View:
Download DOC
Download PDF
Download XLS
THE LIMITED, INC.
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
x 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended July 29, 2000
 
OR
 
¨ 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                            to                         .
 
Commission file number 1-8344
 
THE LIMITED, INC.
(Exact name of registrant as specified in its charter)
   
Delaware
31-1029810
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
  
 
Three Limited Parkway, P.O. Box 16000, Columbus, OH 43216
(Address of principal executive offices)
(Zip Code)

 

Registrant’s telephone number, including area code (614) 415-7000

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   X    No          
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Common Stock, $.50 Par Value
     Outstanding at August 25, 2000
       425,574,209 Shares
 
THE LIMITED, INC.
 
TABLE OF CONTENTS
 
              Page No.
Part I.      Financial Information     
 
 
Item 1.      Financial Statements     
 
       Consolidated Statements of Income Thirteen and Twenty-six Weeks Ended
July 29, 2000 and July 31, 1999 		     3
 
       Consolidated Balance Sheets July 29, 2000, January 29, 2000 and July 31, 1999      4
 
 
       Consolidated Statements of Cash Flows Twenty-six Weeks Ended
July 29, 2000 and July 31, 1999 		     5
 
       Notes to Consolidated Financial Statements      6
 
 
Item 2.      Management’s Discussion and Analysis of Results of Operations and Financial Condition      13
 
Part II.      Other Information     
 
Item 1.      Legal Proceedings      24
 
Item 6.      Exhibits and Reports on Form 8-K      25

 
PART I - FINANCIAL INFORMATION
 
Item 1.       FINANCIAL STATEMENTS
 
THE LIMITED, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF INCOME
 
(Thousands except per share amounts)
 
(Unaudited)
 
       Thirteen Weeks Ended
     Twenty-six Weeks Ended
       July 29,
2000
     July 31,
1999
     July 29,
2000
     July 31,
1999
Net sales      $2,262,977        $2,267,821        $4,371,413        $4,372,619  
Costs of goods sold and buying and
     occupancy costs		      (1,518,900 )      (1,540,174 )      (2,931,809 )      (2,991,604 )
       
       
       
       
  
Gross income      744,077        727,647        1,439,604        1,381,015  
   
 
 
 
General, administrative and store
     operating expenses		      (585,885 )      (587,371 )      (1,157,014 )      (1,150,409 )
Special and nonrecurring items, net      —         (13,075 )      —         (13,075 )
       
       
       
       
  
Operating income      158,192        127,201        282,590        217,531  
Interest expense      (12,671 )      (20,159 )      (26,679 )      (36,949 )
Other income      9,947        12,509        22,368        27,840  
Minority interest      (15,895 )      (14,069 )      (26,756 )      (22,489 )
       
       
       
       
  
Income before income taxes      139,573        105,482        251,523        185,933  
Provision for income taxes      62,000        48,000        111,000        83,000  
       
       
       
       
  
Net income      $      77,573        $      57,482        $    140,523        $    102,933  
       
       
       
       
  
Net income per share:                    
          Basic      $          0.18        $          0.13        $          0.33        $          0.23  
       
       
       
       
  
          Diluted      $          0.17        $          0.12        $          0.31        $          0.22  
       
       
       
       
  
Dividends per share      $        0.075        $        0.075        $          0.15        $          0.15  
       
       
       
       
  

 

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

 
THE LIMITED, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
(Thousands)
 
       July 29,
2000
      January 29,
2000
      July 31,
1999
       (Unaudited)             (Unaudited)
ASSETS               
                          
Current assets:               
          Cash and equivalents      $    321,503        $    817,268        $    490,322  
          Accounts receivable      102,812        108,794        72,824  
          Inventories      1,214,807        1,050,913        1,238,404  
          Other      295,023        269,302        260,039  
     
     
     
  
Total current assets      1,934,145        2,246,277        2,061,589  
Property and equipment, net      1,253,698        1,229,612        1,400,539  
Deferred income taxes      130,689        125,145        97,271  
Other assets      498,187        486,655        468,297  
     
     
     
  
Total assets      $3,816,719        $4,087,689        $4,027,696  
     
     
     
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                          
Current liabilities:               
          Accounts payable      $    311,536        $    256,306        $    305,780  
          Current portion of long-term debt      150,000        250,000        200,000  
          Accrued expenses      569,049        579,442        683,343  
          Income taxes      4,545        152,458        6,875  
     
     
     
  
Total current liabilities      1,035,130        1,238,206        1,195,998  
Long-term debt      400,000        400,000        750,000  
Other long-term liabilities      180,700        183,398        192,820  
Minority interest      101,717        119,008        50,513  
Shareholders’ equity:               
          Common stock      215,817        189,727        189,727  
          Paid-in capital      64,680        178,374        164,588  
          Retained earnings      1,947,306        6,109,371        5,840,298  
     
     
     
  
       2,227,803        6,477,472        6,194,613  
          Less: treasury stock, at average cost      (128,631 )       (4,330,395 )       (4,356,248 )
     
     
     
  
Total shareholders’ equity      2,099,172        2,147,077        1,838,365  
     
     
     
  
Total liabilities and shareholders’ equity      $3,816,719        $4,087,689        $4,027,696  
     
     
     
  
 
The accompanying Notes are an integral part of these Consolidated Financial Statements.

THE LIMITED, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Thousands)
 
(Unaudited)
 
       Twenty-six Weeks Ended
       July 29,
2000
      July 31,
1999
Operating activities:          
          Net income      $140,523        $102,933  
          Adjustments to reconcile net income to net cash provided by
          (used for) operating activities:		          
                    Depreciation and amortization      130,819        143,751  
                    Special and nonrecurring items, net      —         7,845  
                    Minority interest, net of dividends paid      15,126        12,128  
                    Changes in assets and liabilities:          
                               Accounts receivable      5,982        4,891  
                               Inventories      (163,894 )      (118,734 )
                               Accounts payable and accrued expenses      39,528        23,697  
                               Income taxes      (153,457 )      (164,657 )
                               Other assets and liabilities      (30,209 )      11,284  
     
     
  
Net cash provided by (used for) operating activities      (15,582 )      23,138  
     
     
  
Investing activities:          
          Net expenditures related to Easton real estate investment      (9,200 )      (13,348 )
          Capital expenditures      (150,255 )      (191,752 )
          Decrease in restricted cash      —         351,600  
     
     
  
Net cash provided by (used for) investing activities      (159,455 )      146,500  
     
     
  
Financing activities:          
          Repayment of long-term debt      (100,000 )      —   
          Proceeds from floating rate notes      —         300,000  
          Repurchase of common stock, including transaction costs      (150,303 )      (751,482 )
          Repurchase of subsidiary common stock      (31,391 )      (62,639 )
          Dividends paid      (63,377 )      (66,401 )
          Stock options and other      24,343        30,889  
     
     
  
Net cash used for financing activities      (320,728 )      (549,633 )
     
     
  
Net decrease in cash and equivalents      (495,765 )      (379,995 )
Cash and equivalents, beginning of year      817,268        870,317  
     
     
  
Cash and equivalents, end of period      $321,503        $490,322  
     
     
  
 

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

 
THE LIMITED, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
1.
Basis of Presentation

The Limited, Inc. (the “Company”) is principally engaged in the purchase, distribution and sale of women’s and men’s apparel, women’s intimate apparel, and personal care products. The Company operates an integrated distribution system that supports its retail activities. These activities are conducted under various trade names primarily through the retail stores and catalogue businesses of the Company.

The consolidated financial statements include the accounts of the Company and all significant subsidiaries which are more than 50 percent owned and controlled. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements include the results of Limited Too (“TOO”), through August 23, 1999, when it was established as an independent company in a spin-off transaction, and Galyan’s Trading Co. (“Galyan’s”) through August 31, 1999, when a third party purchased a majority interest.
 
The consolidated financial statements also include the results of Intimate Brands, Inc. (“IBI”), an 84%-owned subsidiary. The minority interest in the net equity of IBI was $101.7 million, $119.0 million and $50.5 million at July 29, 2000, January 29, 2000 and July 31, 1999.
         
Investments in other entities (including joint ventures) where the Company has the ability to significantly influence operating and financial policies, including Galyan’s for periods after August 31,1999, are accounted for on the equity method.

The consolidated financial statements as of and for the thirteen and twenty-six week periods ended July 29, 2000 and July 31, 1999 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s 1999 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 to present fairly the financial position and results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations for a full fiscal year.

The consolidated financial statements as of and for the thirteen and twenty-six week periods ended July 29, 2000 and July 31, 1999 included herein have been reviewed by the independent public accounting firm of PricewaterhouseCoopers LLP and the report of such firm follows the Notes to Consolidated Financial Statements. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for its report on the consolidated financial statements because that report is not a “report” within the meaning of Sections 7 and 11 of that Act.
          

           
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133). FAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000 (February 4, 2001 for the Company). FAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of FAS 133 will not have a significant effect on the Company’s results of operations or its financial position.

2.
Shareholders’ Equity and Earnings Per Share

On May 2, 2000, the Company declared a two-for-one stock split (“stock split”) in the form of a stock dividend distributed on May 30, 2000 to shareholders of record on May 12, 2000. Shareholders’ equity reflects the reclassification of an amount equal to the par value of the increase in issued common shares ($107.9 million) from paid-in capital to common stock. All share and per share data throughout this report has been restated to reflect the stock split.

In conjunction with the stock split, the Company retired 163.7 million treasury shares, representing $4.3 billion at cost. A non-cash charge was made against retained earnings for the excess cost of treasury stock over its par value.

Weighted average common shares outstanding (thousands):
          
 
       Thirteen Weeks Ended
      Twenty-six Weeks
Ended
       July 29,
2000
      July 31,
1999
      July 29,
2000
      July 31,
1999
Basic shares      428,616      442,058      429,550      448,762
Dilutive effect of stock options
     and restricted shares		      17,613      18,394      16,218      17,012
       
    
    
    
Diluted shares      446,229      460,452      445,768      465,774
       
    
    
    
 
        
The computation of earnings per diluted share excludes options to purchase 0.1 million and 0.2 million shares of common stock at quarter-end 2000 and 1999, because the options’ exercise price was greater than the average market price of the common shares during the period.

3.
Inventories
 
The fiscal year of the Company and its subsidiaries is comprised of two principal selling seasons: spring (the first and second quarters) and fall (the third and fourth quarters). Valuation of finished goods inventories is based principally upon the lower of average cost or market determined on a first-in, first-out basis, using the retail method. Inventory valuation at the end of the first and third quarters reflects adjustments for inventory markdowns and shrinkage estimates for the total selling season.
 
4.
Property and Equipment, Net
 
Property and equipment, net, consisted of (thousands):
 
       July 29,
2000
      January 29,
2000
      July 31,
1999
Property and equipment, at cost      $2,983,484        $2,944,827        $3,116,234  
Accumulated depreciation and amortization      (1,729,786 )      (1,715,215 )      (1,715,695 )
     
     
     
  
Property and equipment, net      $1,253,698        $1,229,612        $1,400,539  
     
     
     
  
 
5.
Income Taxes
 
The provision for income taxes is based on the current estimate of the annual effective tax rate. Income taxes paid during the twenty-six weeks ended July 29, 2000 and July 31, 1999 approximated $264.5 million and $252.9 million. Income taxes payable included net current deferred tax assets of $40.1 million and $38.5 million at July 29, 2000 and January 29, 2000.
 
The Internal Revenue Service (IRS) has assessed the Company for additional taxes for the years 1992 to 1996 relating to the undistributed earnings of foreign affiliates for which the Company has provided deferred taxes. On September 7, 1999, the United States Tax Court sustained the position of the IRS with respect to the 1992 year. In connection with an appeal of the Tax Court judgment, the Company made a $112 million payment of taxes and interest in the third quarter of 1999 for the years 1992 to 1998 that reduced deferred tax liabilities. Management believes the ultimate resolution of this matter will not have a material adverse effect on the Company’s results of operations or financial condition.

 

 
6.
Long-Term Debt
 
Unsecured long-term debt consisted of (thousands):
 
       July 29,
2000
      January 29,
2000
      July 31,
1999
7 1 /2 % Debentures due March 2023      $250,000      $250,000      $250,000
7 4 /5 % Notes due May 2002      150,000      150,000      150,000
9 1 /8 % Notes due February 2001      150,000      150,000      150,000
8 7 /8 % Notes paid August 1999      —       —       100,000
Floating rate notes      —       100,000      300,000
     
  
  
       550,000      650,000      950,000
Less: current portion of long-term debt      150,000      250,000      200,000
     
  
  
       $400,000      $400,000      $750,000
     
  
  
 
The 7 1 /2 % debentures may be redeemed at the option of the Company, in whole or in part, at any time on or after March 15, 2003, at declining premiums.
 
The Company maintains a $1 billion unsecured revolving credit agreement (the “Agreement”), established on September 29,1997. Borrowings outstanding under the Agreement, if any, are due September 28, 2002. However, the revolving term of the Agreement may be extended an additional two years upon notification by the Company on September 29, 2001, subject to the approval of the lending banks. The Agreement has several borrowing options, including interest rates which are based on either the lender’s “Base Rate,” as defined, LIBOR, CD-based options or at a rate submitted under a bidding process. Facilities fees payable under the Agreement are based on the Company’s long-term credit ratings, and currently approximate 0.1% of the committed amount per annum.
 
The Agreement supports the Company’s commercial paper program, which is used from time to time to fund working capital and other general corporate requirements. The Agreement contains covenants relating to the Company’s working capital, debt and net worth. No commercial paper or amounts under the Agreement were outstanding at July 29, 2000.
 
The Company has a shelf registration statement, under which up to $250 million of debt securities and warrants to purchase debt securities may be issued.
 
Interest paid during the twenty-six weeks ended July 29, 2000 and July 31, 1999 approximated $28.4 million and $34.0 million.

 
7.
Segment Information
 
The Company identifies operating segments based on a business’s operating characteristics. Reportable segments were determined based on similar economic characteristics, the nature of products and services, and the method of distribution. The apparel segment derives its revenues from sales of women’s and men’s apparel. The Intimate Brands segment derives its revenues from sales of women’s intimate and other apparel, and personal care products and accessories. Sales outside the United States were not significant.
 
The Company and IBI have entered into intercompany agreements for services that include merchandise purchases, capital expenditures, real estate management and leasing, inbound and outbound transportation and corporate services. These agreements specify that identifiable costs be passed through to IBI and that other service-related costs be allocated based upon various methods. Costs are passed through and allocated to the apparel businesses in a similar manner. Management believes that the methods of allocation are reasonable.
 
As a result of its spin-off, the operating results of TOO were reclassified from the apparel segment to the “Other” category for all periods presented. The operating results of Galyan’s (which were consolidated through August 31, 1999 and accounted for on the equity method thereafter) are also included in the “Other” category.
 
Segment information as of and for the thirteen and twenty-six weeks ended July 29, 2000 and July 31, 1999 follows (in thousands):
 
2000
      Apparel
Businesses
      Intimate
Brands
      Other (A)
      Reconciling
Items
      Total
 
Thirteen weeks:                         
 
Net sales      $1,105,172        $1,149,779      $      8,026        —         $2,262,977
Intersegment sales      153,446        —       —         $(153,446 ) (B)      — 
Operating income (loss)      (12,828 )      170,668      352        —         158,192
 
Twenty-six weeks:                         
 
Net sales      $2,191,597        $2,162,031      $    17,785        —         $4,371,413
Intersegment sales      297,065        —       —         $(297,065 ) (B)      — 
Operating income (loss)      (452 )      286,939      (3,897 )      —         282,590
 
Total assets      1,147,718        1,354,376      1,590,390        (275,765 ) (C)      3,816,719
 
(A)
Included in the “Other” category are Henri Bendel, TOO (through August 23, 1999), Galyan’s (through August 31, 1999), non-core real estate and corporate, none of which are significant operating segments.
 
(B)
Represents intersegment sales elimination.
 
(C)
Represents intersegment receivable/payable elimination.

 
1999
      Apparel
Businesses
      Intimate
Brands
      Other (A)
      Reconciling
Items
      Total
 
Thirteen weeks:                         
 
Net sales      $1,077,704        $1,017,109      $  173,008        —         $2,267,821
Intersegment sales      150,391        —       —         $(150,391 ) (B)      — 
Operating income (loss)      (11,362 )      155,938      (4,300 )      (13,075 ) (D)      127,201
 
Twenty-six weeks:                         
 
Net sales      $2,140,932        $1,894,930      $  336,757        —         $4,372,619
Intersegment sales      266,325        —       —         $(266,325 ) (B)      — 
Operating income (loss)      (10,064 )      250,632      (9,962 )      (13,075 ) (D)      217,531
 
Total assets      1,166,081        1,166,083      1,871,898        (176,366 ) (C)      4,027,696
 
(A)—(C)     
See description under table on previous page.
 
(D)     
1999 special and nonrecurring item: a $13.1 million second quarter charge for transactions costs related to the Limited Too spin-off, which relates to the “Other” category.

Report of Independent Accountants
 
To the Board of Directors and
Shareholders of
The Limited, Inc.
 
We have reviewed the accompanying condensed consolidated balance sheets of The Limited, Inc. and its subsidiaries (the “Company”) as of July 29, 2000 and July 31, 1999, and the related condensed consolidated statements of income for each of the thirteen and twenty-six week periods ended July 29, 2000 and July 31, 1999 and the condensed consolidated statements of cash flows for the twenty-six week periods ended July 29, 2000 and July 31, 1999. These financial statements are the responsibility of the Company’s management.
 
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with generally accepted accounting principles.
 
We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of January 29, 2000, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year then ended (not presented herein), and in our report dated February 22, 2000 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 29, 2000, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.
 
/s/ PricewaterhouseCoopers LLP
 
PricewaterhouseCoopers LLP
Columbus, Ohio
August 17, 2000

 
Item 2.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
    
RESULTS OF OPERATIONS
 
Net sales for the second quarter of 2000 were $2.263 billion compared to $2.268 billion in 1999. Operating income increased 24% to $158.2 million from $127.2 million in 1999. Net income increased 35% to $77.6 million from $57.5 million in 1999, and earnings per share increased to $0.17 from $0.12 in 1999 (adjusted to reflect the two-for-one stock split declared on May 2, 2000). The second quarter of 1999 includes the results of Limited Too (“TOO”) prior to its spin-off effective August 23, 1999 and a $13.1 million special and nonrecurring charge for transaction costs related to the TOO spin-off. See the “Other Data” section that follows for further discussion of these items and their impact on the second quarter of 1999 earnings.
 
Second quarter business highlights include the following:
 
·
Intimate Brands, Inc. (“IBI”), led by a strong performance at Victoria’s Secret Stores, reported earnings per share of $0.20, compared to $0.18 in 1999. Operating income increased 9% and net income increased 12%.
 
·
Victoria’s Secret’s brand results were driven by new product launches, expanded inventory depth in core basics and a successful semi-annual sale. Victoria’s Secret Stores’ sales increased 15% to $555.8 million, driven by a 12% comparable store sales increase. Operating profits grew 30% as a result of the sales increase and the absence of the relocation costs incurred in 1999 associated with the move of Victoria’s Secret’s beauty business to New York City. Victoria’s Secret Catalogue sales increased 4% to $233.0 million, while operating profits declined due to increased markdowns and promotional offers.
 
·
Bath & Body Works’ sales increased 17% to $354.9 million, driven by the net addition of 177 new stores and a 3% comparable store sales increase.
 
·
The apparel businesses were led by Express, which generated a comparable store sales increase of 12% and nearly doubled its operating income for the second quarter and the spring season. In total, the apparel businesses had a 4% comparable store sales increase while operating income was essentially flat to last year. The merchandise margin rate decreased during the second quarter’s very promotional retail environment. This decrease was mostly offset by improved buying and occupancy and selling, general and store operating expense leverage.
 
Net sales for the twenty-six weeks ended July 29, 2000 decreased to $4.371 billion from $4.373 billion in 1999. Operating income increased 30% to $282.6 million from $217.5 million in 1999. Net income increased 37% to $140.5 million from $102.9 million in 1999, and earnings per share increased 41% to $0.31 from $0.22 in 1999. The first half of 1999 includes the results of TOO prior to its spin-off effective August 23, 1999 and a $13.1 million special and nonrecurring charge for transaction costs related to the TOO spin-off. See the “Other Data” section that follows for further discussion of these items and their impact on year-to-date earnings.
 

Financial Summary
 
The following summarized financial and statistical data compares the thirteen week and twenty-six week periods ended July 29, 2000 to the comparable 1999 periods:
 
       Second Quarter
     Year — to — Date
       2000
     1999
     Change
     2000
     1999
     Change
 
Net Sales (millions):                              
 
Express      $  338        $  302        12%        $  685      $  604        13%  
Lerner New York      214        220        (3% )      434      456        (5% )
Lane Bryant      238        237        —         458      460        —   
Limited Stores      148        166        (11% )      306      331        (8% )
Structure      126        139        (9% )      239      262        (9% )
Other (principally Mast)      41        14        N/M        69      28        N/M  
     
     
       
     
  
     
  
          Total apparel businesses      $1,105        $1,078        3%        $2,191      $2,141        2%  
     
     
       
     
  
     
  
Victoria’s Secret Stores      $  556        $  485        15%        $1,055      $  908        16%  
Bath & Body Works      355        303        17%        659      561        17%  
Victoria’s Secret Catalogue      233        225        4%        437      419        4%  
Other (principally Gryphon)      6        4        N/M        11      7        N/M  
     
     
       
     
  
     
  
          Total Intimate Brands      $1,150        $1,017        13%        $2,162      $1,895        14%  
     
     
       
     
  
     
  
Henri Bendel      8        8        —         18      17        6%  
Galyan’s (through August 31, 1999)      —         78        N/M        —       138        N/M  
TOO (through August 23, 1999)      —         87        N/M        —       182        N/M  
     
     
       
     
  
     
  
Total net sales      $2,263        $2,268        —         $4,371      $4,373        —   
     
     
       
     
  
     
  
 
Operating Income (millions):                              
 
Apparel businesses      $(13 )      $(11 )      (18% )      —       $(10 )      100%  
Intimate Brands      171        156        10%        $  287      251        14%  
Other      —         (5)        100%        (4)      (10 )      60%  
     
     
       
     
  
     
  
Sub-total      158        140        13%        283      231        23%  
Special and nonrecurring items      —         (13 )(a)      100%        —       (13 )(a)      100%  
     
     
       
     
  
     
  
Total operating income      $  158        $  127        24%        $  283      $  218        30%  
     
     
       
     
  
     
  
                                   
N/M Not meaningful                                  
 
           
(a)
1999 special and nonrecurring item: a $13.1 million second quarter charge for transaction costs related to the TOO spin-off, which relates to the “Other” category.

 
       Second Quarter
     Year — to — Date
       2000
     1999
     Change
     2000
     1999
     Change
Comparable Store Sales:                              
Express      12%        9%             14%        12%       
Lerner New York      1%        7%             (1% )      15%       
Lane Bryant      3%        9%             3%        9%       
Limited Stores      0%        10%             4%        7%       
Structure      (4% )      8%             (4% )      6%       
     
     
              
     
        
          Total apparel businesses      4%        9%             5%        10%       
     
     
              
     
        
Victoria’s Secret Stores      12%        13%             13%        13%       
Bath & Body Works      3%        9%             5%        11%       
     
     
              
     
        
          Total Intimate Brands      9%        12%             10%        12%       
     
     
              
     
        
Henri Bendel      (4% )      6%             3%        7%       
Galyan’s (through August 31, 1999)      —         9%             —         9%       
TOO (through August 23, 1999)      —         8%             —         9%       
     
     
              
     
        
Total comparable store sales      6%        10%             7%        11%       
     
     
              
     
        
 
Store Data:                              
Retail sales increase (decrease)
          attributable to net new and
          remodeled stores:		                              
          Apparel businesses      (4% )      (5% )            (4% )      (4% )     
          Intimate Brands      7%        7%             8%        8%       
 
Retail sales per average selling
          square foot:		                              
          Apparel businesses      $    64        $    60        8%        $126        $117        8%
          Intimate Brands      $  137        $  131        4%        $260        $248        5%
 
Retail sales per average store
          (thousands):		                              
          Apparel businesses      $  375        $  349        7%        $739        $684        8%
          Intimate Brands      $  419        $  401        4%        $794        $759        5%
 
Average store size at end of
          quarter (selling square feet):		                              
          Apparel businesses      5,829        5,867        (1% )               
          Intimate Brands      3,051        3,047        0%                 
 
Selling square feet at end of
          quarter (thousands):		                              
          Apparel businesses      16,509        17,735        (7% )               
          Intimate Brands      6,727        6,048        11%                 
 
Number of Stores:                              
          Beginning of period      4,993        5,358             5,023        5,382       
          Opened      68        59             108        143       
          Closed      (23 )      (59 )           (93 )      (167 )     
     
     
              
     
        
          End of period      5,038        5,358             5,038        5,358       
     
     
              
     
        

 
       Number of Stores
      Selling Sq. Ft. (thousands)
       July 29,
2000
      July 31,
1999
      Change
      July 29,
2000
      July 31,
1999
      Change
Express      677      690      (13 )      4,348      4,430      (82 )
Lerner New York      585      625      (40 )      4,446      4,831      (385 )
Lane Bryant      660      699      (39 )      3,205      3,398      (193 )
Limited Stores      422      491      (69 )      2,569      3,022      (453 )
Structure      488      518      (30 )      1,941      2,054      (113 )
     
  
  
     
  
  
  
Total apparel businesses      2,832      3,023      (191 )      16,509      17,735      (1,226 )
     
  
  
     
  
  
  
Victoria’s Secret Stores      902      859      43        4,008      3,810      198  
Bath & Body Works      1,303      1,126      177        2,719      2,238      481  
     
  
  
     
  
  
  
Total Intimate Brands      2,205      1,985      220        6,727      6,048      679  
     
  
  
     
  
  
  
Henri Bendel      1      1      —         35      35      —   
Galyan’s      —       17      (17 )      —       1,196      (1,196 )
TOO      —       332      (332 )      —       1,054      (1,054 )
     
  
  
     
  
  
  
Total stores and selling sq. ft.      5,038      5,358      (320 )      23,271      26,068      (2,797 )
     
  
  
     
  
  
  
 
Net Sales
 
Net sales for the second quarter of 2000 were $2.263 billion compared to $2.268 billion for the same period in 1999. A 6% comparable store sales increase and the net addition of 220 new stores at IBI were more than offset by: 1) the loss of TOO sales following the August 23, 1999 spin-off; 2) the exclusion of Galyan’s sales following the third party purchase of a 60% majority interest effective August 31, 1999; and 3) store closings in the apparel segment.
 
At IBI, net sales for the second quarter of 2000 increased 13% to $1.150 billion from $1.017 billion in 1999. The net sales increase was due to a 9% increase in comparable store sales and the net addition of 220 new stores.
 
At the apparel businesses, net sales for the second quarter of 2000 increased 3% to $1.105 billion from $1.078 billion in 1999. A 4% increase in comparable store sales offset a net reduction of 191 stores. Express led the apparel businesses with a 12% increase in comparable store sales. Additionally, Mast sales increased because sales to TOO are not eliminated in consolidation subsequent to its August 23, 1999 spin-off.
 
The 2000 year-to-date net sales were $4.371 billion compared to $4.373 billion in 1999. A 7% comparable store sales increase was more than offset by the loss of TOO sales following the spin-off, the exclusion of Galyan’s sales following the third party purchase of a 60% majority interest and store closings in the apparel segment.

 
Gross Income
 
The second quarter of 2000 gross income rate (expressed as a percentage of sales) increased to 32.9% from 32.1% for the same period in 1999. At the apparel businesses, the gross income rate decreased slightly as a lower merchandise margin rate was partially offset by improved buying and occupancy expense rate leverage. The decrease in the apparel merchandise margin rate, particularly at Lerner, Lane Bryant and Structure, was primarily due to higher markdowns taken to sell through summer merchandise. At IBI, the gross income rate improvement was primarily due to positive buying and occupancy expense leverage, driven by a 12% increase in comparable store sales at Victoria’s Secret Stores. The buying and occupancy expense leverage was partially offset by a decline in the merchandise margin rate, primarily due to increased markdowns and promotional offers at Victoria’s Secret Catalogue.
 
The 2000 year-to-date gross income rate increased to 32.9% from 31.6% in 1999. The gross income rate increase was principally due to a decrease in the buying and occupancy expense rate as a result of sales leverage at IBI and the benefit from store closings at the apparel businesses.
 
General, Administrative and Store Operating Expenses
 
The second quarter of 2000 general, administrative and store operating expense rate (expressed as a percentage of sales) of 25.9% was flat to last year. The improved expense leverage at the apparel businesses, primarily at Express and Lerner, was offset by a rate increase at IBI which was principally driven by investments in product development and store selling at Bath & Body Works.
 
The 2000 year-to-date general, administrative and store operating expense rate increased to 26.5% from 26.3% in 1999. The rate increase was primarily due to investments in product development and store selling at Bath & Body Works, as well as the inability of the apparel businesses to achieve expense leverage on sales growth of 2%.
 
Operating Income
 
The second quarter of 2000 operating income rate (expressed as a percentage of sales) increased to 7.0% compared to 5.6% in 1999. Excluding the special and nonrecurring item in 1999 (see the “Other Data” section), the second quarter operating income rate increased to 7.0% in 2000 from 6.2% in 1999, primarily driven by gross income improvement.
 

The 2000 year-to-date operating income rate increased to 6.5% from 5.0% in 1999. Excluding the special and nonrecurring item in 1999, the operating income rate increased to 6.5% in 2000 from 5.3% in 1999. The rate improvement was driven by the gross income rate increase of 1.3% which more than offset the general, administrative and store operating expense rate increase.

 

 
Interest Expense
 
       Second Quarter
     Year–to–Date
       2000
     1999
     2000
     1999
Average borrowings (millions)      $667        $1,025        $664        $914  
Average effective interest rate      7.60 %      7.87 %      8.03 %      8.08 %
 
Interest expense for the second quarter of 2000 decreased to $12.7 million from $20.2 million for the same period in 1999. Year-to-date interest expense decreased to $26.7 million from $36.9 million in 2000. The decreases were primarily the result of decreased borrowing levels.
 
Other Income
 
Other income for the second quarter of 2000 decreased to $9.9 million from $12.5 million for the same period in 1999. Year-to-date other income decreased to $22.4 million from $27.8 million in 1999. The decreases were due to lower average invested cash balances. Average invested cash balances were reduced by the repurchase of $150.3 million of common stock in 2000 and by the portion of the $753 million self-tender in 1999, which exceeded the funding provided by the $352 million of (formerly) restricted cash. These impacts were partially offset by $182 million in net proceeds from the sale of a 60% interest in Galyan’s, and the $50 million dividend from TOO prior to its spin-off in 1999.
 
Other Data
 
The following adjusted income information for 1999 gives effect to the spin-off of TOO on August 23, 1999 as if it had occurred on February 1, 1999, and the $13.1 million special and non-recurring charge for transaction costs related to the TOO spin-off.
 
Management believes the presentation below provides a reasonable basis on which to present the adjusted income information. Although the adjusted income information should not be construed as an alternative to the reported results determined in accordance with generally accepted accounting principles, it is provided to assist in investors’ understanding of the Company’s results of operations.

 
Adjusted Income Information (Thousands, except per share amounts):
 
       Thirteen Weeks Ended
       July 29,
2000
     July 31, 1999
       As
Reported
     As
Reported
     Adjustments
     As
Adjusted
Net Sales      $2,262,977        $2,267,821        ($86,864 )      $2,180,957  
     
     
     
     
  
Gross income      744,077        727,647        (28,606 )      699,041  
     
     
     
     
  
General, administrative and store operating expenses      (585,885 )      (587,371 )      26,902        (560,469 )
Special and nonrecurring items      —         (13,075 )      13,075        —   
     
     
     
     
  
Operating income      158,192        127,201        11,371        138,572  
Interest expense      (12,671 )      (20,159 )           (20,159 )
Other income, net      9,947        12,509             12,509  
Minority interest      (15,895 )      (14,069 )           (14,069 )
     
     
     
     
  
Income before income taxes      139,573        105,482        11,371        116,853  
Provision for income taxes      62,000        48,000        4,300        52,300  
     
     
     
     
  
Net income      $      77,573        $      57,482        $    7,071        $      64,553  
     
     
     
     
  
Earnings per share      $          0.17        $          0.12             $          0.14  
     
     
              
  
 Weighted average shares outstanding      446,229        460,452             460,452  
     
     
              
  
 
Reflecting the TOO spin-off as if it had occurred at the beginning of 1999, net sales for the second quarter of 2000 increased 4% to $2.263 billion from $2.181 billion for the same period in 1999. Excluding the $13.1 million special and nonrecurring charge for transaction costs related to the TOO spin-off in 1999, net income for the second quarter of 2000 increased 20% to $77.6 million from $64.6 million in 1999 and earnings per share increased 21% to $0.17 from $0.14.

 
       Twenty-six Weeks Ended
       July 29,
2000
      July 31, 1999
       As
Reported
      As
Reported
      Adjustments
      As
Adjusted
Net Sales      $4,371,413        $4,372,619        ($181,912 )      $4,190,707  
     
     
     
     
  
Gross income      1,439,604        1,381,015        (60,330 )      1,320,685  
     
     
     
     
  
General, administrative and store operating expenses      (1,157,014 )      (1,150,409 )      57,314        (1,093,095 )
Special and nonrecurring items      —         (13,075 )      13,075        —   
     
     
     
     
  
Operating income      282,590        217,531        10,059        227,590  
Interest expense      (26,679 )      (36,949 )           (36,949 )
Other income, net      22,368        27,840             27,840  
Minority interest      (26,756 )      (22,489 )           (22,489 )
     
     
     
     
  
Income before income taxes      251,523        185,933        10,059        195,992  
Provision for income taxes      111,000        83,000        3,800        86,800  
     
     
     
     
  
Net income      $    140,523        $    102,933        $      6,259        $    109,192  
     
     
     
     
  
Earnings per share      $          0.31        $          0.22             $          0.23  
     
     
              
  
Weighted average shares outstanding      445,768        465,774             465,774  
     
     
              
  
 
Reflecting the TOO spin-off as if it had occurred at the beginning of 1999, net sales for the twenty-six weeks ended July 29, 2000 increased 4% to $4.371 billion from $4.191 billion for the same period in 1999. Excluding the $13.1 million special and nonrecurring charge for transaction costs related to the TOO spin-off in 1999, net income for the twenty-six weeks ended July 29, 2000 increased 29% to $140.5 million from $109.2 million in 1999 and earnings per share increased 35% to $0.31 from $0.23.

 
FINANCIAL CONDITION
 
The Company’s consolidated balance sheet as of July 29, 2000 provides evidence of financial strength and flexibility. A more detailed discussion of liquidity, capital resources and capital requirements follows.
 
Liquidity and Capital Resources
 
Cash provided from operating activities, commercial paper backed by funds available under the committed long-term credit agreement and the Company’s capital structure continue to provide the resources to support operations, including projected growth, seasonal requirements and capital expenditures. A summary of the Company’s working capital position and capitalization follows (thousands):
 
       July 29,
2000
      January 29,
2000
      July 31,
1999
Working capital      $    899,015      $ 1,008,071      $    865,591
     
  
  
Capitalization:               
          Long-term debt      $    400,000      $    400,000      $    750,000
          Shareholders’ equity      2,099,172      2,147,077      1,838,365
     
  
  
Total capitalization      $ 2,499,172      $ 2,547,077      $ 2,588,365
     
  
  
Additional amounts available under long-term credit agreements      $ 1,000,000      $ 1,000,000      $ 1,000,000
     
  
  
 
In addition, the Company may offer up to $250 million of debt securities and warrants to purchase debt securities under its shelf registration statement.
 
Net cash used for operating activities was $15.6 million for the twenty-six weeks ended July 29, 2000 versus $23.1 million provided from operating activities last year. Significant uses of cash in both years relate to the growth of inventories for the fall selling seasons and the timing of tax payments related to the fourth quarter of the prior year.
 
Investing activities included capital expenditures, which were primarily for new and remodeled stores, and in 1999, the rescission of the Contingent Stock Redemption Agreement.
 
Financing activities in 2000 primarily included the $100 million repayment of the Series C floating rate notes and the quarterly dividend payments of $0.075 per share. In addition, the Company repurchased 6.3 million shares of common stock for $150.3 million. Also, in 2000, IBI repurchased 1.4 million shares from its public shareholders for $31.4 million and 7.4 million shares from The Limited, Inc. for $166.5 million, which had no net cash flow impact to The Limited, Inc.

 
Financing activities in 1999 included proceeds of $300 million from floating rate notes issued in May 1999. Additionally, the rescission of the Contingent Stock Redemption Agreement made $351.6 million in restricted cash available for general corporate purposes. This cash and other available funds were used to repurchase shares under a self-tender, which was funded June 14, 1999. A total of 15 million shares of the Company’s common stock were repurchased at $50 per share, resulting in a cash outflow of $750 million. Cash used for financing activities in 1999 also reflected the IBI stock repurchase initiated during January 1999. During 1999, IBI repurchased 3.0 million shares from its public shareholders for $62.6 million. Additionally, IBI repurchased 16.4 million shares from The Limited, Inc. for $341.8 million, which had no net cash flow impact to The Limited, Inc.
 
In addition, non-cash financing activities include a two-for-one stock split in the form of a stock dividend distributed on May 30, 2000 to shareholders of record on May 12, 2000. Shareholders’ equity reflects the reclassification of an amount equal to the par value of the increase in issued common shares ($107.9 million) from paid-in capital to common stock. Also, in conjunction with the stock split, the Company retired 163.7 million treasury shares, representing $4.3 billion at cost. A non-cash charge was made against retained earnings for the excess cost of treasury stock over its par value.
 
Capital Expenditures
 
Capital expenditures totaled $150.3 million for the twenty-six weeks ended July 29, 2000, compared to $191.8 million for the same period in 1999. The Company anticipates spending $425 to $450 million for capital expenditures in 2000, of which $325 to $350 million will be for new stores and for remodeling of and improvements to existing stores.
 
The Company expects that 2000 capital expenditures will be funded primarily by net cash provided by operating activities.
 
Adoption of New Accounting Standards
 
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133). FAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000 (February 4, 2001 for the Company). FAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of FAS 133 will not have a significant effect on the Company’s results of operations or its financial position.

 

 
Safe Harbor Statement Under The Private Securities Litigation Act Of 1995
The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Form 10-Q or made by management of the Company involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company’s control. Accordingly, the Company’s future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The following factors, among others, in some cases have affected and in the future could affect the Company’s financial performance and actual results and could cause actual results for 2000 and beyond to differ materially from those expressed or implied in any forward-looking statements included in this Form 10-Q or otherwise made by management: changes in consumer spending patterns, consumer preferences and overall economic conditions, the impact of competition and pricing, changes in weather patterns, political stability, currency and exchange risks and changes in existing or potential duties, tariffs or quotas, availability of suitable store locations at appropriate terms, ability to develop new merchandise and ability to hire and train associates.

 
PART II - OTHER INFORMATION
 
Item 1.
LEGAL PROCEEDINGS
 
The Company is a defendant in a variety of lawsuits arising in the ordinary course of business.
 
On January 13, 1999, two complaints were filed against the Company and its subsidiary, Lane Bryant, Inc., as well as other defendants, including many national retailers. Both complaints relate to labor practices allegedly employed on the island of Saipan, Commonwealth of the Northern Mariana Islands, by apparel manufacturers unrelated to the Company (some of which have sold goods to the Company) and seek injunctions, unspecified monetary damages, and other relief. One complaint, on behalf of a class of unnamed garment workers, filed in the United States District Court for the Central District of California, Western Division, alleges violations of federal statutes, the United States Constitution, and international law. On April 12, 1999, a motion to dismiss that complaint for failure to state a claim upon which relief can be granted was filed, and it remains pending. On September 29, 1999, the United States District Court for the Central District of California, Western Division, transferred the case to the United States District Court for the District of Hawaii. On June 23, 2000, the United States District Court for the District of Hawaii transferred the case to the United States District Court for the District of the Northern Mariana Islands, and on July 7, 2000 denied plaintiffs’ motion for reconsideration of the transfer order. Plaintiffs have filed a Petition for a Writ of Mandamus challenging the transfer order and Motion for Emergency Stay in the U.S. 9th Circuit Court of Appeals, both of which are pending. A first amended complaint was filed on April 28, 2000, which adds additional defendants but does not otherwise substantively alter either the claims alleged or relief sought. The second complaint, filed by a national labor union and other organizations in the Superior Court of the State of California, San Francisco County, and which alleges unfair business practices under California law, remains pending.
 
In May and June 1999, purported shareholders of the Company filed three derivative actions in the Court of Chancery of the State of Delaware, naming as defendants the members of the Company’s board of directors and the Company, as nominal defendant. The actions thereafter were consolidated. The operative complaint generally alleged that the rescission of the Contingent Stock Redemption Agreement previously entered into by the Company with Leslie H. Wexner and The Wexner Children’s Trust (the “Contingent Stock Redemption Agreement”) constituted a waste of corporate assets and a breach of the board members’ fiduciary duties, and that the issuer tender offer completed on June 3, 1999 was a “wasteful transaction in its own right.” On July 30, 1999, all defendants moved to dismiss the complaint, both on the ground that it failed to allege facts showing that demand on the board to institute such an action would be futile and for failure to state a claim. Plaintiffs did not respond to that motion, but on February 16, 2000, plaintiffs filed a first amended consolidated derivative complaint (the “amended complaint”), which makes allegations similar to the first complaint concerning the rescission of the Contingent Stock Redemption Agreement and the 1999 issuer tender offer and adds allegations apparently intended to show that certain directors were not disinterested in those decisions. Defendants moved to dismiss the amended complaint on April 14, 2000. Briefing on the motion is on-going.
 
Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, the foregoing proceedings are not expected to have a material adverse effect on the Company’s financial position or results of operations.
 
Item 6.       EXHIBITS AND REPORTS ON FORM 8-K
 
(a)
Exhibits.
 
11.
Statement re: Computation of Per Share Earnings.
 
12.
Statement re: Computation of Ratio of Earnings to Fixed Charges.
 
15.
Letter re: Unaudited Interim Financial Information to Securities and Exchange
Commission re: Incorporation of Report of Independent Accountants.
 
27.
Financial Data Schedule.
 
(b)
Reports on Form 8-K.
 
 None.

 
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.
 
THE LIMITED, INC.
(Registrant)
 
By   
/s/ V. Ann Hailey
 
V. Ann Hailey,
Executive Vice President and Chief
Financial Officer*
 
Date: September 8, 2000
 
*  Ms. Hailey is the principal financial officer and has been duly authorized to sign on behalf of the Registrant.

COMPUTATION OF PER SHARE EARNINGS
 
EXHIBIT 11
 
THE LIMITED, INC. AND SUBSIDIARIES
 
COMPUTATION OF PER SHARE EARNINGS
 
(Thousands except per share amounts)
 
       Thirteen weeks Ended
       July 29,
2000
      July 31,
1999
Net income      $77,573        $57,482  
Less:  impact of IBI dilutive options and restricted shares on
           consolidated income*		      (1,298 )      (1,265 )
     
     
  
Adjusted net income      $76,275        $56,217  
     
     
  
Weighted average common shares outstanding:          
                    Basic shares      428,616        442,058  
                    Dilutive effect of stock options and restricted shares      17,613        18,394  
     
     
  
                    Diluted shares      446,229        460,452  
     
     
  
Net income per diluted share      $    0.17        $    0.12  
     
     
  
 
       Twenty- six weeks Ended
       July 29,
2000
      July 31,
1999
Net income      $140,523        $102,933  
Less:  impact of IBI dilutive options and restricted shares on
           consolidated income*		      (1,844 )      (1,778 )
     
     
  
Adjusted net income      $138,679        $101,155  
     
     
  
Weighted average common shares outstanding:          
                    Basic shares      429,550        448,762  
                    Dilutive effect of stock options and restricted shares      16,218        17,012  
     
     
  
                    Diluted shares      445,768        465,774  
     
     
  
Net income per diluted share      $      0.31        $      0.22  
     
     
  
 
*Represents the impact of dilutive options and restricted shares at Intimate Brands as a reduction to income.
RATIO OF EARNINGS TO FIXED CHARGES
 
EXHIBIT 12
 
THE LIMITED, INC. AND SUBSIDIARIES
 
RATIO OF EARNINGS TO FIXED CHARGES
 
(Thousands except ratio amounts)
 
       Twenty-six weeks
Ended
       July 29,
2000
      July 31,
1999
Adjusted Earnings          
Pretax earnings      $251,523      $185,933
Portion of minimum rent ($340,773 in 2000 and
      $355,113 in 1999) representative of interest		      113,591      118,371
Interest on indebtedness      26,679      36,949
Minority interest      26,756      22,489
     
  
          Total earnings as adjusted      $418,549      $363,742
      
    
Fixed Charges          
Portion of minimum rent representative of interest      $113,591      $118,371
Interest on indebtedness      26,679      36,949
     
  
          Total fixed charges      $140,270      $155,320
     
  
Ratio of earnings to fixed charges      2.98x      2.34x
     
  
REPORT OF INDEPENDENT ACCOUNTANTS
 
EXHIBIT 15
 
September 8, 2000
 
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
 
Commissioners:
 
We are aware that our report dated August 17, 2000 on our review of interim consolidated financial information of The Limited, Inc. and Subsidiaries (the “Company”) as of and for the period ended July 29, 2000 and included in the Company’s quarterly report on Form 10-Q for the quarter then ended is incorporated by reference in its registration statements on Form S-8, Registration Nos. 33-18533, 33-25005, 2-92277, 33-24829, 33-24507, 33-24828, 2-95788, 2-88919, 33-24518, 33-6965, 33-14049, 33-22844, 33-44041, 33-49871, 333-04927, 333-04941, and the registration statements on Form S-3, Registration Nos. 33-20788, 33-31540, 33-43832, and 33-53366.
 
Very truly yours,
 
/s/ PricewaterhouseCoopers LLP
 
PricewaterhouseCoopers LLP
Columbus, Ohio
  




 5

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OF THE LIMITED, INC. AND
SUBSIDIARIES FOR THE QUARTER ENDED JULY 29, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

 1,000

                             
                   3-MOS
                          FEB-03-2001
                             APR-30-2000
                               JUL-29-2000
                                         321,503
                                         0
                                  102,812
                                         0
                                  1,214,807
                             1,934,145
                                       2,983,484
                               1,729,786
                               3,816,719
                        1,035,130
                                        400,000
                                0
                                          0
                                       215,817
                                   1,883,355
                 3,816,719
                                      2,262,977
                             2,262,977
                                        1,518,900
                                1,518,900
                               585,885
                                     0
                              12,671
                                139,573
                                    62,000
                             77,573
                                       0
                                      0
                                            0
                                    77,573
                                       0.18
                                     0.17