Bath & Body Works (BBWI) 10-Q 3 Jun 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended May. 01, 2010	May. 28, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-05-01
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	LTD
Entity Registrant Name	LIMITED BRANDS INC
Entity Central Index Key	0000701985
Current Fiscal Year End Date	--01-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		325,191,169

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Millions, except Per Share data	3 Months Ended May. 01, 2010	3 Months Ended May. 02, 2009
Net Sales	$1,932	$1,725
Costs of Goods Sold, Buying and Occupancy	(1,238)	(1,177)
Gross Profit	694	548
General, Administrative and Store Operating Expenses	(509)	(483)
Operating Income	185	65
Interest Expense	(61)	(62)
Interest Income	1	1
Other Income (Expense)	62	(1)
Income Before Income Taxes	187	3
Provision for Income Taxes	74	0
Net Income	$113	$3
Net Income Per Basic Share	0.35	0.01
Net Income Per Diluted Share	0.34	0.01
Dividends Per Share	1.15	0.15

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	May. 01, 2010	Jan. 30, 2010	May. 02, 2009
Current Assets:
Cash and Cash Equivalents	$1,188	$1,804	$936
Accounts Receivable, Net	199	219	198
Inventories	1,098	1,037	1,213
Deferred Income Taxes	32	30	75
Other	170	160	194
Total Current Assets	2,687	3,250	2,616
Property and Equipment, Net	1,677	1,723	1,891
Goodwill	1,448	1,442	1,430
Trade Names and Other Intangible Assets, Net	600	594	585
Other Assets	180	164	158
Total Assets	6,592	7,173	6,680
Current Liabilities:
Accounts Payable	485	488	410
Accrued Expenses and Other	632	693	591
Income Taxes	18	141	15
Total Current Liabilities	1,135	1,322	1,016
Deferred Income Taxes	240	213	209
Long-term Debt	2,523	2,723	2,897
Other Long-term Liabilities	717	731	719
Shareholders' Equity:
Preferred Stock - $1.00 par value; 10 shares authorized; none issued	0	0	0
Common Stock - $0.50 par value; 1,000 shares authorized; 325, 323 and 524 shares issued; 325, 323, 322 shares outstanding, respectively	163	161	262
Paid-in Capital	40	0	1,534
Accumulated Other Comprehensive Income (Loss)	(1)	(15)	(22)
Retained Earnings	1,777	2,037	4,731
Less: Treasury Stock, at Average Cost; 0, 0 and 202 shares, respectively	(2)	0	(4,666)
Total Limited Brands, Inc. Shareholders' Equity	1,977	2,183	1,839
Noncontrolling Interest	0	1	0
Total Equity	1,977	2,184	1,839
Total Liabilities and Equity	$6,592	$7,173	$6,680

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Share data in Millions, except Per Share data	May. 01, 2010	Jan. 30, 2010	May. 02, 2009
Preferred Stock, par value	$1	$1	$1
Preferred Stock, shares authorized	10	10	10
Preferred Stock, issued	0	0	0
Common Stock, par value	0.5	0.5	0.5
Common Stock, shares authorized	1,000	1,000	1,000
Common Stock, shares issued	325	323	524
Common Stock, shares outstanding	325	323	322
Treasury Stock, shares	0	0	202

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended May. 01, 2010	3 Months Ended May. 02, 2009
Operating Activities:
Net Income	$113	$3
Adjustments to Reconcile Net Income to Net Cash Provided by (Used for) Operating Activities:
Depreciation and Amortization of Long-lived Assets	97	94
Amortization of Landlord Allowances	(8)	(9)
Deferred Income Taxes	20	3
Share-based Compensation Expense	13	11
Excess Tax Benefits from Share-based Compensation	(5)	0
Gain on Distribution from Express	(49)	0
Changes in Assets and Liabilities:
Accounts Receivable	37	38
Inventories	(57)	(28)
Accounts Payable, Accrued Expenses and Other	(63)	(165)
Income Taxes Payable	(120)	(79)
Other Assets and Liabilities	(38)	14
Net Cash Used for Operating Activities	(60)	(118)
Investing Activities:
Capital Expenditures	(44)	(51)
Return of Capital from Express	49	0
Return of Capital from Limited Stores	7	0
Other Investing Activities	(1)	0
Net Cash Provided by (Used for) Investing Activities	11	(51)
Financing Activities:
Payments of Long-term Debt	(200)	0
Dividends Paid	(373)	(48)
Financing Costs	(13)	(19)
Repurchase of Common Stock	(2)	0
Excess Tax Benefits from Share-based Compensation	5	0
Proceeds From Exercise of Stock Options and Other	13	0
Net Cash Used for Financing Activities	(570)	(67)
Effects of Exchange Rate Changes on Cash and Cash Equivalents	3	(1)
Net Decrease in Cash and Cash Equivalents	(616)	(237)
Cash and Cash Equivalents, Beginning of Period	1,804	1,173
Cash and Cash Equivalents, End of Period	$1,188	$936

Description of Business and Bas

Description of Business and Basis of Presentation
	3 Months Ended May. 01, 2010
Description of Business and Basis of Presentation	1. Description of Business and Basis of Presentation Description of Business Limited Brands, Inc. (the Company) operates in the highly competitive specialty retail business. The Company is a specialty retailer of womens intimate and other apparel, beauty and personal care products and accessories. The Company sells its merchandise through specialty retail stores in the United States and Canada, which are primarily mall-based, and through its websites, catalogue and other channels. The Company currently operates the following retail brands: Victorias Secret Pink La Senza Bath Body Works C. O. Bigelow The White Barn Candle Company Henri Bendel Fiscal Year The Companys fiscal year ends on the Saturday nearest to January31. As used herein, first quarter of 2010 and first quarter of 2009 refers to the thirteen week periods ending May1, 2010 and May2, 2009, 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 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 Companys share of net income or loss of unconsolidated entities from which the Company purchases merchandise or merchandise components is included in Cost of Goods Sold, Buying and Occupancy on the Consolidated Statements of Income. The Companys share of net income or loss of all other unconsolidated entities is included in Other Income (Expense) on the Consolidated Statements of Income. The Companys equity investments are required to be tested for impairment when it is determined there may be an other than temporary loss in value. The Company has a 25% ownership interest in Express and Limited Stores. These investments are accounted for under the equity method of accounting. The Company eliminates in consolidation 25% of merchandise sourcing sales to Express and Limited Stores consistent with the Companys ownership percentage. Interim Financial Statements The Consolidated Financial Statements as of and for the quarter ended May1, 2010 and May2, 2009 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 Companys 2009 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, necessary for a fair presentation of the results for the interim periods. Seasonality of B

New Accounting Pronouncements

New Accounting Pronouncements
	3 Months Ended May. 01, 2010
New Accounting Pronouncements	2. New Accounting Pronouncements Fair Value Measurements In January 2010, the Financial Accounting Standards Board issued Accounting Standard Update 2010-06, which amends ASC 820, Fair Value Measurement and Disclosures. This guidance requires new disclosures and provides amendments to clarify existing disclosures. The new requirements include disclosing transfers in and out of Levels 1 and 2 fair value measurements and the reasons for the transfers and further disaggregating activity in Level 3 fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December15, 2009, except for the new disclosures regarding the activity in Level 3 measurements, which are effective for fiscal years and interim periods beginning after December15, 2010. The Company adopted this guidance for the fiscal period beginning January31, 2010, except for the new disclosure regarding the activity in Level 3 measurements, which the Company will adopt for the fiscal period beginning January30, 2011.

Earnings Per Share and Sharehol

Earnings Per Share and Shareholders' Equity
	3 Months Ended May. 01, 2010
Earnings Per Share and Shareholders' Equity	3. Earnings Per Share and Shareholders Equity Earnings Per Share Earnings per basic share are 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 for the first quarter of 2010 and 2009: First Quarter 2010 2009 (in millions) Weighted-average Common Shares: Issued Shares (a) 323 524 Treasury Shares (a) 0 (203 ) Basic Shares 323 321 Effect of Dilutive Options and Restricted Stock 10 2 Diluted Shares 333 323 Anti-dilutive Options and Awards (b) 3 21 (a) In January 2010, the Company retired 201million shares of its Treasury Stock. (b) These options and awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. Shareholders Equity In March 2010, the Companys Board of Directors declared a special dividend of $1 per share. The special dividend, totaling $325 million, was distributed on April19, 2010 to shareholders of record at the close of business on April5, 2010. In accordance with the anti-dilutive provisions of the 1993 Stock Option and Performance Incentive Plan, the Company adjusted both the exercise price and the number of share-based awards outstanding as of the record date of the special dividend. The aggregate fair value, the aggregate intrinsic value and the ratio of the exercise price to the market price are approximately equal immediately before and after the adjustment, therefore, no compensation expense was recognized. In March 2010, the Companys Board of Directors also approved a new share repurchase program of $200 million and cancelled its previous $250 million share repurchase program, which had $31 million remaining. In the first quarter of 2010, the Company repurchased 85thousand shares of common stock for $2 million under the new program. Through May28, 2010, the Company repurchased 361 thousand shares of common stock for $9 million under the new program. In January 2010, the Company retired 201million shares of its Treasury Stock. The retirement resulted in a reduction of $4.641 billion in Treasury Stock, $101 million in the par value of Common Stock, $1.545 billion in Paid-in Capital and $2.995 billion in Retained Earnings. Beginning in 2010, the Company adopted a policy of issuing new shares to satisfy award exercises or conversions.

Inventories

Inventories
	3 Months Ended May. 01, 2010
Inventories	4. Inventories The following table provides details of inventories as of May1, 2010,January30, 2010 and May2, 2009: May1, 2010 January30, 2010 May2, 2009 (in millions) Finished Goods Merchandise $ 1,035 $ 973 $ 1,154 Raw Materials and Merchandise Components 63 64 59 Total Inventories $ 1,098 $ 1,037 $ 1,213 Inventories are principally valued at the lower of cost, as determined by the weighted-average cost method, or market.

Property and Equipment, Net

Property and Equipment, Net
	3 Months Ended May. 01, 2010
Property and Equipment, Net	5. Property and Equipment, Net The following table provides details of property and equipment, net as of May1, 2010,January30, 2010 and May2, 2009: May1, 2010 January30, 2010 May2, 2009 (in millions) Property and Equipment, at Cost $ 4,054 $ 4,058 $ 4,056 Accumulated Depreciation and Amortization (2,377 ) (2,335 ) (2,165 ) Property and Equipment, Net $ 1,677 $ 1,723 $ 1,891 Depreciation expense was $95 million and $93 million for the first quarter of 2010 and 2009, respectively.

Goodwill, Trade Names and Other

Goodwill, Trade Names and Other Intangible Assets, Net
	3 Months Ended May. 01, 2010
Goodwill, Trade Names and Other Intangible Assets, Net	6. Goodwill, Trade Names and Other Intangible Assets, Net Goodwill The following table provides the rollforward of goodwill for the first quarter of 2010: Victorias Secret Bath Body Works Total (in millions) Balance as of January30, 2010 $ 814 $ 628 $ 1,442 Foreign Currency Translation 6 0 6 Balance as of May1, 2010 $ 820 $ 628 $ 1,448 The following table provides the rollforward of goodwill for the first quarter of 2009: Victorias Secret Bath Body Works Total (in millions) Balance as of January31, 2009 $ 798 $ 628 $ 1,426 Foreign Currency Translation 4 0 4 Balance as of May2, 2009 $ 802 $ 628 $ 1,430 Intangible Assets Indefinite Lives Intangible assets, not subject to amortization, represent the Victorias Secret, Bath Body Works and La Senza trade names. These assets totaled $573 million as of May1, 2010, $566 million as of January30, 2010 and $554 million as of May2, 2009. These intangible assets are included in Trade Names and Other Intangible Assets, Net on the Consolidated Balance Sheets. Intangible Assets Finite Lives The following table provides intangible assets with finite lives as of May1, 2010,January30, 2010 and May2, 2009: May1, 2010 January30, 2010 May2, 2009 (in millions) Intellectual Property $ 41 $ 41 $ 41 Trademarks/Brands 19 19 19 Licensing Agreements and Customer Relationships 24 23 21 Favorable Operating Leases 19 19 18 Total 103 102 99 Accumulated Amortization (76 ) (74 ) (68 ) Intangible Assets, Net $ 27 $ 28 $ 31 Amortization expense was $2 million and $1 million for the first quarter of 2010 and 2009, respectively. Estimated future annual amortization expense will be approximately $6 million for the remainder of 2010, $7 million in 2011, $5 million in 2012, $4 million in 2013, $3 million in 2014 and $2 million in the aggregate thereafter.

Equity Investments and Other

Equity Investments and Other
	3 Months Ended May. 01, 2010
Equity Investments and Other	7. Equity Investments and Other Express In July 2007, the Company completed the divestiture of 75% of its ownership interest in Express. In conjunction with the transaction, the Company and Express entered into transition services agreements whereby the Company provides support to Express in various operational areas including logistics, technology and merchandise sourcing. The terms of these transition services arrangements varied and ranged from 3 months to 3 years. In October 2009, the Company entered into new agreements with Express whereby the Company will continue to provide logistics services and lease office space. These agreements are effective beginning in February 2010 and extend through April 2016 with certain renewal options. The Company also continues to provide sourcing services to Express. The Company recognized merchandise sourcing revenue from Express of $64 million and $67 million in the first quarter of 2010 and 2009, respectively. These amounts are net of the elimination of 25% of the gross merchandise sourcing revenue consistent with the Companys ownership percentage. The Companys accounts receivable from Express for merchandise sourcing and other services provided in accordance with the terms and conditions of the transition services agreements totaled $68 million as of May1, 2010, $80 million as of January30, 2010 and $74 million as of May2, 2009. In March 2010, Express completed a cash distribution to its owners and the Company received $57 million. The Companys portion representing a return on capital is $8 million and is included in Other Assets and Liabilities within the Operating Activities section of the 2010 Consolidated Statement of Cash Flows. The remaining portion representing a return of capital is $49 million and is included in Return of Capital from Express within Investing Activities section of the 2010 Consolidated Statement of Cash Flows. The proceeds received from the cash distribution were in excess of the Companys carrying value of the investment in Express. As a result, the carrying value was reduced to zero as of the date of the cash distribution and a pre-tax gain of approximately $49 million was recorded. The pre-tax gain is included in Other Income on the 2010 Consolidated Statement of Income. The Companys investment carrying value for Express was $5 million as of May1, 2010, $5 million as of January30, 2010 and zero as of May2, 2009. These amounts are included in Other Assets on the Consolidated Balance Sheets. Express Initial Public Offering (IPO) On May13, 2010, Express completed an IPO. The Companys ownership interest was diluted as a result of the IPO. Additionally, the Company sold 1.3million shares of its common stock in Express in the IPO. The Company will recognize a pre-tax gain of approximately $50 million in the second quarter of 2010 as a result of the IPO and the sale of its shares. Subsequent to the IPO and sale of shares, the Companys ownership percentage in Express is approximately 18%. As a result, the Company is currently evaluating whether to continue to account for its investment in Express under the equity method or, alternatively, as an available for sale i

Income Taxes

Income Taxes
	3 Months Ended May. 01, 2010
Income Taxes	8. 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 Companys quarterly effective tax rate does not reflect a benefit associated with losses related to certain foreign subsidiaries. The Companys effective tax rate has historically reflected and continues to reflect a provision related to the undistributed earnings of foreign affiliates, but the taxes are not paid until the earnings are deemed repatriated to the United States. The Company has recorded a deferred tax liability for those undistributed earnings. However, no such deferred tax liability is recorded on the foreign earnings of foreign affiliates for which the tax basis is greater than the carrying value. For the first quarter of 2010, the Companys effective tax rate was 39.8% as compared to 19.5% in the first quarter of 2009. The first quarter 2009 tax rate was lower due to favorable resolution of certain tax matters. Income taxes paid were approximately $169 million and $74 million for the first quarter of 2010 and 2009, respectively. The current income tax liability included net current deferred tax liabilities of $2 million as of May1, 2010,January30, 2010 and May2, 2009.

Long-term Debt

Long-term Debt
	3 Months Ended May. 01, 2010
Long-term Debt	9. Long-term Debt The following table provides the Companys long-term debt balance as of May1, 2010,January30, 2010 and May2, 2009: May1, 2010 January30, 2010 May2, 2009 (in millions) Senior Secured Debt Term Loan due August 2012 $ 0 $ 200 $ 750 5.30% Mortgage due August 2010 2 2 2 Total Senior Secured Debt 2 202 752 Senior Unsecured Debt with Subsidiary Guarantee $500 million, 8.50% Fixed Interest Rate Notes due June 2019, Less Unamortized Discount 485 485 0 Senior Unsecured Debt $700 million, 6.90% Fixed Interest Rate Notes due July 2017, Less Unamortized Discount 699 699 698 $500 million, 5.25% Fixed Interest Rate Notes due November 2014, Less Unamortized Discount 499 499 499 $350 million, 6.95% Fixed Interest Rate Debentures due March 2033, Less Unamortized Discount 350 350 350 $300 million, 7.60% Fixed Interest Rate Notes due July 2037, Less Unamortized Discount 299 299 299 6.125% Fixed Interest Rate Notes due December 2012, Less Unamortized Discount (a) 191 191 299 Total Senior Unsecured Debt 2,038 2,038 2,145 Total 2,525 2,725 2,897 Current Portion of Long-term Debt (2 ) (2 ) 0 Total Long-term Debt, Net of Current Portion $ 2,523 $ 2,723 $ 2,897 (a) The principal balance outstanding was $191 million as of May1, 2010, $191 million as of January30, 2010 and $300 million as of May2, 2009. Issuance of Notes In June 2009, the Company issued $500 million of 8.50% notes due in June 2019 (2019 Notes). The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by certain of the Companys wholly-owned subsidiaries (the guarantors). The net proceeds from the issuance were $473 million, which included an issuance discount of $16 million and transaction costs of $11 million. These transaction costs are being amortized through the maturity date of June 2019 and are included within Other Assets on the May1, 2010 and January31, 2010 Consolidated Balance Sheets. Subsequent to May1, 2010, the Company issued $400 million of 7.00% notes due in May 2020 (2020 Notes) utilizing an existing shelf registration under which up to $1 billion of debt securities, common and preferred stock and other securities could be issued. The 2020 Notes are jointly and severally guaranteed on a full and unconditional basis by the guarantors. The net proceeds from the issuance were $389 million, which included transaction costs of $11 million. These transaction costs will be amortized through the maturity date of May 2020 and will be included within Other Assets on the Consolidated Balance Sheet. Repurchase of Notes In June 2009, the Company repurchased $5 million of the $300 million notes due in December 2012 (2012 Notes) through open market transactions. In August

Derivative Instruments

Derivative Instruments
	3 Months Ended May. 01, 2010
Derivative Instruments	10. Derivative Instruments Foreign Exchange Risk In January 2007, the Company entered into a series of cross-currency swaps related to approximately $470 million of Canadian dollar denominated intercompany loans. These cross-currency swaps mitigate the exposure to fluctuations in the U.S. dollar-Canadian dollar exchange rate related to the Companys La Senza operations. The cross-currency swaps require the periodic exchange of fixed rate Canadian dollar interest payments for fixed rate U.S. dollar interest payments as well as exchange of Canadian dollar and U.S. dollar principal payments upon maturity. The cross-currency swaps mature between 2015 and 2018 at the same time as the related loans and are designated as cash flow hedges of foreign currency exchange risk. Changes in the U.S. dollar-Canadian dollar exchange rate and the related swap settlements result in reclassification of amounts from accumulated other comprehensive income (loss) to earnings to completely offset foreign currency transaction gains and losses recognized on the intercompany loans. The following table provides a summary of the fair value and balance sheet classification of the derivative financial instruments designated as foreign exchange cash flow hedges as of May1, 2010,January30, 2010, and May2, 2009: May1, 2010 January30, 2010 May2, 2009 (in millions) Other Assets $ 0 $ 0 $ 7 Other Long-term Liabilities 47 34 0 The following table provides a summary of the pre-tax financial statement effect of the gains and losses on the Companys derivative instruments designated as foreign exchange cash flow hedges for 2010 and 2009: First Quarter Location 2010 2009 (in millions) Gain (Loss) Recognized in Other Comprehensive Income (Loss) Other Comprehensive Income (Loss) $ (13 ) $ (19 ) (Gain) Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Other Income(a) Other Income 23 14 (a) Represents reclassification of amounts from accumulated other comprehensive income (loss) to earnings to completely offset foreign currency transaction gains and losses recognized on the intercompany loans. No ineffectiveness was associated with these foreign exchange cash flow hedges. Interest Rate Risk Interest Rate Designated Cash Flow Hedges In January 2008, the Company entered into participating interest rate swap arrangements to mitigate exposure to interest rate fluctuations related to the Term Loan. The participating interest rate swap arrangements effectively convert the Term Loan to a fixed interest rate while still allowing the Company to partially benefit from declines in short-term interest rates. The swap arrangements were designated as cash flow hedges of interest rate risk and expired in 2012, at the same time as the related debt. Amounts are reclassified from accumulated other comprehensive income (loss) to earnings as interest expense is recognized on the Term Loan. In June 2009, the Company prepaid $392 million of the Term Loan. In conjunction with the Term Loan prepayment, the Company de-de

Fair Value Measurements

Fair Value Measurements
	3 Months Ended May. 01, 2010
Fair Value Measurements	11. Fair Value Measurements The following table provides a summary of the carrying value and fair value of long-term debt as of May1, 2010,January30, 2010, and May2, 2009: May1, 2010 January30, 2010 May2, 2009 (in millions) Carrying Value $ 2,525 $ 2,725 $ 2,897 Fair Value (a) 2,604 2,690 2,426 (a) The estimated fair value of the Companys publicly traded debt is based on quoted market prices. The estimated fair value of the Term Loan is equal to its carrying value. The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The following table provides a summary of assets and liabilities measured in the financial statements at fair value on a recurring basis as of May1, 2010,January30, 2010 and May2, 2009: Level 1 Level2 Level3 Total (in millions) As of May1, 2010 Assets: Cash and Cash Equivalents $ 1,188 $ 0 $ 0 $ 1,188 Liabilities: Cross-currency Cash Flow Hedges 0 47 0 47 Lease Guarantees 0 0 8 8 As of January30, 2010 Assets: Cash and Cash Equivalents $ 1,804 $ 0 $ 0 $ 1,804 Liabilities: Cross-currency Cash Flow Hedges 0 34 0 34 Interest Rate Designated Cash Flow Hedges 0 10 0 10 Lease Guarantees 0 0 9 9 As of May2, 2009 Assets: Cash and Cash Equivalents $ 936 $ 0 $ 0 $ 936 Cross-currency Cash Flow Hedges 0 7 0 7 Liabilities: Interest Rate Designated Cash Flow Hedges 0 35 0 35 Lease Guarantees 0 0 15 15 The Companys Level 2 fair value measurements are measured using 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. The Companys Level 3 fair value measurements are measured using income approach valuation techniques. The primary inputs to these techniques include the Companys assessment of the risk of default on guaranteed leases and discount rates. Management believes that the carrying values of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturity. The following table provides a reconciliation of the Companys lease guarantees measured at fair value on a recurring basis using unobservable inputs (Level 3) for 2010 and 2009: First Quarter 2010 2009 (in millions) Beginning Balance $ 9 $ 15 Change in Estimated Fair Value Reported in Earnings (1 ) 0 Ending Balance $ 8 $ 15 The Companys lease guarantees include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leas

Comprehensive Income

Comprehensive Income (Loss)
	3 Months Ended May. 01, 2010
Comprehensive Income (Loss)	12. Comprehensive Income (Loss) The following table provides detail for other comprehensive income for first quarter 2010 and 2009: First Quarter 2010 2009 (in millions) Net Income $ 113 $ 3 Other Comprehensive Income (Loss): Foreign Currency Translation (2 ) 0 Unrealized (Loss) Gain on Cash Flow Hedges (13 ) (25 ) Reclassification of Cash Flow Hedges to Earnings 34 18 Income Tax Benefit (Provision) (a) (4 ) 13 Total Comprehensive Income $ 128 $ 9 (a) The income tax benefit (provision) primarily relates to the interest rate designated cash flow hedges. The following table provides additional detail regarding the composition of accumulated other comprehensive income (loss) as of May1, 2010,January30, 2010 and May2, 2009: May1, 2010 January30, 2010 May2, 2009 (in millions) Foreign Currency Translation $ (8 ) $ (6 ) $ (4 ) Cash Flow Hedges 7 (9 ) (18 ) Total Accumulated Other Comprehensive Income (Loss) $ (1 ) $ (15 ) $ (22 )

Commitments and Contingencies

Commitments and Contingencies
	3 Months Ended May. 01, 2010
Commitments and Contingencies	13. 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 Companys results of operations, financial condition or cash flows. On November6, 2009, a class action (International Brotherhood of Electrical Workers Local 697 Pension Fund v. Limited Brands, Inc. et al.) was filed against the Company and certain of its officers in the United States District Court for the Southern District of Ohio on behalf of a purported class of all persons who purchased or acquired shares of Limited Brands common stock between August22, 2007 and February28, 2008.The Company believes the complaint is without merit and that the Company has substantial factual and legal defenses to the claims at issue.The Company intends to vigorously defend against this action. The Company cannot reasonably estimate the possible loss or range of loss that may result from this lawsuit. Guarantees In connection with the disposition of certain businesses, the Company has remaining guarantees of approximately $130 million related to lease payments of Express, Limited Stores, Abercrombie Fitch, Dicks Sporting Goods (formerly Galyans), Lane Bryant, New York Company and Anne.x under the current terms of noncancelable leases expiring at various dates through 2017. 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 businesses. In certain instances, the Companys guarantee may remain in effect if the term of a lease is extended. In April 2008, the Company received an irrevocable standby letter of credit from Express of $34 million issued by a third-party bank to mitigate a portion of the Companys contingent liability for guaranteed future lease payments of Express. The Company can draw from the irrevocable standby letter of credit if Express were to default on any of the guaranteed leases. The irrevocable standby letter of credit is reduced through the November1, 2010 expiration date consistent with the overall reduction in guaranteed lease payments. The outstanding balance of the irrevocable standby letter of credit from Express was $3 million as of May1, 2010, $6 million as of January30, 2010 and $15 million as of May2, 2009. The Companys guarantees related to Express, Limited Stores and New York Company require fair value accounting in accordance with U.S. GAAP in effect at the time of these divestitures. The guaranteed lease payments related to Express (net of the irrevocable standby letter of credit), Limited Stores and New York Company totaled $80 million as of May1, 2010, $84 million as of January30, 2010 and $97 million as of May2,

Retirement Benefits

Retirement Benefits
	3 Months Ended May. 01, 2010
Retirement Benefits	14. 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 United States of America. Participation in the tax-qualified plan is available to associates who meet certain age and service requirements. Participation in the non-qualified plan is made 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 $13 million and $11 million for the first quarter of 2010 and 2009, respectively. 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 rate determined by the Company. 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 equal annual installments over a specified period of up to 10 years. Total expense recognized related to the non-qualified plan was $6 million and $5 million for the first quarter of 2010 and 2009, respectively.

Segment Information

Segment Information
	3 Months Ended May. 01, 2010
Segment Information	15. Segment Information The Company has two reportable segments: Victorias Secret and Bath Body Works. The Victorias Secret segment sells womens intimate and other apparel, personal care and beauty products and accessories under the Victorias Secret, Pink and La Senza brand names. Victorias Secret merchandise is sold through retail stores, its website, www.VictoriasSecret.com, and its catalogue. Through its website and catalogue, certain Victorias Secrets merchandise may be purchased worldwide. La Senza sells merchandise through retail stores located throughout Canada and licensed stores in 49 other countries. La Senza products may also be purchased through its website, www.LaSenza.com. The Bath Body Works segment sells personal care, beauty and home fragrance products under the Bath Body Works, C.O. Bigelow, White Barn Candle Company and other brand names. Bath Body Works merchandise is sold at retail stores and through its website, www.bathandbodyworks.com. Other consists of the following: Henri Bendel, operator of eleven specialty stores, which features accessories and personal care products; Mast, an apparel merchandise sourcing and production function serving Victorias Secret, La Senza and third-party customers; Beauty Avenues, a personal care sourcing and production function serving Victorias Secret, La Senza and Bath Body Works; International retail and wholesale operations (excluding La Senza), which include the Companys Bath Body Works and Victorias Secret Pink stores in Canada; and Corporate functions including non-core real estate, equity investments and other governance functions such as treasury and tax. The following table provides the Companys segment information for first quarter 2010 and 2009: Victorias Secret Bath Body Works Other Total (in millions) 2010 Net Sales $ 1,264 $ 430 $ 238 $ 1,932 Operating Income (Loss) 167 38 (20 ) 185 2009 Net Sales $ 1,125 $ 402 $ 198 $ 1,725 Operating Income (Loss) 87 4 (26 ) 65 The Companys international sales, including La Senza, Bath Body Works Canada, Victorias Secret Pink Canada and direct sales shipped internationally, totaled $146 million and $113 million for first quarter of 2010 and 2009, respectively.

Subsequent Events

Subsequent Events
	3 Months Ended May. 01, 2010
Subsequent Events	16. Subsequent Events In May 2010, the Company issued $400 million of notes due in May 2020 utilizing an existing shelf registration. The Company used the proceeds from these notes to repurchase $134 million of its 2012 notes and $266 million of its 2014 notes. For additional information, see Note 9, Long-term Debt. On May13, 2010, Express, an equity method investee, completed an initial public offering. For additional information, see Note 7, Equity Investments and Other.

Supplemental Guarantor Financia

Supplemental Guarantor Financial Information
	3 Months Ended May. 01, 2010
Supplemental Guarantor Financial Information	17. Supplemental Guarantor Financial Information The Companys 8.50% notes due in June 2019 and the Companys 7.00% notes due in May 2020, which were issued subsequent to May1, 2010, are jointly and severally guaranteed on a full and unconditional basis by certain of the Companys wholly-owned subsidiaries. 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 Companys domestic subsidiaries, (b)more than 90% of the assets owned by the Companys 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 Companys 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 May1, 2010,January30, 2010 and May2, 2009 and the Condensed Consolidating Statements of Income and Cash Flows for the periods ended May1, 2010 and May2, 2009. LIMITED BRANDS, INC. CONSOLIDATED BALANCE SHEETS (in millions) (Unaudited) May1, 2010 Limited Brands,Inc. Guarantor Subsidiaries Non-guarantor Subsidiaries Eliminations Consolidated Limited Brands, Inc. ASSETS Current Assets: Cash and Cash Equivalents $ 0 $ 767 $ 421 $ 0 $ 1,188 Accounts Receivable, Net 1 162 36 0 199 Inventories 0 945 153 0 1,098 Deferred Income Taxes 0 35 (3 ) 0 32 Other 0 113 57 0 170 Total Current Assets 1 2,022 664 0 2,687 Property and Equipment, Net 0 1,020 657 0 1,677 Goodwill 0 1,318 130 0 1,448 Trade Names and Other Intangible Assets, Net 0 419 181 0 600 Net Investments in and Advances to/from Consolidated Affiliates 11,928 12,485 6,302 (30,715 ) 0 Other Assets 51 89 744 (704 ) 180 Total Assets $ 11,980 $ 17,353 $ 8,678 $ (31,419 ) $ 6,592 LIABILITIES AND EQUITY Current Liabilities: Accounts Payable $ 0 $ 318 $ 167 $ 0 $ 485 Accrued Expenses and Other 63 305 264 0 632 Income Taxes (2 ) 23 (3 ) 0 18 Total Current Liabilities 61 646 428 0 1,135 Deferred Income Taxes (9 ) 37 212 0 240 Long-term Debt 2,523 608 82 (690 ) 2,523 Other Long-term Liabilities 14 538 179 (14 ) 717 Total Equity 9,391 15,524 7,777 (30,715 ) 1,977