Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________
FORM 10-Q
 _________________________________
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 5, 20184, 2019
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 1-8344
 _________________________________
L BRANDS, INC.
(Exact name of registrant as specified in its charter)
 ________________________________________________________________
Delaware 31-1029810
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer Identification No.)
Three Limited Parkway
Columbus, Ohio
 43230
(Address of principal executive offices) (Zip Code)
(614) 415-7000
(Registrant's Telephone Number, Including Area Code)
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   ý   No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerýAccelerated filero
    
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting companyo
    
  Emerging growth companyo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  o    No  ý
Indicate the number of shares outstanding of eachSecurities registered pursuant to Section 12(b) of the issuer’s classes of common stock, as of the latest practicable date.Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.50$0.50 Par ValueLBOutstanding at June 1, 2018
277,204,090 SharesThe New York Stock Exchange
As of May 31, 2019, the number of outstanding shares of the Registrant’s common stock, was 276,340,439 shares.
 

L BRANDS, INC.
TABLE OF CONTENTS
 
 Page No.
 
  
 
  
  
  
  
  
  
  
  
  
  
  
  
  
Item 1A. Risk Factors
  
  
  
  
  
Item 6. Exhibits
  
 
*The Company's fiscal year ends on the Saturday nearest to January 31. As used herein, “first quarter of 2018”2019” and “first quarter of 2017”2018” refer to the thirteen-week periods ended May 4, 2019 and May 5, 2018, and April 29, 2017, respectively.


PART I—FINANCIAL INFORMATION
 
Item 1.FINANCIAL STATEMENTS

L BRANDS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions except per share amounts)
(Unaudited)
 
First QuarterFirst Quarter
2018 20172019 2018
Net Sales$2,626
 $2,437
$2,629
 $2,626
Costs of Goods Sold, Buying and Occupancy(1,682) (1,534)(1,695) (1,682)
Gross Profit944
 903
934
 944
General, Administrative and Store Operating Expenses(789) (694)(781) (789)
Operating Income155
 209
153
 155
Interest Expense(98) (101)(99) (98)
Other Income2
 10
6
 2
Income Before Income Taxes59
 118
60
 59
Provision for Income Taxes11
 24
20
 11
Net Income$48
 $94
$40
 $48
Net Income Per Basic Share$0.17
 $0.33
$0.15
 $0.17
Net Income Per Diluted Share$0.17
 $0.33
$0.14
 $0.17
Dividends Per Share$0.60
 $0.60
$0.30
 $0.60


L BRANDS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
First QuarterFirst Quarter
2018 20172019 2018
Net Income$48
 $94
$40
 $48
Other Comprehensive Income (Loss), Net of Tax:      
Foreign Currency Translation(13) 3
(4) (13)
Unrealized Gain on Cash Flow Hedges6
 9
2
 6
Reclassification of Cash Flow Hedges to Earnings2
 (6)(2) 2
Total Other Comprehensive Income (Loss), Net of Tax(5) 6
(4) (5)
Total Comprehensive Income$43
 $100
$36
 $43


The accompanying Notes are an integral part of these Consolidated Financial Statements.

L BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions except par value amounts)
 
May 5,
2018
 February 3,
2018
 April 29,
2017
May 4,
2019
 February 2,
2019
 May 5,
2018
(Unaudited)   (Unaudited)(Unaudited)   (Unaudited)
ASSETS          
Current Assets:          
Cash and Cash Equivalents$1,032
 $1,515
 $1,555
$1,146
 $1,413
 $1,032
Accounts Receivable, Net274
 310
 213
274
 367
 274
Inventories1,350
 1,240
 1,147
1,357
 1,248
 1,350
Other234
 228
 237
170
 232
 234
Total Current Assets2,890
 3,293
 3,152
2,947
 3,260
 2,890
Property and Equipment, Net2,894
 2,893
 2,761
2,794
 2,818
 2,894
Operating Lease Assets3,271
 
 
Goodwill1,348
 1,348
 1,348
1,348
 1,348
 1,348
Trade Names411
 411
 411
411
 411
 411
Deferred Income Taxes22
 14
 23
61
 62
 22
Other Assets184
 190
 187
166
 191
 184
Total Assets$7,749
 $8,149
 $7,882
$10,998
 $8,090
 $7,749
LIABILITIES AND EQUITY (DEFICIT)          
Current Liabilities:          
Accounts Payable$717
 $717
 $664
$688
 $711
 $717
Accrued Expenses and Other848
 1,029
 813
872
 1,082
 848
Current Debt89
 87
 44
72
 72
 89
Current Operating Lease Liabilities443
 
 
Income Taxes204
 198
 310
122
 121
 204
Total Current Liabilities1,858
 2,031
 1,831
2,197
 1,986
 1,858
Deferred Income Taxes234
 238
 360
238
 226
 234
Long-term Debt5,719
 5,707
 5,702
5,749
 5,739
 5,719
Long-term Operating Lease Liabilities3,234
 
 
Other Long-term Liabilities907
 924
 824
478
 1,004
 907
Shareholders’ Equity (Deficit):          
Preferred Stock - $1.00 par value; 10 shares authorized; none issued
 
 

 
 
Common Stock - $0.50 par value; 1,000 shares authorized; 283, 283 and 317 shares issued; 278, 280 and 286 shares outstanding, respectively141
 141
 159
Common Stock - $0.50 par value; 1,000 shares authorized; 284, 283 and 283 shares issued; 276, 275 and 278 shares outstanding, respectively142
 141
 141
Paid-in Capital696
 678
 695
786
 771
 696
Accumulated Other Comprehensive Income17
 24
 18
55
 59
 17
Retained Earnings (Deficit)(1,580) (1,434) 128
(1,527) (1,482) (1,580)
Less: Treasury Stock, at Average Cost; 5, 3 and 31 shares, respectively(245) (162) (1,836)
Less: Treasury Stock, at Average Cost; 8, 8 and 5 shares, respectively(358) (358) (245)
Total L Brands, Inc. Shareholders’ Equity (Deficit)(971) (753) (836)(902) (869) (971)
Noncontrolling Interest2
 2
 1
4
 4
 2
Total Equity (Deficit)(969) (751) (835)(898) (865) (969)
Total Liabilities and Equity (Deficit)$7,749
 $8,149
 $7,882
$10,998
 $8,090
 $7,749

The accompanying Notes are an integral part of these Consolidated Financial Statements.

L BRANDS, INC.
CONSOLIDATED STATEMENTS OF TOTAL EQUITY (DEFICIT)
(in millions except per share amounts)
(Unaudited)

 Common Stock 
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income
 
Retained
Earnings (Accumulated Deficit)
 
Treasury
Stock, at
Average
Cost
 Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding
 
Par
Value
Balance, February 2, 2019275
 $141
 $771
 $59
 $(1,482) $(358) $4
 $(865)
Cumulative Effect of Accounting Change
 
 
 
 (2) 
 
 (2)
Balance, February 3, 2019275
 141
 771
 59
 (1,484) (358) 4
 (867)
Net Income
 
 
 
 40
 
 
 40
Other Comprehensive Income (Loss)
 
 
 (4) 
 
 
 (4)
Total Comprehensive Income
 
 
 (4) 40
 
 
 36
Cash Dividends ($0.30 per share)
 
 
 
 (83) 
 
 (83)
Share-based Compensation and Other1
 1
 15
 
 
 
 
 16
Balance, May 4, 2019276
 $142
 $786
 $55
 $(1,527) $(358) $4
 $(898)

 Common Stock 
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income
 
Retained
Earnings (Accumulated Deficit)
 
Treasury
Stock, at
Average
Cost
 Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding
 
Par
Value
Balance, February 3, 2018280
 $141
 $678
 $24
 $(1,434) $(162) $2
 $(751)
Cumulative Effect of Accounting Changes
 
 
 (2) (26) 
 
 (28)
Balance, February 4, 2018280
 141
 678
 22
 (1,460) (162) 2
 (779)
Net Income
 
 
 
 48
 
 
 48
Other Comprehensive Income (Loss)
 
 
 (5) 
 
 
 (5)
Total Comprehensive Income
 
 
 (5) 48
 
 
 43
Cash Dividends ($0.60 per share)
 
 
 
 (168) 
 
 (168)
Repurchase of Common Stock(2) 
 
 
 
 (83) 
 (83)
Share-based Compensation and Other
 
 18
 
 
 
 
 18
Balance, May 5, 2018278
 $141
 $696
 $17
 $(1,580) $(245) $2
 $(969)

The accompanying Notes are an integral part of these Consolidated Financial Statements.

L BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Year-to-DateYear-to-Date
2018 20172019 2018
Operating Activities:      
Net Income$48
 $94
$40
 $48
Adjustments to Reconcile Net Income to Net Cash Provided by (Used for) Operating Activities:      
Depreciation of Long-lived Assets148
 142
145
 148
Amortization of Landlord Allowances(11) (12)
 (11)
Share-based Compensation Expense25
 25
23
 25
Deferred Income Taxes(13) 5
12
 (13)
Gains on Distributions from Easton Investments
 (9)(2) 
Changes in Assets and Liabilities:      
Accounts Receivable41
 80
65
 41
Inventories(114) (52)(110) (114)
Accounts Payable, Accrued Expenses and Other(219) (200)(231) (219)
Income Taxes Payable7
 11
4
 7
Other Assets and Liabilities9
 (77)(19) 9
Net Cash Provided by (Used for) Operating Activities(79) 7
Net Cash Used for Operating Activities(73) (79)
Investing Activities:      
Capital Expenditures(160) (165)(123) (160)
Proceeds from Divestiture of La Senza12
 
Proceeds from Sales of Marketable Equity Securities3
 
Return of Capital from Easton Investments1
 10
2
 1
Net Cash Used for Investing Activities(159) (155)(106) (159)
Financing Activities:      
Borrowings from Foreign Facilities21
 9
21
 21
Repayments of Foreign Facilities(8) (1)(14) (8)
Dividends Paid(168) (172)(83) (168)
Repurchases of Common Stock(81) (85)
 (81)
Tax Payments related to Share-based Awards(8) (17)(9) (8)
Proceeds from Exercise of Stock Options1
 36
1
 1
Financing Costs and Other(2) 
Net Cash Used for Financing Activities(243) (230)(86) (243)
Effects of Exchange Rate Changes on Cash and Cash Equivalents(2) (1)(2) (2)
Net Decrease in Cash and Cash Equivalents(483) (379)(267) (483)
Cash and Cash Equivalents, Beginning of Period1,515
 1,934
1,413
 1,515
Cash and Cash Equivalents, End of Period$1,032
 $1,555
$1,146
 $1,032

The accompanying Notes are an integral part of these Consolidated Financial Statements.

L BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Description of Business and Basis of Presentation
Description of Business
L Brands, Inc. (“the Company”) operates in the highly competitive specialty retail business. The Company is a specialty retailer of women’s intimate and other apparel, personal care, beauty and home fragrance products. The Company sells its merchandise through company-owned specialty retail stores in the United States (“U.S.”), Canada, the United Kingdom (“U.K.”), Ireland and Greater China (China and Hong Kong), which are primarily mall-based, and through its websites and other channels. The Company's other international operations are primarily through franchise, license and wholesale partners. The Company currently operates the following retail brands:
Victoria’s Secret
PINK
Bath & Body Works
La Senza
Henri Bendel
Fiscal Year
The Company’s fiscal year ends on the Saturday nearest to January 31. As used herein, “first quarter of 20182019” and “first quarter of 20172018” refer to the thirteen-week periods ended May 5, 20184, 2019 and April 29, 2017May 5, 2018, respectively.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The Company accounts for investments in unconsolidated entities where it exercises significant influence, but does not have control, using the equity method. Under the equity method of accounting, the Company recognizes its share of the investee's net income or loss. Losses are only recognized to the extent the Company has positive carrying value related to the investee. Carrying values are only reduced below zero if the Company has an obligation to provide funding to the investee. The Company’s share of net income or loss of unconsolidated entities from which the Company purchases merchandise or merchandise components is included in Costs of Goods Sold, Buying and Occupancy onin the Consolidated Statements of Income. The Company’s share of net income or loss of all other unconsolidated entities is included in Other Income onin the Consolidated Statements of Income. The Company’s equity method investments are required to be testedreviewed for impairment when it is determined there may be an other-than-temporary loss in value.
On January 6, 2019, the Company completed the sale of the La Senza business. For additional information, see Note 5, "Restructuring Activities."
Interim Financial Statements
The Consolidated Financial Statements as of and for the periods ended May 5, 20184, 2019 and April 29, 2017May 5, 2018 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the Company’s 20172018 Annual Report on Form 10-K.
In the opinion of management, the accompanying Consolidated Financial Statements reflect all adjustments which are of a normal recurring nature and necessary for a fair presentation of the results for the interim periods.
Seasonality of Business
Due to seasonal variations in the retail industry, the results of operations for any interim period are not necessarily indicative of the results expected for the full fiscal year.
Concentration of Credit Risk
The Company maintains cash and cash equivalents and derivative contracts with various major financial institutions. The Company monitors the relative credit standing of financial institutions with whom the Company transacts and limits the amount of credit exposure with any one entity. Typically, the Company’s investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits.
The Company also periodically reviews the relative credit standing of franchise, license and wholesale partners and other entities to which the Company grants credit terms in the normal course of business. The Company records an allowance for uncollectable accounts when it becomes probable that the counterparty will be unable to pay.

Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) 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, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from those estimates, and the Company revises its estimates and assumptions as new information becomes available.

2. New Accounting Pronouncements
Revenue from Contracts with CustomersLeases
In May 2014,February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which was further clarified and amended in 2015 and 2016. This guidance requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services. The new standard also results in enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective beginning in fiscal 2018. The standard allows for either a full retrospective or a modified retrospective transition method.

The Company adopted the standard in the first quarter of fiscal 2018 under the modified retrospective approach. Under the standard, income from the Victoria's Secret private label credit card arrangement, which has historically been presented as a reduction to General, Administrative and Store Operating Expenses, is presented as revenue. Further, historical accounting related to loyalty points earned under the Victoria's Secret customer loyalty program changed as the Company now defers revenue associated with customer loyalty points until the points are redeemed using a relative stand-alone selling price method. The standard also changed accounting for sales returns which requires balance sheet presentation on a gross basis.

In the first quarter of fiscal 2018, the Company recorded a cumulative catch-up adjustment resulting in a reduction to opening retained earnings, net of tax, of $28 million. The cumulative adjustment primarily related to the deferral of revenue related to outstanding points, net of estimated forfeitures, under the Victoria's Secret customer loyalty program. In addition, Net Sales and General, Administrative and Store Operating Expenses both increased $25 million in the first quarter of 2018 due to the change in presentation for the Victoria's Secret private label credit card arrangement. Further, gross presentation of the Company's sales return reserve resulted in a $4 million increase in Other Current Assets and Accrued Expenses and Other on the May 5, 2018 Consolidated Balance Sheet.
Fair Value of Financial Instruments
In January 2016, the FASB issued ASC 321, Investments - Equity Securities, which addresses certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. The standard requires the recognition of changes in the fair value of marketable equity securities in net income as compared to historical treatment in accumulated other comprehensive income on the balance sheet. The Company adopted the standard in the first quarter of fiscal 2018 and recorded an increase to opening retained earnings, net of tax, of $2 million.
Leases
In February 2016, the FASB issued ASC 842, Leases, which requires companies classified as lessees to putaccount for most leases on their balance sheets but recognize expenses on their income statements in a manner similar to today’slegacy accounting. The standard also will result inrequires enhanced quantitative and qualitative disclosures, including significant judgments made by management, to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing leases. The standard currently requires a modified retrospective transition approach. In MarchJuly 2018, the FASB tentatively approved an amendment to the standard that provides companies ana modified retrospective transition option that woulddoes not require earlier periods to be restated upon adoption. The standard is effective beginning in fiscal 2019, with early adoption permitted. 

The Company is currently evaluatingadopted the impacts that this standard will have onin the first quarter of 2019 under the modified retrospective approach. As allowed by the new standard, the Company elected the package of transition practical expedients but elected to not apply the hindsight practical expedient to its Consolidated Statementsleases at transition.
Upon adoption at the beginning of Income and Comprehensive Income, Balance Sheets and Statements of Cash Flows. The2019, the Company currently expects that most of its operating lease commitments will be recognized asrecorded operating lease liabilities of $3.7 billion and operating right-of-use assets upon adoptionfor its leases of the standard. Thus, the Company expects adoption will result in a material increase to the$3.3 billion. The operating right-of-use assets are net of $470 million of liabilities for deferred rent and liabilitiesunamortized landlord construction allowances that were previously recorded as Other Long-term Liabilities on the Consolidated Balance Sheet. The Company will adoptalso recorded a decrease to opening retained earnings, net of tax, of $2 million. The adoption of the standard indid not materially impact the first quarterConsolidated Statements of fiscal 2019.Income or Cash Flows. See Note 8, “Leases” for additional disclosure required by the new standard.

Hedging Activities
In August 2017, the FASB issued Accounting Standards Update ("ASU") 2017-12, Targeted Improvements to Accounting for Hedging Activities, which is intended to better align risk management activities and financial reporting for hedging relationships. The standard eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. It also eases certain documentation and assessment requirements. The Company adopted the standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on the Company's consolidated results of operations, financial position or cash flows.
Goodwill
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill. The standard eliminates the second step from the goodwill impairment test, which requires a hypothetical purchase price allocation to determine the implied fair value of goodwill. Under the new standard, the goodwill impairment charge will be the excess of the reporting unit's carrying value over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. This guidance will be effective beginning in fiscal 2019,2020, with early adoption permitted. The Company is currently evaluating the impact ofdoes not expect this standard to have a material impact on its Consolidated Statementsconsolidated results of Income and Comprehensive Income, Balance Sheets and Statements of Cash Flows.operations, financial position or cash flows.

3. Revenue Recognition

In the first quarter of 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective approach. Results for the first quarter of 2018 are presented under ASC 606, while prior period consolidated financial statements have not been adjusted and continue to be presented under the accounting standards in effect for those periods.

The Company recognizes revenue based on the amount it expects to receive when control of the goods or services is transferred to the customer. The Company recognizes sales upon customer receipt of merchandise, which for direct channel revenues reflects an estimate of shipments that have not yet been received by the customer based on shipping terms and historical delivery times. The Company’s shipping and handling revenues are included in Net Sales with the related costs included in Costs of Goods Sold, Buying and Occupancy on the Consolidated Statements of Income. The Company also provides a reserve for projected merchandise returns based on historical experience. Net Sales exclude sales and other similar taxes collected from customers.

The Company’s brands have certain loyalty programs that allow customers to earn points based on purchasing activity. As customers accumulate points and reach point thresholds, they are able to use the points to purchase merchandise in stores or online. The Company allocates revenue to points earned on qualifying purchases and defers recognition until the points are redeemed. The amount of revenue deferred is based on the relative stand-alone selling price method, which includes an estimate for points not expected to be redeemed based on historical experience.

The Company’s brands sell gift cards with no expiration dates to customers. The Company does not charge administrative fees on unused gift cards. The Company recognizes revenue from gift cards when they are redeemed by the customer. In addition, the Company recognizes revenue on unredeemed gift cards where the likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions (gift card breakage). Gift card breakage revenue is recognized in proportion, and over the same time period, as actual gift card redemptions. The Company determines the gift card breakage rate based on historical redemption patterns. Gift card breakage is included in Net Sales in the Consolidated Statements of Income.

Revenue earned in connection with Victoria’s Secret's private label credit card arrangement is recognized over the term of the license arrangement and is included in Net Sales in the first quarter 2018 Consolidated Statement of Income.

The Company also recognizes revenues associated with franchise, license and wholesale arrangements. Revenue recognized under franchise and license arrangements generally consists of royalties earned and recognized upon sale of merchandise by franchise and license partners to retail customers. Revenue is generally recognized under wholesale and sourcing arrangements at the time the title passes to the partner.

Accounts receivable, net from revenue-generating activities were $182 million as of May 4, 2019, $150 million as of February 2, 2019 and $147 million as of May 5, 2018 and $144 million as of the beginning of the period upon adoption of the new standard.2018. Accounts receivable primarily relate to amounts due from the Company's franchise, license and wholesale partners. Under these arrangements, payment terms are typically 60 to 75 days.

The Company records deferred revenue when cash payments are received in advance of transfer of control of goods or services. Deferred revenue primarily relates to gift cards, loyalty and private label credit card programs and direct channel shipments, which are all impacted by seasonal and holiday-related sales patterns. The balanceDeferred revenue was $280 million as of deferred revenue wasMay 4, 2019, $331 million as of February 2, 2019 and $269 million as of May 5, 2018 and $320 million as of the beginning of the period upon adoption of the new standard.2018. The Company recognized $90$120 million as revenue in the first quarter of 20182019 from amounts recorded as deferred revenue at the beginning of the period. The Company'sAs of May 4, 2019, the

Company recorded deferred revenue balance would have been $229of $265 million as of May 5, 2018 under accounting standards in effect prior to the adoption of the new standard. Deferred revenues are included within Accrued Expenses and Other, and $15 million within Other Long-term Liabilities on the Consolidated Balance Sheets.

Sheet.
The following table provides a disaggregation of Net Sales for the first quarter of 2018 in comparison to the first quarter of 2017:2019 and 2018:
First QuarterFirst Quarter
2018 2017 (a)2019 2018
(in millions)(in millions)
Victoria’s Secret Stores (b)(a)$1,236
 $1,247
$1,149
 $1,236
Victoria’s Secret Direct353
 286
362
 353
Victoria’s Secret North America1,589
 1,533
Total Victoria’s Secret1,511
 1,589
Bath & Body Works Stores (b)(a)649
 588
715
 649
Bath & Body Works Direct112
 90
156
 112
Bath & Body Works North America761
 678
Total Bath & Body Works871
 761
Victoria's Secret and Bath & Body Works International (c)(b)135
 104
135
 135
Other (d)(c)141
 122
112
 141
Total Net Sales$2,626
 $2,437
$2,629
 $2,626
 _______________
(a)2017 amounts have not been adjusted under the modified retrospective approach.
(b)Includes company-owned stores in the U.S. and Canada.
(c)(b)Includes company-owned stores in the U.K., Ireland and Greater China, direct sales in Greater China and wholesale sales, royalties and other fees associated with non-company owned stores.
(d)(c)Includes wholesale revenues from the Company's sourcing function,function. Results for 2018 also include store and direct sales for La Senza and Henri Bendel store and direct sales.Bendel.

4. Earnings Per Share and Shareholders’ Equity (Deficit)
Earnings Per Share
Earnings per basic share is computed based on the weighted-average number of outstanding common shares. Earnings per diluted share include the weighted-average effect of dilutive options and restricted stock on the weighted-average shares outstanding.
The following table provides shares utilized for the calculation of basic and diluted earnings per share duringfor the first quarter of 20182019 and 20172018:
First QuarterFirst Quarter
2018 20172019 2018
(in millions)(in millions)
Weighted-average Common Shares:      
Issued Shares283
 316
284
 283
Treasury Shares(4) (30)(8) (4)
Basic Shares279
 286
276
 279
Effect of Dilutive Options and Restricted Stock3
 3
2
 3
Diluted Shares282
 289
278
 282
Anti-dilutive Options and Awards (a)5
 5
5
 5
 _______________
(a)These options and awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.


Shareholders’ Equity (Deficit)
Common Stock Share Repurchases
Under the authority of the Company’s Board of Directors, the Company repurchased shares of its common stock under the following repurchase programs duringfor the first quarter of 2018 and 20172018:
Amount
Authorized
 
Shares
Repurchased
 
Amount
Repurchased
 Average Stock Price of Shares Repurchased within Program
Amount
Authorized
 
Shares
Repurchased
 
Amount
Repurchased
 Average Stock Price of Shares Repurchased within Program
Repurchase Program 2018 2017 2018 2017 2018 2017 
(in millions) (in thousands) (in millions)    (in millions) (in thousands) (in millions)  
March 2018$250
 1,563
 NA
 $58
 NA
 $36.93
 NA
$250
 1,563
 $58
 $36.93
September 2017250
 527
 NA
 25
 NA
 $46.98
 NA
250
 527
 25
 $46.98
February 2017250
 NA
 1,570
 NA
 $80
 NA
 $50.92
February 2016500
 NA
 51
 NA
 3
 NA
 $58.95
Total  2,090
 1,621
 $83
 $83
      2,090
 $83
  
The Company did not repurchase any shares in the first quarter of 2019.
In March 2018, the Company's Board of Directors approved a new $250 million share repurchase program, which included the $23 million remaining under the September 2017 repurchase program.
In September 2017, the Company's Board of Directors approved a $250 million share repurchase program, which included the $10 million remaining under the February 2017 repurchase program.
In February 2017, the Company's Board of Directors approved a $250 million share repurchase program, which included the $59 million remaining under the February 2016 repurchase program.
In February 2016, the Company's Board of Directors approved a $500 million share repurchase program, which included the $17 million remaining under the June 2015 repurchase program.
The March 2018 repurchase program had $192$79 million remaining as of May 5, 2018. Subsequent to May 5, 2018, the Company repurchased an additional 1.2 million shares of common stock for $42 million under this program.4, 2019.
There were $4 million, $2 million and $1 million of share repurchases reflected in Accounts Payable on the May 5, 2018 February 3, 2018 and April 29, 2017 Consolidated Balance Sheets, respectively.

Sheet.
Dividends
Under the authority and declaration of the Board of Directors, the Company paid the following dividends during the first quarter of 20182019 and 2017:2018:
 Ordinary Dividends Total Paid Ordinary Dividends Total Paid
 (per share) (in millions) (per share) (in millions)
2019    
First Quarter $0.30
 $83
2018        
First Quarter $0.60
 $168
 $0.60
 $168
2017    
First Quarter $0.60
 $172

5. Restructuring Activities
La Senza
On January 6, 2019, in an effort to increase shareholder value and in order to focus on its larger core businesses, the Company divested its ownership interest in La Senza to an affiliate of Regent LP, a global private equity firm. Regent LP assumed La Senza’s operating assets and liabilities in exchange for potential future consideration upon the sale or other monetization of La Senza, as defined in the agreement.  In the fourth quarter of 2018, the Company recognized a pre-tax loss on the divestiture of $99 million, primarily related to $45 million of accumulated foreign currency translation adjustments reclassified into earnings that were previously recognized as a component of equity, as well as losses related to the transfer of the net working capital and long-lived store assets to the buyer. The after-tax loss on the divestiture was $55 million, which includes $44 million of tax benefits primarily associated with the recognition of previously unrecognized deferred tax assets. In the first quarter of 2019, the Company received cash proceeds of $12 million related to a net working capital settlement from the divestiture. These proceeds are included within the Investing Activities section of the 2019 Consolidated Statement of Cash Flows.
In conjunction with the transaction, the Company has guaranteed certain lease payments under the current terms of noncancelable leases. For additional information, see Note 15, "Commitments and Contingencies."
Additionally, the Company will continue to provide support to La Senza in various operational areas including logistics, technology and merchandise sourcing for periods of time ranging from one month to 18 months.

Henri Bendel
The Company announced the planned closure of Henri Bendel in the third quarter of 2018. As a result, the Company recognized a pre-tax charge, primarily cash, consisting of lease termination costs, severance and other costs of $20 million in the third quarter of 2018. In the fourth quarter of 2018, the Company recognized an additional pre-tax charge of $3 million,

primarily related to contract termination and employee retention costs. In the fourth quarter of 2018, the Company closed all Henri Bendel stores and ceased selling merchandise online. Through the first quarter of 2019, the Company made cash payments of $22 million. The remaining balance of $1 million is included in Accrued Expenses and Other on the May 4, 2019 Consolidated Balance Sheet.

6. Inventories
The following table provides details of inventories as of May 5, 20184, 2019February 3, 20182, 2019 and April 29, 2017May 5, 2018:
May 5,
2018
 February 3,
2018
 April 29,
2017
May 4,
2019
 February 2,
2019
 May 5,
2018
(in millions)(in millions)
Finished Goods Merchandise$1,225
 $1,121
 $1,049
$1,225
 $1,107
 $1,225
Raw Materials and Merchandise Components125
 119
 98
132
 141
 125
Total Inventories$1,350
 $1,240
 $1,147
$1,357
 $1,248
 $1,350
Inventories are principally valued at the lower of cost, on a weighted-average cost basis, or net realizable value.


6.7. Property and Equipment, Net
The following table provides details of property and equipment, net as of May 5, 20184, 2019February 3, 20182, 2019 and April 29, 2017May 5, 2018:
May 5,
2018
 February 3,
2018
 April 29,
2017
May 4,
2019
 February 2,
2019
 May 5,
2018
(in millions)(in millions)
Property and Equipment, at Cost$6,760
 $6,687
 $6,354
$6,744
 $6,733
 $6,760
Accumulated Depreciation and Amortization(3,866) (3,794) (3,593)(3,950) (3,915) (3,866)
Property and Equipment, Net$2,894
 $2,893
 $2,761
$2,794
 $2,818
 $2,894
Depreciation expense was $148$145 million and $142$148 million for the first quarter of 20182019 and 2017,2018, respectively.

7.8. Leases
In the first quarter of 2019, the Company adopted ASC 842, Leases, using the modified retrospective approach. Results for the first quarter of 2019 are presented under ASC 842, while prior period consolidated financial statements have not been adjusted and continue to be presented under the accounting standard in effect at that time.
The Company leases retail space, office space, warehouse facilities, storage space, equipment and certain other items under operating leases. A substantial portion of the Company’s leases are operating leases for its stores which generally have an initial term of 10 years. Annual store rent consists of a fixed minimum amount and/or variable rent based on a percentage of sales exceeding a stipulated amount. Store lease terms generally also require additional payments covering certain operating costs such as common area maintenance, utilities, insurance and taxes. Certain leases contain predetermined fixed escalations of minimum rentals or require periodic adjustments of minimum rentals depending on an index or rate. Additionally, certain leases contain incentives, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property.
At lease commencement, the Company recognizes an asset for the right to use the leased asset and a liability based on the present value of the unpaid fixed lease payments. Operating lease costs are recognized on a straight-line basis as lease expense over the lease term. Variable lease payments associated with the Company's leases are recognized upon occurrence of the event or circumstance on which the payments are assessed. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet, and lease expense is recognized on a straight-line basis over the lease term.
Since the Company typically cannot determine the implicit borrowing rate in a lease, the Company uses its incremental borrowing rate, adjusted for collateral, to determine the present value of its unpaid lease payments.
The Company’s store leases often include options to extend the initial term or to terminate the lease prior to the end of the initial term. The exercise of these options is typically at the sole discretion of the Company. These options are included in determining the initial lease term at lease commencement if the Company is reasonably certain to exercise the option. Additionally, the Company may operate stores for a period of time on a month-to-month basis after the expiration of the lease term.

For leases entered into or reassessed after the adoption of the new standard, the Company has elected the practical expedient allowed by the standard to account for all fixed consideration in a lease as a single lease component. Therefore, the lease payments used to measure the lease liability for these leases include fixed minimum rentals along with fixed operating costs such as common area maintenance and utilities.
The Company has provided residual value guarantees in connection with noncancelable operating leases of certain assets. See Note 15, “Commitments and Contingencies.”
The following table provides the components of lease cost for operating leases for the first quarter of 2019:
 (in millions)
Operating Lease Costs$175
Variable Lease Costs17
Short-term Lease Costs5
Total Lease Cost$197

The following table provides future maturities of operating lease liabilities as of the first quarter of 2019:
Fiscal Year(in millions)
2019$474
2020692
2021654
2022585
2023528
Thereafter1,800
Total Lease Payments$4,733
Less: Interest(1,056)
Present Value of Operating Lease Liabilities$3,677
As of May 4, 2019, the Company has additional operating lease commitments that have not yet commenced of approximately $71 million.
The following table provides the weighted-average remaining lease term and discount rate for operating leases with lease liabilities as of the first quarter of 2019:
Weighted Average Remaining Lease Term (years)7.8
Weighted Average Discount Rate6.1%
In the first quarter of 2019, the Company paid $171 million for operating lease liabilities recorded on the balance sheet. These payments are included within the Operating Activities section of the 2019 Consolidated Statement of Cash Flows.
In the first quarter of 2019, the Company obtained $125 million of additional lease assets as a result of new operating lease obligations.
Disclosures for 2018
The following table provides rent expense, as presented under the prior accounting standard, for the first quarter of 2018:
 (in millions)
Store Rent: 
Fixed Minimum$167
Contingent12
Total Store Rent179
Office, Equipment and Other22
Total Rent Expense$201

The following table provides future minimum rent commitments under noncancelable operating leases in the next five fiscal years and the remaining years thereafter, as determined under the prior accounting standard, as of February 2, 2019:
Fiscal Year (a)(in millions)
2019$698
2020676
2021630
2022562
2023504
Thereafter$1,738
 _______________
(a)Excludes additional payments covering taxes, common area costs and certain other expenses generally required by store lease terms.
Finance Leases
The Company leases certain fulfillment equipment under finance leases that expire at various dates through 2023. The Company records finance lease assets, net of accumulated amortization, in Property and Equipment, Net on the Consolidated Balance Sheet. Additionally, the Company records finance lease liabilities in Accrued Expenses and Other and Other Long-term Liabilities on the Consolidated Balance Sheet. Finance lease costs are comprised of the straight-line amortization of the right-of-use asset and the accretion of interest expense under the effective interest method.
The Company recorded $24 million and $5 million of finance lease assets, net of accumulated amortization, in Property and Equipment, Net on the May 4, 2019 and May 5, 2018 Consolidated Balance Sheets, respectively. Additionally, the Company recorded finance lease liabilities of $7 million and $1 million in Accrued Expenses and Other and $17 million and $3 million in Other Long-term Liabilities, on the May 4, 2019 and May 5, 2018 Consolidated Balance Sheets, respectively.

Asset Retirement Obligations
The Company has asset retirement obligations related to certain company-owned international stores that contractually obligate the Company to remove leasehold improvements at the end of a lease. The Company’s liability for asset retirement obligations totaled $19 million as of May 4, 2019 and $8 million as of May 5, 2018. These liabilities are included in Other Long-term Liabilities on the Consolidated Balance Sheets.

9. Equity Investments
Easton Investments
The Company has land and other investments in Easton, a planned community in Columbus, Ohio, that integrates office, hotel, retail, residential and recreational space. These investments, totaling $94 million as of May 4, 2019, $89 million as of February 2, 2019, and $82 million as of May 5, 2018,, $81 million as of February 3, 2018, and $79 million as of April 29, 2017, and are recorded in Other Assets on the Consolidated Balance Sheets.

Included in the Company’s Easton investments are equity interests in Easton Town Center, LLC (“ETC”) and Easton Gateway, LLC (“EG”), entities that own and develop commercial entertainment and shopping centers. The Company’s investments in ETC and EG are accounted for using the equity method of accounting. The Company has a majority financial interest in ETC and EG, but another unaffiliated member manages them, and certain significant decisions regarding ETC and EG require the consent of unaffiliated members in addition to the Company.

8.10. Income Taxes
The provision for income taxes is based on the current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events. The Company’s quarterly effective tax rate does not reflect a benefit associated with losses related to certain foreign subsidiaries.
For the first quarter of 2018,2019, the Company’s effective tax rate was 18.5%33.6% compared to 20.6%18.5% in the first quarter of 2017.2018. The first quarter 2019 rate was higher than the Company's combined federal and state statutory rate primarily due to the recognition of tax expense recorded through the income statement on share-based awards that vested in the quarter. The first quarter 2018 rate was lower than the Company's combined federal and state statutory rate primarily due to the release of a valuation allowance against certain deferred tax assets that are more likely than not to be realized. The first quarter 2017 rate was lower than the Company's combined federal and state statutory rate primarily due to the recognition of excess tax benefits recorded through the income statement on stock options exercised in the quarter.
On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted into law. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The TCJA reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. 
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. The ultimate impact may differ from provisional amounts, due to changes in interpretations and assumptions the Company has made regarding application of the TCJA as well as additional regulatory guidance that may be issued. Any adjustments made to the provisional amounts under SAB 118 should be recorded as discrete adjustments in the period identified (not to extend beyond the one-year measurement provided in SAB 118). During the first quarter of 2018, the Company did not make any adjustments to its provisional amounts included in its consolidated financial statements for the year ended February 3, 2018. The accounting is expected to be completed in the fourth quarter of 2018.
Income taxes paid were $11$12 million and $15$11 million for the first quarter of 20182019 and 2017,2018, respectively.


9.11. Long-term Debt and Borrowing Facilities
The following table provides the Company’s outstanding debt balance, net of unamortized debt issuance costs and discounts, as of May 5, 20184, 2019February 3, 20182, 2019 and April 29, 2017May 5, 2018:
 May 5,
2018
 February 3,
2018
 April 29,
2017
 (in millions)
Senior Unsecured Debt with Subsidiary Guarantee     
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)$990

$990

$989
$1 billion, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)994

994

993
$1 billion, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)995

994

993
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)693

693

692
$500 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)497

497

497
$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)495
 495
 
$500 million, 8.50% Fixed Interest Rate Notes due June 2019 (“2019 Notes”)(a)



496
$400 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”)398

398

397
Foreign Facilities with Subsidiary Guarantee12
 1
 
Total Senior Unsecured Debt with Subsidiary Guarantee$5,074

$5,062

$5,057
Senior Unsecured Debt     
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)$348

$348

$348
$300 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)297

297

297
Foreign Facilities without Subsidiary Guarantee89

87

44
Total Senior Unsecured Debt$734

$732

$689
Total$5,808

$5,794

$5,746
Current Debt(89)
(87)
(44)
Total Long-term Debt, Net of Current Portion$5,719

$5,707

$5,702
 May 4,
2019
 February 2,
2019
 May 5,
2018
 (in millions)
Senior Debt with Subsidiary Guarantee     
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)$990

$990

$990
$956 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)952

952

994
$780 million, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)777

776

995
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)693

693

693
$500 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)498

498

497
$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)496
 496
 495
$338 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”)338

337

398
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)274
 273
 
Secured Foreign Facilities91
 91
 12
Total Senior Debt with Subsidiary Guarantee$5,109

$5,106

$5,074
Senior Debt     
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)$348

$348

$348
$300 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)297

297

297
Unsecured Foreign Facilities67

60

89
Total Senior Debt$712

$705

$734
Total$5,821

$5,811

$5,808
Current Debt(72)
(72)
(89)
Total Long-term Debt, Net of Current Portion$5,749

$5,739

$5,719
________________
(a)The balance includes a fair value interest rate hedge adjustment which increased the debt balance by $2 million as of April 29, 2017.
IssuanceExchange of Notes
In JanuaryJune 2018, the Company issued $500completed private offers to exchange $62 million, $220 million and $44 million of 5.25%outstanding 2020 Notes, 2021 Notes and 2022 Notes, respectively, for $297 million of newly issued 6.694% notes due in January 2027 and $52 million in cash consideration, which included a $24 million exchange premium. The exchange was treated as a modification under ASC 470, Debt, and no gain or loss was recognized. The exchange premium will be amortized through the maturity date of January 2027 and is included within Long-term Debt on the May 4, 2019 and February 2028.2, 2019 Consolidated Balance Sheets. The obligation to pay principal and interest on these notesthe 2027 Notes is jointly and severally guaranteed on a full and unconditional basis by certain of the Company's 100% owned subsidiaries (the “Guarantors”). The proceeds from the issuance were $495 million, which were net of issuance costs of $5 million. These issuance costs are being amortized through the maturity date of February 2028 and are included within Long-term Debt on the May 5, 2018 and February 3, 2018 Consolidated Balance Sheets.
Redemption of Notes
In January 2018, the Company used the proceeds from the 2028 Notes to redeem the $500 million 2019 Notes for $540 million. In the fourth quarter of 2017, the Company recognized a pre-tax loss on extinguishment of this debt of $45 million (after-tax loss of $29 million), which includes write-offs of unamortized issuance costs and discounts and losses related to terminated interest rate swaps associated with the 2019 Notes.
Exchange Offer
Subsequent to May 5, 2018, the Company announced the commencement of separate private offers to eligible holders to exchange certain of its outstanding 2020 Notes, 2021 Notes and 2022 Notes (collectively, the "offers") for a series of its newly issued debt securities due 2027 and cash. The offers will expire on June 27, 2018 with a potential early settlement date of June 18, 2018, subject to certain terms and conditions.
Secured Revolving Facility
The Company maintainsand the Guarantors guarantee and pledge collateral to secure a secured revolving credit facility (“("Secured Revolving Facility”Facility"). The Secured Revolving Facility has aggregate availability of $1 billion and expires in May 11, 2022. The Secured Revolving Facility allows the Company and certain of the Company's non-U.S. subsidiaries to borrow and obtain letters of credit in U.S. dollars, Canadian dollars, Euros, Hong Kong dollars or British pounds.

The Secured Revolving Facility fees related to committed and unutilized amounts are 0.25% per annum, and the fees related to outstanding letters of credit are 1.50% per annum. In addition, the interest rate on outstanding U.S. dollar borrowings is the London Interbank Offered Rate (“LIBOR”) plus 1.50% per annum. The interest rate on outstanding foreign denominated borrowings is the applicable benchmark rate plus 1.50% per annum.
The Secured Revolving Facility contains fixed charge coverage and debt to EBITDA financial covenants. The Company is required to maintain a fixed charge coverage ratio of not less than 1.75 to 1.00 and a consolidated debt to consolidated EBITDA ratio not exceeding 4.00 to 1.00 for the most recent four-quarter period. In addition, the Secured Revolving Facility provides that investments and restricted payments may be made, without limitation on amount, if (a) at the time of and after giving effect to such investment or restricted payment, the ratio of consolidated debt to consolidated EBITDA for the most recent four-quarter period is less than 3.00 to 1.00 and (b) no default or event of default exists. As of May 5, 2018,4, 2019, the Company was in

compliance with both of its financial covenants, and the ratio of consolidated debt to consolidated EBITDA was less than 3.00 to 1.00.
As of May 5, 2018,4, 2019, there were no borrowings outstanding under the Secured Revolving Facility.
The Secured Revolving Facility supports the Company’s letter of credit program. The Company had $9$10 million of outstanding letters of credit as of May 5, 20184, 2019 that reduced its remaining availability under the Secured Revolving Facility.
Secured Foreign Facilities
In additionThe Company and the Guarantors guarantee and pledge collateral to the Revolving Facility, the Company maintains varioussecure revolving and term loan bank facilities to support operations in Greater China ("Secured Foreign Facilities"). These facilities allow used by certain of the Company's Greater China subsidiaries to borrow and obtain letters of creditsupport their operations. The Secured Foreign Facilities, which allow borrowings in U.S. dollars and Chinese yuan.
The Company maintains various revolving and term loan bank facilities that are guaranteed by L Brands, Inc. withYuan, have availability totaling $100 million. The interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. During the first quarter of 2018,2019, the Company borrowed $10 million and made payments of $8 million under these facilities.the Secured Foreign Facilities. The maximum daily amount outstanding at any point in time during the first quarter of 20182019 was $90$96 million. Borrowings on these facilitiesthe Secured Foreign Facilities mature between December 2019 and May 7, 2018 and December 18, 2018 and2022. As of May 4, 2019, borrowings of $5 million are included within Current Debt on the May 5, 2018 Consolidated Balance Sheet.Sheet, and the remaining borrowings are included within Long-term Debt.
Unsecured Foreign Facilities
The Company also maintains aguarantees unsecured revolving facility that is guaranteedand term loan bank facilities ("Unsecured Foreign Facilities") used by L Brands, Inc.certain of the Company's Greater China subsidiaries to support their operations. The Unsecured Foreign Facilities, which allow borrowings in U.S. dollars and the Guarantors withChinese Yuan, have availability totaling $100 million. The interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. During the first quarter of 2018,2019, the Company borrowed $11$13 million and made payments of $6 million under this facility. Thesethe Unsecured Foreign Facilities. The maximum daily amount outstanding at any point in time during the first quarter of 2019 was $73 million. Borrowings on the Unsecured Foreign Facilities mature between June 2019 and December 2019. As of May 4, 2019, borrowings which mature on May 11, 2022,of $67 million are included within Long-termCurrent Debt on the May 5, 2018 Consolidated Balance Sheet.

10.12. Derivative Financial Instruments
Foreign Exchange Derivative Instruments
The earnings of the Company's wholly owned foreign businesses are subject to exchange rate risk as substantially all of their merchandise is sourced through U.S. dollar transactions. The Company uses foreign currency forward contracts designated as cash flow hedges to mitigate this foreign currency exposure for its Canadian and U.K. businesses. These forward contracts currently have a maximum term of 18 months. Amounts are reclassified from accumulated other comprehensive income upon sale of the hedged merchandise to the customer. These gains and losses are recognized in Costs of Goods Sold, Buying and Occupancy onin the Consolidated Statements of Income.

The Company had a cross-currency swap related to an intercompany loan of approximately CAD$170 million that matured in January 2018 which was designated as a cash flow hedge of foreign currency exchange risk. This cross-currency swap mitigated the exposures to fluctuations in the U.S. dollar-Canadian dollar exchange rate related to the Company's Canadian operations. Changes in the U.S. dollar-Canadian dollar exchange rate and the related swap settlements resulted in reclassification of amounts from accumulated other comprehensive income to earnings to completely offset foreign currency transaction gains and losses recognized on the intercompany loan.

The Company uses foreign currency forward contracts to mitigate the impact of fluctuations in foreign currency exchange rates relative to recognized payable balances denominated in non-functional currencies. The fair value of these non-designated foreign currency forward contracts is not significant as of May 5, 2018.


4, 2019.
The following table provides the U.S. dollar notional amount of outstanding foreign currency derivative financial instruments as of May 4, 2019, February 2, 2019 and May 5, 2018, February 3, 2018 and April 29, 2017:2018:
 May 5,
2018
 February 3,
2018
 April 29,
2017
 (in millions)
Notional Amount$208
 $217
 $362
 May 4,
2019
 February 2,
2019
 May 5,
2018
 (in millions)
Notional Amount$152
 $147
 $208

The following table provides a summary of the fair value and balance sheet classification of outstanding derivative financial instruments designated as foreign currency cash flow hedges as of May 4, 2019, February 2, 2019 and May 5, 2018, February 3, 2018 and April 29, 2017:2018:
May 5,
2018
 February 3,
2018
 April 29,
2017
May 4,
2019
 February 2,
2019
 May 5,
2018
(in millions)(in millions)
Other Current Assets$1
 $
 $27
$3
 $2
 $1
Accrued Expenses and Other2
 8
 1

 
 2
Other Long-term Liabilities
 1
 


The following table provides a summary of the pre-tax financial statement effect of the gains and losses on derivative financial instruments designated as foreign currency cash flow hedges for the first quarter 2018of 2019 and 2017:2018:
 First Quarter
 2018 2017
 (in millions)
Gain (Loss) Recognized in Accumulated Other Comprehensive Income$6
 $10
(Gain) Loss Reclassified from Accumulated Other Comprehensive Income into Costs of Goods Sold, Buying and Occupancy Expense (a)2
 (2)
(Gain) Loss Reclassified from Accumulated Other Comprehensive Income into Other Income (b)
 (5)
________________
(a)Represents reclassification of amounts from accumulated other comprehensive income to earnings when the hedged merchandise is sold to the customer. No ineffectiveness was associated with these foreign currency cash flow hedges.
(b)Represents reclassification of amounts from accumulated other comprehensive income to earnings to completely offset foreign currency transaction gains and losses recognized on the intercompany loan.

 First Quarter
 2019 2018
 (in millions)
Gain (Loss) Recognized in Accumulated Other Comprehensive Income$2
 $6
(Gain) Loss Reclassified from Accumulated Other Comprehensive Income into Costs of Goods Sold, Buying and Occupancy Expense(2) 2
The Company estimates that $2$3 million of net lossesgains included in accumulated other comprehensive income as of May 5, 20184, 2019 related to foreign currency forward contracts designated as cash flow hedges will be reclassified into earnings within the following 12 months. Actual amounts ultimately reclassified depend on the exchange rates in effect when derivative contracts that are currently outstanding mature.

11.13. Fair Value Measurements
The following table provides a summary of assets and liabilities measured in the consolidated financial statements at fair value on a recurring basis as of May 4, 2019, February 2, 2019 and May 5, 2018:
 Level 1 Level 2 Level 3 Total
 (in millions)
As of May 4, 2019       
Assets:       
Cash and Cash Equivalents$1,146
 $
 $
 $1,146
Marketable Equity Securities8
 
 
 8
Foreign Currency Cash Flow Hedges
 3
 
 3
As of February 2, 2019       
Assets:       
Cash and Cash Equivalents$1,413
 $
 $
 $1,413
Marketable Equity Securities11
 
 
 11
Foreign Currency Cash Flow Hedges
 2
 
 2
As of May 5, 2018       
Assets:       
Cash and Cash Equivalents$1,032
 $
 $
 $1,032
Marketable Equity Securities17
 
 
 17
Foreign Currency Cash Flow Hedges
 1
 
 1
Liabilities:       
Foreign Currency Cash Flow Hedges
 2
 
 2

The Company's Level 1 fair value measurements use unadjusted quoted prices in active markets for identical assets. The Company's marketable equity securities are classified as Level 1 fair value measurements as they are traded with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.
The Company’s Level 2 fair value measurements use market approach valuation techniques. The primary inputs to these techniques include foreign currency exchange rates, as applicable to the underlying instruments.

The following table provides a summary of the principal value and estimated fair value of long-termoutstanding publicly traded debt excluding Foreign Facility borrowings, as of May 4, 2019, February 2, 2019 and May 5, 2018February 3, 2018 and April 29, 2017:2018:
May 5,
2018
 February 3,
2018
 April 29,
2017
May 4,
2019
 February 2,
2019
 May 5,
2018
(in millions)(in millions)
Principal Value$5,750
 $5,750
 $5,750
$5,722
 $5,722
 $5,750
Fair Value (a)5,735
 5,943
 5,992
5,486
 5,340
 5,735
  _______________
(a)
The estimated fair value of the Company’s publicly traded debt is based on reported transaction prices which are considered Level 2 inputs in accordance with ASC 820,Fair Value Measurement. The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

The authoritative guidance included in ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 – Quoted market prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted market prices included in Level 1, such as quoted prices of similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The following table provides a summary of assets and liabilities measured in the consolidated financial statements at fair value on a recurring basis as of May 5, 2018, February 3, 2018 and April 29, 2017:
 Level 1 Level 2 Level 3 Total
 (in millions)
As of May 5, 2018       
Assets:       
Cash and Cash Equivalents$1,032
 $
 $
 $1,032
Marketable Securities17
 
 
 17
Foreign Currency Cash Flow Hedges
 1
 
 1
Liabilities:       
Foreign Currency Cash Flow Hedges
 2
 
 2
As of February 3, 2018       
Assets:       
Cash and Cash Equivalents$1,515
 $
 $
 $1,515
Marketable Securities17
 
 
 17
Liabilities:       
Foreign Currency Cash Flow Hedges
 9
 
 9
As of April 29, 2017       
Assets:       
Cash and Cash Equivalents$1,555
 $
 $
 $1,555
Marketable Securities5
 
 
 5
Interest Rate Fair Value Hedges
 2
 
 2
Foreign Currency Cash Flow Hedges
 27
 
 27
Liabilities:       
Foreign Currency Cash Flow Hedges
 1
 
 1

The Company's Level 1 fair value measurements use unadjusted quoted prices in active markets for identical assets. The Company's marketable securities are classified as Level 1 fair value measurements as they are traded with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.

In January 2016, the FASB issued ASC 321, Investments - Equity Securities. The standard requires the recognition of changes in the fair value of the Company's marketable securities in net income as compared to historical treatment in accumulated other comprehensive income. The Company adopted the standard in the first quarter of 2018. The Company recognized an unrealized holding loss of less than $1 million related to its marketable equity securities in Other Income in the first quarter of 2018 Consolidated Statement of Income.
The Company’s Level 2 fair value measurements use market approach valuation techniques. The primary inputs to these techniques include benchmark interest rates and foreign currency exchange rates, as applicable to the underlying instruments.
Management believes that the carrying values of accounts receivable, accounts payable, accrued expenses and current debt approximate fair value because of their short maturity.

12.
14. Comprehensive Income
The following table provides the rollforward of accumulated other comprehensive income for the first quarter of 2019:
 Foreign Currency Translation Cash Flow Hedges Accumulated Other Comprehensive Income
 (in millions)
Balance as of February 2, 2019$57
 $2
 $59
Other Comprehensive Income (Loss) Before Reclassifications(4) 2
 (2)
Amounts Reclassified from Accumulated Other Comprehensive Income
 (2) (2)
Tax Effect
 
 
Current-period Other Comprehensive Income (Loss)(4) 
 (4)
Balance as of May 4, 2019$53
 $2
 $55
The following table provides the rollforward of accumulated other comprehensive income for the first quarter of 2018:
Foreign Currency Translation Cash Flow Hedges Marketable Securities Accumulated Other Comprehensive IncomeForeign Currency Translation Cash Flow Hedges Marketable Equity Securities Accumulated Other Comprehensive Income
(in millions)(in millions)
Balance as of February 3, 2018$32
 $(10) $2
 $24
$32
 $(10) $2
 $24
Amount reclassified to Retained Earnings upon adoption of ASC 321
 
 (2) (2)
Amount reclassified to Retained Earnings upon adoption of ASC 321, Investments - Equity Securities

 
 (2) (2)
Balance as of February 4, 201832
 (10) 
 22
32
 (10) 
 22
Other Comprehensive Income (Loss) Before Reclassifications(13) 6
 
 (7)(13) 6
 
 (7)
Amounts Reclassified from Accumulated Other Comprehensive Income
 2
 
 2

 2
 
 2
Tax Effect
 
 
 

 
 
 
Current-period Other Comprehensive Income (Loss)(13) 8
 
 (5)(13) 8
 
 (5)
Balance as of May 5, 2018$19
 $(2) $
 $17
$19
 $(2) $
 $17

The following table provides the rollforward of accumulated other comprehensive income for the first quarter of 2017:
 Foreign Currency Translation Cash Flow Hedges Marketable Securities Accumulated Other Comprehensive Income
 (in millions)
Balance as of January 28, 2017$9
 $3
 $
 $12
Other Comprehensive Income (Loss) Before Reclassifications3
 10
 
 13
Amounts Reclassified from Accumulated Other Comprehensive Income
 (7) 
 (7)
Tax Effect
 
 
 
Current-period Other Comprehensive Income (Loss)3
 3
 
 6
Balance as of April 29, 2017$12
 $6
 $
 $18

The following table provides a summary of the reclassification adjustments out of accumulated other comprehensive income for the first quarter of 2018 and 2017:
Details About Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Location on Consolidated Statements of Income
  First Quarter  
  2018 2017  
  (in millions) 
(Gain) Loss on Cash Flow Hedges $2
 $(2) Costs of Goods Sold, Buying and Occupancy
  
 (5) Other Income
  
 1
 Provision for Income Taxes
  $2
 $(6) Net Income

13.15. Commitments and Contingencies
The Company is subject to various claims and contingencies related to lawsuits, taxes, insurance, regulatory and other matters arising out of the normal course of business. Actions filed against the Company from time to time include commercial, tort, intellectual property, customer, employment, data privacy, securities and other claims, including purported class action lawsuits. Management believes that the ultimate liability arising from such claims and contingencies, if any, is not likely to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

Guarantees
In connection with the dispositionsale of a certain business,La Senza in the fourth quarter of 2018, the Company has remaining guarantees of $9$71 million related to lease payments under the current terms of noncancellablenoncancelable leases expiring at various dates through 2021.2028. These guarantees include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of the business. The Company recorded a liability of $5 millionas of May 4, 2019 and February 2, 2019 representing the estimated fair value of its obligation as guarantor in accordance with ASC 460, Guarantees. In connection with the disposition of a certain instances,other business, the Company’s guaranteeCompany has remaining guarantees of $5 million related to lease payments under the current terms of a noncancelable lease expiring in 2021, which may remain in effect if the term of a lease is extended. The Company has not recorded a liability with respect to thesethis guarantee obligationsobligation as of May 4, 2019, February 2, 2019 or May 5, 2018 February 3, 2018 or April 29, 2017 as it concluded that payments under these guaranteesthis guarantee were not probable.
In connection with noncancellablenoncancelable operating leases of certain assets, the Company provided residual value guarantees to the lessor if the leased assets cannot be sold for an amount in excess of a specified minimum value at the conclusion of the lease term. The leases expire at various dates through 2021, and the total amount of the guarantees is $104$94 million. The Company recorded a liability of $10 million as of May 4, 2019, $11 million as of February 2, 2019 and $3 million as of May 5, 2018 and February 3, 2018, and a liability of less than $1 million as of April 29, 2017 related to these guarantee obligations, which areobligations. This liability is included in Long-term Operating Lease Liabilities on the May 4, 2019 Consolidated Balance Sheet, and in Other Long-term Liabilities on the February 2, 2019 and May 5, 2018 Consolidated Balance Sheets.

14.16. Retirement Benefits
The Company sponsors a tax-qualified defined contribution retirement plan and a non-qualified supplemental retirement plan for substantially all of its associates within the U.S. Participation in the tax-qualified plan is available to associates who meet certain age and service requirements. Participation in the non-qualified plan is available to associates who meet certain age, service, job level and compensation requirements.
The qualified plan permits participating associates to elect contributions up to the maximum limits allowable under the Internal Revenue Code. The Company matches associate contributions according to a predetermined formula and contributes additional amounts based on a percentage of the associates’ eligible annual compensation and years of service. Associate contributions and Company matching contributions vest immediately. Additional Company contributions and the related investment earnings are subject to vesting based on years of service. Total expense recognized related to the qualified plan was $19 million for the first quarter of 2019 and $18 million for the first quarter of 2018 and $16 million for the first quarter of 2017.2018.
The non-qualified plan is an unfunded plan which provides benefits beyond the Internal Revenue Code limits for qualified defined contribution plans. The plan permits participating associates to elect contributions up to a maximum percentage of eligible compensation. The Company matches associate contributions according to a predetermined formula and contributes additional amounts based on a percentage of the associates’ eligible compensation and years of service. The plan also permits participating associates to defer additional compensation up to a maximum amount which the Company does not match. Associates’ accounts are credited with interest using a fixed rate determined by the Company and reviewed by the Compensation Committee of the Board of Directors prior to the beginning of each year. Associate contributions and the related interest vest immediately. Company contributions, along with related interest, are subject to vesting based on years of service. Associates may elect in-service distributions for the unmatched additional deferred compensation component only. The remaining vested portion of associates’ accounts in the plan will be distributed upon termination of employment in either a lump sum or in annual installments over a specified period of up to 10 years. Total expense recognized related to the non-qualified plan was $6 million for both the first quarter of 20182019 and $4 million for the first quarter of 2017.2018.

15.17. Segment Information
The Company has three reportable segments: Victoria’s Secret, Bath & Body Works and Victoria's Secret and Bath & Body Works International.
The Victoria’s Secret segment sells women’s intimate and other apparel, personal care and beauty products under the Victoria’s Secret and PINK brand names. Victoria’s Secret merchandise is sold online and through retail stores located in the U.S. and Canada.
The Bath & Body Works segment sells body care, home fragrance products, soaps and sanitizers under the Bath & Body Works, White Barn, C.O. Bigelow and other brand names. Bath & Body Works merchandise is sold online and at retail stores located in the U.S. and Canada.

The Victoria's Secret and Bath & Body Works International segment includes the Victoria's Secret and Bath & Body Works company-owned and partner-operated stores located outside of the U.S. and Canada, as well as the online business in Greater China on the Tmall domestic platform.China. This segment includes the following:
Victoria's Secret International, comprised of company-owned stores in the U.K., Ireland and Greater China, as well as stores operated by partners under franchise and license arrangements;

Victoria's Secret Beauty and Accessories, comprised of company-owned stores in Greater China, as well as stores operated by partners under franchise, license and wholesale arrangements, which feature Victoria's Secret branded beauty and accessories products in travel retail and other locations; and
Bath & Body Works International stores in travel retail and other locations operated by partners under franchise, license and wholesale arrangements.
Other consists of the following:
includes Mast Global, a merchandise sourcing and production function serving the Company and its international partners;
La Senza, which sells women's intimate apparel onlinepartners, and through company-owned stores located in Canada and the U.S., as well as stores operated by partners under franchise and license arrangements;
Henri Bendel, which sells handbags, jewelry and other accessory products online and through company-owned stores;and
Corporate functions, including non-core real estate, equity investments and other governance functions such as treasury and tax. Results for 2018 also include La Senza and Henri Bendel.
The following table provides the Company’s segment information for the first quarter of 20182019 and 20172018:
Victoria’s
Secret
 
Bath &
Body Works
 
Victoria’s Secret
and
Bath & Body Works International
 Other Total
Victoria’s
Secret
 
Bath &
Body Works
 
Victoria’s Secret
and
Bath & Body Works International
 Other Total
(in millions)(in millions)
2018         
First Quarter:         
2019         
First Quarter         
Net Sales$1,589
 $761
 $135
 $141
 $2,626
$1,511
 $871
 $135
 $112
 $2,629
Operating Income (Loss)83
 124
 (5) (47) 155
33
 155
 (4) (31) 153
2017         
First Quarter:         
2018         
First Quarter         
Net Sales$1,533
 $678
 $104
 $122
 $2,437
$1,589
 $761
 $135
 $141
 $2,626
Operating Income (Loss)159
 102
 (1) (51) 209
83
 124
 (5) (47) 155
The Company's international net sales include sales from company-owned stores, royalty revenue from franchise and license arrangements, wholesale revenues and direct sales shipped internationally. Certain of these sales are subject to the impact of fluctuations in foreign currency. The Company’s international net sales across all segments totaled $359$349 million and $299$359 million for the first quarter of 2019 and 2018, and 2017, respectively.
16. Subsequent Events

On May 31, 2018, the Company announced the commencement of separate private offers to eligible holders to exchange certain of its outstanding 2020 Notes, 2021 Notes and 2022 Notes (collectively, the "offers") for a series of its newly issued debt securities due 2027 and cash. The offers will expire on June 27, 2018 with a potential early settlement date of June 18, 2018, subject to certain terms and conditions.
Subsequent to May 5, 2018, the Company repurchased an additional 1.2 million shares of common stock for $42 million under the March 2018 repurchase program.

17.18. Supplemental Guarantor Financial Information
The Company’s 2020 Notes, 2021 Notes, 2022 Notes, 2023 Notes, 2027 Notes, 2028 Notes, 2035 Notes, 2036 Notes, Secured Revolving Facility and certain of itsSecured Foreign Facilities are jointly and severally guaranteed on a full and unconditional basis by the Guarantors. The Company is a holding company, and its most significant assets are the stock of its subsidiaries. The Guarantors represent: (a) substantially all of the sales of the Company’s domestic subsidiaries, (b) more than 90% of the assets owned by the Company’s domestic subsidiaries, other than real property, certain other assets and intercompany investments and balances and (c) more than 95% of the accounts receivable and inventory directly owned by the Company’s domestic subsidiaries.
The following supplemental financial information sets forth for the Company and its guarantor and non-guarantor subsidiaries: the Condensed Consolidating Balance Sheets as of May 5, 20184, 2019, February 3, 20182, 2019 and April 29, 2017May 5, 2018 and the Condensed Consolidating Statements of Income, Comprehensive Income and Cash Flows for the periods ended May 5, 20184, 2019 and April 29, 2017May 5, 2018.

L BRANDS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
(in millions)
(Unaudited)
 
 May 5, 2018
 L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
ASSETS         
Current Assets:         
Cash and Cash Equivalents$
 $677
 $355
 $
 $1,032
Accounts Receivable, Net
 152
 122
 
 274
Inventories
 1,199
 151
 
 1,350
Other1
 136
 97
 
 234
Total Current Assets1
 2,164
 725
 
 2,890
Property and Equipment, Net
 1,970
 924
 
 2,894
Goodwill
 1,318
 30
 
 1,348
Trade Names
 411
 
 
 411
Net Investments in and Advances to/from Consolidated Affiliates4,690
 18,969
 2,025
 (25,684) 
Deferred Income Taxes
 9
 13
 
 22
Other Assets129
 16
 651
 (612) 184
Total Assets$4,820
 $24,857
 $4,368
 $(26,296) $7,749
LIABILITIES AND EQUITY (DEFICIT)         
Current Liabilities:         
Accounts Payable$5
 $350
 $362
 $
 $717
Accrued Expenses and Other59
 461
 328
 
 848
Current Debt
 
 89
 
 89
Income Taxes6
 176
 22
 
 204
Total Current Liabilities70
 987
 801
 
 1,858
Deferred Income Taxes(2) (41) 277
 
 234
Long-term Debt5,707
 597
 12
 (597) 5,719
Other Long-term Liabilities1
 823
 98
 (15) 907
Total Equity (Deficit)(956) 22,491
 3,180
 (25,684) (969)
Total Liabilities and Equity (Deficit)$4,820
 $24,857
 $4,368
 $(26,296) $7,749




 May 4, 2019
 L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
ASSETS         
Current Assets:         
Cash and Cash Equivalents$
 $731
 $415
 $
 $1,146
Accounts Receivable, Net
 153
 121
 
 274
Inventories
 1,235
 122
 
 1,357
Other
 85
 85
 
 170
Total Current Assets
 2,204
 743
 
 2,947
Property and Equipment, Net
 1,895
 899
 
 2,794
Operating Lease Assets
 2,665
 606
 
 3,271
Goodwill
 1,318
 30
 
 1,348
Trade Names
 411
 
 
 411
Net Investments in and Advances to/from Consolidated Affiliates4,698
 19,854
 2,223
 (26,775) 
Deferred Income Taxes
 9
 52
 
 61
Other Assets127
 12
 639
 (612) 166
Total Assets$4,825
 $28,368
 $5,192
 $(27,387) $10,998
LIABILITIES AND EQUITY (DEFICIT)         
Current Liabilities:         
Accounts Payable$
 $378
 $310
 $
 $688
Accrued Expenses and Other61
 485
 326
 
 872
Current Debt
 
 72
 
 72
Current Operating Lease Liabilities
 358
 85
 
 443
Income Taxes(7) 102
 27
 
 122
Total Current Liabilities54
 1,323
 820
 
 2,197
Deferred Income Taxes1
 (42) 279
 
 238
Long-term Debt5,663
 597
 86
 (597) 5,749
Long-term Operating Lease Liabilities
 2,671
 563
 
 3,234
Other Long-term Liabilities60
 406
 27
 (15) 478
Total Equity (Deficit)(953) 23,413
 3,417
 (26,775) (898)
Total Liabilities and Equity (Deficit)$4,825
 $28,368
 $5,192
 $(27,387) $10,998













L BRANDS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
(in millions)

February 3, 2018February 2, 2019
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
ASSETS                  
Current Assets:                  
Cash and Cash Equivalents$
 $1,164
 $351
 $
 $1,515
$
 $997
 $416
 $
 $1,413
Accounts Receivable, Net
 186
 124
 
 310

 241
 126
 
 367
Inventories
 1,095
 145
 
 1,240

 1,093
 155
 
 1,248
Other
 132
 96
 
 228

 139
 93
 
 232
Total Current Assets
 2,577
 716
 
 3,293

 2,470
 790
 
 3,260
Property and Equipment, Net
 1,984
 909
 
 2,893

 1,922
 896
 
 2,818
Goodwill
 1,318
 30
 
 1,348

 1,318
 30
 
 1,348
Trade Names
 411
 
 
 411

 411
 
 
 411
Net Investments in and Advances to/from Consolidated Affiliates4,912
 18,359
 2,106
 (25,377) 
4,755
 19,737
 2,047
 (26,539) 
Deferred Income Taxes
 10
 4
 
 14

 9
 53
 
 62
Other Assets129
 18
 654
 (611) 190
127
 15
 670
 (621) 191
Total Assets$5,041
 $24,677
 $4,419
 $(25,988) $8,149
$4,882
 $25,882
 $4,486
 $(27,160) $8,090
LIABILITIES AND EQUITY (DEFICIT)                  
Current Liabilities:                  
Accounts Payable$2
 $349
 $366
 $
 $717
$
 $363
 $348
 $
 $711
Accrued Expenses and Other101
 529
 399
 
 1,029
92
 597
 393
 
 1,082
Current Debt
 
 87
 
 87

 
 72
 
 72
Income Taxes6
 174
 18
 
 198
(7) 100
 28
 
 121
Total Current Liabilities109
 1,052
 870
 
 2,031
85
 1,060
 841
 
 1,986
Deferred Income Taxes(2) (46) 286
 
 238
1
 (44) 269
 
 226
Long-term Debt5,706
 597
 1
 (597) 5,707
5,661
 606
 79
 (607) 5,739
Other Long-term Liabilities3
 835
 100
 (14) 924
59
 852
 107
 (14) 1,004
Total Equity (Deficit)(775) 22,239
 3,162
 (25,377) (751)(924) 23,408
 3,190
 (26,539) (865)
Total Liabilities and Equity (Deficit)$5,041
 $24,677
 $4,419
 $(25,988) $8,149
$4,882
 $25,882
 $4,486
 $(27,160) $8,090


L BRANDS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
(in millions)
(Unaudited)
 
April 29, 2017May 5, 2018
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
ASSETS                  
Current Assets:                  
Cash and Cash Equivalents$
 $1,207
 $348
 $
 $1,555
$
 $677
 $355
 $
 $1,032
Accounts Receivable, Net1
 130
 82
 
 213

 152
 122
 
 274
Inventories
 1,000
 147
 
 1,147

 1,199
 151
 
 1,350
Other
 130
 107
 
 237
1
 136
 97
 
 234
Total Current Assets1
 2,467
 684
 
 3,152
1
 2,164
 725
 
 2,890
Property and Equipment, Net
 1,935
 826
 
 2,761

 1,970
 924
 
 2,894
Goodwill
 1,318
 30
 
 1,348

 1,318
 30
 
 1,348
Trade Names
 411
 
 
 411

 411
 
 
 411
Net Investments in and Advances to/from Consolidated Affiliates4,819
 16,358
 1,449
 (22,626) 
4,751
 18,908
 2,025
 (25,684) 
Deferred Income Taxes
 10
 13
 
 23

 9
 13
 
 22
Other Assets129
 34
 636
 (612) 187
129
 16
 651
 (612) 184
Total Assets$4,949
 $22,533
 $3,638
 $(23,238) $7,882
$4,881
 $24,796
 $4,368
 $(26,296) $7,749
LIABILITIES AND EQUITY (DEFICIT)                  
Current Liabilities:                  
Accounts Payable$2
 $371
 $291
 $
 $664
$5
 $350
 $362
 $
 $717
Accrued Expenses and Other109
 394
 310
 
 813
59
 461
 328
 
 848
Current Debt
 
 44
 
 44

 
 89
 
 89
Income Taxes(11) 226
 95
 
 310
6
 176
 22
 
 204
Total Current Liabilities100
 991
 740
 
 1,831
70
 987
 801
 
 1,858
Deferred Income Taxes(3) (86) 449
 
 360
(2) (41) 277
 
 234
Long-term Debt5,702
 597
 
 (597) 5,702
5,707
 597
 12
 (597) 5,719
Other Long-term Liabilities3
 752
 84
 (15) 824
62
 762
 98
 (15) 907
Total Equity (Deficit)(853) 20,279
 2,365
 (22,626) (835)(956) 22,491
 3,180
 (25,684) (969)
Total Liabilities and Equity (Deficit)$4,949
 $22,533
 $3,638
 $(23,238) $7,882
$4,881
 $24,796
 $4,368
 $(26,296) $7,749


L BRANDS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
(in millions)
(Unaudited)
 
First Quarter 2018First Quarter 2019
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
Net Sales$
 $2,466
 $839
 $(679) $2,626
$
 $2,488
 $754
 $(613) $2,629
Costs of Goods Sold, Buying and Occupancy
 (1,622) (669) 609
 (1,682)
 (1,649) (587) 541
 (1,695)
Gross Profit
 844
 170
 (70) 944

 839
 167
 (72) 934
General, Administrative and Store Operating Expenses(4) (726) (109) 50
 (789)(5) (737) (89) 50
 (781)
Operating Income (Loss)(4) 118
 61
 (20) 155
(5) 102
 78
 (22) 153
Interest Expense(97) (20) (3) 22
 (98)(97) (23) (1) 22
 (99)
Other Income (Loss)
 4
 (2) 
 2

 6
 
 
 6
Income (Loss) Before Income Taxes(101) 102
 56
 2
 59
(102) 85
 77
 
 60
Provision (Benefit) for Income Taxes(2) 13
 
 
 11
Provision for Income Taxes
 8
 12
 
 20
Equity in Earnings (Loss), Net of Tax147
 215
 152
 (514) 
142
 66
 4
 (212) 
Net Income (Loss)$48
 $304
 $208
 $(512) $48
$40
 $143
 $69
 $(212) $40



L BRANDS, INC.
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
 
First Quarter 2018First Quarter 2019
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
Net Income (Loss)$48
 $304
 $208
 $(512) $48
$40
 $143
 $69
 $(212) $40
Other Comprehensive Income (Loss), Net of Tax:                  
Foreign Currency Translation
 
 (13) 
 (13)
 
 (4) 
 (4)
Unrealized Gain on Cash Flow Hedges
 
 6
 
 6
Unrealized Gain (Loss) on Cash Flow Hedges
 
 2
 
 2
Reclassification of Cash Flow Hedges to Earnings
 
 2
 
 2

 
 (2) 
 (2)
Total Other Comprehensive Income (Loss), Net of Tax
 
 (5) 
 (5)
 
 (4) 
 (4)
Total Comprehensive Income (Loss)$48
 $304
 $203
 $(512) $43
$40
 $143
 $65
 $(212) $36











L BRANDS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
(in millions)
(Unaudited)
 
First Quarter 2017First Quarter 2018
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
Net Sales$
 $2,310
 $696
 $(569) $2,437
$
 $2,466
 $839
 $(679) $2,626
Costs of Goods Sold, Buying and Occupancy
 (1,486) (571) 523
 (1,534)
 (1,622) (669) 609
 (1,682)
Gross Profit
 824
 125
 (46) 903

 844
 170
 (70) 944
General, Administrative and Store Operating Expenses(4) (635) (90) 35
 (694)(4) (726) (109) 50
 (789)
Operating Income (Loss)(4) 189
 35
 (11) 209
(4) 118
 61
 (20) 155
Interest Expense(100) (11) (3) 13
 (101)(97) (20) (3) 22
 (98)
Other Income
 3
 7
 
 10

 4
 (2) 
 2
Income (Loss) Before Income Taxes(104) 181
 39
 2
 118
(101) 102
 56
 2
 59
Provision for Income Taxes
 20
 4
 
 24
(2) 13
 
 
 11
Equity in Earnings (Loss), Net of Tax198
 179
 150
 (527) 
147
 215
 152
 (514) 
Net Income (Loss)$94
 $340
 $185
 $(525) $94
$48
 $304
 $208
 $(512) $48



L BRANDS, INC.
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
 
First Quarter 2017First Quarter 2018
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
Net Income (Loss)$94
 $340
 $185
 $(525) $94
$48
 $304
 $208
 $(512) $48
Other Comprehensive Income (Loss), Net of Tax:                  
Foreign Currency Translation
 
 3
 
 3

 
 (13) 
 (13)
Unrealized Gain on Cash Flow Hedges
 
 9
 
 9
Unrealized Gain (Loss) on Cash Flow Hedges
 
 6
 
 6
Reclassification of Cash Flow Hedges to Earnings
 
 (6) 
 (6)
 
 2
 
 2
Total Other Comprehensive Income (Loss), Net of Tax
 
 6
 
 6

 
 (5) 
 (5)
Total Comprehensive Income (Loss)$94
 $340
 $191
 $(525) $100
$48
 $304
 $203
 $(512) $43






L BRANDS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(in millions)
(Unaudited)
 
Year-to-Date 2018First Quarter 2019
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
Net Cash Provided by (Used for) Operating Activities$(141) $65
 $(3) $
 $(79)$(132) $(332) $391
 $
 $(73)
Investing Activities:                  
Capital Expenditures
 (91) (69) 
 (160)
 (75) (48) 
 (123)
Proceeds from Divestiture of La Senza
 12
 
 
 12
Proceeds from Sales of Marketable Equity Securities
 
 3
 
 3
Return of Capital from Easton Investments
 
 1
 
 1

 
 2
 
 2
Net Investments in Consolidated Affiliates
 
 (11) 11
 

 
 
 
 
Net Cash Provided by (Used for) Investing Activities
 (91) (79) 11
 (159)
 (63) (43) 
 (106)
Financing Activities:                  
Borrowings from Foreign Facilities
 
 21
 
 21

 
 21
 
 21
Repayments of Foreign Facilities
 
 (8) 
 (8)
 
 (14) 
 (14)
Dividends Paid(168) 
 
 
 (168)(83) 
 
 
 (83)
Repurchases of Common Stock(81) 
 
 
 (81)
Tax Payments related to Share-based Awards(8) 
 
 
 (8)(9) 
 
 
 (9)
Proceeds from Exercise of Stock Options1
 
 
 
 1
1
 
 
 
 1
Financing Costs and Other
 (2) 
 
 (2)
Net Financing Activities and Advances to/from Consolidated Affiliates397
 (461) 75
 (11) 
223
 131
 (354) 
 
Net Cash Provided by (Used for) Financing Activities141
 (461) 88
 (11) (243)132

129

(347)


(86)
Effects of Exchange Rate Changes on Cash and Cash Equivalents
 
 (2) 
 (2)
 
 (2) 
 (2)
Net Increase (Decrease) in Cash and Cash Equivalents
 (487) 4
 
 (483)
Net Decrease in Cash and Cash Equivalents
 (266) (1) 
 (267)
Cash and Cash Equivalents, Beginning of Period
 1,164
 351
 
 1,515

 997
 416
 
 1,413
Cash and Cash Equivalents, End of Period$
 $677
 $355
 $
 $1,032
$
 $731
 $415
 $
 $1,146


L BRANDS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(in millions)
(Unaudited)
 
Year-to-Date 2017First Quarter 2018
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
L Brands, Inc. 
Guarantor
Subsidiaries
 
Non-
guarantor
Subsidiaries
 Eliminations 
Consolidated
L Brands, Inc.
Net Cash Provided by (Used for) Operating Activities$(96) $181
 $(78) $
 $7
$(141) $65
 $(3) $
 $(79)
Investing Activities:                  
Capital Expenditures
 (135) (30) 
 (165)
 (91) (69) 
 (160)
Return of Capital from Easton Investments
 
 10
 
 10

 
 1
 
 1
Net Cash Used for Investing Activities
 (135) (20) 
 (155)
Net Investments in Consolidated Affiliates
 
 (11) 11
 
Net Cash Provided by (Used for) Investing Activities
 (91) (79) 11
 (159)
Financing Activities:                  
Borrowings from Foreign Facilities
 
 9
 
 9

 
 21
 
 21
Repayments of Foreign Facilities
 
 (1) 
 (1)
 
 (8) 
 (8)
Dividends Paid(172) 
 
 
 (172)(168) 
 
 
 (168)
Repurchases of Common Stock(85) 
 
 
 (85)(81) 
 
 
 (81)
Tax Payments related to Share-based Awards(17) 
 
 
 (17)(8) 
 
 
 (8)
Proceeds from Exercise of Stock Options36
 
 
 
 36
1
 
 
 
 1
Net Financing Activities and Advances to/from Consolidated Affiliates334
 (401) 67
 
 
397
 (461) 75
 (11) 
Net Cash Provided by (Used for) Financing Activities96
 (401) 75
 
 (230)141
 (461) 88
 (11) (243)
Effects of Exchange Rate Changes on Cash and Cash Equivalents
 
 (1) 
 (1)
 
 (2) 
 (2)
Net Decrease in Cash and Cash Equivalents
 (355) (24) 
 (379)
Net Increase (Decrease) in Cash and Cash Equivalents
 (487) 4
 
 (483)
Cash and Cash Equivalents, Beginning of Period
 1,562
 372
 
 1,934

 1,164
 351
 
 1,515
Cash and Cash Equivalents, End of Period$
 $1,207
 $348
 $
 $1,555
$
 $677
 $355
 $
 $1,032


Report of Independent Registered Public Accounting Firm


To the Shareholders and Board of Directors of L Brands, Inc.:

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheets of L Brands, Inc. (the Company) as of May 4, 2019 and May 5, 2018, and April 29, 2017, and the related consolidated statements of income, comprehensive income, total equity (deficit) and cash flows for the thirteen-week periods ended May 4, 2019 and May 5, 2018, and April 29, 2017, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of February 3, 2018,2, 2019, and the related consolidated statements of income, comprehensive income, total equity (deficit), and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated March 23, 2018,22, 2019, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of February 3, 2018,2, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, 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.

/s/ Ernst & Young LLP
Grandview Heights, Ohio
June 7, 20184, 2019


SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION ACT OF 1995
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
We caution 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 our company or our management involve risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “planned,” “potential” and any similar expressions may identify forward-looking statements. Risks associated with the following factors, among others, in some cases have affected and in the future could affect our financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this report or otherwise made by our company or our management:
general economic conditions, consumer confidence, consumer spending patterns and market disruptions including severe weather conditions, natural disasters, health hazards, terrorist activities, financial crises, political crises or other major events, or the prospect of these events;
the seasonality of our business;
the dependence on mall traffic and the availability of suitable store locations on appropriate terms;
our ability to grow through new store openings and existing store remodels and expansions;
our ability to successfully expand internationally and related risks;
our independent franchise, license and wholesale partners;
our direct channel businesses;
our ability to protect our reputation and our brand images;
our ability to attract customers with marketing, advertising and promotional programs;
our ability to protect our trade names, trademarks and patents;
the highly competitive nature of the retail industry and the segments in which we operate;
consumer acceptance of our products and our ability to manage the life cycle of our brands, keep up with fashion trends, develop new merchandise and launch new product lines successfully;
our ability to source, distribute and sell goods and materials on a global basis, including risks related to:
political instability, significant health hazards, environmental hazards or natural disasters;
duties, taxes and other charges;
legal and regulatory matters;
volatility in currency exchange rates;
local business practices and political issues;
potential delays or disruptions in shipping and transportation and related pricing impacts;
disruption due to labor disputes; and
changing expectations regarding product safety due to new legislation;
our geographic concentration of vendor and distribution facilities in central Ohio;
fluctuations in foreign currency exchange rates;
stock price volatility;
our ability to pay dividends and related effects;
our ability to maintain our credit rating;
our ability to service or refinance our debt;
shareholder activism matters;
our ability to retain key personnel;
our ability to attract, develop and retain qualified associates and manage labor-related costs;

the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations;
fluctuations in product input costs;
our ability to adequately protect our assets from loss and theft;
fluctuations in energy costs;
increases in the costs of mailing, paper and printing;
claims arising from our self-insurance;
liabilities arising from divested businesses;
our ability to implement and maintain information technology systems and to protect associated data;
our ability to maintain the security of customer, associate, third-party or company information;
our ability to comply with regulatory requirements;
legal and compliance matters; and
tax, trade and other regulatory matters.
We are not under any obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this report to reflect circumstances existing after the date of this report or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Additional information regarding these and other factors can be found in “Item 1A. Risk Factors” in our 20172018 Annual Report on Form 10-K.

Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The following information should be read in conjunction with our financial statements and the related notes included in Item 1. Financial Statements.
Executive Overview
In the first quarter of 2018,2019, our operating income decreased $54$2 million, or 26%1%, to $155$153 million, and our operating income rate decreased to 5.9%5.8% from 8.6%5.9%. Net sales increased $189$3 million to $2.626$2.629 billion, comparable sales increased 3%remained flat and comparable store sales decreased 2%3%. Our performance was mixed. At Victoria's Secret, net sales increased 4%decreased 5%, and operating income decreased 48%.$50 million. At Bath & Body Works, net sales increased 12%15%, and operating income increased 21%.$31 million. At Victoria's Secret and Bath & Body Works International, net sales increased 31%,remained flat, and operating incomeloss decreased by $4$1 million. For additional information related to our first quarter 20182019 financial performance, see “Results of Operations.”
The global retail sector and our business continue to face an uncertain environment and, as a result, we will continue to manage our business thoughtfully, and we will focus on the execution of the retail fundamentals.
At the same time, we are aggressively focusing on bringing compelling merchandise assortments, marketing and marketing, store and online experiences to our customers. We will look for, and seek to capitalize on, those opportunities available to us. We believe that our brands, which lead their categories and offer high emotional content to customers at accessible prices, are well positioned.


Company-Owned Store Data
The following table compares the first quarter of 20182019 company-owned store data to the first quarter of 2017:2018 and first quarter of 2019 store data to first quarter of 2018:
First QuarterFirst Quarter
2018 2017 % Change2019 2018 % Change
Sales per Average Selling Square Foot          
Victoria’s Secret U.S.$166
 $167
 (1)%$158
 $166
 (5%)
Bath & Body Works U.S.150
 140
 7 %160
 150
 7 %
Sales per Average Store (in thousands)          
Victoria’s Secret U.S.$1,063
 $1,061
  %$1,027
 $1,063
 (3%)
Bath & Body Works U.S.381
 346
 10 %413
 381
 8 %
Average Store Size (selling square feet)          
Victoria’s Secret U.S.6,419
 6,352
 1 %6,540
 6,419
 2 %
Bath & Body Works U.S.2,542
 2,467
 3 %2,592
 2,542
 2 %
Total Selling Square Feet (in thousands)          
Victoria’s Secret U.S.7,189
 7,191
  %6,959
 7,189
 (3%)
Bath & Body Works U.S.4,052
 3,935
 3 %4,224
 4,052
 4 %

The following table represents company-owned store data for the first quarter of 2018:2019:
Stores Operating at     Stores Operating atStores Operating at     Stores Operating at
February 3, 2018 Opened Closed May 5, 2018February 2, 2019 Opened Closed May 4, 2019
Victoria’s Secret U.S.1,124
 1
 (5) 1,120
1,098
 1
 (35) 1,064
Victoria’s Secret Canada46
 
 (1) 45
45
 
 
 45
Total Victoria's Secret1,170
 1
 (6) 1,165
1,143
 1
 (35) 1,109
Bath & Body Works U.S.1,592
 13
 (11) 1,594
1,619
 14
 (3) 1,630
Bath & Body Works Canada102
 
 
 102
102
 
 
 102
Total Bath & Body Works1,694
 13
 (11) 1,696
1,721
 14
 (3) 1,732
Victoria's Secret U.K. / Ireland24
 
 
 24
26
 
 
 26
Victoria's Secret Beauty and Accessories China29
 
 
 29
Victoria's Secret Beauty and Accessories38
 2
 (2) 38
Victoria's Secret China7
 
 
 7
15
 
 
 15
Total Victoria's Secret and Bath & Body Works International60
 
 
 60
79
 2
 (2) 79
Henri Bendel27
 
 (3) 24
La Senza Canada119
 
 
 119
La Senza U.S.5
 
 
 5
Total L Brands Stores3,075
 14
 (20) 3,069
2,943
 17
 (40) 2,920


The following table represents company-owned store data for the first quarter of 2017:2018:
Stores Operating at     Stores Operating atStores Operating at     Stores Operating at
January 28, 2017 Opened Closed April 29, 2017February 3, 2018 Opened Closed May 5, 2018
Victoria’s Secret U.S.1,131
 2
 (1) 1,132
1,124
 1
 (5) 1,120
Victoria’s Secret Canada46
 1
 (1) 46
46
 
 (1) 45
Total Victoria's Secret1,177
 3
 (2) 1,178
1,170
 1
 (6) 1,165
Bath & Body Works U.S.1,591
 7
 (3) 1,595
1,592
 13
 (11) 1,594
Bath & Body Works Canada102
 
 
 102
102
 
 
 102
Total Bath & Body Works1,693
 7
 (3) 1,697
1,694
 13
 (11) 1,696
Victoria's Secret U.K.18
 
 
 18
Victoria's Secret Beauty and Accessories China31
 
 
 31
Victoria's Secret U.K. / Ireland24
 
 
 24
Victoria's Secret Beauty and Accessories29
 
 
 29
Victoria's Secret China
 2
 
 2
7
 
 
 7
Total Victoria's Secret and Bath & Body Works International49

2



51
60





60
Henri Bendel29
 
 
 29
27
 
 (3) 24
La Senza Canada122
 1
 (2) 121
119
 
 
 119
La Senza U.S.4
 
 
 4
5
 
 
 5
Total L Brands Stores3,074
 13
 (7) 3,080
3,075
 14
 (20) 3,069

Noncompany-Owned Store Data
The following table represents noncompany-owned store data for the first quarter of 2018:2019:
Stores Operating at     Stores Operating atStores Operating at     Stores Operating at
February 3, 2018 Opened Closed May 5, 2018February 2, 2019 Opened Closed May 4, 2019
Victoria’s Secret Beauty & Accessories397
 13
 (10) 400
383
 7
 (12) 378
Victoria's Secret37
 6
 
 43
56
 3
 
 59
Bath & Body Works185
 13
 (3) 195
235
 9
 (1) 243
La Senza194
 
 (2) 192
Total813
 32
 (15) 830
674
 19
 (13) 680
The following table represents noncompany-owned store data for the first quarter of 2017:2018:
Stores Operating at     Stores Operating atStores Operating at     Stores Operating at
January 28, 2017 Opened Closed April 29, 2017February 3, 2018 Opened Closed May 5, 2018
Victoria’s Secret Beauty & Accessories391
 11
 (6) 396
397
 13
 (10) 400
Victoria's Secret28
 2
 
 30
37
 6
 
 43
Bath & Body Works159
 7
 (1) 165
185
 13
 (3) 195
La Senza203
 2
 (6) 199
194
 
 (2) 192
Total781
 22
 (13) 790
813
 32
 (15) 830


Results of Operations
First Quarter of 20182019 Compared to First Quarter of 20172018
Operating Income
The following table provides our segment operating income (loss) and operating income (loss) rates (expressed as a percentage of net sales) for the first quarter of 20182019 in comparison to the first quarter of 20172018:
    Operating Income Rate    Operating Income Rate
2018 2017 2018 20172019 2018 2019 2018
First Quarter(in millions)    (in millions)    
Victoria’s Secret$83
 $159
 5.2 % 10.4 %$33
 $83
 2.2 % 5.2 %
Bath & Body Works124
 102
 16.3 % 15.0 %155
 124
 17.8 % 16.3 %
Victoria’s Secret and Bath & Body Works International(5) (1) (3.6)% (0.5)%(4) (5) (3.0%) (3.6%)
Other (a)(47) (51) (33.5)% (41.6)%(31) (47) (26.9%) (33.5%)
Total Operating Income$155
 $209
 5.9 % 8.6 %$153
 $155
 5.8 % 5.9 %
  _______________
(a)Includes Mast Global and corporate functions. Results for 2018 also include La Senza and Henri Bendel and Corporate.Bendel.
For the first quarter of 20182019, operating income decreased $54$2 million, or 26%1%, to $155$153 million, and the operating income rate decreased to 5.9%5.8% from 8.6%5.9%. The drivers of the operating income results are discussed in the following sections.
Net Sales
The following table provides net sales for the first quarter of 20182019 in comparison to the first quarter of 20172018:
2018 2017 % Change2019 2018 % Change
First Quarter(in millions)  (in millions)  
Victoria’s Secret Stores (a)$1,236
 $1,247
 (1)%$1,149
 $1,236
 (7%)
Victoria’s Secret Direct353
 286
 23 %362
 353
 2 %
Total Victoria’s Secret1,589
 1,533
 4 %1,511
 1,589
 (5%)
Bath & Body Works Stores (a)649
 588
 10 %715
 649
 10 %
Bath & Body Works Direct112
 90
 25 %156
 112
 40 %
Total Bath & Body Works761
 678
 12 %871
 761
 15 %
Victoria’s Secret and Bath & Body Works International(b)135
 104
 31 %135
 135
  %
Other (b)(c)141
 122
 15 %112
 141
 (20%)
Total Net Sales$2,626
 $2,437
 8 %$2,629
 $2,626
  %
 _______________
(a)Includes company-owned stores in the U.S. and Canada.
(b)Includes Mast Global,company-owned stores in the U.K., Ireland and Greater China, direct sales in Greater China and wholesale sales, royalties and other fees associated with non-company owned stores.
(c)Includes wholesale revenues from our sourcing function. Results for 2018 also include store and direct sales for La Senza and Henri Bendel.


The following table provides a reconciliation of net sales for the first quarter of 20182019 to the first quarter of 2017:2018:
Victoria’s
Secret
 
Bath &
Body Works
 
Victoria’s Secret
and
Bath & Body Works International
 Other Total
Victoria’s
Secret
 
Bath &
Body Works
 
Victoria’s Secret
and
Bath & Body Works International
 Other Total
First Quarter(in millions)(in millions)
2017 Net Sales$1,533
 $678
 $104
 $122
 $2,437
2018 Net Sales$1,589
 $761
 $135
 $141
 $2,626
Comparable Store Sales(55) 29
 (12) 
 (38)(86) 44
 (6) 
 (48)
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net25
 30
 20
 (1) 74
(12) 23
 19
 
 30
Divested/Closed Businesses
 
 
 (68) (68)
Foreign Currency Translation2
 2
 5
 1
 10
(1) (2) (5) 
 (8)
Direct Channels59
 22
 8
 2
 91
4
 45
 2
 
 51
Private Label Credit Card25
 
 
 
 25
17
 
 
 
 17
International Wholesale, Royalty and Other
 
 10
 17
 27

 
 (10) 39
 29
2018 Net Sales$1,589
 $761
 $135
 $141
 $2,626
2019 Net Sales$1,511
 $871
 $135
 $112
 $2,629
The following table compares the first quarter of 20182019 comparable sales to the first quarter of 20172018:
First Quarter2018 20172019 2018
Comparable Sales (Stores and Direct) (a)      
Victoria's Secret (b)1 % (14)%(5%) 1 %
Bath & Body Works (b)8 % 2 %13% 8 %
Total Comparable Sales3 % (9)%% 3 %
      
Comparable Store Sales (a)      
Victoria’s Secret (b)(5)% (12)%(7%) (5%)
Bath & Body Works (b)5 % (1)%7% 5%
Total Comparable Store Sales(2)% (9)%(3%) (2%)
________
(a)
The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. A store is typically included in the calculation of comparable sales when it has been open or owned 12 months or more and it has not had a change in selling square footage of 20% or more. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales areis calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.
(b)Includes company-owned stores in the U.S. and Canada.
The results by segment are as follows:
Victoria's Secret
For the first quarter of 2018,2019, net sales increased $56decreased $78 million to $1.589$1.511 billion, comparable sales increased 1%decreased 5%, and comparable store sales decreased 5%7%. NetPINK comparable sales increased primarily due to increasesdecreased in constructed bras as we continue to focus on that core business and beauty and sleepthe low-double digit range driven by a merchandise assortment that incorporated newness, innovationperformance in apparel and fashion. Additionally, net sales increased $25 million as a resultthe exit of the change in presentation for income received from ourswim business. Victoria's Secret private label credit card arrangement. These results were partially offsetLingerie comparable sales decreased in the low-single digit range, primarily driven by declines in unconstructed and sport bras, due to merchandise performance, partially offset by increases in sleep and category resets,panties. Victoria's Secret Beauty comparable sales were about flat, as growth in accessories and fragrance was offset by declines in the lip business and PINK beauty, as we lapped the launch from last year.
The decrease in comparable sales was driven by a decline in swim as we exit the category.
The decrease in comparable store sales was driven by lowertraffic and average unit retail and reduced traffic.partially offset by an increase in conversion.

Bath & Body Works
For the first quarter of 2018,2019, net sales increased $83$110 million to $761$871 million, comparable sales increased 8%13%, and comparable store sales increased 5%7%. Net sales increased in most categories including home fragrance, body care and soaps and sanitizers, which incorporated newness, innovation and fashion.

The increase in comparable store sales was driven primarily by higher conversion.an increase in conversion, average unit retail and digital traffic.
Victoria's Secret and Bath & Body Works International
For the first quarter of 2018,2019, net sales increased $31 million to $135 million primarily relatedwere flat due to new company-owned Victoria's Secret stores additional stores opened by our partners and direct channel growth in Greater China. These increases were partiallyChina, offset by a declinedeclines in the Victoria's Secret U.K. sales.Beauty and Accessories travel retail business.
Other
For the first quarter of 2018,2019, net sales increased $19decreased $29 million to $141$112 million primarily due to the sale of La Senza and the closure of Henri Bendel in the fourth quarter of 2018, partially offset by an increase in wholesale sales to our international partners.
Gross Profit
For the first quarter of 2018,2019, our gross profit increased $41decreased $10 million to $944$934 million, and our gross profit rate (expressed as a percentage of net sales) decreased to 35.9%35.5% from 37.1%35.9%, primarily driven by the following:
Victoria's Secret
For the first quarter of 2018,2019, the gross profit decrease was primarily driven by lower merchandise margin dollars duerelated to the decrease in net sales and increased promotional activity to drive traffic and attract new customers.clear inventory, partially offset by lower depreciation expense.
The gross profit rate decrease was driven by a decline in the merchandise margin rate due to additionalincreased promotional activity to drive traffic.and buying and occupancy expense deleverage on lower net sales.
Bath & Body Works
For the first quarter of 2018,2019, the gross profit increase was primarily driven by higher merchandise margin dollars related to the increase in net sales and reduced promotional activity, partially offset by higher occupancy expenses due to investments in store real estate and distributionincreases in supply chain and fulfillment expenses related to higher direct channel sales.sourcing costs.
The gross profit rate increase was primarily driven by buyinglower promotional activity and occupancy leverage on higher net sales.
Victoria's Secret and Bath & Body Works International
For the first quarter of 2018, the2019, gross profit increase wasremained flat primarily driven bydue to increased merchandise margin dollars related to higher net sales in Greater China and additional stores opened by our partners, partially offset by higher occupancy expenses due to investments in store real estate in Greater China and the U.K.China.
The gross profit rate decreaseimprovement was driven by an increasegrowth in occupancy expenses due toGreater China partially offset by declines in merchandise margin rates in the investments in store real estate.Travel Retail business.
General, Administrative and Store Operating Expenses
For the first quarter of 2018,2019, our general, administrative and store operating expenses increased $95decreased $8 million to $789$781 million driven by the change in presentation for income received from ourlower marketing expenses at Victoria's Secret private label credit card arrangement, incremental wage investments and the elimination of the La Senza and Henri Bendel businesses, partially offset by higher selling expenses related to new company-owned stores in Greater China.higher sales volumes at Bath & Body Works.
The general, administrative and store operating expense rate increaseddecreased to 29.7% from 30.0% from 28.5%primarily due to the presentation change for income received from ourlower marketing expenses at Victoria's Secret private label credit card and increased wage investments.Secret.
Other Income and Expense
Interest Expense
The following table provides the average daily borrowings and average borrowing rates for the first quarter of 20182019 and 20172018:
First Quarter2018 20172019 2018
Average daily borrowings (in millions)$5,845
 $5,790
$5,878
 $5,845
Average borrowing rate (in percentages)6.5% 7.0%6.6% 6.5%
For the first quarter of 2018,2019, our interest expense decreased $3increased $1 million to $98$99 million primarily due to a lowerhigher average borrowing rate partially offset byand higher average daily borrowings.

Other Income
For the first quarter of 2018,2019, our other income decreased $8increased $4 million to $2$6 million primarily due to a distribution received from our Easton investmentsan increase in the first quarter of 2017.

average interest rate received on cash deposits.
Provision for Income Taxes
For the first quarter of 2018,2019, our effective tax rate was 18.5%33.6% compared to 20.6%18.5% in the first quarter of 2017.2018. The first quarter 2019 rate was higher than the Company's combined federal and state statutory rate primarily due to the recognition of tax expense recorded through the income statement on share-based awards that vested in the quarter. The first quarter 2018 rate was lower than the Company's combined federal and state statutory rate primarily due to the release of a valuation allowance against certain deferred tax assets that are more likely than not to be realized. The first quarter 2017 rate was lower than the Company's combined federal and state statutory rate primarily due to the recognition of excess tax benefits recorded through the income statement on stock options exercised in the quarter.

FINANCIAL CONDITION

Liquidity and Capital Resources
Liquidity, or access to cash, is an important factor in determining our financial stability. We are committed to maintaining adequate liquidity. Cash generated from our operating activities provides the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures. Our cash provided from operations is impacted by our net income and working capital changes. Our net income is impacted by, among other things, sales volume, seasonal sales patterns, success of new product introductions, profit margins and income taxes. Historically, sales are higher during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns. Generally, our need for working capital peaks during the summer and fall months as inventory builds in anticipation of the holiday period. The majority of our cash and cash equivalents arewere held by domestic subsidiaries.subsidiaries as of May 4, 2019. Our cash and cash equivalents held by foreign subsidiaries were $354$410 million as of May 5, 2018.
We believe in returning value to our shareholders through a combination of dividends and share repurchase programs. During the first quarter of 2018, we paid $168 million in regular dividends and repurchased $83 million of our common stock. We use cash flow generated from operating and financing activities to fund our dividends and share repurchase programs.4, 2019.
The following table provides our outstanding debt balance, net of unamortized debt issuance costs and discounts, as of May 4, 2019, February 2, 2019 and May 5, 2018, February 3, 2018 and April 29, 2017:2018:
 May 5,
2018
 February 3,
2018
 April 29,
2017
 (in millions)
Senior Unsecured Debt with Subsidiary Guarantee     
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)$990
 $990
 $989
$1 billion, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)994
 994
 993
$1 billion, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)995
 994
 993
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)693
 693
 692
$500 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)497
 497
 497
$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)495
 495
 
$500 million, 8.50% Fixed Interest Rate Notes due June 2019 (“2019 Notes”)(a)
 
 496
$400 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”)398
 398
 397
Foreign Facilities with Subsidiary Guarantee12
 1
 
Total Senior Unsecured Debt with Subsidiary Guarantee$5,074
 $5,062
 $5,057
Senior Unsecured Debt     
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)$348
 $348
 $348
$300 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)297
 297
 297
Foreign Facilities without Subsidiary Guarantee89
 87
 44
Total Senior Unsecured Debt$734
 $732
 $689
Total$5,808
 $5,794
 $5,746
Current Debt(89) (87) (44)
Total Long-term Debt, Net of Current Portion$5,719
 $5,707
 $5,702
 May 4,
2019
 February 2,
2019
 May 5,
2018
 (in millions)
Senior Debt with Subsidiary Guarantee     
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)$990
 $990
 $990
$956 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)952
 952
 994
$780 million, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)777
 776
 995
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)693
 693
 693
$500 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)498
 498
 497
$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)496
 496
 495
$338 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”)338
 337
 398
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)274
 273
 
Secured Foreign Facilities91
 91
 12
Total Senior Debt with Subsidiary Guarantee$5,109
 $5,106
 $5,074
Senior Debt     
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)$348
 $348
 $348
$300 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)297
 297
 297
Unsecured Foreign Facilities67
 60
 89
Total Senior Debt$712
 $705
 $734
Total$5,821
 $5,811
 $5,808
Current Debt(72) (72) (89)
Total Long-term Debt, Net of Current Portion$5,749
 $5,739
 $5,719
 _______________
(a)The balance includes a fair value interest rate hedge adjustment which increased the debt balance by $2 million as of April 29, 2017.


IssuanceExchange of Notes
In JanuaryJune 2018, we issued $500completed private offers to exchange $62 million, $220 million and $44 million of 5.25%outstanding 2020 Notes, 2021 Notes and 2022 Notes, respectively, for $297 million of newly issued 6.694% notes due in January 2027 and $52 million in cash consideration, which included a $24 million exchange premium. The exchange was treated as a modification under ASC

470, Debt, and no gain or loss was recognized. The exchange premium will be amortized through the maturity date of January 2027 and is included within Long-term Debt on the May 4, 2019 and February 2028.2, 2019 Consolidated Balance Sheets. The obligation to pay principal and interest on these notesthe 2027 Notes is jointly and severally guaranteed on a full and unconditional basis by the Guarantors. The proceeds from the issuance were $495 million, which were net of issuance costs of $5 million. These issuance costs are being amortized through the maturity date of February 2028 and are included within Long-term Debt on the May 5, 2018 and February 3, 2018 Consolidated Balance Sheets.
Redemption of Notes
In January 2018, we used the proceeds from the 2028 Notes to redeem the $500 million 2019 Notes for $540 million. In the fourth quarter of 2017, we recognized a pre-tax loss on extinguishment of this debt of $45 million (after-tax loss of $29 million), which includes write-offs of unamortized issuance costs and discounts and losses related to terminated interest rate swaps associated with the 2019 Notes.
Exchange Offer
Subsequent to May 5, 2018, we announced the commencement of separate private offers to eligible holders to exchange certain of our outstanding 2020 Notes, 2021 Notes and 2022 Notes (collectively, the "offers"100% owned subsidiaries (the “Guarantors”) for a series of our newly issued debt securities due 2027 and cash. The offers will expire on June 27, 2018 with a potential early settlement date of June 18, 2018, subject to certain terms and conditions..
Secured Revolving Facility
We maintainand the Guarantors guarantee and pledge collateral to secure a secured revolving credit facility thatfacility. The Secured Revolving Facility has aggregate availability of $1 billion and expires in May 11, 2022. The Secured Revolving Facility allows us and certain of our non-U.S. subsidiaries to borrow and obtain letters of credit in U.S. dollars, Canadian dollars, Euros, Hong Kong dollars or British pounds.
The Secured Revolving Facility fees related to committed and unutilized amounts are 0.25% per annum, and the fees related to outstanding letters of credit are 1.50% per annum. In addition, the interest rate on outstanding U.S. dollar borrowings is LIBOR plus 1.50% per annum. The interest rate on outstanding foreign denominated borrowings is the applicable benchmark rate plus 1.50% per annum.
The Secured Revolving Facility contains fixed charge coverage and debt to EBITDA financial covenants. We are required to maintain a fixed charge coverage ratio of not less than 1.75 to 1.00 and a consolidated debt to consolidated EBITDA ratio not exceeding 4.00 to 1.00 for the most recent four-quarter period. In addition, the Secured Revolving Facility provides that investments and restricted payments may be made, without limitation on amount, if (a) at the time of and after giving effect to such investment or restricted payment, the ratio of consolidated debt to consolidated EBITDA for the most recent four-quarter period is less than 3.00 to 1.00 and (b) no default or event of default exists. As of May 5, 2018,4, 2019, we were in compliance with both of our financial covenants, and the ratio of consolidated debt to consolidated EBITDA was less than 3.00 to 1.00.
As of May 5, 2018,4, 2019, there were no borrowings outstanding under the Secured Revolving Facility.
The Secured Revolving Facility supports our letter of credit program. We had $9$10 million of outstanding letters of credit as of May 5, 20184, 2019 that reduced our remaining availability under the Secured Revolving Facility.
Secured Foreign Facilities
In additionWe and the Guarantors guarantee and pledge collateral to the Revolving Facility, we maintain varioussecure revolving and term loan bank facilities to support our operations in Greater China. These facilities allowused by certain of our Greater China subsidiaries to borrow and obtain letters of creditsupport their operations. The Secured Foreign Facilities, which allow borrowings in U.S. dollars and Chinese yuan.
We maintain various revolving and term loan bank facilities that are guaranteed by L Brands, Inc. withYuan, have availability totaling $100 million. The interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. During the first quarter of 2018,2019, we borrowed $10 million and made payments of $8 million under these facilities.the Secured Foreign Facilities. The maximum daily amount outstanding at any point in time during the first quarter of 20182019 was $90$96 million. Borrowings on these facilitiesthe Secured Foreign Facilities mature between December 2019 and May 7, 2018 and December 18, 2018 and2022. As of May 4, 2019, borrowings of $5 million are included within Current Debt on the May 5, 2018 Consolidated Balance Sheet.Sheet and the remaining borrowings are included within Long-term Debt.
Unsecured Foreign Facilities
We also maintain aguarantee unsecured revolving facility that is guaranteedand term loan bank facilities used by L Brands, Inc.certain of our Greater China subsidiaries to support their operations. The Unsecured Foreign Facilities, which allow borrowings in U.S. dollars and the Guarantors withChinese Yuan, have availability totaling $100 million. The interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. During the first quarter of 2018,2019, we borrowed $11$13 million and made payments of $6 million under this facility. Thesethe Unsecured Foreign Facilities. The maximum daily amount outstanding at any point in time during the first quarter of 2019 was $73 million. Borrowings on the Unsecured Foreign Facilities mature between June 2019 and December 2019. As of May 4, 2019, borrowings which mature on May 11, 2022,of $67 million are included within Long-termCurrent Debt on the May 5, 2018 Consolidated Balance Sheet.

Working Capital and Capitalization
We believe that our available short-term and long-term capital resources are sufficient to fund foreseeable requirements.

The following table provides a summary of our working capital position and capitalization as of May 4, 2019, February 2, 2019 and May 5, 2018, February 3, 2018 and April 29, 2017:2018:
 May 4,
2019
 February 2, 2019 May 5,
2018
 (in millions)
Net Cash Provided by (Used for) Operating Activities (a)$(73) $1,377
 $(79)
Capital Expenditures (a)123
 629
 160
Working Capital750
 1,274
 1,032
Capitalization:     
Long-term Debt5,749
 5,739
 5,719
Shareholders’ Equity (Deficit)(902) (869) (971)
Total Capitalization$4,847
 $4,870
 $4,748
Remaining Amounts Available Under Credit Agreements (b)$990
 $991
 $991
 May 5,
2018
 February 3, 2018 April 29,
2017
 (in millions)
Net Cash Provided by (Used for) Operating Activities (a)$(79) $1,406
 $7
Capital Expenditures (a)160
 707
 165
Working Capital1,032
 1,262
 1,321
Capitalization:     
Long-term Debt5,719
 5,707
 5,702
Shareholders’ Equity (Deficit)(971) (753) (836)
Total Capitalization$4,748
 $4,954
 $4,866
Remaining Amounts Available Under Credit Agreements (b)$991
 $991
 $992
 _______________
(a)The February 3, 20182, 2019 amounts represent a fifty-three week52-week period, and the May 4, 2019 and May 5, 2018 and April 29, 2017 amounts represent thirteen-week13-week periods.
(b)Letters of credit issued reduce our remaining availability under the Secured Revolving Facility. We had outstanding letters of credit that reducereduced our remaining availability under the Secured Revolving Facility of $10 million as of May 4, 2019, and $9 million as of February 2, 2019 and May 5, 2018 and February 3, 2018, and $8 million as of April 29, 2017.2018.

Credit Ratings
The following table provides our credit ratings as of May 5, 2018:
Moody’sS&PFitch
CorporateBa1BB+BB+
Senior Unsecured Debt with Subsidiary GuaranteeBa1BB+BB+
Senior Unsecured DebtBa2BB-BB
OutlookStableStableStable
On May 30, 2018, Fitch revised our outlook from stable to negative, while reaffirming our ratings. This outlook revision has no impact to our borrowing costs under our Revolving Facility.
Our borrowing costs under our Secured Revolving Facility and Secured Foreign Facilities are linked to our credit ratings at Moody’s, S&P and Fitch.ratings. If we receive an upgrade or downgrade to our corporate credit ratings, by Moody’s, S&P or Fitch, the borrowing costs could decrease or increase, respectively. The guarantees of our obligations under the Secured Revolving Facility and Secured Foreign Facilities by the Guarantors and the security interests granted in our and the Guarantors’ collateral securing such obligations are released if our credit ratings are higher than a certain level. Additionally, the restrictions imposed under the Secured Revolving Facility and Secured Foreign Facilities on our ability to make investments and to make restricted payments cease to apply if our credit ratings are higher than certain levels. Credit rating downgrades by any of the agencies do not accelerate the repayment of any of our debt.
The following table provides our credit ratings as of May 4, 2019:
Moody’sS&P
CorporateBa1BB
Senior Unsecured Debt with Subsidiary GuaranteeBa1BB
Senior Unsecured DebtBa2B+
OutlookNegativeNegative
Common Stock Share Repurchases
Our Board of Directors will determine share repurchase authorizations giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements as well as financial and other conditions existing at the time. We use cash flow generated from operating and financing activities to fund our share repurchase programs. The timing and amount of any repurchases will be made at our discretion, taking into account a number of factors, including market conditions.

Under the authority of our Board of Directors, we repurchased shares of our common stock under the following repurchase programs duringfor the first quarter of 2018 and 2017:2018:
Amount
Authorized
 
Shares
Repurchased
 
Amount
Repurchased
 Average Stock Price of Shares Repurchased within Program
Amount
Authorized
 
Shares
Repurchased
 
Amount
Repurchased
 Average Stock Price of Shares Repurchased within Program
Repurchase Program 2018 2017 2018 2017 2018 2017 
(in millions) (in thousands) (in millions)    (in millions) (in thousands) (in millions)  
March 2018$250
 1,563
 NA
 $58
 NA
 $36.93
 NA
$250
 1,563
 $58
 $36.93
September 2017250
 527
 NA
 25
 NA
 $46.98
 NA
250
 527
 25
 $46.98
February 2017250
 NA
 1,570
 NA
 $80
 NA
 $50.92
February 2016500
 NA
 51
 NA
 3
 NA
 $58.95
Total  2,090
 1,621
 $83
 $83
      2,090
 $83
  
We did not repurchase any shares in the first quarter of 2019.

In March 2018, our Board of Directors approved a new $250 million share repurchase program, which included the $23 million remaining under the September 2017 repurchase program.
In September 2017, our Board of Directors approved a $250 million share repurchase program, which included the $10 million remaining under the February 2017 repurchase program.
In February 2017, our Board of Directors approved a $250 million share repurchase program, which included the $59 million remaining under the February 2016 repurchase program.
In February 2016, our Board of Directors approved a $500 million share repurchase program, which included the $17 million remaining under the June 2015 repurchase program.
The March 2018 repurchase program had $192$79 million remaining as of May 5, 2018. Subsequent to May 5, 2018, we repurchased an additional 1.2 million shares of common stock for $42 million under this program.4, 2019.
There were $4 million, $2 million and $1 million of share repurchases reflected in Accounts Payable on the May 5, 2018 February 3, 2018 and April 29, 2017 Consolidated Balance Sheets, respectively.

Sheet.
Dividend Policy and Procedures
Our Board of Directors will determine future dividends after giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements as well as financial and other conditions existing at the time. We use cash flow generated from operating activities to fund our ordinary dividends and a combination of cash flow generated from operating activities and financing activities to fund our special dividends.dividends and share repurchase programs.
Under the authority and declaration of our Board of Directors, we paid the following dividends during the first quarter of 20182019 and 2017:2018:
 Ordinary Dividends Total Paid Ordinary Dividends Total Paid
 (per share) (in millions) (per share) (in millions)
2019    
First Quarter $0.30
 $83
2018        
First Quarter $0.60
 $168
 $0.60
 $168
2017    
First Quarter $0.60
 $172

Cash Flow
The following table provides a summary of our cash flow activity for the first quarter of 20182019 and 2017:2018:
Year-to-DateYear-to-Date
2018 20172019 2018
(in millions)(in millions)
Cash and Cash Equivalents, Beginning of Period$1,515
 $1,934
$1,413
 $1,515
Net Cash Flows Provided by (Used for) Operating Activities(79) 7
Net Cash Flows Used for Operating Activities(73) (79)
Net Cash Flows Used for Investing Activities(159) (155)(106) (159)
Net Cash Flows Used for Financing Activities(243) (230)(86) (243)
Effects of Exchange Rate Changes on Cash and Cash Equivalents(2) (1)(2) (2)
Net Decrease in Cash and Cash Equivalents(483) (379)(267) (483)
Cash and Cash Equivalents, End of Period$1,032
 $1,555
$1,146
 $1,032
Operating Activities
Net cash used for operating activities in 2019 was $73 million, including net income of $40 million. Net income included depreciation of $145 million and share-based compensation expense of $23 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant items in working capital were the seasonal changes in Accounts Payable, Accrued Expenses and Other, Inventories and Accounts Receivable.
Net cash used for operating activities in 2018 was $79 million, including net income of $48 million. Net income included depreciation and amortization of $148 million and share-based compensation expense of $25 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant items in working capital were the seasonal changes in Accounts Payable, Accrued Expenses and Other, and Inventories and the change in Accounts Receivable.
Net cash provided by operating activities in 2017 was $7 million, including net income of $94 million. Net income included depreciation and amortization of $142 million and share-based compensation expense of $25 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant items in working capital were the seasonal changes in Accounts Payable, Accrued Expenses and Other and Inventories, and the change in Accounts Receivable.
Investing Activities
Net cash used for investing activities in 2019 was $106 million consisting primarily of capital expenditures of $123 million partially offset by proceeds of $12 million related to our divestiture of La Senza. The capital expenditures included $83 million for opening new stores and remodeling and improving existing stores. Remaining capital expenditures were primarily related to spending on technology and logistics to support our digital businesses and other retail capabilities.
Net cash used for investing activities in 2018 was $159 million consisting primarily of capital expenditures of $160 million. The capital expenditures included $122 million for opening new stores and remodeling and improving existing stores. Remaining capital expenditures were primarily related to spending on technology and infrastructure to support growth.
Financing Activities
Net cash used for investingfinancing activities in 20172019 was $155$86 million consisting primarily of capital expendituresquarterly dividend payments of $165$0.30 per share, or $83 million, and tax payments related to share-based awards of $9 million, partially offset by a $10$7 million return of capital fromnet new borrowings under our Easton Investments. The capital expenditures included $150 million for opening new stores and remodeling and improving existing stores. Remaining capital expenditures were primarily related to spending on technology and infrastructure to support growth.
Financing ActivitiesForeign Facilities.
Net cash used for financing activities in 2018 was $243 million consisting primarily of quarterly dividend payments of $0.60 per share, or $168 million, payments for repurchases of common stock of $81 million and tax payments related to share-based awards of $8 million, partially offset by $13 million of net new borrowings under our Foreign Facilities.
Net cash used for financing activities in 2017 was $230 million consisting primarily of quarterly dividend payments of $0.60 per share, or $172 million, payments for repurchases of common stock of $85 million, and tax payments related to share-based awards of $17 million, partially offset by proceeds from the exercise of stock options of $36 million.
Contingent Liabilities and Contractual Obligations
In connection with the dispositionsale of a certain business,La Senza in the fourth quarter of 2018, we have remaining guarantees of $9$71 million related to lease payments under the current terms of noncancellablenoncancelable leases expiring at various dates through 2021.2028. These guarantees include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of the business. We recorded a liability of $5 million as of May 4, 2019 and February 2, 2019 representing the estimated fair value of our obligation as guarantor in accordance with ASC 460, Guarantees. In connection with the disposition of a certain instances, our guaranteeother business, we have remaining guarantees of $5 million related to lease payments under the current terms of a noncancelable lease expiring in 2021, which may remain in effect if the term of a lease is extended. We have not recorded a liability with respect to thesethis guarantee obligationsobligation as of May 4, 2019, February 2, 2019 or May 5, 2018 February 3, 2018 or April 29, 2017 as we concluded that payments under these guaranteesthis guarantee were not probable.
In connection with noncancellablenoncancelable operating leases of certain assets, we provided residual value guarantees to the lessor if the leased assets cannot be sold for an amount in excess of a specified minimum value at the conclusion of the lease term. The leases expire at various dates through 2021, and the total amount of the guarantees is $104$94 million. We recorded a liability of $10 million as of May 4, 2019, $11 million as of February 2, 2019 and $3 million as of May 5, 2018 and February 3, 2018, and a liability of less than $1 million as of April 29, 2017 related to these guarantee obligations, which areobligations. This liability is included in Long-term Operating Lease Liabilities on the May 4, 2019 Consolidated Balance Sheet, and in Other Long-term Liabilities on the February 2, 2019 and May 5, 2018 Consolidated Balance Sheets.

Our contractual obligations primarily consist of long-term debt and the related interest payments, operating leases, purchase orders for merchandise inventory and other long-term obligations. These contractual obligations impact our short-term and long-term liquidity and capital resource needs. There have been no material changes in our contractual obligations since February 3, 2018,2, 2019, as discussed in “Contingent Liabilities and Contractual Obligations” in our 20172018 Annual Report on Form 10-K. Certain of our contractual obligations may fluctuate during the normal course of business (primarily changes in our merchandise inventory-related purchase obligations which fluctuate throughout the year as a result of the seasonal nature of our operations).

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Revenue from Contracts with Customers
In May 2014, the FASB issued ASC 606, Revenue from Contracts with Customers, which was further clarified and amended in 2015 and 2016. This guidance requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services. The new standard also results in enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective beginning in fiscal 2018. The standard allows for either a full retrospective or a modified retrospective transition method.

We adopted the standard in the first quarter of fiscal 2018 under the modified retrospective approach. Under the standard, income from the Victoria's Secret private label credit card arrangement, which has historically been presented as a reduction to General, Administrative and Store Operating Expenses, is presented as revenue. Further, historical accounting related to loyalty points earned under the Victoria's Secret customer loyalty program changed as we now defer revenue associated with customer loyalty points until the points are redeemed using a relative stand-alone selling price method. The standard also changed accounting for sales returns which requires balance sheet presentation on a gross basis.

In the first quarter of fiscal 2018, we recorded a cumulative catch-up adjustment resulting in a reduction to opening retained earnings, net of tax, of $28 million. The cumulative adjustment primarily related to the deferral of revenue related to outstanding points, net of estimated forfeitures, under our Victoria's Secret customer loyalty program. In addition, Net Sales and General, Administrative and Store Operating Expenses both increased $25 million in the first quarter of 2018 due to the change in presentation for the Victoria's Secret private label credit card arrangement. Further, gross presentation of our sales return reserve resulted in a $4 million increase in Other Current Assets and Accrued Expenses and Other on the May 5, 2018 Consolidated Balance Sheet.
Fair Value of Financial Instruments
In January 2016, the FASB issued ASC 321, Investments - Equity Securities, which addresses certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. The standard requires the recognition of changes in the fair value of marketable equity securities in net income as compared to historical treatment in accumulated other comprehensive income on the balance sheet. We adopted the standard in the first quarter of fiscal 2018 and recorded an increase to opening retained earnings, net of tax, of $2 million.
Leases
In February 2016, the FASB issued ASC 842, Leases, which requires companies classified as lessees to putaccount for most leases on their balance sheets but recognize expenses on their income statements in a manner similar to today’slegacy accounting. The standard also will result inrequires enhanced quantitative and qualitative disclosures, including significant judgments made by management, to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing leases. The standard currently requires a modified retrospective transition approach. In MarchJuly 2018, the FASB tentatively approved an amendment to the standard that provides companies ana modified retrospective transition option that woulddoes not require earlier periods to be restated upon adoption. The standard is effective beginning in fiscal 2019, with early adoption permitted. 

We are currently evaluating the impacts that this standard will have on our Consolidated Statements of Income and Comprehensive Income, Balance Sheets and Statements of Cash Flows. We currently expect that most of our operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption of the standard. Thus, we expect adoption will result in a material increase to the assets and liabilities on our Consolidated Balance Sheet. We will adoptadopted the standard in the first quarter of fiscal 2019.2019 under the modified retrospective approach. As allowed by the new standard, we elected the package of transition practical expedients but elected to not apply the hindsight practical expedient to our leases at transition.
Upon adoption at the beginning of 2019, we recorded operating lease liabilities of $3.7 billion and operating right-of-use assets for our leases of $3.3 billion. The operating right-of-use assets are net of $470 million of liabilities for deferred rent and

unamortized landlord construction allowances that were previously recorded as Other Long-term Liabilities on the Consolidated Balance Sheet. We also recorded a decrease to opening retained earnings, net of tax, of $2 million. The adoption of the standard did not materially impact the Consolidated Statements of Income or Cash Flows.
Hedging Activities
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which is intended to better align risk management activities and financial reporting for hedging relationships. The standard eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. It also eases certain documentation and assessment requirements. We adopted the standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated results of operations, financial position or cash flows.
Goodwill
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill. The standard eliminates the second step from the goodwill impairment test, which requires a hypothetical purchase price allocation to determine the implied fair value of goodwill. Under the new standard, the goodwill impairment charge will be the excess of the reporting unit's carrying value over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. This guidance will be effective beginning in fiscal 2019,2020, with early adoption permitted. We are currently evaluating the impact ofdo not expect this standard to have a material impact on our Consolidated Statementsconsolidated results of Income and Comprehensive Income, Balance Sheets and Statements of Cash Flows.operations, financial position or cash flows.

IMPACT OF INFLATION
While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on the results of operations and financial condition have been minor.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies related to 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, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to inventories, long-lived assets, claims and contingencies, income taxes and revenue recognition. Management bases our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
There have been no material changes to the critical accounting policies and estimates disclosed in our 20172018 Annual Report on Form 10-K, other than the adoption of ASC 606,842, Revenue from Contracts with Customers.Leases.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk
The market risk inherent in our financial instruments represents the potential loss in fair value, earnings or cash flows arising from adverse changes in foreign currency exchange rates or interest rates. We may use derivative financial instruments like cross-currency swaps, foreign currency forward contracts and interest rate swap arrangements to manage exposure to market risks. We do not use derivative financial instruments for trading purposes.
Foreign Exchange Rate Risk
We have operations in foreign countries which expose us to market risk associated with foreign currency exchange rate fluctuations. Our Canadian dollar, British pound, Chinese yuan,Yuan, Hong Kong dollar and Euro denominated earnings are subject to exchange rate risk as substantially all of our merchandise sold in Canada, the U.K., Ireland and Greater China is sourced through U.S. dollar transactions. Although we utilize foreign currency forward contracts to partially offset risks associated with Canadian dollarour operations in Canada and British pound denominated earnings,the U.K., these measures may not succeed in offsetting all of the short-term impact of foreign currency rate movements and generally may not be effective in offsetting the long-term impact of sustained shifts in foreign currency rates.
Further, although our royalty arrangements with our international partners are denominated in U.S. dollars, the royalties we receive in U.S. dollars are calculated based on sales in the local currency. As a result, our royalties in these arrangements are exposed to foreign currency exchange rate fluctuations.

Interest Rate Risk
Our investment portfolio primarily consists of interest-bearing instruments that are classified as cash and cash equivalents based on their original maturities. Our investment portfolio is maintained in accordance with our investment policy, which specifies permitted types of investments, specifies credit quality standards and maturity profiles and limits credit exposure to any single issuer. The primary objective of our investment activities areis the preservation of principal, the maintenance of liquidity and the maximization of interest income while minimizing risk. Typically, our investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits. Given the short-term nature and quality of investments in our portfolio, we do not believe there is any material risk to principal associated with increases or decreases in interest rates.

Excluding our Foreign Facilities, all of our long-term debt as of May 5, 2018,4, 2019 has fixed interest rates. We will from time to timetime-to-time adjust our exposure to interest rate risk by entering into interest rate swap arrangements. Our exposure to interest rate changes is limited to the fair value of the debt issued, which would not have a material impact on our earnings or cash flows.
Fair Value of Financial Instruments
As of May 5, 2018,4, 2019, we believe that the carrying values of accounts receivable, accounts payable, accrued expenses and current debt approximate fair value because of their short maturity.
The following table provides a summary of the principal value and estimated fair value of long-termoutstanding publicly traded debt excluding Foreign Facility borrowings and swap arrangements,other financial instruments as of May 4, 2019, February 2, 2019 and May 5, 2018February 3, 2018 and April 29, 2017:2018:
May 5,
2018
 February 3, 2018 April 29,
2017
May 4,
2019
 February 2, 2019 May 5,
2018
(in millions)(in millions)
Long-term Debt:          
Principal Value$5,750
 $5,750
 $5,750
$5,722
 $5,722
 $5,750
Fair Value, Estimated (a)5,735
 5,943
 5,992
5,486
 5,340
 5,735
Foreign Currency Cash Flow Hedges (b)1
 9
 (26)(3) (2) 1
Interest Rate Fair Value Hedges (b)
 
 (2)
Marketable Equity Securities (b)(8) (11) (17)
 _______________
(a)The estimated fair value is based on reported transaction prices. The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange.
(b)Hedge arrangementsFinancial instruments are in a net liability (asset) position.
Concentration of Credit Risk
We maintain cash and cash equivalents and derivative contracts with various major financial institutions. We monitor the relative credit standing of financial institutions with whom we transact and limit the amount of credit exposure with any one entity. Typically, our investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits. We also periodically review the relative credit standing of franchise, license and wholesale partners and other entities to which we grant credit terms in the normal course of business.

Item 4.CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective and designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting. The adoption of ASC 606,842, Revenue from Contracts with CustomersLeases, required the implementation of new controls and the modification of certain accounting processes related to revenue recognition.lease accounting. Additionally, we implemented a new domestic order management system for Victoria's Secret Direct, which required the implementation of new controls and the modification of certain accounting processes to ensure the accuracy and integrity of our financial statements. There were no other changes in our internal control over financial reporting that occurred in the first quarter 2018of 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.LEGAL PROCEEDINGS

We are a defendant in a variety of lawsuits arising in the ordinary course of business. Actions filed against our Company from time to time include commercial, tort, intellectual property, customer, employment, data privacy, securities and other claims, including purported class action lawsuits. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, our current legal proceedings are not expected to have a material adverse effect on our financial position or results of operations.

Item 1A.RISK FACTORS

The risk factors that affect our business and financial results are discussed in “Item 1A: Risk Factors” in the 20172018 Annual Report on Form 10-K. We wish to caution the reader that the risk factors discussed in “Item 1A: Risk Factors” in our 20172018 Annual Report on Form 10-K and those described elsewhere in this report or other SEC filings, could cause actual results to differ materially from those stated in any forward-looking statements.

Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides our repurchases of our common stock during the first quarter of 2018:2019:
Period
Total
Number of
Shares
Purchased (a)
 
Average Price
Paid per
Share (b)
 Total Number of Shares Purchased as Part of Publicly Announced Programs (c) Maximum Number of Shares (or Approximate Dollar Value) that May Yet be Purchased Under the Programs (c)
 (in thousands)   (in thousands)
February 2018425
 $47.58
 417
 $28,019
March 2018863
 39.39
 650
 228,695
April 20181,027
 35.63
 1,023
 192,232
Total2,315
   2,090
  
Period
Total
Number of
Shares
Purchased (a)
 
Average Price
Paid per
Share (b)
 Total Number of Shares Purchased as Part of Publicly Announced Programs (c) Maximum Number of Shares (or Approximate Dollar Value) that May Yet be Purchased Under the Programs (c)
 (in thousands)   (in thousands)
February 20194
 $26.59
 
 $78,677
March 2019327
 27.04
 
 78,677
April 20193
 27.48
 
 78,677
Total334
   
  
  _______________
(a)The total number of shares repurchased includes shares repurchased as part of publicly announced programs, with the remainder relating to shares repurchased in connection with tax payments due upon vesting of employee restricted stock awards and the use of our stock to pay the exercise price on employee stock options.
(b)The average price paid per share includes any broker commissions.
(c)For additional share repurchase program information, see Note 4, “Earnings Per Share and Shareholders' Equity (Deficit)” included in Item 1. Financial Statements.

Item 3.DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4.MINE SAFETY DISCLOSURES

Not applicable.

Item 5.OTHER INFORMATION

None.


Item 6. EXHIBITS

Exhibits 
  
10.1
   
15 
   
31.1 
   
31.2 
   
32 
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Definition Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document


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. 
 
L BRANDS, INC.
 (Registrant)
 By:/s/ STUART B. BURGDOERFER
  
Stuart B. Burgdoerfer
Executive Vice President and Chief Financial Officer *
Date: June 7, 20184, 2019
*Mr. Burgdoerfer is the principal financial officer and the principal accounting officer and has been duly authorized to sign on behalf of the Registrant.


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