<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 3, 1997
-----------
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 1-13814
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INTIMATE BRANDS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1436998
- ------------------- -------------------------
(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) 479-6900
-----------------------
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.
Class A Common Stock Outstanding at May 30, 1997
-------------------- ---------------------------
$.01 Par Value 42,542,092 Shares
Class B Common Stock Outstanding at May 30, 1997
-------------------- ---------------------------
$.01 Par Value 210,000,000 Shares
<PAGE>
INTIMATE BRANDS, INC.
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income
Thirteen Weeks Ended
May 3, 1997 and May 4, 1996............................ 3
Consolidated Balance Sheets
May 3, 1997 and February 1, 1997....................... 4
Consolidated Statements of Cash Flows
Thirteen Weeks Ended
May 3, 1997 and May 4, 1996............................ 5
Notes to Consolidated Financial Statements....................... 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition.......... 10
Part II. Other Information
Item 1. Legal Proceedings............................................ 16
Item 4. Submission of Matters to a Vote of Security Holders.......... 16
Item 5. Other Information............................................ 17
Item 6. Exhibits and Reports on Form 8-K............................. 17
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------------------
May 3, May 4,
1997 1996
--------------- ---------------
<S> <C> <C>
NET SALES $704,041 $586,208
Cost of Goods Sold, Occupancy and Buying Costs 475,959 411,431
--------------- ---------------
GROSS INCOME 228,082 174,777
General, Administrative and Store Operating Expenses (167,800) (125,894)
--------------- ---------------
OPERATING INCOME 60,282 48,883
Interest Expense ( 7,564) ( 7,563)
Other Income 2,080 715
--------------- ---------------
INCOME BEFORE INCOME TAXES 54,798 42,035
Provision for Income Taxes 21,900 16,800
--------------- ---------------
NET INCOME $32,898 $25,235
=============== ===============
NET INCOME PER SHARE $.13 $.10
=============== ===============
DIVIDENDS PER SHARE $.13 $.12
=============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 253,091 252,757
=============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
May 3, February 1,
1997 1997
--------------- --------------
(Unaudited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and Equivalents $18,732 $135,111
Accounts Receivable 18,322 18,750
Inventories 445,201 434,800
Intercompany Receivable - 60
Other 73,256 68,255
--------------- --------------
TOTAL CURRENT ASSETS 555,511 656,976
PROPERTY AND EQUIPMENT, NET 389,286 395,647
OTHER ASSETS 85,218 82,539
--------------- --------------
TOTAL ASSETS $1,030,015 $1,135,162
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts Payable $74,431 $88,896
Accrued Expenses 115,511 136,598
Income Taxes Payable 27,772 98,187
Intercompany Payable 19 -
--------------- --------------
TOTAL CURRENT LIABILITIES 217,733 323,681
LONG-TERM DEBT 350,000 350,000
DEFERRED INCOME TAXES 50,936 50,935
OTHER LONG-TERM LIABILITIES 9,004 8,493
SHAREHOLDERS' EQUITY:
Common Stock 2,527 2,527
Paid-in Capital 675,151 675,240
Retained Deficit (272,000) (272,071)
--------------- --------------
405,678 405,696
Less Treasury Stock, at Average Cost (3,336) (3,643)
--------------- --------------
TOTAL SHAREHOLDERS' EQUITY 402,342 402,053
--------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,030,015 $1,135,162
=============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-------------------------------
May 3, May 4,
1997 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 32,898 $ 25,235
Impact of Other Operating Activities on Cash Flows:
Depreciation and Amortization 24,375 19,250
Changes in Assets and Liabilities:
Inventories (10,401) 18,938
Accounts Payable and Accrued Expenses (35,552) (24,315)
Income Taxes (70,414) (59,787)
Other Assets and Liabilities (9,693) (1,762)
-------------- --------------
NET CASH USED FOR OPERATING ACTIVITIES (68,787) (22,441)
-------------- --------------
CASH USED FOR INVESTING ACTIVITIES
Capital Expenditures (15,062) (19,068)
-------------- --------------
FINANCING ACTIVITIES:
Dividends Paid (32,827) (30,324)
Change in Intercompany Payable/Receivable 79 73,598
Other Changes in Shareholders' Equity 218 --
-------------- --------------
NET CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES (32,530) 43,274
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (116,379) 1,765
Cash and Equivalents, Beginning of Year 135,111 12,095
-------------- --------------
CASH AND EQUIVALENTS, END OF PERIOD $ 18,732 $ 13,860
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
INTIMATE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
Intimate Brands, Inc. (the "Company") includes specialty retail and
catalogue operations which offer women's intimate and other apparel,
personal care products and accessories. They consist of Victoria's
Secret Stores, Victoria's Secret Catalogue, Bath & Body Works,
Cacique, and Gryphon Development. An initial public offering of 42.7
million shares of the Company's Class A common stock was consummated
in 1995 and as a result, approximately 83% of the outstanding common
stock of the Company is owned by The Limited, Inc. ("The Limited").
The consolidated financial statements include the accounts of the
Company and all significant subsidiaries which are more than 50
percent owned and controlled.
The consolidated financial statements as of and for the periods ended
May 3, 1997 and May 4, 1996 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 1996 Annual
Report. In the opinion of management, the accompanying consolidated
financial statements reflect all adjustments (which are of a normal
recurring nature) 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 May 3, 1997 and for the
thirteen week periods ended May 3, 1997 and May 4, 1996 included
herein have been reviewed by the independent public accounting firm
of Coopers & Lybrand L.L.P. and the report of such firm follows the
notes to consolidated financial statements.
2. ADOPTION OF ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
------------
Share." The Company will adopt the computation, presentation and
-----
disclosure requirements for earnings per share in the fourth quarter
of 1997, the effect of which will not be material to the Company's
consolidated financial statements.
3. 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 utilizing 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.
6
<PAGE>
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of (thousands):
<TABLE>
<CAPTION>
May 3, February 1,
1997 1997
----------- ------------
<S> <C> <C>
Property and equipment, at cost $712,635 $701,599
Accumulated depreciation and
amortization (323,349) (305,952)
----------- ------------
Property and equipment, net $389,286 $395,647
=========== ============
</TABLE>
5. INCOME TAXES
The Company is included in The Limited's consolidated federal and
certain state income tax groups for income tax purposes and is
responsible for its proportionate share of income taxes calculated
upon its federal taxable income at a current estimate of the annual
consolidated effective tax rate. Income taxes paid during the
thirteen weeks ended May 3, 1997 and May 4, 1996 approximated $92.3
million and $76.6 million.
6. LONG-TERM DEBT
Long-term debt consists of notes which represent the Company's
proportionate share of certain long-term debt of The Limited. The
interest rates and maturities of the notes parallel those of the
corresponding debt of The Limited. The 7 1/2% debentures are subject
to early redemption beginning in 2003 concurrent with any prepayment
of the corresponding debt by The Limited. Unsecured long-term debt
consisted of (thousands):
<TABLE>
<CAPTION>
May 3, February 1,
1997 1997
----------- ------------
<S> <C> <C>
7 1/2% Debentures due March 2023 $100,000 $100,000
9 1/8% Notes due February 2001 150,000 150,000
8 7/8% Notes due August 1999 100,000 100,000
----------- ------------
$350,000 $350,000
=========== ============
</TABLE>
Interest paid during the thirteen weeks ended May 3, 1997 and May 4, 1996,
including interest on the intercompany cash management account (see note
7), approximated $15.1 million and $19.5 million.
7
<PAGE>
7. INTERCOMPANY RELATIONSHIP WITH PARENT
The Limited provides various services to the Company including, but not
limited to, store design and construction supervision, real estate
management, travel and flight support and merchandise sourcing. To the
extent expenditures are specifically identifiable they are charged to the
Company. All other related support expenses are charged to the Company and
other divisions of The Limited based upon various allocation methods.
The Company participates in The Limited's centralized cash management
system whereby cash received from operations is transferred to The
Limited's centralized cash accounts and cash disbursements are funded from
the centralized cash accounts on a daily basis. After the initial
capitalization of the Company, the intercompany cash management account
became an interest earning asset or interest bearing liability of the
Company depending upon the level of cash receipts and disbursements.
Interest on the intercompany cash management account is calculated based on
30-day commercial paper rates for "AA" rated companies as reported in the
Federal Reserve's H.15 statistical release.
8
<PAGE>
[LETTERHEAD OF COOPERS & LYBRAND APPEARS HERE]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Audit Committee of
The Board of Directors of
Intimate Brands, Inc.
We have reviewed the condensed consolidated balance sheet of Intimate Brands,
Inc. and Subsidiaries at May 3, 1997 and the related condensed consolidated
statements of income and cash flows for the thirteen-week periods ended May 3,
1997 and May 4, 1996. 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 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 February 1, 1997 and the related
statements of income, shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated February 24, 1997 we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying condensed balance sheet as of
February 1, 1997, is fairly stated, in all material respects, in relation to the
balance sheet from which it has been derived.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
June 10, 1997
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net sales for the first quarter of 1997 increased 20% to $704 million from $586
million in the first quarter of 1996. Operating income for the 1997 quarter of
$60.3 million increased 23% from $48.9 million in 1996. Earnings per share grew
30% to $.13 per share, compared to $.10 per share in 1996.
Divisional highlights include the following:
Victoria's Secret Stores had a 14% sales gain in the first quarter as the
business continued to see excellent response to new products including `Angels,'
its new bra and panty, and the ongoing inflow of fresh fashion sleepware. Also,
the business benefited from the strong sales growth at Victoria's Secret Bath &
Fragrance shops.
Bath & Body Works achieved a 60% sales gain and a 50% increase in operating
income in the first quarter. Bath & Body Works continued to enjoy success from
continued new product introductions, such as antibacterial hand gel and unique
gift selections. The business opened 46 stores in the quarter, with a goal of
opening approximately 200 new stores in 1997.
Victoria's Secret Catalogue recorded a sales increase of 7% to $179.6 million.
Improved per page productivity and catalogue response rates resulted in a 24%
increase in operating income.
10
<PAGE>
Financial Summary
- -----------------
The following summarized financial data compares the thirteen week period ended
May 3, 1997 to the comparable 1996 period:
<TABLE>
<CAPTION>
Change From
1997 1996 Prior Year
------------ ------------ -----------------
<S> <C> <C> <C>
Net Sales (millions):
Victoria's Secret Stores $325 $286 14%
Victoria's Secret Catalogue 180 167 7%
Bath & Body Works 177 111 60%
Cacique 19 19 -
Other 3 3 -
------------ ------------ -----------------
Total Net Sales $704 $586 20%
============ ============ =================
Increase in comparable store sales:
Victoria's Secrets Stores 7% 8%
Bath & Body Works 13% 14%
Cacique 4% 19%
------------ ------------
Total Intimate Brands, Inc. 8% 9%
============ ============
Retail Sales Excluding Catalogue and Other:
Retail sales increase attributable to new
and remodeled stores 17% 20%
Retail sales per average selling square foot $102 $97
Retail sales per average store (thousands) $319 $316
Average store size at end of quarter 3,127 3,257
(square feet)
Retail selling square feet (thousands) 5,179 4,351
Number of Stores:
Beginning of year 1,609 1,293
Opened 55 44
Closed (8) * (1)
------------ ------------
End of Period 1,656 1,336
============ ============
</TABLE>
* Includes sale of four Penhaligon's stores in April 1997.
11
<PAGE>
<TABLE>
<CAPTION>
Number of Stores Selling Sq. Ft. (thousands)
---------------------------------------------- -------------------------------------------------
Change Change
May 3, May 4, From May 3, May 4, From
1997 1996 Prior Year 1997 1996 Prior Year
----------- ------------ --------------- ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Victoria's Secret Stores 742 683 59 3,360 3,074 286
Bath & Body Works 796 528 268 1,457 906 551
Cacique 118 121 (3) 362 369 (7)
Penhaligon's - 4 (4) - 2 (2)
----------- ------------ --------------- ------------ ------------- ----------------
Total stores and selling
square feet 1,656 1,336 320 5,179 4,351 828
=========== ============ =============== ============ ============= ================
</TABLE>
Net Sales
- ---------
Net sales for the first quarter of 1997 increased 20% over the same period in
1996. This increase was primarily attributable to the net addition of 320 new
stores which accounted for 62% of the increase. The remaining increase came from
an 8% increase in comparable store sales (28% of total increase) and a 7%
increase in catalogue net sales.
Victoria's Secret Stores net sales for the first quarter of 1997 increased 14%
to $325 million from $286 million a year ago. The sales increase was due to the
net addition of 59 new stores and 286,000 selling square feet (a 9% increase in
selling square feet over 1996) and a 7% increase in comparable store sales.
Victoria's Secret Catalogue net sales for the first quarter of 1997 increased 7%
to $180 million from $167 million a year ago. This increase was primarily
attributable to a 14% increase in catalogue circulation to approximately 91
million catalogues mailed in the first quarter 1997 from approximately 79
million catalogues for the same period in 1996.
Bath & Body Works net sales for the first quarter of 1997 increased 60% to $177
million from $111 million a year ago. This increase was primarily attributable
to a net addition of 268 stores and 551,000 selling square feet, a 61% increase
in selling square feet over 1996. The balance of the increase was from a 13%
increase in comparable store sales.
Gross Income
- ------------
Gross income increased as a percentage of net sales to 32.4% for the first
quarter of 1997 from 29.8% for the same period in 1996. The increase was
primarily due to a 1.8% reduction in buying and occupancy costs and a .8%
increase in merchandise margins. The reduction in buying and occupancy costs,
expressed as a percentage of net sales, was experienced across virtually all of
the Company's businesses. The decrease was especially significant at Bath & Body
Works due to the growth in net sales in the first quarter, and Victoria's Secret
Catalogue, which experienced lower paper and postage costs.
12
<PAGE>
The increase in merchandise margins is attributable to the growth of Bath & Body
Works net sales as a percentage of total Company sales and a margin rate
increase at Victoria's Secret Stores. Bath & Body Works has historically
recorded significantly higher merchandise margins and significantly lower buying
and occupancy costs (due to smaller store size and higher sales productivity),
as compared with the rest of the Company. This advantage results from the higher
margins of the personal care products and the high merchandise productivity,
expressed in sales per selling square feet, that Bath & Body Works stores enjoy.
The Company believes that continued strong growth of Bath & Body Works will have
a positive impact on gross income as a percentage of total Company sales. The
Victoria's Secret Stores' margin rate increase was the result of higher initial
markups and the continuation of a non-promotional pricing strategy adopted in
the fourth quarter of 1996, as well as the strong sales increase of high margin
personal care products.
General, Administrative and Store Operating Expenses
- ----------------------------------------------------
General, administrative and store operating expenses increased as a percentage
of net sales to 23.8% in the first quarter of 1997 from 21.5% for the same
period in 1996. The increase in the Company's expense rate was primarily the
result of two factors: first, the investments made at Victoria's Secret Stores
in store staffing and management for the personal care business and the use of
national television advertising in connection with promoting the brand and new
product launches; and second, the growth of Bath & Body Works net sales in the
first quarter from 19% of total Company sales in 1996 to 25% in 1997. Due to an
emphasis on point of sale marketing and in store staffing, Bath & Body Works has
higher general, administrative and store operating expenses as a percentage of
net sales. The Company believes that continued strong growth of Bath & Body
Works as a percentage of total Company business may cause these costs to
increase, expressed as a percentage of total Company sales, without significant
expense rate improvement by other Company divisions.
Operating Income
- ----------------
First quarter operating income, as a percentage of sales, was 8.6% in 1997 and
8.3% in 1996. The increase was a result of the improved gross income rate, which
more than offset increases in the general, administrative and store operating
expenses expressed as a percentage of sales.
Interest Expense and Other Income
- ---------------------------------
The Company incurred $7.6 million in interest expense in both the first quarter
of 1997 and 1996, which is primarily the interest on the Company's $350 million
long-term debt.
In the first quarter of 1997, the Company earned $2.1 million in other income
compared to $.7 million for the same period in 1996. The other income was
primarily interest income earned from excess net cash from operations managed
through The Limited's centralized cash management system (see Note 7 of the
Company's Consolidated Financial Statements).
13
<PAGE>
FINANCIAL CONDITION
Liquidity and Capital Resources
- -------------------------------
Cash provided from operating activities and cash funding from The Limited's
centralized cash management systems 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
($000):
<TABLE>
<CAPTION>
May 3, February 1,
1997 1997
----------------- -----------------
<S> <C> <C>
Working Capital $337,778 $333,295
================= =================
Capitalization:
Long-term debt $350,000 $350,000
Deferred income taxes 50,936 50,935
Shareholders' equity 402,342 402,053
----------------- -----------------
Total Capitalization $803,278 $802,988
================= =================
</TABLE>
Net cash used in operating activities totaled $68.8 million for the thirteen
weeks ended May 3, 1997 versus $22.4 million for the same period in 1996. The
increase in the net cash requirements of the Company for the first quarter was
due principally to the growth in inventories this year, consistent with business
growth trends, versus a reduction last year and higher income tax payments
associated with higher taxable income for the prior year.
Investing activities were all for capital expenditures, which are primarily for
new and remodeled stores.
Capital Expenditures
- --------------------
Capital expenditures, primarily for new and remodeled stores, totaled $15.1
million for the thirteen weeks ended May 3, 1997, compared to $19.1 million for
the comparable period of 1996. The Company anticipates spending $140-$160
million in 1997 for capital expenditures, of which $115-$135 million will be for
new stores, the relocation and expansion of existing stores and related
improvements for the retail business. Also included in the capital expenditure
estimate is $20 million for equipment and leasehold improvements for the Bath &
Body Works new distribution center and world headquarters, scheduled for
completion during 1997.
The Company has previously announced its intention to add approximately 750,000
selling square feet in 1997, which will represent a 15% increase over year-end
1996. It is anticipated the increase will result from the addition of
approximately 260 new stores and the expansion of approximately 42 stores. The
Company expects that capital expenditures will be funded principally by net cash
provided by operating activities.
14
<PAGE>
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
All forward-looking statements made by the Company involve material risks and
uncertainties and are subject to change based on various important factors 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. Such factors include, but are
not limited to, 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 on appropriate terms, ability to develop new merchandise and
ability to hire and train associates, and other factors that may be described in
the Company's filings with the Securities and Exchange Commission. The Company
does not undertake to publicly update or revise its forward-looking statements
even if experience or future changes make it clear that any projected results
expressed or implied therein will not be realized.
15
<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 April 8, 1997, the United States
District Court, Central District of California, unsealed and permitted
to be served an amended complaint previously filed in that court against
the Company, The Limited and certain of The Limited's other subsidiaries
by the American Textiles Manufacturers Institute, a textile industry
trade association. The complaint alleges that the defendants violated
the federal False Claims Act by submitting false country of origin
records to the US Customs Service. The complaint seeks recovery on
behalf of the United States in an unspecified amount. On June 2, 1997,
the defendants filed a motion to dismiss the complaint. The Company
believes the allegations made in the suit are without merit and intends
to defend it vigorously.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 19, 1997. The
matters voted upon and the results of the voting were as follows:
(a) Cynthia D. Fedus, E. Gordon Gee, and Alex Shumate were elected to
the Board of Directors for a term of three years. Of the 35,350,969
Class A shares and 210,000,000 Class B shares (representing
630,000,000 votes) present in person or represented by proxy at the
meeting, the number of votes for and the number of votes as to
which authority to vote in the election was withheld, were as
follows with respect to each of the nominees:
<TABLE>
<CAPTION>
Votes Votes as to Which
For Voting Authority
Name Election Withheld
---------------------- ---------------- --------------------
<S> <C> <C>
Cynthia D. Fedus 664,569,124 781,845
E. Gordon Gee 664,564,216 786,753
Alex Shumate 664,567,259 783,710
</TABLE>
In addition, directors whose term of office continued after the
Annual Meeting were: Leslie H. Wexner, Kenneth B. Gilman, Beth M.
Pritchard, Roger D. Blackwell, Grace A. Nichols and Donald B.
Shackelford.
16
<PAGE>
(b) The Company's Incentive Compensation Performance Plan was approved
with 664,874,906 votes for approval, 324,795 against and 31,494
abstained.
(c) The Company's 1997 Restatement of the Intimate Brands, Inc. 1995
Stock Option and Performance Incentive Plan was approved with
663,426,804 votes for approval, 1,769,411 against and 34,980
abstained.
Item 5. OTHER INFORMATION
The Company's Certificate of Incorporation includes provisions relating
to potential conflicts of interest that may arise between the Company
and The Limited. Such provisions were adopted in light of the fact that
the Company and The Limited and its subsidiaries are engaged in retail
businesses and may pursue similar opportunities in the ordinary course
of business. Among other things, these provisions generally eliminate
the liability of directors and officers of the Company with respect to
certain matters involving The Limited and its subsidiaries, including
matters that may constitute corporate opportunities of The Limited, its
subsidiaries or the Company. Any person purchasing or acquiring an
interest in shares of capital stock of the Company will be deemed to
have consented to such provisions relating to conflicts of interest and
corporate opportunities, and such consent may restrict such person's
ability to challenge transactions carried out in compliance with such
provisions. Investors should review the Company's Certificate of
Incorporation before making any investment in shares of the Company's
capital stock.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
3. Articles of Incorporation and Bylaws
3.1 Amended and Restated Certificate of Incorporation of the
Company incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995.
3.2 Bylaws of the Company incorporated by reference to
Exhibit 3.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended October 28, 1995.
4. Instruments Defining the Rights of Security Holders.
4.1 Specimen Certificate of Class A Common Stock of the
Company incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1 (File No.
33-92568) (the "Form S-1").
4.2 Certificate of Incorporation of The Limited, Inc.
incorporated by reference to Exhibit 4.2 to the Company's
Form S-1.
4.3 Bylaws of The Limited, Inc. incorporated by reference to
Exhibit 4.3 to the Company's Form S-1.
17
<PAGE>
10. Material Contracts
10.1 Intimate Brands, Inc. 1996 Stock Option and Performance
Incentive Plan incorporated by reference to Exhibit 4.3
to the Company's Registration Statement on Form S-8 (File
No. 333-04923).
10.2 Intimate Brands, Inc. Incentive Compensation Plan
incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 (File No. 333-04921).
11. Statements re: Computation of Per Share Earnings
15. Letter re: Unaudited Interim Financial Information to Securities
and Exchange Commission re: Incorporation of Independent
Accountants' Report.
27. Financial Data Schedule
(b) Reports on Form 8-K.
-------------------
None.
18
<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.
INTIMATE BRANDS, INC.
(Registrant)
By /s/ Philip E. Mallott
-----------------------------
Philip E. Mallott,
Chief Financial Officer*
Date: June 12, 1997
- -----------------------------------------------
* Mr. Mallott is the principal financial officer and has been duly
authorized to sign on behalf of the Registrant.
19
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Document
----------- ---------------------------------------------
<S> <C>
11 Statement re: Computation of Per Share Earnings.
15 Letter re: Unaudited Interim Financial Information to
Securities and Exchange Commission re: Incorporation
of Independent Accountants' Report.
27 Financial Data Schedule.
</TABLE>
<PAGE>
EXHIBIT 11
----------
INTIMATE BRANDS, INC.
COMPUTATION OF PER SHARE EARNINGS
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------
May 3, May 4,
1997 1996
-------------- -------------
<S> <C> <C>
Net income $32,898 $25,235
============== =============
Common shares outstanding:
Weighted average 252,700 252,700
Dilutive effect of stock options 560 57
Weighted average treasury shares (169) -
-------------- -------------
Weighted average used to calculate
net income per share 253,091 252,757
============== =============
Net income per share $.13 $.10
============== =============
</TABLE>
<PAGE>
[LETTERHEAD OF COOPERS & LYBRAND APPEARS HERE] EXHIBIT 15
----------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated June 10, 1997, on our review of the interim
consolidated financial information of Intimate Brands, Inc. and Subsidiaries
for the thirteen-week period ended May 3, 1997 and included in this Form 10-Q is
incorporated by reference in the Company's registration statements on Form S-8,
Registration Nos. 333-04921 and 333-04923. Pursuant to Rule 436(c) under the
Securities Act of 1933, this report should not be considered part of the
Registration Statement prepared or certified by us within the meanings of
Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
June 10, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statgements (unaudited) of Intimate Brands, Inc. and
Subsidiaries for the quarter ended May 3, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> MAY-03-1997
<CASH> 18,372
<SECURITIES> 0
<RECEIVABLES> 18,322
<ALLOWANCES> 0
<INVENTORY> 445,201
<CURRENT-ASSETS> 555,511
<PP&E> 712,635
<DEPRECIATION> 323,349
<TOTAL-ASSETS> 1,030,015
<CURRENT-LIABILITIES> 217,733
<BONDS> 350,000
0
0
<COMMON> 2,527
<OTHER-SE> 399,815
<TOTAL-LIABILITY-AND-EQUITY> 1,030,015
<SALES> 704,041
<TOTAL-REVENUES> 704,041
<CGS> 475,959
<TOTAL-COSTS> 475,959
<OTHER-EXPENSES> 167,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,564
<INCOME-PRETAX> 54,798
<INCOME-TAX> 21,900
<INCOME-CONTINUING> 32,898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,898
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
