million at January
29, 1994 and January 30, 1993.
A summary of minimum rent commitments under noncancelable leases follows:
<TABLE>
<S> <C>
- - --------------------------------------------------------------------------------
1994 $568,338
- - --------------------------------------------------------------------------------
1995 559,356
- - --------------------------------------------------------------------------------
1996 542,072
- - --------------------------------------------------------------------------------
1997 523,249
- - --------------------------------------------------------------------------------
1998 503,816
- - --------------------------------------------------------------------------------
Thereafter $2,695,394
- - --------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
6 LONG-TERM DEBT
Long-term debt consisted of:
- - --------------------------------------------------------------------------------
1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper $ - $29,439
- - --------------------------------------------------------------------------------
Certificates of Deposit - 12,200
- - --------------------------------------------------------------------------------
7 1/2% Debentures due March, 2023 250,000 -
- - --------------------------------------------------------------------------------
7.80% Notes due May, 2002 150,000 150,000
- - --------------------------------------------------------------------------------
9 1/8% Notes due February, 2001 150,000 150,000
- - --------------------------------------------------------------------------------
8 7/8% Notes due August, 1999 100,000 100,000
- - --------------------------------------------------------------------------------
8.61% Notes due December, 1993 - 100,000
- - --------------------------------------------------------------------------------
$650,000 $541,639
- - --------------------------------------------------------------------------------
</TABLE>
79
<PAGE>
The Company maintains two revolving credit agreements (the "Agreements")
totalling $840 million. One Agreement provides the Company available
borrowings of up to $560 million. The other Agreement provides World Financial
Network National Bank, a wholly-owned consolidated subsidiary, available
borrowings of up to $280 million. Borrowings outstanding under the Agreements
are due December 4, 1997. However, the revolving terms of each of the
Agreements may be extended an additional two years upon notification by the
Company on the second and fourth anniversaries of the Effective Date, subject to
the approval of the lending banks. Both Agreements have similar borrowing
options, including interest rates which are based on either the lenders' "Base
Rate," as defined, LIBOR, CD-based options or at a rate submitted under a bid-
ding process. Aggregate commitment and facility fees for the Agreements
approximate 0.15% of the total commitment. Both Agreements and certain of the
Company's other debt agreements place restrictions on the amount of the
Company's working capital, debt and net worth. No amounts were outstanding
under the Agreements at January 29, 1994.
Both Agreements support the Company's commercial paper program which funds
working capital and other general corporate requirements. No commercial paper
was outstanding at January 29, 1994.
In February, 1993, the Company amended its shelf registration statement
enabling it to issue up to $500 million of debt securities and warrants to
purchase debt securities. Following the $250 million issuance of 7 1/2%
Debentures due 2023 on March 15,1993, the Company has $250 million remaining
under its shelf registration statement authorization.
At January 30, 1993, the 8.61% Notes, the commercial paper and the
certificates of deposit were classified as long-term based on the Company's
intention and ability to refinance the obligations on a long-term basis.
Following the $250 million issuance of 7 1/2% Debentures in March, 1993, the
Company retired the 8.61% Notes upon their maturity in December, 1993 and now
classifies commercial paper and certificates of deposit as current liabilities
based on their maturity.
All long-term debt outstanding at January 29, 1994 and January 30, 1993
is unsecured.
The Company periodically enters into interest rate swap agreements with
the intent to manage the interest rate exposure of its debt portfolio. At
January 29, 1994, the Company had two interest rate swap positions outstanding,
each having a $100 million notional principal amount. One contract effectively
changed the Company's interest rate exposure on $100 million of variable rate
debt to a fixed rate of 8.09% through July, 2000. The counterparty to the swap
contract has an option to cancel the remaining term of the contract in July,
1995. The second contract effectively changes the interest rate on $100 million
of fixed rate debt to a variable rate through November, 1995.
No long-term debt matures in years 1994-1998. Interest paid approximated
$57.4 million, $60.0 million and $58.2 million in 1993, 1992 and 1991.
- - --------------------------------------------------------------------------------
7 INCOME TAXES
As discussed in Note 1, the Company adopted SFAS 109 effective January
31,1993. No cumulative effect adjustment was required for the adoption as the
difference in deferred income taxes under SFAS 109 and APB Opinion 11 was
immaterial. The impact of adoption on the current year was also immaterial.
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
CURRENTLY PAYABLE: 1993 1992 1991
- - ---------------------------------------------------------
<S> <C> <C> <C>
Federal $249,400 $174,900 $173,700
- - ---------------------------------------------------------
State 35,100 28,700 27,000
- - ---------------------------------------------------------
Foreign 6,400 6,400 4,500
- - ---------------------------------------------------------
290,900 210,000 205,200
- - ---------------------------------------------------------
DEFERRED:
- - ---------------------------------------------------------
Federal (41,800) 62,700 41,800
- - ---------------------------------------------------------
State 4,900 17,300 10,000
- - ---------------------------------------------------------
(36,900) 80,000 51,800
- - ---------------------------------------------------------
Total Provision $254,000 $290,000 $257,000
- - ---------------------------------------------------------
</TABLE>
80
>OUR FINANCIAL GOALS REQUIRE US TO STRETCH BEYOND OUR INDIVIDUAL "COMFORT
ZONES."
<PAGE>
The foreign component of pre-tax income, arising principally from overseas
sourcing operations, was $54.8 million, $58.7 million and $44.5 million in
1993, 1992 and 1991.
A reconciliation between the statutory Federal income tax rate and the
effective income tax rate follows:
<TABLE>
<CAPTION>
===============================================================================
1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 34.0% 34.0%
- - --------------------------------------------------------------------------------
State income tax, net of
Federal income tax effect 4.0 4.0 3.7
- - --------------------------------------------------------------------------------
Other items, net .4 .9 1.2
- - --------------------------------------------------------------------------------
39.4% 38.9% 38.9%
================================================================================
</TABLE>
Income taxes payable included current deferred tax assets of $41.1 million and
$19.6 million at January 29, 1994 and January 30, 1993. The effect of
temporary differences which gives rise to deferred income tax balances at
January 29,1994 was as follows:
<TABLE>
<CAPTION>
================================================================================
Assets Liabilities Total
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Excess of tax over book
depreciation $(123,539) $(123,539)
- - -------------------------------------------------------------------------------
Undistributed earnings of
foreign affiliate (103,485) (103,485)
- - -------------------------------------------------------------------------------
Investment in affiliate (39,171) (39,171)
- - -------------------------------------------------------------------------------
State income taxes $8,681 8,681
- - --------------------------------------------------------------------------------
Bad debt reserve 11,022 11,022
- - --------------------------------------------------------------------------------
Restructuring 25,092 25,092
- - --------------------------------------------------------------------------------
Other 23,163 (35,735) (12,572)
- - --------------------------------------------------------------------------------
$67,958 $(301,930) $(233,972)
================================================================================
</TABLE>
For the years 1992 and 1991, deferred income tax expense resulted from timing
differences in the recognition of income and expense. The components of the
deferred tax provision follow:
<TABLE>
<CAPTION>
================================================================================
1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C>
Excess of tax over book depreciation $45,400 $17,200
- - --------------------------------------------------------------------------------
Other items, net 34,600 34,600
- - --------------------------------------------------------------------------------
$80,000 $51,800
================================================================================
</TABLE>
Income tax payments approximated $291.3 million, $199.8 million and $212.4
million for 1993, 1992 and 1991.
- - --------------------------------------------------------------------------------
8 STOCK OPTIONS AND RESTRICTED STOCK
Stock options are granted to officers and key associates based upon fair
market value at the date of grant. Option activity for 1991, 1992 and 1993
follows:
<TABLE>
<CAPTION>
================================================================================
Number of Weighted Average
Shares Option Price Per Share
- - --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding Options, February 2, 1991 5,796,000 $14.26
- - --------------------------------------------------------------------------------
Activity during 1991: Granted 707,000 $26.56
Exercised (1,187,000) 10.12
Cancelled (194,000) 18.05
- - --------------------------------------------------------------------------------
Outstanding Options, February 1, 1992 5,122,000 $16.49
- - --------------------------------------------------------------------------------
Activity during 1992: Granted 1,476,000 $23.91
Exercised (772,000) 12.73
Cancelled (312,000) 22.99
- - --------------------------------------------------------------------------------
Outstanding Options, January 30, 1993 5,514,000 $18.57
- - --------------------------------------------------------------------------------
Activity during 1993: Granted 2,457,000 $21.74
Exercised (431,000) 12.22
Cancelled (357,000) 22.32
- - --------------------------------------------------------------------------------
Outstanding Options, January 29,1994 7,183,000 $19.87
================================================================================
</TABLE>
The Company had approximately 5.3 million shares available for grant at
January 29, 1994 as compared to 7.4 million shares available at January 30,
1993 and 8.5 million shares available at February 1, 1992. Approximately 7.2
million shares of the Company's common stock were reserved for outstanding
options, of which 3.3 million were exercisable as of January 29, 1994.
81
<PAGE>
In 1993, 590,000 restricted shares of the Company's common stock were granted
to certain officers and key associates. The market value of the shares at the
date of grant amounted to $12.7 million and is recorded within treasury stock
in the accompanying consolidated financial statements. The market value is
being amortized as compensation expense over the vesting period which ranges
from four to ten years. Compensation expense of $1.3 million was recorded in
1993.
- - --------------------------------------------------------------------------------
9 RETIREMENT BENEFITS
The Company sponsors a defined contribution retirement plan. Participation in
this plan is available to all associates who have completed 1,000 or more
hours of service with the Company during certain 12 month periods and attained
the age of 21. Company contributions to this plan are based on a percentage of
the associates' annual compensation. The cost of this plan was $25.9 million
in 1993, $20.1 million in 1992 and $16.3 million in 1991.
- - --------------------------------------------------------------------------------
10 FINANCE SUBSIDIARY
World Financial Network National Bank, a wholly-owned consolidated finance
subsidiary, provides private label credit card lines to the customers of
certain retail affiliates. Condensed financial information of the finance
subsidiary follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
ASSETS Jan. 29, 1994 Jan. 30, 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Credit card receivables, net of
allowance for uncollectible accounts $978,500 $731,000
- - --------------------------------------------------------------------------------
Other assets, net 40,300 20,500
- - --------------------------------------------------------------------------------
$1,018,800 $751,500
- - --------------------------------------------------------------------------------
LIABILITIES AND INVESTMENT
- - --------------------------------------------------------------------------------
Certificates of deposit $15,700 $12,200
- - --------------------------------------------------------------------------------
Payable to wholly-owned subsidiaries
and affiliates of The Limited, Inc. 18,200 6,400
- - --------------------------------------------------------------------------------
INVESTMENT OF THE LIMITED, INC.:
- - --------------------------------------------------------------------------------
Subordinated debt 902,700 665,200
- - --------------------------------------------------------------------------------
Equity investment 82,200 67,700
- - --------------------------------------------------------------------------------
$1,018,800 $751,500
- - --------------------------------------------------------------------------------
</TABLE>
Holders of credit cards issued by the finance subsidiary are located
throughout the United States, and have various available lines of credit which
are subject to change by the finance subsidiary. The credit cards are used to
purchase merchandise offered for sale by affiliates.
- - --------------------------------------------------------------------------------
11 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
- - --------------------------------------------------------------------------------
CURRENT ASSETS AND CURRENT LIABILITIES
The fair value of cash and equivalents, short-term borrowings, accounts
payable and accrued expenses approximate fair value because of their short
maturity. The carrying amount of the credit card receivables approximates fair
value due to the short maturity and because the average interest rate
approximates current market origination rates.
- - --------------------------------------------------------------------------------
LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
- - --------------------------------------------------------------------------------
INTEREST RATE SWAP AGREEMENTS
The fair value of interest rate swaps (used for hedging purposes) is the
estimated amount that the Company would receive or pay to terminate the swap
agreements at the reporting date, taking into account current interest rates
and the current credit-worthiness of the swap counterparties.
82
>OUR DEBT-TO-EQUITY RATIO IS 27%, INDICATING THAT OUR DEBT IS SMALL, RELATIVE TO
OUR SHAREHOLDERS'
<PAGE>
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
1993 1992
----------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term debt $(650,000) $(712,078) $(541,639) $(584,472)
- - -------------------------------------------------------------------------------
Net interest rate swaps $(13) $(13,289) $374 $(5,334)
- - -------------------------------------------------------------------------------
</TABLE>
- - -------------------------------------------------------------------------------
12 QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial results for 1993 and 1992 follow:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
1993 QUARTER First Second Third Fourth
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $1,518,561 $1,689,055 $1,616,667 $2,420,805
- - ------------------------------------------------------------------------------
Gross Income 380,727 427,710 447,048 703,350
- - ------------------------------------------------------------------------------
Net Income 44,225 68,232 82,215 196,327
- - ------------------------------------------------------------------------------
Net Income Per Share $0.12 $0.19 $0.23 $0.54
- - ------------------------------------------------------------------------------
1992 QUARTER
- - ------------------------------------------------------------------------------
Net Sales $1,415,625 $1,489,393 $1,611,320 $2,427,958
- - ------------------------------------------------------------------------------
Gross Income 357,938 410,932 440,421 781,449
- - ------------------------------------------------------------------------------
Net Income 51,525 80,073 79,995 243,904
- - ------------------------------------------------------------------------------
Net Income Per Share $0.14 $0.22 $0.22 $0.67
- - ------------------------------------------------------------------------------
</TABLE>
Market Price and Dividend Information
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
Cash
Dividend
Market Price Per Share
- - ------------------------------------------------------------------------------
FISCAL YEAR 1993 High Low
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
4th Quarter $23 1/4 $16 5/8 $.09
- - ------------------------------------------------------------------------------
3rd Quarter 24 20 .09
- - ------------------------------------------------------------------------------
2nd Quarter 24 7/8 19 3/4 .09
- - ------------------------------------------------------------------------------
1st Quarter $30 $21 1/4 $.09
- - ------------------------------------------------------------------------------
FISCAL YEAR 1992
- - ------------------------------------------------------------------------------
4th Quarter $29 5/8 $22 7/8 $.07
- - ------------------------------------------------------------------------------
3rd Quarter 25 1/2 19 3/4 .07
- - ------------------------------------------------------------------------------
2nd Quarter 24 5/8 19 1/4 .07
- - ------------------------------------------------------------------------------
1st Quarter $32 7/8 $22 $.07
- - ------------------------------------------------------------------------------
</TABLE>
The Company's common stock is traded on the New York Stock Exchange ("LTD")
and the London Stock Exchange. On January 29, 1994, there were 68,025
shareholders of record. However, when including active associates who
participate in the Company's stock purchase plan, associates who own shares
through Company sponsored retirement plans and others holding shares in broker
accounts under street name, the Company estimates the shareholder base at
approximately 131,000.
83
<PAGE>
The Limited, Inc.
Appendix A to the 1993
Annual Report
Page # Description of Graph
- - ------ --------------------
64-65 Three connecting polaroid pictures spanning pages 64 and 65 of an
individual holding a chart titled "Number of Stores." The chart
is a horizontal bar chart with the following points:
<TABLE>
<CAPTION>
Year # Stores
---- --------
<S> <C>
1973 30
1978 258
1983 937
1988 3,497
1993 4,623
</TABLE>
71 A polaroid picture of an individual holding a bar chart titled
"Selling Square Feet (in thousands)." The chart is a horizontal
bar chart with the following points:
<TABLE>
<CAPTION>
Selling
Square
Year Feet
---- ----
<S> <C>
83 3,667
84 5,166
85 10,460
86 11,320
87 12,795
88 14,296
89 14,374
90 17,008
91 20,355
92 22,863
93 24,426
</TABLE>
<PAGE>
Page # Description of Graph
- - ------ --------------------
72 Two polaroid pictures appear on this page: The top polaroid is
of an individual holding a chart titled "Net Income (in millions)
CAGR 19%." The chart is a horizontal bar chart with the
following points:
<TABLE>
<CAPTION>
Net
Year Income
---- ------
<S> <C>
83 $ 71
84 92
85 145
86 228
87 235
88 245
89 347
90 398
91 403
92 455
93 $ 391
</TABLE>
The bottom polaroid is an individual holding a chart titled "Net
Sales (in millions) CAGR 21% (Compounded Annual Growth Rate, last
ten years)." The chart is a horizontal bar chart with the
following points:
<TABLE>
<CAPTION>
Year Net Sales
---- ---------
<S> <C>
83 $1,086
84 1,343
85 2,387
86 3,143
87 3,528
88 4,071
89 4,648
90 5,254
91 6,149
92 6,944
93 7,245
</TABLE>
<PAGE>
Page # Description of Graph
- - ------ --------------------
73 A polaroid picture of an individual holding a line chart
depicting the year end balance of equity from 1983 through 1993
plotted against the year end balance of debt from 1983 through
1993. The plot points are:
<TABLE>
<CAPTION>
Debt Year Equity
---- ---- ------
<S> <C> <C>
$ 68,763 83 $ 192,576
150,139 84 275,403
670,744 85 404,075
417,420 86 781,542
681,000 87 729,171
517,952 88 946,207
445,674 89 1,240,454
540,446 90 1,560,052
713,758 91 1,876,792
541,639 92 2,267,617
$650,000 93 $2,441,293
</TABLE>
74 Two polaroid pictures appear on this page. The top polaroid is
of an individual holding a chart titled "Shareholders' Equity (in
millions) CAGR 29%." The chart is a horizontal bar chart with
the following points:
<TABLE>
<CAPTION>
Shareholders'
Year Equity
---- ------
<S> <C>
83 $ 193
84 275
85 404
86 782
87 729
88 946
89 1,240
90 1,560
91 1,877
92 2,268
93 $2,441
</TABLE>
<PAGE>
The bottom polaroid is of an individual holding a chart titled
"Net Income per Share CAGR 18%." The chart is a horizontal bar
chart with the following points:
<TABLE>
<CAPTION>
Net Income
Year Per Share
---- ---------
<S> <C>
83 $0.20
84 0.26
85 0.40
86 0.60
87 0.62
88 0.68
89 0.96
90 1.10
91 1.11
92 1.25
93 $1.08
</TABLE>
75 A polaroid picture of an individual holding a chart titled
"Working Capital." The chart is a horizontal bar chart with the
following points:
<TABLE>
<CAPTION>
Working
Year Capital
---- -------
<S> <C>
83 $ 101,665
84 180,960
85 419,706
86 586,827
87 629,783
88 567,639
89 685,524
90 884,004
91 1,084,205
92 1,063,352
93 $1,513,181
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction
Subsidiaries (a) of Incorporation
------------ ----------------
Express, Inc. (b) Delaware
The Limited London-Paris-New York, Inc. (c) Delaware
Lerner New York, Inc. (d) Delaware
Lane Bryant, Inc. (e) Delaware
Victoria's Secret Stores, Inc. (f) Delaware
Structure, Inc. (g) Delaware
Limited Too, Inc. (h) Delaware
Abercrombie & Fitch, Inc. (i) Delaware
Henri Bendel, Inc. (j) Delaware
Bath & Body Works, Inc. (k) Delaware
Cacique, Inc. (l) Delaware
Penhaligon's Limited (m) United Kingdom
Victoria's Secret Catalogue, Inc. (n) Delaware
Mast Industries, Inc. (o) Delaware
Mast Industries (Far East) Limited (p) Hong Kong
Gryphon Development, Inc. (q) Delaware
World Financial Network National Bank (r) United States
Limited Distribution Services, Inc. (s) Delaware
Limited Service Corporation (t) Delaware
- - -------------------
(a) The names of certain subsidiaries are omitted since such unnamed
subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary as of January 29, 1994.
(b) Express, Inc. is a wholly-owned subsidiary of Express Holding Corporation,
a Delaware corporation and a wholly-owned subsidiary of the registrant.
(c) The Limited London-Paris-New York, Inc. is a wholly-owned subsidiary of LIM
Holding Corporation, a Delaware corporation and a wholly-owned subsidiary
of the registrant.
(d) Lerner New York, Inc. is a wholly-owned subsidiary of Lerner Holding
Corporation, a Delaware corporation and a wholly-owned subsidiary of the
registrant.
(e) Lane Bryant, Inc. is a wholly-owned subsidiary of Lane Bryant Holding
Corporation, a Delaware corporation and a wholly-owned subsidiary of the
registrant.
(f) Victoria's Secret Stores, Inc. is a wholly-owned subsidiary of Victoria's
Secret Stores Holding Corporation, a Delaware corporation and a wholly-
owned subsidiary of the registrant.
(g) Structure, Inc. is a wholly-owned subsidiary of Structure Holding
Corporation, a Delaware corporation and a wholly-owned subsidiary of the
registrant.
(h) Limited Too, Inc. is a wholly-owned subsidiary of Limited Too Holding
Corporation, a Delaware corporation and a wholly-owned subsidiary of the
registrant.
<PAGE>
(i) Abercrombie & Fitch, Inc. is a wholly-owned subsidiary of Abercrombie &
Fitch Holding Corporation, a Delaware corporation and a wholly-owned
subsidiary of the registrant.
(j) Henri Bendel, Inc. is a wholly-owned subsidiary of Henri Bendel Holding
Corporation, a Delaware corporation and a wholly-owned subsidiary of the
registrant.
(k) Bath & Body Works, Inc. is a wholly-owned subsidiary of Bath and Body Works
Holding Corporation, Inc., a Delaware corporation and a wholly-owned
subsidiary of the registrant.
(l) Cacique, Inc. is a wholly-owned subsidiary of Cacique Holding Corporation,
a Delaware corporation and a wholly-owned subsidiary of the registrant.
(m) Penhaligon's Limited is a wholly-owned subsidiary of PENHAL Investments,
Inc., a Delaware corporation and a wholly-owned subsidiary of the
registrant.
(n) Victoria's Secret Catalogue, Inc. is a wholly-owned subsidiary of
Victoria's Secret Catalogue Holding Corporation, a Delaware corporation and
a wholly-owned subsidiary of the registrant.
(o) Mast Industries, Inc. is a wholly-owned subsidiary of Mast Holding
Corporation, a Delaware corporation and a wholly-owned subsidiary of the
registrant.
(p) Mast Industries (Far East) Limited is a wholly-owned subsidiary of Mast
Industries, Inc.
(q) Gryphon Development, Inc. is a wholly-owned subsidiary of the Gryphon
Holding Corporation, a Delaware corporation and a wholly-ownded subsidiary
of the registrant.
(r) World Financial Network National Bank is a wholly-owned subsidiary of the
registrant.
(s) Limited Distribution Services, Inc. is a wholly-owned subsidiary of LTDSP,
Inc., a Delaware corporation and a wholly-owned subsidiary of the
registrant.
(t) Limited Service Corporation is a wholly-owned subsidiary of the registrant.
<PAGE>
EXHIBIT 23
(LOGO OF COOPERS & LYBRAND
APPEARS HERE)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
The Limited, Inc. on Form S-8, Registration Nos. 33-18533, 33-25005, 2-92277,
33-24829, 33-24507, 33-24828, 2-95788, 2-88919, 33-24518, 33-6965, 33-14049, 33-
22844, 33-44041, 33-49871 and the registration statements on Form S-3,
Registration Nos. 33-20788, 33-31540, 33-43832 and 33-53366 of our report dated
February 14, 1994, on our audits of the consolidated financial statements and
financial statement schedules of The Limited, Inc. and Subsidiaries as of
January 29, 1994, and January 30, 1993, and for the fiscal years ended January
29, 1994, January 30, 1993, and February 1, 1992, which report is included in
this Annual Report on Form 10-K.
/s/ Coopers & Lybrand
COOPERS & LYBRAND
Columbus, Ohio
April 22, 1994
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ KENNETH B. GILMAN
---------------------
Kenneth B. Gilman
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ LESLIE H. WEXNER
--------------------
Leslie H. Wexner
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 27th day of February, 1994.
/s/ BELLA WEXNER
----------------
Bella Wexner
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ MICHAEL A. WEISS
--------------------
Michael A. Weiss
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ MARTIN TRUST
----------------
Martin Trust
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 28th day of February, 1994.
/s/ E. GORDON GEE
-----------------
E. Gordon Gee
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ THOMAS G. HOPKINS
---------------------
Thomas G. Hopkins
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ DAVID T. KOLLAT
-------------------
David T. Kollat
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ CLAUDINE MALONE
-------------------
Claudine Malone
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ JOHN K. PFAHL
-----------------
John K. Pfahl
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ DONALD B. SHACKELFORD
-------------------------
Donald B. Shackelford
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ ALLAN R. TESSLER
--------------------
Allan R. Tessler
<PAGE>
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
THE LIMITED, INC.
The undersigned officer and/or director of The Limited, Inc., a Delaware
corporation, which anticipates filing an Annual Report on Form 10-K for its
fiscal year ended January 29, 1994 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 25th day of February, 1994.
/s/ RAYMOND ZIMMERMAN
---------------------
Raymond Zimmerman
<PAGE>
EXHIBIT 99
[LETTERHEAD OF ARY, EARMAN AND ROEPCKE APPEARS HERE]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Plan Administrator of The Limited,
Inc. Savings and Retirement Plan:
We have audited the accompanying statements of net assets available for plan
benefits of The Limited, Inc. Savings and Retirement Plan as of December 31,
1993 and 1992, and the related statements of changes in net assets available for
plan benefits for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Plan's management. Our
responsi- bility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
manage- ment, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for plan benefits of the Plan
as of December 31, 1993 and 1992, and the changes in net assets available for
plan benefits for each of the three years in the period ended December 31, 1993,
in conformity with generally accepted accounting principles.
/s/ ARY, EARMAN AND ROEPCKE
Columbus, Ohio,
March 24, 1994.
<PAGE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
---------------------------------------------------
DECEMBER 31, 1993
-----------------
<TABLE>
<CAPTION>
Limited Fixed
ASSETS TOTAL Stock Fund Income Fund Indexed Fund World Fund
- - ------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Investments, at Fair Value:
Determined by Quoted Market Price
Common Stock of The Limited, Inc.
(Cost $28,548,294) $ 76,924,612 $ 76,924,612 $ -- $ -- $ --
Vanguard Indexed Mutual Fund
(Cost $15,690,019) 17,288,449 -- -- 17,288,449 --
Vanguard World Mutual Fund
(Cost $13,532,146) 13,799,287 -- -- -- 13,799,287
Determined By Contract Value:
Guaranteed Investment Contracts:
Vanguard Investment Contract Trust 46,129,637 -- 46,129,637 -- --
Metropolitan Life Insurance 11,929,738 -- 11,929,738 -- --
John Hancock Life Insurance 1,693,809 -- 1,693,809 -- --
Temporary Investments (Cost
approximates fair value) 351,056 2,390 312,905 17,880 17,881
------------ ------------ ------------ ------------ ------------
Total Investments 168,116,588 76,927,002 60,066,089 17,306,329 13,817,168
Contribution Receivable from Employers 16,654,367 2,961,061 8,853,901 2,637,242 2,202,163
Receivable from Employers for Withheld
Participants' Contributions 884,649 111,468 381,942 227,114 164,125
Due from Brokers 531,601 531,601 -- -- --
Interfund Transfers -- (856,847) 373,730 340,564 142,553
Accrued Interest and Dividends 1,373 621 358 143 251
Other Assets 780 -- 368 -- 412
------------ ------------ ------------ ------------ ------------
Total Assets 186,189,358 79,674,906 69,676,388 20,511,392 16,326,672
------------ ------------ ------------ ------------ ------------
LIABILITIES
- - -----------
Other Liabilities 1,218 1,218 -- -- --
Administrative Fees Payable 699,365 320,641 249,463 71,876 57,385
------------ ------------ ------------ ------------ ------------
Total Liabilities 700,583 321,859 249,463 71,876 57,385
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $185,488,775 $ 79,353,047 $ 69,426,925 $ 20,439,516 $ 16,269,287
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-1
<PAGE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
---------------------------------------------------
DECEMBER 31, 1992
-----------------
<TABLE>
<CAPTION>
Limited Fixed
ASSETS TOTAL Stock Fund Income Fund Indexed Fund World Fund
- - ------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investments, at Fair Value:
Determined by Quoted Market Price:
Common Stock of The Limited, Inc.
(Cost $24,610,491) $142,525,467 $142,525,467 $ -- $ -- $ --
Vanguard Indexed Mutual Fund
(Cost $13,008,597) 14,049,457 -- -- 14,049,457 --
Vanguard World Mutual Fund
(Cost $13,168,311) 13,908,741 -- -- -- 13,908,741
Determined By Contract Value:
Guaranteed Investment Contracts:
Vanguard Investment Contract Trust 49,987,244 -- 49,987,244 -- --
Metropolitan Life Insurance 10,852,749 -- 10,852,749 -- --
John Hancock Life Insurance 3,190,512 -- 3,190,512 -- --
Temporary Investments (Cost
approximates fair value) 76,655 76,655 -- -- --
------------ ------------ ------------ ------------ ------------
Total Investments 234,590,825 142,602,122 64,030,505 14,049,457 13,908,741
Contribution Receivable from Employers 14,554,945 3,643,073 7,739,884 1,487,099 1,684,889
Receivable from Employers for Withheld
Participants' Contributions 853,266 289,201 286,968 133,213 143,884
Due from Brokers 1,557,031 1,454,170 -- 21,387 81,474
Interfund Transfers -- (121,760) 168,224 14,396 (60,860)
Accrued Interest and Dividends 3,147 2,812 294 13 28
Other Assets 368 -- 368 -- --
------------ ------------ ------------ ------------ ------------
Total Assets 251,559,582 147,869,618 72,226,243 15,705,565 15,758,156
------------ ------------ ------------ ------------ ------------
LIABILITIES
- - -----------
Other Liabilities 1,218 1,218 -- -- --
Administrative Fees Payable 187,534 106,152 57,675 12,247 11,460
------------ ------------ ------------ ------------ ------------
Total Liabilities 188,752 107,370 57,675 12,247 11,460
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $251,370,830 $147,762,248 $ 72,168,568 $ 15,693,318 $ 15,746,696
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
--------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1993
------------------------------------
<TABLE>
<CAPTION>
Limited Fixed
Total Stock Fund Income Fund Indexed Fund World Fund
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Increase (Decrease) in Net
Unrealized Appreciation $(51,165,802) $(51,222,621) $ -- $ 537,811 $ (480,992)
Realized gain on Sale of Securities 4,073,977 3,367,169 -- 636,926 69,882
Interest 4,439,846 6,689 4,429,569 1,880 1,708
Dividends 1,783,025 1,783,025 -- -- --
Mutual Funds' Earnings 657,135 -- -- 464,994 192,141
------------ ------------ ------------ ------------ ------------
Total Investment Income (Loss) (40,211,819) (46,065,738) 4,429,569 1,641,611 (217,261)
------------ ------------ ------------ ------------ ------------
Contributions:
Employers 23,371,564 5,561,152 11,270,178 3,496,942 3,043,292
Participants 10,428,961 3,098,271 3,790,368 1,934,509 1,605,813
------------ ------------ ------------ ------------ ------------
Total contributions 33,800,525 8,659,423 15,060,546 5,431,451 4,649,105
------------ ------------ ------------ ------------ ------------
Transfer of Participants' Account
Balances from Affiliated Plans 1,140,371 -- 514,198 422,367 203,806
------------ ------------ ------------ ------------ ------------
Transfer of Participants' Account
Balances to Former Affiliate's Plan (20,815,838) (5,390,244) (10,483,032) (3,227,343) (1,715,219)
------------ ------------ ------------ ------------ ------------
Interfund Transfers -- (4,461,978) 1,028,778 3,401,455 31,745
------------ ------------ ------------ ------------ ------------
Administrative Expense (752,234) (354,091) (261,967) (75,921) (60,255)
------------ ------------ ------------ ------------ ------------
Benefits to Participants (39,043,060) (20,796,573) (13,029,735) (2,847,422) (2,369,330)
------------ ------------ ------------ ------------ ------------
Increase (Decrease) in Net Assets
Available for Plan Benefits (65,882,055) (68,409,201) (2,741,643) 4,746,198 522,591
Beginning Net Assets Available for Plan
Benefits 251,370,830 147,762,248 72,168,568 15,693,318 15,746,696
------------ ------------ ------------ ------------ ------------
Ending Net Assets Available for Plan
Benefits $185,488,775 $ 79,353,047 $ 69,426,925 $ 20,439,516 $ 16,269,287
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
--------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1992
------------------------------------
<TABLE>
<CAPTION>
Limited Fixed Balanced
Total Stock Fund Income Fund Indexed Fund World Fund Fund
------------ ------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Increase (Decrease) in Net
Unrealized Appreciation $(35,113,811) $(30,558,791) $ -- $ 1,040,860 $ 740,430 $ (6,336,310)
Realized Gain on Sale of
Securities 14,724,409 14,621,430 -- 76,279 26,700 --
Master Trusts' Earnings 5,079,699 -- 410,088 -- -- 4,669,611
Interest 3,339,282 20,979 3,317,745 273 285 --
Dividends 1,656,283 1,656,283 -- -- -- --
Mutual Funds' Earnings 569,200 -- -- 336,311 232,889 --
------------ ------------ -------------- ------------ ------------ ------------
Total Investment Income (Loss) (9,744,938) (14,260,099) 3,727,833 1,453,723 1,000,304 (1,666,699)
------------ ------------ -------------- ------------ ------------ ------------
Contributions:
Employers:
Cash 21,629,777 6,331,664 10,291,305 2,211,975 2,391,300 403,533
The Limited, Inc. Common Stock 2,252,884 2,252,884 -- -- -- --
Participants 9,745,785 3,664,723 3,776,604 846,944 877,007 580,507
------------ ------------ -------------- ------------ ------------ ------------
Total Contributions 33,628,446 12,249,271 14,067,909 3,058,919 3,268,307 984,040
------------ ------------ -------------- ------------ ------------ ------------
Transfer of Participants' Account
Balances from Affiliated Plans 121,306,985 61,642,002 12,602,071 -- -- 47,062,912
------------ ------------ -------------- ------------ ------------ ------------
Interfund Transfers -- (4,110,765) 46,737,477 12,081,798 12,305,257 (67,013,767)
------------ ------------ -------------- ------------ ------------ ------------
Administrative Expense (386,007) (225,205) (113,686) (23,692) (23,424) --
------------ ------------ -------------- ------------ ------------ ------------
Benefits to Participants (43,518,434) (29,018,749) (12,495,636) (877,430) (803,748) (322,871)
------------ ------------ -------------- ------------ ------------ ------------
Increase (Decrease) in Net Assets
Available for Plan Benefits 101,286,052 26,276,455 64,525,968 15,693,318 15,746,696 (20,956,385)
Beginning Net Assets Available for
Plan Benefits 150,084,778 121,485,793 7,642,600 -- -- 20,956,385
------------ ------------ -------------- ------------ ------------ ------------
Ending Net Assets Available for
Plan Benefits $251,370,830 $147,762,248 $ 72,168,568 $ 15,693,318 $ 15,746,696 $ --
============ ============ ============== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
--------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1991
------------------------------------
<TABLE>
<CAPTION>
Limited Fixed Balance
Total Stock Fund Income Fund Fund
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Investment Income:
Increase in Net Unrealized Appreciation $ 54,875,493 $ 52,992,078 $ -- $ 1,883,415
Realized gain on Sale of Securities 2,192,097 2,192,097 -- --
Master Trusts' Earnings 1,594,746 -- 555,102 1,039,644
Dividends 1,315,315 1,315,315 -- --
Interest 4,085 4,085 -- --
------------- ------------ ------------ ------------
Total Investment Income 59,981,736 56,503,575 555,102 2,923,059
------------- ------------ ------------ ------------
Contributions:
Employers 4,315,801 1,040,171 555,793 2,719,837
Participants 2,964,282 1,510,956 775,582 677,744
------------- ------------ ------------ ------------
Total contributions 7,280,083 2,551,127 1,331,375 3,397,581
------------- ------------ ------------ ------------
Transfer of Participants' Account Balance
from Affiliated Plans (3,012,346) (2,511,535) (75,506) (425,305)
------------- ------------ ------------ ------------
Forfeitures -- (914,897) -- 914,897
------------- ------------ ------------ ------------
Interfund Transfers -- (1,098,251) 305,647 792,604
------------- ------------ ------------ ------------
Benefits to Participants (27,355,442) (24,823,105) (545,585) (1,986,752)
------------- ------------ ------------ ------------
Increase in Net Assets Available for Plan 36,894,031 29,706,914 1,571,033 5,616,084
Benefits
Beginning Net Assets Available for Plan 113,190,747 91,778,879 6,071,567 15,340,301
Benefits ------------- ------------ ------------ ------------
Ending Net Assets Available for Plan $150,084,778 $121,485,793 $ 7,642,600 $ 20,956,385
Benefits ============= ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) DESCRIPTION OF THE PLAN
-----------------------
General
-------
The Limited, Inc. Savings and Retirement Plan (the "Plan"), formerly The
Limited Stores Savings and Retirement Plan, is a defined contribution
plan covering certain employees of The Limited, Inc. and its
affiliates (the "Employers") who are at least 21 years of age and have
completed 1,000 or more hours of service during their first
consecutive twelve months of employment or any calendar year beginning
in or after their first consecutive twelve months of employment.
Certain employees of the Employers, who are covered by a collective
bargaining agreement, are not eligible to participate in the Plan. At
December 31, 1993, there were 20,446 participants in the Plan.
Effective January 1, 1992, the plans of affiliates, except Fulcrum
Management Group Savings and Retirement Plan, were merged and all
assets and liabilities of the affiliate plans were pooled into the
Plan. Effective January 1, 1993, the Fulcrum Management Group Savings
and Retirement Plan was merged into the Plan.
On August 31, 1993, The Limited, Inc. sold 60% of its interest in
Brylane, Inc. and the assets and liabilities allocated to the
employees of Brylane, Inc. and its affiliates were transferred to the
Brylane L.P. Savings and Retirement Plan.
The following description of the Plan provides only general information.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA) as amended.
Amendments
----------
Effective May 1, 1991, the Plan was amended and restated to restrict
certain transactions for participants defined by the Plan to have
insider information.
Effective January 1, 1992, the Plan was amended and restated to, among
other things, (1) change the sponsorship of the Plan to the Limited
Service Corporation from The Limited, Inc., (2) rename the Plan The
Limited, Inc. Savings and Retirement Plan from The Limited Stores
Savings and Retirement Plan and (3) change the Employers' retirement
contributions as noted under "Employer Contributions" below.
Effective April 1, 1992, the Plan was amended and restated to, among
other things, (1) allow participants to change investment directions
quarterly and in 1% increments from semi-annually and 10%, (2) allow
participants to direct the investment of the Employers' retirement
contribution and (3) allow the payment of benefits as noted under
"Payment of Benefits" below.
Contributions
-------------
Employer Contributions:
The Employers may provide a non-service related retirement contribution
of 4% of annual compensation up to the Social Security wage base and
7% of annual compensation after that and a service related retirement
contribution of 1% of annual compensation for participants who have
completed five or more years of vesting service as of the last day of
the Plan year. Participants who complete 500 hours of service during
the Plan year and are participants on the last day of the Plan year
are eligible. The annual compensation of each participant taken into
account under the Plan is limited to the first $200,000 adjusted
annually based on the cost of living adjustment. The annual
compensation limit for the Plan year ended December 31, 1993, was
$235,840. Prior to the amendments effective January 1, 1992 there was
no service related retirement contribution.
F-6
<PAGE>
The Employers may provide a matching contribution of 100% of the
participant's voluntary contributions up to 3% of the participant's
total annual compensation.
Participant Voluntary Contributions:
A participant may elect to make a voluntary tax-deferred contribution of
1% to 6% of his or her annual compensation up to the maximum permitted
under Section 402(g) of the Internal Revenue Code adjusted annually
($8,994 at December 31, 1993). This voluntary tax-deferred
contribution may be limited by Section 401(k) of the Internal Revenue
Code and, if so limited, a participant may elect to make up the
difference through an additional voluntary non-tax-deferred cash
contribution.
A participant earning annually more than $64,245, $62,345 and $60,535,
for the years ended December 31, 1993, 1992 and 1991, respectively,
may be limited to voluntary contributions to the Plan of less than 6%
due to requirements by Section 401(k) of the Internal Revenue Code
based on the current levels of participant voluntary contributions.
Vesting
-------
A participant is fully and immediately vested for voluntary and rollover
contributions. A summary of vesting percentages in the Employers'
contributions follows:
<TABLE>
<CAPTION>
Years of Vested Service Percentage
------------------------- -----------
<S> <C>
Less than 3 years 0%
3 years 20
4 years 40
5 years 60
6 years 80
7 years 100
</TABLE>
Payment Of Benefits
-------------------
The full value of participants' accounts becomes payable upon retirement,
disability, or death. Upon termination of employment for any other
reason, participants' accounts, to the extent vested, become payable.
Those participants with vested account balances greater than $3,500
have the option to leave their accounts invested in the Plan until age
65. All benefits shall be paid as a lump-sum distribution. Those
participants holding greater than 100 shares of Employer Securities
will be distributed in shares. Prior to the amendment effective April
1, 1992, participants had the option to receive cash in lieu of
shares. Effective January 1, 1993, participants have the option to
have their benefit paid directly to an eligible retirement plan
specified by the participant.
A participant who is fully vested in his or her account and who has
participated in the Plan for a least five years may obtain an in-service
withdrawal from their account based on the percentage amounts designated
by the Plan. A participant may also request a hardship distribution due
to an immediate and heavy financial need based on the terms of the Plan.
Amounts Allocated Participants Withdrawn from the Plan
------------------------------------------------------
The vested portion of net assets available for plan benefits allocated to
participants withdrawn from the plan as of December 31, 1993, is set
forth below:
<TABLE>
<CAPTION>
Fixed
Limited Income Indexed World
Total Stock Fund Fund Fund Fund
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1993 $2,746,868 $ 964,773 $1,332,112 $ 280,308 $ 169,675
</TABLE>
F-7
<PAGE>
Forfeitures
-----------
Forfeitures are used to reduce the Employers' required contributions. In
1993, 1992 and 1991, forfeitures utilized amounted to $2,362,621,
$2,937,347 and $2,065,217, respectively.
Expenses and Unallocated Earnings
---------------------------------
Administrative expenses of the Plan may be paid from the Plan unless the
Employers elect to pay such expenses. Prior to July 1, 1992, expenses
of the Plan were paid by the Employers. Since July 1, 1992, the Plan
has been paying these expenses from earnings not allocated to
participants' accounts. Unallocated earnings being held as of December
31, 1993 and 1992 are set forth below:
<TABLE>
<CAPTION>
Limited Fixed
Stock Income Indexed World
Total Fund Fund Fund Fund
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
December 31, 1993 $974,367 $402,278 $289,298 $149,361 $133,430
December 31, 1992 $279,153 $ 93,288 $ 51,649 $ 67,801 $ 66,415
</TABLE>
Tax Determination
-----------------
The Plan obtained its latest determination letter on June 26, 1991, in
which the Internal Revenue Service stated that the Plan, as amended and
restated July 1, 1990, was in compliance with the applicable
requirements of the Internal Revenue Code. The Plan has been amended
subsequent to July 1, 1990, but no request for a new determination
letter has been made. However, the Employers and the Plan's tax counsel
believe that the Plan is currently designed and being operated in
compliance with the applicable requirements of the Internal Revenue
Code. Therefore, they believe that the Plan was qualified and the
related trust was tax exempt as of the financial statement date.
Accordingly, the following Federal income tax rules will apply to the
Plan:
Voluntary tax-deferred contributions made under the Plan by a
participant and contributions made by the Employers to participant
accounts are generally not taxable until such amounts are
distributed.
The participants are not subject to Federal income tax on interest,
dividends, or gains in their particular accounts until distributed.
The foregoing is only a brief summary of certain tax implications and
applies only to Federal tax regulations currently in effect.
(2) SUMMARY OF ACCOUNTING POLICIES
------------------------------
The Plan's financial statements are prepared on the accrual basis of
accounting. Assets of the Plan are valued at fair value. If available,
quoted market prices are used to value investments. The amounts for
investments that have no quoted market price are shown at their
estimated fair value, which is determined based on yields equivalent for
such securities or for securities of comparable maturity, quality, and
type as obtained from market makers. Guaranteed investment contracts
issued by insurance companies are valued at contract value. Contract
value represents contributions made under the contract, plus interest at
the contract rate, less Plan withdrawals and administration expenses
charged by the insurance companies. Master trusts are valued at the
total fair value of the investments held by the master trust.
Realized gains or losses on the distribution or sale of securities
represent the difference between the average cost of such securities
held and the fair value on the date of distribution or sale.
F-8
<PAGE>
(3) INVESTMENTS
-----------
Net unrealized appreciation, equal to the difference between cost and fair
value of all investments held at the applicable valuation dates, is
recognized in determining the value of each fund. The unrealized
appreciation as of December 31, 1993, 1992 and 1991 follows:
<TABLE>
<CAPTION>
Unrealized Appreciation
-----------------------
Limited Fixed
Stock Income Indexed World Balanced
Total Fund Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1993 $ 50,241,889 $ 48,376,318 $ - $ 1,598,430 $ 267,141 $ -
December 31, 1992 $119,696,266 $117,914,976 $ - $ 1,040,860 $ 740,430 $ -
December 31, 1991 $116,927,475 $115,270,437 $ - $ - $ - $ 1,657,038
</TABLE>
The following is a summary of the net gain on securities sold during the
periods ended December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
Limited Fixed
Stock Income Indexed World
Total Fund Fund Fund Fund
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Period Ended
December 31, 1993
Proceeds $47,420,114 $ 4,627,603 $29,287,560 $7,187,529 $6,317,422
Cost 43,346,137 1,260,434 29,287,560 6,550,603 6,247,540
----------- ----------- ----------- ---------- ----------
Net Realized Gain $ 4,073,977 $ 3,367,169 $ - $ 636,926 $ 69,882
=========== =========== =========== ========== ==========
Period Ended
December 31, 1992
Proceeds $33,651,152 $17,863,464 $13,045,550 $1,662,911 $1,079,227
Cost 18,926,743 3,242,034 13,045,550 1,586,632 1,052,527
----------- ----------- ----------- ---------- ----------
Net Realized Gain $14,724,409 $14,621,430 $ - $ 76,279 $ 26,700
=========== =========== =========== ========== ==========
Period Ended
December 31, 1991
Proceeds $ 2,328,032 $ 2,328,032 $ - $ - $ -
Cost 135,935 135,935 - - -
----------- ----------- ----------- ---------- ----------
Net Realized Gain $ 2,192,097 $ 2,192,097 $ - $ - $ -
=========== =========== =========== =========== ===========
</TABLE>
Contributions under the Plan are invested in one of four investment funds:
(1) The Limited Stock Fund, consisting of common stock of The Limited,
Inc., a Delaware corporation (the "Issuer") and parent company of the
Employers, (2) the Fixed Income Fund, which is invested in the Vanguard
Investment Contract Trust and other guaranteed investment contracts
issued by insurance companies, (3) the Indexed Fund, which is invested
in the Vanguard Indexed Fund, and (4) the World Fund, which is invested
in the Vanguard World Fund.
Prior to April 1, 1992, the Fixed Fund was invested through a master trust
consisting of guaranteed investment contracts issued by insurance
companies and the Plan provided for a Balanced Fund, which was invested
through a master trust consisting of stocks, bonds, notes, investment
contracts, cash and cash equivalents. Effective April 1, 1992, the
Balanced Fund was eliminated as an investment election when the Indexed
and World Funds were offered.
Participants' voluntary and Employers' contributions may be invested in any
one or more of the funds, at the election of the participant. There are
6,824 participants in the Limited Stock Fund, 14,351 in the Fixed Income
Fund, 3,524 in the Indexed Fund, and 3,151 in the World Fund at December
31, 1993.
F-9
<PAGE>
The Balanced Fund was held in The Limited, Inc. Balanced Fund Master Trust
(the "Balanced Fund Trust") along with other balanced funds of other
employee benefit plans of the Employers' affiliates. Effective April 1,
1992, the Balanced Fund Trust was terminated with the assets being sold
and cash distributed to the participating plans. The Plan's
participation in the Balanced Fund Trust assets was based on fair value
and monthly earnings in the Balanced Fund Trust were allocated based on
the respective Plan's investment as of the 15th of the month.
The Fixed Income Fund was held in The Limited Fixed Income Fund Master
Trust (the "Fixed Income Fund Trust") along with other fixed income
funds of other employee benefit plans of the Employers' affiliates.
Effective April 1, 1992, the Fixed Income Fund Trust was terminated and
the assets distributed to the respective participating plans. The Plan's
participation in the Fixed Income Fund Trust assets was based on fair
value and monthly earnings in the Fixed Income Fund Trust were allocated
based on the respective Plan's investment as of the 15th of the month in
each of the investment pools within the Fixed Income Fund Trust.
(4) PLAN ADMINISTRATION
-------------------
The Plan is administered by a Committee, the members of which are appointed
by the Board of Directors of the Employers.
(5) PLAN TERMINATION
----------------
Although the Employers have not expressed any intent, the Employers have
the right under the Plan to discontinue their contributions at any time.
The Limited, Inc. has the right any time, by action of its Board of
Directors, to terminate the Plan subject to provisions of ERISA. Upon
Plan termination or partial termination, participants will become fully
vested in their accounts.
F-10
