<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 Identification No.)
incorporation or organization)
Three Limited Parkway, P.O. Box 16000, Columbus, OH 43216
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 415-6900
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock Outstanding at March 24, 2000
-------------------- -----------------------------
$.01 Par Value 39,505,622 Shares
Class B Common Stock Outstanding at March 24, 2000
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$.01 Par Value 209,799,538 Shares
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INTIMATE BRANDS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Information Regarding Filing of Form 10-Q/A 3
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income
Thirteen and Twenty-six Weeks Ended
July 31, 1999 and August 1, 1998........................................................ 4
Consolidated Balance Sheets
July 31, 1999, January 30, 1999 and August 1, 1998...................................... 5
Consolidated Statements of Cash Flows
Twenty-six Weeks Ended
July 31, 1999 and August 1, 1998........................................................ 6
Notes to Consolidated Financial Statements....................................................... 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition........................................... 15
Part II. Other Information
Item 1. Legal Proceedings........................................................................... 24
Item 5. Other Information........................................................................... 25
Item 6. Exhibits and Reports on Form 8-K............................................................ 25
</TABLE>
2
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INFORMATION REGARDING FILING OF FORM 10-Q/A
CHANGE IN ACCOUNTING FOR GIFT CERTIFICATES, STORE CREDITS AND LAYAWAY SALES
The Company sells gift certificates in exchange for cash and issue store
credits in exchange for the value of returned merchandise. These gift
certificates and store credits do not expire and both can be redeemed toward
the purchase of merchandise in the future. The Company also offers a layaway
sales program, which allows customers to make payments over a period of time
toward the purchase of merchandise.
As discussed in Note 2 to the Consolidated Financial Statements, the Company
has changed its accounting for gift certificates, store credits and layaway
sales. The Company has historically recognized net receipts/(redemptions)
from gift certificates and store credits as a reduction/(increase) to
general, administrative and store operating expenses. Layaway sales were
recognized upon receipt of the initial payment. The Company now defers the
recognition of income on these transactions until the merchandise is
delivered to the customer.
The Company has given retroactive effect to this accounting change by
restating its previously issued financial statements, including the
Consolidated Statements of Operations for the thirteen and twenty-six weeks
ended July 31, 1999 and August 1, 1998. In addition, the restatement resulted
to changes to the Consolidated Balance Sheets as of July 31, 1999 and August 1,
1998, and to Notes 1, 8, 9, 15 and 16 to the Consolidated Financial
Statements. Although the restatement has no impact on the cash flows of the
Company, certain classifications within the Consolidated Statements of Cash
Flows for the twenty-six weeks ended July 31, 1999 and August 1, 1998 were
adjusted to reflect the restatement.
3
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PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
------------------------------ ------------------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $1,017,109 $874,708 $1,894,930 $1,645,576
Costs of goods sold, and buying and occupancy
costs (623,244) (543,694) (1,174,473) (1,047,705)
------------- ------------- ------------- -------------
Gross income 393,865 331,014 720,457 597,871
General, administrative and store operating
expenses (237,927) (202,197) (469,825) (388,036)
------------- ------------- ------------- -------------
Operating income 155,938 128,817 250,632 209,835
Interest expense (7,894) (7,563) (16,758) (15,126)
Other income 59 5,408 2,035 9,780
------------- ------------- ------------- -------------
Income before income taxes 148,103 126,662 235,909 204,489
Provision for income taxes 59,200 50,800 94,300 81,800
------------- ------------- ------------- -------------
Net income $88,903 $75,862 $141,609 $122,689
============= ============= ============= =============
Net income per share:
Basic $0.36 $0.29 $0.56 $0.46
============= ============= ============= =============
Diluted $0.35 $0.28 $0.56 $0.46
============= ============= ============= =============
Dividends per share $0.14 $0.13 $0.27 $0.27
============= ============= ============= =============
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
4
<PAGE>
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
July 31, January 30, August 1,
1999 1999 1998
-------------- --------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $11,787 $387,774 $21,796
Accounts receivable 18,414 15,627 16,465
Inventories 561,206 479,896 432,228
Intercompany receivables - - 192,350
Other 77,730 82,639 76,863
-------------- --------------- ---------------
Total current assets 669,137 965,936 739,702
Property and equipment, net 413,819 398,469 396,168
Other assets 83,127 83,672 82,019
-------------- --------------- ---------------
Total assets $1,166,083 $1,448,077 $1,217,889
============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $81,051 $93,764 $81,593
Current portion of long-term debt 100,000 100,000 -
Accrued expenses 207,164 232,592 189,900
Intercompany payable 176,366 5,860 -
Income taxes 25,037 114,623 4,867
-------------- --------------- ---------------
Total current liabilities 589,618 546,839 276,360
Long-term debt 250,000 250,000 350,000
Deferred income taxes 2,785 2,251 8,599
Other long-term liabilities 42,854 40,244 36,504
Shareholders' equity:
Common stock 2,646 2,527 2,527
Paid-in capital 1,214,958 672,391 673,854
Retained earnings (deficit) (360,585) 109,496 (92,389)
-------------- --------------- ---------------
857,019 784,414 583,992
Less: treasury stock, at average cost (576,193) (175,671) (37,566)
-------------- --------------- ---------------
Total shareholders' equity 280,826 608,743 546,426
-------------- --------------- ---------------
Total liabilities and shareholders' equity $1,166,083 $1,448,077 $1,217,889
============== =============== ===============
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
5
<PAGE>
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
-------------------------------------
July 31, August 1,
1999 1998
---------------- ----------------
<S> <C> <C>
Operating activities:
Net income $141,609 $122,689
Impact of other operating activities on cash flows:
Depreciation and amortization 48,980 49,448
Changes in assets and liabilities:
Accounts receivable (2,787) 18,174
Inventories (81,310) (14,525)
Accounts payable and accrued expenses (38,141) (75,766)
Income taxes (89,052) (73,060)
Other assets and liabilities 10,097 39,216
---------------- ----------------
Net cash provided from (used for) operating activities (10,604) 66,176
---------------- ----------------
Investing activities:
Capital expenditures (66,363) (55,009)
---------------- ----------------
Financing activities:
Dividends paid (66,724) (70,713)
Change in intercompany receivable/payable 170,506 (179,893)
Repurchase of common stock (404,410) (48,659)
Stock options and other 1,608 1,174
---------------- ----------------
Net cash used for financing activities (299,020) (298,091)
---------------- ----------------
Net decrease in cash and equivalents (375,987) (286,924)
Cash and equivalents, beginning of year 387,774 308,720
---------------- ----------------
Cash and equivalents, end of period $11,787 $21,796
================ ================
</TABLE>
In 1999, noncash financing activities include the addition of $0.1 million
common stock and $544.9 million paid-in capital that was transferred from
retained earnings as a result of the 5% stock dividend which resulted in the
issuance of 11.8 million additional shares of common stock (see Note 3).
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
6
<PAGE>
INTIMATE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
Intimate Brands, Inc. (the Company) includes specialty retail and
catalogue operations, which offer women's intimate and other apparel,
personal care products and accessories. The Company consists of
Victoria's Secret Stores, Victoria's Secret Catalogue, Bath & Body
Works and Gryphon Development. The Limited, Inc. owns 84.3% of the
outstanding common stock of the Company.
The consolidated financial statements include the accounts of the
Company and all significant subsidiaries which are more than 50 percent
owned and controlled. All significant intercompany balances and
transactions have been eliminated in consolidation. Certain prior
period amounts have been reclassified to conform with current period
presentation.The consolidated financial statements as of and for the
thirteen and twenty-six week periods ended July 31, 1999 and August 1,
1998 are unaudited and are presented pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly,
these consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained
in the Company's 1998 Annual Report on Form 10-K/A. In the opinion of
management, the accompanying consolidated financial statements reflect
all adjustments (which are of a normal recurring nature except as
discussed in Note 10) necessary to present fairly the financial
position and results of operations and cash flows for the interim
periods, but are not necessarily indicative of the results of
operations for a full fiscal year.
The consolidated financial statements as of and for the thirteen and
twenty-six week periods ended July 31, 1999 and August 1, 1998 included
herein have been reviewed by the independent public accounting firm of
PricewaterhouseCoopers LLP and the report of such firm follows the
Notes to Consolidated Financial Statements.
7
<PAGE>
2. Change in Accounting
The Company sells gift certificates in exchange for cash and issues
store credits in exchange for the value of returned merchandise. These
gift certificates and store credits do not expire and both can be
redeemed toward the purchase of merchandise in the future. The Company
also offers a layaway sales program, which allows customers to make
payments over a period of time toward the purchase of merchandise.
The Company has changed its accounting for gift certificates, store
credits and layaway sales. The Company had historically recognized
net receipts/(redemptions) from gift certificates and store credits
as a reduction/(increase) to general, administrative and store
operating expenses. Layaway sales were recognized upon receipt of the
initial payment. The Company now defers the recognition of income on
these transactions until the merchandise is delivered to the customer.
The Company has given retroactive effect to this accounting change by
restating its previously issued financial statements beginning with
fiscal 1996. The impact of the restatement on the Consolidated
Statements of Operations relates principally to gift certificates and
store credits. The impact for the thirteen and twenty-six weeks ended
July 31, 1999 and August 1, 1998 is as follows (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirteen Weeks Ended
July 31, 1999 August 1, 1998
-------------------------------- --------------------------------
As Previously As As Previously As
Reported Restated Reported Restated
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
General, administrative and $ (249,107) $ (237,927) $ (211,227) $ (202,197)
store operating expenses
Operating income 150,838 155,938 124,917 128,817
Income before income taxes 143,003 148,103 122,762 126,662
Provision for income taxes 57,200 59,200 49,200 50,800
Net income $ 85,803 $ 88,903 $ 73,562 $ 75,862
Basic earnings per share $ 0.34 $ 0.36 $ 0.28 $ 0.29
Diluted earnings per share $ 0.34 $ 0.35 $ 0.28 $ 0.28
<CAPTION>
Twenty-six Weeks Ended Twenty-six Weeks Ended
July 31, 1999 August 1, 1998
-------------------------------- --------------------------------
As Previously As As Previously As
Reported Restated Reported Restated
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
General, administrative and $ (498,340) $ (469,825) $ (411,681) $ (388,036)
store operating expenses
Operating income 235,032 250,632 196,335 209,835
Income before income taxes 220,309 235,909 190,989 204,489
Provision for income taxes 88,100 94,300 76,400 81,800
Net income $ 132,209 $ 141,609 $ 114,589 $ 122,689
Basic earnings per share $ 0.53 $ 0.56 $ 0.43 $ 0.46
Diluted earnings per share $ 0.52 $ 0.56 $ 0.43 $ 0.46
</TABLE>
8
<PAGE>
In addition, the restatement resulted in changes to the Consolidated
Balance Sheets as of July 31, 1999, January 30, 1999 and August 1,
1998.
Although the restatement has no impact on the cash flows of the
Company, certain classifications within the Consolidated Statements of
Cash Flows for the twenty-six weeks ended July 31, 1999 and August 1,
1998 were adjusted to reflect the restatement.
In addition to the above, the Company reclassified certain distribution
costs related to Bath and Body Works from general, administrative and
store operating expense to buying and occupancy expense, consistent
with the Company's other businesses. Such amounts were $6.1 million and
$5.1 million for the thirteen weeks ended July 31, 1999 and August 1,
1998 and $12.9 million and $10.1 million for the twenty-six weeks ended
July 31, 1999 and August 1, 1998.
3. Shareholders' Equity and Earnings Per Share
On June 22, 1999, the Company declared a five percent stock dividend to
both The Limited and public shareholders of record as of July 2, 1999,
which resulted in the issuance of 11.8 million additional shares of
common stock. Accordingly, common stock, additional paid-in capital and
retained earnings have been adjusted based on the fair market value of
the additional shares issued.
Weighted average shares outstanding, earnings per share and dividends
per share for all periods presented have been restated to reflect the
five percent stock dividend.
Weighted average common shares outstanding (thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------------------- --------------------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Common shares issued 265,828 265,335 265,783 265,335
Treasury shares (17,050) (672) (15,092) (434)
-------------- -------------- -------------- --------------
Basic shares 248,778 264,663 250,691 264,901
Dilutive effect of stock options and
restricted shares 4,518 2,088 4,334 2,127
-------------- -------------- -------------- --------------
Diluted shares 253,296 266,751 255,025 267,028
============== ============== ============== ==============
</TABLE>
The computation of earnings per diluted share excludes options to
purchase 0.6 million shares of common stock at quarter-end for 1998,
because the options' exercise price was greater than the average market
price of the common shares during the period.
4. Inventories
The fiscal year of the Company and its subsidiaries is comprised of two
principal selling seasons: Spring (the first and second quarters) and
Fall (the third and fourth quarters). Valuation of finished goods
inventories is based principally upon the lower of average cost or
market determined on a first-in, first-out basis using the retail
method. Inventory
9
<PAGE>
valuation at the end of the first and third quarters reflects
adjustments for inventory markdowns and shrinkage estimates for the
total selling season.
5. Property and Equipment, Net
Property and equipment, net, consisted of (thousands):
<TABLE>
<CAPTION>
July 31, January 30, August 1,
1999 1999 1998
----------------- ----------------- ---------------
<S> <C> <C> <C>
Property and equipment, at cost $869,086 $821,061 $782,677
Accumulated depreciation and amortization (455,267) (422,592) (386,509)
----------------- ----------------- ---------------
Property and equipment, net $413,819 $398,469 $396,168
================= ================= ===============
</TABLE>
10
<PAGE>
6. Income Taxes
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 Company's
annual effective tax rate. Income taxes paid to The Limited during the
twenty-six weeks ended July 31, 1999 and August 1, 1998 approximated
$183 million and $155 million.
7. Long-term Debt
Long-term debt consists of notes which represent the Company's
proportionate share of certain long-term debt of The Limited. The
interest rates and maturities of the notes parallel those of the
corresponding debt of The Limited. The 7 1/2% debentures are subject to
early redemption beginning in 2003 concurrent with any prepayment of
the corresponding debt by The Limited.
Unsecured long-term debt consisted of (thousands):
<TABLE>
<CAPTION>
July 31, January 30, August 1,
1999 1999 1998
------------ ------------- --------------
<S> <C> <C> <C>
7 1/2% debentures due March 2023 $100,000 $100,000 $100,000
9 1/8% notes due February 2001 150,000 150,000 150,000
8 7/8% notes due August 1999 100,000 100,000 100,000
------------ ------------- --------------
350,000 350,000 350,000
Less: current portion of long-term debt 100,000 100,000 -
------------ ------------- --------------
$250,000 $250,000 $350,000
============ ============= ==============
</TABLE>
Interest paid during the twenty-six weeks ended July 31, 1999 and
August 1, 1998, including interest on the intercompany cash management
account (see Note 8), approximated $16.8 million and $15.2 million.
8. Intercompany Relationship with the Parent
The Limited provides various services to the Company including, but not
limited to, store design and construction supervision, real estate
management, travel and flight support and merchandise sourcing. To the
extent expenditures are specifically identifiable they are charged to
the Company. All other services-related costs not specifically
attributable to an operating business have been allocated to the
Company based upon various allocation methods. The Company and The
Limited have entered into intercompany agreements which establish the
provision of services in accordance with the terms described above.
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 cash management account is an interest-earning
asset or interest-bearing liability of the Company. Interest on the
intercompany
11
<PAGE>
cash management account is calculated based on the Federal Reserve AA
Composite 30-day rate.
The Company's proprietary credit card processing is performed by
Alliance Data Systems, which is approximately 31%-owned by The Limited.
The Company and The Limited are parties to a corporate agreement under
which the Company granted to The Limited a continuing option to
purchase, under certain circumstances, additional shares of Class B
Common Stock or shares of nonvoting capital stock of the Company. The
Corporate Agreement further provides that, upon request of The Limited,
the Company will use its best efforts to effect the registration of any
of the shares of Class B Common Stock and nonvoting capital stock held
by The Limited for sale.
9. Segment Information
The Company identifies operating segments based on a business's
operating characteristics and whether management reports directly to
the Chairman. Reportable segments were determined based on the similar
economic characteristics of the retail businesses and the similar
methods used to distribute products and combine 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 immaterial.
Segment information for the thirteen weeks ended July 31, 1999 and
August 1, 1998 follows (in thousands):
<TABLE>
<CAPTION>
Reconciling
1999 Retail Catalogue Other (a) Items Total
- --------------------------- -------------- ------------ ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $787,731 $224,726 $4,652 - $1,017,109
Intersegment sales - - 95,943 ($95,943) (b) -
Operating income (loss) 144,078 27,256 (15,396) - 155,938
Total assets 869,894 187,615 108,574 - 1,166,083
Reconciling
1998 Retail Catalogue Other (a) Items Total
- --------------------------- -------------- ------------ -------------- ----------------- -------------
Net sales $666,834 $201,975 $5,899 - $874,708
Intersegment sales - - 74,745 ($74,745) (b) -
Operating income (loss) 126,873 22,360 (20,416) - 128,817
Total assets 747,004 178,221 292,664 - 1,217,889
</TABLE>
(a) Included in the "Other" category are Gryphon and Corporate, neither of
which are significant operating segments. The Company maintained an
intercompany payable of $176,366 as of July 31, 1999 (see Note 8).
Total assets included an intercompany receivable of $192,350 as of
August 1, 1998.
(b) Represents intersegment sales elimination.
12
<PAGE>
Segment information for the twenty-six weeks ended July 31, 1999 and
August 1, 1998 follows (in thousands):
<TABLE>
<CAPTION>
Reconciling
1999 Retail Catalogue Other (a) Items Total
- --------------------------- -------------- ------------ ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $1,468,602 $418,733 $7,595 - $1,894,930
Intersegment sales - - 173,517 ($173,517) (b) -
Operating income (loss) 240,069 44,357 (33,794) - 250,632
Reconciling
1998 Retail Catalogue Other (a) Items Total
- --------------------------- -------------- ------------ -------------- ----------------- -------------
Net sales $1,233,722 $400,988 $10,866 - $1,645,576
Intersegment sales - - 137,952 ($137,952) (b) -
Operating income (loss) 203,754 42,604 (36,523) - 209,835
</TABLE>
(a)-(b) See description under table on previous page.
In addition to its operating segments, management also focuses on
Victoria's Secret as a brand. Sales of the Victoria's Secret brand grew
15% for the thirteen weeks ended July 31, 1999 to $709.7 million in
1999 and 13% for the twenty-six weeks ended July 31, 1999 to
$1.327 billion in 1999.
10. Special and Nonrecurring Charge
In the fourth quarter of 1997, the Company recognized a $67.6 million
charge in conjunction with closing Cacique, a 118-store lingerie
business. Outlays for the cash component of the charge amounted to
$26.8 million in 1998 and $3.2 million in 1999, leaving a $7.6 million
liability at July 31, 1999. The liability relates principally to future
payments for settlement of store obligations, currently scheduled
through 2004. In determining the provision for lease obligations, the
Company considered the estimated amount necessary for either buying out
the lease or continuing rent payments through lease expiration.
No accruals related to these charges were reversed or recorded in
operating income during the first half of 1999 or fiscal year 1998.
13
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Intimate Brands, Inc.
We have reviewed the accompanying condensed consolidated balance sheets of
Intimate Brands, Inc. and Subsidiaries (the "Company") as of July 31, 1999
and August 1, 1998, and the related condensed consolidated statements of
income for each of the thirteen and twenty-six periods ended July 31, 1999
and August 1, 1998 and the condensed consolidated statements of cash flows
for the twenty-six week periods ended July 31, 1999 and August 1, 1998. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated interim financial
statements for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 30, 1999, and the
related consolidated statements of income, shareholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
February 17, 1999, except for the information in Notes 2 and 3 as to which
the date is February 16, 2000, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of January 30,
1999 is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
The condensed consolidated financial statements as of July 31, 1999 and
August 1, 1998 and for each of the thirteen and twenty-six week periods ended
July 31, 1999 and August 1, 1998 have been restated as described in Note 2.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
August 11, 1999, except for the information in Note 2 as to which the date is
February 16, 2000
14
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
CHANGE IN ACCOUNTING FOR GIFT CERTIFICATES, STORE CREDITS AND LAYAWAY SALES
The Company sells gift certificates in exchange for cash and issues store
credits in exchange for the value of returned merchandise. These gift
certificates and store credits do not expire and both can be redeemed toward
the purchase of merchandise in the future. The Company also offers a layaway
sales program, which allows customers to make payments over a period of time
toward the purchase of merchandise.
As discussed in Note 2 to the Consolidated Financial Statements, the Company
has changed its accounting for gift certificates, store credits and layaway
sales. The Company had historically recognized net receipts/(redemptions)
from gift certificates and store credits as a reduction/(increase) to
general, administrative and store operating expenses. Layaway sales were
recognized upon receipt of the initial payment. The Company now defers the
recognition of income on these transactions until the merchandise is
delivered to the customer.
The Company has given retroactive effect to this accounting change by
restating its previously issued financial statements beginning with fiscal
1996. The change in accounting results in a shift in the pattern of quarterly
earnings from the fourth quarter (when receipts exceed redemptions) to the
first and second quarters (when redemptions exceed receipts). Accordingly,
net income for the thirteen weeks ended July 31, 1999 and August 1, 1998 was
increased from the previously reported amounts by $3.1 million, or $0.01 per
diluted share, and $2.3 million, or $0.00 per diluted share. Net income for
the twenty-six weeks ended July 31, 1999 and August 1, 1998 was increased by
$9.4 million, or $0.04 per diluted share, and $8.1 million, or $0.03 per
diluted share.
RESULTS OF OPERATIONS
Net sales for the second quarter of 1999 were $1.017 billion, an increase of
16%, from $874.7 million for the second quarter of 1998. This increase was
driven by a 12% increase in comparable store sales and a 9% increase in
selling square feet. Gross income increased 19% to $393.9 million from $331.0
million in 1998 and operating income increased 21% to $155.9 million from
$128.8 million in 1998. Net income was $88.9 million, an increase of 17%,
from $75.9 million in 1998. Earnings per diluted share grew 25% to $0.35 per
share, compared to $0.28 per share in 1998 (adjusted for a 5% stock dividend
declared June 22, 1999).
Second quarter highlights included the following:
- - Victoria's Secret's second quarter performance was driven by a successful
June semi-annual sale, the `never-out-of-stock' on basics inventory program
and three new product launches backed by national television advertising.
Victoria's Secret Stores recorded comparable stores sales of 13% for the
quarter and Victoria's Secret Catalogue sales grew 11%.
- - Bath & Body Works delivered a sales increase of 19% and second quarter
comparable store sales of 9%. The brand realized consistent performance in
all product categories with new introductions in fragrance, body care
products, `Art Stuff' and home fragrance.
15
<PAGE>
- - On June 22, 1999, the Company declared a five percent stock dividend to
shareholders of record on July 2, 1999. The stock dividend resulted in the
issuance of 11.8 million additional shares. All share and per share
information throughout this report have been retroactively adjusted to
reflect this dividend.
Net sales for the twenty-six weeks ended July 31, 1999 were $1.895 billion,
an increase of 15%, from $1.646 billion in 1998, driven by comparable store
sales of 12%. Gross income increased 21% to $720.5 million from $597.9
million in 1998 and operating income increased 19% to $250.6 million from
$209.8 million in 1998. Earnings per diluted share grew 22% to $0.56 per
share, compared to $0.46 per share in 1998.
16
<PAGE>
FINANCIAL SUMMARY
The following summarized financial and statistical data compares the thirteen
week and twenty-six week periods ended July 31, 1999 to the comparable 1998
periods:
<TABLE>
<CAPTION>
Second Quarter Year - to - Date
----------------------------------- -------------------------------------
1999 1998 Change 1999 1998 Change
--------- -------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET SALES (MILLIONS):
Victoria's Secret Stores $485 $413 18% $908 $775 17%
Bath & Body Works 303 254 19% 561 459 22%
--------- -------- ---------- --------- --------- ----------
Total retail sales 788 667 18% 1,469 1,234 19%
Victoria's Secret Catalogue 225 202 11% 419 401 4%
Other 4 6 N/M 7 11 N/M
--------- -------- ---------- --------- --------- ----------
Total net sales $1,017 $875 16% $1,895 $1,646 15%
========= ======== ========== ========= ========= ==========
COMPARABLE STORE SALES:
Victoria's Secret Stores 13% 2% 13% 4%
Bath & Body Works 9% 3% 11% 1%
--------- --------- --------- ---------
Total comparable store sales increase 12% 2% 12% 3%
========= ========= ========= =========
STORE DATA:
Retail sales increase
attributable to net new and
remodeled stores 7% 9% 8% 9%
Retail sales per average
selling square foot $131 $121 8% $248 $227 9%
Retail sales per average
store (thousands) $401 $375 7% $759 $703 8%
Average store size at end of
quarter (selling square feet) 3,047 3,084 (1%)
Retail selling square feet at end of
quarter (thousands) 6,048 5,549 9%
N/M Not meaningful
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Second Quarter Year - to - Date
-------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
NUMBER OF STORES:
Beginning of period 1,950 1,757 1,890 1,710
Opened 43 51 104 102
Closed (8) (9) (9) (13)
----------- ----------- ------------ -----------
End of period 1,985 1,799 1,985 1,799
=========== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Number of Stores Selling Sq. Ft. (thousands)
-------------------------------------------- --------------------------------------------
Change Change
July 31, August 1, From Prior July 31, August 1, From Prior
1999 1998 Year 1999 1998 Year
-------------- -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Victoria's Secret Stores 859 799 60 3,810 3,595 215
Bath & Body Works 1,126 1,000 126 2,238 1,954 284
-------------- -------------- -------------- --------------- -------------- --------------
Total stores and selling
square feet 1,985 1,799 186 6,048 5,549 499
============== ============== ============== =============== ============== ==============
</TABLE>
NET SALES
Net sales for the second quarter of 1999 increased 16% to $1.017 billion from
$874.7 million in 1998. The net sales increase was primarily due to a 12%
increase in comparable store sales. The balance of the increase was due to
the net addition of 186 new stores and an increase in catalogue sales.
In the second quarter of 1999, retail sales increased 18% to $787.7 million
from $666.8 million in 1998. Bath & Body Works' sales increase was primarily
attributable to the net addition of 126 new stores. Victoria's Secret Stores'
sales increased 18% to $485.0 million. The sales increase was primarily due
to a 13% increase in comparable store sales, with the remaining increase
coming from the addition of 60 new stores.
Victoria's Secret Catalogue net sales for the second quarter of 1999
increased 11% to $224.7 million from $202.0 million a year ago. This sales
increase was due to an increase in catalogue circulation and an improved
response rate.
Year-to-date net sales increased 15% to $1.895 billion from $1.646 billion in
1998. The net sales increase was primarily due to a 12% increase in
comparable store sales. The balance of the increase was due to the net
addition of 186 new stores and a 4% increase in catalogue sales.
GROSS INCOME
The second quarter of 1999 gross income rate, expressed as a percentage of
sales, increased to 38.7% from 37.8% for the same period in 1998. The rate
increase was primarily due to a decrease in the buying and occupancy rate,
with positive leverage resulting from a 13% comparable store sales increase
at Victoria's Secret Stores. The remaining increase was driven by an increase
in the merchandise margin rate, which resulted from higher retail markups and
lower markdowns, particularly at Victoria's Secret Stores.
The 1999 year-to-date gross income rate increased to 38.0% from 36.3% in
1998. The rate increase was primarily due to a decrease in the buying and
occupancy rate. The remaining
18
<PAGE>
increase was driven by an increase in the merchandise margin rate. The
increase in the merchandise margin rate was primarily attributable to higher
retail markups and reduced markdowns, particularly at Victoria's Secret
Stores. Both the buying and occupancy rate and the merchandise margin rate
were favorably impacted by Bath & Body Works, which increased to 30% of total
Company net sales in 1999 from 28% in 1998. Bath & Body Works has
historically recorded higher merchandise margins due to higher retail markups
and lower buying and occupancy costs due to smaller store sizes and higher
sales productivity.
GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES
The general, administrative and store operating expense rate, expressed as a
percentage of net sales, increased to 23.4% in the second quarter of 1999
from 23.1% for the same period in 1998. The rate increase was primarily due
to relocation costs and higher operating expenses associated with moving
Victoria's Secret's beauty business to New York City, as well as an increase
in base infrastructure costs for the beauty business. These factors were
partially offset by improved leverage from a 13% comparable store sales
increase at Victoria's Secret Stores.
The year-to-date, general, administrative and store operating expense rate
increased to 24.8% from 23.6% in 1998. In addition to the reasons discussed
above, the rate increase was driven by an increase in national advertising
investment for the Victoria's Secret brand.
OPERATING INCOME
Second quarter and year-to-date operating income, expressed as a percentage
of net sales, was 15.3% and 13.2% in 1999 compared to 14.7% and 12.8% in
1998, respectively. The increase in gross income rate more than offset the
increase in the general, administrative and store operating expense rate for
both the second quarter and year-to-date.
INTEREST EXPENSE AND OTHER INCOME
Second quarter and year-to-date interest expense was $7.9 million and $16.8
million in 1999 compared to $7.6 million and $15.1 million in 1998,
respectively. The interest expense is primarily for the Company's $350
million long-term debt. The year-to-date increase in interest expense was
primarily due to an increase in the Company's intercompany payable as a
result of the share repurchase.
Other income decreased $5.3 million and $7.7 million in the second quarter
and year-to-date periods in 1999 from the comparable periods in 1998. The
decrease was primarily due to lower average invested cash balances as a
result of the share repurchase.
SPECIAL AND NONRECURRING CHARGE
In the fourth quarter of 1997, the Company recognized a $67.6 million charge
in conjunction with closing Cacique, a 118-store lingerie business. Outlays
for the cash component of the charge amounted to $26.8 million in 1998 and
$3.2 million in 1999, leaving a $7.6 million liability at July 31, 1999. The
liability relates principally to future payments for settlement of store
obligations, currently scheduled through 2004. In determining the provision
for lease obligations, the Company considered the estimated amount necessary
for either buying out the lease or continuing rent payments through lease
expiration.
No accruals related to these charges were reversed or recorded in operating
income during the first half of 1999 or fiscal year 1998.
FINANCIAL CONDITION
19
<PAGE>
The Company's consolidated balance sheet as of July 31, 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 from operating activities and cash funding from The Limited's
centralized cash management system provide the resources to support
operations, including projected growth, seasonal working capital requirements
and capital expenditures. A summary of the Company's working capital position
and capitalization follows (thousands):
<TABLE>
<CAPTION>
July 31, January 30, August 1,
1999 1999 1998
--------------- --------------- -------------
<S> <C> <C> <C>
Working capital $79,519 $419,097 $463,342
=============== =============== =============
Capitalization:
Long-term debt $250,000 $250,000 $350,000
Shareholders' equity 280,826 608,743 546,426
--------------- --------------- -------------
Total capitalization $530,826 $858,743 $896,426
=============== =============== ============
</TABLE>
Net cash used for operating activities totaled $10.6 million for the
twenty-six weeks ended July 31, 1999 versus net cash provided from operating
activities of $66.2 million for the same period in 1998. The change in net
cash provided from operating activities was primarily driven by an increase
in inventories, especially at Victoria's Secret Stores with the `never out of
stock' on basics inventory program.
Investing activities were for capital expenditures, which were primarily for
new and remodeled stores.
Financing activities included the first quarter cash dividend payment of
$0.13 per share and the second quarter cash dividend payment of $0.14 per
share. In addition, financing activities included the repurchase of
approximately 10.2 million shares of the Company's common stock, of which 8.6
million shares were repurchased from The Limited, for $404.4 million. The
stock repurchase program was completed in May 1999. The cash dividend payment
and stock repurchase were partially offset by a $170.5 million net increase
in The Limited's intercompany cash management account payable (see Note 8 to
the Consolidated Financial Statements).
20
<PAGE>
CAPITAL EXPENDITURES
Capital expenditures, primarily for new and remodeled stores, totaled $66.4
million for the twenty six weeks ended July 31, 1999, compared to $55.0
million for the comparable period of 1998. The Company anticipates spending
$150-$170 million in 1999 for capital expenditures, of which $110-$120
million will be for new stores, the relocation and expansion of existing
stores and related improvements for the retail business.
The Company intends to add approximately 766,000 selling square feet in 1999,
which will represent a 13% increase over year-end 1998. It is anticipated the
increase will result from the addition of approximately 240 net new stores
and the expansion of approximately 50 stores. The Company expects that
capital expenditures will be funded principally by net cash provided by
operating activities.
INFORMATION SYSTEMS AND "YEAR 2000" COMPLIANCE
The Year 2000 issue arises primarily from computer programs, commercial
systems and embedded chips that will be unable to properly interpret dates
beyond the year 1999. The Company utilizes a variety of proprietary and third
party computer technologies - both hardware and software - directly in its
businesses. The Company also relies on numerous third parties and their
systems' ability to address the Year 2000 issue. The Company's critical
information technology ("IT") functions include point-of-sale equipment,
merchandise distribution, merchandise and non-merchandise procurement, credit
card and banking services, transportation, and business and accounting
management systems. The Company is using both internal and external resources
to complete its Year 2000 initiatives.
READINESS
In order to address the Year 2000 issue, the Company 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:
- - awareness, which includes identifying risks and conducting an education
program regarding Year 2000 issues
- - assessment, which primarily includes establishing project resources,
developing a Year 2000 renovation strategy, completing a company-wide
inventory of information technology and determining the necessary
training and testing facility requirements
- - renovation/development, which includes the analysis of existing
information systems, the design of remediation activities and the
coding of necessary remedies
- - validation, which primarily includes system testing
- - implementation, which includes the placement of renovated systems "in
production" and training end users
There are four areas of focus:
- - RENOVATION OF LEGACY SYSTEMS. The Company's operating businesses have
completed all five stages of Year 2000 implementation for renovation of
legacy systems.
21
<PAGE>
- - INSTALLATION OF NEW SOFTWARE PACKAGES to replace selected legacy
systems at one of the Company's four operating businesses. Replacement
of significant legacy systems with new software packages is complete.
- - ASSESSMENT OF YEAR 2000 READINESS AT KEY VENDORS AND SUPPLIERS. A vast
network of vendors, suppliers and service providers located both within
and outside the United States provide the Company with merchandise for
resale, supplies for operational purposes and services. The Company has
identified key vendors, suppliers and service providers, and The
Limited is making efforts to determine their Year 2000 status. As a
result, The Limited obtained completed Year 2000 surveys from
approximately 160 of our third-party vendors to determine an estimated
compliance date. Of the 160 third-party vendors surveyed, approximately
90 have indicated that they are Year 2000 compliant. The majority of
the remaining vendors have indicated they will be compliant prior to
year-end. Based upon the results of the surveys, the Company selected
15 vendors for on-site visits to further assess the vendors' progress
and estimated compliance dates. The Limited will continue to monitor
the status of the vendors' estimated compliance dates in order to
identify potential delays.
- - EVALUATING FACILITIES AND DISTRIBUTION EQUIPMENT WITH EMBEDDED COMPUTER
TECHNOLOGY. The Company uses various facilities and distribution
equipment with embedded computer technology, such as conveyors,
elevators, and security systems, fire protection systems and energy
management systems. All our remediation efforts are complete.
COST TO ADDRESS THE YEAR 2000 ISSUE
Total expenditures related to remediation, testing, conversion, replacement
and upgrading system applications were $18 million. These expenditures were
completed in 1998. In addition, significant internal payroll costs (not
separately identified) were incurred relating to the Company's Year 2000
initiatives. During the period from Fall 1997 through Fall 1999, the Company
has allocated approximately 16% of its information technology budget toward
Year 2000 remediation efforts.
Any additional expenditures related to the Company's Year 2000 efforts are
not expected to be material.
REASONABLY LIKELY WORST CASE SCENARIO AND CONTINGENCY PLANS
The Company believes that the reasonably likely worst case scenario would
involve short-term disruption of systems affecting its supply and
distribution channels. The Limited is in the process of developing
contingency plans, such as alternative sourcing and accelerated delivery of
merchandise from foreign suppliers, and identifying the necessary actions
that it would need to take if critical systems or service providers were not
Year 2000 compliant. The Limited expects to finalize these contingency plans
in the second half of 1999.
At the present time, the Company and The Limited are not aware of any Year
2000 issues that are expected to affect materially its products, services,
competitive position or financial performance. Additionally, the Company has
not postponed any significant information technology projects due to the Year
2000 project. Thus, the Company does not believe that the delay of any
projects has had a material impact on its financial condition and results of
operations. However, despite The Limited's significant efforts to make its
systems, facilities and equipment Year 2000 compliant, the compliance of
third party service providers and vendors (including, for instance,
governmental entities and utility companies) is beyond the Company's control.
Accordingly, the Company can give no assurances that the failure of
technology
22
<PAGE>
infrastructure of the United States, foreign nations or other companies on
which the Company's systems rely, or the failure of key suppliers or other
third parties to comply with Year 2000 requirements, will not have a material
adverse effect on the Company.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION 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 Form 10-Q/A or made by management of the Company involve risks and
uncertainties and are subject to change based on various important factors,
many of which may be beyond the Company's control. Accordingly, the Company's
future performance and financial results may differ materially from those
expressed or implied in any such forward-looking statements. Among other
things, certain of the foregoing statements as to costs and dates relating to
the Year 2000 effort are forward-looking and are based on the Company's
current best estimates that may be proven incorrect as additional information
becomes available. The Company's Year 2000-related forward-looking statements
are also based on assumptions about many important factors, including the
technical skills of employees and independent contractors, the
representations and preparedness of third parties, the ability of vendors to
deliver merchandise or perform services required by the Company and the
collateral effects of the Year 2000 issues on the Company's business partners
and customers. While the Company believes its assumptions are reasonable, it
cautions that it is impossible to predict factors that could cause actual
costs or timetables to differ materially from the expected results. In
addition to Year 2000 issues, the following factors, among others, in some
cases have affected and in the future could affect the Company's financial
performance and actual results and could cause actual results for 1999 and
beyond to differ materially from those expressed or implied in any
forward-looking statements included in this Form 10-Q/A or otherwise made by
management: changes in consumer spending patterns, consumer preferences and
overall economic conditions, the impact of competition and pricing, changes
in weather patterns, political stability, currency and exchange risks and
changes in existing or potential duties, tariffs or quotas, 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.
23
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a defendant in a variety of lawsuits arising in the
ordinary course of business.
On November 13, 1997, the United States District Court for the Southern
District of Ohio, Eastern Division, dismissed with prejudice an amended
complaint that had been filed against the Company, 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 declarations to
the U.S. Customs Service. On November 26, 1997, ATMI served a motion to
alter or amend judgment and a motion to disqualify the presiding judge
and to vacate the order of dismissal. The motion to disqualify was
denied on December 22, 1997, but as a matter of his personal
discretion, the presiding judge elected to recuse himself from further
proceedings and this matter was transferred to a judge of the United
States District Court for the Southern District of Ohio, Western
Division. On May 21, 1998, this judge denied all pending motions
seeking to alter, amend or vacate the judgment that had been entered in
favor of the Company. On June 5, 1998, ATMI appealed to the United
States Court of Appeals for the Sixth Circuit (the "Sixth Circuit"). On
August 12, 1999, the Sixth Circuit heard arguments from both sides, and
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 on April 12, 1999, a motion to
dismiss the complaint for failure to state a claim upon which relief
can be granted was filed. Both motions remain pending. The second
complaint, filed by a national labor union and other organizations in
the Superior Court of the State of California, San Francisco County,
alleges unfair business practices under California law. On March 29,
1999, a motion seeking dismissal of this complaint was filed. That
motion also remains pending.
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.
24
<PAGE>
Item 5. OTHER INFORMATION
The Company's Certificate of Incorporation includes provisions relating
to potential conflicts of interest that may arise between the Company
and The Limited. Such provisions were adopted in light of the fact that
the Company and The Limited and its subsidiaries are engaged in retail
businesses and may pursue similar opportunities in the ordinary course
of business. Among other things, these provisions generally eliminate
the liability of directors and officers of the Company with respect to
certain matters involving The Limited and its subsidiaries, including
matters that may constitute corporate opportunities of The Limited, its
subsidiaries or the Company. Any person purchasing or acquiring an
interest in shares of capital stock of the Company will be deemed to
have consented to such provisions relating to conflicts of interest and
corporate opportunities, and such consent may restrict such person's
ability to challenge transactions carried out in compliance with such
provisions. Investors should review the Company's Certificate of
Incorporation before making any investment in shares of the Company's
capital stock.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
15. Letter re: Unaudited Interim Financial Information to
Securities and Exchange Commission re: Incorporation of Report
of Independent Accountants.
27. Restated Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
i. On July 28, 1999 the Company filed a report on Form 8-K which
contained a press release dated July 28, 1999.
25
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTIMATE BRANDS, INC.
(Registrant)
By /s/ V. Ann Hailey
----------------------------
V. Ann Hailey,
Executive Vice President
and Chief Financial Officer
of The Limited, Inc.*
Date: April 18, 2000
- -------------------------------
* Ms. Hailey is the principal financial officer of The Limited, Inc. and has
been duly authorized to sign on behalf of the Registrant.
26
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTIMATE BRANDS, INC.
(Registrant)
By
----------------------------
V. Ann Hailey,
Executive Vice President
and Chief Financial Officer
of The Limited, Inc.*
Date: April 18, 2000
- ------------------------------------
* Ms. Hailey is the principal financial officer of The Limited, Inc. and has
been duly authorized to sign on behalf of the Registrant.
27
<PAGE>
Exhibit 15
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Commissioners:
We are aware that our report dated August 11, 1999, except for the
information in Note 2 as to which the date is February 16, 2000, on our
review of the interim consolidated financial information of Intimate Brands,
Inc. and Subsidiaries (the "Company") as of and for the thirteen and
twenty-six week periods ended July 31, 1999 and included in this Form 10-Q/A
is incorporated by reference in the Company's registration statement on
Form S-3, Registration No. 333-78485 and the registration statements on
Form S-8, Registration Nos. 333-04921 and 333-04923. Pursuant to Rule 436(c)
under the Securities Act of 1933, this report should not be considered a part
of the registration statement prepared or certified by us within the meaning
of Sections 7 and 11 of that Act.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
April 14, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OF INTIMATE BRANDS, INC. AND
SUBSIDIARIES FOR THE QUARTER ENDED JULY 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THE COMPANY CHANGED ITS
ACCOUNTING FOR GIFT CERTIFICATES, STORE CREDITS AND LAYAWAY SALES (SEE NOTE
2 TO THE CONSOLIDATED FINANCIAL STATEMENTS). THE COMPANY HAS GIVEN
RETROACTIVE EFFECT TO THIS ACCOUNTING CHANGE BY RESTATING ITS PREVIOUSLY
ISSUED FINANCIAL STATEMENTS BEGINNING WITH FISCAL 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> MAY-02-1999
<PERIOD-END> JUL-31-1999
<CASH> 11,787
<SECURITIES> 0
<RECEIVABLES> 18,414
<ALLOWANCES> 0
<INVENTORY> 561,206
<CURRENT-ASSETS> 669,137
<PP&E> 869,086
<DEPRECIATION> 455,267
<TOTAL-ASSETS> 1,166,083
<CURRENT-LIABILITIES> 589,618
<BONDS> 0
0
0
<COMMON> 2,646
<OTHER-SE> 278,180
<TOTAL-LIABILITY-AND-EQUITY> 1,166,083
<SALES> 1,017,109
<TOTAL-REVENUES> 1,017,109
<CGS> 623,244
<TOTAL-COSTS> 623,244
<OTHER-EXPENSES> 237,927
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,894
<INCOME-PRETAX> 148,103
<INCOME-TAX> 59,200
<INCOME-CONTINUING> 88,903
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,903
<EPS-BASIC> $0.36
<EPS-DILUTED> $0.35
</TABLE>
