<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended January 30, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 1-13814
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INTIMATE BRANDS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 31-1436998
- ----------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Three Limited Parkway, P.O. Box 16000,
Columbus, Ohio 43216
- ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 415-8000
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------------------------ -----------------------------------------
Class A Common Stock, $.01 Par Value The New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the proceeding 12 months and (2) has been subject to the filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of the Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. X
Aggregate market value of the registrant's Common Stock held by non-affiliates
of the registrant as of March 26, 1999: $1,644,820,423.
Number of shares outstanding of the registrant's Common Stock as of March 26,
1999: 37,171,083 shares of Class A common stock; 200,409,163 shares of Class B
common stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's annual report to shareholders for the fiscal year
ended January 30, 1999 are incorporated by reference into Part I, Part II and
Part IV, and portions of the registrant's proxy statement for the Annual Meeting
of Shareholders scheduled for May 17, 1999 are incorporated by reference into
Part III.
<PAGE> 2
PART I.
ITEM 1. BUSINESS.
GENERAL.
Intimate Brands, Inc., a Delaware corporation (the "Company"), is principally
engaged in the purchase, distribution and sale of intimate and other women's
apparel and personal care products. The Company's retail activities are
conducted under two brand names through an integrated retail approach: stores,
catalogue and internet. Apparel merchandise is targeted to appeal to customers
in specialty markets who have distinctive consumer characteristics. All of the
Company's retail distribution channels offer lingerie, hosiery, swimwear,
accessories, beauty products and specialty gift items. In addition, the
Company's print catalogue offers women's apparel, shoes and accessories.
DESCRIPTION OF OPERATIONS.
GENERAL.
The Company was incorporated on May 16, 1995, and on May 19, 1995 acquired the
assets and liabilities of the Intimate Brands businesses in exchange for 210
million shares of Class B common stock issued to The Limited, Inc. ("The
Limited"). An initial public offering of 42.7 million shares of the Company's
Class A common stock was consummated in the Fall of 1995 and, as a result,
approximately 83% of the outstanding common stock of the Company was owned by
The Limited.
During 1998, the Company initiated two stock repurchases which resulted in The
Limited owning 84.5% of the outstanding common stock of the Company as of
January 30, 1999. Further information regarding these transactions is contained
in Note 1 of the Notes to the Consolidated Financial Statements included in the
Intimate Brands, Inc., 1998 Annual Report to Shareholders, portions of which are
annexed hereto as Exhibit 13 (the "1998 Annual Report") and are incorporated
herein by reference.
As of January 30, 1999, the Company operated retail lingerie and personal care
businesses (Victoria's Secret Stores and Bath & Body Works) and a print
catalogue and internet business selling lingerie and other women's apparel
(Victoria's Secret Catalogue). The following chart reflects the number of stores
in operation at January 30, 1999 and January 31, 1998.
<TABLE>
<CAPTION>
Retail Businesses Number of Stores
------------------------- --------------------
January 30, January 31,
1999 1998
---------- ----------
<S> <C> <C>
Victoria's Secret Stores 829 789
Bath & Body Works 1,061 921
----- -----
Total 1,890 1,710
===== =====
</TABLE>
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The following table shows the changes in the number of retail stores operated by
the Company for the past five fiscal years:
<TABLE>
<CAPTION>
Fiscal Beginning
Year of Year Opened Closed End of Year
------ --------- ------ ------ -----------
<S> <C> <C> <C> <C>
1994 879 166 (8) 1,037
1995 1,037 260 (4) 1,293
1996 1,293 325 (9) 1,609
1997 1,609 233 *(132) 1,710
1998 1,710 201 (21) 1,890
</TABLE>
* Includes 118 stores from the January 31, 1998 closing of
Cacique.
The Company also operates Gryphon Development, Inc. ("Gryphon"). Gryphon
creates, develops and sources a substantial portion of the bath and personal
care products sold by the Company.
During fiscal year 1998, the Company purchased merchandise from approximately
1,200 suppliers and factories located throughout the world. The Company sourced
approximately 18% of its merchandise through Mast Industries, Inc., a
wholly-owned contract manufacturing subsidiary of The Limited. In addition to
purchases from Mast, the Company purchases merchandise directly in foreign
markets, with additional merchandise purchased in the domestic market, some of
which is manufactured overseas. The Company's business is subject to a variety
of risks generally associated with doing business in foreign markets and
importing merchandise from abroad, such as political instability, currency and
exchange risks, and local business practice and political issues. The Company
has established formal polices and procedures designed to address such risks;
however, they remain beyond the Company's control. One third party manufacturer
accounted for 5.8% of total goods purchased by the Company.
Most of the merchandise and related materials for the Company's stores and
catalogue is shipped to distribution centers owned by The Limited in the
Columbus, Ohio area, where the merchandise is received and inspected. The
Limited uses common and contract carriers to distribute merchandise and related
materials to the Company's stores. The Company pays outbound freight for stores
to The Limited based on weight shipped. The catalogue business, which operates
the Victoria's Secret website, contracts and ships to its customers via
independent third parties including the U.S. Postal Service. The Company's
divisions generally have independent distribution capabilities and no division
receives priority over any other division. There are no distribution channels
between the retail divisions.
The Company's policy is to maintain sufficient quantities of inventory on hand
in its retail stores and distribution centers so that it can offer customers a
full selection of current merchandise. The Company emphasizes rapid turnover and
takes markdowns where required to keep merchandise fresh and current with
fashion trends.
The Company views the retail apparel market as having two principal selling
seasons, Spring and Fall. As is consistent with the apparel industry, the
Company experiences its peak sales activity during the Fall season. This
seasonal sales pattern results in increased inventory during the Fall and
Christmas holiday selling periods. During fiscal year 1998, the highest
inventory level approximated $651 million at the November 1998 month-end and the
lowest inventory level approximated $389 million at the June 1998 month-end.
Merchandise sales are paid for in cash or by personal check, credit cards issued
by third parties or The Limited's 31% owned credit card processing venture,
Alliance Data Systems ("ADS"). ADS was formed in part from World Financial
Network National Bank ("WFNNB"), a wholly-owned subsidiary of The Limited prior
to January 1996, when a 60% interest was sold to a New York investment firm,
resulting in the formation of a venture that provides private-label and bank
card transaction processing and database management services to retailers,
including the Company's private-label card operations.
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The Company offers its customers a liberal return policy stated as "No Sale is
Ever Final." The Company believes that certain of its competitors offer similar
credit card and service policies.
The following is a brief description of the Company's operating businesses,
including their respective target markets.
RETAIL BUSINESSES
- -----------------
Victoria's Secret Stores - is the world's best known specialty retailer of
- ------------------------
women's intimate apparel and related products. Victoria's Secret Stores
(including Victoria's Secret Beauty) operates over 820 stores nationwide and had
net sales of $1.829 billion in 1998.
Bath & Body Works - is the leading specialty retailer of personal care products.
- -----------------
Launched in 1990, Bath & Body Works (including White Barn Candle Company)
operates over 1,050 stores nationwide and had net sales of $1.272 billion in
1998.
CATALOGUE BUSINESS
- ------------------
Victoria's Secret Catalogue - is a leading catalogue retailer of intimate and
- ---------------------------
other women's apparel. At the end of 1998, Victoria's Secret Catalogue launched
its own web site, www.VictoriasSecret.com, through which certain of its products
may be purchased worldwide. Victoria's Secret Catalogue mailed approximately 406
million catalogues and had net sales of $759 million in 1998.
Additional information about the Company's business, including its revenues and
profits for the last three years, plus selling square footage and other
information about each of the Company's operating businesses, is set forth under
the caption "Management's Discussion and Analysis" of the Intimate Brands, Inc.
1998 Annual Report to Shareholders, and is incorporated herein by reference. For
the financial results of the Company's reportable operating segments, see Note
13 of the Notes to the Consolidated Financial Statements included in the 1998
Annual Report, incorporated herein by reference.
COMPETITION.
The sale of intimate and other women's apparel and personal care products
through retail stores is a highly competitive business with numerous
competitors, including individual and chain fashion specialty stores, and
department stores. Brand image, marketing, design, price, service, selection and
quality are the principal competitive factors in retail store sales. The
Company's catalogue business competes with numerous national and regional
catalogue merchandisers. Design, price, quality and catalogue presentation are
the principal competitive factors in catalogue sales.
The Company is unable to estimate the number of competitors or its relative
competitive position due to the large number of companies selling apparel,
lingerie and personal care products. However, the Company estimates its total
share of the domestic lingerie market at approximately 14% and its share of the
domestic personal care market at 6%.
ASSOCIATE RELATIONS.
On January 30, 1999, the Company employed approximately 55,000 associates,
41,000 of whom were part-time. In addition, temporary associates are hired
during peak periods, such as the Holiday season.
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ITEM 2. PROPERTIES
The Company's business is principally conducted from office, distribution and
shipping facilities located in the Columbus, Ohio area. Additional facilities
are located in New York City, New York, Kettering, Ohio, Rio Rancho, New Mexico,
and London, England.
The distribution and shipping facilities are owned by The Limited and are leased
by the Company under fifteen year leases, with options to renew.
Substantially all of the retail stores operated by the Company are located in
leased facilities, primarily in shopping centers throughout the continental
United States. The leases expire at various dates principally between 1999 and
2017 and generally have renewal options.
Typically, when space is leased for a retail store in a shopping center, all
improvements, including interior walls, floors, ceilings, fixtures and
decorations, are supplied by the tenant. In certain cases, the landlord of the
property may provide a construction allowance to fund all or a portion of the
cost of improvements. The cost of improvements varies widely, depending on the
size and location of the store. Rental terms for locations usually include a
fixed minimum rent plus a percentage of sales in excess of a specified amount.
Certain operating costs such as common area maintenance, utilities, insurance
and taxes are typically paid by tenants.
ITEM 3. LEGAL PROCEEDINGS.
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, The Limited and certain of The Limited's
other 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 records 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, where the matter remains pending.
On January 13, 1999, two complaints were filed against the Company's parent, The
Limited, and one of its subsidiaries, 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 Limited (some of which have sold goods
to The Limited) 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
The Limited intends to file a motion to dismiss the complaint for failure to
state a claim upon which relief can be granted. 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, The Limited filed a motion seeking dismissal
of this complaint.
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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.
None.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information regarding the executive officers of the
Company as of January 30, 1999.
Leslie H. Wexner, 61, has been Chairman of the Board and Chief Executive Officer
of the Company since 1995. Mr. Wexner has been President and Chief Executive
Officer of The Limited since he founded The Limited in 1963 and has been
Chairman of the Board of Directors of The Limited for more than five years.
Kenneth B. Gilman, 52, has been Vice Chairman of the Company since 1995. Mr.
Gilman has been Vice Chairman and Chief Administrative Officer of The Limited
since June 1997 and was Vice Chairman and Chief Financial Officer of The Limited
from June 1993 to June 1997 and Executive Vice President and Chief Financial
Officer of The Limited for five years prior thereto.
Cynthia A. Fields, 49, has been President and Chief Executive Officer of
Victoria's Secret Catalogue since August 1988, and assumed such position with
the Company in 1995.
Grace A. Nichols, 52, has been President and Chief Executive Officer of
Victoria's Secret Stores, Inc. since January 1991, and assumed such position
with the Company in 1995. For three years prior thereto, Ms. Nichols was
Executive Vice President, General Merchandise Manager of Victoria's Secret
Stores.
Beth M. Pritchard, 52, has been President and Chief Executive Officer of Bath &
Body Works, Inc. ("BBW") since November 1993 and assumed such position with the
Company in 1995. For approximately one and one-half years prior thereto, Ms.
Pritchard held the position of Executive Vice President and General Manager at
BBW. From 1991 until 1993, Ms. Pritchard was Executive Vice President at
Express, a business operated by The Limited.
Philip E. Mallott, 41, has been Vice President Finance and Chief Financial
Officer of the Company since 1995. For approximately one year prior thereto, Mr.
Mallott was Chief Financial Officer at Structure, a business operated by The
Limited. From 1991 until 1994, Mr. Mallott was Vice President-Finance at
Structure.
All of the above officers serve at the pleasure of the Board of Directors of the
Company.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Information regarding markets in which the Company's common stock was traded
during fiscal year 1998 and 1997, approximate number of holders of common stock,
and quarterly cash dividend per share information of the Company's common stock
for the fiscal year 1998 and 1997 is set forth under the caption "Market Price
and Dividend Information" on page 52 of the 1998 Annual Report and is
incorporated herein by reference.
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ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data is set forth under the caption "Financial Summary" on
page 34 of the 1998 Annual Report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results of
operations is set forth under the caption "Management's Discussion and Analysis"
on pages 35 through 41 of the 1998 Annual Report and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements of the Company and subsidiaries, the Notes
to Consolidated Financial Statements and the Report of Independent Accountants
are set forth in the 1998 Annual Report and are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of the Company is set forth under the captions
"ELECTIONS OF DIRECTORS - Nominees and directors", "-Information concerning the
Board of Directors", "Committees of the Board of Directors and "- Security
ownership of directors and management" on pages 4 through 8 of the Company's
proxy statement for the Annual Meeting of Shareholders to be held on May 17,
1999 (the "Proxy Statement") and is incorporated herein by reference.
Information regarding compliance with Section 16 (a) of the Securities Exchange
Act of 1934, as amended, is set forth under the caption "EXECUTIVE COMPENSATION
- - Section 16 (a) beneficial ownership reporting compliance" on page 13 of the
Proxy Statement and is incorporated herein by reference. Information regarding
the executive officers is set forth herein under the caption "SUPPLEMENTAL ITEM.
EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation is set forth under the caption
"EXECUTIVE COMPENSATION" on pages 9 through 13 of the Proxy Statement and is
incorporated herein by reference. Such incorporation by reference shall not be
deemed to specifically incorporate by reference the information referred to in
Item 402 (a) (8) of Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information regarding the security ownership of certain beneficial owners and
management is set forth under the captions "ELECTION OF DIRECTORS - Security
ownership of directors and management" on pages 7 and 8 of the Proxy Statement
and "Share ownership of principal stockholders" on page 18 of the Proxy
Statement and is incorporated herein by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions is set
forth under the caption "ELECTION OF DIRECTORS - Nominees and directors" on
pages 4 and 5 of the Proxy Statement and is incorporated herein by reference.
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 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.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a)(1) List of Financial Statements.
-----------------------------
The following consolidated financial statements of Intimate Brands,
Inc. and subsidiaries and the related notes are filed as a part of this
report pursuant to ITEM 8:
Consolidated Statements of Income for the fiscal years ended January
30, 1999, January 31, 1998 and February 1, 1997.
Consolidated Balance Sheets as of January 30, 1999 and January 31,
1998.
Consolidated Statements of Shareholders' Equity for the fiscal years
ended January 30, 1999, January 31, 1998 and February 1, 1997.
Consolidated Statements of Cash Flows for the fiscal years ended
January 30, 1999, January 31, 1998 and February 1, 1997.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
(a)(2) List of Financial Statement Schedules.
--------------------------------------
All schedules are omitted because the required information is
either presented in the financial statements or notes thereto,
or is not applicable, required or material.
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(a)(3) List of Exhibits.
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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 adopted October 20, 1995 and as
amended April 1, 1999.
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. Restated Bylaws of The Limited, Inc.
10. Material Contracts.
10.1. Services Agreement by Intimate Brands, Inc. and The
Limited, Inc., dated October 23, 1995 incorporated by
reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 28,
1995.
10.2. Credit Card Processing Agreement by World Financial
Network National Bank and Victoria's Secret Stores,
Inc., dated October 23, 1995 incorporated by reference
to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 28, 1995.
10.3. Credit Card Processing Agreement by World Financial
Network National Bank and Victoria's Secret Catalogue,
Inc., dated October 23, 1995 incorporated by reference
to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 28, 1995.
10.4. Corporate Agreement by Intimate Brands, Inc. and The
Limited, Inc., dated October 23, 1995 incorporated by
reference to Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 28,
1995.
10.5. Tax Sharing Agreement by Intimate Brands, Inc. and The
Limited, Inc., dated October 23, 1995 incorporated by
reference to Exhibit 10.5 to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 28,
1995.
10.6. Building Lease Agreement by Distribution Land Corp. and
Victoria's Secret Stores, Inc., dated June 1, 1995
incorporated by reference to Exhibit 10.6 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995.
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10.7. Building Lease Agreement by Distribution Land Corp. and
Victoria's Secret Catalogue, Inc., dated June 1, 1995
incorporated by reference to Exhibit 10.7 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995.
10.8. Sublease Agreement by The Limited London-Paris-New
York, Inc. and Bath & Body Works, Inc., dated June 1,
1995 incorporated by reference to Exhibit 10.8 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995.
10.9. Reserved for future use.
10.10. Sublease Agreement by Victoria's Secret Stores, Inc.
and Henri Bendel, Inc., dated June 1, 1995 incorporated
by reference to Exhibit 10.10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
October 28, 1995.
10.11. Sublease Agreement by Victoria's Secret Stores, Inc.
and Abercrombie & Fitch Co., Inc., dated June 1, 1995
incorporated by reference to Exhibit 10.11 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995.
10.12. Shared Facilities Agreement by The Limited
London-Paris-New York, Inc. and Bath & Body Works,
Inc., dated October 25, 1995 incorporated by reference
to Exhibit 10.12 to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 28, 1995.
10.13. Shared Facilities Agreement by Structure, Inc. and Bath
& Body Works, Inc., dated October 25, 1995 incorporated
by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
October 28, 1995.
10.14. Shared Facilities Agreement by The Limited
London-Paris-New York, Inc. and Victoria's Secret
Stores, Inc., dated October 25, 1995 incorporated by
reference to Exhibit 10.14 to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 28,
1995.
10.15. Shared Facilities Agreement by Express, Inc. and Bath &
Body Works, Inc., dated October 25, 1995 incorporated
by reference to Exhibit 10.15 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
October 28, 1995.
10.16. Shared Facilities Agreement by The Limited
London-Paris-New York, Inc. and Victoria's Secret
Stores, Inc., dated October 25, 1995 incorporated by
reference to Exhibit 10.16 to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 28,
1995.
10.17. Reserved for future use.
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10.18. Reserved for future use.
10.19. Shared Facilities Agreement by Express, Inc. and
Victoria's Secret Stores, Inc., dated October 25, 1995
incorporated by reference to Exhibit 10.20 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995.
10.20. Shared Facilities Agreement by Lerner New York, Inc.
and Bath & Body Works, Inc., dated October 25, 1995
incorporated by reference to Exhibit 10.21 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995.
10.21. Reserved for future use.
10.22. Shared Facilities Agreement by Express, Inc. and
Victoria's Secret Stores, Inc., dated October 25, 1995
incorporated by reference to Exhibit 10.23 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995.
10.23. Intimate Brands, Inc. 1995 Stock Option and Performance
Incentive Plan incorporated by reference to Exhibit B
to the Company's Proxy Statement dated April 14, 1997.
10.24. Intimate Brands, Inc. Incentive Compensation
Performance Plan incorporated by reference to Exhibit A
to the Company's Proxy Statement dated April 14, 1997.
10.25. Intimate Brands, Inc. 1995 Stock Plan for Non-Associate
Directors incorporated by reference to Exhibit 10.26 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended October 28, 1995.
10.26. Form of Indemnification Agreement between the Company
and the directors and officers of the Company
incorporated by reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K for the year ended
February 3, 1996.
10.27 Supplemental Schedule of Directors and Executive
Officers who are Parties to an Indemnification
Agreement.
13. Excerpts from the 1998 Annual Report to Shareholders, including
"Financial Summary", "Management's Discussion and Analysis",
"Financial Statements and Notes", and "Report of Independent
Accountants" on pages 34 - 52.
21. Subsidiaries of the Registrant.
23. Consent of Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule.
99. Annual Report of The Limited, Inc. Savings and Retirement Plan.
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed during the fourth quarter of
fiscal year 1998.
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(c) Exhibits.
---------
The exhibits to this report are listed in section (a)(3) of Item
14 above.
(d) Financial Statement Schedules.
------------------------------
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or l5(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: April 27, 1999
INTIMATE BRANDS, INC.
(registrant)
By /s/ PHILIP E. MALLOTT
--------------------------
Philip E. Mallott,
Vice President Finance and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on January 30, 1999:
Signature Title
--------- -----
/s/ LESLIE H. WEXNER* Chairman of the Board of Directors,
- ---------------------------- President and Chief Executive Officer
Leslie H. Wexner
/s/ KENNETH B. GILMAN* Director and Vice Chairman
- ----------------------------
Kenneth B. Gilman
/s/ ROGER D. BLACKWELL* Director
- ----------------------------
Roger D. Blackwell
/s/ CYNTHIA A. FIELDS* Director
- ----------------------------
Cynthia A. Fields
/s/ E. GORDON GEE* Director
- ----------------------------
E. Gordon Gee
/s/ WILLIAM E. KIRWAN* Director
- ----------------------------
William E. Kirwan
/s/ GRACE A. NICHOLS* Director
- ----------------------------
Grace A. Nichols
/s/ BETH M. PRITCHARD* Director
- ----------------------------
Beth M. Pritchard
13
<PAGE> 14
/s/ DONALD B. SHACKELFORD* Director
- ----------------------------
Donald B. Shackelford
/s/ ALEX SHUMATE* Director
- ----------------------------
Alex Shumate
*The undersigned, by signing his name hereto, does hereby sign this report on
behalf of each of the above-indicated directors of the registrant pursuant to
powers of attorney executed by such directors.
By /s/ KENNETH B. GILMAN
----------------------
Kenneth B. Gilman
Attorney-in-fact
14
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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INTIMATE BRANDS, INC.
(exact name of Registrant as specified in its charter)
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EXHIBITS
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<PAGE> 16
EXHIBIT INDEX
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Exhibit No. Document
- ----------- --------
3.2 Bylaws of the Company adopted October 20, 1995 and as
amended April 1, 1999.
4.3 Restated Bylaws of The Limited, Inc.
10.27 Supplemental Schedule of Directors and Executive
Officers who are Parties to an Indemnification Agreement.
13 Excerpts from the 1998 Annual Report to Shareholders,
including "Financial Summary", "Management's Discussion
and Analysis" and "Financial Statements and Notes", and
"Report of Independent Accountants" on pages 34 - 52.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
99 Annual Report of The Limited, Inc. Savings and Retirement
Plan.
<PAGE> 1
EXHIBIT 3.2
-----------
BYLAWS
OF
INTIMATE BRANDS, INC.
Adopted October 20, 1995
and as Amended
April 1, 1999
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. The annual meeting of the stockholders of
this corporation, for the purpose of fixing or changing the number of directors
of the corporation, electing directors and transacting such other business as
may come before the meeting, shall be held on such date, at such time and at
such place as may be designated by the Board of Directors.
Section 1.02. Special Meetings. Special meetings of the stockholders
may be called at any time by the chairman of the board, the vice chairman of the
board, or in case of the death, absence or disability of the chairman of the
board and the vice chairman of the board, the president, or in case of the
president's death, absence, or disability, the vice-president, if any,
authorized to exercise the authority of the president, or a majority of the
Board of Directors acting with or without a meeting; provided, that if and to
the extent that any special meeting of stockholders may be called by any other
person or persons specified in any provision of the certificate of incorporation
or any amendment thereto or any certificate filed under Section 151(g) of the
Delaware General Corporation Law (or its successor statute as in effect from
time to time), then such special meeting may also be called by the person or
persons, in the manner, at the times and for the purposes so specified.
Section 1.03. Place of Meetings. Meetings of stockholders shall be held
at the principal office of the corporation in the State of Ohio, unless the
Board of Directors decides that a meeting shall be held at some other place and
causes the notice thereof to so state.
Section 1.04. Notice of Meetings. (a) Unless waived, a written,
printed, or typewritten notice of each annual or special meeting, stating the
date, hour and place and the purpose or purposes thereof shall be served upon or
mailed to each stockholder of record entitled to vote or entitled to notice, not
more than 60 days nor less than 10 days before any such meeting. If mailed, such
notice shall be directed to a stockholder at his or her address as the same
appears on the records of the corporation. If a meeting is adjourned to another
time or place and such adjournment is for 30 days or less and no new record date
is fixed for the adjourned meeting, no further notice as to such adjourned
meeting need be given if the time and place to which it is adjourned are fixed
and announced at such meeting. In the event of a transfer of shares after notice
has been given and prior to the holding of the meeting, it shall not be
necessary to serve notice on the transferee. Such notice shall specify the place
where the stockholders list will be open for examination prior to the meeting if
required by Section 1.08 hereof. If the adjournment
<PAGE> 2
is for more than 30 days, or after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
(b) A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 1.05. Fixing Date for Determination of Stockholders of Record.
In order that the corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. If the Board shall not fix such a
record date, (i) the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held, and (ii) in any case involving the determination of stockholders for any
purpose other than notice of or voting at a meeting of stockholders, the record
date for determining stockholders for such purpose shall be the close of
business on the day on which the Board of Directors shall adopt the resolution
relating thereto. Determination of stockholders entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 1.06. Organization. At each meeting of the stockholders, the
chairman of the board, or in his absence, the vice chairman of the board, or in
his absence, the president, or, in his absence, any vice-president, or, in the
absence of the chairman of the board, the vice chairman of the board, the
president and a vice-president, a chairman chosen by a majority in interest of
the stockholders present in person or by proxy and entitled to vote, shall act
as chairman, and the secretary of the corporation, or, if the secretary of the
corporation not be present, the assistant secretary, or if the secretary and the
assistant secretary not be present, any person whom the chairman of the meeting
shall appoint, shall act as secretary of the meeting.
Section 1.07. Quorum. A stockholders' meeting duly called shall not be
organized for the transaction of business unless a quorum is present. Except as
otherwise expressly provided by law, the certificate of incorporation, these
bylaws, or any certificate filed under Section 151(g) of the Delaware General
Corporation Law (or its successor statute as in effect from time to time), (i)
at any meeting called by the Board of Directors, the presence in person or by
proxy of holders of record entitling them to exercise at least one-third of the
voting power of the corporation shall constitute a quorum for such meeting and
(ii) at any meeting
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called other than by the Board of Directors, the presence in person or by proxy
of holders of record entitling them to exercise at least a majority of the
voting power of the corporation shall constitute a quorum for such meeting. The
stockholders present at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. If a meeting cannot be organized because a quorum has
not attended, a majority in voting interest of the stockholders present may
adjourn, or, in the absence of a decision by the majority, any officer entitled
to preside at such meeting may adjourn the meeting from time to time to such
time (not more than 30 days after the previously adjourned meeting) and place as
they (or he) may determine, without notice other than by announcement at the
meeting of the time and place of the adjourned meeting. At any such adjourned
meeting at which a quorum is present any business may be transacted which might
have been transacted at the meeting as originally called.
Section 1.08. Order of Business and Procedure. The order of business at
all meetings of the stockholders and all matters relating to the manner of
conducting the meeting shall be determined by the chairman of the meeting.
Meetings shall be conducted in a manner designed to accomplish the business of
the meeting in a prompt and orderly fashion and to be fair and equitable to all
stockholders, but it shall not be necessary to follow any manual of
parliamentary procedure.
Section 1.09. Advance Notice of Stockholder Proposals. In order to
properly submit any business to an annual meeting of stockholders, a stockholder
must give timely notice in writing to the secretary of the corporation. To be
considered timely, a stockholder's notice must be delivered either in person or
by United States certified mail, postage prepaid, and received at the principal
executive offices of the corporation (a) not less than 120 days nor more than
150 days before the first anniversary date of the corporation's proxy statement
in connection with the last annual meeting of stockholders or (b) if no annual
meeting was held in the previous year or the date of the applicable annual
meeting has been changed by more than 30 days from the date contemplated at the
time of the previous year's proxy statement, not less than a reasonable time, as
determined by the Board of Directors, prior to the date of the applicable annual
meeting.
Nomination of persons for election to the Board of Directors may be
made by the Board of Directors or any committee designated by the Board of
Directors or by any stockholder entitled to vote for the election of directors
at the applicable meeting of stockholders. However, nominations other than those
made by the Board of Directors or its designated committee must comply with the
procedures set forth in this Section 1.09, and no person shall be eligible for
election as a director unless nominated in accordance with the terms of this
Section 1.09.
A stockholder may nominate a person or persons for election to the
Board of Directors by giving written notice to the secretary of the corporation
in accordance with the procedures set forth above. In addition to the timeliness
requirements set forth above for notice to the corporation by a stockholder of
business to be submitted at an annual meeting of stockholders, with respect to
any special meeting of stockholders called for the election of directors,
written notice must be delivered in the manner specified above and not later
than the
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close of business on the seventh day following the date on which notice of such
meeting is first given to stockholders.
The secretary of the corporation shall deliver any stockholder
proposals and nominations received in a timely manner for review by the Board of
Directors or a committee designated by the Board of Directors.
A stockholder's notice to submit business to an annual meeting of
stockholders shall set forth (i) the name and address of the stockholder, (ii)
the class and number of shares of stock beneficially owned by such stockholder,
(iii) the name in which such shares are registered on the stock transfer books
of the corporation, (iv) a representation that the stockholder intends to appear
at the meeting in person or by proxy to submit the business specified in such
notice, (v) any material interest of the stockholder in the business to be
submitted and (vi) a brief description of the business desired to be submitted
to the annual meeting, including the complete text of any resolutions to be
presented at the annual meeting, and the reasons for conducting such business at
the annual meeting. In addition, the stockholder making such proposal shall
promptly provide any other information reasonably requested by the corporation.
In addition to the information required above to be given by a
stockholder who intends to submit business to a meeting of stockholders, if the
business to be submitted is the nomination of a person or persons for election
to the Board of Directors then such stockholder's notice must also set forth, as
to each person whom the stockholder proposes to nominate for election as a
director, (a) the name, age, business address and, if known, residence address
of such person, (b) the principal occupation or employment of such person, (c)
the class and number of shares of stock of the corporation which are
beneficially owned by such person, (d) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors or is otherwise required by the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended, (e) the written consent of such person to be named in the
proxy statement as a nominee and to serve as a director if elected and (f) a
description of all arrangements or understandings between such stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
stockholder.
Any person nominated for election as director by the Board of Directors
or any committee designated by the Board of Directors shall, upon the request of
the Board of Directors or such committee, furnish to the secretary of the
corporation all such information pertaining to such person that is required to
be set forth in a stockholder's notice of nomination.
Notwithstanding the foregoing provisions of this Section 1.09, a
stockholder who seeks to have any proposal included in the corporation's proxy
statement shall comply with the requirements of Regulation 14A under the
Securities Exchange Act of 1934, as amended.
Section 1.10. Voting. (a) Each stockholder shall, at each meeting of
the stockholders, be entitled to vote in person or by proxy each share or
fractional share of the stock of the corporation having voting rights on the
matter in question and which shall have been held by him and registered in his
name on the books of the corporation on the date fixed pursuant to
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Section 1.05 of these bylaws as the record date for the determination of
stockholders entitled to notice of and to vote at such meeting.
(b) Shares of its own stock belonging to the corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto or by his proxy appointed by an instrument in writing or in any other
manner then permitted by law, subscribed by such stockholder or by such
stockholder's attorney thereunto authorized in any manner then permitted by law
and delivered to the secretary of the meeting in sufficient time to permit the
necessary examination and tabulation thereof before the vote is taken; provided,
however, that no proxy shall be valid after the expiration of three years after
its date of execution, unless the stockholder executing it shall have specified
therein the length of time it is to continue in force. At any meeting of the
stockholders all matters, except as otherwise provided in the certificate of
incorporation, in these bylaws or by law, shall be decided by the vote of a
majority in voting interest of the stockholders present in person or by proxy
and voting thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting or required by the certificate of incorporation. On a
vote by ballot each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and it shall state the number of shares voted.
Section 1.11. Inspectors. The Board of Directors, in advance of any
meeting of the stockholders, may appoint one or more inspectors to act at the
meeting. If inspectors are not so appointed, the person presiding at the meeting
may appoint one or more inspectors. If any person so appointed fails to appear
or act, the vacancy may be filled by appointment made by the Board of Directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector at the meeting with
strict impartiality and according to the best of his ability. The inspectors so
appointed, if any, shall determine the number of shares outstanding, the shares
represented at the meeting, the existence of a quorum and the authenticity,
validity and effect of proxies and shall receive votes, ballots, waivers,
releases, or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots,
waivers, releases, or consents, determine and announce the results and do such
acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the meeting, the inspectors
shall make a report in writing of any challenge, question or matter determined
by them and execute a certificate of any fact found by them. Any report or
certificate made by them shall be prima facie evidence of the facts stated and
of the vote as certified by them.
ARTICLE II
BOARD OF DIRECTORS
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Section 2.01. General Powers of Board. The powers of the corporation
shall be exercised, its business and affairs conducted, and its property
controlled by or under the direction of the Board of Directors, except as
otherwise provided by the law of Delaware or in the certificate of
incorporation.
Section 2.02. Number of Directors. The number of directors of the
corporation (exclusive of directors to be elected by the holders of any one or
more series of Preferred Stock voting separately as a class or classes) shall
not be less than 9 nor more than 13, the exact number of directors to be such
number as may be set from time to time within the limits set forth above by
resolution adopted by affirmative vote of a majority of the whole Board of
Directors. As used in these Bylaws, the term "whole Board" means the total
number of directors which the corporation would have if there were no vacancies.
Section 2.03. Election of Directors. At each meeting of the
stockholders for the election of directors, the persons receiving the greatest
number of votes shall be the directors. Directors need not be stockholders.
Section 2.04. Nominations.
2.04.1. Nominations for the election of directors may be made
by the Board of Directors or by any stockholder entitled to vote for the
election of directors.
2.04.2. Such nominations, if not made by the Board of
Directors, shall be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the secretary of the corporation
not less than 14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided, however, that if
less than 21 days' notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the secretary of the
corporation not later than the close of the seventh day following the day on
which notice of the meeting was mailed to stockholders. Each such notice shall
set forth (i) the name, age, business address and, if known, residence address
of each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, and (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee.
2.04.3. Notice of nominations which are proposed by the Board
of Directors shall be given on behalf of the Board by the chairman of the
meeting.
2.04.4. The chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if the chairman should so
determine, the chairman shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 2.05. Resignations. Any director of the corporation may resign
at any time by giving written notice to the chairman of the board or the
secretary of the corporation. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
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Section 2.06. Vacancies. In the event that any vacancy shall occur in
the Board of Directors, whether because of death, resignation, removal, newly
created directorships resulting from any increase in the authorized number of
directors, the failure of the stockholders to elect the whole authorized number
of directors, or any other reason, such vacancy may be filled by the vote of a
majority of the directors then in office, although less than a quorum. A
director elected to fill a vacancy, other than a newly created directorship,
shall hold office for the unexpired term of his predecessor. Whenever the
holders of any class or classes of stock or series thereof are entitled to elect
one or more directors by the certificate of incorporation, vacancies and newly
created directorships of such class or classes or series may be filled by a
majority of directors elected by such class or classes or series thereof then in
office, or by a sole remaining director so elected.
Section 2.07. Removal of Directors. Directors may be removed only as
provided in the certificate of incorporation.
Section 2.08. Place of Meeting, etc. The Board of Directors may hold
any of its meetings at the principal office of the corporation or at such other
place or places as the Board of Directors (or the chairman in the absence of a
determination by the Board of Directors) may from time to time designate.
Directors may participate in any regular or special meeting of the Board of
Directors by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board of
Directors can hear each other and such participation shall constitute presence
in person at such meeting.
Section 2.09. Annual Meeting. A regular annual meeting of the Board of
Directors shall be held each year at the same place as and immediately after the
annual meeting of stockholders, or at such other place and time as shall
theretofore have been determined by the Board of Directors and notice thereof
need not be given. At its regular annual meeting the Board of Directors shall
organize itself and elect the officers of the corporation for the ensuing year,
and may transact any other business.
Section 2.10. Regular Meetings. Regular meetings of the Board of
Directors may be held at such intervals at such time as shall from time to time
be determined by the Board of Directors. After such determination and notice
thereof has been once given to each person then a member of the Board of
Directors, regular meetings may be held at such intervals and time and place
without further notice being given.
Section 2.11. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Board of Directors or by the chairman
or by a majority of directors then in office to be held on such day and at such
time as shall be specified by the person or persons calling the meeting.
Section 2.12. Notice of Meetings. Notice of each special meeting or,
where required, each regular meeting, of the Board of Directors shall be given
to each director either by being mailed on at least the third day prior to the
date of the meeting or by being telegraphed, faxed or given personally or by
telephone on at least 24 hours notice prior to the date of meeting. Such notice
shall specify the place, date and hour of the meeting and, if it is for a
special
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meeting, the purpose or purposes for which the meeting is called. At any meeting
of the Board of Directors at which every director shall be present, even though
without such notice, any business may be transacted. Any acts or proceedings
taken at a meeting of the Board of Directors not validly called or constituted
may be made valid and fully effective by ratification at a subsequent meeting
which shall be legally and validly called or constituted. Notice of any regular
meeting of the Board of Directors need not state the purpose of the meeting and,
at any regular meeting duly held, any business may be transacted. If the notice
of a special meeting shall state as a purpose of the meeting the transaction of
any business that may come before the meeting, then at the meeting any business
may be transacted, whether or not referred to in the notice thereof. A written
waiver of notice of a special or regular meeting, signed by the person or
persons entitled to such notice, whether before or after the time stated therein
shall be deemed the equivalent of such notice, and attendance of a director at a
meeting shall constitute a waiver of notice of such meeting except when the
director attends the meeting and prior to or at the commencement of such meeting
protests the lack of proper notice.
Section 2.13. Quorum and Voting. At all meetings of the Board of
Directors, the presence of a majority of the directors then in office shall
constitute a quorum for the transaction of business. Except as otherwise
required by law, the certificate of incorporation, or these bylaws, the vote of
a majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. At all meetings of the Board of
Directors, each director shall have one vote.
Section 2.14. Committees. The Board of Directors may appoint an
executive committee and any other committee of the Board of Directors, to
consist of one or more directors of the corporation, and may delegate to any
such committee any of the authority of the Board of Directors, however
conferred, other than the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the bylaws of the corporation. No committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock unless the
resolution creating such committee expressly so provides. Each such committee
shall serve at the pleasure of the Board of Directors, shall act only in the
intervals between meetings of the Board of Directors and shall be subject to the
control and direction of the Board of Directors. Any such committee may act by a
majority of its members at a meeting or by a writing or writings signed by all
of its members. Any such committee shall keep written minutes of its meetings
and report the same to the Board of Directors at the next regular meeting of the
Board of Directors.
Section 2.15. Compensation. The Board of Directors may, by resolution
passed by a majority of those in office, fix the compensation of directors for
service in any capacity and may fix fees for attendance at meetings and may
authorize the corporation to pay the traveling and other expenses of directors
incident to their attendance at meetings, or may delegate such authority to a
committee of the board.
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Section 2.16. Action by Consent. Any action required or permitted to be
taken at any meeting of the board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the board or such committee.
ARTICLE III
OFFICERS
Section 3.01. General Provisions. The principal officers of the
corporation shall be the chairman of the board (who shall be a director), a vice
chairman of the board (who shall be a director), a president, such number of
vice-presidents as the board may from time to time determine, a secretary and a
treasurer. Any person may hold any two or more offices and perform the duties
thereof, except the offices of chairman of the board and vice chairman of the
board, or the offices of president and vice-president or the offices of
president and secretary.
Section 3.02. Election, Terms of Office, and Qualification. The
officers of the corporation named in Section 3.01 of this Article III shall be
elected by the Board of Directors for an indeterminate term and shall hold
office at the pleasure of the Board of Directors.
Section 3.03. Additional Officers, Agents, etc. In addition to the
officers mentioned in Section 3.01 of this Article III, the corporation may have
such other officers or agents as the Board of Directors may deem necessary and
may appoint, each of whom shall hold office for such period, have such authority
and perform such duties as the Board of Directors may from time to time
determine. The Board of Directors may delegate to any officer the power to
appoint any subordinate officers or agents. In the absence of any officer of the
corporation, or for any other reason the Board of Directors may deem sufficient,
the Board of Directors may delegate, for the time being, the powers and duties,
or any of them, of such officer to any other officer, or to any director.
Section 3.04. Removal. Except as set forth below, any officer of the
corporation may be removed, either with or without cause, at any time, by
resolution adopted by the Board of Directors at any meeting, the notice (or
waivers of notice) of which shall have specified that such removal action was to
be considered. Any officer appointed not by the Board of Directors but by an
officer or committee to which the Board of Directors shall have delegated the
power of appointment may be removed, with or without cause, by the committee or
superior officer (including successors) who made the appointment, or by any
committee or officer upon whom such power of removal may be conferred by the
Board of Directors.
Section 3.05. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors, or to the chairman of the
board, the vice chairman of the board, the president, or the secretary of the
corporation. Any such resignation shall take effect at the time specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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Section 3.06. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise, shall be filled in the
manner prescribed in these bylaws for regular appointments or elections to such
office.
ARTICLE IV
DUTIES OF THE OFFICERS
Section 4.01. The Chairman of the Board. The chairman of the board
shall be chief executive officer of the corporation and shall have general
supervision over the property, business and affairs of the corporation and over
its several officers, subject, however, to the control of the Board of
Directors. The chairman shall, if present, preside at all meetings of the
stockholders and of the Board of Directors. The chairman may sign, with the
secretary, treasurer or any other proper officer of the corporation thereunto
authorized by the Board of Directors, certificates for shares in the
corporation. The chairman may sign, execute and deliver in the name of the
corporation all deeds, mortgages, bonds, leases, contracts, or other instruments
either when specially authorized by the Board of Directors or when required or
deemed necessary or advisable by him in the ordinary conduct of the
corporation's normal business, except in cases where the signing and execution
thereof shall be expressly delegated by these bylaws to some other officer or
agent of the corporation or shall be required by law or otherwise to be signed
or executed by some other officer or agent, and the chairman may cause the seal
of the corporation, if any, to be affixed to any instrument requiring the same.
Section 4.02. Vice Chairman of the Board. The vice chairman of the
board shall perform such duties as are conferred upon him by these bylaws or as
may from time to time be assigned to him by the chairman of the board or the
Board of Directors. The authority of the vice chairman of the board to sign in
the name of the corporation all certificates for shares and deeds, mortgages,
leases, bonds, contracts, notes and other instruments, shall be coordinate with
like authority of the chairman of the board. In the absence or disability of the
chairman of the board, the vice chairman of the board shall perform all the
duties of the chairman of the board, and when so acting, shall have all the
powers of the chairman of the board.
Section 4.03. The President. The president shall perform such duties as
are conferred upon him by these bylaws or as may from time to time be assigned
to him by the chairman of the board or the vice chairman of the board or the
Board of Directors.
Section 4.04. Vice-Presidents. The vice-presidents shall perform such
duties as are conferred upon them by these bylaws or as may from time to time be
assigned to them by the Board of Directors, the chairman of the board, the vice
chairman of the board or the president. At the request of the chairman of the
board, in the absence or disability of the president, the vice-president
designated by the chairman of the board shall perform all the duties of the
president, and when so acting, shall have all of the powers of the president.
Section 4.05. The Treasurer. The treasurer shall be the custodian of
all funds and securities of the corporation. Whenever so directed by the Board
of Directors, the treasurer shall
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render a statement of the cash and other accounts of the corporation, and the
treasurer shall cause to be entered regularly in the books and records of the
corporation to be kept for such purpose full and accurate accounts of the
corporation's receipts and disbursements. The treasurer shall have such other
powers and shall perform such other duties as may from time to time be assigned
to him by the Board of Directors, the chairman of the board or the vice chairman
of the board.
Section 4.06. The Secretary. The secretary shall record and keep the
minutes of all meetings of the stockholders and the Board of Directors in a book
to be kept for that purpose. The secretary shall be the custodian of, and shall
make or cause to be made the proper entries in, the minute book of the
corporation and such other books and records as the Board of Directors may
direct. The secretary shall be the custodian of the seal of the corporation, if
any, and shall affix such seal to such contracts, instruments and other
documents as the Board of Directors or any committee thereof may direct. The
secretary shall have such other powers and shall perform such other duties as
may from time to time be assigned to him by the Board of Directors, the chairman
of the board or the vice chairman of the board.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5.01. Indemnification. (a) The corporation shall indemnify and
hold harmless any person (and the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to, or is
involved in, any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he, his testator, or intestate is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust or other enterprise, or as a member of any committee or similar
body, to the fullest extent permitted by the laws of Delaware as they may exist
from time to time. The right to indemnification conferred in this Article V
shall also include the right to be paid by the Corporation the expenses incurred
in connection with any such proceeding in advance of its final disposition to
the fullest extent permitted by the laws of Delaware as they may exist from time
to time.
(b) The corporation may, by action of its Board of Directors, provide
indemnification to such of the employees and agents of the corporation to such
extent and to such effect as the Board of Directors shall determine to be
appropriate and authorized by the laws of Delaware as they may exist from time
to time.
Section 5.02. Insurance. The proper officers of the corporation,
without further authorization by the Board of Directors, may in their discretion
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent for
another corporation, partnership, joint venture, trust or other enterprise,
against any liability.
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Section 5.03. ERISA. To assure indemnification under this Article of
all such persons who are or were "fiduciaries" of an employee benefit plan
governed by the Act of Congress entitled "Employee Retirement Income Security
Act of 1974", as amended from time to time, the provisions of this Article V
shall, for the purposes hereof, be interpreted as follows: an "other enterprise"
shall be deemed to include an employee benefit plan; the corporation shall be
deemed to have requested a person to serve as an employee of an employee benefit
plan where the performance by such person of his duties to the corporation also
imposes duties on, or otherwise involves services by, such person to the plan or
participants or beneficiaries of the plan; excise taxes assessed on a person
with respect to an employee benefit plan pursuant to said Act of Congress shall
be deemed "fines"; and action taken or omitted by a person with respect to an
employee benefit plan in the performance of such person's duties for a purpose
reasonably believed by such person to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
Section 5.04. Contractual Nature. The foregoing provisions of this
Article V shall be deemed to be a contract between the corporation and each
director and officer who serves in such capacity at any time while this Article
is in effect. Neither any repeal or modification of this Article or, to the
fullest extent permitted by the laws of Delaware, any repeal or modification of
laws, shall affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought based in whole or in part upon any such state
of facts.
Section 5.05. Construction. For the purposes of this Article V,
references to "the corporation" include in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director or officer of such constituent corporation or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise or as a member of any committee or similar body shall stand in the
same position under the provisions of this Article with respect to the resulting
or surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
ARTICLE VI
DEPOSITORIES, CONTRACTS AND OTHER INSTRUMENTS
Section 6.01. Depositories. The chairman of the board, the vice
chairman of the board, the president, the treasurer, and any vice-president of
the corporation whom the Board of
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Directors authorizes to designated depositories for the funds of the corporation
are each authorized to designate depositories for the funds of the corporation
deposited in its name and the signatories and conditions with respect thereto in
each case, and from time to time, to change such depositories, signatories and
conditions, with the same force and effect as if each such depository, the
signatories and conditions with respect thereto and changes therein had been
specifically designated or authorized by the Board of Directors; and each
depository designated by the Board of Directors or by the chairman of the board,
the vice chairman of the board, the president, the treasurer, or any such
vice-president of the corporation, shall be entitled to rely upon the
certificate of the secretary or any assistant secretary of the corporation
setting forth the fact of such designation and of the appointment of the
officers of the corporation or of other persons who are to be signatories with
respect to the withdrawal of funds deposited with such depository, or from time
to time the fact of any change in any depository or in the signatories with
respect thereto.
Section 6.02. Execution of Instruments Generally. In addition to the
powers conferred upon the chairman of the board in Section 4.01 and the vice
chairman of the board in Section 4.02 and except as otherwise provided in
Section 6.01 of this Article VI, all contracts and other instruments entered
into in the ordinary course of business requiring execution by the corporation
may be executed and delivered by the president, the treasurer, or any
vice-president and authority to sign any such contracts or instruments, which
may be general or confined to specific instances, may be conferred by the Board
of Directors upon any other person or persons. Any person having authority to
sign on behalf of the corporation may delegate, from time to time, by instrument
in writing, all or any part of such authority to any person or persons if
authorized so to do by the Board of Directors.
ARTICLE VII
SHARES AND THEIR TRANSFER
Section 7.01. Certificate for Shares. Every owner of one or more shares
in the corporation shall be entitled to a certificate, which shall be in such
form as the Board of Directors shall prescribe, certifying the number and class
of shares in the corporation owned by him. When such certificate is
counter-signed by an incorporated transfer agent or registrar, the signature of
any of said officers may be facsimile, engraved, stamped or printed. The
certificates for the respective classes of such shares shall be numbered in the
order in which they shall be issued and shall be signed in the name of the
corporation by the chairman of the board or the vice chairman of the board, or
the president or a vice-president, and by the secretary or an assistant
secretary or the treasurer or an assistant treasurer. A record shall be kept of
the name of the person, firm, or corporation owning the shares represented by
each such certificate and the number of shares represented thereby, the date
thereof, and in case of cancellation, the date of cancellation. Every
certificate surrendered to the corporation for exchange or transfer shall be
cancelled and no new certificate or certificates shall be issued in exchange for
any existing certificates until such existing certificates shall have been so
cancelled.
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Section 7.02. Lost, Destroyed and Mutilated Certificates. If any
certificates for shares in this corporation become worn, defaced, or mutilated
but are still substantially intact and recognizable, the directors or authorized
officers, upon production and surrender thereof, shall order the same cancelled
and shall issue a new certificate in lieu of same. The holder of any shares in
the corporation shall immediately notify the corporation if a certificate
therefor shall be lost, destroyed, or mutilated beyond recognition, and the
corporation may issue a new certificate in the place of any certificate
theretofore issued by it which is alleged to have been lost or destroyed or
mutilated beyond recognition, and the Board of Directors may, in its discretion,
require the owner of the certificate which has been lost, destroyed, or
mutilated beyond recognition, or his legal representative, to give the
corporation a bond in such sum and with such surety or sureties as it may
direct, not exceeding double the value of the stock, to indemnity the
corporation against any claim that may be made against it on account of the
alleged loss, destruction, or mutilation of any such certificate. The Board of
Directors may, however, in its discretion, refuse to issue any such new
certificate except pursuant to legal proceedings, under the laws of the State of
Delaware in such case made and provided.
Section 7.03. Transfers of Shares. Transfers of shares in the
corporation shall be made only on the books of the corporation by the registered
holder thereof, his legal guardian, executor, or administrator, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the secretary of the corporation or with a transfer agent appointed by the Board
of Directors, and on surrender of the certificate or certificates for such
shares properly endorsed or accompanied by properly executed stock powers and
evidence of the payment of all taxes imposed upon such transfer. The person in
whose name shares stand on the books of the corporation shall, to the full
extent permitted by law, be deemed the owner thereof for all purposes as regards
the corporation.
Section 7.04. Regulations. The Board of Directors may make such rules
and regulations as it may deem expedient, not inconsistent with these bylaws
concerning the issue, transfer, and registration of certificates for shares in
the corporation. It may appoint one or more transfer agents or one or more
registrars, or both, and may require all certificates for shares to bear the
signature of either or both.
ARTICLE VIII
SEAL
The Board of Directors may provide a corporate seal, which shall be
circular and contain the name of the corporation engraved around the margin and
the words "corporate seal", the year of its organization, and the word
"Delaware".
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EXHIBIT 4.3
-----------
RESTATED BYLAWS
OF
THE LIMITED, INC.
Adopted April 2, 1984
and as Amended
September 17, 1987
and
February 23, 1990
and
April 1, 1999
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. The annual meeting of the stockholders of
this corporation, for the purpose of fixing or changing the number of directors
of the corporation, electing directors and transacting such other business as
may come before the meeting, shall be held on such date, at such time and at
such place as may be designated by the Board of Directors.
Section 1.02. Special Meetings. Special meetings of the stockholders
may be called at any time by the chairman of the board, the vice chairman of the
board, or in case of the death, absence or disability of the chairman of the
board and the vice chairman of the board, the president, or in case of the
president's death, absence, or disability, the vice-president, if any,
authorized to exercise the authority of the president, or a majority of the
Board of Directors acting with or without a meeting; provided, that if and to
the extent that any special meeting of stockholders may be called by any other
person or persons specified in any provision of the certificate of incorporation
or any amendment thereto or any certificate filed under Section 151(g) of the
Delaware General Corporation Law (or its successor statute as in effect from
time to time), then such special meeting may also be called by the person or
persons, in the manner, at the times and for the purposes so specified.
Section 1.03. Place of Meetings. Meetings of stockholders shall be held
at the principal office of the corporation in the State of Ohio, unless the
Board of Directors decides that a meeting shall be held at some other place and
causes the notice thereof to so state.
Section 1.04. Notices of Meetings. Unless waived, a written, printed,
or typewritten notice of each annual or special meeting, stating the date, hour
and place and the purpose or purposes thereof shall be served upon or mailed to
each stockholder of record entitled to vote or entitled to notice, not more than
60 days nor less than 10 days before any such meeting. If mailed, such notice
shall be directed to a stockholder at his or her address as the same appears on
the records of the corporation. If a meeting is adjourned to another time or
place and such
<PAGE> 2
adjournment is for 30 days or less and no new record date is fixed for the
adjourned meeting, no further notice as to such adjourned meeting need be given
if the time and place to which it is adjourned are fixed and announced at such
meeting. In the event of a transfer of shares after notice has been given and
prior to the holding of the meeting, it shall not be necessary to serve notice
on the transferee. Such notice shall specify the place where the stockholders
list will be open for examination prior to the meeting if required by Section
1.08 hereof.
Section 1.05. Fixing Date for Determination of Stockholders of Record.
In order that the corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. If the Board shall not fix such a
record date, (i) the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held, and (ii) in any case involving the determination of stockholders for any
purpose other than notice of or voting at a meeting of stockholders, the record
date for determining stockholders for such purpose shall be the close of
business on the day on which the Board of Directors shall adopt the resolution
relating thereto. Determination of stockholders entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 1.06. Organization. At each meeting of the stockholders, the
chairman of the board, or in his absence, the vice chairman of the board, or in
his absence, the president, or, in his absence, any vice-president, or, in the
absence of the chairman of the board, the vice chairman of the board, the
president and a vice-president, a chairman chosen by a majority in interest of
the stockholders present in person or by proxy and entitled to vote, shall act
as chairman, and the secretary of the corporation, or, if the secretary of the
corporation not be present, the assistant secretary, or if the secretary and the
assistant secretary not be present, any person whom the chairman of the meeting
shall appoint, shall act as secretary of the meeting.
Section 1.07. Quorum. A stockholders' meeting duly called shall not be
organized for the transaction of business unless a quorum is present. Except as
otherwise expressly provided by law, the certificate of incorporation, these
bylaws, or any certificate filed under Section 151 (g) of the Delaware General
Corporation Law (or its successor statute as in effect from time to time), (i)
at any meeting called by the Board of Directors, the presence in person or by
proxy of holders of record entitling them to exercise at least one-third of the
voting power of the corporation shall constitute a quorum for such meeting and
(ii) at any meeting called other than by the Board of Directors, the presence in
person or by proxy of holders of record entitling them to exercise at least a
majority of the voting power of the corporation shall constitute a quorum for
such meeting. The stockholders present at a duly organized meeting can continue
to do business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a
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quorum. If a meeting cannot be organized because a quorum has not attended, a
majority in voting interest of the stockholders present may adjourn, or, in the
absence of a decision by the majority, any officer entitled to preside at such
meeting may adjourn the meeting from time to time to such time (not more than 30
days after the previously adjourned meeting) and place as they (or he) may
determine, without notice other than by announcement at the meeting of the time
and place of the adjourned meeting. At any such adjourned meeting at which a
quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
Section 1.08. List of Stockholders. The secretary of the corporation
shall prepare and make a complete list of the stockholders of record as of the
applicable record date entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 1.09. Order of Business and Procedure. The order of business at
all meetings of the stockholders and all matters relating to the manner of
conducting the meeting shall be determined by the chairman of the meeting, whose
decisions may be overruled only by majority vote of the stockholders present and
entitled to vote at the meeting in person or by proxy. Meetings shall be
conducted in a manner designed to accomplish the business of the meeting in a
prompt and orderly fashion and to be fair and equitable to all stockholders, but
it shall not be necessary to follow any manual of parliamentary procedure.
Section 1.10. Voting. (a) Each stockholder shall, at each meeting of
the stockholders, be entitled to vote in person or by proxy each share or
fractional share of the stock of the corporation having voting rights on the
matter in question and which shall have been held by him and registered in his
name on the books of the corporation on the date fixed pursuant to Section 1.05
of these bylaws as the record date for the determination of stockholders
entitled to notice of and to vote at such meeting.
(b) Shares of its own stock belonging to the corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto or by his proxy appointed by an instrument in writing or in any other
manner then permitted by law, subscribed by such stockholder or such
stockholder's attorney thereunto authorized in any manner then permitted by law
and delivered to the secretary of the meeting in sufficient time to permit the
necessary examination and tabulation thereof before the vote is taken; provided,
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however, that no proxy shall be valid after the expiration of three years after
its date of execution, unless the stockholder executing it shall have specified
therein the length of time it is to continue in force. At any meeting of the
stockholders all matters, except as otherwise provided in the certificate of
incorporation, in these bylaws or by law, shall be decided by the vote of a
majority in voting interest of the stockholders present in person or by proxy
and voting thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting or required by the certificate of incorporation. On a
vote by ballot each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and it shall state the number of shares voted.
Section 1.11. Inspectors. The Board of Directors, in advance of any
meeting of the stockholders, may appoint one or more inspectors to act at the
meeting. If inspectors are not so appointed, the person presiding at the meeting
may appoint one or more inspectors. If any person so appointed fails to appear
or act, the vacancy may be filled by appointment made by the Board of Directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector at the meeting with
strict impartiality and according to the best of his ability. The inspectors so
appointed shall determine the number of shares outstanding, the shares
represented at the meeting, the existence of a quorum and the authenticity,
validity and effect of proxies and shall receive votes, ballots, waivers,
releases, or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots,
waivers, releases, or consents, determine and announce the results and do such
acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the meeting, the inspectors
shall make a report in writing of any challenge, question or matter determined
by them and execute a certificate of any fact found by them. Any report or
certificate made by them shall be prima facie evidence of the facts stated and
of the vote as certified by them.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers of Board. The powers of the corporation
shall be exercised, its business and affairs conducted, and its property
controlled by the Board of Directors, except as otherwise provided by the law of
Delaware or in the certificate of incorporation.
Section 2.02. Number of Directors. The number of directors of the
corporation (exclusive of directors to be elected by the holders of any one or
more series of Preferred Stock voting separately as a class or classes) shall
not be less than 9 nor more than 13, the exact number of directors to be such
number as may be set from time to time within the limits set forth above by
resolution adopted by affirmative vote of a majority of the whole Board of
Directors. As used in these Bylaws, the term "whole Board" means the total
number of directors which the corporation would have if there were no vacancies.
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<PAGE> 5
Section 2.03. Election of Directors. At each meeting of the
stockholders for the election of directors, the persons receiving the greatest
number of votes shall be the directors.
Section 2.04. Nominations.
2.04.1. Nominations for the election of directors may be made
by the Board of Directors or by any stockholder entitled to vote for the
election of directors.
2.04.2. Such nominations, if not made by the Board of
Directors, shall be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the secretary of the corporation
not less than 14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided, however, that if
less than 21 days' notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the secretary of the
corporation not later than the close of the seventh day following the day on
which notice of the meeting was mailed to stockholders. Each such notice shall
set forth (i) the name, age, business address and, if known, residence address
of each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, and (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee.
2.04.3. Notice of nominations which are proposed by the Board
of Directors shall be given on behalf of the Board by the chairman of the
meeting.
2.04.4. The chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
Section 2.05. Resignations. Any director of the corporation may resign
at any time by giving written notice to the chairman of the board or the
secretary of the corporation. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 2.06. Vacancies. In the event that any vacancy shall occur in
the Board of Directors, whether because of death, resignation, removal, newly
created directorships resulting from any increase in the authorized number of
directors, the failure of the stockholders to elect the whole authorized number
of directors, or any other reason, such vacancy may be filled by the vote of a
majority of the directors then in office, although less than a quorum. A
director elected to fill a vacancy, other than a newly created directorship,
shall hold office for the unexpired term of his predecessor.
Section 2.07. Removal of Directors. Directors may be removed only as
provided in the certificate of incorporation.
5
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Section 2.08. Place of Meeting. etc. The Board of Directors may hold
any of its meetings at the principal office of the corporation or at such other
place or places as the Board of Directors may from time to time designate.
Directors may participate in any regular or special meeting of the Board of
Directors by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board of
Directors can hear each other and such participation shall constitute presence
in person at such meeting.
Section 2.09. Annual Meeting. A regular annual meeting of the Board of
Directors shall be held each year at the same place as and immediately after the
annual meeting of stockholders, or at such other place and time as shall
theretofore have been determined by the Board of Directors and notice thereof
need not be given. At its regular annual meeting the Board of Directors shall
organize itself and elect the officers of the corporation for the ensuing year,
and may transact any other business.
Section 2.10. Regular Meetings. Regular meetings of the Board of
Directors may be held at such intervals and at such time as shall from time to
time be determined by the Board of Directors. After such determination and
notice thereof has been once given to each person then a member of the Board of
Directors, regular meetings may be held at such intervals and time and place
without further notice being given.
Section 2.11. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Board of Directors or by the chief
executive officer or by a majority of directors then in office to be held on
such day and at such time as shall be specified by the person or persons calling
the meeting.
Section 2.12. Notice of Meetings. Notice of each special meeting or,
where required, each regular meeting, of the Board of Directors shall be given
to each director either by being mailed on at least the third day prior to the
date of the meeting or by being telegraphed or given personally or by telephone
on at least 24 hours notice prior to the date of meeting. Such notice shall
specify the place, date and hour of the meeting and, if it is for a special
meeting, the purpose or purposes for which the meeting is called. At any meeting
of the Board of Directors at which every director shall be present, even though
without such notice, any business may be transacted. Any acts or proceedings
taken at a meeting of the Board of Directors not validly called or constituted
may be made valid and fully effective by ratification at a subsequent meeting
which shall be legally and validly called or constituted. Notice of any regular
meeting of the Board of Directors need not state the purpose of the meeting and,
at any regular meeting duly held, any business may be transacted. If the notice
of a special meeting shall state as a purpose of the meeting the transaction of
any business that may come before the meeting, then at the meeting any business
may be transacted, whether or not referred to in the notice thereof. A written
waiver of notice of a special or regular meeting, signed by the person or
persons entitled to such notice, whether before or after the time stated therein
shall be deemed the equivalent of such notice, and attendance of a director at a
meeting shall constitute a waiver of notice of such meeting except when the
director attends the meeting and prior to or at the commencement of such meeting
protests the lack of proper notice.
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Section 2.13. Quorum and Voting. At all meetings of the Board of
Directors, the presence of a majority of the directors then in office shall
constitute a quorum for the transaction of business. Except as otherwise
required by law, the certificate of incorporation, or these bylaws, the vote of
a majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. At all meetings of the Board of
Directors, each director shall have one vote.
Section 2.14. Committees. The Board of Directors may appoint an
executive committee and any other committee of the Board of Directors, to
consist of one or more directors of the corporation, and may delegate to any
such committee any of the authority of the Board of Directors, however
conferred, other than the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the bylaws of the corporation. No committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock unless the
resolution creating such committee expressly so provides. Each such committee
shall serve at the pleasure of the Board of Directors, shall act only in the
intervals between meetings of the Board of Directors and shall be subject to the
control and direction of the Board of Directors. Any such committee may act by a
majority of its members at a meeting or by a writing or writings signed by all
of its members. Any such committee shall keep written minutes of its meetings
and report the same to the Board of Directors at the next regular meeting of the
Board of Directors.
Section 2.15. Compensation. The Board of Directors may, by resolution
passed by a majority of those in office, fix the compensation of directors for
service in any capacity and may fix fees for attendance at meetings and may
authorize the corporation to pay the traveling and other expenses of directors
incident to their attendance at meetings, or may delegate such authority to a
committee of the board.
Section 2.16. Action by Consent. Any action required or permitted to be
taken at any meeting of the board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the board or such committee.
ARTICLE III
OFFICERS
Section 3.01. General Provisions. The officers of the corporation shall
be the chairman of the board (who shall be a director), a vice chairman of the
board (who shall be a director), a president, such number of vice-presidents as
the board may from time to time determine, a secretary and a treasurer. Any
person may hold any two or more offices and perform the duties
7
<PAGE> 8
thereof, except the offices of chairman of the board and vice chairman of the
board, or the offices of president and vice-president.
Section 3.02. Election, Terms of Office, and Qualification. The
officers of the corporation named in Section 3.01 of this Article III shall be
elected by the Board of Directors for an indeterminate term and shall hold
office during the pleasure of the Board of Directors.
Section 3.03. Additional Officers, Agents, etc. In addition to the
officers mentioned in Section 3.01 of this Article III, the corporation may have
such other officers or agents as the Board of Directors may deem necessary and
may appoint, each of whom or each member of which shall hold office for such
period, have such authority and perform such duties as may be provided in these
bylaws as the Board of Directors may from time to time determine. The Board of
Directors may delegate to any officer the power to appoint any subordinate
officers or agents. In the absence of any officer of the corporation, or for any
other reason the Board of Directors may deem sufficient, the Board of Directors
may delegate, for the time being, the powers and duties, or any of them, of such
officer to any other officer, or to any director.
Section 3.04. Removal. Any officer of the corporation may be removed,
either with or without cause, at any time, by resolution adopted by the Board of
Directors at any meeting, the notice (or waivers of notice) of which shall have
specified that such removal action was to be considered. Any officer appointed
not by the Board of Directors but by an officer or committee to which the Board
of Directors shall have delegated the power of appointment may be removed, with
or without cause, by the committee or superior officer (including successors)
who made the appointment, or by any committee or officer upon whom such power of
removal may be conferred by the Board of Directors.
Section 3.05. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors, or to the chairman of the
board, the vice chairman of the board, the president, or the secretary of the
corporation. Any such resignation shall take effect at the time specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.06. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise, shall be filled in the
manner prescribed in these bylaws for regular appointments or elections to such
office.
ARTICLE IV
DUTIES OF THE OFFICERS
Section 4.01. The Chairman of the Board. The chairman of the board
shall be chief executive officer of the corporation and shall have general
supervision over the property, business and affairs of the corporation and over
its several officers, subject, however, to the control of the Board of
Directors. He shall, if present, preside at all meetings of the stockholders and
of the Board of Directors. He may sign, with the secretary, treasurer or any
other proper
8
<PAGE> 9
officer of the corporation thereunto authorized by the Board of Directors,
certificates for shares in the corporation. He may sign, execute and deliver in
the name of the corporation all deeds, mortgages, bonds, leases, contracts, or
other instruments either when specially authorized by the Board of Directors or
when required or deemed necessary or advisable by him in the ordinary conduct of
the corporation's normal business, except in cases where the signing and
execution thereof shall be expressly delegated by these bylaws to some other
officer or agent of the corporation or shall be required by law or otherwise to
be signed or executed by some other officer or agent, and he may cause the seal
of the corporation, if any, to be affixed to any instrument requiring the same.
Section 4.02. Vice Chairman of the Board. The vice chairman of the
board shall perform such duties as are conferred upon him by these bylaws or as
may from time to time be assigned to him by the chairman of the board or the
Board of Directors. The authority of the vice chairman of the board to sign in
the name of the corporation all certificates for shares and deeds, mortgages,
leases, bonds, contracts, notes and other instruments, shall be coordinate with
like authority of the chairman of the board. In the absence or disability of the
chairman of the board, the vice chairman of the board shall perform all the
duties of the chairman of the board, and when so acting, shall have all the
powers of the chairman of the board.
Section 4.03. The President. The president shall perform such duties as
are conferred upon him by these bylaws or as may from time to time be assigned
to him by the chairman of the board or the vice chairman of the board or the
Board of Directors.
Section 4.04. Vice-Presidents. The vice-presidents shall perform such
duties as are conferred upon them by these bylaws or as may from time to time be
assigned to them by the Board of Directors, the chairman of the board, the vice
chairman of the board or the president. At the request of the chairman of the
board, in the absence or disability of the president, the vice-president,
designated by the chairman of the board shall perform all the duties of the
president, and when so acting, shall have all of the powers of the president.
Section 4.05. The Treasurer. The treasurer shall be the custodian of
all funds and securities of the corporation. Whenever so directed by the Board
of Directors, he shall render a statement of the cash and other accounts of the
corporation, and he shall cause to be entered regularly in the books and records
of the corporation to be kept for such purpose full and accurate accounts of the
corporation's receipts and disbursements. He shall have such other powers and
shall perform such other duties as may from time to time be assigned to him by
the Board of Directors, the chairman of the board or the vice chairman of the
board.
Section 4.06. The Secretary. The secretary shall record and keep the
minutes of all meetings of the stockholders and the Board of Directors in a book
to be kept for that purpose. He shall be the custodian of, and shall make or
cause to be made the proper entries in, the minute book of the corporation and
such other books and records as the Board of Directors may direct. He shall be
the custodian of the seal of the corporation, if any, and shall affix such seal
to such contracts, instruments and other documents as the Board of Directors or
any committee thereof may direct. He shall have such other powers and shall
perform such other duties as may from
9
<PAGE> 10
time to time be assigned to him by the Board of Directors, the chairman of the
board or the vice chairman of the board.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5.01. Indemnification. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he, his
testator, or intestate is or was a director or officer of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust or
other enterprise, or as a member of any committee or similar body against all
expenses (including attorneys' fees), judgments, penalties, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding (including appeals) or the defense or settlement
thereof or any claim, issue, or matter therein, to the fullest extent permitted
by the laws of Delaware as they may exist from time to time.
Section 5.02. Insurance. The proper officers of the corporation,
without further authorization by the Board of Directors, may in their discretion
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent for
another corporation, partnership, joint venture, trust or other enterprise,
against any liability.
Section 5.03. ERISA. To assure indemnification under this Article of
all such persons who are or were "fiduciaries" of an employee benefit plan
governed by the Act of Congress entitled "Employee Retirement Income Security
Act of 1974", as amended from time to time, the provisions of this Article V
shall, for the purposes hereof, be interpreted as follows: an "other enterprise"
shall be deemed to include an employee benefit plan; the corporation shall be
deemed to have requested a person to serve as an employee of an employee benefit
plan where the performance by such person of his duties to the corporation also
imposes duties on, or otherwise involves services by, such person to the plan or
participants or beneficiaries of the plan; excise taxes assessed on a person
with respect to an employee benefit plan pursuant to said Act of Congress shall
be deemed "fines"; and action taken or omitted by a person with respect to an
employee benefit plan in the performance of such person's duties for a purpose
reasonably believed by such person to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
Section 5.04. Contractual Nature. The foregoing provisions of this
Article V shall be deemed to be a contract between the corporation and each
director and officer who serves in such capacity at any time while this Section
is in effect, and any repeal or modification thereof shall not affect any rights
or obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or thereafter
brought based in whole or in part upon any such state of facts.
10
<PAGE> 11
Section 5.05. Construction. For the purposes of this Article V,
references to "the corporation" include in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director or officer of such constituent corporation or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise or as a member of any committee or similar body shall stand in the
same position under the provisions of this Article with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
Section 5.06. Non-Exclusive. The corporation may indemnify, or agree to
indemnify, any person against any liabilities and expenses and pay any expenses,
including attorneys' fees, in advance of final disposition of any action, suit
or proceeding, under any circumstances, if such indemnification and/or payment
is approved by the vote of the stockholders or of the disinterested directors,
or is, in the opinion of independent legal counsel selected by the Board of
Directors, to be made on behalf of an indemnitee who acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the corporation.
ARTICLE VI
DEPOSITORIES, CONTRACTS AND OTHER INSTRUMENTS
Section 6.01 Depositories. The chairman of the board, the vice chairman
of the board, the president, the treasurer, and any vice-president of the
corporation whom the Board of Directors authorizes to designate depositories for
the funds of the corporation are each authorized to designate depositories for
the funds of the corporation deposited in its name and the signatories and
conditions with respect thereto in each case, and from time to time, to change
such depositories, signatories and conditions, with the same force and effect as
if each such depository, the signatories and conditions with respect thereto and
changes therein had been specifically designated or authorized by the Board of
Directors; and each depository designated by the Board of Directors or by the
chairman of the board, the vice chairman of the board, the president, the
treasurer, or any such vice-president of the corporation, shall be entitled to
rely upon the certificate of the secretary or any assistant secretary of the
corporation setting forth the fact of such designation and of the appointment of
the officers of the corporation or of both or of other persons who are to be
signatories with respect to the withdrawal of funds deposited with such
depository, or from time to time the fact of any change in any depository or in
the signatories with respect thereto.
Section 6.02. Execution of Instruments Generally. In addition to the
powers conferred upon the chairman of the board in Section 4.01 and the vice
chairman of the board in Section 4.02 and except as otherwise provided in
Section 6.01 of this Article VI, all contracts and other instruments entered
into in the ordinary course of business requiring execution by the corporation
may be executed and delivered by the president, the treasurer, or any
vice-president
11
<PAGE> 12
and authority to sign any such contracts or instruments, which may be general or
confined to specific instances, may be conferred by the Board of Directors upon
any other person or persons. Any person having authority to sign on behalf of
the corporation may delegate, from time to time, by instrument in writing, all
or any part of such authority to any person or persons if authorized so to do by
the Board of Directors.
ARTICLE VII
SHARES AND THEIR TRANSFER
Section 7.01. Certificate for Shares. Every owner of one or more shares
in the corporation shall be entitled to a certificate, which shall be in such
form as the Board of Directors shall prescribe, certifying the number and class
of shares in the corporation owned by him. When such certificate is
counter-signed by an incorporated transfer agent or registrar, the signature of
any of said officers may be facsimile, engraved, stamped or printed. The
certificates for the respective classes of such shares shall be numbered in the
order in which they shall be issued and shall be signed in the name of the
corporation by the chairman of the board or the vice chairman of the board, or
the president or a vice-president, and by the secretary or an assistant
secretary or the treasurer or an assistant treasurer. A record shall be kept of
the name of the person, firm, or corporation owning the shares represented by
each such certificate and the number of shares represented thereby, the date
thereof, and in case of cancellation, the date of cancellation. Every
certificate surrendered to the corporation for exchange or transfer shall be
cancelled and no new certificate or certificates shall be issued in exchange for
any existing certificates until such existing certificates shall have been so
cancelled.
Section 7.02. Lost, Destroyed and Mutilated Certificates. If any
certificates for shares in this corporation become worn, defaced, or mutilated
but are still substantially intact and recognizable, the directors, upon
production and surrender thereof, shall order the same cancelled and shall issue
a new certificate in lieu of same. The holder of any shares in the corporation
shall immediately notify the corporation if a certificate therefor shall be
lost, destroyed, or mutilated beyond recognition, and the corporation may issue
a new certificate in the place of any certificate theretofore issued by it which
is alleged to have been lost or destroyed or mutilated beyond recognition, and
the Board of Directors may, in its discretion, require the owner of the
certificate which has been lost, destroyed, or mutilated beyond recognition, or
his legal representative, to give the corporation a bond in such sum and with
such surety or sureties as it may direct, not exceeding double the value of the
stock, to indemnify the corporation against any claim that may be made against
it on account of the alleged loss, destruction, or mutilation of any such
certificate. The Board of Directors may, however, in its discretion, refuse to
issue any such new certificate except pursuant to legal proceedings, under the
laws of the State of Delaware in such case made and provided.
Section 7.03. Transfers of Shares. Transfers of shares in the
corporation shall be made only on the books of the corporation by the registered
holder thereof, his legal guardian, executor, or administrator, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the secretary of the corporation or with a transfer agent appointed by the
12
<PAGE> 13
Board of Directors, and on surrender of the certificate or certificates for such
shares properly endorsed or accompanied by properly executed stock powers and
evidence of the payment of all taxes imposed upon such transfer. The person in
whose name shares stand on the books of the corporation shall, to the full
extent permitted by law, be deemed the owner thereof for all purposes as regards
the corporation.
Section 7.04. Regulations. The Board of Directors may make such rules
and regulations as it may deem expedient, not inconsistent with these bylaws
concerning the issue, transfer, and registration of certificates for shares in
the corporation. It may appoint one or more transfer agents or one or more
registrars, or both, and may require all certificates for shares to bear the
signature of either or both.
13
<PAGE> 14
ARTICLE VIII
SEAL
The Board of Directors may provide a corporate seal, which shall be
circular and contain the name of the corporation engraved around the margin and
the words "corporate seal", the year of its organization, and the word
"Delaware".
14
<PAGE> 1
EXHIBIT 10.27
-------------
SUPPLEMENTAL SCHEDULE OF DIRECTORS AND EXECUTIVE OFFICERS
WHO ARE PARTIES TO AN
INDEMNIFICATION AGREEMENT
SIGNATORY CAPACITY
- --------- --------
Roger D. Blackwell Director
Cynthia D. Fields Director and Officer
E. Gordon Gee Director
Kenneth B. Gilman Director and Officer
Philip E. Mallott Officer
Grace A. Nichols Director and Officer
Beth M. Pritchard Director and Officer
Donald B. Shackelford Director
Leslie H. Wexner Director and Officer
Alex Shumate Director
William E. Kirwan Director
<PAGE> 1
EXHIBIT 13
----------
FINANCIAL SUMMARY
(Thousands except per share amounts, ratios and store and associate data)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Fiscal year 1998 1997 1996 1995* 1994
- ---------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Net sales $3,885,753 $3,617,856 $2,997,340 $2,516,555 $2,108,310
Gross income $1,595,397 $1,360,032 $1,055,045 $ 820,928 $ 702,287
Operating income $ 680,849 $ 504,652 $ 458,142 $ 386,296 $ 337,988
Operating income as a
percentage of sales 17.5% 13.9% 15.3% 15.4% 16.0%
Adjusted operating income- $ 680,849 $ 572,252- $ 470,142- $ 386,296 $ 337,988
Adjusted operating income
as a percentage of sales- 17.5% 15.8%- 15.7%- 15.4% 16.0%
Income before income taxes $ 667,199 $ 482,936 $ 430,210 $ 340,059 $ 337,988
Net income $ 400,199 $ 288,936 $ 258,210 $ 204,059 $ 202,988
Net income as a
percentage of sales 10.3% 8.0% 8.6% 8.1% 9.6%
Adjusted net income- $ 400,199 $ 329,536- $ 265,410- $ 204,059 $ 202,988
Adjusted net income as a
percentage of sales- 10.3% 9.1%- 8.9%- 8.1% 9.6%
- ---------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL INFORMATION
Total assets $1,448,077 $1,347,700 $1,135,162 $ 943,353 $ 768,551
Return on average assets 29% 23% 25% 24% 29%
Adjusted return on average assets- 29% 27%- 26%- 24% 29%
Working capital $ 440,073 $ 463,123 $ 333,295 $ 241,177 $ 220,757
Current ratio 1.8 2.1 2.0 2.0 2.6
Capital expenditures $ 121,543 $ 124,275 $ 123,630 $ 128,229 $ 107,037
Long-term debt $ 250,000 $ 350,000 $ 350,000 $ 350,000 --
Debt-to-equity ratio 39% 62% 87% 130% --
Shareholders' equity $ 644,643 $ 560,795 $ 402,053 $ 268,937 $ 573,195
Return on average
shareholders' equity 66% 60% 77% 48% 39%
Adjusted return on average
shareholders' equity- 66% 68%- 79%- 48% 39%
Comparable store sales increase 5% 11% 7% 1% 13%
- ---------------------------------------------------------------------------------------------------------------
PER SHARE RESULTS
Basic net income $ 1.60 $ 1.14 $ 1.02 $ 0.92 $ 0.97
Diluted net income $ 1.59 $ 1.14 $ 1.02 $ 0.92 $ 0.97
Adjusted diluted net income- $ 1.59 $ 1.30- $ 1.05- $ 0.92 $ 0.97
Dividends $ 0.56 $ 0.52 $ 0.48 $ 0.12+ --
Book value $ 2.55 $ 2.22 $ 1.59 $ 1.06 $ 2.73
Diluted weighted average
shares outstanding 252,438 253,536 253,055 221,300 210,000
- ---------------------------------------------------------------------------------------------------------------
STORES AND ASSOCIATES
AT END OF YEAR
Total number of stores open 1,890 1,710 1,609 1,293 1,037
Selling square feet 5,794,000 5,328,000 5,047,000 4,230,000 3,419,000
Number of associates 55,000 50,000 43,900 39,300 30,100
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Fiscal year 1993 1992 1991
- -----------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
<S> <C> <C> <C>
Net sales $1,630,828 $1,325,326 $1,199,496
Gross income $ 496,500 $ 397,936 $ 366,938
Operating income $ 218,462 $ 167,287 $ 177,837
Operating income as a
percentage of sales 13.4% 12.6% 14.8%
Adjusted operating income- $ 218,462 $ 167,287 $ 177,837
Adjusted operating income
as a percentage of sales- 13.4% 12.6% 14.8%
Income before income taxes $ 218,462 $ 167,287 $ 177,837
Net income $ 132,462 $ 102,287 $ 106,404
Net income as a
percentage of sales 8.1% 7.7% 8.9%
Adjusted net income- $ 132,462 $ 102,287 $ 106,404
Adjusted net income as a
percentage of sales- 8.1% 7.7% 8.9%
- -----------------------------------------------------------------------------------
OTHER FINANCIAL INFORMATION
Total assets $ 655,061 $ 611,429 $ 487,388
Return on average assets 21% 19% 26%
Adjusted return on average assets- 21% 19% 26%
Working capital $ 157,464 $ 151,870 $ 169,703
Current ratio 2.3 2.6 3.1
Capital expenditures $ 81,145 $ 78,792 76,975
Long-term debt -- -- --
Debt-to-equity ratio -- -- --
Shareholders' equity $ 469,136 $ 455,180 $ 371,188
Return on average
shareholders' equity 29% 25% 36%
Adjusted return on average
shareholders' equity- 29% 25% 36%
Comparable store sales increase 9% 1% 8%
- -----------------------------------------------------------------------------------
PER SHARE RESULTS
Basic net income $ 0.63 $ 0.49 $ 0.51
Diluted net income $ 0.63 $ 0.49 $ 0.51
Adjusted diluted net income- $ 0.63 $ 0.49 $ 0.51
Dividends -- -- --
Book value $ 2.23 $ 2.17 $ 1.77
Diluted weighted average
shares outstanding 210,000 210,000 210,000
- -----------------------------------------------------------------------------------
STORES AND ASSOCIATES
AT END OF YEAR
Total number of stores open 879 743 662
Selling square feet 2,915,000 2,349,000 1,895,000
Number of associates 22,500 15,900 14,200
- ------------------------------------------------------------------------------------
</TABLE>
* Fifty-three week fiscal year
- - Excluding special and nonrecurring charge of $67.6 million in 1997 and
$12.0 million in 1996
+ Represents one quarter's dividend subsequent to the Company's October
1995 initial public offering
34
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net sales for the fourth quarter of 1998 were $1.531 billion, an increase of 10%
from $1.397 billion for the fourth quarter a year ago. Gross income increased to
$712.4 million from $600.2 million in 1997 and operating income increased to
$413.9 million from $271.2 million in 1997. Earnings per diluted share were
$0.98 versus $0.63 in 1997. In 1997, operating income included a $68 million
special and nonrecurring charge reflecting the closing of Cacique, a 118-store
lingerie business. Excluding this charge, earnings per diluted share increased
24% to $0.98 versus $0.79 for the fourth quarter in 1997.
Net sales for the fiscal year ended January 30, 1999 were $3.886 billion, an
increase of 7% from $3.618 billion for last year. Gross income increased to
$1.595 billion from $1.360 billion in 1997 and operating income increased to
$680.8 million from $504.7 million in 1997. Earnings per diluted share were
$1.59 per share, compared to $1.14 last year. Excluding the impact of the
Cacique charge, sales increased 10% and earnings per diluted share increased 22%
to $1.59 versus $1.30 in 1997.
[PHOTOGRAPH]
Business highlights include the following:
- -------------------------------------------------------------------------------
o Bath & Body Works', Intimate Brands' fastest growing and highest profit margin
business, sales grew 20% in 1998 to $1.272 billion. Operating profits grew
23%.
o The Victoria's Secret brand grew to $2.588 billion in 1998, a 6% sales
increase. Victoria's Secret brand teams continue to build strong brand equity
through fashion-right, high-quality products, major product introductions, and
successful brand extensions such as Victoria's Secret Beauty. The introduction
of www.VictoriasSecret.com in December 1998 has increased the prospects of
building a global sales base at a faster pace.
o Victoria's Secret Stores' sales increased 7% to $1.829 billion, while
operating profits grew 14%.
o Sales at Victoria's Secret Catalogue were up 3%, while operating profits were
down slightly. Sales productivity improved with a second half "fewer, better
books" strategy and more focused mailings.
o In January 1999, the Company announced its intention to repurchase up to $500
million of its common stock on a proportionate basis from both the open market
and The Limited, Inc. As of January 30, 1999, the Company had repurchased a
total of 2.6 million shares for $95.5 million.
<TABLE>
<CAPTION>
Intimate Brands Number of Stores
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C>
1,037 1,293 1,609 1,828* 1,890
</TABLE>
<TABLE>
<CAPTION>
Intimate Brands Capital Expenditures
(in millions)
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C>
$107 $128 $124 $124 $122
</TABLE>
* Before closing 118 Cacique stores on January 31, 1998
35
<PAGE> 3
FINANCIAL SUMMARY
The following summarized financial data compares 1998 to the comparable periods
for 1997 and 1996:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
% Change
----------------------
NET SALES (MILLIONS): 1998 1997 1996 1998-97 1997-96
<S> <C> <C> <C> <C> <C>
Victoria's Secret Stores $ 1,829 $ 1,702 $ 1,450 7% 17%
Bath & Body Works 1,272 1,057 753 20% 40%
- -----------------------------------------------------------------------------------------------------------------------------
Total retail sales 3,101 2,759 2,203 12% 25%
Victoria's Secret Catalogue 759 734 684 3% 7%
Other* 26 125 110 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total net sales $ 3,886 $ 3,618 $ 2,997 7% 21%
- -----------------------------------------------------------------------------------------------------------------------------
COMPARABLE STORE SALES:
Victoria's Secret Stores 4% 11% 5%
Bath & Body Works 7% 11% 11%
- -----------------------------------------------------------------------------------------------------------------------------
Total comparable store sales increase* 5% 11% 7%
- -----------------------------------------------------------------------------------------------------------------------------
STORE DATA*:
Retail sales increase attributable to new and
remodeled stores (1998 change excludes impact
of closing Cacique) 7% 14% 19%
Retail sales per average selling square foot $ 558 $ 532 $ 495 5% 7%
Retail sales per average store (thousands) $ 1,723 $ 1,661 $ 1,583 4% 5%
Average store size at the end of year
(selling square feet) 3,066 3,116 3,137 (2%) (1%)
Retail selling square feet at end of year (thousands) 5,794 5,328 5,047 9% 6%
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF STORES:
Beginning of year 1,710 1,609 1,293
Opened 201 233 325
Closed (21) (132) (9)
- -----------------------------------------------------------------------------------------------------------------------------
End of year 1,890 1,710 1,609 11% 6%
==============================================================================================================================
</TABLE>
* Includes the Cacique business which was closed effective January 31, 1998
NET SALES
FOURTH QUARTER
Net sales for the fourth quarter of 1998 increased by 10% to $1.531 billion from
$1.397 billion in 1997. Excluding Cacique, net sales grew 12%. The net sales
increase, excluding Cacique, was primarily due to an 8% increase in comparable
store sales. The balance of the increase was due to the net addition of 180 new
stores and an increase in catalogue and other sales. Net sales for the fourth
quarter of 1997 increased 20% to $1.397 billion from $1.161 billion for 1996.
The sales increase was attributable to a 13% increase in comparable store sales,
new and remodeled stores, and an increase in catalogue and other sales.
FULL YEAR
Net sales for 1998 increased 7% to $3.886 billion from $3.618 billion in 1997.
Excluding Cacique, net sales grew 10%. The net sales increase, excluding
Cacique, was primarily due to the net addition of 180 new stores. The balance of
the increase was due to a 5% increase in comparable store sales and an increase
in catalogue and other sales. Sales for 1997 increased 21% to $3.618 billion
from $2.997 billion for 1996. The sales increase was primarily attributable to
new and remodeled stores. The balance of the increase was due to an 11% increase
in comparable store sales and a $58 million increase in catalogue and other
sales.
In 1998, retail sales increased 12% to $3.101 billion, led by Bath & Body
Works' sales increase of 20%. Bath & Body Works' sales increase was primarily
attributable to the net addition of 140 new stores and 319,000 selling square
feet, as well as a 7% increase in comparable store sales. Overall, Bath & Body
Works' sales increase was primarily driven by the brand's new, unique holiday
product collections. Victoria's Secret Stores' sales increased 7% to $1.829
billion. The sales increase was primarily attributable to a 4% increase in
comparable store sales. The remaining increase came from the net addition of 40
new stores and 147,000 selling square feet.
In 1997, retail sales increased 25% to $2.759 billion, also led by Bath &
Body Works' sales increase of 40%. Bath & Body Works' sales increase was
attributable to the net addition of 171 new stores and 419,000 selling square
feet, with the remaining increase coming from
36
<PAGE> 4
11% growth in comparable store sales. In 1997, Victoria's Secret Stores' sales
increased 17% to $1.702 billion. The sales increase was primarily attributable
to an 11% increase in comparable store sales, with the remaining increase coming
from the net addition of 53 new stores and 229,000 selling square feet.
In 1998, Victoria's Secret Catalogue's net sales increased 3% to $759
million. The sales increase was attributable to an increased response rate. In
1997, Victoria's Secret Catalogue's net sales increased 7% to $734 million,
primarily driven by an 18% increase in catalogues mailed.
GROSS INCOME
FOURTH QUARTER
The fourth quarter of 1998 gross income rate (expressed as a percentage of net
sales) increased to 46.5% from 43.0% for the same period in 1997. The rate
increase was primarily due to a 2.2% increase in the merchandise margin rate
(which represents gross income before deduction of buying and occupancy costs)
and a 1.3% decrease in the buying and occupancy rate. The increase in the
merchandise margin rate was primarily attributable to higher retail markups and
reduced markdowns. The decrease in the buying and occupancy rate was primarily
due to accelerated depreciation expense at Victoria's Secret in 1997. Both the
merchandise margin rate and the buying and occupancy rate were also favorably
impacted by Bath & Body Works. This business increased to 39% of total Company
net sales in 1998 from 35% in 1997. Bath & Body Works has historically recorded
higher merchandise margins due to higher retail markups and lower buying and
occupancy costs as a result of smaller store sizes and higher sales
productivity. The Company believes that the continued strong growth of Bath &
Body Works will have a positive impact on the gross income rate going forward.
The fourth quarter of 1997 gross income rate increased to 43.0% from 40.4%
for the same period in 1996. The rate improvement was primarily due to a 3.5%
increase in the merchandise margin rate, partially offset by a 0.9% increase in
the buying and occupancy expense rate. The increase in the merchandise margin
rate was primarily attributable to higher retail markups across all businesses,
particularly at Victoria's Secret Stores. Merchandise margins have also been
positively impacted by the growth of Bath & Body Works to 35% of total Company
net sales from 32% in 1996. The growth in the buying and occupancy expense rate
was primarily due to accelerated depreciation expense to regularly remodel and
refresh stores at Victoria's Secret, as well as, lower catalogue response rates.
FULL YEAR
In 1998, the gross income rate increased to 41.1% from 37.6% in 1997. The rate
increase was attributable to a 3.2% increase in the merchandise margin rate and
a 0.4% decrease in the buying and occupancy expense rate. The increase in the
merchandise margin rate was primarily attributable to higher retail markups and
reduced markdowns, especially at Victoria's Secret Stores. Both the merchandise
margin rate and the buying and occupancy rate were also favorably impacted by
Bath & Body Works. This business increased to 33% of total Company net sales in
1998 from 29% in 1997.
The 1997 gross income rate increased to 37.6% from 35.2% in 1996. The
increase was attributable to a 2.1% increase in the merchandise margin rate and
a 0.3% decrease in the buying and occupancy expense rate. The increase in the
merchandise margin rate was primarily attributable to higher retail markups
across all businesses, but especially at Victoria's Secret Stores. The balance
of the merchandise margin rate increase was due to Bath & Body Works' growth to
29% of total Company net sales from 25% in 1996. The buying and occupancy rate
decrease was attributable to leverage resulting from 11% comparable store sales,
as well as, the favorable sales mix shift described above.
[photograph]
37
<PAGE> 5
GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES
FOURTH QUARTER
The general, administrative and store operating expense rate (expressed as a
percentage of net sales) increased to 19.5% in the fourth quarter of 1998, from
18.7% for the same period in 1997. The rate increase was primarily due to the
continued investment in national advertising for Victoria's Secret. In addition,
the increase was driven by a shift in the mix of net sales to Bath & Body Works,
which has higher general, administrative and store operating expense rates due
to significantly smaller stores. These increases were partially offset by
savings from the closing of Cacique.
The general, administrative and store operating expense rate increased to
18.7% in the fourth quarter of 1997 from 16.2% for the same period in 1996. This
2.5% increase was primarily driven by investments in national advertising for
Victoria's Secret. The balance of the increase was driven by the growth of Bath
& Body Works to 35% of total Company net sales from 32% in 1996.
FULL YEAR
The general, administrative and store operating expense rates were 23.5%, 21.8%
and 19.5% in 1998, 1997 and 1996. The rate increases were primarily due to
increases in national advertising by Victoria's Secret, the growth of Bath &
Body Works in the overall mix of net sales, and additional store staffing to
support product extensions and new initiatives at Victoria's Secret Stores. In
1998, these increases were partially offset by savings from the closing of
Cacique.
SPECIAL AND NONRECURRING CHARGES
In 1997, the Company recognized a $67.6 million fourth quarter charge which
represented the estimated loss on the closing of the Cacique business. Cacique
had $95.2 million in sales for 1997 and a $17.0 million operating loss. The
business closed effective January 31, 1998 (see Note 2 to the Consolidated
Financial Statements). After cash disbursements of $26.8 million in 1998,
accruals of $10.8 million, principally for contractual obligations, remained at
January 30, 1999.
In 1996, the Company recognized a $12.0 million fourth quarter charge, which
represented the estimated loss on the April 1997 sale of Penhaligon's (a
U.K.-based subsidiary), which had 1996 sales of $5.5 million and a $3.1 million
operating loss.
OPERATING INCOME
FOURTH QUARTER
The operating income rate (expressed as a percentage of net sales) increased to
27.0% in the fourth quarter of 1998, from 19.4% for the same period in 1997.
Excluding the 1997 special and nonrecurring charge, the fourth quarter operating
income rate increased to 27.0% from 24.2%. The rate increase is primarily due to
an increase in the gross income rate which more than offset an increase in the
general, administrative and store operating expense rate. The operating income
rate decreased to 19.4% in the fourth quarter of 1997, from 23.2% in 1996.
Excluding special and nonrecurring charges, the operating income rate in the
fourth quarter of 1997 was flat to 1996 as a result of an increase in the gross
income rate offsetting an increase in the general, administrative and store
operating expense rate increase.
FULL YEAR
The operating income rate was 17.5%, 13.9% and 15.3% in 1998, 1997 and 1996.
Excluding special and nonrecurring charges, the operating income rate would have
been 15.8% in 1997 and 15.7% in 1996. The improvement in the operating income
rate was driven by increased gross income rates which more than offset greater
general, administrative and store operating rates.
INTEREST EXPENSE AND OTHER INCOME
In 1998, the Company incurred $7.6 million and $30.1 million in interest
for the fourth quarter and year, compared to $7.6 million and $30.3 million in
1997 for the same periods. Interest expense for 1998 and 1997 primarily resulted
from the $350 million of debt.
In 1998, the Company earned $3.8 million and $16.4 million in other income
for the fourth quarter and year, compared to $3.7 million and $8.6 million in
1997 for the same periods. The full year increase is primarily due to interest
income earned (based upon the Federal Reserve AA composite 30-day rate) on
higher invested cash balances managed through The Limited, Inc.'s ("The
Limited") centralized cash management system (see Note 9 to the Consolidated
Financial Statements).
38
<PAGE> 6
FINANCIAL CONDITION
The Company's consolidated balance sheet as of January 30, 1999 provides
evidence of financial strength and flexibility. A more detailed discussion of
liquidity, capital resources and capital requirements follows.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities and cash available from The Limited's
centralized cash management system provide the resources to support current
operations, including projected growth, seasonal requirements, and capital
expenditures.
A summary of the Company's working capital position and capitalization follows
(thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by operating
activities $509,671 $440,475 $337,664
Working capital $440,073 $463,123 $333,295
Capitalization:
Long-term debt $250,000 $350,000 $350,000
Shareholders' equity 644,643 560,795 402,053
- -------------------------------------------------------------------------------
Total capitalization $894,643 $910,795 $752,053
- -------------------------------------------------------------------------------
</TABLE>
In 1998, working capital has been reduced to reflect $100 million of debt due in
1999 (see Note 8 to the Consolidated Financial Statements) which will be repaid
through cash from operations. No additional borrowings are currently
anticipated.
The Company considers the following to be appropriate measures of liquidity and
capital resources:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------
<S> <C> <C> <C>
Debt-to-capitalization ratio
(long-term debt divided by
total capitalization) 28% 38% 47%
Cash flow to capital investment
(net cash provided by
operating activities divided
by capital expenditures) 419% 354% 273%
- --------------------------------------------------------------------
</TABLE>
The Company's operations are seasonal in nature and are comprised of two
principal selling seasons: Spring (the first and second quarters) and Fall (the
third and fourth quarters). The fourth quarter, including the Holiday season,
has accounted for approximately 39% of net sales in each of the last three
years. Accordingly, cash requirements are highest in the third quarter as the
Company's inventory builds in anticipation of the Holiday season, which in turn
produces a substantial portion of the Company's operating cash flow for the
year.
OPERATING ACTIVITIES
Net cash provided by operating activities totaled $509.7 million, $440.5 million
and $337.7 million for 1998, 1997 and 1996. The increase in cash provided by
operating activities in 1998 was primarily driven by three factors: 1) an
increase in net income; 2) a difference in the amount and timing of income tax
payments; and 3) a decrease in paper inventory at Victoria's Secret Catalogue.
These increases were partially offset by cash used to fund inventory increases,
primarily in non-seasonal merchandise at Victoria's Secret Stores.
INVESTING ACTIVITIES
Investing activities were all for capital expenditures, primarily for new and
remodeled stores.
FINANCING ACTIVITIES
Financing activities included four quarterly cash dividend payments of $0.14 per
share. In addition, financing activities included two stock repurchases during
1998. In a repurchase completed in August 1998, the Company acquired 4.5 million
shares of its common stock for $106 million from its public shareholders. These
repurchased shares were specifically reserved to cover shares needed for
employee benefit plans. In January 1999, the Company announced its intention to
repurchase up to $500 million of its common stock. Purchases will be made on a
proportionate basis from both the Company's public shareholders and The Limited.
As of January 30, 1999, the Company had repurchased 0.4 million shares from
public shareholders for $14.8 million and 2.2 million shares from The Limited,
at the same weighted average per share price, for $80.7 million. Other financing
activities in 1998 included an $18.3 million net decrease in The Limited's
intercompany cash management account receivable (see Note 9 to the Consolidated
Financial Statements).
[PHOTOGRAPH]
39
<PAGE> 7
<TABLE>
<CAPTION>
A summary of stores and selling square feet follows: Change from Prior Year
- -------------------------------------------------------------------------------------------------------------
Goal-1999 1998 1997 1999-98 1998-97
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Victoria's Secret Stores
Stores 919 829 789 90 40
Selling sq. ft. 3,995,000 3,702,000 3,555,000 293,000 147,000
Bath &Body Works
Stores 1,231 1,061 921 170 140
Selling sq. ft. 2,499,000 2,092,000 1,773,000 407,000 319,000
- -------------------------------------------------------------------------------------------------------------
Total retail
Stores 2,150 1,890 1,710 260 180
Selling sq. ft. 6,494,000 5,794,000 5,328,000 700,000 466,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
CAPITAL EXPENDITURES
Capital expenditures amounted to $121.5 million, $124.3 million and $123.6
million for 1998, 1997 and 1996, of which $87.0 million, $72.4 million and $91.5
million were for new stores and remodeling and expanding existing stores.
The Company added approximately 466,000 selling square feet in 1998 which
represented an increase of 9% over 1997. The increase in selling square feet
resulted from the net addition of 180 new stores and the expansion of 48 stores.
The capital expenditures were funded with cash from operations.
The Company anticipates spending $150 to $170 million in 1999 for capital
expenditures, of which $110 to $120 million will be for new stores and the
remodeling and expansion of existing stores.
The Company announced its intention to add approximately 700,000 selling
square feet in 1999, which will represent a 12% increase over year-end 1998. It
is anticipated the increase will result from the addition of approximately 260
new stores and the expansion of approximately 40 stores. The Company expects
that future capital expenditures will be funded by net cash provided by
operating activities.
YEAR 2000 READINESS DISCLOSURES
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.
In order to address the Year 2000 issue, the Company is participating with
its parent, The Limited, which 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: (i) awareness, (ii) assessment, (iii) renovation / development,
(iv) validation, and (v) implementation. There are several areas of focus: (1)
renovation of legacy systems throughout the Company; (2) upgrade existing
software packages at two operating businesses; (3) assessment of Year 2000
readiness at key vendors and suppliers; and (4) evaluating facilities and
distribution equipment with embedded computer technology.
The status of each area of focus is as follows:
(1) All five stages of Year 2000 implementation for renovation of legacy systems
are complete for significant IT systems at the Company's businesses.
(2) The upgrade of existing software packages at two of the Company's businesses
has been completed.
(3) 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 has
identified key vendors, suppliers, and service providers and is making inquiries
to determine their Year 2000 status. The Company has obtained assurances from a
number of its key vendors regarding their Year 2000 status and expects to
complete this process in mid-1999. In addition, the Company is in the process of
conducting on-site assessments of certain of its key vendors to further assess
such vendors' progress and expects to complete this process in mid-1999. Also,
the Company, along with other major retail organizations, is participating in a
national industry Year 2000 survey of over 80,000 suppliers and vendors.
(4) The Company also utilizes various facilities and distribution equipment with
embedded computer technology, such as conveyors, elevators, security systems,
fire protection systems, and energy management systems. The Company's assessment
of these systems is in process and all stages of its efforts are expected to be
completed in the second quarter of 1999. The Company believes that the
reasonably likely worst-case scenario would
40
<PAGE> 8
involve short-term disruption of systems affecting its supply and distribution
channels. The Company is developing contingency plans, such as alternative
sourcing, and identifying the necessary actions that it would need to take if
critical systems or service providers were not Year 2000 compliant.The Company
expects to finalize these contingency plans by mid-1999.
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. 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,
government entities and utility companies) is beyond the Company's control.
Accordingly, the Company can give no assurances that the failure of systems of
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.
Total expenditures incurred through 1998 related to remediation, testing,
conversion, replacement and upgrading system applications were $18 million. In
addition, the Company has incurred internal payroll costs (not separately
identified) relating to the Company's Year 2000 initiatives. Any additional
expenditures are not expected to be material. Total incremental expenses,
primarily depreciation and amortization of new package systems, are not expected
to have a material impact on the Company's financial condition during 1999 and
2000.
IMPACT OF INFLATION
The Company's results of operations and financial condition are presented based
on historical cost. While it is difficult to accurately measure the impact of
inflation due to the imprecise nature of the estimates required, the Company
believes the effects of inflation, if any, on the results of operations and
financial condition have been minor.
ADOPTION OF NEW ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." The SOP requires that certain external costs and internal payroll
and payroll-related costs be capitalized during the application development and
implementation stages of a software development project and amortized over the
software's useful life. The SOP is effective in the first quarter of 1999 and
the Company does not anticipate that this SOP will have an adverse effect on the
Company's results of operations.
Additionally, SOP 98-5, "Reporting on the Costs of Start-Up Activities," was
issued in April 1998. The SOP requires that entities expense start-up costs and
organization costs as they are incurred. The SOP is effective in the first
quarter of 1999 and the Company does not anticipate that this SOP will have an
adverse effect on the Company's results of operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM 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 Report 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, 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, which 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 1998 and
beyond to differ materially from those expressed or implied in any
forward-looking statements included in this Report 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, postal rate increases and
charges, paper and printing costs, availability of suitable store locations at
appropriate terms, ability to develop new merchandise and ability to hire and
train associates.
41
<PAGE> 9
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 3,885,753 $ 3,617,856 $ 2,997,340
Costs of goods sold, occupancy and buying costs (2,290,356) (2,257,824) (1,942,295)
- ------------------------------------------------------------------------------------------------------
GROSS INCOME 1,595,397 1,360,032 1,055,045
General, administrative and store operating expenses (914,548) (787,780) (584,903)
Special and nonrecurring charge -- (67,600) (12,000)
- ------------------------------------------------------------------------------------------------------
OPERATING INCOME 680,849 504,652 458,142
Interest expense (30,050) (30,326) (32,544)
Other income, net 16,400 8,610 4,612
- ------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 667,199 482,936 430,210
Provision for income taxes 267,000 194,000 172,000
- ------------------------------------------------------------------------------------------------------
NET INCOME $ 400,199 $ 288,936 $ 258,210
- ------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE:
Basic $ 1.60 $ 1.14 $ 1.02
Diluted $ 1.59 $ 1.14 $ 1.02
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Thousands)
- ----------------------------------------------------------------------------------------------
Assets JANUARY 30, 1999 January 31, 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 387,774 $ 308,720
Accounts receivable 15,627 34,639
Inventories 479,896 417,703
Intercompany receivable -- 12,457
Other 93,944 102,540
- ----------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 977,241 876,059
- ----------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET 398,469 392,504
- ----------------------------------------------------------------------------------------------
OTHER ASSETS 72,367 79,137
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,448,077 $ 1,347,700
- ----------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 93,764 $ 94,498
Current portion of long-term debt 100,000 --
Accrued expenses 198,321 224,380
Intercompany payable 5,860 --
Income taxes 139,223 94,058
- ----------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 537,168 412,936
- ----------------------------------------------------------------------------------------------
LONG-TERM DEBT 250,000 350,000
- ----------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 2,251 13,068
- ----------------------------------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES 14,015 10,901
- ----------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock 2,527 2,527
Paid-in capital 672,391 674,620
Retained earnings (deficit) 145,396 (114,465)
- ----------------------------------------------------------------------------------------------
820,314 562,682
Less: treasury stock, at average cost (175,671) (1,887)
- ----------------------------------------------------------------------------------------------
Total shareholders' equity 644,643 560,795
- ----------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,448,077 $ 1,347,700
===============================================================================================
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements
42
<PAGE> 10
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
(Thousands)
- ------------------------------------------------------------------------------------------------------------------------
Common Stock
------------------------- Retained Treasury Total
Shares Par Paid-In Earnings Stock, at Shareholders'
Outstanding Value Capital (Deficit) Average Cost Equity
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 3, 1996 252,700 $ 2,527 $ 675,421 $(409,011) -- $ 268,937
Net income -- -- -- 258,210 -- 258,210
Cash dividends -- -- -- (121,270) -- (121,270)
Repurchase of common stock (235) -- -- -- $ (3,986) (3,986)
Exercise of stock options and other 33 -- (181) -- 343 162
- ------------------------------------------------------------------------------------------------------------------------
BALANCE, FEBRUARY 1, 1997 252,498 $ 2,527 $ 675,240 $(272,071) $ (3,643) $ 402,053
Net income -- -- -- 288,936 -- 288,936
Cash dividends -- -- -- (131,330) -- (131,330)
Exercise of stock options and other 99 -- (620) -- 1,756 1,136
- ------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 31, 1998 252,597 $ 2,527 $ 674,620 $(114,465) $ (1,887) $ 560,795
Net income -- -- -- 400,199 -- 400,199
Cash dividends -- -- -- (140,338) -- (140,338)
Repurchase of common stock (7,113) -- -- -- (201,606) (201,606)
Exercise of stock options and other 400 -- (2,229) -- 27,822 25,593
- ------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 30, 1999 245,884 $ 2,527 $ 672,391 $ 145,396 $(175,671) $ 644,643
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
[PICTURE]
<TABLE>
<CAPTION>
Intimate Brands Net Sales (in millions)
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
$1,631 $2,108 $2,517 $2,997 $3,618 $3,886
</TABLE>
5-year compounded annual growth rate at 19%
<TABLE>
<CAPTION>
Intimate Brands Net Income (in millions)
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
$132 $203 $204 $265* $330* $400
</TABLE>
* Excluding special and nonrecurring charge
43
5-year compounded annual growth rate at 25%
<PAGE> 11
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 400,199 $ 288,936 $ 258,210
- ----------------------------------------------------------------------------------------------------
IMPACT OF OTHER OPERATING ACTIVITIES ON CASH FLOWS
Depreciation and amortization 101,221 106,197 85,573
Special and nonrecurring charge, net of income taxes -- 40,600 7,200
- ----------------------------------------------------------------------------------------------------
CHANGE IN ASSETS AND LIABILITIES
Inventories (62,193) 7,097 (75,954)
Accounts payable and accrued expenses (15,753) 55,785 53,510
Income taxes 34,348 (14,996) 3,664
Other assets and liabilities 51,849 (43,144) 5,461
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 509,671 440,475 337,664
- ----------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures (121,543) (124,275) (123,630)
- ----------------------------------------------------------------------------------------------------
Financing activities
Dividends paid (140,338) (131,330) (121,270)
Repurchase of common stock (201,606) -- (3,986)
Decrease (increase) in intercompany receivable/payable 18,317 (12,397) 34,076
Stock options and other 14,553 1,136 162
- ----------------------------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES (309,074) (142,591) (91,018)
- ----------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND EQUIVALENTS 79,054 173,609 123,016
Cash and equivalents, beginning of year 308,720 135,111 12,095
- ----------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS, END OF YEAR $ 387,774 $ 308,720 $ 135,111
=====================================================================================================
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
(in millions)
<S> <C> <C> <C> <C> <C>
Intimate Brands Working Capital $221 $241 $333 $463 $440
</TABLE>
<TABLE>
<CAPTION>
VSS BBW VSC OTHER
(in millions)
<S> <C> <C> <C> <C>
Intimate Brands Capital Expenditures
by Business $64 $45 $10 $3
Total: $122 million
</TABLE>
44
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. The Limited, Inc. ("The Limited") owns approximately
85% of the outstanding common stock of the Company, which initiated public
ownership on October 24, 1995.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all significant subsidiaries which are more than 50% owned and controlled. All
significant intercompany balances and transactions have been eliminated in
consolidation.
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to January 31. Fiscal
years are designated in the financial statements and notes by the calendar year
in which the fiscal year commences. The results for fiscal years 1998, 1997 and
1996 represent 52-week periods ended January 30, 1999, January 31, 1998, and
February 1, 1997.
CASH AND EQUIVALENTS
Cash and equivalents include amounts on deposit with financial institutions and
money market investments with maturities of less than 90 days.
INVENTORIES
Inventories are principally valued at the lower of average cost or market, on a
first-in first-out basis, utilizing the retail method.
CATALOGUE AND ADVERTISING COSTS
Catalogue costs, primarily consisting of catalogue production and mailing costs,
are amortized over the expected future revenue stream, which is principally from
three to six months from the date catalogues are mailed. All other advertising
costs are expensed at the time the promotion first appears in media or in the
store. Catalogue and advertising costs amounted to $294 million, $255 million
and $229 million in 1998, 1997 and 1996. At January 30, 1999 and January 31,
1998, $26.7 million and $26.1 million of unamortized catalogue costs were
included in other current assets.
PROPERTY AND EQUIPMENT
Depreciation and amortization of property and equipment are computed for
financial reporting purposes on a straight-line basis, using service lives
ranging principally from 10 to 15 years for building and leasehold improvements,
and 3 to 10 years for other property and equipment. The cost of assets sold or
retired and the related accumulated depreciation or amortization are removed
from the accounts with any resulting gain or loss included in net income.
Maintenance and repairs are charged to expense as incurred. Major renewals and
betterments that extend service lives are capitalized. Long-lived assets are
reviewed for impairment whenever events or changes in circumstances indicate
that full recoverability is questionable. Factors used in the valuation include,
but are not limited to, management's plans for future operations, brand
initiatives, recent operating results and projected cash flows.
GOODWILL AMORTIZATION
Goodwill represents the excess of the purchase price over the fair value of the
net assets of acquired companies and is amortized on a straight-line basis over
30 years.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
requires the use of the liability method. Under this method, deferred tax assets
and liabilities are recognized based on the difference between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect in the years in which those temporary differences
are expected to reverse. Under SFAS No. 109, the effect on deferred taxes of a
change in tax rates is recognized in income in the period that includes the
enactment date.
The Company is included in The Limited's consolidated Federal and certain
state income tax groups for income tax reporting purposes and is responsible for
its proportionate share of income taxes calculated upon its Federal taxable
income at a current estimate of the annual effective tax rate.
45
<PAGE> 13
SHAREHOLDERS' EQUITY
At January 30, 1999, there were 550 million of $0.01 par value Class A shares
and 550 million of $0.01 par value Class B shares authorized, of which 38.1
million Class A shares and 207.8 million Class B shares were issued and
outstanding, net of 4.7 million Class A shares and 2.2 million Class B shares
held in treasury. At January 31, 1998, there were approximately 42.6 million
Class A shares and 210 million Class B shares issued and outstanding net of 0.1
million Class A shares held in treasury. In addition, there are 55 million of
$0.01 par value preferred shares authorized, none of which have been issued.
Holders of Class A common stock generally have identical rights to holders of
Class B common stock, except that holders of Class A common stock are entitled
to one vote per share while holders of Class B common stock are entitled to
three votes per share on all matters submitted to a vote of shareholders. Each
share of Class B common stock is convertible while held by The Limited or any of
its subsidiaries into one share of Class A common stock.
In 1998, the Board of Directors authorized two stock repurchases. In a
repurchase completed in August 1998, the Company acquired 4.5 million shares of
its common stock for $106 million from its public shareholders. These
repurchased shares were specifically reserved to cover shares needed for
employee benefit plans. In January 1999, the Company announced its intention to
repurchase up to $500 million of its common stock. Purchases will be made on a
proportionate basis from both the Company's public shareholders and The
Limited. As of January 30, 1999, the Company had repurchased 0.4 million shares
from public shareholders for $14.8 million and 2.2 million shares from The
Limited, at the same weighted average per share price, for $80.7 million.
REVENUE RECOGNITION
Sales are recorded upon purchase by customers. A reserve is provided for the
gross profit on projected catalogue merchandise returns, based on prior
experience.
EARNINGS PER SHARE
Net income per share is computed in accordance with SFAS No. 128, "Earnings Per
Share." Earnings per basic share is computed based upon the weighted average
number of outstanding common shares. Earnings per diluted share includes the
weighted average effect of dilutive options and restricted stock.
Weighted average common shares outstanding (thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------
<S> <C> <C> <C>
Common shares issued 252,700 252,700 252,700
Treasury shares (2,170) (130) (42)
- -----------------------------------------------------------------
Basic shares 250,530 252,570 252,658
Dilutive effect of options
and restricted shares 1,908 966 397
- -----------------------------------------------------------------
Diluted shares 252,438 253,536 253,055
- -----------------------------------------------------------------
</TABLE>
The computation of earnings per diluted share excludes options to purchase
583,000, 66,000 and 751,000 shares of common stock that were outstanding at
year-end 1998, 1997 and 1996 because the options' exercise price was greater
than the average market price of the common shares.
USE OF ESTIMATES IN THE PREPARATION
OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Since actual results may differ from those estimates, the
Company revises its estimates and assumptions as new information becomes
available.
2. SPECIAL AND NONRECURRING CHARGES
During the fourth quarter of 1997, the Company recognized a $67.6 million charge
in conjunction with closing Cacique, a 118-store lingerie business, effective
January 31, 1998. The amount included noncash charges of $30 million comprised
principally of write-offs and liquidations of store assets. After cash
disbursements of $26.8 million in 1998, accruals of $10.8 million,
principally for contractual obligations, remained at January 30, 1999. During
the fourth quarter of 1996, the Company recognized a $12.0 million charge
representing the estimated loss on the sale of Penhaligon's, a U.K.-based
subsidiary. The transaction closed in April 1997.
46
<PAGE> 14
3. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consisted of (thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Furniture, fixtures
and equipment $672,077 $613,983
Land, building improvements
and leaseholds 147,302 127,918
Construction in progress 1,682 1,885
- --------------------------------------------------------------------------------
821,061 743,786
Less: accumulated depreciation
and amortization 422,592 351,282
- --------------------------------------------------------------------------------
Property and equipment, net $398,469 $392,504
================================================================================
</TABLE>
4. Leased Facilities and Commitments
Annual store rent is comprised of a fixed minimum amount, and/or contingent rent
based upon a percentage of sales exceeding a stipulated amount. Store lease
terms generally require additional payments covering taxes, common area costs
and certain other expenses.
A summary of rent expense follows (thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Store rent:
Fixed minimum $159,368 $155,571 $133,215
Contingent 22,414 19,229 13,098
- --------------------------------------------------------------------------------
Total store rent 181,782 174,800 146,313
Buildings, equipment
and other 18,092 17,196 15,633
- --------------------------------------------------------------------------------
Total rent expense $199,874 $191,996 $161,946
================================================================================
</TABLE>
Rent expense includes charges from The Limited and its subsidiaries for store,
office and distribution center space under formal agreements which approximate
market rates. At January 30, 1999, the Company was committed to noncancelable
leases with remaining terms of 1 to 20 years. These commitments include store
leases with initial terms, which primarily range from 10 to 20 years, and
offices and distribution centers leased from The Limited with initial terms of
15 years.
A summary of total minimum rent commitments and the related party portion (see
Note 9) under noncancelable leases follows (thousands):
<TABLE>
<CAPTION>
Total Related Party
- ---------------------------------------------
<S> <C> <C>
1999 $174,399 $ 29,408
2000 173,718 29,672
2001 169,458 29,436
2002 161,116 28,855
2003 144,551 27,860
Thereafter 478,048 120,768
</TABLE>
5. OTHER ASSETS
<TABLE>
<CAPTION>
Other assets consisted of (thousands):
- -------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Goodwill, net of accumulated amortization
of $32,143 and $29,034 $ 70,312 $ 73,421
Other 2,055 5,716
- -------------------------------------------------------------------------------
Total other assets $ 72,367 $ 79,137
================================================================================
</TABLE>
6. Accrued Expenses
Accrued expenses consisted of (thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Compensation,
payroll taxes and benefits $ 44,939 $ 53,529
Rent 42,319 27,214
Taxes, other than income 13,789 14,806
Estimated returns for
catalogue merchandise 11,959 11,913
Interest 13,663 13,948
Cacique closing 10,787 28,403
Other 60,865 74,567
- --------------------------------------------------------------------------------
Total accrued expenses $198,321 $224,380
================================================================================
</TABLE>
7. Income Taxes
The provision for income taxes consisted of (thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $ 207,900 $ 180,500 $ 146,700
State 42,400 29,900 28,300
- -------------------------------------------------------------------------------
250,300 210,400 175,000
- -------------------------------------------------------------------------------
Deferred:
Federal 13,400 (19,600) (4,700)
State 3,300 3,200 1,700
- -------------------------------------------------------------------------------
16,700 (16,400) (3,000)
- -------------------------------------------------------------------------------
Total provision $ 267,000 $ 194,000 $ 172,000
- -------------------------------------------------------------------------------
</TABLE>
A reconciliation between the statutory Federal income tax rate and the effective
income tax rate follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0 % 35.0%
State income taxes,
net of Federal income
tax effect 4.5% 4.5 % 4.5%
Other items, net 0.5% 0.7 % 0.5%
- -------------------------------------------------------------------------------
Total 40.0% 40.2 % 40.0%
================================================================================
</TABLE>
47
<PAGE> 15
Income taxes payable included net current deferred tax assets of $13.8 million
and $41.3 million at January 30, 1999 and January 31, 1998. Current income tax
obligations are treated as having been settled through the intercompany accounts
as if the Company were filing its income tax returns on a separate company
basis. Such amounts were $232.7 million, $236.0 million and $167.0 million in
1998, 1997 and 1996.
A summary of the effect of temporary differences that give rise to deferred
income taxes follows (thousands):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
1998 Assets Liabilities Total
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
EXCESS OF TAX OVER
BOOK DEPRECIATION -- $(40,600) $(40,600)
SPECIAL AND NONRECURRING CHARGE $ 4,500 -- 4,500
STATE INCOME TAXES 9,900 -- 9,900
OTHER, NET 37,700 -- 37,700
- ---------------------------------------------------------------------------------
TOTAL DEFERRED INCOME TAXES $ 52,100 $(40,600) $ 11,500
- ---------------------------------------------------------------------------------
1997
- ---------------------------------------------------------------------------------
Excess of tax over
book depreciation -- $(34,100) $(34,100)
Special and nonrecurring charge $ 15,100 -- 15,100
State income taxes 12,700 -- 12,700
Other, net 50,700 (16,200) 34,500
- ---------------------------------------------------------------------------------
Total deferred income taxes $ 78,500 $(50,300) $ 28,200
=================================================================================
</TABLE>
8. 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.
Long-term debt consisted of (thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
1998 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
Less current portion of long-term debt 100,000 --
- --------------------------------------------------------------------
$250,000 $350,000
====================================================================
</TABLE>
Each of the notes is to be automatically prepaid concurrently with any
prepayment of the corresponding debt of The Limited. The debt of The Limited
corresponding to the 7 1/2% debentures maturing in 2023 is subject to early
redemption by The Limited at its option beginning in 2003 at specified declining
premiums. The other notes are not subject to early redemption by The Limited.
Interest paid approximated $30.3 million, $30.4 million and $35.7 million in
1998, 1997 and 1996.
9. RELATED PARTY TRANSACTIONS
Transactions between the Company and The Limited and its wholly-owned
subsidiaries commonly occur in the normal course of business and principally
consist of the following:
- - Merchandise purchases
- - Capital expenditures
- - Real estate management and leasing
- - Inbound and outbound transportation
- - Corporate services
Information with regard to these transactions is as follows:
Significant purchases are made from Mast, a wholly-owned subsidiary of The
Limited. Mast is a contract manufacturer and apparel importer. Prices are
negotiated on a competitive basis by merchants of the Company with Mast.
The Company's real estate operations, which include all aspects of lease
negotiations, ongoing dealings with landlords and developers, and lease and
utility payments, are handled centrally by the Real Estate Division of The
Limited. Specifically identifiable costs are charged directly to the Company.
All other services-related costs not specifically attributable are allocated to
the Company based on new and remodeled store construction projects and open
selling square feet in relation to the totals for The Limited.
The Company's store design and construction operations are coordinated
centrally by the Store Planning Division of The Limited ("Store Planning
Division"). The Store Planning Division facilitates the design and construction
of new stores and remodels and, upon completion, transfers store assets to the
Company at actual cost. Store Planning Division expenses are charged to the
Company based on new and remodeled store construction projects and open selling
square feet in relation to the totals for The Limited.
The Company's inbound and outbound transportation expenses, exclusive of
Victoria's Secret Catalogue (which maintains its own order fulfillment
operation), are managed centrally by Limited Distribution Services, a
wholly-owned subsidiary of The Limited. Inbound freight is charged to the
Company based on actual receipts while outbound freight is charged based on
weight shipped.
The Limited provides certain services to the Company including, among other
things, aircraft, certain tax, treasury, legal, accounting and audit, corporate
development, risk management, associate benefit plan administration, human
resources and compensation, and government affairs services. Specifically
identifiable
48
<PAGE> 16
costs are charged directly to the Company. All other services-related costs not
specifically attributable to an operating business have been allocated to the
Company based upon a percentage of sales.
The Company participates in The Limited's centralized cash management system.
Under this system, cash received from the Company's operations is transferred to
The Limited's centralized cash accounts and cash disbursements are funded from
the centralized cash accounts on a daily basis. The intercompany account
represents an interest-earning asset or interest-bearing liability. Interest on
the intercompany account is calculated based on the Federal Reserve AA Composite
30-day rate. The amount of the intercompany payable to The Limited under these
agreements at January 30, 1999 is $5.9 million.
The Company is charged rent expense, common area maintenance charges and
utilities for stores shared with other consolidated subsidiaries of The Limited.
The charges are based on square footage and represent the proportionate share of
the underlying leases with third parties.
The Company is also charged rent expense and utilities at market rates for
the distribution center and home office space that it occupies according to
formal 15-year lease agreements, which contain options to renew.
The Company and The Limited have entered into intercompany agreements which
establish the provision of services in accordance with the terms described
above. The prices charged to the Company for services provided under these
agreements may be higher or lower than prices that may be charged by third
parties. It is not practicable to estimate what these costs would be if The
Limited were not providing these services and the Company were required to
purchase these services from outsiders or develop internal expertise. Management
believes the charges and allocations described above are fair and reasonable.
The following table summarizes the related party transactions between the
Company and The Limited and its wholly-owned subsidiaries (thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Mast purchases $383,193 $360,192 $367,240
Capital expenditures 73,603 75,474 88,740
Inbound and outbound freight 50,163 45,308 31,816
Corporate charges 69,864 51,376 35,130
Store leases and other occupancy 26,223 38,700 35,510
Distribution center, MIS and
home office expenses 22,955 17,302 11,253
Centrally managed benefits 44,064 40,736 32,713
Interest charges 30,050 30,326 32,544
Interest income 15,136 8,610 4,612
- --------------------------------------------------------------------------------
</TABLE>
The Company has no arrangements with The Limited that result in the Company's
guarantee, pledge of assets or stock to provide collateral for The Limited's
debt obligations.
Proprietary credit cards accepted by the Company are offered to customers
through Alliance Data Systems, a 31%-owned venture of The Limited.
10. STOCK OPTIONS AND RESTRICTED STOCK
Under the Company's stock plan, associates may be granted up to 17.5 million
restricted shares or options to purchase the Company's common stock at the
market price on the date of grant. Options generally vest 25% per year over the
first four years of the grant. Of the options granted, 0.2 million options in
1998 and 2.3 million options in 1997 had graduated vesting schedules over six
years. Options have a maximum term of ten years.
The Company adopted the disclosure requirements of SFAS No. 123, "Accounting
for Stock-Based Compensation," effective with the 1996 financial statements, but
elected to continue to measure compensation expense in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no
compensation expense for stock options has been recognized. If compensation
expense had been determined based on the estimated fair value of options granted
since 1995, consistent with the methodology in SFAS No. 123, the pro forma
effects on the Company's net income and earnings per diluted share would have
been a reduction of approximately $3.8 million or $0.02 per share in 1998, $2.8
million or $0.01 per share in 1997 and $1.0 million or $0.00 per share in 1996.
The weighted average per share fair value of options granted ($7.36, $5.50
and $3.80 during 1998, 1997 and 1996) was used to calculate the pro forma
compensation expense. The fair value was estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions for 1998,
1997 and 1996: dividend yields of 2.8%, 3.1% and 3.7%; volatility of 34%, 27%
and 31%; risk-free interest rates of 5%, 6% and 5.25%; assumed forfeiture rates
of 20%, 15% and 15%; and expected lives of 5.6 years, 6.5 years and 5 years.
Approximately 405,000, 1,442,000 and 169,000 restricted shares were granted
in 1998, 1997 and 1996, with market values at date of grant of $12.9 million,
$30.2 million and $3.0 million. Restricted stock grants generally vest either on
a graduated scale over four years or 100% at the end of a fixed vesting period,
principally five years. In 1997, 1,100,000 restricted shares, were granted with
graduated vesting schedules over six years.
49
<PAGE> 17
[photo]
These grants included 850,000 restricted shares with performance requirements,
all of which have been met.
The market value of restricted shares is being amortized as compensation
expense over the vesting period, generally four to six years. Compensation
expense related to restricted stock awards amounted to $11.6 million, $10.0
million and $3.0 million in 1998, 1997 and 1996.
A summary of stock options outstanding for 1998 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercisable
Prices Outstanding Life Price Exercisable Price
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$14 - $18 1,400,000 7.2 $16 566,000 $16
$19 - $24 3,055,000 8.5 $21 316,000 $21
$25 - $29 1,109,000 9.5 $27 - -
- ---------------------------------------------------------------------------
$14 - $29 5,564,000 8.4 $21 882,000 $18
- ---------------------------------------------------------------------------
</TABLE>
A summary of stock option activity follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1998 1997 1996
------------------------- ---------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Shares Option Price Shares Option Price Shares Option Price
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 4,303,000 $18.69 1,530,000 $15.89 682,000 $16.98
Granted 1,714,000 25.47 3,074,000 19.89 931,000 15.13
Exercised (273,000) 16.37 (66,000) 16.05 (15,000) 17.00
Canceled (180,000) 19.45 (235,000) 17.62 (68,000) 16.12
- -------------------------------------------------------------------------------------------------
Outstanding at
end of year 5,564,000 $20.87 4,303,000 $18.69 1,530,000 $15.89
- -------------------------------------------------------------------------------------------------
Options exercisable
at year-end 882,000 $17.65 418,000 $16.40 126,000 $16.90
- -------------------------------------------------------------------------------------------------
</TABLE>
11. RETIREMENT BENEFITS
The Company participates in a qualified defined contribution retirement plan and
a nonqualified supplemental retirement plan sponsored by The Limited.
Participation in the qualified plan is available to all associates who have
completed 1,000 or more hours of service with the Company during certain
12-month periods and attained the age of 21. Participation in the nonqualified
plan is subject to service and compensation requirements. The Company's
contributions to these plans are based on a percentage of the associates'
eligible annual compensation. The cost of these plans was $14.4 million, $12.7
million and $11.7 million in 1998, 1997 and 1996.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.
CURRENT ASSETS AND CURRENT
LIABILITIES
The carrying value of cash equivalents, accounts receivable, accounts payable,
current portion of long-term debt and accrued expenses approximates fair value
because of their short maturity.
LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities. The estimated fair value
of the Company's long-term debt at January 30, 1999 and January 31, 1998 was
$257.5 million and $364.1 million compared to the carrying value of $250.0
million in 1998 and $350.0 million in 1997.
50
<PAGE> 18
[photo]
13. SEGMENT INFORMATION
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company determines operating segments
based on a business's operating characteristics. Reportable segments were
determined based on the similar economic characteristics of the retail
businesses and the similar methods used to distribute products for the
store-based operations of Victoria's Secret Stores and Bath & Body Works. The
Catalogue segment consists of the Victoria's Secret Catalogue operations. Sales
outside the United States were insignificant.
Segment information follows (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Reconciling
1998 Retail Catalogue Other(a) Items Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $3,101,298 $ 759,335 $ 25,120 -- $3,885,753
INTERSEGMENT SALES -- -- 368,995 $ (368,995)(C) --
DEPRECIATION AND
AMORTIZATION 87,581 8,556 5,084 -- 101,221
OPERATING INCOME
(LOSS) 660,676 71,013 (50,840) -- 680,849
TOTAL ASSETS 796,095 179,045 472,937 -- 1,448,077
CAPITAL EXPENDITURES 108,790 9,580 3,173 -- 121,543
- ------------------------------------------------------------------------------------------------
1997
- ------------------------------------------------------------------------------------------------
Net sales $2,758,756 $ 734,362 $ 124,738 -- $3,617,856
Intersegment sales -- -- 305,454 $ (305,454)(c) --
Depreciation and
amortization 89,500 6,943 9,754 -- 106,197
Operating income
(loss) 559,427 76,708 (63,883) (67,600)(b) 504,652
Total assets 700,953 218,335 428,412 -- 1,347,700
Capital expenditures 101,269 17,619 5,387 -- 124,275
- ------------------------------------------------------------------------------------------------
1996
- ------------------------------------------------------------------------------------------------
Net sales $2,203,498 $ 684,303 $ 109,539 -- $2,997,340
Intersegment sales -- -- 263,155 $ (263,155)(c) --
Depreciation and
amortization 67,729 6,661 11,183 -- 85,573
Operating income
(loss) 444,646 67,974 (42,478) (12,000)(b) 458,142
Total assets 654,523 163,790 316,849 -- 1,135,162
Capital expenditures 112,491 5,970 5,169 -- 123,630
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Included in "other" category are the Cacique lingerie business, which
was closed effective January 31, 1998. Gryphon and Corporate, none of
which are significant operating segments
(b) Includes special and nonrecurring charge of $67.6 million in 1997 and
$12.0 million in 1996 (see Note 2)
(c) Represents intersegment sales elimination.
51
<PAGE> 19
In addition to its operating segments, management also focuses on Victoria's
Secret as a brand. Sales of the Victoria's Secret brand grew 6% in 1998 and 14%
in 1997 and totaled $2.588 billion in 1998, $2.436 billion in 1997 and $2.134
billion in 1996.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial results follow (thousands except per share
amounts):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
First Second Third Fourth
- --------------------------------------------------------------------------
1998 Quarters
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $770,868 $874,708 $708,985 $1,531,192
GROSS INCOME 271,872 336,144 274,943 712,438
NET INCOME 41,027 73,562 39,727 245,883
NET INCOME PER SHARE:
BASIC $ 0.16 $ 0.29 $ 0.16 $ 0.99
DILUTED 0.16 0.29 0.16 0.98
- --------------------------------------------------------------------------
1997 Quarters
- --------------------------------------------------------------------------
Net sales $704,041 $826,574 $689,978 $ 1,397,263
Gross income 228,082 282,571 249,227 600,152
Net income 32,898 60,998 35,434 159,606
Net income per share:
Basic $ 0.13 $ 0.24 $ 0.14 $ 0.63(*)
Diluted 0.13 0.24 0.14 0.63(*)
- --------------------------------------------------------------------------
</TABLE>
(*) Including special and nonrecurring charge of $67.6 million ($0.16 per
diluted share) in the fourth quarter of 1997 in conjunction with the
closing of Cacique (see Note 2)
The Company's common stock is traded on the New York Stock Exchange ("IBI"). On
January 30, 1999, there were approximately 1,400 shareholders of record.
However, when including active associates who participate in the Company's stock
purchase plan, associates who own shares through Company sponsored retirement
plans and others holding shares in broker accounts under street names, the
Company estimates the shareholder base at approximately 60,000.
MARKET PRICE AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
Market Price
-------------------------------------
Cash
Dividend
Fiscal Year End 1998 High Low Per Share
- -----------------------------------------------------------------
<S> <C> <C> <C>
4th Quarter $40 1/4 $23 3/16 $0.14
3rd Quarter 23 7/16 18 1/2 0.14
2nd Quarter 30 1/8 22 1/8 0.14
1st Quarter 29 1/16 25 5/16 0.14
=================================================================
Fiscal Year End 1997
- -----------------------------------------------------------------
4th Quarter $25 3/8 $21 3/16 $0.13
3rd Quarter 25 20 5/16 0.13
2nd Quarter 23 1/16 19 0.13
1st Quarter 20 5/8 17 1/8 0.13
=================================================================
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF INTIMATE BRANDS, INC.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity, and cash flows present
fairly, in all material respects, the consolidated financial position of
Intimate Brands, Inc. and its subsidiaries at January 30, 1999 and January 31,
1998, and the consolidated results of their operations and their cash flows for
each of the three fiscal years in the period ended January 30, 1999 (on pages
42-52) in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these consolidated statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Columbus, Ohio
February 17, 1999
52
<PAGE> 1
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction
Subsidiaries (a) of Incorporation
------------ ----------------
Victoria's Secret Stores, Inc. (b) Delaware
Victoria's Secret Catalogue, LLC (c) Delaware
Bath & Body Works, Inc. (d) Delaware
Gryphon Development, Inc. (e) Delaware
Intimate Brands Service Corporation (f) Delaware
(a) The names of certain subsidiaries are omitted since such unnamed
subsidiaries, considered in the aggregate as a single subsidiary, would
not constitute a significant subsidiary as of January 30, 1999.
(b) Victoria's Secret Stores, Inc. is a wholly-owned subsidiary of the
registrant.
(c) Victoria's Secret Catalogue, LLC is a wholly-owned subsidiary of
Victoria's Secret Catalogue Holding LLC, a Delaware limited liability
corporation and a wholly-owned subsidiary of the registrant.
(d) Bath & Body Works, Inc. is a wholly-owned subsidiary of the registrant.
(e) Gryphon Development, Inc. is a wholly-owned subsidiary of the Gryphon
Holding Corporation, a Delaware corporation and a wholly-owned
subsidiary of the registrant.
(f) Intimate Brands Service Corporation is a wholly-owned subsidiary of the
registrant.
<PAGE> 1
EXHIBIT 23
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Intimate Brands, Inc. on Form S-8, Registration Nos. 333-1960, 333-04921,
333-04923 and 333-10215 of our report dated February 17, 1999, on our audits of
the consolidated financial statements of Intimate Brands, Inc. and Subsidiaries
as of January 30, 1999, and January 31, 1998, and for the fiscal years ended
January 30, 1999, January 31, 1998 and February 1, 1997, which report is
incorporated by reference in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Columbus, Ohio
April 26, 1999
<PAGE> 1
EXHIBIT 24
----------
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ LESLIE H. WEXNER
-------------------------
Leslie H. Wexner
<PAGE> 2
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ KENNETH B. GILMAN
-------------------------
Kenneth B. Gilman
<PAGE> 3
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ ROGER D. BLACKWELL
-------------------------
Roger D. Blackwell
<PAGE> 4
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ CYNTHIA A. FIELDS
-------------------------
Cynthia A. Fields
<PAGE> 5
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ E. GORDON GEE
-------------------------
E. Gordon Gee
<PAGE> 6
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ GRACE A. NICHOLS
-------------------------
Grace A. Nichols
<PAGE> 7
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ BETH M. PRITCHARD
-------------------------
Beth M. Pritchard
<PAGE> 8
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ ALEX SHUMATE
-------------------------
Alex Shumate
<PAGE> 9
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ DONALD B. SHACKELFORD
-------------------------
Donald B. Shackelford
<PAGE> 10
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
INTIMATE BRANDS, INC.
The undersigned officer and/or director of Intimate Brands, Inc., a
Delaware corporation, which anticipates filing an Annual Report on Form 10-K for
its fiscal year ended January 30, 1999 under the provisions of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, Washington,
D.C., hereby constitutes and appoints Leslie H. Wexner and Kenneth B. Gilman,
and each of them, with full powers of substitution and resubstitution, as
attorney to sign for the undersigned in any and all capacities such Annual
Report on Form 10-K and any and all amendments thereto, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report on Form 10-K with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 29th day of January, 1999.
/s/ WILLIAM E. KIRWAN
---------------------
William E. Kirwan
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF INTIMATE BRANDS, INC. AND SUBSIDIARIES FOR
THE YEAR ENDED JANUARY 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-30-1999
<CASH> 387,774
<SECURITIES> 0
<RECEIVABLES> 15,627
<ALLOWANCES> 0
<INVENTORY> 479,896
<CURRENT-ASSETS> 977,241
<PP&E> 821,061
<DEPRECIATION> 422,592
<TOTAL-ASSETS> 1,448,077
<CURRENT-LIABILITIES> 537,168
<BONDS> 250,000
0
0
<COMMON> 2,527
<OTHER-SE> 642,116
<TOTAL-LIABILITY-AND-EQUITY> 1,448,077
<SALES> 3,885,753
<TOTAL-REVENUES> 3,885,753
<CGS> 2,290,356
<TOTAL-COSTS> 2,290,356
<OTHER-EXPENSES> 914,548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,050
<INCOME-PRETAX> 667,199
<INCOME-TAX> 267,000
<INCOME-CONTINUING> 400,199
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 400,199
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.59
</TABLE>
<PAGE> 1
EXHIBIT 99
----------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Plan Administrator of The Limited,
Inc. Savings and Retirement Plan:
We have audited the accompanying statements of net assets available for
benefits of The Limited, Inc. Savings and Retirement Plan (the "Plan") as of
December 31, 1998 and 1997, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for benefits of the
Plan as of December 31, 1998 and 1997, and the changes in net assets available
for benefits for each of the years then ended, in conformity with generally
accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedules of
assets held for investment purposes at December 31, 1998 and reportable
transactions in excess of 5% of the current value of plan assets for the year
ended December 31, 1998, are presented for the purpose of additional analysis
and are not a required part of the basic financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Columbus, Ohio,
February 16, 1999.
<PAGE> 2
<TABLE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
----------------------------------------------
DECEMBER 31, 1998
-----------------
<CAPTION>
Limited Fixed Index-500
TOTAL Stock Fund Income Fund Fund
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments, at Fair Value:
At Quoted Market Price:
Common Stock:
The Limited, Inc. $ 70,799,467 $70,799,467 $ -- $ --
Intimate Brands, Inc. 5,876,681 -- -- --
Abercrombie & Fitch Co 5,721,765 -- -- --
Mutual Funds:
Vanguard Retirement
Savings Trust Fund 89,083,764 -- 89,083,764 --
Vanguard Index Trust
500 Portfolio 98,041,511 -- -- 98,041,511
Vanguard U.S. Growth
Portfolio 86,327,108 -- -- --
Vanguard Wellington
Fund 24,530,446 -- -- --
At Estimated Value:
Common Collective Trust 101,414 357 100,307 --
------------ ----------- ------------ ------------
Total Investments 380,482,156 70,799,824 89,184,071 98,041,511
Contribution Receivable
from Employers 25,548,732 1,590,209 10,942,273 5,475,740
Receivable from Employers
for Withheld Participants'
Contributions 1,906,944 117,898 448,468 565,248
Due from Brokers 197,476 149,399 -- --
Interfund Transfers -- 11,546 (52,641) 14,808
Accrued Interest and Dividends 4,286 580 1,627 1,007
------------ ----------- ------------ ------------
Total Assets 408,139,594 72,669,456 100,523,798 104,098,314
------------ ----------- ------------ ------------
LIABILITIES
- -----------
Administrative Fees Payable 86,807 24,554 9,463 8,650
Due to Brokers 673 345 -- --
------------ ----------- ------------ ------------
Total Liabilities 87,480 24,899 9,463 8,650
------------ ----------- ------------ ------------
NET ASSETS AVAILABLE FOR
BENEFITS $408,052,114 $72,644,557 $100,514,335 $104,089,664
============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Intimate Abercrombie
U.S. Growth Wellington Brands & Fitch Co.
Fund Fund Stock Fund Stock Fund
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments, at Fair Value:
At Quoted Market Price:
Common Stock:
The Limited, Inc. $ -- $ -- $ -- $ --
Intimate Brands, Inc. -- -- 5,876,681 --
Abercrombie & Fitch Co -- -- -- 5,721,765
Mutual Funds:
Vanguard Retirement
Savings Trust Fund -- -- -- --
Vanguard Index Trust
500 Portfolio -- -- -- --
Vanguard U.S. Growth
Portfolio 86,327,108 -- -- --
Vanguard Wellington
Fund -- 24,530,446 -- --
At Estimated Value:
Common Collective Trust -- -- 345 405
----------- ----------- ---------- -----------
Total Investments 86,327,108 24,530,446 5,877,026 5,722,170
Contribution Receivable
from Employers 4,604,275 2,153,489 782,746 --
Receivable from Employers
for Withheld Participants'
Contributions 465,463 230,949 78,918 --
Due from Brokers -- -- 45,530 2,547
Interfund Transfers 24,857 18,149 (12,825) (3,894)
Accrued Interest and Dividends 639 289 136 8
----------- ----------- ---------- -----------
Total Assets 91,422,342 26,933,322 6,771,531 5,720,831
----------- ----------- ---------- -----------
LIABILITIES
- -----------
Administrative Fees Payable 44,140 -- -- --
Due to Brokers -- -- 328 --
----------- ----------- ---------- -----------
Total Liabilities 44,140 -- 328 --
----------- ----------- ---------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS $91,378,202 $26,933,322 $6,771,203 $ 5,720,831
=========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-1
<PAGE> 3
<TABLE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
----------------------------------------------
DECEMBER 31, 1997
-----------------
<CAPTION>
Limited Fixed Index-500
TOTAL Stock Fund Income Fund Fund
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments, at Fair Value:
At Quoted Market Price:
Common Stock:
The Limited, Inc. $ 68,513,782 $68,513,782 $ -- $ --
Intimate Brands, Inc. 3,027,342 -- -- --
Mutual Funds:
Vanguard Investment Contract Trust 88,164,291 -- 88,164,291 --
Vanguard Index Trust - 500
Portfolio 75,764,074 -- -- 75,764,074
Vanguard U.S. Growth Portfolio 62,996,962 -- -- --
Vanguard Wellington Fund 19,115,007 -- -- --
At Estimated Value:
Common Collective Trust 308 241 -- --
------------ ----------- ------------ -----------
Total Investments 317,581,766 68,514,023 88,164,291 75,764,074
Contribution Receivable from Employers 22,644,974 1,372,671 10,275,136 4,632,422
Receivable from Employers for Withheld
Participants' Contributions 1,395,711 91,947 391,319 391,168
Due from Brokers 1,655,464 1,543,543 -- --
Interfund Transfers -- 858,585 (35,679) 3,698
Cash 417,865 -- 368,110 49,755
Accrued Interest and Dividends 4,297 693 1,410 1,086
Other 2,470 -- 2,470 --
------------ ----------- ------------ -----------
Total Assets 343,702,547 72,381,462 99,167,057 80,842,203
------------ ----------- ------------ -----------
LIABILITIES
- -----------
Cash Overdraft 418,897 -- -- --
Administrative Fees Payable 218,952 85,121 -- --
------------ ----------- ------------ -----------
Total Liabilities 637,849 85,121 -- --
------------ ----------- ------------ -----------
NET ASSETS AVAILABLE FOR BENEFITS $343,064,698 $72,296,341 $ 99,167,057 $80,842,203
============ =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Intimate
U.S. Growth Wellington Brands
Fund Fund Stock Fund
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
- ------
Investments, at Fair Value:
At Quoted Market Price:
Common Stock:
The Limited, Inc. $ -- $ -- $ --
Intimate Brands, Inc. -- -- 3,027,342
Mutual Funds:
Vanguard Investment Contract Trust -- -- --
Vanguard Index Trust - 500
Portfolio -- -- --
Vanguard U.S. Growth Portfolio 62,996,962 -- --
Vanguard Wellington Fund -- 19,115,007 --
At Estimated Value:
Common Collective Trust -- -- 67
----------- ----------- ----------
Total Investments 62,996,962 19,115,007 3,027,409
Contribution Receivable from Employers 3,993,277 1,928,218 443,250
Receivable from Employers for Withheld
Participants' Contributions 333,773 156,157 31,347
Due from Brokers -- -- 111,921
Interfund Transfers (2,722) (828,447) 4,565
Cash -- -- --
Accrued Interest and Dividends 769 166 173
Other -- -- --
----------- ----------- ----------
Total Assets 67,322,059 20,371,101 3,618,665
----------- ----------- ----------
LIABILITIES
- -----------
Cash Overdraft 36,843 382,054 --
Administrative Fees Payable 127,701 5,551 579
----------- ----------- ----------
Total Liabilities 164,544 387,605 579
----------- ----------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $67,157,515 $19,983,496 $3,618,086
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE> 4
<TABLE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------
<CAPTION>
Limited Fixed Index-500
Total Stock Fund Income Fund Fund
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Investment Income:
Net Appreciation
(Depreciation)in Fair
Value of Investments $ 56,085,295 $ 9,237,871 $ -- $ 20,820,362
Mutual Funds' Earnings 15,139,419 -- 5,452,457 1,523,923
Dividends 1,415,407 1,319,274 -- --
Common Collective Trust's
Earnings 69,440 10,386 24,585 15,438
------------ ----------- ------------ ------------
Total Investment Income 72,709,561 10,567,531 5,477,042 22,359,723
------------ ----------- ------------ ------------
Contributions:
Employers 36,425,460 2,274,483 14,169,692 8,450,499
Participants 20,557,157 1,264,604 4,992,762 6,073,286
------------ ----------- ------------ ------------
Total Contributions 56,982,617 3,539,087 19,162,454 14,523,785
------------ ----------- ------------ ------------
Interfund Transfers -- (5,047,007) (5,085,523) 3,791,862
------------ ----------- ------------ ------------
Administrative Expense (869,548) (148,065) (267,737) (257,344)
------------ ----------- ------------ ------------
Benefits to Participants (56,754,614) (7,279,308) (16,403,488) (15,588,092)
------------ ----------- ------------ ------------
Increase in Net Assets
Available for Benefits 72,068,016 1,632,238 2,882,748 24,829,934
Transfer of Net Assets
Available for Benefits to
Plan of Former Affiliate (7,080,600) (1,284,022) (1,535,470) (1,582,473)
Beginning Net Assets
Available for Benefits 343,064,698 72,296,341 99,167,057 80,842,203
------------ ----------- ------------ ------------
Ending Net Assets Available
for Benefits $408,052,114 $72,644,557 $100,514,335 $104,089,664
============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Intimate Abercrombie
U.S. Growth Wellington Brands & Fitch Co.
Fund Fund Stock Fund Stock Fund
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Net Appreciation
(Depreciation)in Fair
Value of Investments $ 19,999,819 $ (203,371) $1,010,617 $5,219,997
Mutual Funds' Earnings 5,429,608 2,733,431 -- --
Dividends -- -- 96,133 --
Common Collective Trust's
Earnings 12,896 3,906 2,034 195
------------ ----------- ---------- ----------
Total Investment Income 25,442,323 2,533,966 1,108,784 5,220,192
------------ ----------- ---------- ----------
Contributions:
Employers 6,998,828 3,390,948 1,141,010 --
Participants 5,131,046 2,416,210 679,249 --
------------ ----------- ---------- ----------
Total Contributions 12,129,874 5,807,158 1,820,259 --
------------ ----------- ---------- ----------
Interfund Transfers 1,245,394 2,857,829 662,969 1,574,476
------------ ----------- ---------- ----------
Administrative Expense (122,370) (59,709) (11,360) (2,963)
------------ ----------- ---------- ----------
Benefits to Participants (12,559,377) (3,865,228) (370,431) (688,690)
------------ ----------- ---------- ----------
Increase in Net Assets
Available for Benefits 26,135,844 7,274,016 3,210,221 6,103,015
Transfer of Net Assets
Available for Benefits to
Plan of Former Affiliate (1,915,157) (324,190) (57,104) (382,184)
Beginning Net Assets
Available for Benefits 67,157,515 19,983,496 3,618,086 --
------------ ----------- ---------- ----------
Ending Net Assets Available
for Benefits $ 91,378,202 $26,933,322 $6,771,203 $5,720,831
============ =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE> 5
<TABLE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------
<CAPTION>
Limited Fixed Index-500
Total Stock Fund Income Fund Fund
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Investment Income:
Net Appreciation in Fair Value of
Investments $ 50,588,081 $20,451,530 $ -- $ 17,411,774
Mutual Funds' Earnings 10,793,675 -- 5,245,293 1,569,334
Dividends 1,474,398 1,422,393 -- --
Common Collective Trust's Earnings 88,904 10,449 41,272 18,262
------------ ----------- ------------ ------------
Total Investment Income 62,945,058 21,884,372 5,286,565 18,999,370
------------ ----------- ------------ ------------
Contributions:
Employers 32,697,039 1,963,696 15,507,190 6,371,651
Participants 18,024,880 1,322,245 5,226,156 4,897,686
------------ ----------- ------------ ------------
Total Contributions 50,721,919 3,285,941 20,733,346 11,269,337
------------ ----------- ------------ ------------
Interfund Transfers -- (6,914,328) (1,840,989) 3,344,531
------------ ----------- ------------ ------------
Administrative Expense (892,874) (204,971) (261,763) (203,185)
------------ ----------- ------------ ------------
Benefits to Participants (45,591,634) (9,049,583) (14,699,472) (11,143,418)
------------ ----------- ------------ ------------
Increase in Net Assets Available
for Benefits 67,182,469 9,001,431 9,217,687 22,266,635
Beginning Net Assets Available
for Benefits 275,882,229 63,294,910 89,949,370 58,575,568
------------ ----------- ------------ ------------
Ending Net Assets Available
for Benefits $343,064,698 $72,296,341 $ 99,167,057 $ 80,842,203
============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Intimate
U.S. Growth Wellington Brands
Fund Fund Stock Fund
----------- ----------- ----------
<S> <C> <C> <C>
Investment Income:
Net Appreciation in Fair Value of
Investments $10,457,321 $ 1,631,686 $ 635,770
Mutual Funds' Earnings 2,443,033 1,536,015 --
Dividends -- -- 52,005
Common Collective Trust's Earnings 14,531 2,544 1,846
----------- ----------- ----------
Total Investment Income 12,914,885 3,170,245 689,621
----------- ----------- ----------
Contributions:
Employers 5,370,568 2,879,631 604,303
Participants 4,290,800 1,963,375 324,618
----------- ----------- ----------
Total Contributions 9,661,368 4,843,006 928,921
----------- ----------- ----------
Interfund Transfers 2,288,479 1,827,162 1,295,145
----------- ----------- ----------
Administrative Expense (174,289) (42,505) (6,161)
----------- ----------- ----------
Benefits to Participants (8,344,965) (2,030,715) (323,481)
----------- ----------- ----------
Increase in Net Assets Available
for Benefits 16,345,478 7,767,193 2,584,045
Beginning Net Assets Available
for Benefits 50,812,037 12,216,303 1,034,041
----------- ----------- ----------
Ending Net Assets Available
for Benefits $67,157,515 $19,983,496 $3,618,086
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE> 6
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) DESCRIPTION OF THE PLAN
-----------------------
General
-------
The Limited, Inc. Savings and Retirement Plan (the "Plan") is a defined
contribution plan covering certain employees of The Limited, Inc.
and its affiliates (the "Employers") who are at least 21 years of
age and have completed 1,000 or more hours of service during their
first consecutive twelve months of employment or any calendar year
beginning in or after their first consecutive twelve months of
employment. Certain employees of the Employers, who are covered by
a collective bargaining agreement, are not eligible to participate
in the Plan.
Effective January 1, 1997, the Plan allowed for the associates of
Galyan's Trading Company, Inc. who met the eligibility
requirements of the Plan, to participate in the Plan for purposes
of electing voluntary tax-deferred contributions only. Effective
February 1, 1998, associates of Galyan's electing to participate
are eligible to receive allocations of Employers' contributions as
noted below.
Effective October 1, 1997, the Plan's enrollment dates were changed
from quarterly to monthly.
The Limited, Inc. owned 84.2% of the outstanding Common Stock of
Abercrombie & Fitch Co. until the completion of a tax-free
exchange offer (the "Exchange Offer") on May 19, 1998,
establishing Abercrombie & Fitch Co. as an independent company
and, as a result, Abercrombie & Fitch Co.'s associates are no
longer participants in the Plan. Subsequent to the Exchange Offer,
the net assets available for benefits allocated to the former
participants employed by Abercrombie & Fitch Co. were transferred
to the Abercrombie & Fitch Savings and Retirement Plan.
The Abercrombie & Fitch Co. Stock Fund was established due to the
Exchange Offer. No additional contributions may be made to this
fund.
The following description of the Plan provides only general
information. Participants should refer to the Plan document for a
more complete description of the Plan's provisions. The Plan is
subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA) as amended.
Contributions
-------------
Employer Contributions:
The Employers may provide a non-service related retirement contribution
of 4% of annual compensation up to the Social Security wage base
and 7% of annual compensation thereafter, and a service related
retirement contribution of 1% of annual compensation for
participants who have completed five or more years of vesting
service as of the last day of the Plan year. Participants who
complete 500 hours of service during the Plan year and are
participants on the last day of the Plan year are eligible. The
annual compensation of each participant taken into account under
the Plan is limited to the maximum amount permitted under Section
401(a)(17) of the Internal Revenue Code. The annual compensation
limit for the Plan year ended December 31, 1998, was $160,000.
The Employers may also provide a matching contribution of 100% of the
participant's voluntary contributions (50% for participants who
are associates of Galyan's) up to 3% of the participant's total
annual compensation.
F-5
<PAGE> 7
Participant Voluntary Contributions:
A participant may elect to make a voluntary tax-deferred contribution of 1% to
6% of his or her annual compensation up to the maximum permitted under
Section 402(g) of the Internal Revenue Code adjusted annually ($10,000 at
December 31, 1998). This voluntary tax-deferred contribution may be limited
by Section 401(k) of the Internal Revenue Code.
Vesting
- -------
A participant is fully and immediately vested for voluntary and rollover
contributions and is credited with a year of vesting service in the
Employers' contributions for each Plan year that they are credited with at
least 500 hours of service. A summary of vesting percentages in the
Employers' contributions follows:
<TABLE>
<CAPTION>
Years of Vested Service Percentage
----------------------- ----------
<S> <C>
Less than 3 years 0%
3 years 20
4 years 40
5 years 60
6 years 80
7 years 100
</TABLE>
Payment Of Benefits
- -------------------
The full value of participants' accounts becomes payable upon retirement,
disability, or death. Upon termination of employment for any other reason
participants' accounts, to the extent vested, become payable. Those
participants with vested account balances greater than $5,000 have the option
of leaving their accounts invested in the Plan until age 65. All benefits
will be paid as a lump-sum distribution. Those participants holding shares of
Employer Securities will have the option of receiving such amounts in whole
shares of Employer Securities and cash for any fractional shares.
Participants have the option of having their benefit paid directly to an
eligible retirement plan specified by the participant.
A participant who is fully vested in his or her account and who has participated
in the Plan for at least seven years may obtain an in-service withdrawal from
their account based on the percentage amounts designated by the Plan. A
participant may also request a hardship distribution due to an immediate and
heavy financial need based on the terms of the Plan.
Amounts Allocated to Participants Withdrawn from the Plan
- ---------------------------------------------------------
The vested portion of net assets available for benefits allocated to
participants withdrawn from the plan as of December 31, 1998 and 1997, is set
forth below:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Limited Stock Fund $ 210,766 $ 377,704
Fixed Income Fund 611,899 645,142
Index-500 Fund 778,834 489,489
U.S. Growth Fund 605,616 409,316
Wellington Fund 159,863 128,102
Intimate Brands Stock Fund 15,785 12,002
Abercrombie & Fitch Co. Fund 6,692 -
---------- ----------
$2,389,455 $2,061,755
========== ==========
</TABLE>
F-6
<PAGE> 8
Forfeitures
-----------
Forfeitures are used to reduce the Employers' required contributions.
Utilized forfeitures for 1998 and 1997, are set forth below:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Limited Stock Fund $ 172,668 $ 345,937
Fixed Income Fund 3,135,785 2,715,821
Index-500 Fund 1,292,792 1,240,275
U.S. Growth Fund 1,021,924 1,028,955
Wellington Fund 443,714 269,006
Intimate Brands Stock Fund 59,013 9,983
---------- ----------
$6,125,896 $5,609,977
========== ==========
</TABLE>
Expenses
--------
Brokerage fees, transfer taxes, and other expenses incurred in
connection with the investment of the Plan's assets will be added
to the cost of such investments or deducted from the proceeds
thereof, as the case may be. Administrative expenses of the Plan
will be paid from the Plan from earnings not allocated to
participants' accounts. The remainder will be paid by the
Employers, unless the Employers elect to pay more or all of such
costs.
Tax Determination
-----------------
The Plan obtained its latest determination letter on January 30, 1995,
in which the Internal Revenue Service stated that the Plan, as
amended and restated January 1, 1992 was in compliance with the
applicable requirements of the Internal Revenue Code. The Plan has
been amended since receiving the determination letter. However,
the Plan administrator and the Plan's tax counsel believe that the
Plan is designed and is currently being operated in compliance
with the applicable requirements of the Internal Revenue Code.
Accordingly, the following Federal income tax rules will apply to
the Plan:
Voluntary tax-deferred contributions made under the Plan by a
participant and contributions made by the Employers to
participant accounts are generally not taxable until such
amounts are distributed.
The participants are not subject to Federal income tax on
interest, dividends, or gains in their particular accounts
until distributed.
The foregoing is only a brief summary of certain tax implications and
applies only to Federal tax regulations currently in effect.
(2) SUMMARY OF ACCOUNTING POLICIES
------------------------------
Basis of Accounting
-------------------
The Plan's financial statements are prepared on the accrual basis of
accounting. Assets of the Plan are valued at fair value. The
preparation of the financial statements in conformity with
generally accepted accounting principles requires the Plan's
management to use estimates and assumptions that affect the
accompanying financial statements and disclosures. Actual results
could differ from these estimates.
Income Recognition
------------------
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
F-7
<PAGE> 9
Investment Valuation
--------------------
Mutual funds are stated at fair value as determined by quoted market
prices, which represents the net asset value of shares held by the
Plan at year end. Common stock is valued as determined by quoted
market price. The common collective trust, a money fund, uses an
estimated value of one dollar per share.
Net Appreciation (Depreciation) in Fair Value of Investments
------------------------------------------------------------
Net realized and unrealized appreciation (depreciation) is recorded in the
accompanying statement of changes in net assets available for benefits
as net appreciation (depreciation) in fair value of investments.
Benefit Payments
----------------
Benefits are recorded when paid.
Reclassification of Prior Year Information
------------------------------------------
Certain prior year information has been reclassified to conform with
current year presentation.
(3) INVESTMENTS
-----------
The Plan's investments are held by The Chase Manhattan Bank, as trustee of
the Plan. The following table presents balances for 1998 and 1997 for
the Plan's current investment options. Investments that represent 5
percent or more of the Plan's net assets are separately identified.
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Investments at Fair Value as Determined by
Quoted Market Price:
Common Stock:
The Limited, Inc. $ 70,799,467 $ 68,513,782
Other 11,598,446 3,027,342
Mutual Funds:
Vanguard Retirement Savings Trust Fund 89,083,764 --
Vanguard Investment Contract Trust -- 88,164,291
Vanguard Index Trust - 500 Portfolio 98,041,511 75,764,074
Vanguard U.S. Growth Portfolio 86,327,108 62,996,962
Vanguard Wellington Fund 24,530,446 19,115,007
------------ ------------
380,380,742 317,581,458
Estimated Fair Value:
Common Collective Trust 101,414 308
------------ ------------
Total Investments at Fair Value $380,482,156 $317,581,766
============ ============
</TABLE>
The Plan's investments (including investments bought, sold, and held
during the year) appreciation in value for the years ended
December 31, 1998 and 1997, is set forth below:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Investments at Fair Value as Determined
By Quoted Market Price:
Mutual Funds $ 40,616,810 $ 29,500,781
Common Stock 15,468,485 21,087,300
------------ ------------
Net Appreciation in Fair Value $ 56,085,295 $ 50,588,081
============ ============
</TABLE>
F-8
<PAGE> 10
Contributions under the Plan are invested in one of six investment funds:
(1) The Limited Stock Fund, consisting of common stock of The Limited,
Inc., a Delaware corporation (the "Issuer") and parent company of the
Employers, (2) the Fixed Income Fund, which is invested in the
Vanguard Retirement Savings Trust Fund which was exchanged for the
prior investment in the Vanguard Investment Contract Trust, (3) the
Index-500 Fund, which is invested in the Vanguard Index - 500
Portfolio, (4) the U.S. Growth Fund, which is invested in the Vanguard
U.S. Growth Portfolio, (5) the Wellington Fund, which is invested in
the Vanguard Wellington Fund, and (6) the Intimate Brands Stock Fund,
consisting of common stock of Intimate Brands, Inc., a Delaware
corporation and an 84.5% owned subsidiary of The Limited, Inc.
Participants' voluntary and Employers' contributions may be invested in any
one or more of the funds, at the election of the participant.
Participants' may make or change an investment direction as of the first
day of any month of the Plan year.
(4) PLAN ADMINISTRATION
-------------------
The Plan is administered by a Committee, the members of which are appointed
by the Board of Directors of the Employers.
(5) PLAN TERMINATION
----------------
Although the Employers have not expressed any intent to do so, the
Employers have the right under the Plan to discontinue their
contributions at any time. The Limited, Inc. has the right at any
time, by action of its Board of Directors, to terminate the Plan
subject to provisions of ERISA. Upon Plan termination or partial
termination, participants will become fully vested in their accounts.
(6) RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
---------------------------------------------------
The following is a reconciliation of net assets available for benefits per
the financial statements to Form 5500:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net Assets Available for Benefits
Per the Financial Statements $408,052,114 $343,064,698
Amounts Allocated to Withdrawing
Participants (2,389,455) (2,061,755)
------------ ------------
Net Assets Available for Benefits
Per Form 5500 $405,662,659 $341,002,943
============ ============
</TABLE>
The following is a reconciliation of benefits paid to participants per
the financial statements to Form 5500:
Benefits Paid to Participants Per the Financial
Statements $ 56,754,614
Amounts Allocated to Withdrawing Participants:
At December 31, 1998 2,389,455
At December 31, 1997 (2,061,755)
------------
Benefits Paid to Participants Per Form 5500 $ 57,082,314
============
Amounts allocated to withdrawing participants are recorded on Form 5500 for
benefit claims that have been processed and approved for payment prior
to December 31 but not yet paid as of that date.
F-9
<PAGE> 11
SCHEDULE I
<TABLE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
EIN #31-1048997 PLAN #002
-------------------------
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
----------------------------------------------------------
DECEMBER 31, 1998
-----------------
<CAPTION>
Description of Investment Including Maturity
Identity of Issue, Borrower, Date, Rate of Interest, Collateral, Par or Current
Lessor, or Similar Party Maturity Value Cost Value
- ------ ------------------------------ ----------------------------------------------- ------------ ------------
<S> <C> <C> <C> <C>
* The Limited, Inc. 2,430,883 Shares of Common Stock, Par Value $ 31,110,330 $ 70,799,467
$0.50
* Intimate Brands, Inc. 196,709 Shares of Common Stock, Class A 4,491,448 5,876,681
Abercrombie & Fitch Co. 80,873 Shares of Common Stock, Class A, Par 1,215,436 5,721,765
Value $0.01
The Vanguard Group 89,083,764 Shares of Vanguard Retirement 89,083,764 89,083,764
Savings Trust Fund
The Vanguard Group 860,391 Shares of Vanguard Index 500 58,699,848 98,041,511
Portfolio Fund
The Vanguard Group 2,302,670 Shares of Vanguard World Fund, U.S. 56,970,077 86,327,108
Growth Portfolio
The Vanguard Group 835,790 Shares of Vanguard Wellington Fund 23,749,124 24,530,446
* Chase Manhattan Bank 101,414 Shares of Chase Manhattan Bank Enhanced 101,414 101,414
Cash Investment Fund, a Common/Collective Trust,
7 Day Net annualized Yield on 12/31/98 of 5.48%
</TABLE>
* Represents a party in interest
The accompanying notes are an integral part of this schedule.
F-10
<PAGE> 12
SCHEDULE II
<TABLE>
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
EIN #31-1048997 PLAN #002
-------------------------
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
----------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------
<CAPTION>
Current
Expense Value of
Identity Incurred Asset on
of Party Purchase Selling Lease With Cost Transaction Net Gain
Involved Description of Asset Price Price Rental Transaction of Asset Date or (Loss)
- -------------- -------------------- ------------ ------------ -------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
* The Limited, The Limited, Inc. $ 8,020,702 $ -- $ -- $ 8,020,702
Inc. Common Stock $ 10,453,868 -- $ 4,321,938 10,453,868 $ 6,131,930
The Vanguard Vanguard Investment 15,475,462 -- -- 15,475,462
Group Contract Trust 103,639,753 -- 103,639,753 103,639,753 --
The Vanguard Vanguard Retirement 109,329,808 -- -- 109,329,808
Group Savings Trust Fund 18,721,596 -- 18,721,596 18,721,596 --
The Vanguard Vanguard Index 500 23,002,542 -- -- 23,002,542
Group Portfolio Fund 20,394,776 -- 12,644,028 20,394,776 7,750,748
The Vanguard Vanguard World Fund, 22,654,992 -- -- 22,654,992
Group U.S. Growth Portfolio 21,434,658 -- 10,849,865 21,434,658 10,584,793
The Vanguard Vanguard Wellington 12,792,018 -- -- 12,792,018
Group Fund 8,699,959 -- 6,177,858 8,699,959 2,522,101
* Chase Chase Manhattan Bank 74,644,066 -- -- 74,644,066
Manhattan Enhanced Cash 74,542,960 -- 74,542,960 74,542,960 --
Bank Investment Fund
</TABLE>
*Represents a party in interest
The accompanying notes are an integral part of this schedule.
F-11
