<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 30, 1999
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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, OH 43216
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 415-7000
-------------------
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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.50 Par Value Outstanding at March 24, 2000
---------------------------- -----------------------------
215,184,743 Shares
<PAGE>
THE LIMITED, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Information Regarding Filing of Form 10-Q/A 3
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income
Thirteen and Thirty-nine Weeks Ended
October 30, 1999 and October 31, 1998......................................... 4
Consolidated Balance Sheets
October 30, 1999, January 30, 1999 and October 31, 1998...................... 5
Consolidated Statements of Cash Flows
Thirty-nine Weeks Ended
October 30, 1999 and October 31, 1998........................................ 6
Notes to Consolidated Financial Statements......................................... 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition................................ 14
Part II. Other Information
Item 1. Legal Proceedings............................................................ 25
Item 6. Exhibits and Reports on Form 8-K............................................. 26
</TABLE>
2
<PAGE>
INFORMATION REGARDING FILING OF FORM 10-Q/A
Change in Accounting for Gift Certificates, Store Credits and Layaway Sales
The Company sells gift certificates in exchange for cash and issues store
credits in exchange for the value of returned merchandise. These gift
certificates and store credits do not expire and both can be redeemed toward the
purchase of merchandise in the future. The Company also offers a layaway sales
program, which allows customers to make payments over a period of time toward
the purchase of merchandise.
As discussed in Note 2 to the Consolidated Financial Statements, the Company has
changed its accounting for gift certificates, store credits and layaway sales.
The Company had historically recognized net receipts/(redemptions) from gift
certificates and store credits as a reduction/(increase) to general,
administrative and store operating expenses. Layaway sales were recognized upon
receipt of the initial payment. The Company now defers the recognition of
income on these transactions until the merchandise is delivered to the customer.
The Company has given retroactive effect to this accounting change by restating
its previously issued financial statements, including the Consolidated
Statements of Operations for the thirteen and thirty-nine weeks ended October
30, 1999 and October 31, 1998. In addition, the restatement resulted in changes
to the Consolidated Balance Sheets as of October 30, 1999, January 30, 1999 and
October 31, 1998, and to Notes 6 and 8 to the Consolidated Financial Statements.
Although the restatement has no impact on the cash flows of the Company, certain
classifications within the Consolidated Statements of Cash Flows for the
thirty-nine weeks ended October 30, 1999 and October 31, 1998 were adjusted to
reflect the restatement.
3
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
THE LIMITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $2,064,105 $1,999,862 $ 6,436,724 $ 6,091,040
Costs of goods sold and buying and
occupancy costs (1,393,856) (1,390,684) (4,385,460) (4,290,623)
----------- ----------- ----------- -----------
Gross income 670,249 609,178 2,051,264 1,800,417
General, administrative and store
operating expenses (576,055) (526,992) (1,726,464) (1,560,306)
Special and nonrecurring items, net - - (13,075) 1,740,030
----------- ----------- ----------- -----------
Operating income 94,194 82,186 311,725 1,980,141
Interest expense (20,412) (17,074) (57,361) (49,229)
Other income 9,655 12,561 37,495 44,309
Minority interest (6,077) (6,080) (28,566) (27,901)
Gain on sale of subsidiary stock 11,002 - 11,002 -
----------- ----------- ----------- -----------
Income before income taxes 88,362 71,593 274,295 1,947,320
Provision for income taxes 47,000 31,000 130,000 129,000
----------- ----------- ----------- -----------
Net income $ 41,362 $ 40,593 $ 144,295 $ 1,818,320
=========== =========== =========== ===========
Net income per share:
Basic $ 0.19 $ 0.18 $ 0.65 $ 7.40
=========== =========== =========== ===========
Diluted $ 0.18 $ 0.17 $ 0.62 $ 7.24
=========== =========== =========== ===========
Dividends per share $ 0.15 $ 0.13 $ 0.45 $ 0.39
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THE LIMITED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
October 30, January 30, October 31,
1999 1999 1998
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
------
Current assets:
Cash and equivalents $ 173,303 $ 870,317 $ 64,799
Accounts receivable 129,670 77,715 101,474
Inventories 1,420,899 1,119,670 1,568,996
Store supplies 97,679 98,797 95,169
Other 180,783 140,380 79,757
----------- ----------- -----------
Total current assets 2,002,334 2,306,879 1,910,195
Property and equipment, net 1,254,875 1,361,761 1,468,092
Restricted cash - 351,600 351,600
Deferred income taxes 172,241 48,782 70,517
Other assets 474,383 480,686 487,843
----------- ----------- -----------
Total assets $ 3,903,833 $ 4,549,708 $ 4,288,247
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 391,248 $ 289,947 $ 419,939
Current portion of long-term debt 200,000 100,000 100,000
Accrued expenses 601,009 661,784 632,151
Income taxes - 128,273 12,223
----------- ----------- -----------
Total current liabilities 1,192,257 1,180,004 1,164,313
Long-term debt 650,000 550,000 550,000
Other long-term liabilities 182,072 195,641 195,777
Minority interest 47,923 105,504 90,909
Contingent stock redemption agreement - 351,600 351,600
Shareholders' equity:
Common stock 189,727 180,352 180,352
Paid-in capital 162,574 157,214 149,819
Retained earnings 5,825,089 5,470,689 5,271,935
----------- ----------- -----------
6,177,390 5,808,255 5,602,106
Less: treasury stock, at average cost (4,345,809) (3,641,296) (3,666,458)
----------- ----------- -----------
Total shareholders' equity 1,831,581 2,166,959 1,935,648
----------- ----------- -----------
Total liabilities and shareholders' equity $ 3,903,833 $ 4,549,708 $ 4,288,247
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
THE LIMITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
--------------------------------------
October 30, October 31,
1999 1998
--------------- -------------
<S> <C> <C>
Operating activities:
Net income $ 144,295 $ 1,818,320
Impact of other operating activities on cash flows:
Sale of subsidiary stock, net of tax 2,198 -
Depreciation and amortization 208,348 214,146
Special and nonrecurring items, net 7,845 (1,705,030)
Minority interest, net of dividends paid 12,338 10,504
Changes in assets and liabilities:
Accounts receivable (57,651) (19,055)
Inventories (424,256) (602,993)
Accounts payable and accrued expenses 100,004 145,938
Income taxes (284,241) (111,890)
Other assets and liabilities (8,684) (62,605)
--------------- -------------
Net cash used for operating activities (299,804) (312,665)
--------------- -------------
Investing activities:
Net proceeds (expenditures) related to Easton real estate
investment (15,888) 33,658
Proceeds from sale of Galyan's common stock and property 170,200 -
Capital expenditures (288,993) (286,320)
Decrease in restricted cash 351,600 -
Proceeds from sale of interest in investee - 131,262
--------------- -------------
Net cash provided from (used for) investing activities 216,919 (121,400)
--------------- -------------
Financing activities:
Repayment of note payable (100,000) -
Proceeds from floating rate notes 300,000 -
Repurchase of common stock, including transaction costs (751,482) (43,095)
Repurchase of Intimate Brands, Inc. common stock (62,639) (106,046)
Dividends paid (98,268) (94,783)
Settlement of Limited Too and Abercrombie & Fitch intercompany
accounts 12,000 (47,649)
Dividend received from Limited Too 50,000 -
Stock options and other 36,260 44,042
--------------- -------------
Net cash used for financing activities (614,129) (247,531)
--------------- -------------
Net decrease in cash and equivalents (697,014) (681,596)
Cash and equivalents, beginning of year 870,317 746,395
--------------- -------------
Cash and equivalents, end of period $ 173,303 $ 64,799
=============== =============
</TABLE>
In 1999, noncash financing activities include a $25 million reduction to
retained earnings in connection with the spin-off of Limited Too (see Note 9).
In 1998, noncash financing activities included the addition of $1.766 billion
treasury stock as a result of the exchange of 40.5 million common shares of
Abercrombie & Fitch ("A&F") previously owned by the Company for 47.1 million
shares of common stock of the Company. Additional noncash financing activities
included a $5.6 million dividend effected by a pro rata spin-off of the
Company's remaining shares of A&F (see Note 9).
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
THE LIMITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
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. The consolidated
financial statements include the results of Abercrombie & Fitch ("A&F")
through May 19, 1998, when it was established as an independent company,
Limited Too ("Too") through August 23, 1999, when it was established as an
independent company, and Galyan's Trading Co. through August 31, 1999, when
a third party purchased a majority interest.
Investments in other entities (including joint ventures) where the Company
has the ability to significantly influence operating and financial
policies, including Galyan's Trading Co. for periods after August 31, 1999,
are accounted for on the equity method.
Certain amounts on previously reported financial statement captions have
been reclassified to conform with current period presentation.
The consolidated financial statements as of and for the thirteen and
thirty-nine week periods ended October 30, 1999 and October 31, 1998 are
unaudited and are presented pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, these consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto contained in the Company's 1998
Annual Report on Form 10-K, as amended. In the opinion of management, the
accompanying consolidated financial statements reflect all adjustments
(which are of a normal recurring nature except as discussed in Note 9)
necessary to present fairly the financial position and results of
operations and cash flows for the interim periods, but are not necessarily
indicative of the results of operations for a full fiscal year.
The consolidated financial statements as of and for the thirteen and
thirty-nine week periods ended October 30, 1999 and October 31, 1998
included herein have been reviewed by the independent public accounting
firm of PricewaterhouseCoopers LLP and the report of such firm follows the
Notes to Consolidated Financial Statements.
2. Change in Accounting
The Company sells gift certificates in exchange for cash and issues store
credits in exchange for the value of returned merchandise. These gift
certificates and store credits do not expire and both can be redeemed
toward the purchase of merchandise in the future. The Company also offers a
layaway sales program, which allows customers to make payments over a
period of time toward the purchase of merchandise.
The Company has changed its accounting for gift certificates, store credits
and layaway sales. The Company had historically recognized net
receipts/(redemptions) from gift certificates and store credits as a
reduction/(increase) to general, administrative and store operating
expenses. Layaway sales were recognized upon receipt of the initial
payment. The Company now defers the recognition of income on these
transactions until the merchandise is delivered to the customer.
The Company has given retroactive effect to this accounting change by
restating its previously issued financial statements beginning with fiscal
1996. The impact of the restatement on the Consolidated Statements of
Operations relates principally to gift certificates and store credits. The
impact for the thirteen and thirty-nine weeks ended October 30, 1999 and
October 31, 1998 is as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------------------------------------------------------------------------
October 30, 1999 October 31, 1998
------------------------------------------ -------------------------------------------
As Previously As As Previously As
Reported Restated Reported Restated
------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
General, administrative and store
operating expenses $ (585,110) $ (576,055) $ (535,757) $ (526,992)
Operating income 92,494 94,194 80,986 82,186
Minority interest (5,992) (6,077) (6,118) (6,080)
Income before income taxes 86,747 88,362 70,355 71,593
Provision for income taxes 46,000 47,000 31,000 31,000
Net income $ 40,747 $ 41,362 $ 39,355 $ 40,593
=========== =========== =========== ===========
Basic earnings per share $ 0.19 $ 0.19 $ 0.17 $ 0.18
Diluted earnings per share $ 0.18 $ 0.18 $ 0.17 $ 0.17
</TABLE>
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
--------------------------------------------------------------------------------------------
October 30, 1999 October 31, 1998
------------------------------------------ -------------------------------------------
As Previously As As Previously As
Reported Restated Reported Restated
------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
General, administrative and store $ (1,777,934) $ (1,726,464) $ (1,604,416) $ (1,560,306)
operating expenses
Operating income 280,525 311,725 1,953,741 1,980,141
Minority interest (27,003) (28,566) (26,659) (27,901)
Income before income taxes 244,658 274,295 1,922,162 1,947,320
Provision for income taxes 118,000 130,000 119,000 129,000
Net income $ 126,658 $ 144,295 $ 1,803,162 $ 1,818,320
============== ============== ============== ==============
Basic earnings per share $ 0.57 $ 0.65 $ 7.34 $ 7.40
Diluted earnings per share $ 0.54 $ 0.62 $ 7.18 $ 7.24
</TABLE>
In addition, the restatement resulted in changes to the Consolidated
Balance Sheets as of October 30, 1999, January 30, 1999 and October 31,
1998.
Although the restatement has no impact on the cash flows of the Company,
certain classifications within the Consolidated Statements of Cash Flows
for the thirty-nine weeks ended October 30, 1999 and October 31, 1998 were
adjusted to reflect the restatement.
In addition to the above, the Company reclassified certain distribution
costs related to Bath and Body Works from general, administrative and store
opening expense to buying and occupancy expense, consistent with the
Company's other businesses. Such amounts were $7.4 million and $7.6 million
for the thirteen weeks ended October 30, 1999 and October 31, 1998 and
$20.3 million and $17.7 million for the thirty-nine weeks ended October 30,
1999 and October 31, 1998.
3. Shareholders' Equity and Earnings Per Share
On June 3, 1999, the Company completed an issuer tender offer by purchasing
15 million shares of its common stock at $50 per share. Additionally, on
May 3, 1999, the Contingent Stock Redemption Agreement was rescinded,
making the $351.6 million in restricted cash available for general
corporate purposes. This cash and other available funds were used to
purchase shares under the issuer tender offer.
Weighted average common shares outstanding (thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------------ -------------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Common shares issued 379,454 379,454 379,454 379,454
Treasury shares (164,743) (152,141) (158,296) (133,693)
----------- ----------- ------------ -----------
Basic shares 214,711 227,313 221,158 245,761
Dilutive effect of stock options and
restricted shares 8,173 3,739 8,394 5,403
----------- ----------- ------------ -----------
Diluted shares 222,884 231,052 229,552 251,164
=========== =========== ============ ===========
</TABLE>
7
<PAGE>
The computation of earnings per diluted share excludes options to purchase
0.5 million and 4.9 million shares of common stock that were outstanding at
quarter-end for 1999 and 1998, because the options' exercise price was
greater than the average market price of the common shares.
4. Inventories
The fiscal year of the Company and its subsidiaries is comprised of two
principal selling seasons: Spring (the first and second quarters) and Fall
(the third and fourth quarters). Valuation of finished goods inventories
is based principally upon the lower of average cost or market determined on
a first-in, first-out basis, using the retail method. Inventory valuation
at the end of the first and third quarters reflects adjustments for
inventory markdowns and shrinkage estimates for the total selling season.
5. Property and Equipment, Net
Property and equipment, net, consisted of (thousands):
<TABLE>
<CAPTION>
October 30, January 30, October 31,
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Property and equipment, at cost $ 2,943,637 $ 3,014,084 $ 3,109,144
Accumulated depreciation and
amortization (1,688,762) (1,652,323) (1,641,052)
----------- ------------ -----------
Property and equipment, net $ 1,254,875 $ 1,361,761 $ 1,468,092
=========== ============ ===========
</TABLE>
6. Income Taxes
The provision for income taxes is based on the current estimate of the
annual effective tax rate, and for the thirteen and thirty-nine weeks ended
October 30, 1999, includes $13 million associated with the Galyan's Trading
Co. transaction (see Note 9). Income taxes paid during the thirty-nine
weeks ended October 30, 1999 and October 31, 1998 approximated $398.0
million and $203.5 million. Income tax assets of $16.3 million were
included in other current assets at October 30, 1999.
The Internal Revenue Service (IRS) has assessed the Company for additional
taxes for the years 1992 to 1994 relating to the undistributed earnings of
foreign affiliates for which the Company has provided deferred taxes. On
September 7, 1999, the United States Tax Court sustained the position of
the IRS with respect to the 1992 tax year. In connection with an appeal of
the Tax Court judgment, the Company made a $112 million payment of taxes
and interest for the years 1992 to 1998 that reduced deferred tax
liabilities. Management believes the ultimate resolution of this matter
will not have a material adverse effect on the Company's results of
operations or financial condition.
8
<PAGE>
7. Financing Arrangements
Unsecured long-term debt consisted of (thousands):
<TABLE>
<CAPTION>
October 30, January 30, October 31,
1999 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
7 1/2% Debentures due March 2023 $ 250,000 $ 250,000 $ 250,000
7 4/5% notes due May 2002 150,000 150,000 150,000
9 1/8% notes due February 2001 150,000 150,000 150,000
8 7/8% notes due August 1999 - 100,000 100,000
Floating rate notes 300,000 - -
---------- ---------- ----------
850,000 650,000 650,000
Less: current portion of long-term debt 200,000 100,000 100,000
---------- ---------- ----------
$ 650,000 $ 550,000 $ 550,000
========== ========== ==========
</TABLE>
In May 1999, the Company issued $300 million of floating rate notes,
consisting of three individual series (Series A, B and C) of $100 million
each. The notes are senior, unsecured obligations and bear interest based
on LIBOR, payable quarterly in arrears.
The notes were originally repayable as follows: Series A due May 2000,
Series B due November 2000 and Series C due May 2001. However, on November
22,1999, the Company redeemed the Series A and Series B notes.
Accordingly, these notes are included in the current portion of long-term
debt at October 30, 1999. The Company, at its option, may redeem the
remaining Series C notes (in their entirety) on any interest payment date,
at par plus accrued and unpaid interest, if any.
The Company maintains a $1 billion unsecured revolving credit agreement
(the "Agreement"), under which no amounts were outstanding at October 30,
1999. Borrowings outstanding under the Agreement, if any, are due
September 28, 2002. However, the revolving term of the Agreement may be
extended an additional two years upon notification by the Company on
September 29, 2001, subject to the approval of the lending banks. The
Agreement has several borrowing options, including interest rates which are
based on either the lender's "Base Rate," as defined, LIBOR, CD-based
options or at a rate submitted under a bidding process. Facilities fees
payable under the Agreement are based on the Company's long-term credit
ratings, and currently approximate 0.1% of the committed amount per annum.
The Agreement contains covenants relating to the Company's working capital,
debt and net worth.
The Agreement supports the Company's commercial paper program which is used
from time to time to fund working capital and other general corporate
requirements. No commercial paper was outstanding at October 30, 1999.
Up to $250 million of debt securities and warrants to purchase debt
securities may be issued under the Company's shelf registration statement.
The Company periodically enters into interest rate swap agreements with the
intent to manage interest rate exposure. At October 30, 1999 the Company
has an interest rate swap position of $100 million notional principal
amount outstanding. This 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.
Interest paid during the thirty-nine weeks ended October 30, 1999 and
October 31, 1998 approximated $64.1 million and $57.5 million.
9
<PAGE>
8. Segment Information
The Company identifies operating segments based on a business's operating
characteristics. Reportable segments were determined based on similar
economic characteristics, the nature of products and services, and the
method of distribution. The apparel segment derives its revenues from sales
of women's and men's apparel. The Intimate Brands segment derives its
revenues from sales of women's intimate and other apparel, and personal
care products and accessories. Sales outside the United States were
immaterial.
The Company and Intimate Brands Inc. ("IBI") have entered into intercompany
agreements for services that include merchandise purchases, capital
expenditures, real estate management and leasing, inbound and outbound
transportation and corporate services. These agreements specify that
identifiable costs be passed through to IBI and that other services-related
costs be allocated in accordance with the intercompany agreement. Costs are
passed through and allocated to the apparel businesses in a similar manner.
As a result of its spin-off, the operating results of Limited Too were
reclassified from the apparel segment to the "Other" category for all
periods presented. The operating results of Galyan's Trading Co. are
included in the "Other" category. However, subsequent to August 31, 1999,
the Company includes only its 40% share of Galyan's income or loss.
Segment information as of and for the thirteen and thirty-nine weeks ended
October 30, 1999 and October 31, 1998 follows (in thousands):
<TABLE>
<CAPTION>
Apparel Intimate Reconciling
1999 Businesses Brands Other (a) Items Total
- ----------------------- ------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Thirteen weeks:
Net sales $1,170,214 $ 814,158 $ 79,733 - $2,064,105
Intersegment sales 145,945 - - $(145,945) (b) -
Operating income (loss) 22,540 72,058 (404) - 94,194
Thirty-nine weeks:
Net sales 3,311,146 2,709,088 416,490 - 6,436,724
Intersegment sales 412,270 - - (412,270) (b) -
Operating income (loss) 12,476 322,690 (10,366) (13,075) (d) 311,725
Total assets 1,223,470 1,456,851 1,779,739 (556,227) (c) 3,903,833
</TABLE>
<TABLE>
<CAPTION>
Apparel Intimate Reconciling
1998 Business Brands Other (a) Items Total
- ----------------------- ------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Thirteen weeks:
Net sales $ 1,135,581 $ 708,985 $ 155,296 - $1,999,862
Intersegment sales 125,925 - - $ (125,925) (b) -
Operating income (loss) (1,120) 70,218 13,088 - 82,186
Thirty-nine weeks:
Net sales 3,166,145 2,354,561 570,334 - 6,091,040
Intersegment sales 330,225 - - (330,225) (b) -
Operating income (loss) (71,947) 280,053 32,005 1,740,030 (e) 1,980,141
Total assets 1,449,296 1,234,914 1,631,468 (27,431) (c) 4,288,247
</TABLE>
10
<PAGE>
(a) Included in the "Other" category are Henri Bendel, Limited Too (through
August 23, 1999), Galyan's Trading Co. (only 40% subsequent to August 31,
1999), A&F (through May 19, 1998), non-core real estate, and corporate,
none of which are significant operating segments.
(b) Represents intersegment sales elimination.
(c) Represents intersegment receivable/payable elimination.
(d) 1999 special and nonrecurring item: a $13.1 million second quarter charge
for transaction costs related to the Limited Too spin-off, which relates to
the "Other" category.
(e) 1998 special and nonrecurring items: 1) a $1.651 billion second quarter
tax-free gain on the split-off of A&F; 2) a $93.7 million first quarter
gain from the sale of the Company's remaining interest in Brylane; and 3) a
$5.1 million first quarter charge for severance and other associate
termination costs related to the closing of Henri Bendel stores. These
special items relate to the "Other" category.
9. Special Items
Effective August 31, 1999, an affiliate of Freeman, Spogli & Co.
(together with Galyan's Trading Co. management) purchased a 60%
interest in Galyan's Trading Co., with the Company retaining a 40%
interest. In addition, the Company sold certain property for $59
million to a third party, which then leased the property to Galyan's
under operating leases. The Company received total cash proceeds from
these transactions of approximately $170 million, as well as
subordinated debt and warrants of $20 million from Galyan's. The
transactions resulted in a third quarter pretax gain on sale of
subsidiary stock of $11 million, offset by a $6 million provision for
taxes. In addition, the revised tax basis of the Company's remaining
investment in Galyan's resulted in an additional $7 million deferred
tax expense.
On July 15, 1999, the Company's Board of Directors approved a formal
plan to spin-off Limited Too. The record date for the spin-off was
August 11, 1999, with The Limited, Inc. shareholders receiving one
share of Too, Inc. (successor company to Limited Too) common stock for
every seven shares of The Limited common stock held on that date. The
spin-off was completed on August 23, 1999. The Company recorded the
spin-off by reducing retained earnings by $25 million, which
represents the carrying value of the net assets underlying the common
stock distributed. As part of the transaction, the Company received
from Limited Too a $50 million dividend and a $12 million repayment of
advances. During the second quarter of 1999, the Company recorded a
$13.1 million special and nonrecurring charge for transaction costs
related to the spin-off.
On May 19, 1998, the Company completed a tax-free exchange offer to
establish A&F as an independent company. A total of 47.1 million
shares of the Company's common stock were exchanged at a ratio of .86
of a share of A&F common stock for each Limited share tendered. In
connection with the exchange, the Company recorded a $1.651 billion
tax-free gain. This gain was measured based on the $43 5/8 per share
market value of the A&F common stock at the expiration date of the
exchange offer. In addition, on June 1, 1998 a $5.6 million dividend
was effected through a pro rata spin-off to shareholders of the
Company's remaining 3.1 million A&F shares.
During the first quarter of 1998, the Company recognized a pretax gain
of $93.7 million from the sale of 2.57 million shares at $51 per
share, representing its remaining interest in Brylane, Inc. This gain
was partially offset by a $5.1 million pretax charge for severance and
other associate termination costs related to the closing of five of
six Henri Bendel stores. The severance charge was paid in 1998.
As a result of a plan adopted in connection with a 1997 review of the
Company's retail businesses and investments as well as implementation
of initiatives intended to promote and strengthen the Company's
various retail brands (including closing businesses, identification
and disposal of non-core assets and identification of store locations
not
11
<PAGE>
consistent with a particular brand), the Company recognized special
and nonrecurring charges of $276 million during the fourth quarter of
1997, which included store closing and lease termination liabilities
of $107 million, of which $18 million and $32 million were paid in
1999 and 1998, leaving a $57 million liability at October 30, 1999.
The $57 million liability relates principally to future payments and
estimated settlement amounts for store closings and downsizings and
will continue until final payments to landlords are made, currently
scheduled through the year 2016. Unless settlements with landlords
occur before the end of such lease periods, completion will run the
full lease term. In determining the provision for lease obligations,
the Company considered the amount of time remaining on each store's
lease and estimated the amount necessary for either buying out the
lease or continuing rent payments through lease expiration.
No accruals related to these charges were reversed or recorded in
operating income during 1999 or 1998.
12
<PAGE>
Report of Independent Accountants
To the Board of Directors and
Shareholders of
The Limited, Inc.
We have reviewed the accompanying condensed consolidated balance sheets of The
Limited, Inc. and Subsidiaries (the "Company") as of October 30, 1999 and
October 31, 1998, and the related condensed consolidated statements of income
for each of the thirteen and thirty-nine week periods ended October 30, 1999 and
October 31, 1998 and the condensed consolidated statements of cash flows for the
thirty-nine week periods ended October 30, 1999 and October 31, 1998. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 30, 1999, and the
related consolidated statements of income, shareholders' equity, and cash flows
for the year then ended (not presented herein); and in our report dated February
23, 1999, except for the information in Note 2 as to which the date is February
16, 2000, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of January 30, 1999, is fairly stated in
all material respects in relation to the consolidated balance sheet from which
it has been derived.
The condensed consolidated financial statements as of October 30, 1999 and
October 31, 1998 and for each of the thirteen and thirty-nine week periods ended
October 30, 1999 and October 31, 1998 have been restated as described in Note
2.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
November 16, 1999, except for the information in Note 2 as to which the date is
February 16, 2000.
13
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
CHANGE IN ACCOUNTING FOR GIFT CERTIFICATES, STORE CREDITS AND LAYAWAY SALES
The Company sells gift certificates in exchange for cash and issues store
credits in exchange for the value of returned merchandise. These gift
certificates and store credits do not expire and both can be redeemed toward the
purchase of merchandise in the future. The Company also offers a layaway sales
program, which allows customers to make payments over a period of time toward
the purchase of merchandise.
As discussed in Note 2 to the Consolidated Financial Statements, the Company has
changed its accounting for gift certificates, store credits and layaway sales.
The Company had historically recognized net receipts/(redemptions) from gift
certificates and store credits as a reduction/(increase) to general,
administrative and store operating expenses. Layaway sales were recognized upon
receipt of the initial payment. The Company now defers the recognition of income
on these transactions until the merchandise is delivered to the customer.
The Company has given retroactive effect to this accounting change by restating
its previously issued financial statements beginning with fiscal 1996. The
change in accounting results in a shift in the pattern of quarterly earnings
from the fourth quarter (when receipts exceed redemptions) to the first and
second quarters (when redemptions exceed receipts). Accordingly, net income for
the thirteen weeks ended October 30, 1999 and October 31, 1998 was increased
from the previously reported amounts by $0.6 million, or $0.00 per share, and
$1.2 million, or $0.00 per share. Net income for the thirty-nine weeks ended
October 30, 1999 and October 31, 1998 was increased from the previously reported
amounts by $17.6 million, or $0.08 per share, and $15.2 million, or $0.06 per
share.
RESULTS OF OPERATIONS
Net sales for the third quarter of 1999 increased 3% to $2.064 billion from
$2.000 billion in 1998. Operating income increased 14.6% to $94.2 million from
$82.2 million in 1998, primarily the result of improved performances at the
Company's apparel businesses. Net income was $41.4 million in 1999 and $40.6
million in 1998, and earnings per share was $0.18 in 1999 and $0.17 in 1998. In
the third quarter of 1999, the Company recognized an $11.0 million pretax gain
on the third party purchase of a 60% majority interest in Galyan's Trading Co.
See the "Other Data" section that follows for further discussion of this item
and its impact on third quarter earnings.
Third quarter business highlights include the following:
. The apparel businesses continued their 1999 progress, with a $23.7 million
improvement in operating income for the quarter. Merchandise margins were
up and buying and occupancy expenses were leveraged by strong sales growth
and closing of low productivity stores. Comparable store sales increases of
11% at Lerner, 7% at Lane Bryant, 9% at Limited Stores and 8% at Structure,
also contributed to the improved third quarter performance.
. Intimate Brands, Inc. ("IBI") reported earnings per diluted share of $0.15
in both 1999 and 1998 (adjusted for the 5% stock dividend declared June 22,
1999). Operating income was $72.1 million in 1999 compared to $70.2 million
in 1998 and net income was $38.4 million in 1999 versus $39.5 million in
1998. Comparable store sales increases of 16% at Victoria's Secret Stores
and 10% at Bath & Body Works were partially offset by a 5% sales decrease
at Victoria's Secret Catalogue.
. The Company completed the spin-off of Limited Too on August 23, 1999, and a
third party purchased a 60% majority interest in Galyan's Trading Co.
effective August 31, 1999.
Net sales for the thirty-nine weeks ended October 30, 1999 were $6.437 billion,
an increase of 6% from $6.091 billion in 1998. Operating income was $311.7
million in 1999 and $1.980 billion in 1998. Net income was $144.3 million in
1999 and $1.818 billion in 1998, and earnings per share was $0.62 in 1999 and
$7.24 in 1998. In 1999, the Company recognized an $11 million third quarter
pretax gain on the third party purchase of a 60% majority interest in Galyan's
Trading Co., and a $13.1 million second quarter charge for transaction costs
related to the Limited Too spin-off. In 1998, the Company recognized a $1.651
billion second quarter gain from the split-off of A&F, a $93.7 million first
quarter gain from the sale of the Company's remaining interest in Brylane, Inc.,
and a $5.1 million first quarter charge for severance and other associate
termination costs at Henri Bendel. See the "Special Items" and "Other Data"
sections that follow for further discussion of these items and their impact on
year-to-date earnings.
14
<PAGE>
Financial Summary
- -----------------
The following summarized financial and statistical data compares the thirteen
week and thirty-nine week periods ended October 30, 1999 to the comparable 1998
periods:
<TABLE>
<CAPTION>
Third Quarter Year - to - Date
---------------------------------------- ----------------------------------------------
1999 1998 Change 1999 1998 Change
----------- ----------- ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales (millions):
Express $ 361 $ 357 1% $ 965 $ 910 6%
Lerner New York 233 218 7% 689 636 8%
Lane Bryant 213 209 2% 673 649 4%
Limited Stores 177 181 (2%) 508 522 (3%)
Structure 147 140 5% 409 393 4%
Other (principally Mast) 39 31 N/M 67 56 N/M
----------- ----------- ----------- ----------- ------------ --------------
Total apparel businesses $1,170 $1,136 3% $3,311 $3,166 5%
----------- ----------- ----------- ----------- ------------ --------------
Victoria's Secret Stores $ 423 $ 352 20% $1,331 $1,127 18%
Victoria's Secret Catalogue 124 130 (5%) 543 531 2%
Bath & Body Works 260 218 19% 820 677 21%
Other 7 9 N/M 15 20 N/M
----------- ----------- ----------- ----------- ------------ --------------
Total Intimate Brands $ 814 $ 709 15% $2,709 $2,355 15%
----------- ----------- ----------- ----------- ------------ --------------
Henri Bendel 11 10 10% 29 30 (3%)
Galyan's Trading Co. (a) 27 48 (44%) 165 130 27%
Limited Too (a) 42 97 (57%) 223 254 (12%)
Abercrombie & Fitch (a) - - - - 156 (100%)
----------- ----------- ----------- ----------- ------------ --------------
Total net sales $2,064 $2,000 3% $6,437 $6,091 6%
=========== =========== =========== =========== ============ ==============
Operating Income
(millions):
Apparel businesses $ 23 $ (1) N/M $ 12 $ (72) 117%
Intimate Brands 72 70 3% 323 280 15%
Other (1) 13 (108%) (10) 32 (131%)
----------- ----------- ----------- ----------- ------------ --------------
Subtotal 94 82 15% 325 240 35%
Special and nonrecurring
items - - - (13) (b) 1,740 (c) (101%)
----------- ----------- ----------- ----------- ------------ --------------
Total operating income $ 94 $ 82 15% $ 312 $1,980 (84%)
=========== =========== =========== =========== ============ ==============
</TABLE>
(a) Limited Too was spun-off on August 23, 1999, and a third party purchased a
60% majority interest in Galyan's effective August 31, 1999. The
Abercrombie & Fitch business was split-off effective May 19, 1998 via a
tax-free exchange offer. Results up to these dates are included in the
consolidated financial statements.
(b) 1999 special and nonrecurring item: a $13.1 million second quarter charge
for Limited Too spin-off transaction costs, which relates to the "Other"
category.
(c) 1998 special and nonrecurring items: 1) a $1.651 billion second quarter
tax-free gain on the split-off of A&F; 2) a $93.7 million first quarter
gain from the sale of the Company's remaining interest in Brylane; and 3) a
$5.1 million first quarter charge for severance and other associate
termination costs related to the closing of Henri Bendel stores. These
special items relate to the "Other" category.
N/M Not meaningful
15
<PAGE>
<TABLE>
<CAPTION>
Third Quarter Year - to - Date
---------------------------------------- ---------------------------------------------
1999 1998 Change 1999 1998 Change
----------- ---------- ------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Comparable Store Sales:
Express 3% 15% 9% 17%
Lerner New York 11% (1%) 13% 7%
Lane Bryant 7% (2%) 8% 4%
Limited Stores 9% 7% 8% 1%
Structure 8% (2%) 7% (7%)
----------- ---------- ------------ -------------
Total apparel businesses 7% 5% 9% 6%
----------- ---------- ------------ -------------
Victoria's Secret Stores 16% 4% 14% 4%
Bath & Body Works 10% 6% 11% 3%
----------- ---------- ------------ -------------
Total Intimate Brands 13% 4% 13% 3%
----------- ---------- ------------ -------------
Henri Bendel 13% (2%) 9% (15%)
Galyan's Trading Co. (a) N/M 5% 9% 3%
Limited Too (a) N/M 11% 9% 17%
Abercrombie & Fitch (a) - - - 48%
----------- ---------- ------------ -------------
Total other businesses 13% 8% 9% 17%
----------- ---------- ------------ -------------
Total comparable store sales
increase 9% 5% 10% 6%
=========== ========== ============ =============
Store Data:
Retail sales increase (decrease)
attributable to net new and
remodeled (closed) stores:
Apparel businesses (4%) (3%) (4%) (2%)
Intimate Brands 7% 7% 8% 8%
Retail Sales per average selling
square foot:
Apparel businesses $ 64 $ 57 11% $ 180 $ 158 13%
Intimate Brands $ 111 $ 101 10% $ 357 $ 327 9%
Retail sales per average store
(thousands):
Apparel businesses $ 371 $ 333 11% $1,051 $ 925 14%
Intimate Brands $ 338 $ 312 8% $1,091 $1,013 8%
Average store size at end of
quarter (selling square feet):
Apparel businesses 5,831 5,845 0%
Intimate Brands 3,052 3,080 (1%)
Retail selling square feet at end of
quarter (thousands):
Apparel businesses 17,626 19,173 (8%)
Intimate Brands 6,264 5,716 10%
Number of Stores:
Beginning of period 5,358 5,441 5,382 5,640
Opened 81 72 224 195
Disposal of Galyan's, Limited Too
and A&F (a) (353) - (353) (159)
Closed (25) (51) (192) (214)
----------- ---------- ------------ -------------
End of period 5,061 5,462 5,061 5,462
=========== ========== ============ =============
</TABLE>
(a) Limited Too was spun-off on August 23, 1999, and a third party purchased a
60% majority interest in Galyan's effective August 31, 1999. The
Abercrombie & Fitch business was split-off effective May 19, 1998 via a
tax-free exchange offer. Results up to these dates are included in the
consolidated financial statements.
N/M Not meaningful
16
<PAGE>
<TABLE>
<CAPTION>
Number of Stores Selling Sq. Ft. (thousands)
------------------------------------------------- ------------------------------------------------
October 30, October 31, October 30, October 31,
1999 1998 Change 1999 1998 Change
------------- ---------------- -------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Express 690 706 (16) 4,440 4,535 (95)
Lerner New York 624 677 (53) 4,798 5,195 (397)
Lane Bryant 695 770 (75) 3,377 3,740 (363)
Limited Stores 487 593 (106) 2,989 3,577 (588)
Structure 511 534 (23) 2,022 2,126 (104)
------------- ---------------- -------------- --------------- --------------- -------------
Total apparel businesses 3,007 3,280 (273) 17,626 19,173 (1,547)
------------- ---------------- -------------- --------------- --------------- -------------
Victoria's Secret Stores 887 812 75 3,924 3,662 262
Bath & Body Works 1,166 1,044 122 2,340 2,054 286
------------- ---------------- -------------- --------------- --------------- -------------
Total Intimate Brands 2,053 1,856 197 6,264 5,716 548
------------- ---------------- -------------- --------------- --------------- -------------
Henri Bendel 1 1 - 35 35 -
Galyan's Trading Co. (a) - 14 (14) - 947 (947)
Limited Too (a) - 311 (311) - 983 (983)
------------- ---------------- -------------- --------------- --------------- -------------
Total stores and selling
square feet 5,061 5,462 (401) 23,925 26,854 (2,929)
============= ================ ============== =============== =============== =============
</TABLE>
(a) See description under table on previous page.
Net Sales
---------
Net sales for the third quarter of 1999 increased 3% to $2.064 billion from
$2.000 billion in 1998. A 9% comparable store sales increase was partially
offset by: 1) the loss of Limited Too sales following the August 23, 1999
spin-off; 2) the exclusion of Galyan's sales following the third party
purchase of a 60% majority interest effective August 31, 1999; and 3) the
closure of stores in the apparel segment.
At the apparel businesses, net sales for the third quarter of 1999
increased 3% to $1.170 billion from $1.136 billion in 1998. The overall 7%
increase in comparable store sales at the apparel businesses was partially
offset by a net closure of 273 stores.
At IBI, net sales for the third quarter of 1999 increased 15% to $814.2
million from $709.0 million in 1998, primarily due to a 13% comparable
store sales increase. The balance of the increase was due to the net
addition of 197 new stores.
Year-to-date net sales increased 6% to $6.437 billion from $6.091 billion
in 1998. A 10% comparable store sales increase was partially offset by: 1)
the loss of A&F sales following the May 19, 1998 split-off; 2) the loss of
Limited Too sales following the August 23, 1999 spin-off; and 3) the
closure of stores in the apparel segment.
Gross Income
------------
The third quarter gross income rate (expressed as a percentage of sales)
increased to 32.5% in 1999 from 30.5% in 1998. The gross income rate
increased 1.6% at the apparel businesses, primarily due to an increase in
merchandise margin rate and buying and occupancy expense leverage. IBI's
gross income rate increased to 38.8% from 37.7%, primarily due to an
increase in merchandise margin rate and positive buying and occupancy
expense leverage (particularly at Victoria's Secret Stores).
The 1999 year-to-date gross income rate increased 2.3% to 31.9% in 1999
from 29.6% in 1998, attributable to an increase in merchandise margin rate
at both the apparel businesses and IBI and
17
<PAGE>
positive buying and occupancy expense leverage.
General, Administrative and Store Operating Expenses
- ----------------------------------------------------
The third quarter general, administrative and store operating expense rate
(expressed as a percentage of sales) increased to 27.9% in 1999 from 26.4% in
1998, primarily due to an increase at IBI. The rate increase at IBI was
primarily due to an increase in national advertising investment for the
Victoria's Secret brand and increased training and merchandising costs at Bath &
Body Works. The rate was essentially flat at the apparel businesses, as
investments in brand building activities, particularly at Express, were offset
by savings at Limited Stores and Structure.
The 1999 year-to-date general, administrative and store operating expense rate
increased to 26.8% from 25.6% in 1998. In addition to the reasons discussed
above, the rate increase was driven by investment in infrastructure and by
relocation costs and higher operating costs associated with moving the
Victoria's Secret's beauty business to New York City.
Special Items
- -------------
Effective August 31, 1999, a third party purchased a 60% majority interest in
Galyan's Trading Co. As a result, the Company recorded a related pretax gain on
sale of subsidiary stock of $11 million, offset by a $6 million provision for
taxes. In addition, the revised tax basis of the Company's remaining investment
in Galyan's resulted in an additional $7 million deferred tax expense (see Note
9 to the Consolidated Financial Statements).
During the second quarter of 1999, the Company recognized a $13.1 million
special and nonrecurring charge for transaction costs related to the Limited Too
spin-off (see Note 9 to the Consolidated Financial Statements).
On May 19, 1998, the Company completed a tax-free exchange offer to establish
A&F as an independent company. A total of 47.1 million shares of the Company's
common stock were exchanged at a ratio of .86 a share of A&F common stock for
each Limited share tendered. In connection with the exchange, the Company
recorded a $1.651 billion tax-free gain. This gain was measured based on the $43
5/8 per share market value of the A&F common stock at the expiration date of the
exchange offer.
During the first quarter of 1998, the Company recognized a pretax gain of $93.7
million from the sale of 2.57 million shares at $51 per share, representing its
remaining interest in Brylane, Inc. This gain was partially offset by a $5.1
million pretax charge for severance and other associate termination costs
related to the closing of five of six Henri Bendel stores. The severance charge
was paid in 1998.
As a result of a plan adopted in connection with a 1997 review of the Company's
retail businesses and investments as well as implementation of initiatives
intended to promote and strengthen the Company's various retail brands
(including closing businesses, identification and disposal of non-core assets
and identification of store locations not consistent with a particular brand),
the Company recognized special and nonrecurring charges of $276 million during
the fourth quarter of 1997. These charges included store closing and lease
termination liabilities of $107 million, of which $18 million and $32 million
were paid in 1999 and 1998, leaving a $57 million liability at October 30,
1999.
The remaining $57 million liability relates principally to future payments and
estimated settlement amounts for store closings and downsizings and will
continue until final payments to landlords are made, currently scheduled through
the year 2016. Unless settlements with landlords occur before the end of such
lease periods, completion will run the full lease term. In determining the
provision for lease obligations, the Company considered the amount of time
remaining on each store's lease and estimated the amount necessary for either
buying out the lease or continuing rent payments through lease expiration.
18
<PAGE>
No accruals related to these charges were reversed or recorded in operating
income during 1999 or 1998.
The $276 million charge taken in 1997 also included $86 million of impairment
charges, which reduced depreciation by approximately $18 million in fiscal year
1998 and will have a similar impact in fiscal year 1999.
Operating Income
- ----------------
The third quarter operating income rate (expressed as a percentage of sales)
increased to 4.6% in 1999 from 4.1% in 1998. The improvement was driven by the
gross income rate increase of 2.0%, more than offsetting the increase in
general, administrative and store operating expense rate of 1.5%. The entire
operating income increase resulted from improvements at the apparel businesses.
The year-to-date operating income rate was 4.8% in 1999, including $(13.1)
million, or (.2%), in special and nonrecurring expense. The year-to-date
operating income rate was 32.5% in 1998, including $1.651 billion, or 28.6%, in
special and nonrecurring income. Excluding special and nonrecurring items, the
improvement in the operating income rate from 3.9% to 5.0% was driven by the
gross income rate increase of 2.3%, more than offsetting the increase in the
general, administrative and store operating expense rate of 1.2%. The rate
improvement was driven by higher margins at the apparel businesses, while IBI
was able to maintain its 1998 operating income rate of 11.9%.
Interest Expense
- ----------------
<TABLE>
<CAPTION>
Third Quarter Year-to-Date
---------------------------- ------------------------------
1999 1998 1999 1998
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Average borrowings (millions) $1,079 $ 840 $ 967 $ 776
Average effective interest rate 7.57% 8.12% 7.90% 8.46%
</TABLE>
Compared to 1998, interest expense increased $3.4 million in the third quarter
and $8.1 million year-to-date. The increases were due primarily to increased
borrowings, partially offset by a lower average effective interest rate.
Other Income
- ------------
Compared to 1998, other income decreased $2.9 million in the third quarter and
$6.8 million year-to-date. The decreases were due to lower average invested cash
balances, principally due to the $750 million share repurchase, and to lower
interest rates on 1999 balances.
Other Data
- ----------
The Company recorded special items in 1999 and 1998 that impacted the
comparability of the Company's earnings per share data and are more fully
described in the "Special Items" section herein and in Note 9 to the
Consolidated Financial Statements.
The information included in this section is not intended to be presented in
accordance with SEC guidelines for pro forma financial information but is
provided to assist in investors' understanding of the Company's results of
operations.
Excluding special items in both years and reflecting the A&F split-off and
Limited Too spin-off as if they had occurred at the beginning of 1998, third
quarter net income increased 14% to $41.4 million from $36.3 million in 1998,
and earnings per share increased 20% to $0.18 from $0.15. For the thirty-nine
weeks ended October 30, 1999 and October 31, 1998, net income
19
<PAGE>
increased 47% to $150.6 million from $102.2 million in 1998 and earnings per
share increased 48% to $0.65 from $0.44. The special items excluded were as
follows:
. In 1999, an $11.0 million third quarter pretax gain, related to the third
party purchase of a 60% majority interest in Galyan's Trading Co., was offset
by a $6.0 million provision for taxes on the gain. In addition, the revised
tax basis of the Company's remaining Galyan's investment resulted in an
additional $7.0 million deferred tax expense.
. In 1999, a $13.1 million second quarter charge for transaction costs related
to the Limited Too spin-off to shareholders of record on August 11, 1999.
. In 1998, a $1.651 billion second quarter tax-free gain on the split-off of
A&F, a $93.7 million first quarter gain from the sale of the Company's
remaining interest in Brylane and a $5.1 million first quarter charge for
severance and other associate termination costs related to the closing of
Henri Bendel stores.
FINANCIAL CONDITION
A more detailed discussion of liquidity, capital resources and capital
requirements follows.
Liquidity and Capital Resources
- -------------------------------
Cash provided from operating activities, commercial paper backed by funds
available under the committed long-term credit agreement and the Company's
capital structure continue to provide the capital resources to support
operations, including projected growth, seasonal requirements and capital
expenditures. A summary of the Company's working capital position and
capitalization follows (thousands):
<TABLE>
<CAPTION>
October 30, January 30, October 31,
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Working capital $ 810,077 $1,126,875 $ 745,882
=========== =========== ===========
Capitalization:
Long-term debt $ 650,000 $ 550,000 $ 550,000
Shareholders' equity 1,831,581 2,166,959 1,935,648
----------- ----------- -----------
Total capitalization $2,481,581 $2,716,959 $2,485,648
=========== =========== ===========
Additional amounts available under
long-term credit agreements $1,000,000 $1,000,000 $1,000,000
=========== =========== ===========
</TABLE>
In addition, the Company may offer up to $250 million of debt securities and
warrants to purchase debt securities under its shelf registration statement.
Net cash used for operating activities was $299.8 million for the thirty-nine
weeks ended October 30, 1999 versus $312.7 million used for operating activities
last year. Significant uses of cash in both years relate to the growth of
inventories for the Fall selling seasons and the payment of tax accruals related
to the fourth quarter of the prior year. The cash used for inventories was lower
in 1999 than 1998 because of lower Fall inventories at the apparel businesses,
including the impact of closed stores. Additionally, in the third quarter of
1999, the Company made a $112 million payment of taxes and interest related to
an Internal Revenue Service assessment (see Note 6 to the Consolidated Financial
Statements).
Investing activities in 1999 included the rescission of the Contingent Stock
Redemption Agreement; and $170.2 million in proceeds from the third party
purchase of a 60% majority
20
<PAGE>
interest in Galyan's Trading Co. and the sale of related property; and capital
expenditures, primarily for new and remodeled stores. In 1998, major investing
activities included capital expenditures and $131.2 million in proceeds from the
sale of the Company's remaining investment in Brylane, Inc.
Financing activities in 1999 included proceeds of $300 million from floating
rate notes issued in May 1999 as well as the repayment of $100 million of term
debt in August 1999. Additionally, the rescission of the Contingent Stock
Redemption Agreement made $351.6 million in restricted cash available for
general corporate purposes. This cash and other available funds were used to
repurchase shares under the self-tender, which was funded June 14, 1999. A total
of 15 million shares of the Company's common stock were repurchased at $50 per
share, resulting in a cash outflow of $750 million plus transaction costs. Cash
used for financing activities in 1999 also reflected the IBI stock repurchase
initiated during January 1999. During 1999, IBI repurchased 1.6 million shares
from its public shareholders for $62.6 million. Additionally, IBI repurchased
8.6 million shares from The Limited at the same weighted average per share
price, with no net cash flow impact to The Limited. Financing activities also
reflected a $50 million dividend and a $12 million repayment of advances to
Limited Too in connection with the August 23, 1999 spin-off. In addition,
financing activities included an increase in the quarterly dividend from $0.13
per share to $0.15 per share, which was partially offset by a lower number of
outstanding shares.
On November 22, 1999, the Company redeemed the $100 million Series A floating
rate notes originally repayable in May 2000, and the $100 million Series B
floating rate notes originally repayable in November 2000.
Capital Expenditures
- --------------------
Capital expenditures totaled $289.0 million for the thirty-nine weeks ended
October 30, 1999, compared to $286.3 million for the same period in 1998. The
Company anticipates spending $400 to $420 million for capital expenditures in
1999, of which $280 to $300 million will be for new stores and for remodeling of
and improvements to existing stores. These amounts include capital expenditures
related to Galyan's and Limited Too prior to their divestiture.
The Company expects that 1999 capital expenditures will be funded primarily by
net cash provided by operating activities.
21
<PAGE>
INFORMATION SYSTEMS AND "YEAR 2000" COMPLIANCE
The Year 2000 issue arises primarily from computer programs, commercial systems
and embedded chips that will be unable to properly interpret dates beyond the
year 1999. The Company utilizes a variety of proprietary and third party
computer technologies - both hardware and software - directly in its businesses.
The Company also relies on numerous third parties and their systems' ability to
address the Year 2000 issue. The Company's critical information technology (IT)
functions include point-of-sale equipment, merchandise distribution, merchandise
and non-merchandise procurement, credit card and banking services,
transportation, and business and accounting management systems. The Company is
using both internal and external resources to complete its Year 2000
initiatives.
Readiness
- ---------
In order to address the Year 2000 issue, the Company established a program
management office to oversee, monitor and coordinate the company-wide Year 2000
effort. This office has developed and is implementing a Year 2000 plan. The
implementation includes five stages:
. awareness, which includes identifying risks and conducting an education
program regarding Year 2000 issues
. assessment, which primarily includes establishing project resources,
developing a Year 2000 renovation strategy, completing a company-wide
inventory of information technology and determining the necessary training
and testing facility requirements
. renovation/development, which includes the analysis of existing information
systems, the design of remediation activities and the coding of necessary
remedies
. validation, which primarily includes system testing
. implementation, which includes the placement of renovated systems "in
production" and training end users
There are four areas of focus:
. Renovation of legacy systems. The Company's ten operating businesses have
completed all five stages of Year 2000 implementation for renovation of
legacy systems.
. Installation of new software packages to replace selected legacy systems at
five of the Company's ten operating businesses. Replacement of these
significant legacy systems with new software packages is complete.
22
<PAGE>
. Assessment of Year 2000 readiness at key vendors and suppliers. A vast
network of vendors, suppliers and service providers located both within and
outside the United States provide the Company with merchandise for resale,
supplies for operational purposes and services. The Company identified key
vendors, suppliers and service providers, and sent Year 2000 surveys to 400
of these vendors to determine their Year 2000 status. A total of 370 vendors
responded and indicated that they will be Year 2000 compliant. Based upon the
results of the surveys, the Company selected twenty-one vendors for on-site
visits to further assess the vendors' progress and estimated compliance
dates. Each of the Company's businesses has considered the results of the
vendor surveys and on-site visits during the development of its contingency
plan.
. Evaluating facilities and distribution equipment with embedded computer
technology. The Company uses various facilities and distribution equipment
with embedded computer technology, such as conveyors, elevators, and security
systems, fire protection systems and energy management systems. All our
remediation efforts are complete.
Cost to Address the Year 2000 Issue
- -----------------------------------
Total expenditures incurred from 1997 through October 30, 1999 related to
remediation, testing, conversion, replacement and upgrading system applications
were $80 million, and incremental expenses totaled $15 million. Total costs
included expenditures associated with the development of an internal testing
center, which has enabled the Company to perform comprehensive testing of newly
renovated systems by processing transactions as if they had occurred in the Year
2000. This internal testing process was used to develop the risk and cost
estimates described in the "Information Systems and `Year 2000' Compliance"
section of the Form 10-Q.
In addition to the previously described costs, significant internal payroll
costs (not separately identified) were incurred relating to the Company's Year
2000 initiatives. These payroll costs include the efforts by approximately 500
employees of the Company's information technology division, representing
approximately three-fourths of the total information technology budgeted hours
for the Year 2000 project. In addition, the Company engaged external consultants
to assist it with program management and new software package implementation,
which represent the remaining hours. The Company has allocated approximately 15%
of its information technology budget for the period from Fall 1997 through Fall
1999 toward Year 2000 remediation efforts.
Total remaining expenditures are expected to range from $5 to $10 million during
1999 and 2000. Total incremental expenses, including depreciation and
amortization of new package systems, remediation to bring current systems into
compliance, and writing off legacy systems are not expected to have a material
impact on the Company's financial condition during 1999 and 2000.
Reasonably Likely Worst Case Scenario and Contingency Plans
- -----------------------------------------------------------
The Company believes that the reasonably likely worst case scenario would
involve short-term disruption of systems affecting its supply and distribution
channels. The Company and its individual operating businesses have substantially
completed the development of contingency plans that identify actions to be taken
if any critical systems or services are interrupted. The Company's businesses
have considered various contingency plans, such as alternative sourcing and
accelerated delivery of merchandise from foreign suppliers, and operational
alternatives, including manual processes. In addition, the Company plans to have
key managerial, operational and technical support personnel available to
identify and remedy any disruption that may occur during the transition to the
new millennium.
At the present time, the Company is not aware of any Year 2000 issues that are
expected to affect materially its products, services, competitive position or
financial performance. Additionally, the Company has not postponed any
significant information technology projects due to the Year 2000 project. Thus,
the Company does not believe that the delay of any projects
23
<PAGE>
has had a material impact on its financial condition and results of operations.
However, despite the Company's significant efforts to make its systems,
facilities and equipment Year 2000 compliant, the compliance of third party
service providers and vendors (including, for instance, governmental entities
and utility companies) is beyond the Company's control. Accordingly, the Company
can give no assurances that the failure of technology infrastructure of the
United States (or other systems, such as utilities, of general importance),
foreign nations or other companies on which the Company's systems rely, or the
failure of key suppliers or other third parties to comply with Year 2000
requirements, will not have a material adverse effect on the Company.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
- -------------------------------------------------------------------------
The Company cautions that any forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) contained in
this Form 10-Q/A or made by management of the Company involve risks and
uncertainties and are subject to change based on various important factors, many
of which may be beyond the Company's control. Accordingly, the Company's future
performance and financial results may differ materially from those expressed or
implied in any such forward-looking statements. Among other things, certain of
the foregoing statements as to costs and dates relating to the Year 2000 effort
are forward-looking and are based on the Company's current best estimates that
may be proven incorrect as additional information becomes available. The
Company's Year 2000-related forward-looking statements are also based on
assumptions about many important factors, including the technical skills of
employees and independent contractors, the representations and preparedness of
third parties, the ability of vendors to deliver merchandise or perform services
required by the Company and the collateral effects of the Year 2000 issues on
the Company's business partners and customers. While the Company believes its
assumptions are reasonable, it cautions that it is impossible to predict factors
that could cause actual costs or timetables to differ materially from the
expected results. In addition to Year 2000 issues, the following factors, among
others, in some cases have affected and in the future could affect the Company's
financial performance and actual results and could cause actual results for 1999
and beyond to differ materially from those expressed or implied in any forward-
looking statements included in this Form 10-Q/A or otherwise made by management:
changes in consumer spending patterns, consumer preferences and overall economic
conditions, the impact of competition and pricing, changes in weather patterns,
political stability, currency and exchange risks and changes in existing or
potential duties, tariffs or quotas, availability of suitable store locations at
appropriate terms, ability to develop new merchandise and ability to hire and
train associates.
24
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a defendant in a variety of lawsuits arising in the
ordinary course of business.
On November 13, 1997, the United States District Court for the Southern
District of Ohio, Eastern Division, dismissed with prejudice an amended
complaint that had been filed against the Company and certain of its
subsidiaries by the American Textile Manufacturers Institute ("ATMI"), a
textile industry trade association. The amended complaint alleged that
the defendants violated the federal False Claims Act by submitting false
country of origin declarations to the U.S. Customs Service. On November
26, 1997, ATMI served a motion to alter or amend judgment and a motion
to disqualify the presiding judge and to vacate the order of dismissal.
The motion to disqualify was denied on December 22, 1997, but as a
matter of his personal discretion, the presiding judge elected to recuse
himself from further proceedings and this matter was transferred to a
judge of the United States District Court for the Southern District of
Ohio, Western Division. On May 21, 1998, this judge denied all pending
motions seeking to alter, amend or vacate the judgment that had been
entered in favor of the Company. On June 5, 1998, ATMI appealed to the
United States Court of Appeals for the Sixth Circuit. On September 14,
1999, the United States Court of Appeals for the Sixth Circuit affirmed
the order of dismissal. ATMI's petition for rehearing and suggestion for
rehearing en banc were denied on November 2, 1999.
On January 13, 1999, two complaints were filed against the Company and
its subsidiary, Lane Bryant, Inc., as well as other defendants,
including many national retailers. Both complaints relate to labor
practices allegedly employed on the island of Saipan, Commonwealth of
the Northern Mariana Islands, by apparel manufacturers unrelated to the
Company (some of which have sold goods to the Company) and seek
injunctions, unspecified monetary damages, and other relief. One
complaint, on behalf of a class of unnamed garment workers, filed in the
United States District Court for the Central District of California,
Western Division, alleges violations of federal statutes, the United
States Constitution, and international law. On March 29, 1999, a motion
was filed to transfer this action to the United States District Court
located on Saipan, and on April 12, 1999, a motion to dismiss the
complaint for failure to state a claim upon which relief can be granted
was filed. On September 29, 1999, the United States District Court for
the Central District of California, Western Division, transferred the
case to the United States District Court for the District of Hawaii. The
Company, along with certain other defendants, has filed a petition for a
writ of mandamus in the Ninth Circuit Court of Appeals seeking an order
holding that the transfer of the case to the United States District
Court for the District of Hawaii was in error and ordering that the case
be transferred to the United States District Court on Saipan. The motion
to dismiss the complaint for failure to state a claim upon which relief
can be granted remains pending. The second complaint, filed by a
national labor union and other organizations in the Superior Court of
the State of California, San Francisco County, alleges unfair business
practices under California law. On March 29, 1999, a motion (called a
"demurrer") seeking dismissal of this complaint was filed. On September
3, 1999, portions of the demurrer were overruled and the plaintiffs were
given leave to amend other portions of the complaint. A First Amended
Complaint was filed on September 23, 1999, and a second demurrer was
filed on October 6, 1999. On November 22, 1999, the demurrer to the
First Amended Complaint was overruled.
In May and June 1999, alleged shareholders of the Company filed three
purported derivative actions in the Court of Chancery of the State of
Delaware, naming the members of the Company's board of directors as
defendants and the Company as nominal defendant. The three actions have
been consolidated. The operative complaint in the consolidated action
generally alleges that the rescission of the
25
<PAGE>
Contingent Stock Redemption Agreement constituted a waste of corporate
assets and a breach of the board members' fiduciary duties, and that the
issuer tender offer completed on June 3, 1999 was a "wasteful
transaction in its own right." The complaint seeks monetary damages in
an unspecified amount from the members of the Company's board of
directors. On July 30, 1999, the defendants moved to dismiss the
complaint. Plaintiffs have not yet responded to that motion.
Although it is not possible to predict with certainty the eventual
outcome of any litigation, in the opinion of management, the foregoing
proceedings are not expected to have a material adverse effect on the
Company's financial position or results of operations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
--------
11. Statement re: Computation of Restated Per Share Earnings.
12. Statement re: Computation of Restated Ratio of Earnings to Fixed
Charges.
15. Letter re: Unaudited Interim Financial Information to Securities and
Exchange Commission re: Incorporation of Report of Independent
Accountants.
27. Restated Financial Data Schedule.
(b) Reports on Form 8-K.
-------------------
None.
26
<PAGE>
SIGNATURE
---------
Pursuant to the requirements 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.
THE LIMITED, INC.
(Registrant)
By /S/ V. Ann Hailey
----------------------------------
V. Ann Hailey,
Executive Vice President and Chief
Financial Officer*
Date: April 18, 2000
__________________________________
* Ms. Hailey is the principal financial officer and has been duly authorized to
sign on behalf of the Registrant.
<PAGE>
EXHIBIT 11
----------
THE LIMITED, INC. AND SUBSIDIARIES
RESTATED COMPUTATION OF PER SHARE EARNINGS
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------
October 30, October 31,
1999 1998
---------------- -----------------
<S> <C> <C>
Net income $ 41,362 $ 40,593
Less: impact of IBI dilutive options and
restricted shares on consolidated income* (467) (266)
---------------- -----------------
Adjusted net income $ 40,895 $ 40,327
================ =================
Weighted average common shares outstanding:
Common shares issued 379,454 379,454
Dilutive effect of stock options and restricted
shares 8,173 3,739
Treasury shares (164,743) (152,141)
---------------- -----------------
Diluted shares 222,884 231,052
================ =================
Net income per diluted share $ 0.18 $ 0.17
================ =================
<CAPTION>
Thirty-nine Weeks Ended
-------------------------------------------
October 30, October 31,
1999 1998
---------------- -----------------
<S> <C> <C>
Net income $ 144,295 $ 1,818,320
Less: impact of IBI dilutive options and restricted
shares on consolidated income* (2,221) (910)
---------------- -----------------
Adjusted net income $ 142,074 $ 1,817,410
================ =================
Weighted average common shares outstanding:
Common shares issued 379,454 379,454
Dilutive effect of stock options and restricted
shares 8,394 5,403
Treasury shares (158,296) (133,693)
---------------- -----------------
Diluted shares 229,552 251,164
================ =================
Net income per diluted share $ 0.62 $ 7.24
================ =================
</TABLE>
*Represents the impact of dilutive options and restricted shares at Intimate
Brands as a reduction to income.
<PAGE>
EXHIBIT 12
----------
THE LIMITED, INC. AND SUBSIDIARIES
RESTATED RATIO OF EARNINGS TO FIXED CHARGES
(Thousands except ratio amounts)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
-----------------------------------
October 30, October 31,
1999 1998
----------- -----------
<S> <C> <C>
Adjusted Earnings
- -----------------
Pretax earnings $274,295 $1,947,320
Portion of minimum rent ($524,857 in 1999
and $546,662 in 1998) representative
of interest 174,952 182,221
Interest on indebtedness 57,361 49,229
Minority interest 28,566 27,901
----------- -----------
Total earnings as adjusted $535,174 $2,206,671
=========== ===========
Fixed Charges
- -------------
Portion of minimum rent representative
of interest $174,952 $ 182,221
Interest on indebtedness 57,361 49,229
----------- -----------
Total fixed charges $232,313 $ 231,450
=========== ===========
Ratio of earnings to fixed charges 2.30x 9.53x
=========== ===========
Ratio of earnings to fixed charges excluding special
and nonrecurring items and gain on sale of
subsidiary stock 2.31x 2.02x
=========== ===========
</TABLE>
<PAGE>
EXHIBIT 15
----------
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Commissioners:
We are aware that our report dated November 16, 1999, except for the information
in Note 2 as to which the date is February 16, 2000, on our review of the
interim consolidated financial information of The Limited, Inc. and Subsidiaries
(the "Company") as of and for the thirteen and thirty-nine week periods ended
October 30, 1999 and included in this Form 10-Q/A is incorporated by reference
in the Company's registration statements 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, 333-04927, 333-04941,
and the registration statements on Form S-3, Registration Nos. 33-20788, 33-
31540, 33-43832, and 33-53366. Pursuant to Rule 436(c) under the Securities Act
of 1933, this report should not be considered a part of the registration
statement prepared or certified by us within the meaning of Sections 7 and 11 of
that Act.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
April 14, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OF THE LIMITED, INC. AND
SUBSIDIARIES FOR THE QUARTER ENDED OCTOBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
THE COMPANY CHANGED ITS ACCOUNTING POLICY FOR GIFT CERTIFICATES, STORE CREDITS
AND LAYAWAY SALES (SEE NOTE 2 TO THE CONSOLIDATED FINANCIAL STATEMENTS). THE
COMPANY HAS GIVEN RETROACTIVE EFFECT TO THIS NEW ACCOUNTING POLICY BY RESTATING
ITS PREVIOUSLY ISSUED FINANCIAL STATEMENTS BEGINNING WITH FISCAL 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-30-1999
<CASH> 173,303
<SECURITIES> 0
<RECEIVABLES> 129,670
<ALLOWANCES> 0
<INVENTORY> 1,420,899
<CURRENT-ASSETS> 2,002,334
<PP&E> 2,943,637
<DEPRECIATION> 1,688,762
<TOTAL-ASSETS> 3,903,833
<CURRENT-LIABILITIES> 1,192,257
<BONDS> 650,000
0
0
<COMMON> 189,727
<OTHER-SE> 1,641,854
<TOTAL-LIABILITY-AND-EQUITY> 3,903,833
<SALES> 2,064,105
<TOTAL-REVENUES> 2,064,105
<CGS> 1,393,856
<TOTAL-COSTS> 1,393,856
<OTHER-EXPENSES> 576,055
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,412
<INCOME-PRETAX> 88,362
<INCOME-TAX> 47,000
<INCOME-CONTINUING> 41,362
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,362
<EPS-BASIC> .19
<EPS-DILUTED> .18
</TABLE>