Transaction Overview January 2020 - Investor Relations | Bath & Body ...
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Transaction Overview January 2020
Cautionary Notices & Non-GAAP Financial Measures
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this presentation or made by our company or our management
involve risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. Accordingly, our future performance and financial results may differ materially
from those expressed or implied in any such forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “planned,” “potential” and any similar
expressions may identify forward-looking statements. Risks associated with the following factors, among others, in some cases have affected and in the future could affect our financial performance and
actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this presentation or otherwise made by our company or our
management:
• general economic conditions, consumer confidence, consumer spending patterns and market disruptions including severe weather conditions, natural disasters, significant health hazards or
pandemics, terrorist activities, financial crises, political crises or other major events, or the prospect of these events;
• divestitures or other dispositions, including any divestiture of Victoria’s Secret and related operations, could negatively impact our business, and contingent liabilities from businesses that we have sold
could adversely affect our financial statements;
• the seasonality of our business;
• difficulties arising from turnover in company leadership or other key positions;
• our ability to attract, develop and retain qualified associates and manage labor-related costs;
• liabilities arising from divested businesses;
• the dependence on mall traffic and the availability of suitable store locations on appropriate terms;
• our ability to grow through new store openings and existing store remodels and expansions;
• our ability to successfully expand internationally and related risks;
• our independent franchise, license and wholesale partners;
• our direct channel businesses;
• our ability to protect our reputation and our brand images;
• our ability to attract customers with marketing, advertising and promotional programs;
• our ability to protect our trade names, trademarks and patents;
• the highly competitive nature of the retail industry and the segments in which we operate;
• consumer acceptance of our products and our ability to manage the life cycle of our brands, keep up with fashion trends, develop new merchandise and launch new product lines successfully;
• our ability to source, distribute and sell goods and materials on a global basis, including risks related to:
• political instability, environmental hazards or natural disasters;
• significant health hazards or pandemics, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in
infected areas;
• duties, taxes and other charges;
• legal and regulatory matters;
• volatility in currency exchange rates;
• local business practices and political issues;
• potential delays or disruptions in shipping and transportation and related pricing impacts;
• disruption due to labor disputes; and
• changing expectations regarding product safety due to new legislation;
2
Cautionary Notices & Non-GAAP Financial Measures
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
• our geographic concentration of vendor and distribution facilities in central Ohio;
• fluctuations in foreign currency exchange rates;
• stock price volatility;
• our ability to pay dividends and related effects;
• our ability to maintain our credit rating;
• our ability to service or refinance our debt;
• shareholder activism matters;
• the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations;
• fluctuations in product input costs;
• our ability to adequately protect our assets from loss and theft;
• fluctuations in energy costs;
• increases in the costs of mailing, paper and printing;
• claims arising from our self-insurance;
• our ability to implement and maintain information technology systems and to protect associated data;
• our ability to maintain the security of customer, associate, third-party or company information;
• our ability to comply with laws and regulations or other obligations related to data privacy and security;
• our ability to comply with regulatory requirements;
• legal and compliance matters; and
• tax, trade and other regulatory matters.
We are not under any obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this presentation to reflect circumstances
existing after the date of this presentation or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-
looking statements will not be realized.
Non-GAAP Financial Measures
In presenting the company's results, management has included and discussed certain non-GAAP financial measures. Management believes that these non-GAAP measures, which may be defined
differently by other companies, better explain the company's results of operations in a manner that allows for a more complete understanding of the underlying trends in the company's business. However,
these measures should not be viewed as a substitute for those determined in accordance with GAAP. For a description of non-GAAP financial measures and reconciliations used in this presentation,
please see the Appendix to this presentation.
3
Key Highlights
1 Strong portfolio of highly recognized and global brands
Bath & Body Works – The #1 fragrance specialty retailer1 (with leading market share
across categories)
Victoria’s Secret – The #1 intimates retailer with strong global reach
2 Committed to establishing Bath & Body Works as a pure-play public company; taking
necessary steps to prepare Victoria’s Secret to operate on a separate, standalone basis
3 Compelling digital presence and omni-channel capabilities
4 Highly productive real estate footprint with strategic initiatives underway to right-size the fleet
5 Strong liquidity and historical cash flow generation
6 Highly experienced leadership team and Board of Directors
1) Source: NPD Group
4
2020 Actions
As with most companies, COVID-19 defined 2020 for us
Our stores were closed for significant periods of time during the first half of 2020
We dedicated resources to maximize capacity in our direct fulfillment centers to meet increased customer demand, while focusing
on distribution, fulfillment and call center safety.
BBW Direct sales were up 109% and VS Direct sales were up 31% in 2020
L Brands delivered record fourth quarter performance despite the impact of the pandemic. Total earnings per share were $3.03, an
increase of 61% compared to adjusted $1.88 last year. Fourth quarter operating income increased 38% at BBW and 108% at VS
We took action to maintain liquidity and conserve cash during the pandemic, resulting in a strong financial position, with $3.9 billion
in cash at year-end and no amounts drawn under our revolving credit facility.
Suspended the dividend and share repurchases
Reduced capital expenditures
Converted our revolving credit facility from a cash-flow based facility to an asset-backed loan facility
Issued $1.25 billion in new notes with a portion of proceeds to retire the $450 million maturity due April 2021
Issued $1.0 billion in new notes with proceeds to retire $1.0 billion maturities primarily due 2022/2023
We have implemented a plan to achieve meaningful reductions in overhead expenses and to decentralize significant shared
functions and services to support the creation of standalone companies (our Profit Improvement Plan). The plan is expected to
reduce costs by $400 million on an annualized basis.
We remain committed to a separation of Victoria’s Secret and Bath and Body Works; we retained Goldman Sachs and J.P. Morgan
to serve as financial advisors on the separation of Bath & Body Works and Victoria’s Secret and are targeting an August separation
5
Profit Improvement Plan Expected To Yield $400 Million In Annual Cost Reduction beginning Q3 2020
1
Victoria's Secret Merchandise Margin rate improvement through:
Disciplined inventory management
Sourcing / tariff mitigation
More on trend fashion / full price selling
2
Store selling cost rate reduction through changes in management structure and labor model
3
Elimination / substantial reduction of worst store losses / rent reductions
Closed ~240 VS stores in North America in 2020
4
Adressed Victoria's Secret UK and China Operating losses
UK: Announced partnership with Next, plc to operate a restructured VS coming out of administration
China: Closed unprofitable flagship store in Hong Kong; restructured flagship leases in Shanghai and Beijing, reduced
stores and headcount
5
L Brands Home office overhead reductions (approximately 15% of headcount, ~850 associates)
6
L Brands Historical Performance
BBW REVENUE BBW OPERATING INCOME1 BBW OPERATING INCOME BY QUARTER1
($ in millions) ($ in millions) ($ in millions)
$1,000
$2,000 $914
$7,000 $1,832
$6,434 $800
$664
$1,500 $600
$6,000
$494
$1,224
$5,356 $1,103
$400 $349
$5,000 $4,776 $1,000
$184 $209
$200 $168
$76
$4,000 $500 $0
2018 2019 2020 2018 2019 2020 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20
Adjusted % to LY 30% 6% 9% 9% (55%) 90% 137% 38%
VS REVENUE VS OPERATING INCOME1 VS OPERATING INCOME BY QUARTER1
($ in millions) ($ in millions) ($ in millions)
$8,500 $403
$8,103 $600 $599 $400
$300
$7,509
$7,500 $194
$200
$400 $115
$100
$32 $35
$6,500
$0
$191
$5,413 $200 $174
($100)
$5,500 ($70) ($87)
($200)
$4,500 ($257)
$0 ($300)
2018 2019 2020 2018 2019 2020 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20
Adjusted Adjusted Adjusted % to LY (64%) (71%) nm (46%) nm nm 264% 108%
See Notes to Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
(1) Operating Income is depicted on a non‐GAAP reported basis. 77
Strong Portfolio of Highly Recognized and Global Brands
Specialty retailer of women's intimate and other apparel,
One of the largest specialty personal care and home
featuring fashion-inspired collections and prestige
fragrance brands in the world, with $6.4 billion in net sales
fragrances, with $5.4 billion in net sales in 2020. Victoria’s
in 2020 selling under the brands Bath & Body Works, White
Secret also includes the brand PINK which markets
Barn, C.O. Bigelow and others.
products to the college-aged woman.
#1 Specialty Home Fragrance Retailer in America and
#1 Brand in America for Body Moisturizer, #1 in Intimates market share (1)
Hand Soap & Hand Sanitizer
1,736 Stores(2) 871 Stores(2)
(1) Source: NPD Group
(2) Includes company-operated stores in the U.S. and Canada as of January 30, 2021.
8
Bath & Body Works: The Specialty Fragrance Retailer
Category Dominant
BODY CARE & FRAGRANCE HOME FRAGRANCE SOAPS & SANITIZERS
~30% Of BBW Sales* ~40% Of BBW Sales* ~20% Of BBW Sales*
A Uniquely Differentiated POV
FASHION EVERYDAY USE GIFTABLE
*Fiscal Year 2020 BBW net sales for US and Canada.
9
Bath & Body Works: Store Overview
BBW Stores by Location Type
High profitability across all mall types in North America
45% of stores are not in malls
Leases provide significant protection based on occupancy and co- Current Total
tenancy provisions Stores(1)
1,736
28% of stores are in C-mall locations and have a remaining average
lease term of 3 years or less
Minimal exposure in vulnerable venues due to strong lease termination
rights which provide flexibility
Sales Productivity
BBW U.S. Sales per
perAverage Selling Square
Foot Foot
Continued proactive management of real estate BBW U.S. Sales Average Selling Square
$931 $916
$891
Performance based investment – we can and do adjust spending $815 $831 $844
levels based on performance
Diverse real estate portfolio across venue tiers and types
2015 2016 2017 2018 2019 2020
(1) Total BBW stores in US and Canada as of January 30, 2021
10Bath & Body Works: Topline Consistency and Success
Historical Quarterly Comps (BBW Segment)
Read & Quickly Correct
15%
13% 13%
12% 12%
10% 10% 10%
10% 9% 9%
8% 8% 8% 8% 8%
7% 7% 7% 7% 7%
6% 6% 6% 6% 6% 6%
5% 5% 5% 5% 5% 5% 5%
5% 4% 4% 4% 4%
3%
2% 2% 2%
1%
0%
0%
2009 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
‐2%
-5%
‐5%
-10%
11Bath & Body Works: Digital Strengths and Capabilities
Digital Engagement Select examples
More than 420 million website visits to bathandbodyworks.com Social media presence:
per year
Robust social media engagement as a specialty retailer
10 million Facebook followers
6 million Instagram followers
297 thousand followers on Twitter
413 thousand Pinterest followers with 10 million monthly views
Bath & Body Works direct net sales
increased by 74% in Q4 2020
% of BBW
Bath & Body Works Direct net sales ($mm): North America Direct channel capabilities:
compared to Q4 2019
$2,003
$958
$724
$559
$452
$362
2015 2016 2017 2018 2019 2020
10% 12% 14% 16% 19% 32%
12Victoria’s Secret: Business Overview
Two Brands Two Channels
871 company-operated stores (US and Canada)1 FY 2019 FY 2020
726 Victoria’s Secret
145 PINK Direct 3 Direct 3
25%
62 international company-operated stores Stores
44%
$1.7bn $2.2bn
458 international franchised locations2 75% Stores
$5.1bn 56%
$2.8bn
Scale Category Dominant
Sizable footprint in North America
#1 in Intimates market share
High unaided awareness
Large customer base and strong online presence
across various social media
Global reach and appeal
(1) Includes company-operated stores in the U.S. and Canada as of January, 2021
(2) Represents Partner-Operated Stores for Victoria's Secret Beauty & Accessories - Travel Retail, Victoria's Secret Beauty & Accessories, Victoria’s Secret and PINK
(3) Direct penetration based on North America sales.
13Victoria’s Secret: Digital and Store Overview
VS Digital VS Stores
Digital Engagement VS Stores by Location Type
Victoria’s Secret:
69 million followers on Instagram
29 million fans on Facebook
11 million followers on Twitter Current Total
2 million followers on YouTube Stores(1)
871
PINK:
14 million fans on Facebook
8 million followers on Instagram
6 million members of PINK Nation
846 thousand followers on Twitter
Sales Productivity
% of VS North
Victoria’s Secret Direct sales ($mm): America Victoria’s Secret VS
U.S.
U.S.Sales
Sales perper Average
Average Selling
Selling Square Foot Square Foot
$864 $844
$2,223 $784 $757 Impacted
$702 by COVID
$1,747 $1,693 closures
$1,560 $1,582 $1,508
$426
2015 2016 2017 2018 2019 2020
20% 20% 20% 24% 25% 44%
VS direct sales increased by 33% in Q4 2020 compared to Q4 2019 2015 2016 2017 2018 2019 2020
(1) Total company‐operated VS stores in US and Canada as of January 30, 2021 14L Brands Historical Financials
Net Sales Adjusted EBITDA 1
($ in bn) ($ in bn)
$2.6 $2.5
$12.6 $13.2 $12.9 $2.3
$12.2 $12.6 $2.3
$11.8
$2.0
$1.8
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
% Growth 6.1% 3.5% 0.5% 4.8% ‐2.4% ‐8.3% % Margin 22% 20% 18% 15% 14% 20%
Adjusted Operating Income 1 Capital Expenditures
($ in bn) ($ in bn)
$2.2
$2.0 $1.0
$1.7 $1.8
$1.4 $0.7 $0.7
$1.2 $0.6
$0.5
$0.2
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
% Margin 18.0% 16.2% 13.7% 10.9% 9.5% 15.3% % of OCF 36% 50% 50% 46% 37% 11%
(1) Non‐GAAP measure. See appendix for reconciliation.
15Strong Liquidity and Historical Cash Flow Generation
Liquidity ($mm)
Cash & Cash Equivalents Available Revolver $4,693 We maintain
significant liquidity
$790
$2,926
through cash on
$2,506 $2,480 the balance sheet
$2,404
and capacity
$992
$991 $991 $981 $3,903 through our
revolving credit
$1,934
$1,515 $1,413 $1,499 facility
1
2016 2017 2018 2019 2020
Free cash flow 2 ($mm)
We have generated
~$700 million of
$1,782 free cash flow2 or
more in each of the
$1,000
$699 $748 $778 last 4 fiscal years
2016 2017 2018 2019 2020
See Notes to Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
Source: SEC Filings.
(1) 2020 ABL Revolver availability based on borrowing base of $853mm less $63mm LCs outstanding as of 1/30/21.
(2) Free Cash Flow is a non-GAAP measure that is defined as Operating Cash Flow less Capital Expenditures.
16Healthy Maturity Profile
($ in millions)
$1,400
$1,200 $500
$1,000
$1,000
$1,000 $1,000
$800 $860 $285 9.375%
$750
$700
$600
$450
$320 $500 $500
$400
$320 $350
$285 $297
$200 $247
$180
5.625% 5.625% 6.875% 6.694% 5.250% 7.500% 6.625% 6.950% 6.875% 6.750% 7.600%
$0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037
$0.6 Billion + $180 Million SRP $2.3 Billion $2.2 Billion
Outstanding Bonds SRP Termination / Payout Amended ABL Revolver
17Historical Leverage Ratios
($'s in Millions) 2015 …... 2018 2019 2020
Balance Sheet Debt $5,721 $5,811 $5,547 $6,366
Balance Sheet Lease Liability 3,074 3,740 3,530 3,087
Adjusted Debt $8,795 $9,551 $9,077 $9,453
Adjusted Operating Income $2,192 $1,437 $1,231 $1,808
Other (2) 5 15 4
Depreciation 415 547 588 521
Rent 683 831 837 765
EBITDAR $3,288 $2,820 $2,671 $3,098
Adjusted Debt/EBITDAR 2.7x 3.4x 3.4x 3.1x
Face Value of Debt $5,757 $5,873 $5,611 $6,449
Adjusted EBITDA $2,605 $1,989 $1,834 $2,333
Debt/EBITDA 2.2x 3.0x 3.1x 2.8x
See Notes to Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
18Highly Experienced Leadership Team
Andrew Meslow Julie Rosen Chris Cramer
Chief Executive Officer, L Brands / President, Executive Vice President and
Bath & Body Works Bath & Body Works Chief Operating Officer,
Bath & Body Works
Joined: Joined: Joined:
2003 2020 2001
Martin Waters Greg Unis Amy Hauk
Chief Executive Officer, Victoria's Chief Executive Officer, Victoria’s Chief Executive Officer, Victoria’s
Secret Secret Beauty Secret PINK
Joined: Joined: Joined:
2008 2016 2008
Stuart Burgdoerfer Dein Boyle Jamie Bersani
Executive Vice President and Chief Operating Officer, President, Real Estate
Chief Financial Officer Victoria's Secret
Joined: Joined: Joined:
CSC Index Ernst & Whinney
2007 2004 1986
19APPENDIX
Reconciliation of Reported To Adjusted Results
L BRANDS, INC. AND SUBSIDIARIES
ADJUSTED FINANCIAL INFORMATION
THIRTEEN WEEKS ENDED JANUARY 30, 2021 AND FEBRUARY 1, 2020
(Unaudited)
(In thousands except per share amounts)
2020 2019
Reported Adjustments Adjusted Reported Adjustments Adjusted
Net Sales $ 4,817,940 $ - $ 4,817,940 $ 4,707,141 $ - $ 4,707,141
Costs of Goods Sold, Buying & Occupancy (2,511,020) - (2,511,020) (2,913,454) 35,384 (2,878,070)
Gross Profit 2,306,920 - 2,306,920 1,793,687 35,384 1,829,071
General, Administrative and Store Operating Expenses (1,034,319) - (1,034,319) (1,022,397) - (1,022,397)
Impairment of Victoria's Secret Goodwill - - - (689,576) 689,576 -
Operating Income 1,272,601 - 1,272,601 81,714 724,960 806,674
Interest Expense (116,690) - (116,690) (91,977) - (91,977)
Other Income (Loss) (546) - (546) 3,720 - 3,720
Income (Loss) Before Income Taxes 1,155,365 - 1,155,365 (6,543) 724,960 718,417
Provision for Income Taxes 295,034 - 295,034 185,712 8,997 194,709
Net Income (Loss) $ 860,331 $ - $ 860,331 $ (192,255) $ 715,963 $ 523,708
Net Income (Loss) Per Diluted Share $ 3.03 $ 3.03 $ (0.70) $ 1.88
Weighted Average Shares Outstanding 1 283,802 283,802 276,477 278,785
See Notes to Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.
1
- Reported Weighted Average Shares Outstanding in the fourth quarter of 2019 reflects basic shares due to the Net Loss.
21Reconciliation of Reported To Adjusted Results
L BRANDS, INC. AND SUBSIDIARIES
ADJUSTED FINANCIAL INFORMATION
FIFTY-TWO WEEKS ENDED JANUARY 30, 2021 AND FEBRUARY 1, 2020
(Unaudited)
(In thousands except per share amounts)
2020 2019
Reported Adjustments Adjusted Reported Adjustments Adjusted
Net Sales $ 11,846,891 $ - $ 11,846,891 $ 12,914,236 $ - $ 12,914,236
Costs of Goods Sold, Buying & Occupancy (7,180,393) 175,806 (7,004,587) (8,463,793) 252,442 (8,211,351)
Gross Profit 4,666,498 175,806 4,842,304 4,450,443 252,442 4,702,885
General, Administrative and Store Operating Expenses (3,086,944) 52,749 (3,034,195) (3,471,946) - (3,471,946)
Impairment of Victoria's Secret Goodwill - - - (720,051) 720,051 -
Operating Income 1,579,554 228,555 1,808,109 258,446 972,493 1,230,939
Interest Expense (438,462) - (438,462) (378,082) - (378,082)
Other Income (Loss) (48,774) 52,668 3,894 (61,830) 76,781 14,951
Income (Loss) Before Income Taxes 1,092,318 281,223 1,373,541 (181,466) 1,049,274 867,808
Provision for Income Taxes 247,868 151,205 399,073 184,930 45,544 230,474
Net Income (Loss) $ 844,450 $ 130,018 $ 974,468 $ (366,396) $ 1,003,730 $ 637,334
Net Income (Loss) Per Diluted Share $ 3.00 $ 3.46 $ (1.33) $ 2.29
Weighted Average Shares Outstanding 1 281,471 281,471 276,163 278,356
See Notes to Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.
1
- Reported Weighted Average Shares Outstanding in 2019 reflects basic shares due to the Net Loss.
22Reconciliation of Adjusted Operating Income and Adjusted EBITDA
Fiscal Year Ended
January 30, February 1, February 2, February 3, January 28, January 30,
($'s in Millions) 2021 2020 2019 2018 2017 2016
Details of Special Items ‐ Income (Expense)
Impairment of Victoria's Secret Goodwill $ ‐ $ (720) $ ‐ $ ‐ $ ‐ $ ‐
Victoria's Secret Store‐Related Asset Impairment (214) (252) (81) ‐ ‐ ‐
Henri Bendel Closure Costs ‐ ‐ (20) ‐ ‐ ‐
Loss on Divestiture of La Senza ‐ ‐ (99) ‐ ‐ ‐
Victoria's Secret Restructuring (51) ‐ ‐ ‐ (35) ‐
Bath & Body Works/Other Restructuring (30)
Hong Kong Store Closure and Lease Termination 36 ‐ ‐ ‐ ‐ ‐
Victoria's Secret UK Joint Venture 30 ‐ ‐ ‐ ‐ ‐
Special Items included in Operating Income (a) (229) (972) (200) ‐ (35) ‐
La Senza Charges ‐ (37) ‐ ‐ ‐ ‐
Loss on Extinguishment of Debt (53) (40) ‐ (45) (36) ‐
Gain on Distribution from Easton Town Center, LLC ‐ ‐ ‐ ‐ 108 ‐
Gain on Divestiture of Third‐party Apparel Sourcing Business ‐ ‐ ‐ ‐ ‐ 78
Special Items included in Other Income (Loss) (b) (53) (77) ‐ (45) 72 78
Special Items Included in EBITDA (a) + (b) (282) (1,049) (200) (45) 37 78
Reconciliation of Reported Operating Income to Adjusted Operating Income
Reported Operating Income (Loss) $ 1,580 $ 258 $ 1,237 $ 1,728 $ 2,003 $ 2,192
Special Items included in Operating Income (Loss)(a) 229 972 200 ‐ 35 ‐
Adjusted Operating Income (Loss) $ 1,808 $ 1,230 $ 1,437 $ 1,728 $ 2,038 $ 2,192
Reconciliation of Net Income (Loss) to EBITDA to Adjusted EBITDA
Reporting Net Income (Loss) $ 844 $ (366) $ 644 $ 983 $ 1,158 $ 1,253
Interest Expense $ 438 $ 378 $ 385 $ 406 $ 394 $ 334
Income Tax Expense $ 248 $ 185 $ 213 $ 329 $ 538 $ 681
Depreciation & Amortization $ 521 $ 588 $ 547 $ 524 $ 472 $ 415
EBITDA $ 2,051 $ 785 $ 1,789 $ 2,242 $ 2,562 $ 2,683
Special Items included in EBITDA (a) + (b) 282 1,049 200 45 $ (37) (78)
Adjusted EBITDA $ 2,333 $ 1,834 $ 1,989 $ 2,287 $ 2,525 $ 2,605
See the following pages for notes
23Reconciliation of Segment Adjusted Operating Income/(Loss)
Reflects new segment reporting effective October 31, 2020
January 30, 2021 February 1, 2020 February 2, 2019
($'s in Millions) Q1 20 Q2 20 Q3 20 Q4 20 Full Year Q1 19 Q2 19 Q3 19 Q4 19 Full Year Full Year
Bath & Body Works
Reported Operating Income $76 $337 $494 $914 $1,820 $168 $184 $209 $664 $1,224 $1,103
Adjustments ‐ 12 0 ‐ 12 ‐ ‐ ‐ ‐ ‐ ‐
Adjusted Operating Income $76 $349 $494 $914 $1,832 $168 $184 $209 $664 $1,224 $1,103
Victoria's Secret
Reported Operating Income/(Loss) ($354) ($219) $145 $403 ($25) $32 $35 ($318) ($531) ($782) $518
Adjustments 97 132 (30) ‐ 199 ‐ ‐ 248 725 972 81
Adjusted Operating Income/(Loss) ($257) ($87) $115 $403 $174 $32 $35 ($70) $194 $191 $599
Other
Reported Operating Income/(Loss) ($40) ($74) ($58) ($45) ($216) ($46) ($44) ($42) ($51) ($184) ($384)
Adjustments ‐ 18 ‐ ‐ 18 ‐ ‐ ‐ ‐ ‐ 120
Adjusted Operating Income/(Loss) ($40) ($56) ($58) ($45) ($198) ($46) ($44) ($42) ($51) ($184) ($265)
Total L Brands
Reported Operating Income/(Loss) ($318) $44 $581 $1,273 $1,579 $153 $175 ($151) $82 $258 $1,237
Adjustments 97 162 (30) ‐ 229 ‐ ‐ 248 725 972 200
Adjusted Operating Income/(Loss) $ (221) $ 206 $ 551 $ 1,273 $ 1,808 $ 153 $ 175 $ 96 $ 807 $ 1,231 $ 1,437
24Notes to Reconciliation of Adjusted Results
L BRANDS, INC. AND SUBSIDIARIES
NOTES TO RECONCILIATION OF GAAP FINANCIAL MEASURES
TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
The Adjusted Financial Information should not be construed as an alternative to the reported results determined in accordance with generally accepted accounting principles. Further, the Company’s
definition of adjusted income information may differ from similarly titled measures used by other companies. Management believes that the presentation of adjusted financial information provides
additional information to investors to facilitate the comparison of past and present operations. While it is not possible to predict future results, management believes the adjusted information is useful for
the assessment of the ongoing operations of the Company because the adjusted items are not indicative of our ongoing operations due to their size and nature. Additionally, management uses adjusted
financial information as key performance measures of results of operations for the purpose of evaluating performance internally. The Adjusted Financial Information should be read in conjunction with the
Company’s historical financial statements and notes thereto contained in the Company’s quarterly reports on Form 10-Q and annual report on Form 10-K.
The “Adjusted Financial Information” provided in the attached reflects the following non-GAAP financial measures:
Fiscal 2020
In the fourth quarter of 2020, there were no adjustments to results.
In the third quarter of 2020, adjusted results exclude the following:
A $52.7 million pre-tax loss ($40.0 million net of tax of $12.7 million), included in other income (loss), associated with the early extinguishment of outstanding notes.
A $29.9 million pre-tax gain ($27.2 million net of tax of $2.7 million), included in general, administrative and store operating expenses, related to the establishment of a joint venture for the
Victoria’s Secret U.K. and Ireland business with Next PLC.
A $23.1 million net income tax benefit related to tax matters associated with foreign investments and recent changes in tax legislation.
In the second quarter of 2020, adjusted results exclude the following:
A $117.1 million charge ($98.7 million net of tax of $18.5 million), included in buying and occupancy expenses, related to the impairment of certain Victoria’s Secret lease and store assets.
An $80.8 million charge ($65.2 million net of tax of $15.6 million), included in general, administrative and store operating expenses, related to previously announced restructuring actions.
A $36.3 million gain ($24.7 million net of tax of $11.6 million), principally included in buying and occupancy expenses, related to the closure and termination of our lease and the related
liability for the Victoria’s Secret Hong Kong flagship store.
A $20.5 million income tax benefit related to recent changes in tax legislation included in the CARES Act.
25Notes to Reconciliation of Adjusted Results
L BRANDS, INC. AND SUBSIDIARIES
NOTES TO RECONCILIATION OF GAAP FINANCIAL MEASURES
TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
In the first quarter of 2020, adjusted results exclude the following:
A $96.8 million charge ($72.0 million net of tax of $24.8 million), included in buying and occupancy expenses, related to the impairment of certain Victoria’s Secret store assets.
A $50.4 million tax benefit related to the resolution of certain tax matters.
Fiscal 2019
In the fourth quarter of 2019, adjusted results exclude the following:
A $689.6 million charge ($686.4 million net of tax of $3.2 million) related to the impairment of Victoria’s Secret goodwill.
A $35.4 million charge ($29.5 million net of tax of $5.8 million), included in buying and occupancy expenses, related to the impairment of certain Victoria’s Secret store-related assets.
In the third quarter of 2019, adjusted results exclude the following:
A $217.1 million charge ($199.6 million net of tax of $17.5 million), included in buying and occupancy expenses, related to the impairment of Victoria’s Secret store-related assets.
A $30.5 million charge (no tax impact) related to the impairment of Victoria’s Secret goodwill.
A $37.2 million charge ($27.7 million net of tax of $9.5 million), included in other income (loss), to increase reserves related to ongoing guarantees for the La Senza business which was
sold in the fourth quarter of 2018.
In the second quarter of 2019, adjusted results exclude the following:
A $39.6 million pre-tax loss ($30.0 million net of tax of $9.5 million), included in other income (loss), associated with the early extinguishment of $764 million in outstanding notes maturing
between 2020 and 2022 through the issuance of $500 million of new notes maturing in 2029 and the use of $315 million in cash, lowering total debt by $264 million.
In the first quarter of 2019, there were no adjustments to results.
26Notes to Reconciliation of Adjusted Results
L BRANDS, INC. AND SUBSIDIARIES
NOTES TO RECONCILIATION OF GAAP FINANCIAL MEASURES
TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Fiscal 2018
A $99.2 million ($55.1 million net of tax of $44.1 million) loss on the sale of La Senza to an affiliate of Regent LP.
An $80.9 million charge ($72.7 million net of tax of $8.2 million), included in buying and occupancy expenses, related to the impairment of certain Victoria’s Secret store-related assets.
$20.3 million ($15.0 million net of tax of $5.3 million) of Henri Bendel closure costs, included in buying and occupancy expenses ($13.8 million) and general, administrative and store operating
expenses ($6.5 million).
Fiscal 2017
A $45.0 million pre-tax loss ($28.8 million net of tax of $16.2 million), included in other income (loss), associated with the early extinguishment of our June 2019 notes.
A $92.2 million tax benefit related to changes in U.S. tax legislation.
Fiscal 2016
A $41.7 million tax benefit related to the favorable resolution of a discrete income tax matter.
A $108.3 million pre-tax gain ($70.2 million net of tax of $38.1 million), included in other income (loss), related to a $124.4 million cash distribution from Easton Town Center.
A $35.8 million pre-tax loss ($22.4 million net of tax of $13.4 million), included in other income (loss), associated with the early extinguishment of our July 2017 notes.
Pre-tax charges of $34.5 million ($21.4 million net of tax of $13.1 million) related to actions at Victoria’s Secret, including severance charges, fabric cancellations and the write-off of catalogue paper.
Fiscal 2015
A $78 million pre-tax gain related to the sale of our remaining interest in the third-party apparel sourcing business.
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